Download Marketing history

CCM 105
1.
PRINCIPLES OF MARKETING
Overview Of Marketing
a) Definition
The simplest definition of marketing: Marketing is managing profitable customer relationships.
Philip Kotler, the father of marketing says, Marketing can also be defined as a societal process by which
individuals and groups obtain what they need and want through creating, offering, and, freely exchanging
products and services of value with others. The twofold goal of marketing is to attract new customers by
promising superior value and to keep and grow current customers by delivering value.
Peter Drucker, a leading management theorist, puts it this way:
‘There will always, one can assume be need for some selling. But the main of marketing is to make selling
superfluous. The aim of marketing is to know and understand the customer so well that the product or
service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that
should be needed then is to make the product/service available.
The American Marketing Association offers the following definition: Marketing is the process of planning
and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create
exchanges that satisfy individual and organizational goals.
Marketing comprises all activities involved in the transfer of goods from the producer or seller to the
consumer or buyer, including advertising, shipping, storing, and selling.
b) Evolution of marketing
The study of the history of marketing as an academic field emerged only recently. The publication in 1976
of the book The History of Marketing Thought, by Robert Bartels marks a turning-point in marketing
thought. Since then, academics specializing in marketing decided to imitate economics, distinguishing
theory and practice.
Two different fields of study emerged:
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the history of marketing thought, giving theoretical accounts
marketing history, focusing on the history of marketing practice
History of marketing thought
The history of marketing thought deals with the evolution of theories in the field of marketing, from the
ancient world to contemporary days. Marketing historians agree that the discipline branched out of applied
economics at the turn of the twentieth century, though some argue that scholars in the ancient and medieval
ages had already studied marketing ideas.
Robert Bartels in The History of Marketing Thought categorized the development of marketing theory
decade by decade from the beginning of the 20th century thus:
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1900s: discovery of basic concepts and their exploration
1910s: conceptualization, classification and definition of terms
1920s: integration on the basis of principles
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1930s: development of specialization and variation in theory
1940s: reappraisal in the light of new demands and a more scientific approach
1950s: re-conceptualization in the light of managerialism, social development and quantitative
approaches
1960s: differentiation on bases such as managerialism, holism, environmentalism, systems, and
internationalism
1970s: socialization; the adaptation of marketing to social change
With the growth in importance of marketing departments and their associated marketing managers, the field
has become ripe for the propagation of management fads which do not always lend themselves to
Periodization.
Birth of marketing ideas
In pre-modern economies, the predominance of small enterprises (peddlers, stalls) and/or natural regional
monopolies militated against the recognition of marketing as a separate field of expertise. Changes in the
patterns and intensity of economic activity, as well as the rise of economics as a science, particularly in the
19th century, paved the way for studies of marketing.
The growth in size and scope of national and international economies in the course of the Industrial
revolution led eventually to a transcendence of ad hoc retailing and advertising innovations and eventually
to systematization. Marketing emerged as a separate technical field only in the late 19th century.
Traditional schools
Traditional authorities on marketing concentrated on products and on the sale and purchase of goods and
services. They paid little attention to areas like after-sales service, and devoted even less attention to social
responsibility or to social accountability.
Modern schools
Marketing historians like Eric Shaw and Barton A. Weitz point to the publication of Wroe Alderson's book,
Marketing Behavior and Executive Action (1957), as a break-point in the history of marketing thought,
moving from the macro functions-institutions-commodities approach to a micromarketing management
paradigm; marketing began to incorporate other fields of knowledge besides economics, notably behavioral
science, becoming a multidisciplinary field. For some scholars, Alderson's book marks the beginning of the
Marketing Management Era.
Unlike economists, marketers have difficulty in organizing the different theories in their discipline into
schools-of-thought. However, some marketing historians like Jagdish Sheth have tried to identify the main
concepts behind the work of scholars in the field, grouping their ideas into "marketing schools" such as the
following:
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The Managerial school emerged during the late 1950s and became arguably the predominant and
most influential school of thought in the field.
The Consumer/buyer behavior school, which dominated the academic field in the second half of
the twentieth century (apart from the Managerial school), features theories emerging from
behavioral science.
The Social exchange school, which focuses on exchange as the fundamental concept of marketing.
Marketing history
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Much of traditional marketing practice prior to the twentieth century remained hidebound by rules-ofthumb and lack of information.
Information technology, especially since the mid-twentieth century, has given the marketers new channels
of communication as well as enhanced means of aggregating and analyzing marketing data.
Specializations have emerged (especially sales versus marketing and advertising versus retailing) and recombined (business development) over the years.
Timeline of innovation
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1450: Gutenberg's metal movable type, leading eventually to mass-production of flyers and
brochures
1730s: emergence of magazines (a future vector of niche marketing)
1836: first paid advertising in a newspaper (in France)
1839: posters on private property banned in London
1864: earliest recorded use of the telegraph for mass unsolicited spam
1867: earliest recorded billboard rentals
1880s: early examples of trademarks as branding
1905: the University of Pennsylvania offered a course in "The Marketing of Products"[6]
1908: Harvard Business School opens
1922: radio advertising commences
1940s: electronic computers developed
1941: first recorded use of television advertising
1950s: systematization of telemarketing
1970s: E-commerce invented
1980s: development of database marketing as precursor to Customer Relationship Management
(CRM).
1980s: emergence of relationship marketing
1980s: emergence of computer-oriented spam
1984: introduction of guerrilla marketing
1985: desktop publishing democratizes the production of print-advertising
1991: Integrated marketing communications (IMC) gains academic status
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1990s CRM and IMC (in various guises and names) gain dominance in promotions and marketing
planning.
1995-2001: the Dot-com bubble temporarily re-defines the future of marketing
1996: identification of viral marketingMARKETING CONCEPTS
There are five core marketing concepts:
a.
Needs, wants and demands
Needs
The basic concept underlying marketing is the human needs. Human needs are states of deprivation. They
include:
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Physical needs-food, clothing, warmth and
safety.
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Social needs-for belonging and affection.
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Individual needs-for knowledge and selfexpression.
These needs were not created by marketers; they are a basic part of the human DNA.
Wants
Wants are the form human needs take as they are shaped by culture and individual. For example a Kenyan
Urbanite needs food but wants a burger from Galitos fast food outlet. Wants are shaped by one’s society
and are described in terms of objects that will satisfy needs.
Demands
Demands are wants that are backed by purchasing/buying power. People demand products with benefits
that add up to the most value and satisfaction.
Outstanding companies go to greater lengths to learn about and understand their customers’ needs, wants
and demands. They conduct consumer research and analyze mountains of customer data.
b.
Marketing Offers
This mans a combination of products, services, information or experiences offered to a market to satisfy a
need or want. Marketing offers also include services, activities or benefits offered for sale that are
essentially intangible and do not result in the ownership of anything.
Marketing offers also include other entities-such persons, places, organizations, information and ideas.
Smart marketers look beyond the attributes of the products (marketing myopia) and services they sell and
they create brand meaning and brand experiences for consumers. For example Nike is more than just shoes;
it’s what the shoes do for you and where they take you.
c.
Value and satisfaction
Customer value and satisfaction are the key building blocks for developing and managing customer
relationships. Consumers make choices based on their perceptions of the value and satisfaction that various
products and services deliver. Customers form expectations about the value of various marketing offers and
buy according .Satisfied customers buy again and tell others of their good experiences. Dissatisfied
customers often switch to competitors and disparage the product to others.
d.
Exchanges, transactions and relationships
An exchange is the act of obtaining a desired object from someone by offering something in return.
Whereas exchange is the core concept of marketing, a transaction in turn is marketing’s unit of
measurement.
A transaction consists of a trade of values between two parties. For example you pay at Nakumatt sh.20000
and a get a Samsung flat-screen TV.
Marketing consists of actions taken to build and maintain desirable relationships with target audiences
involving a product, service, idea or other objects. Beyond simply attracting new customers and creating
transactions, the goal is to retain customers and social relationship by consistently delivering superior
value.
e.
Markets
A market is a set of actual and potential buyers of a product .These buyers share a particular need or want
that can be satisfied through an exchange relationship. The size of the market depends on the number of
people who exhibit the need, have resources to engage in exchange and are willing to exchange these
resources for what they want.
ROLE OF MARKETING IN SOCIETY
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a) Creating value for customers
The marketing department starts by researching consumer needs, wants and managing marketing
information to gain a full understanding of the market place.
Good marketing companies know they cannot serve all customers in every way and need to focus their
resources on the customers they can serve best and most profitably.
b) Championing More Ethics and Social Responsibility
Marketers are reasoning their relationships with social values and responsibilities. With the worldwide
consumerism and environmentalism movements, today’s markets are being called upon to take greater
responsibility for social and environmental impact of their actions. More forward looking companies are
readily accepting their responsibilities to the world around them .They take socially responsible actions as
opportunities to do well by doing well.
c)
Growth of not for-- Profit Marketing
In recent years, marketing has become a major part of the strategies of many not-for-profit organizations
such as colleges, hospitals, museums and even churches. Churches facing competition and shrinking
numbers, have increasingly borrowed marketing tools and tactics from companies selling worldlier goods.
Many are tailoring their core product-religion-to needs of specific demographic groups.
Similarly private colleges facing declining enrollment and rising costs are using marketing to compete for
students and funds.
d) Creation of new Lifestyles in the New Digital Age
Using today’s vastly more powerful computers, marketers are able to create detailed database and use them
to target customers with offer designed to meet in their specific needs and buying patterns. Technology
together with marketing has brought a new communication and advertising tools-ranging from cell phones,
CD ROMS and interactive TV to video kiosks at airports and shopping malls. Through e-commerce,
customers can learn about, design, order and pay for products and services-without leaving home. This has
brought about a culture of convenience, express delivery and home deliveries.
MARKETING ENVIRONMENT
Former McDonald’s CEO, Jim Cantalupo, summed the marketing environment up his way
“Ray Kroc (52 years old salesman of milk-shake mixing machines bought in 1955 a string of 7
restaurants owned by Richard and Maurice McDonald-today (2006) –more than 31,000 restaurants
worldwide serving 47 million customers per day, raking up sales of more than $50 B annually) used to
say he didn’t know what we would be selling in the year 2000, but whatever it was, we would be selling
the most of it. He recognized early on that the consumer needs change and we want to change with it.”
Marketing environment are the actors and forces outside marketing that affect marketing management’s
ability to build and maintain successful relationships with target customers.
As we move into the 21st Century, both consumers and marketers wonder what the future holds as the
future holds as the environment continues to change rapidly.
The marketing environment is made up of the microenvironment and macro environment.
A.
MICRO-ENVIRONMENT
The microenvironment consists of actors close to the company that affects its ability to serve its customersthese include the company, suppliers, marketing intermediaries, customer markets, competitors and publics.
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Marketing management’s job is to build relationships with customers by crating customer value and
satisfaction. For marketing Managers to succeed, they need to build relationships with other company
departments, suppliers, marketing intermediaries, customer markets, competitors, and publics.
ACTORS IN THE MICRO-ENVIRONMENT
a.
THE COMPANY
In designing marketing plans, the marketing management takes into account groups such as top
management ,finance, research and Development(R&D),purchasing&Logistics,operations and accounting.
Top management sets the company’s mission, objectives, broad strategies and policies. Marketing
managers make decisions within these strategies and plans. Marketing managers must work closely with
other departments. Finance is concerned with finding and using funds to carry out marketing plan. The
R&D department focuses on designing safe and attractive products. Purchasing worries about getting
suppliers and materials whereas operations are responsible for producing and distributing the desired
quality and quantity of products.
Accounting has to measures revenues and costs to help marketing know how well it is achieving its
objectives.
Under the marketing concept all of these functions must ‘think Customer!’
b.
SUPPLIERS
Suppliers form an important link in the company’s overall customer value delivery system .They provide
the resources needed by the company to produce goods and services. Suppliers’ problems can seriously
affect marketing. Marketing Managers must watch supply availability-supply shortages or delays, labor
strikes and other events, can cost sales in the short-run and damage customer satisfaction in the long-run.
Marketing Managers also monitor the price trends of their key inputs-rising trends of their increases that
can harm the company’s sales volumes.
Most marketers today treat their suppliers as partners in creating and delivering value.
c.
MARKETING INTERMEDIARIES
These are firms that help the company to promote, sell and distribute its goods to final buyers; they include
resellers/distributors, physical distribution firms, marketing service agents, brokers and financial
intermediaries.
Resellers are the distribution channel firms that help the company find customers or make sales to them.
They include wholesalers and retailers who buy and resell merchandise.
Physical distribution firms help a company to stock and move goods from their points of origin to their
destination. Working with warehouse and transportation firms, a company must determine the most
appropriate ways to store and ship goods, balancing factors such as cost, delivery, speed and safety.
Marketing service agencies are the marketing research firms, advertising agencies, and media firms,
marketing consultation firms that help the company target and promote its products to the right markets.
When you decide to use on of these firms as a company, you must choose carefully because these firms
vary in creativity, quality, service and price.
Financial intermediaries include banks, credit companies, insurance companies and other businesses that
help finance transactions or insure against the risks associated with the buying and selling of goods.
A firm must partner with their intermediaries as partners rather than channels through which they sell their
products. These partnerships optimize the performance of the entire system.
d.
CUSTOMERS
The company needs to put into account 5 types of customer markets:
i.
Consumer markets-Consists of individual and
households that buy goods and services for personal consumption.
ii.
Business markets buy goods and services for
further processing or for use in their production process.
iii.
Reseller markets buy goods and services to resell
at a profit.
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iv.
Government markets are made up of government
agencies that buy goods and services or transfer the goods and services to others who need them.
International markets consist of those buyers in
the other countries including consumers, producers, resellers, governments.
v.
Each market has special characteristics that call for careful study by the seller/marketer.
e.
COMPETITORS
Marketers do more than simply adapt to the needs of the target consumers. They also must gain strategic
advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers.
No competitive marketing strategy is best for all companies. Each firm should consider its size and industry
position compared with those of its competitors. Large firms with dominant positions in an industry can use
certain strategies that smaller firms cannot afford.
There are however, strategies that small firms can develop that give them better rates of return than large
firms enjoy(e.g. overall cost leadership ,differentiation strategies or focus strategy-focuses on a few market
segments than going over the whole market).Other competitive positions include market leader, market
challenger, market follower or market nicher strategies.
f.
PUBLICS
Publics are any group that has an actual or potential interest or impact on an organization’s ability to
achieve its objectives.
There are 7 types of Publics:
i.
