What is Marketing?

Marketing is a process of creating and delivering desirable good/services to customers in

order to satisfy them.

Marketing involves:

1) All activities for winning and retaining customers

2) Ascertaining what customers want.
3) Choosing the products or services that satisfy customer’s needs/wants.
4) Meeting the needs and wants of customers.
5) Setting the prices that customers are willing to pay.
6) Selling your products/services at a profit.
7) Informing and attracting customers to buy your products/services.
8) Creating a good exchange environment e.g. good customer care, getting products
to them.
9) Achieving corporate goals through meeting and exceeding customers’ needs
better than that of competitors.

Importance of marketing
Customers are the most important people for your business. If you do not provide what they need
and want at prices they are willing to pay and treat them with respect they will buy somewhere
else. Without customers there will be no sales and your business will have to close down.

Satisfied customers will come back and buy more from your business. They will tell their friends
and others about your products or services and about your business. Hence more satisfied
customers large sales and bigger profits.

Business people need to know as much as possible about their customers and what they
need/want so that they can serve them better.

What is a market?
A market is anybody who needs/wants the same or substitute product/services and who are
willing and able to pay for them. (Need, willingness and ability).

Substitute product/services are those that in the eyes of the customers can be used for the
same purpose. OR

A market is the set of all actual and potential buyers of a product or service.

A market always has the following three characteristics

a) People who need or want to buy a particular product or service

b) People who are able to buy these products or services
c) People who are willing to buy these products
Therefore a market consists only of those people who need a product, or service and are willing
and able to buy the product or service

ACTIVITY 1

Is there a market for shoes?

A shoe merchant based in Goma town, Congo sent a salesman called Tupu to a distant isolated
village to find out if there is a market for shoes. Tupu took a journey on a donkey for several
days only to find that no one in that village wears shoes. Disappointed, he travelled back to
Goma to tell his employer that there is no market for shoes in that village. The shoe merchant
decided to send another salesman, called Tele to the same village. Upon noticing that no one in
that village wears shoes, Tele was very exited and he came back quickly to report to his
employer that there is a huge market because no one wears shoes in that village. Which one of
the two was right?

Steps Followed in Understanding the Market

The market for business is all the people within a specific geographic area, who need a product
or service and are willing and able to buy it.

Every business sells some type of product or service to people. These potential customers can be
described as people who (a) want the product/service, (b) are able to buy the product/service, and
(c) are willing to buy the product/service

Competition must be considered. If competitors are servicing the same market, a potential
entrepreneur must decide if the market is large enough to support another business. It should
also be determined if the product or service is different from the competitors’

When undertaking marketing a business person needs to ask himself, and then get answers to the
following questions:
i). Who are my customers?

ii). What do the customers want?

iii). Where do the customers buy?

iv). When do the customers buy:

v). How do the customers buy?

AND

vi. Where can consumer information be located?

Who are my customers?

The market can be segmented by dividing the market into meaningful buyer groups or dividing
the market according to characteristics such as: age, sex, marital and family status, income. , and
occupation, i.e. whether they are students, other business people, workers etc

Market Segmentation
Market segmentation is dividing a market into separate groups, and then tailoring a
marketing strategy for each group based on “demand differential”. It is dividing or breaking
down the market on the basis of chosen criterion or criteria such as sizes of the product, incomes,
geographical location, age, and gender. Segmenting a market is crucial for purposes of efficiency
and cost effectiveness. One should avoid going for the market as a whole.

Why market segmentation?

1) Enable an entrepreneur to view market from the customer’s point of view.

2) Help him to exploit his/her strengths better by selecting compatible market

segments.

3) To develop more sharply focused strategies aimed at market requirements.

4) Identify gaps in the market that offer new product opportunities.

5) Become a leader in a smaller market.

6) Have more effective use of marketing budget.

How to segment a market?

Market segmentation is done in order to obtain the target market.

I: For individuals

Age, gender, race, ethnic group, hobbies, education, social class, occupation, income level,
personality and life style

II: For businesses

What kind of business? manufacturing, service, retail or wholesale. Location, Structure, sales
level, special requirement, distribution pattern, number of employees

The Target Market

Enables you to:

1) Know who you intend to sell to. (to be able to plan for them better))

2) Select specific target markets or clients that the business can efficiently respond to their
needs purchasing power.