Financial publics that influence the Company’s
ability to obtain funds. Banks, investment houses and stockholders are the major financial publics.
ii.
Media publics which carry the news, features
and editorial opinion on the company. These include the newspapers, magazines, radios and TV
stations.
iii.
Government publics- Management must take
government regulatory developments into account by consulting the company’s lawyers on such
issues as laws and regulations on product safety, and truth in advertising.
iv.
Citizen-action publics –A company’s marketing
decisions may be questioned by consumer organizations, environmental groups, and minority
groups and so on. Its public relations department can help it to stay in touch with consumer and
citizen groups.
v.
Local publics include neighborhood, residents
and community organizations. Large companies usually appoint a community Relations Officer to
deal with community, attend meetings, answer questions and contribute to worthwhile causes.
vi.
General Publics. A Company needs to be
concerned about the general public’s attitude towards its products and activities. The public’s
image of the company affects its buying patterns and capacities.
vii.
Internal publics. Include workers, managers,
volunteers and the board of directors. Large companies use newsletters, websites and other means
to inform and motivate their internal publics. When employees feel good about their company, this
positive attitude spills over to the external publics.
A company can prepare marketing plans putting into account these major publics as well as for its customer
markets
B.
MACRO-ENVIRONMENT
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Macro-Environment forces are forces that shape opportunities and pose threats to the company.
These include demographic, economic, natural, technological, political and cultural forces.
1.
DEMOGRAPHIC ENVIRONMENT
Demography is the study of human populations in terms of size, density, location, age, gender, race,
occupation, and other statistics.
The demographic environment is of major interest to markets, because it involves people and people make
up markets. Changes in the world demographic environment have major implications for business. For
example, 25 years ago, the Chinese government passed a regulation limiting families to one child per
family to curb the skyrocketing population. As a result. Today Chinese children (known as little emperors
and empresses) are being showered with attention and luxuries under what is known as the “six-pocket
syndrome” since as many as six adults-the two parents and the doting grandparents-may be indulging the
whims of each child. On average a Beijing household now spends about 40% of their income on their
cherished child. Among other things, this trend has created huge market opportunities for children’s
educational products.
In the US Market, the following are some of the demographic groups according to age/generations:
i.
Millennial – (1-10 years)
ii.
Generation Y(11-28 years)-Born 1977-1989
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re a large teen and young adult market
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omfortable using computer, digital and internet technology
iii.
Generation X(29-40 years)
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are about the environment and respond favorably to socially responsible companies.
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ess materialistic
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autious, romantics who want a better life.
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ore interested in job-satisfaction than in sacrificing personal happiness and growth for
promotion.
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keptical bunch and cynical of frivolous marketing pitches.
iv.
Baby Boomers(41-59 years)
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ore educated
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ore Wealthy
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pproach life with reasonableness and stability
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nti-aging products and services consumers.
v.
Aged (60 years and above)
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Considerable purchasing
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Healthier, wealthier, better
educated power
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Market potential not
fully tapped
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2.
ECONOMIC ENVIRONMENT
This consists of the factors that affect consumer buying power and spending patterns.
Nations and markets vary greatly in their levels and distribution of income. Some countries have
subsistence economies (they consume most of their own agricultural and industrial output). These countries
offer few marketing opportunities.
At the other extreme end are industrial economies which constitute rich markets for many different market
opportunities.
Changes in Income
Due to the global recession today, the financially squeezed consumers are spending more cautiously. Value
marketing has become the catch phrase for many marketers. Rather than offering high quality at high prices
or lesser quality at very low prices, marketers are looking for ways to offer today’s financially cautious
clients greater value-just the right combination of product quality and good service at a fair price.
Marketers need to pay attention to the income distribution as well as the average income .Income
distribution is still much skewed. At the top are the upper class consumers whose spending patterns are not
affected by current economic events and are a major market for luxury goods.
There is the middle class, who are careful about their spending patterns but still can afford the good
products and services in life the working class must stick to the basics of living such as food, clothing, and
shelter and must try hard to save. Finally, the under class (bottom of the pyramid class) that include
retirees, street families, slum dwellers, who must count their pennies and be extremely careful when even
making the most basic products.
Changing consumer spending patterns
On average food, housing and transportation use up most of the household income. However consumers at
different income levels have different spending patterns. Ernst Engel studied how people shifted their
spending patterns as their income rose.
He found out that as family income rises the percentage spent on food declines, the percentage spent on
housing remains constant(except for such utilities as gas, electricity and public services which decrease)
and both the percentage spent on most other categories and that devoted to savings increase.
Changes in major economic variables such as income, cost of living, interest rates and savings and
borrowings patterns have a large impact on the market place.Busineses can be wiped by an economic
downturn or caught unprepared in a boom.
3.
NATURAL/ECOLOGICAL ENVIRONMENT
This involves the natural resources that are needed as inputs by marketers or that are affected by marketing
activities. Environmental concerns have grown steadily during the past three decades.
Marketers should be aware of the several trends on the natural environment. This involves:
i.
Shortage of raw materials
Air and water may seem to be infinite resources, but some groups see long –run dangers. Air pollution
chokes many of the world’s large cities posing a great environmental hazar4d and water shortage is already
a problem in many cities in the world.
Renewable resources such as forests and food also need to be used wisely.Non-renewable resources such as
oil, coal and various minerals pose a serious problem. Firms making products that require these scarce
resources face large costs increases, even if the raw materials do remain available.
ii.
Increased Pollution
Industry has continued to damage the quality of the natural environment .For example, the disposal of
chemical and nuclear wastes, the dangerous mercury levels in the oceans, the quantity of chemical
pollutants in our food and soil, the littering of the environment with biodegradable plastics and bottles.
iii.
Increased government intervention in natural resource management
Many developed economies/countries vigorously pursue environmental quality whereas poorer nations do
little about pollution, largely because they lack the needed funds or political will.
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The general hope is that companies around the world will accept more social responsibility to control and
reduce pollution. Going into the future, firms doing business in Kenya and in the global arena expect strong
controls from government and pressure groups.
Instead of opposing regulations, marketers should help develop solutions to the material and energy
problems facing the world. Concerns for the natural environment have spawned the so-called green
Movement. Today enlightened companies are going beyond what government regulations demand. They
are developing environmentally sustainable strategies and practices in an effort to create a world economy
that the planet can support indefinitely.
4.
POLITICAL ENVIRONMENT
It consists of laws, regulations, government agencies and pressure groups that influence or limit various
organizations and individuals in a given society. Even the most liberal advocates of free-market economies
agree that the commercial system works well with at least some regulations.
Well-conceived regulations encourage competition and ensure fair markets for goods and services. Thus
governments develop public policy to guide commerce (a policy is a set of laws and regulations that limit
business for the good of the society as a whole).
Many governments have laws covering such issues as competition, fair trade practices, environmental
protection, product safety, truth in advertising, consumer privacy, packaging, labeling and pricing.
5.
TECHNOLOGICAL ENVIRONMENT
It is the most dynamic and dramatic force now shaping our destiny.Technol;ogy has released such wonders
as the internet, laptop computers, mobile telephony as well as such horrors as nuclear missiles, chemical
weapons and assault rifles.
Example of how the technological environment is affecting business is the implanting of Little transmitters
in all products in Supermarkets, which uses the RFID (Radio Frequency Identification or smart chip/AutoID), to allow tracking of these products from point of production through to point of use&disposal.Already
this technology is being experimented on by Procter Gamble and Gillette Companies in collaboration with
Walmart&Tesco Stores.
New technologies create new markets and opportunities and replace the older technology. For example the
automobile hurt the railroad, compact discs hurt the phonograph records, the mobile phone is coming after
landline phones. When old industries/technologies fight or ignore new technologies, their business declines
or completely dies out.
Today’s research is usually carried out in research teams rather than by lone inventors such as Thomas
Edison (man who discovered the bulb).Many companies are adding marketing people to R&D teams to try
and obtain a stronger marketing orientation.
Finally products and technology become more complex, the more the public needs assurance that these
products are safe and of quality.
6.
CULTURAL ENVVIRONMENT
Kenyan population is becoming a multicultural society and workforce and the trend is toward greater
multiculturalism (When all major ethnic groups in an area--such as a city, county, or census tract--are
roughly represented).
When designing global marketing strategies, companies must understand how culture affects consumer
reactions in each of the world market. In turn they must also understand how their strategies affect local
cultures.
Impact of Culture on Marketing
The seller must examine the ways consumers indifferent countries think about and use certain products
before planning a marketing program. There are often surprises. For example, the average Frenchman uses
twice as many cosmetics and beauty aids as the wife. The Germans and the French eat more packaged,
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branded spaghetti than do Italians. Italian children like to eat chocolate bars between slices of bread as a
snack. Women in some communities Tanzania will give them eggs for fear of making them bald.
Business norms and behavior also vary from country to country. American business executives need to
be briefed on these factors before conducting business in another country. Here are some examples
of different global behavior.
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South Americans like to sit or stand very close to each other when they
talk business-in fact, almost nose-to-nose. The American business
executive tends to keep backing away as the South American moves
closer. Both may end up being offended.
 Fast and tough bargaining, which works well in other parts of the world, is
often inappropriate in Japan and other Asian countries. Moreover, in faceto-face communications, Japanese executives rarely say so. Thus,
Americans tend to become impatient with having to spend time in polite
conversation about the weather or other such topics before getting down to
business. And they become frustrated when they don’t know where they
stand. However, when Americans come to point quickly, Japanese
business executives may find this behavior offensive.
 In France, wholesalers do not to promote a product. They ask their retailers
what they want and deliver it. If an American company builds its strategy
around the French’s wholesaler’s cooperation in promotions, it is likely to
fail.
 When American executives exchange business cards, each usually gives
the other’s card a cursory glance and stuff for future reference. In Japan,
however, executives dutifully study each other’s card during a greeting,
carefully noting company affiliation and rank. They a business card the
same respect they show a person first.
By the same token, companies that understand cultural nuances can use them to advantage when
positioning products internationally.
Thus understanding cultural traditions, preferences, and behaviors can help companies not only to avoid
embarrassing mistakes but also to take advantage of cross-cultural opportunities.
MARKETING INFORMATION SYSTEM AND MARKETING RESEARCH
MARKETING INFORMATION SYSTEM
A marketing Information System (MIS) consists of people, equipment, and procedures to gather, sort,
analyze, evaluate and distribute needed, timely and accurate information.MIS begins and ends with
information users-marketing managers, internal and external partners and others who need marketing
information.
Marketing Information System
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Marketing Managers and Other Information
Analysis
Planning Implementation Organization
Control
DEVELOING Needed INFORMATION
Assessing
Information
Needs
Internal Data
Bases
Information
Analysis
Marketing
Research
Marketing
Intelligence
Target
Forces
Markets
Marketing
Distributin
g and
Using
Informatio
n
MARKETING ENVIRONMENT
Competitors
Publics
Channels
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Macro-Environment
A.
Assessing Marketing Information Needs
A marketing Information system (MIS) primarily serves the company marketing managers and other
managers. However; it may also provide information to external partners such as suppliers, resellers, or
marketing services agencies. For example Nakumatt might give Samsung Electronics Limited or BBK
access to information on customer buying patterns and inventory levels.
A good Marketing Information System balances the information users would like to have against what they
really need and what is feasible to offer. The MIS must monitor the marketing environment in order to
provide decision makers with information they should have to make key marketing decisions.
At times the company cannot provide the needed information, either because it is not available or because
of MIS Limitations. For example a brand Manager might want to know how competitors will change their
advertising budgets next year and how these changes will affect the Industry market shares. This
information on planned budgets may not be available and even if it is, the company’s MIS may not be
advanced enough to forecast resulting changes in the market shares.
Lastly the costs of obtaining, processing, storing and delivering information can mount quickly and the
company must decide whether the benefits of having additional information are worth the costs of
providing it, and both value and cost are hard to assess. Marketers should not assume that additional
information will always be worth obtaining but should rather weigh carefully costs of getting more
information against the benefits resulting from it.
B.
Developing Needed Marketing Information
Marketers can obtain needed information from:
a.
Internal Data
Companies build extensive internal data bases. Internal databases are electronic collections of information
obtained from data sources within the company. Marketing managers can readily access and work with
information in the database to identify marketing opportunities and problems, programs and evaluate
performance.
Sources of information in the data base include:
i.
Accounting department-who prepares financial statements and keeps
detailed records of costs, sales and cash flow.
ii.
Operation reports-production schedules, shipments and inventories.
iii.
Sales force reports – reseller reactions and competitor information.
iv.
Marketing department-gives information on customer demographics,
psychographics and buying behavior.
v.
Customer Service department-keeps records of customer satisfaction
or service problems.
Challenges of Internal Data

Because the information was collected for other purposes, it may be
incomplete or in wrong forma for making decisions.

Data ages quickly-keeping data current requires a major effort both
financial and manpower.

A large company produces lots of information, and keeping track of
all of it is difficult.
b.
Marketing Intelligence
Marketing Intelligence is the systematic collection and analysis of publicly available information about
competitors and developments in the marketplace. The goal of marketing intelligence is to improve
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strategic decision making, assess and track competitors’ and provide early warning of opportunities and
threats.
Techniques used by competitors range from:
i.
Quizzing company’s own employees
ii.
Benchmarking competitors’ products
iii.
Researching the Internet
iv.
Industry trade shows
v.
Snooping on the rival’s garbage(P&G admitted dumpster diving at
rival Unilever’s HQs.Whereas Bob Ayling-ex-CEO of British Airways visited Easy Jet
founder Stelios Haji-Ioannou,claiming that he was fascinated by the budget airline formula.
One year later BA, launched GO-‘carbon copy’ of Easy Jet.
vi.
Suppliers, resellers and key customers.
vii.
Observing competitors – buy and analyze their products and monitor
their sales, parking lots (empty lots could mean hard times, full lots could mean plenty of
business).
viii.
Company annual reports, business publications, press releases,
traders’ exhibits and advertisements.
Facing determined marketing Intelligence training efforts by competitors, most companies are now
taking countermeasures. For example Unilever (US) does competitive intelligence training:
i.
Staff is told to protect information as well as how to get it.
ii.
Keep their mouths shut when travelling.
iii.
Take care with hired company cab drivers-as they might be spies.
iv.
Unilever normally do random undercover checks on internal security
by planting an ‘actor’ during a sales conference to see who spoke to him, how
much they told him and how long it took for him to be found out.
c.
Marketing Research
It is a systematic design, collection, analysis and reporting of data relevant to a specific marketing situation
facing an organization.
Uses of marketing research data are:
a.
Understand customer satisfaction and purchase behavior.
b.
Assess market potential and market shares.
c.
Measure effectiveness of pricing, product distribution and promotion
activities.
Sources of market research data include:
a.
Own research departments
b.
Hire outside research specialists on specific marketing problems.
c.
Purchase data collected by outside firms to aid in decision making.
ACTIVITIES OF RESEARCH
A.
Defining the Problem and research objectives.
Marketing managers and researchers must work closely together to define the problem and agree on
research objectives.
After defining the problem, the marketing research project might use one of these of types of research:
a.
Exploratory research-marketing research used to gather preliminary
information that will help define problems and suggest hypotheses.
b.
Descriptive Research- This is research used to describe things such as
the market potential for a product, demographics and attitudes of consumers
who buy the product.
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c.
Causal-Marketing research which is used to test the hypotheses about
cause and effect relationships, for example. Could a 20% decrease in tuition
at Kenya Institute of Management result into an enrollment increase
sufficient to offset the reduced tuition.
Market Research vs Marketing Research
Market Research -Researching the immediate competitive environment of the marketplace, including
customers, competitors, suppliers, distributors and retailers
Marketing Research Includes the entire above plus:
- Companies and their strategies for products and markets
- The wider environment within which the firm
operates (for example political, social)
Types of Market Research
1. By Source
- Primary
- Secondary
2. By Methodology
- Qualitative
- Quantitative
3. By Objectives
- Exploratory
Exploratory research is most commonly unstructured, “informal” research that is undertaken to
gain background information about the general nature of the research problem.
Exploratory research is usually conducted when the researcher does not know much about the
problem and needs additional information or desires new or more recent information.
Exploratory research is used in a number of situations:
i.
To gain background information
ii.
To define terms
iii.
To clarify problems and hypotheses
iv.
To establish research priorities
A variety of methods are available to conduct exploratory research:
i.
Secondary Data Analysis
ii.
Experience Surveys
iii.
Case Analysis
iv.
Focus Groups
v.
Projective Techniques
- Descriptive
Descriptive research is undertaken to provide answers to questions of who, what, where, when,
and how – but not why.
Two basic classifications:
• Cross-sectional studies
i.
Cross-sectional studies measure units from a sample of the population at only one point in time.
15
ii.
iii.
Sample surveys are cross-sectional studies whose samples are drawn in such a way as to be
representative of a specific population.
On-line survey research is being used to collect data for cross-sectional surveys at a faster rate of
speed.
•
Longitudinal studies
i.
Longitudinal studies repeatedly draw sample units of a population over time.
ii.
One method is to draw different units from the same sampling frame.
iii.
A second method is to use a “panel” where the same people are asked to respond periodically.
iv.
On-line survey research firms recruit panel members to respond to online queries.
Two types of panels:
• Continuous panels ask panel members the same questions on each panel measurement.
•
Discontinuous (Omnibus) panels vary questions from one time to the next.
Longitudinal data used for:
• Market tracking
•
Brand-switching
•
Attitude and image checks
- Causal (Or experimental)
Causality may be thought of as understanding a phenomenon in terms of conditional statements of
the form “If x, then y.”
Causal relationships are typically determined by the use of experiments, but other methods are
also used.
An experiment is defined as manipulating (changing values/situations) one or more independent variables
to see how the dependent variable(s) is/are affected, while also controlling the affects of additional
extraneous variables.
a) Independent variables: those over which the researcher has control and wishes to
manipulate that is package size, ad copy, and/or price.
b) Dependent variables: those over which the researcher has little to no direct control, but
has a strong interest in testing for example sales, profit, market share.
c) Extraneous variables: those that may affect a dependent variable but are not independent
variables.
Experimental Design
An experimental design is a procedure for devising an experimental setting such that a change in the
dependent variable may be solely attributed to a change in an independent variable.
Symbols of an experimental design:
• O = measurement of a dependent variable
• X = manipulation, or change, of an independent variable
• R = random assignment of subjects to experimental and control groups
• E = experimental effect
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•
How Valid Are Experiments?
An experiment is valid if:
• the observed change in the dependent variable is, in fact, due to the independent variable
(internal validity)
• if the results of the experiment apply to the “real world” outside the experimental setting
(external validity)
Types of Experiments
Two broad classes:
a. Laboratory experiments: those in which the independent variable is manipulated and
measures of the dependent variable are taken in a contrived, artificial setting for the
purpose of controlling the many possible extraneous variables that may affect the
dependent variable.
b.
B.
Field experiments: those in which the independent variables are manipulated and
measurements of the dependent variable are made on test units in their natural setting.
Developing the research plan
The research plan outlines:

Sources of data

Spells out the specific research approaches.

Contact methods-mail, questionnaires, telephone interviewing,
personal interviewing (individual vs. group interviewing), computer assisted telephone
interviewing (CATI),online surveys and online focus groups.

Sampling plans
Instruments that researchers will use to gather new data-two main
instruments are normally used (questionnaire-open vs. closed) and mechanical devices
(supermarket scanners & people meters).
C.
Implementing the Research plan
This involves collecting, processing and analyzing the information. Researchers should watch closely to
make sure the plan is implemented correctly.
D.
Interpreting and reporting the findings
The researcher must not try to overwhelm managers with numbers and fancy statistical techniques. Rather,
the researcher should present important findings that are useful in the major decisions faced by
management. Thus managers and researchers must work together closely when interpreting research results
and must share responsibility for the research and resulting decisions.
Limiting factors to conduct a successful Marketing research
1.
Problems with research buyers vs suppliers
Buyer
17
a.
Narrow concept of research
• Many managers see M.R. as no more than fact-finding
•
They therefore spend little time defining the problem or explaining the context
•
The results are irrelevant
•
a vicious circle arises
b.
Research used token applications-used to confirm existing views rather than objective look at
marketplace
c.
Unrealistic view of timeframe-often results are expected very rapidly, hence research therefore
commissioned too late AND research firms bow to time pressure and results are sub-optimal.
Supplier
i.
Variable quality of market researchers- little uniformity of professionalism across the industry and
also many small, poorly qualified companies
ii.
Market researchers not sufficiently demanding-upfront time often insufficient and also little
contact throughout process
iii.
Technical problems for example problem ill-defined and questionnaires poorly constructed.
2.
Frequent technical pitfalls
i.
ii.
iii.
iv.
Poor definition of problem
Designing the questionnaire
Sample size small
Data collection inadequate.
3.
Problems with traditional market research
a. Market research has allowed prominent product failures, and wrong predictions
b. Markets are increasingly becoming micro-segmented (e.g. sports shoes aimed at affluent
fashion conscious women specifically for aerobics), so mass market research becomes
correspondingly irrelevant
c. It is helpful for improvements, but less so for radical innovations
d. For more accurate targeting it may be advantageous to work with leading customers
within the target group
4.
When and how not to do it
i.
ii.
iii.
iv.
Lack of resources
Research results not actionable
Closed mindset
Vague objectives
C.
Analyzing Marketing Information
Information gathered in internal databases, through marketing intelligence and marketing research usually
requires more analysis. Marketing managers may use advanced statistical analysis models which go beyond
means and standard deviations in the data. Such analysis will help them to answer questions about markets,
marketing activities and outcomes.
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CUSTOMER RELATIONSHIP MANAGEMENT
Smart companies capture information at every possible customer touch point. These touch points include
customer purchases, sales force contacts, service and support calls, websites visits, satisfaction surveys,
credit and payment interactions, and market research studies.
To sort out the problem with this information which is scattered widely across the organization and at times
buried deep in the separate databases, plans and records of different company functions and departments,
Customer Relationship Management (CRM) is used.
Customer Relationship Management involves managing detailed information about individual customers
and carefully managing customer ‘touch points’ in order to maximize customer loyalty.CRM consists of
sophisticated software and analytical tools that integrate customer information from all sources, analyze in
depth and apply the results to build stronger customer relationships. Companies gain the following benefits
from CRM:
i. They can provide higher level of customer service.
ii. Companies are able to develop deeper customer relationships.
iii. Companies are able to pinpoint high-value customers.
iv. Companies are able to target & cross-sell the company’s products.
v. The company is able to create offers tailored to specific customer
requirements.
D.
Distributing and Using Marketing Information
Marketing information must make marketing decisions easier to make or dealing with customers more
informed. The information made available to the managers help them to prepare periodic and intelligence
reports. But managers also need non-routine information for special situations, for example, a sales
manager having trouble with a large customer may want a summary of the account’s sales and profitability
over the past year.
Companies use intranet to provide information to employees and other stakeholders and extranets, which
make information available to suppliers and customers. Thanks to modern technology today’s marketing
managers can gain direct access to information system at anytime and from virtually any location.
Role of Research Information in Marketing
The company needs sound information in order to produce superior value and satisfaction. The marketing
department also requires information on competitors, resellers and other actors in the marketplace.
Increasingly marketers are viewing information as an important strategic asset and marketing tool.
Test Marketing
There are many problems and difficulties that must be overcome if research study is to provide valuable
information for decision-making.
Test marketing is used largely to measure new product sales on a limited basis where competitive
retaliation and other factors are used to operate freely. In this way, future sales potential can be estimated
reasonably well.
Test marketing is the phrase commonly used to indicate an experiment, study, or test that is conducted in a
field setting.
Two broad classes:
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• To test the sales potential for a new product or service
• To test variations in the marketing mix for a product or service
Types of Test Marketing
a.
Standard test market: one in which the firm tests the product and/or
marketing mix variables through the companies normal distribution channels
b.
Controlled test markets: ones that are conducted by outside research
firms that guarantee distribution of the product through prespecified types and numbers
of distributors.
c.
Electronic test markets: those in which a panel of consumers has
agreed to carry identification cards that each consumer presents when buying goods and
services
d.
Simulated test markets: those in which a limited amount of data on
consumer response to a new product is fed into a model containing certain assumptions
regarding planned marketing programs, which generates likely sales volume
Criteria for Selecting Test Market towns
i.
ii.
iii.
Representativeness: Do demographics match the total market?
Degree of isolation: Nyeri and Meru are isolated markets; Thika is not isolated.
Ability to control distribution and promotion: Are there preexisting arrangements to distribute the
new product in selected channels of distribution? Are local media designed to test variations in
promotional messages?
Test Marketing Advantages:
a. Allows most accurate method of forecasting future sales
b. Allows firms the opportunity to pretest marketing mix variables
Disadvantages of Test Marketing:
a. Does not yield infallible results
b. Are expensive
c. Exposes the new product or service to competitors
d. Takes time to conduct
There are a number of problems, however, that could invalidate test marketing results:
1. Test markets are not representative of the market, in general terms of
population characteristics, competition, and distribution outlets.
2. Sample size and design are incorrectly formulated because of budget
constraints.
3. Pretest measurements of competitive brand sales are not made or are
inaccurate, limiting the meaningfulness of market share estimates.
4. Test scores do not give complete support to the study such that
certain package sizes may not be carried or prices may not be held
constant during the test period.
5. Test market products are advertised or promoted beyond a profitable
level for the market in general.
6. The effects of factors that influence sales such as the sales force,
season, weather conditions, competitive retaliation, and shelf space
are ignored in the research.
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7. The test-market period is too short to determine whether the product
will be repurchased by customers.
BUYER BEHAVIOUR AND MARKET SEGMENTATION
BUYER BEHAVIOUR
Types of Buying decision Behavior
Buying behavior differs greatly for tube of toothpaste, an iPod, financial services, and new car.
More complex decisions involve more buying participants and more buyer deliberations as shown
below in the figure:
Four types of buying behavior
High Involvement
Low Involvement
Complex buying
behavior
Variety-seeking
buying behavior
Dissonance-reducing
buying behavior
Habitual buying
behavior
Significant differences
Between brands
Few differences
Between brands
1) Complex buying Behavior
This consumer behavior in found in situations characterized by high consumer involvement in a
purchase and significant perceived differences among brands.
Consumers may be highly involved when the product is expensive, risky, purchased infrequently
and highly self-expressive.
In fact the consumer has a lot to learn about the product category. For instance a Digital LCD TV
buyer may not know what attributes to consider.
The buyer will pass through a learning process, first developing beliefs (descriptive thoughts that a
person has about something) about the product, then attitudes (a person’s relatively constitent
evaluations, feelings, tendencies towards an object/idea), and then making a thoughtful purchase
choice.
Marketers of high involvement products must understand the information-gathering and
evaluation behavior of high involvement consumers.
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They need to help buyers learn about product-class attributes and relative importance.
They need to differentiate their brand features.
They need to motivate store’s sales teams and buying acquaintances to influence the final brand
choice.
2) Dissonance-reducing Buying Behavior
This occurs when consumers are highly involved with an expensive, infrequent, or risky purchase,
but see little difference among brands.
For example consumers buying tiling materials for a home may face a high-involvement decision
because tiling a home is expensive and self-expressive. Yet the buyers may consider most Tile
brands in a given price range to be the same.
In this case, because perceived brand differences are not large, buyers may shop around to learn
what is available, but buy relatively quickly. They may respond primarily to a good price or to
purchase convenience.
After the purchase, consumers may experience post purchase dissonance when they notice certain
disadvantages of the purchased tile brand or era favorable things about brands not purchased.
To counter that a marketers after-sale communications should provide evidence and support to
help consumers feel good about their choices.
3) Habitual Buying Behavior
Habitual buying behavior occurs under conditions of low consumer involvement and little brand
difference. For example, salt. Consumers have little involvement in this product category-they
simply go to the store and reach for a brand. If they keep reaching for the same brand, it more out
of habit rather than strong brand loyalty. Consumers appear to have low brand involvement with
low-cost, frequently purchased items.
Consumers do not search extensively for the brands, evaluate brand characteristics, and make
weighty decisions about which brands to buy.
Because buyers are not highly committed to any brands, marketers of low-involvement products
with few brand differences often use price and sales promotions to stimulate product trial. In
advertisement of a low involvement product, and ad copy should stress only a few key points
.Visual symbols and imagery are important because they can be remembered easily and associated
with the brand.
TV is more effective than print media as it is a low-involvement medium suitable for passive
learning.
Advertising planning should be based on classical conditioning theory, in which buyers learn to
identify a certain product but a symbol repeatedly attached to it.
4) Variety –Seeking Buying Behavior
Consumers undertake variety –seeking buying behavior in situations characterized by low
consumer involvement but significant perceived brand differences.
In such cases consumers do a lot of brand switching .For example in buying cakes/yoghurt, a
consumer may hold some beliefs, choose a cake/yoghurt brand without much evaluation, and then
22
evaluate that brand during consumption. But nest time, the consumer might pick another brand out
of boredom or simply to try something different.
Brand switching occurs for the sake of variety rather than brand switching.
Buyer Decision Making Process
The Buying Process
Buying process/buying funnel-It is a description that involves all the steps in the purchasing
process, and also goes by the names of buying cycle, buyer decision cycle, and sales cycle.
Most marketers do not give a lot of thought to the buying processes of their customers. Giving
attention to the buying process can have a positive effect on your sales.
What is the buying process? Where does your customer fall within it? How can you use it to help
bring your customer to the point-of-purchase? The customer makes decisions before deciding to
buy.
Each and every one of us goes through some sort of buying process when we make a purchase. At
times the process is long and labored as when buying a new car. At other moments it happens
almost without thought when buying a box of your favorite chocolate, for instance. But whatever
the level of a buying decision a process does happen.
Generally speaking, the buying process consists of five steps. Those products/services that are new
to the market, are new to your customer, or are very expensive will require a longer period of
consideration in each phase. Products/services that are familiar, that have market longevity, or that
cost very little will require a shorter (even instantaneous) process.
Step One - Need/Want or Problem Recognition
During this step, buyers realize they want or need something. They recognize that they have a
problem or a desire, and they choose to find a solution. If this need or want is something along the
lines of lunch, the buying decision can be made relatively quickly, without much thought of the
actual buying process. Hunger is a quick problem to solve, most options are familiar to buyers,
and the cost is usually low.
If the need or want is a new car or a home, however, the actual buying decision can take weeks or
months. There is a greater risk, new models and features come out all the time, the cost is high,
and the possibility of making a "mistake" when buying is great.
Step Two - Information Search
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Once the choice has been made to fill a need or want, your customer begins to search for
information in order to make a quality decision that is in his/her best interest.
Information sources include: Personal(family
,friends,neighbours,acquaintances),commercial9advertising,websites,sales
persons,dealers,packaging,displays),Public(mass media, consumer-rating organizations) and
Experiential(handling,examining,using the product)
Car bazaar or web sites may be visited (in which case you should offer some way for the customer
to remember you, such as printable versions of information, downloadable brochures and catalogs,
a way to bookmark your site, etc.). Brochures may be gathered (be sure to offer your contact
information). Phone calls might be placed (check to ensure you or your call staff has the
information they need to answer questions). Free samples, test drives, and other means of "trial"
work wonderfully to guide your customer through the information search stage and onto the
evaluation and purchase stages.
Step Three Evaluation of Alternatives
After your customers have collected all the information they feel is necessary, they begin to
evaluate their options and narrow their choices until they finally pick the one thing that they are
comfortable with, and that they can afford.
Some basic concepts will help us understand consumer evaluation processes; first-the consumer is
trying to satisfy a need. Second-the consumer is looking for certain benefits from the product
solution .Third-the consumer sees each product as a bundle of attributes with varying abilities for
delivering the benefits sought to satisfy this need.
E.G.THE SAROVA STANELY –location, cleanliness, atmosphere and price.
This is the time to follow-up with your customers. Is there additional information they need in
order to choose? Did they have problems with the free sample that can be corrected? Your
"presence" during the evaluation stage is important, so do your best to retain customer contact
information in order to "gently" offer any additional details the buyer might need. (Nobody likes a
hard sell, or to be pushed into buying.)
Step Four Purchase Decision
Once all the information has been evaluated, a purchase is made, and your customer walks away
happy….right? Well, not always.
In executing a purchase intention, the consumer may make up to five sub decisions; For instance
buying a car, brand (VW Toureg), quantity (2200cc),timing(weekend) and payment mode(cash).
Even if consumers form brand evaluations, two general factors can intervene between the purchase
intention and the purchase decision. These are:
i.
Attitude of others-this depends on two things-the intensity of the other person’s
negative attitude toward our preferred alternative and our motivation to comply with
the other person wishes. Related to the attitude of others is the Role played by
infomediaries (chat rooms, log sites, music reviewers) who use various media
channels to disseminate their evaluations e.g. published product testing reports in
consumer magazines.
ii.
Unanticipated situational factors-e.g. loss of job,storeperson being a turn-off, or
other major purchase
A consumer’s decision to modify, postpone, or avoid a purchase decision is heavily influenced by
perceived risk. Consumers may perceive many types of risk in buying and consuming a product;
i.
Functional risk-The product does no perform up to expectations.
24
ii.
iii.
iv.
v.
vi.
Physical risks-the product may pose a threat to physical well-being or
heath of the user or others.
Financial risk-the product is not worth the price paid
Social risk-The product results in embarrassment from others.
Psychological risk-The product affects the mental wellbeing of the user.
Time risk-the failure of the product results in an opportunity cost of
finding another satisfactory product.
Step Five - Cognitive Dissonance (Post Purchase Anxiety)
While customers may have thought they chose the best solution when they purchased, many times
customers later experience cognitive dissonance, otherwise known as ‘buyers’ regret. They second
guess their decision and begin to feel uncomfortable about their decision. This is where trial
periods, guarantees, and/or warranties come into play.
Customers will have more confidence in their decision, even after it is made, if they know they are
not stuck with their purchase. Having a guarantee to fall back on gives them the comfort to know
that should something go wrong they will be left stranded?
Generally speaking, a guarantee is a psychological support rather than a literal one. Most
customers never take advantage of guarantees... they do not think they need to. However, if a
guarantee was not offered, the anxiety of feeling "all alone" would overcome many buyers and
persuade them into asking for a refund where possible.
Understanding each step in the buying process can help you structure your selling process and
your marketing materials to cater to the customer. Take the time to consider what your customer
goes through when making the choice to buy, and alter your business accordingly. In doing so,
you’ll increase your chances of making more sales, and landing more satisfied customers.
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Marketing Segmentation
It is the process of dividing a market into groups of similar consumers and selecting appropriate groups for
the firm to serve. It can also be defined as dividing a market into distinct groups with distinct needs,
characteristics or behavior who might require separate products or marketing mixes.
The group or market segment that a company selects to focus on is called a target market.
Market segmentation can be broken into 6 steps as indicated in the diagram below:
A model of Market Segmentation Process
Delineate firm’s current situation
Determine consumer needs and wants
Divide markets on relevant dimensions
Develop product positioning
Decide segmentation strategy
Design marketing mix strategy
Segmentation is done along the two types of markets available:
A. CONSUMER MARKETS
The major variables that might be used in segmentation of consumer markets are geographic,
psychographic and behavioral variables.
Segmentation Base includes:
i.
Geographic
Continents
Global regions
Countries
Country regions
City, town/Province
Population Density
Climate
Africa,Asia,Europe,North America
South East Asia,Mediterranean,Carribean Islands
Kenya,China,Canad,France
West Africa,S.Africa,East Africa
Under 5000 people,5000-19999,20,000 and over
Urban,surburban,rural
Tropical,temperate,cold
Geographic segmentation involves dividing the market into different geographic units such as nations,
states, regions, counties, cities or neighborhoods. Many companies today are localizing their products,
advertising, promotion and sales efforts to fit the needs of individual regions, cities and even
neighborhoods.
ii.
Demographic
Segmentation base
Age
Example
Under 6 years old,6-12,13-19,20-29,30-39,40-49,50+
26
Gender
Family size
Family lifecycle
Income
Education
Marital Status
iii.
Social
Segmentation base
Culture/subculture
Religion
Race
Nationality
iv.
Example
American,African,Asian,European
Christian,Jewish,Muslim,Buddhist
European,Indian,Black
Kenyan,Ugandan,Nigerian,French
Psychographic
Segmentation base
Social class
Lifestyle
Personality
v.
Male or Female
1-2 persons,3-4 persons, more than 4 persons
Single,young,married with children, sole survivor
Under sh.49, 999 per year,sh.50,000-sh.100000/yr,..
High school or less, high school graduate, college graduate, post
graduate.
Single,married,divorced,widowed
Example
Upper class, middle class, working class, lower class
Achievers,strivers,strugglers
Compulsive,gregarious,authoritarian and ambitious
Behavior
Segmentation base
Knowledge
Involvement
Attitude
Benefits sought
Innovativeness
Readiness stage
Perceived risk
Media usage
Payment method
Loyalty status
Usage rate
User status
Usage Situation
Example
Expert, novice
High,medium,low
Positive,neutral,negative
Convenience,economy,prestige
Innovator, early adopter, early majority,laggards,non-adopter
Unaware,aware,interested,desirous,plan to purchase
High,moderate,low
Newspaper,magazine,TV,internet
Cash, Visa, Check, …
None,some,total
Light,medium,heavy
Non-user,ex-user, current user, potential user
Work,home,vacation,commuting
B. BUSINESS/ORGANISATIONAL MARKETS
Segmentation base
Company size
Purchase quantity
Product application
Organization type
Location
Purchase Status
Attribute Importance
Example
Small,medium,large relative to industry
Small,medium,large account
Production,maintainance,product component
Manufacturer,retailer,government agency, hospital
Mt.Kenya,Western,Nairobi,Mombasa
New Customer, occasional purchaser, frequent purchaser, non-purchaser
Price,service,reliability of supply
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MARKETING SEGMENTATION
Consumer markets
A) Demographic Segmentation
It is dividing the market into groups based on variables such as age, gender, family, size, family
lifecycle, income, education, religion, race, generation and nationality. There are two reasons
expended for demographic segmentation:
a. The consumer needs, wants and usage rate often vary with demographic
variables.
b. It is easier to measure demographic variables as opposed to other types of
variables
Demographic segmentation includes:
i. Age and lifecycle stage
This involves dividing a market into different age and lifecycle groups. For example Keringet sells bottled
water for kids featuring favorite cartoon characters and with funny colors plus easy to pull-push back and
drink cap. For adults, it sells different water bottles. Companies marketing to mature consumers usually
employ positive images and appeals, for example NIMEKAMUA PESA NA KCC TV ad for the mature
adults market..
ii. Gender segmentation
This means diving your market into different groups based on gender. It has been used in clothing,
cosmetics, toiletries and magazines. More recently ,other marketers noticed opportunities for targeting
women. For example Standard Chartered Bank started the Diva Account for women. Research has shown
that 90% of all home improvement decisions are today made by women,2/3 of all women are involved in
materials installations and 80% of all household consumer purchases are influenced by women.
iii. Income
This implies dividing a market into different markets along income groups. This has been used by
marketers of such products and services as automobiles, clothing, cosmetics, financial services and travel.
Many companies targets affluent consumers with luxury goods and convenience services. Other companies
target lower income groups .Tuskys Supermarket has traditionally located its branches near bus-terminus or
in low/medium income residential areas to target the lower income group.
B) Geographic
It involves dividing a market into different geographic units such as nations, states, regions,
countries, cities, neighbourhoods.Many companies today are localizing their products, advertising,
promotion and sales efforts to fit the needs of individual regions, cities and even
neighbourhoods.For example many corporate companies I Kenya are advertising in regional radio
stations. Other companies are seeking to cultivate yet untapped geographic territory. For example,
large companies are fleeing the competitive cities and suburbs to set up factories in smaller rural
towns since it costs less to operate in the latter environment, for example Bidco Oil Refineries
plant in Thika town.
C) Psychographic
It entails dividing a market into different groups based on social class, lifestyle or personality
characteristics. Marketers often segment their markets by consumer lifestyle.
Virtually every human society’s exhibit social stratification. Stratification sometimes takes the form of a
caste system where the members of different castes are reared for certain roles and cannot change their case
membership.
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Social classes reflect not only income but other indicators such as occupation, education, area of residence.
Social classes differ in dress, speech patterns, recreational preferences, and many other characteristics.
Seven Major Social Classes
1. Upper Uppers - the social elite on inherited wealth. They give large sums to charity, run
the debutante balls/parties, maintain more than one home, and send their children to the
finest schools. They are a market for jewelry, antiques, homes, and vacations. They often
buy and dress conservatively .Although small as a group, they serve as a reference group
to the extent that their consumption decisions are imitated by the other social classes.
2.
Lower Uppers-Persons usually in the middle class, who have earned high income or
wealth through exceptional ability in their profession or business-CEOs/COOs of blue
chip companies and young successful entrepreneurs. They tend to active in social and
civic affairs and to buy the symbols of status for themselves and their children. They
include the nouveau riche, whose pattern of conspicuous consumption is designed to
impress those below them.
3.
Upper Middle – These possess neither family status nor unusual wealth and are primarily
concerned with ‘career.’ They are professionals, independent businesspersons, and
corporate managers who believe in education and want their children to develop
professional or administrative skills. Members of this group are civic-minded and homeorinented.They are the quality market for good homes, clothes, furniture and appliances.
4.
Middle Class – Average white and blue collar workers who live on the ‘right side of
town.’ Often, they buy popular products to keep up with trends. A good number-almost ¼
owned imported cars and most are concerned with fashion. The middle class believes in
spending more money on ‘worthwhile experiences’ for their children and steering them
toward a college education.
5.
Working class-Average pay blue-collar workers and those who lead a working-class
lifestyle, whatever their income, school background, or job. The working class depends
heavily on relatives for economic and emotional support, for tips on job opportunities, for
advice, and assistance. A working-class vacation means staying in town and going down
to the coast/nyalgunga/gichagi/Naivasha no more than two hours away. The working
class tends to maintain sharp sex-role divisions and stereotyping.
6.
Upper Lowers – Upper lowers are working although their living standards are just above
poverty. They perform unskilled work and are very poorly paid. Often upper lowers are
educationally deficient.
7.
Lower Lowers – Lower lowers are visibly poverty-stricken, and usually out of work and
on Welfare(in Western economies).Some are not interested in finding a permanent job
,and most are dependent on public aid or charity for income.
Conclusion
Social classes show distinct product and brand preferences in many areas including clothing, home
furnishings, leisure activities and automobiles. Social classes differ in media preferences, with upper-class
consumers preferring magazines and books and lower-class consumers prefer television.
Even with a media category such as TV, upper class prefer news and drama, lower class consumers prefer
soap operas and sports program.
D) Behavioral
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This dividing the market into groups based on consumer knowledge, attitude, use or response to a product.
i. Occasion
It can help the firm to build up product usage .For example Tuzo milk has been promoted as an afterexercise drink of choice or Weetabix as a breakfast cereal. Many marketers prepare special offers ad ads for
holiday occasions, for example Christmas or Valentine offers.
ii. Benefits segmentation
It means dividing the market into groups according to the different benefits that consumers seek from the
product. This requires finding the major benefits people look for in a product class, the kinds of people who
look for each benefit for example, Reckitt Benkiser has Jik Ordinary Bleach for ordinary clothes and Jik
Colors for colored clothes.
iii. User Status
Markets can be segmented into groups of non-users, ex-users, ex-users, potential, first-time users and
regular users of a product. A company’s market position also influences its focus. Market share leaders
focus on attracting potential users, whereas smaller firms focus on attracting current users away from the
market leader.
iv. Usage rate
Markets can be segmented into light, medium and heavy users. Heavy users are often a small percentage of
the total consumption. Marketers usually prefer to attract one heavy user to their product/service rather than
several light users. On average in the fast-0food industry, heavy users make up 20% of patrons and eat up
to 60% of the food served. But marketing dollars are often spent trying to convince light users that want a
burger in the first place.
v. Loyalty Status
A market can be segmented by consumer loyalty. Consumers can be loyal to brands (Omo), Stores (Mr.
Price/Nakumatt), and companies (Microsoft).Buyers can be divided into groups according to their degree of
loyalty-completely loyal (they buy one brand all the time), somewhat loyal (loyal to 2or3 brands of a given
product/favor one brand while sometimes buying others).
In conclusion, marketers rarely limit their segmentation analysis to only one/few variables but use multiple
segmentation bases in an effort to identify small, better-defined target groups. Thus a bank may not only
identify a group of wealthy retired adults but also within that group distinguish several segments based on
their current income, asset, savings and risk preferences and lifestyles.
Business Markets (Segmentation)
Business buyers can be segmented geographically, demographically (industry, company size or by benefits
sought, user status, usage rate and loyalty status).Additional variables that help in segmentation are:
customer operating characteristics, purchasing approaches, situational factors and personal characteristics.
Within the chosen industry, a company can further segment by customer size or geographic location.
Within a given target industry and customer size, the company can segment by purchase approaches and
criteria. As consumer segmentation many marketers believe that buying behavior and benefit provide the
best basis for segmenting business markets.
REQUIREMENTS OF EFFECTIVE SEGMENTATION
To be useful, market segments must be:
a. Measurable
This means that the size, purchasing power and profiles of the segments must be measured, for example
there is no data on the demographics of lefties segment and hence very few products are targeted to this
group.
b. Accessible
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The market segments can be effectively reached and served. For example, a cosmetics company finds that
heavy users of its brands are single working men and women who stay out late and socialize a lot. It is
there very difficult to reach them through conventional media,
c. Substantial
The market segments are large and profitable enough to serve. It would not pay for example, for an
automobile manufacturer to develop cars especially for people whose height is less than 3 ft tall.
d. Differentiable
The segments are conceptually distinguishable and respond differently to different marketing mix elements
and programs. If gay and non-gay men respond similarly to a sale of a deodorant, they do not constitute
separate segments.
e. Actionable
Effective programs can be designed for attracting and serving the segments. For example one small milkprocessing company identified 5 market segments, however its staff was too small to develop and
implement separate marketing programs for each segment.
MARKETING MIX
A. PRODUCT
Product meaning
Product is anything that is offered to a market for attention, acquisition, use, or consumption that might
satisfy a want or a need. Products include more than just tangible goods. Broadly defined, products include
physical objects, services, events, persons, places, organizations, ideas or mixes of these entities. That is an
Apple iPod, a Toyota Lexus, and a Caffe Latte at Kengeles are products. But so are Zanzibar/Malaysian
vacation, Old Mutual investment services and the advice from your doctor.
Product is a key element in the overall market offering .This offering becomes the basis upon which the
company builds profitable relationships with customers.
Today, as products and services become more commoditized, many companies are moving to a new level
in creating value for their customers. To differentiate their offers, beyond simply making products and
delivering services, they are creating and managing customer experiences with their products or company.
Levels of Products (services)
Product planners need to think about products and services on there levels. Each level adds customer value.
The most basic level is the core benefit-which addresses the question What is the buyer really buying? A
woman buying lipstick buys more than the lip color. Charles Revson of Revlon saw this early, ‘In the
factory, we make cosmetics; in the store, we sell hope.” And people who buy a Black Berry are buying
more than a wireless mobile phone, e-mail and web-browsing device, or personal organizer. They are
buying freedom and on-going connectivity to people and resources.
At the second level product planners must turn the core benefit into an actual product. They need to
develop product and service features, design and quality level, a brand name, and the packaging. For
example, the Black Berry is an actual product. Its name styling, features, packaging and other attributes
have all been combined to deliver the core benefit of staying connected.
Three Levels of Product
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Augmented Product
Actual Product
Delivery
And
Credit
Features
After-sales
Brand
name
Quality
Packaging
Installations
Credit
Core
Produc
t
Quality
Warranty
Design
Packaging
Installation
Warranty
Finally, product planners must build an augmented product around the core benefit and actual product by
offering additional consumer services and benefits. Black Berry must offer just more than a communication
device. It must provide consumers with a complete solution to mobile connectivity problems. Thus when
consumers buy Black Berry, the company and the dealers also might give the consumers/buyers a warranty
on parts and workmanship, instructions on how to use the device, quick repair services when needed, and a
toll-free telephone number and website to use if they have problems or questions.
Marketers make product and service decisions at three levels: individual product decisions, product line
decisions and the product mix decisions.
Product and Service Classifications
Although broadly defined products also include marketable entities such as experiences, organizations,
persons, places and ideas, Products and services fall into two main classifications:
1. Consumer products – these are products and services bought by the final consumers
for personal consumption. Marketers further classify these products and services based
on how consumers go about buying them.
i.
Convenience products. These are consumer products and services that
the customer usually buys frequently, low-priced, immediately and with
minimum of comparison and buying efforts. Examples include soap,
newspapers, candy and fast-food. Their promotion is through mass
promotion by the producer.
ii.
Shopping products .These are less frequently purchased consumer
products and services that customers compare carefully on suitability,
quality, price and style. Example is furniture, clothing and used cars, hotel
and airline services. Shopping products’ marketers usually distribute their
products through fewer outlets but provide deeper sales support to help
customers in their comparison effoerts.Promotion is through advertising
and personal selling by the producer and the reseller/agent.
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2.
iii.
Specialty products. These are consumer products and services with
unique characteristics or brand identification for which a significant group
of buyers is willing to make a special purchase effort. Examples include
specific brands and types of cars, high-priced photographic equipment,
designer clothes and the services of the medical or legal specialists. A
Hummer is a specialty product, for example, because buyers are usually
willing to travel great distances to buy one. Buyers normally do not
compare specialty products. Promotion is more carefully targeted by both
the producer and the reseller.
iv.
Unsought products. These are consumer products that the consumer
either does not know about or knows about but does not normally think of
buying. Classic examples of known but unsought products and services
are life insurance, preplanned funeral services, burial/cemetery plots and
blood donations to the Red Cross. Also major innovations are unsought
until the consumers are aware of them through advertising. Most of these
products require lot of advertising, personal selling and other marketing
effort.
Industrial Products-.These are those purchases for further processing or for use in
conducting a business. If a consumer buys a WAHL electric Shaver for use for home
use, the shaver is a consumer product. If the same consumer the WAHL electric for a
kinyozi business, the WAHL shaver is an industrial product. The three groups of
industrial products and services:
i.
Materials and parts –.They include raw materials and
manufactured materials and parts. Raw materials include farm
products (-wheat, cotton, livestock) and natural products (fish,
crude petroleum).Manufactured materials and parts consists
component materials (iron, yarn, cement) and component parts
(small motors, castings).Most manufactured materials and parts
are sold directly to the industrial users. Price and service are the
major marketing factors. Branding and advertising tend to be
less important.
ii.
Capital items-.These is industrial products that aid the buyer’s
production or operations including installations (major
purchases such as buildings-offices as well as factories and
fixed equipment, namely generators, lifts, elevators) and
accessory equipment which include portable factory equipments
and tools (hard tools, forklift trucks) and office equipment
(computers, fax machines, desks).
iii.
Supplies and services. Supplies include operating supplies
(lubricants, coal, paper, pencils) and repair and maintenance
items (paint, nails, brooms).Supplies are the convenience
products of the industrial field as they are purchased with
minimum of effort or comparison. Business services include
maintenance and repair services(window cleaning, computer
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repair) and business advisory services(legal,managem,ent
consultancy, advertising)
3.
Organizations , Persons, Place and ideas
Organizations-often carry out activities to ‘sell’ the organization itself. Organization marketing consists of
activities undertaken to create, maintain or change the attitudes and behavior of target consumers toward an
organizations. Business firms sponsor public relations or corporate image advertising campaigns to polish
their images and market themselves to various publics.
Person marketing consists of activities undertaken to create, maintain, or change attitudes or behavior
toward particular people. People ranging from presidents, entainers, and sports figures to professionals such
as doctors, lawyers and architects use person marketing to build their reputation. The skilful use of person
marketing can turn a person’s name into a powerhouse brand. The brand power of Oprah Winfrey’s name
has made her billionaire: Oprah-branded products include her television show, TV and feature movies, O,
The Opray Magazine, Oprah’s Angel Network, Oprah’s Boutiques online shop, and Oprah’s Book Club.
Place Marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward
particular places. Cities, states, regions and even nations compete to attract tourists, new residents,
conventions and company offices and factories. Kenya advertises under the Kenya Tourist Board abroad
about our lush green ice capped Mt.Kenya, the inviting coastal beaches and the seductive Maasai Mara.
Ideas can be also marketed. We will narrow our focus to the marketing of social ideas. Social marketing
defined by the Social Marketing Institute as the use of commercial marketing concepts and tools in
programs designed to influence individuals’ behavior to improve their well-being and that of society.
Social Marketing programs include public health campaigns to reduce smoking, alcoholism, drug abuse and
overeating. Still others address issues such as family planning, human rights, and racial equality.
Product Mix
Product Mix (product assortment) is the set of all product lines and items that a particular seller offers for
sale.
A company’s product mix has four important dimensions: width, length, depth, and consistency.
i.
Product Mix Width
It refers to the number of different product lines the company carries. For example Procter & Gamble
carries and sells a wide product mix consisting of 250 brands organized into such product lines as fabrics
and homecare; baby feminine and family care; beauty care; health care; and food and beverage products.
ii.
Product Mix length
It refers to the total number of items the company carries within its product lines. For example East African
Breweries Limited (EABL) typically carries many brands namely over half dozen beer products, over 10
spirits, over 8 wines and so on.
iii.
Product Mix depth
It refers to the number of versions offered of each product in the line .Dettol soaps comes in around six
varieties-fresh,cool,medicated,herbal, normal and so on
iv.
Consistency
Consistency of the product mix implies how closely related the various product lines are in end use,
production requirements, distribution channels or some other way.EABL’s product lines are consistent in
so far as they are consumer products that go through the same distribution channels. The lines are less
consistent in so far as they perform different functions for buyers.
Nb: A company can increase its business in 4 ways:
a. It can add new product lines.
b. Widening the product mix, that’s new lines, built on the company’s reputation in its other lines.
c. Lengthen its existing product lines to become a more full-line company.
d. Add more versions of each product and therefore deepen its product mix.
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PRODUCT LIFECYCLE
It means the course a product’s sales and profits over its lifetime. It involves five distinct stages:
a. Product development
It begins when the company finds and develops a new-product idea. At this stage, sales are zero and the
company’s investment are increasing by the day.
b. Introduction stage
The product lifecycle stage in which the new product is first distributed and made available for purchase.
Profits are low or negative because of low sales and high distribution and promotion expenses(in order to
attract distributors and build their inventories).Promotion spending is relatively high to inform consumers
on the new product and get them to try it.
c. Growth
It is the lifecycle stage in which a product’s sales start climbing quickly. The early adopters will continue to
buy and the late buyers will start following their lead, especially if they hear favorable word of mouth. New
competitors will enter the market, attracted by opportunities for profits.
The increase in competitors leads to an increase in the number of distribution outlets and sales jump just to
build reseller inventories. Prices remain the same or fall slightly as companies keep their promotion
spending at the same or a slightly high level. Profits increase as promotion costs are spread over a large
volume and as unit manufacturing costs fall.
d.
Maturity
This is the stage in the product lifecycle in which sales growth slows or levels off. The slowdown in sales
results in many producers with many products to sell. In turn this overcapacity leads to greater competition.
Competitors begin marking down their prices, increasing their advertising and sales promotions and
increasing their R&D budgets to find better versions of the product. These steps lead to a drop in profit.
Some of the weaker competitors start dropping out and the industry contains only well-established
competitors.
Offensive strategies used to defend mature markets:
1.
Modify the market.
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2.
Modify the product.
3.
Modify the marketing mix elements.
e.
Decline
This is the product lifecycle stage in which a product’s sales decline. Sales may decline because of a
number of reasons, namely, technological advances, shifts in consumer tastes, and increase in competition.
Management may decide to maintain its brand without change in the hope that competitors will leave the
industry, reposition/reformulate the brand in the hopes of moving it back to the growth stage of the
lifecycle, or harvest the product.
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NEW PRODUCT DEVELOPMENT
This means the development of original products, product improvements, product modification and new
brands through the firm’s own research and development efforts. Give the rapid changes in consumer
tastes, technology and competition; companies develop a steady stream of new products and services. A
company can obtain new products in two ways:
1) Acquisition-to buy a whole company, a patent or a licensee to produce someone else’s product.
2) New Product development through the company’s research and development department.
Why new products can fail?
a)
The market size may be overwhelmed even if the idea is good.
b) The actual product was not designed as well as it should have been.
c)
It is incorrectly positioned in the market, priced too high or advertised poorly.
d) A high-level executive might push a favorite idea despite poor marketing research
findings.
e)
Costs of development are higher than expected.
f)
The competitors might at times fight back harder than expected.
The new product development process involves major steps:
1.
Idea generation
Idea generation means the systematic search of new product ideas. A well known management consultant
said,” For every 1000 ideas, only 100 ideas will have enough commercial promise to merit a small-scale
experiment, only 10 of these will warrant substantial financial commitment, and of these, only a couple will
turn out to be qualified success.”
Major sources of new product ideas are:
I. Internal sources
It can find new ideas through research and development. It can pick the brains of its executives, scientists,
engineers, manufacturing staff and salespeople. Some companies have developed successful
‘intrapreneurial’ programs that encourage employees to think up and develop new-product ideas. A
company like 3M fosters creativity and gives employees the freedom to take risks and try new ideas. The
successful Post-it notes evolved out of this program (employees are allowed to spend 15% of their time
working on projects of personal interest).
II. External Sources
Customers
Ideas can come from watching and listening to customers. The company can analyze customer questions
and complaints to find new products that solve consumer problems. The company can conduct surveys or
focus groups to learn about consumer needs and wants. At times, consumers create new products and uses
on their own and companies can benefit by finding the products and putting them into the market. For
example Chloride Exide developed solar batteries as rural consumers were already buying normal acid
batteries to light and run electronic appliances (such as radios and Television sets).Other companies even
give customers the tools and resources to design their own products for example General Electric(GE)
Plastics gives customers access to company data sheets, engineering expertise, simulation software and
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other web-based tools for designing better plastic products to make product development faster and less
expensive.
Competitors
Companies watch competitors’ ads and other communications to get due about their own products. They
buy competing new products, take them apart top see how they work, analyze their sales and decide
whether they should bring out a new product.
Distributors and Suppliers.
Resellers/agents are close to the market and pass along information about consumer problems and new
product possibilities. Suppliers can tell the company about new concepts, techniques and materials that can
be used to develop new products.
NB: Trade magazines, shows, seminars, government agencies, new product consultants, advertising
agencies, marketing research firms, university and commercial laboratories can also be other external
sources.
To avoid new ideas generation/development being haphazard or going unrecognized, management needs to
install an idea management system either through I). appointing a respected senior manager to be the
company’s idea manager or ii).create a cross-functional idea management committee,iii).set a toll-free
number of website for anyone who wants to send an idea to the idea manager,iv).encourage all company
shareholders-to contribute,v).set up a recognition programs to reward those who contribute the best ideas.
2. Idea screening
This entails screening new-product ideas in order to spot good ideas and drop poor ones. Many companies
require their executives to write up new product ideas on a standard form that can be reviewed by a newproduct committee-the form describes the Product, the target market and the competition, estimate of
market size, product price, development time and costs, manufacturing costs and rate of return.
3. Concept development and testing
An attractive idea needs to be converted into a product concept .A product concept is an idea for a possible
product that the company can see itself offering to the market. A product concept is the detailed version of
the idea stated in a meaningful consumer terms. A product image is the way consumers perceive an actual
or potential product.
Concept testing
This calls for testing new product concepts with groups of target customers. The concepts may be presented
to consumers symbolically or physically. Concept testing may be done through a word/picture description
but other times a more concrete and physical presentation of the concept will increase the reliability of the
concept test, for example hairdressers have used virtual reality for years to show consumers how they might
look with a new style.
4. Marketing Strategy Development
It involves designing an initial marketing strategy for a new product based on the product concept.
It consists of three parts:
a. Description of the target market; the planned product
positioning; Sales, market share and profit goals for the first
few years.
5.
b.
Product planned price, distribution and marketing budget for
the first year.
c.
Planned long-term sales, profit goals and marketing mix
strategy.
Business Analysis
It involves a review of the sales, costs and profit projections of a new product to find out whether these
factors satisfy the company’s objectives. If they do, the product can move to the product development
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stage’s estimate sales the company might look at sales history of similar products and conduct surveys of
market opinion.
6. Product Development
This involves developing the product concept into physical product in order to ensure that the product can
be turned into a workable product. The R&D or engineering develops the product concept into a physical
product. The R&D will develop and test one or more physical versions of the product concept. Developing
a successful prototype can take days, weeks, months or even years. On any given day at Procter &
Gamble(US),subjects meet in focus groups, sell their dirty lau7ndry to researchers, put prototype diapers on
their babies bottoms and rub mysterious creams on their faces(It has also paid students in the past an
parents to wear new sneakers that they hand in every month for six months. Half of them returned the shoes
cleaned but no one knows what P&G is testing and the company will not say .A new product must have the
required functional features and also convey the intended psychological characters.
7. Test Marketing
This is the stage of the new product development in which the product and marketing program are tested in
more realistic market settings. It lets the company test the product and its entire marketing programpositioning strategy, advertising, distribution, pricing, branding, packaging and budget levels.
When management is already confident about the new product, the company may do little or no test
marketing. But when introducing a new product requires a big investment or when management is not sure
of the product or marketing program, a company may do a lot of test marketing.
Although test marketing costs can be high, they are often small compared to the costs of making a major
mistake. For example, McDonald’s made a costly mistake when it introduced low-fat burger called
McLean Deluxe, nationally in the US Market without the chain’s normal and lengthy testing process. It
failed after a big investment but lean results. However, be aware that test marketing does not guarantee
results.
8.
Commercialization
This entails introducing a new product into the market. The company launching a new product must first
decide on the introduction timing. Next the company must decide where to launch the new product-in a
single location, a region, the national market or the international market. Many companies due to the
shortage in capital, capacity and confidence, will develop a planned market roll-out.
Companies with international distribution systems may introduce new products through global rollout, for
example Microsoft may follow a lead-country strategy by launching its products in some markets first.
NB: There are two approaches to new product development process, namely:
a. Sequential Product development approach-one company department works individually top
complete its stage of the process before passing the new product along to the next department
and stage.
b.
Simultaneous product development (or team-based/collaborative product development) where
the company departments work closely together through a cross-functional team, overlapping
the steps in the product development process to save time and increase effectiveness.
B. PRICING
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Meaning
The amount of money charged for a product or service, or the sum of the values that consumers exchange
for the benefits of having or using the product or service.
Factors affecting price
A company’s pricing decisions are affected by both internal company factors and external environmental
factors.
a. Internal Factors
Internal factors affecting pricing include the company’s marketing objectives, marketing mix strategy, costs
and organizational considerations.
i.
Marketing Objectives
Pricing strategy is largely determined by decisions on market positioning. Business/companies that provide
economical products/services for budget-minded clients charge a low price whereas companies that target
higher-income segments charge a high price.
ii.
Marketing Mix Strategy
Price is one of the marketing mix tools that a company uses to achieve its marketing objectives. Price
decisions must be coordinated with product design, distribution, and promotion decisions to form a
consistent and effective marketing pro9hgram.Companies often position their products on price and the
tailor other marketing mix decisions to the prices they want to charge. This price positioning strategy is
supported by target costing-pricing that starts with an ideal selling price then targets costs that will ensure
that the price is met. Other companies such as Sony deemphasize price and use other marketing mix tools
to create non-price positions. Sony uses higher quality and customers are willing to pay more to get it.
iii.
Costs
Companies with lower costs can set lower prices that result in greater sales and profits. A company’s costs
take 2 forms’) Fixed costs, which are costs that do not vary with production/sales level (for instance rent,
interest and executive salaries).ii) Variable costs, are costs that vary directly with the level of production
(plastics, supplies, services)
Management wants to charge a price that will at least cover the total production costs at a given level of
production.
iv.
Organizational Considerations
On average in many organizations, top management sets the pricing objectives and policies and it often
approves the prices proposed by lower management or salespeople. In small companies prices are often set
by top management whereas in large companies, pricing is left to division or product line managers.
b. External Factors
These factors include the nature of the market and demand, competition and the other environmental
elements.
i.
The Market and Demand
Costs set the lower limit of prices, but the market and demand set the upper limit. Pricing varies in different
types of markets for example:
I. Pure competition markets, where the market consists of many buyers and
sellers, no single buyer or seller has much effect on the going market
price, for example wheat, copper or financial services. Sellers in these
markets do not spend too much time on marketing strategy.
II. Monopolistic competition, where the market consists of many buyers and
sellers who trade over a range of prices rather than a single market price.
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Sellers try to develop differentiated offers for different customer
segments and in addition to price, freely use branding, advertising and
personal selling to set their offers apart.
III. Oligopolistic Competition, where the market consists of a few sellers who
are highly sensitive to each other’s pricing and marketing strategies. The
product can be uniform such as steel, cement or non-uniform such as cars.
Each seller is alert to competitors’ strategies and moves. If one seller
slashes prices or increase prices by 10% the other sellers have to quickly
follow suit. In the end ,the consumer will decide whether a product’s
prices is right. Pricing decisions, like other marketing mix decisions must
be buyer-minded. Each price the company charges will lead to a different
level of demand, which is in a demand curve. Thus the higher the price,
the lower the demand. However in prestige goods, consumers think
higher prices mean more quality. When demand is inelastic ,a small
change in price hardly charges demand, but if demand changes greatly,
with a slight change in price, then it is said to be elastic.
ii.
Competitors’ Costs, Prices and Offers
A consumer who is considering the purchase of a Samsung hifi system will evaluate Samsun’s price and
value against the prices and values of comparable products made by Sony, Panasonic, LG and others. In
addition, a company’s pricing strategy may affect ct the nature of the competition it faces. If Samsung
follows a high-price high-margin strategy, it may attract competition, but a low-price, low-margin strategy
however may stop competitors or drive them out of the market.
iii.
Other External Factors
Economic conditions can have strong impact on the firm’s pricing strategy. Economic factors such as
boom/recession, inflation and interest rates affect pricing decisions because they affect both the costs of
producing a product and consumer perceptions of the product’s price and value. The Government is another
important external influence on pricing decisions. Social concerns may have to be taken into account when
setting prices.Resellers and their reactions to various prices is a factor to be considered.
PRICING OBJECTIVES AND POLICIES
Two price policies putting into consideration that prices were set by negotiation between buyers and sellers
include:
a. Fixed pricing policies, where a company is involved in setting one price for all the buyers. It is a
relative modern idea that has been brought up with the development of large-scale retailing.
b. Dynamic pricing policy, where different prices are charged depending on individual customers
and situations. This is due to the internal corporate networks that are wireless connecting sellers
and buyers as never before thorough the internet.
PRICING METHODS
There are different pricing methods depending on the approaches used, namely:
a. General Pricing
These include:
I. Cost based
i.
Cost-plus, which is the simplest pricing method which involves adding a standard
mark-up to the cost of the product. A weakness of this pricing method is the fact
that it ignores demand and competitors prices.
ii.
Break-even pricing/target pricing, which entails setting price to break even on the
costs of making and marketing a product, setting price to make a target profit. It
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fails to consider the impact of price on sales volume needed to realize target profits
and the likelihood that the needed volume will be achieved at each possible price.
II. Buyer based approach(value-based pricing)
It involves setting prices based on buyer’s perceptions of the value rather than on the seller’s cost.
i. Value pricing, which entails offering the right combinations of quality and god
service at a fair price. In many cases, this has involved introducing less
expensive versions of established brand name products or in other cases at the
retail level, it is the everyday low pricing adopted by a number of supermarket
chains.
ii. Value-added marketing, which normally happens especially in business-tobusiness marketing, where companies rather than cut prices to match
competitors ,attach value-added services to differentiate their offers and thus
support higher margins. Caterpillar charges premium prices for its heavy
construction and mining equipment by convincing customers that its products
and services justify every additional coin.
III. Competition-based approach
It entails setting prices based on the prices that the competitors charge for similar products. It takes
two forms:
i. Going-rate pricing, in which the firm bases its price largely on competitors
prices with less attention paid on its own costs or to demand ,for
example,steel,gasoline companies.
ii. Sealed-bid pricing, Where the firms bid for jobs/tenders and bases their prices
on how they think competitors will price rather than on its own costs or on the
demand.
b. New Product pricing
These are methods/strategies that usually change as the product passes through its lifecycle. They are two
broad strategies:
i.
Market-skimming pricing
It means setting a high price for a new product to skim maximum revenues layer by layer from the
segments willing to pay a high price; the company makes fewer but more profitable sales. Marketing
skimming makes sense only under these conditions:
I. The product’s quality and image must support its higher price and enough buyers must
buy the product at that price.
II. The costs of producing a smaller volume cannot be so high that they cancel the advantage
of charging more.
III. Competitors should not be able to enter the market easily and undercut the high price.
ii.
Market-penetration pricing(MPP)
MPP means setting a low price for a new product in order to attract a large number of buyers and a large
market share. The high sales volumes results in falling costs, allowing the company to cut prices even
further. Several conditions must be met for this strategy to work:
I.
The market must be highly price-sensitive so that a low price produces more market growth.
II.
Production and distribution costs must fall as sales volume increases.
III.
The low price must help keep out the competition and the penetration pricer must maintain
its low-price position.
c.
Product Mix pricing
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The firm looks for a set of prices that maximizes the profits on the total product mix. There are 5 product
mix pricing situations:
i.
Product line pricing
Companies usually develop product lines rather than single products. For example Sony offers not just one
type of television but several lines of televisions, each containing many models-it offers everything from
Watchman portable Color TV starting from approximately sh.1,000 to flat screen Trinitrons ranging from
sh.30,000 to sh.150000 to its top-of-the-line plasma WEGA flat panel sets running from sh.600,000 to
sh.800,000.
Product-line pricing entails the price steps between various products in a product line based on cost
differences between the products, customer evaluations of different features, and competitors. The sellers’
task is to establish perceived quality differences that support the price differences.
ii.
Optional-Product pricing
A situation where many companies offer to sell optional or accessory products along with the main product.
For example, a car consumer/buyer may choose to order power windows and a CD changer.GM normal
pricing strategy was to advertise a stripped down model at a base price(to attract people into their
showrooms) and then devote most of the showroom space to showing option-loaded cars at higher prices.
The economy model was stopped of so many comforts and conveniences that most buyers rejected.
iii.
Captive-product pricing(CPP)
CPP means setting a price for products that must be used along with a main product such as blades for a
Gillette razor, films for a camera, Video games and printer catridges.Producers of the main
products(razors,cameras,video game consoles and printers) often price them low and set high mark-ups on
the supplies, for example HP makes very low margins on its printer but very high margins on the printer
catridges.Similarly Sony loses money on its play station game console but makes money on the games
themselves.
In service, this strategy is known as two-part pricing. The price of the service is broken into a fixed fee plus
a variable usage. The fixed amount should be low enough to induce use of the service; profit can be made
on the variable fees (Safaricom).
iv.
By-product pricing(BPP)
BPP means setting a price for by-products in order to make the main product’s price more competitive. The
firm will seek a market for these products and should accept any price that covers more than the cost of
storing and delivering them. Such industries as meat processing, petroleum products, quarrying channels
have often by-products for example-Nairobi National Park (KWS) can generate income from their
occupants, manure and even brand the manure. It can even be bought on-line as, “the easiest way to buy
our Crap!”.East African Breweries Limited Machicha Business or Equity Bank starting of stock-brokerage
services.
v.
Product bundle pricing
It will involve combining several products and offering the bundle aat a reduced price. Price bundling can
promote the sales of product consumers might not otherwise buy, but the combined price must be low
enough to get them to buy the bundle. For example hotels sell specially priced weekend or holiday
packages that include room, meals and entertainment.
d. Price-adjustment strategies(PAS)
PAS depicts situation where companies usually adjust their basic prices to account for various customer
differences and changing differences. There are six price adjustment strategies:
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i.
Discount and allowance pricing-DAR
DAR will happen when companies adjust their prices to reward customers for certain responses such as
early payment of bills, volume purchase and off-season buying. These discounts and allowances can take
various forms namely:
I.
Discounts, which are straight deductions in price on purchase during a stated period.
There are cash discounts (price reduction to buyer who pay their bills promptly), Quantity
discounts (price reduction to buyers who large volumes and given to customers to buy
more from one given seller rather than from many different sources.),functional
discounts-trade discount(which is offered by the seller to trade channel members who
perform certain functions as selling, storing and record keeping),seasonal discounts(is a
price reduction to buyers who buy merchandise or services out of season and allows the
seller/producer to keep production/business steady during an entire year, for example low
tourist season offers on Tourist Hotels at the coast).
II.
Allowances, which means promotional money paid by manufactures to retailers in return
for agreement to feature the manufacturer’s products in some way. For example
promotional allowances (price or payment reductions to reward dealers for participating
in advertising and sales support programs) to supermarkets and dealers, trade allowances
to motor vehicle dealers(entailing a price-reduction given for turning in an old car when
buying a new one).
ii.
Segmented pricing-SP
Sp means selling a product or service at two or more prices, where the difference in prices is not based on
difference in costs. It takes several forms:
a. Customer segment pricing, where different customers pay different prices for the same
product, for example national parks’ entry fees for residents or non-residents.
b. Product-form pricing where different versions of the product are priced differently but
according to differences in their costs, for example, Philips Iron box is price differently from
Philips steam iron box.
c. Location pricing, where a company charges different prices for different locations even though
the cost of offering each location is the same. For example theatre seats.
d. Time pricing, a form of pricing where the firm varies its price by the season, the month, the
day and even the hour. For example Terrible Tuesday price-down on burgers, Resorts gives
weekend and seasonal discounts.
iii.
Psychological pricing-PP
A pricing approach that considers the psychology of prices and not simply the economics; the price is used
to say something about the product. For example consumers perceive higher-priced products as having
higher quality.
Another aspect of PP is reference prices. This means prices that buyers carry in their minds and refer to
when they look at a given product.PP can be formed by noting current prices, remembering past prices, or
assessing the buying situation. Some psychologists argue that each digit has symbolic and visual qualities
that should be considered in pricing. Thus 8 is round and even and creates a soothing effect whereas 7 is
angular and creates a jarring effect. Furthermore sh.3000 vs. sh.2999.95-the former looks expensive
whereas the latter looks cheap).
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iv.
Promotional pricing0-PPg
PPg means temporarily pricing products below the lit price and sometimes even below cost to increase
short-run sales. This is supposed to create buying excitement and urgency. Supermarkets and departmental
stores will price a few products as loss leaders to attract customers to the stores in the hope that they will
buy other times at normal mark-ups.Sellers will also use special events prices to draw customer traffic in
certain seasons, for example Christmas and Back-to-School shoppers.
Manufacturers sometimes offer cash rebates to customers who will buy the product from dealers within a
specified time, the manufacturer sends the rebate directly to the customer(common to auto industry as well
as consumer packaged goods).Other manufacturers offer low-interest financing ,longer warranties or fee
maintenance to reduce the customer’s process. This is a favorite for auto industry.
PPg has adverse effects by creation of ‘deal-prone’ customers, who only wait until brands go on
promotional prices before placing an Order; it hurts the brand’s image in the eyes of users and can also lead
to industry price wars.
C. PROMOTION MIX
This is also known as a communication mix-also called a promotion mix and consists of the specific
blend of the advertising, sales promotion, public relations, personal selling and direct marketing tools
that a company uses to pursue its advertising and marketing objectives.
Importance of Promotion Mix
One of the importance of the Promotion mix is to build closer relationships with customers in more
narrowly defined micro markets as the mass markets fragment.
At the same time today’s information technology helps marketers to keep closer track of customer needs
and these newer technologies also provide new communication avenues for reaching smaller customer
segments with tailored messages.
All too often companies failed to integrate their various communications channels resulting in consumer
confusion, for instance, mass media advertisements say one thing, a price promotion sends a different
signal, a [product label creates still another message, a company sales literature says something altogether
and the company’s website seems out of sync with everything else!
Hence IMC (Integrated Marketing Communication),a concept under which a company carefully integrates
and coordinates its many communications channels to deliver a clear, consistent and compelling messages
about the organization and its products. Integrated promotion mix(communication) produces better
communications consistency and greater sales impact.
a. Advertising
It is any paid form of impersonal presentation and promotion of ideas, goods or services by an identified
sponsor.
Advantages
i.
It can reach masses of geographically dispersed buyers at a low cost per exposure and it enables
the seller to repeat a message many times.
ii.
Large-scale advertising also says something positive about the seller’s size, popularity and
success. They look more legitimate.
iii.
Advertising is very expensive and it allows the company to dramatize its products through the
artful use of visuals, print, sound and color.
iv.
It can trigger quick sales.
v.
It can build long-term image of the company.
Disadvantages
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i.
It is impersonal and cannot be as directly persuasive as salesmanship.
ii.
It can carry only one-way communication with consumers/audience.
iii.
Audience has no obligation to pay attention or respond.
iv.
Though radio advertising may be cheaper, but TV advertisement can be expensive.
Marketing management must make four important decisions when developing an advertising program:
i.
Setting the advertising objectives
This means a specific task to be accomplished with a specific target audience during a specific period of
time. Advertising objectives can be classified by the primary purpose:
1. To inform, this also means informative advertising. It is used heavily when introducing a
new product category.
ii.
2.
Persuade, this also means Persuasive advertising, here the company’s objective is to build
selective demand, and becomes more important as competition increases. This goes along
with comparative advertising (comparing two brands).
3.
Reminder advertising (to remind).It is important for mature products and keeps the
consumers thinking about the product. Expensive Coca Cola television ads primarily remind
people about the brand rather than informing or persuading them.
Setting the advertising budget
There are four common methods of setting advertisement budgets:
1. Affordable Method, which implies setting the promotion budget at the level
management, thinks the company can afford. It tends to place advertising last
among spending priorities, even in situations in which advertising is critical to
firm’s success.
2.
3.
Some of the demerits of this method include: It ignores the effect of promotion on
sales, it tends to place advertising last among spending priorities, and it leads to
uncertain annual promotion budget which makes long-range market planning
difficult.
Percentage-of-sales Method; It involves setting their promotion budget at a certain
%age of current or forecasted sales or as a %age of unit sales.
Some advantages include that it is simple to use and helps management think about
the relationship between promotion spending, setting price and profit/unit.
However disadvantages include: it wrongly view sales as the cause of promotion
rather than result as the method is based on the availability of funds rather than on
opportunities: Budget varies from year to year and hence long-term planning is
hard: It does not promise any specific percentage except what has been done in the
past or what competitors
Competitor-parity method
This involves setting the promotion budget to match competitors’ outlays. You monitor competitor’s
advertising or get industry spend estimates from trade publications. Some advantages include that it
represents collective wisdom of the industry, spending what the competitors spend helps prevent promotion
wars.
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Disadvantages include, there is no evidence for believing that the competitor has better idea, Companies
differ greatly and each has its own special promotion needs, and there is no evidence that budgets on that
the method prevents promotion wars.
4.
Objective and Task Method
This means developing the promotion budget by: a) defining specific objectives) determining the tasks that
must be performed to achieve these objectives, c) estimating the costs of performing these tasks.
The disadvantages are that it is a difficult method, as it is hard to figure out which specific tasks will
achieve specific objectives.
In conclusion, no matter what method is used deciding how much to spend on advertising is one of the
hardest marketing decisions a company faces measuring the results of advertising results of advertising
spending and’ advertising return on investment’ remains an inexact science.
iii.
Developing advertising strategy(message decisions and media decisions)
iv.
b.
Evaluating advertising campaigns.
Personal Selling
It is the most effective tool especially in the building up buyer’s preferences, convictions and actions. It
involves interaction between two or more specific people, so each person can observe the other’s needs and
characteristics and make quick adjustments. The effective
Personal selling means the personal presentation by the firm’s sales force for the purpose of making sales
and building customer relationship.
There effective salesperson keeps the customers’ interests at heart in order to build a long-term
relationship. The buyer usually to feel a great need to listen and respond even if a polite “no, thanks you”
A salesperson is an individual acting for a company by performing one/more of the following activities---prospecting, communicating, servicing and information gathering. Sale Force management means the
analysis planning, implementation and control of sales force activities. It includes setting and designing
sales force strategy and structure, and recruiting, selecting, training, supervising, compensating and
evaluating the firm’s salespeople.
Designing Sales Force Strategy and Structure
There are several ways to structure a sales force:
i.
Territory Sales Force-TSF
A sales organization that assigns each salesperson to an exclusive geographic territory which the
salesperson sells the company’s the company’s full line of products/services. Travel expenses are relatively
low as salespersons travel were limited area. The Salesperson’s work is clearly defined by the organization
and fixes accountability.TSF increases the salesperson’s desire to build local business relationship.
ii.
Product Sales Force Structure
A Sales force organization under which salespeople specialize in selling only a portion of the company’s
products/lines. It leads into problems when a major client (hospital) has several salespeople from same
company calling on them on the same day. The benefits are that the salesperson gains better product
knowledge and attention to individual products.
iii.
Customer Sales Force Structure
A sales force organization under which salespeople specialize in selling only to certain customers or
industries.
The Merits of this structure are that Organization becomes more customer-focused and build closer
relationship with key customers.
iv.
Complex Sales Force
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Where a company sells a wide variety of products or services to many types of customers over a broad
geographic area it combines several types of sales force structures. Salespeople can be specialized by
customer and territory, by product and customer, or by product and territory, product or customer.
Other Personal Selling activities and issues include recruiting, training, compensating, supervising and
evaluating salespeople
Sales Force Size;
Once the company has set up its structure, it is ready to consider sales force size. Sales forces may range in
size from only a few salespeople to many tens of thousands.
The sales force constitutes one of the company’s most productive – and most expensive-assets. Therefore
increasing their number will increase both sales and costs.
One of the method used s the Workload Approach which entails several steps:
1. Using the method a company groups accounts into different classes according to
size, amount status, or other factors related in the amount of effort required to
maintain them.
2.
Determine the number of salespeople needed to call on each class of accounts, the
desired number of times.
3.
For example, the company might think as follows:
Suppose w had 200 Type A accounts and 400 Type B accounts.
Type A requires 36 calls a year
Type B requires 12 calls a year
In this case, the sales force’s workload-the number of calls it must make per year-is
9600(36*200)+(400*12)=7200+2400=9600
Suppose our average salesperson can make 1000 calls a year.
Thus the company needs 10 salespeople
=9600/1000=9.6
Sales promotion
They are short-term incentives to encourage the purchase or sale of a product or service. It is targeted
toward final buyers (consumer promotion),retailers and wholesalers(trade promotions),business
customers(business promotions) and members of the sales force(sales force promotions).
Sales Promotion objectives vary with target groups:
i.
With Consumers, which is supposed to increase short-term sales or help build market share.
ii.
Trade, the aim is to get retailers to carry new items and more inventory, getting them to advertise
the product and give it more shelf space and getting them to buy ahead.
iii.
Sales Force, it is used in order to get more sales support for current or new products/getting
salespeople to sign up new accounts.
Consumer Promotion Tools
This include samples, cash refunds, price Packs, premuims,advertising speciallities,patronage rewards,
point-of-purchase displays and demonstrations and contests, sweepstakes and games.
Samples are offers of a trial amount of a product. Some samples are free, whereas for others a company
charges a small amount to offset its costs.
Coupons are certificates that give buyers a saving when they purchase specified products. Most consumers
love coupons. Coupons can stimulate sales of a mature brand or promote trial of a new brand. Marketers
are also cultivating new markets for distributing coupons such as supermarkets shelf dispensers, electronic
point-of-sale coupon printers or ‘paperless coupon systems’
Cash refund offers (rebates), are like coupons except the price reduction occurs after the purchase rather
than at the retail outlets. The consumer sends a ‘proof of purchase’ to the manufacturer, who then refunds
part of the purchase price by mail.
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Price packs (cents-off deals), which the offer the consumers savings off the regular price of the product.
They are very effective in stimulating short-term sales. The reduced prices marked by the producer directly
on the label or package.
Premiums are gods offered either free or at low cost as incentive to buy a product. A premium may come
inside the pack (in-pack), outside the pack (on-pack) or through the mail.
Advertising specialties/promotion products. These are useful articles, imprinted with an advertiser’s
name, logo, message that are given as gifts, to consumers. They include T-shirts, apparel, pens, coffee,
mugs, calendars, key rings mouse pads, matches, goofballs and caps.
Patronage rewards are cash or other awards offered for the regular use of a certain company’
products/services. For example airlines offer frequent flier plans awarding points for miles traveled that can
be turned into free airline trips or the Nakumatt loyalty card.
Point of Purchase promotions (POP) promotions include displays and demonstrations that take place at
the point of sale. They include aisle displays, signs, posters and so on received from the manufacturer’s
every year.
Contests, sweepstakes and games give consumers the chance to win something such as cash, trips or gods
by luck or through extra effort.
Trade Promotion Tools
These are sales promotion tools used to persuade resellers to carry a brand, give it shelf space, promote it in
advertising and push it to customers. Shelf space is s scarce these days that manufacturers often have to
offer price-offs,allowances,buy-back guarantees of free goods to retailers and wholesalers to get products
on the shelf and once there to keep them on it.
Many of the tools used for consumer promotions such as contest, premiums and displays can be used as
trade promotions:
1)
Manuf
acturer’s may also offer straight discount off the list price, on each case purchased during a stated
period of time (also called a price-off).
2)
Manuf
acturers can offer allowance-usually so much money off a case in return to the retailer’s agreement
to feature the manufacturer’s product in a certain way.
3)
Free
goods. Manufacturers’ may offer free goods which are extra cases of merchandise, to resellers
who buy a certain quantity or who feature a certain flavor or size.
4)
Push
money. These are cash/gifts top dealers or their sales to “push” the manufacturer’s goods.
5)
Special
ty advertising items: These are given to the retailers by the manufacturers and carry the company’s
calendars, pens, pencils, paperweights, memo pads and so on.
Business Tools
Sales Promotion tools used to generate business leads, stimulate purchases, reward customers and motivate
salespeople. Business tools includes many of the same tools used for consumer/trade p[promotions.
However in addition, there are 2 more:
Conventions and trade shows. This provides that many vendors receive many benefits such as
opportunities to find new sales leads, contact customers, introduce new products, meet new customers, sell
more to present customers and educate customers with publications and audiovisual materials.
Sales Contests: It is a contest for salespeople/dealers to motivate them to increase their performance over a
given period.
Sales contests have several benefits: motivate and recognize good company performers-who receive trips,
cash prizes, and also award points for performance which the receiver can turn in for any of a variety and
49
work best when tied to measurable and achievable sales objectives.(such finding new accounts ,receiving
old accounts or increasing account profitability).
c.
Public Relations
It means building good relations with the company’s various publics by obtaining favorable publicity,
building up a good corporate image and handling or heading off unfavorable rumors, stories and events.
The Public Relations may perform any or all of the following functions or more:
a. Press relations or press agency: creating and placing newsworthy information in the news
media to attract attention to a person, product, or service.
b.
Product publicity: publishing specific products.
c.
Public affairs: building and maintaining national or local relations.
d.
Lobbying: building and maintaining relations with legislators and government officials to
influence legislation and regulation.
e.
Investor relations: maintaining relationships with shareholders and others in the financial
community.
f.
Development: Public relations with donors or members of nonprofit organizations to gain
financial or volunteer.
Public relations are used to promote products, people, places, ideas, activities, organizations and even
unions.
Role and Impact of Public Relations
Public Relations (PR) can have a strong impact on public awareness at a much lower cost than advertising
can. The company does not pay for the space or time in the media. If a company develops an interesting
story, it could be picked by several different media, having the same effects as advertising that would cost
millions of dollars. And it would have credibility than advertising.
PR has potential strengths, but it has always been viewed as marketing stepchild because of its limited and
scattered use.
PR consultants assert that advertising does not build brands but PR does.
Major Public Relations Tools
They include:
a. News.PR professionals find or create favorable news about the company and its products or
people. Sometimes news stories occur naturally and sometimes the PR person can suggest events
or activities that would create news.
b.
Speeches can also create product and company publicity. Increasingly company executives must
field questions from the media or give talks at trade associations or sales meetings, and these
events can either build or hurt the company’s image.
c.
Special events, ranging from new conferences, press tours, grand openings, and fireworks displays
to laser shows, hot air balloon release, multimedia presentations and star-studded spectaculars or
educational programs designed to reach and interest target publics.
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d.
Mobile marketing, travelling promotional tours that bring the brand to consumers that has
emerged as an effective way to build one-to-one relationships with targeted consumers.
e.
Written materials. These are intended to reach and influence their target markets. These materials
include annual reports, brochures, articles and company newsletters band magazines.
f.
Audiovisual materials, such as films, slide and sound programs, video and audio cassettes, are
being used increasingly as communication tools.
g.
Corporate identity materials can also help create a corporate identity that the public immediately
recognizes. These include logos, stationery, brochures, designs, business forms, business cards,
buildings, uniforms and company cars and trucks.
h.
Public Service activities. Companies can improve public goodwill by contributing money and
time.
i.
Company website can also be a good public relations vehicle. Consumers and members of other
publics can visit the site for information and entertainment.
g.
Direct Marketing
The direct connection with carefully targeted individual consumers to both obtain immediate response and
cultivate lasting customer relationships-the use of telephone,mail,fax,email;,the internet and other tools to
communicate directly with specific consumers.
The Early direct marketers used catalogs, direct mail, telemarketing models but today, direct marketing has
been transformed into a new transformation that is on-online marketing. Online marketing constitutes a
new complete model of doing business.
Benefits/Importance of Direct Marketing
Direct marketing continues to become more web-oriented and internet marketing is claiming a first
growing share of direct marketing spending.
Importance to Buyers
i.
It is convenient, easy and private. Direct marketers never close their doors, customers do not need
to be traffic, find parking spaces and trudge through the stores to find products.
ii.
It gives buyers a wealth of products can offer almost unlimited selection to consumers almost
anywhere in the world.
iii.
Direct marketing channels give buyers access to a wealth of comparative information about
products, companies and competitors. Good ca6tatalogues/websites often provide more
information in more useful forms than even the most helpful retail salesperson.
iv.
It is interactive and immediate. Buyers can interact with sellers by phone or on the seller’s web
site create exactly the configuration of information, products or services they desire and then order
them on the spot.
v.
DM gives consumers greater measures of control. Consumers decide which catalogs they will
browse and which websites they will visit.
Importance/Benefits to Sellers
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i.
A powerful tool building customer relationships .Because of the one-to-one nature of Direct
marketing (DM), companies can interact with customers by phone or online, learn more about
their needs and tailor products/services to specific customer tastes. Customers can also ask
questions and volunteer feedback.
ii.
DM offers sellers a low-cost efficient, speedy alternative for reaching their markets. Personal
selling is a higher-cost-per-contact media as compared to DM media such as telemarketing direct
mail and company websites. It also results in lower costs and speedier handling of such functions
as order processing, inventory building and delivery.
iii.
DM can offer greater flexibility. It allows marketers to make ongoing adjustments to its prices and
programs, or to make immediate and timely announcements and offers.
iv.
DM gives sellers access to buyers that they could not reach through other channels. Smaller firms
can mail catalogs to customers outside their local markets. Internet marketing is truly a global
medium that allows buyers and sellers to click from one country to another in seconds.
Direct Marketing and Customer Databases
Customer databases; an organized collection of comprehensive data about individual customers or
prospects, including geographic, psychographic and behavioral data. Effective direct marketing begins with
a good customer database.
In consumer marketing, a customer database contains a customer’s demographics (age, income, family
members, birthdays), psychographics (activities, interest and opinions) and buying behavior (buying
preferences and the recency, frequency and monetary value-RFM-of past purchases).
In B-2-B marketing, the customer profile might contain, the products and services the customer has bought,
past volumes and prices; key contacts(and their ages,birthdays,hobbies,and favorite foods);competing
suppliers; status of current contracts; estimated customer spending for the next few years and assessment;
of competitive strengths and weaknesses in selling and servicing the account.
Some databases are huge .Yahoo!(Internet portal) records every click made by every visitor, adding some
400 billion bytes of data per day to its database-the equivalent of 800000 books.
Companies can use data for the following:
a) Locate good potential customers.
b) Generate sales leads
c)
Mine data base to learn about customers in detail and tailor their market offerings and
communication
Components of Direct Marketing
These include:
a) Personal selling-refer to Personal selling notes.
b) direct-mail marketing
This is the most predominant selling method and includes everything from a simple black-and-white
postcard to an impressive multicolor professional package. Catalogs, letters, brochures, pamphlets, flyers as
well as computer disks (CDS), videotapes and other promotional materials are mailed directly to customers.
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Direct mail is well-suited to direct one-to-one communication. It allows high target selectivity, can be
personalized, flexible and allows easy measurement of results. Direct mail has proved successful in
promoting all kinds of products, from books, magazine subscriptions, and insurance to gift items, clothing,
and industrial products.
The direct-mail industry constantly seeks new methods and approaches. For example used with the internet,
CDs offer an affordable way to drive traffic to web pages personalized for a specific market segment or a
specific promotion. They can also be used to demonstrate computer-related products.
Three forms of mail delivery have become popular including fax mail (which marketers now routinely send
fax mail announcing special offers, sales and other events to prospects and customers with fax
machines),E-mail(marketers are now sending sales announcements,offers,product information and other
messages to e-mail addresses-sometimes to a few individuals, sometimes to large groups. The new breed of
email ad uses glitzy features such as animation, interactive links, streaming video, and personalized audio
messages to reach out and grab attention, voice mail (marketers have set up automated programs that
exclusively target voice mailboxes and answering machines with prerecorded messages-they target homes
between 10am-4pm and businesses between 7-9pm,to thwart hang-ups by annoyed potential customers. If
the automated dialer hears a live voice, it disconnects).
c)
catalog marketing
This means direct marketing through print, video or electronic catalogs that are mailed to select customers,
made available in stores, or presented online. Most print catalogers have added web-based catalogs to their
marketing mixes, and a variety of new Web-only catalogers have emerged. Although the internet has
provided the new avenue for catalogs sales, printed catalogs remain the primary medium (over 87% of
catalogs sales come from this medium).
Consumers can buy just about anything from a catalog.-from jet propelled surfboards, Masaai Mara travel
and Mr. Price Clothing Company features everything they sell in catalogs.
Along with benefits, however, web-based catalogs also present challenges. Whereas a print catalog is
intrusive and creates its own attention, web catalogs are passive and must be marketed. Attracting new
customers is much more difficult for a web catalog than for a print catalog.
d) Telephone marketing
This means the using the telephone to sell directly to customers. Marketers use outbound telephone
marketing to sell directly to consumers and businesses. In bound numbers are used to receive orders,
sometimes toll-free numbers are provided.
Targeted telemarketing provides benefits such as purchasing convenience, and increased product and
service information. However the recent explosion in unsolicited telephone marketing has annoyed many
consumers, who object to almost daily, ‘junk phone calls’ that pulls them away from their usual work or fill
the answering machine.
It also actually means a very broad term that applies to a multiplicity of both inbound and outbound
telephone marketing.
However the recent explosion in unsolicited telephone marketing has annoyed many consumers, who
object to almost daily, ‘junk phone calls’ that pulls them away from their usual work or fill the answering
machine.
The most common functions of telemarketing include:
1.
Improving marketing data: at a basic level this may include gathering the contact details of
decision makers and their usage of products and services relevant to your market, but further probing can
deliver more in-depth information - perhaps on distribution channels for example.
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2.
Lead generation: using a team of dedicated telemarketers to do this tough, up-front work can make
more cost-effective use of your often highly paid field sales or telesales executives by allowing them to
focus on closing sales rather than chasing prospects.
3.
Event planning: if you're investing money in marketing events - perhaps a seminar to introduce
your company to likely sales prospects in your target market, or presenting a new product or service to
potential customers - telemarketing is an effective way to ensure the right people turn up in the right
numbers. This method is often used as a follow up to a targeted mailing.
4.
Direct mails follow up: telephone follow up to mailings is proven to increase returns, by between
three and seven times as much in some cases.
5.
Point of sale promotion: for those distributing products through multiple channels, regular contact
with distributors or resellers has numerous benefits. It can ensure that they are familiar with your products
and have the right marketing materials to sell them successfully, but can also achieve the difficult goal of
keeping your product/service at the forefront of their minds.
6.
Company profiling: this offers the opportunity to go beyond the type of superficial prospect data
held by most businesses and gain a full understanding of how potential customers operate. Information on
aspects such as their decision making processes and who they currently purchase from enables much better
tailoring of sales and marketing approaches.
7.
Customer contact: while all of the above functions are relevant to existing and potential customers,
there is scope for more creative uses of telemarketing that have particular relevance to previous/existing
customers. For one has set up a new website - so call customers to introduce them to this new way of doing
business with them. Or if you change location or company name - as well as writing to your customers, call
them - and perhaps take the opportunity to pass on new product information and/or a special offer.
Getting a good return from your telemarketing investment will require:
a)
Planning: you need to consider your budget, your objectives for the volume/quality of data you
want, and your in-house resources, in terms of manpower, skills and equipment, compared to the cost of
using an outside agency. Telemarketing rarely stands on its own; you need to establish how it integrates
with your other sales and marketing activities.
b)
Accurate data: as with all direct marketing methods, accurate data is the essential foundation for
success. Naturally, successful targeting rests on speaking to the right decision makers - getting data that
includes this information may cost more but the outcomes are consistently more profitable.
c)
A good script: an effective telemarketing script is actually not a script at all but a guide for the
discussion that steers the listener in the direction you want him/her to go. It must be tailored to the target
audience, must grab the attention of the listener within a few seconds of the conversation, and must be
highly interactive; long presentations of information can be frustrating for the listener who is then less
likely to focus on the issue being presented. The guide/script should be refined in the early stages of a
campaign according to quality of responses received.
d)
Skilled telemarketers: no matter how well targeted the call is, nor how well thought out the script,
a wooden and inflexible caller will not deliver the goods. To achieve the desired outcomes the telemarketer
must have a good knowledge of the company and product/service they represent, be able to talk
intelligently around the structure of the script without getting side tracked, absorb all the negative
responses, and talk persuasively to people at all levels.
Outsourcing Telemarketing
Increasingly larger companies are recognising the value of developing in-house telemarketing teams.
However, most businesses lack the resources to conduct a reasonably sized project in a practical time scale,
for example say, contacting a thousand companies on their purchasing intentions for a particular CAD
software within two weeks. All too often telemarketing is carried out with stretched and sometimes
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inappropriate resources, such as using highly paid sales staff to gather leads, or a harassed secretary to cram
in as many calls as possible in between other duties.
If you are considering bringing in an external agency to conduct the work, here are three points to bear in
mind:
a.
Find a company with experience of working in your industry and who shows an understanding of
your target market as well your products and services. You'll have to be satisfied that they have staff with
the right skills and knowledge and accurate data to ensure the credibility of your company is not
undermined.
b.
Make sure you clarify the objectives of the campaign with them and that these are included in their
full proposal of how they will conduct the work.
c.
Don't commit yourself to a full project to gather a specified number of leads or contact a certain
number of companies; even for an agency that knows your market well it's very hard to predict a
percentage of successful outcomes. Agree a pilot period to evaluate the project and refine - or shelve it - as
necessary.
e) Direct-response television marketing
This means direct marketing via television, including direct-response television advertising (infomercials)
and home shopping channels.
Direct marketers air television spots, often 60 or 120 seconds long that persuasively describe a product and
give customers a toll-free number for ordering. Television viewers often encounter 30 minute advertising
programs or infomercials foe a single product. Direct- response TV commercial are usually cheaper to
make and the media purchase is less costly. Moreover results are easily measured. Unlike branding
campaigns, direct-response ads always include a toll free number or web address, making it easier for
marketers to gauge whether consumers are paying attention to their pitches. Home shopping channels,
another form of direct-response television marketing, are television programs or entire channels dedicated
to selling goods and services.
f) Kiosk marketing
Some companies place information and ordering machines-called kiosks (in contrast to vending machines,
which dispense actual products)-in stores, airports and other locations. Kiosks are used to help customers
create and purchase personalized greeting cards, listening kiosks that customers listen to the music before
purchasing.
Business markets also use kiosks that collect sales leads and provide information on their products. Like
everything else these days, kiosks are going online, as many companies merge the powers of the real and
virtual worlds. For example Levi Strauss stores, you can plug your measurements into a web kiosk and
have custom-made jeans delivered to your home in 2 weeks.
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