3) Concentrate more on those markets that bring in the biggest percentage of sales and
profits.

After having segmented the market and having identified the segment to concentrate on, the next
thing is to determine the size of the segment in terms of anticipated sales. This is important
because for a business to be viable one needs to have a sizeable market big enough to generate
income which will more than meet the costs of production.

To see how a market is segmented let’s assume that this person in the business of selling shoes.
And let’s assume that this person has decided to segment the market on geographical, income
and gender bases. In marketing research his/her questionnaire will have to be designed such that
all these three dimensions are considered. By taking these three dimensions you end up with 12
sub-markets as shown in diagram below:

Females Males

Income levels Girls Adults Boys Adults

Low 1 2 3 4

Middle 5 6 7 8

High 9 10 11 12

After segmenting the market we have ended up with 12 submarkets. Depending on the results of
the survey, one should be in a position to decide which sub market to concentrate on and
maximize profits i.e. the target market

By segmenting the marketing into groups, it is easier for entrepreneurs to determine what
products or services each group wants.
What do the customers want?
By segmenting the marketing into groups, it is easier for entrepreneurs to determine what
products or services each group wants.
Where do the customers buy?
Entrepreneurs need to determine where the customers in their market are buying now, and
determine what factors will cause them to buy from the entrepreneur’s business.
When do the customers buy?
Knowing when customers buy (daily, weekly, monthly, yearly, seasonally) will help potential
entrepreneurs determine such things as possible hours of operation, when to advertise, and
quantity of merchandise to have on hand at specific times?
How do the customers buy?
Knowing how the customer pays for products and services can help the entrepreneur determine a
credit policy as well as a pricing policy for the business.
Where can consumer information be located?
Trade associations (publications), chamber of Commerce, government agencies, newspapers and
magazines, and individual research
If these questions are answered accurately, then the business person is said to have done a market
research

Market area:This describes the geographical area in which the business is located. Depending
on the nature of industry and size of business, the area can spread all over the country or be
limited to an estate or the population in a location or district. For example, TANESCO has its
market spread out all over the country while an internet cafe has its market limited to the town
dwellers where the enterprise is located

Market Strategy: This is process of selecting a segment of the market and designing the proper
mix of the product/service, price, promotion and distribution to meet the needs and wants of the
customers within the target market.

LECTURE 2
MANAGING THE MARKET MIX/ELEMENTS OF MARKETING
Marketing is explained in terms of four key general activities. These four activities concern
decisions about the firm’s Product or services, its Prices, methods of Promotion and
Place/distribution strategies. These are called the four Ps. In some cases other Ps, such as
personnel, packaging and public relations (positioning) have been added. The marketing mix
is used to describe how owners can combine these four areas into an overall marketing program

1. Products /services:
Product includes physical objects or services being sold, together with packaging, image, brand
name, and warranty. In addition product includes physical attributes that influence customers’
perceptions, such as colours, shapes, sizes, and materials. A product can also relate to the
“business concept” such as fast – food franchising. Effective strategies for a small business may
include: concentrating on a narrow product line, developing a highly specialized product/service.

2. Price:
Price is the amount of money that customers have to pay for the product. From a customer’s
view point, price is a monetary unit required for a purchase, and from an entrepreneur’s view
point, it is the unit of income. Prices communicate information about value, image, and
competition, and they influence decision about distribution, market segmentation, product
characteristics, and related services.

3. Place/Distribution:

Place represents the location of the business or office, it can include any physical store as well as
virtual stores on the Internet while distribution is the physical movement of goods/services.

The manufacturer and wholesaler must decide how to distribute their products. Working
through established distributors or manufacturers’ agents generally is most feasible for
small manufacturers.
Small retailers should consider cost and traffic flow as two major factors in location site
selection, especially since advertising and rent can be reciprocal. In other words, low-cost, low-
traffic location means you must spend more on advertising to build traffic.

The nature of the product/service also is important in location decisions. If purchases are made
largely on desire (e.g. soda or candy), then high traffic and visibility are critical. On the other
hand, location is less a concern for products/services that customers are willing to go out of their
way to find (e.g., hotel supplies).

4. Promotion:
Promotion is the act of communication that provides consumers with information about a
company’s products, its services, or the venture itself. It is through promotional activities that the
venture attracts customers. They includes advertising, sales promotion salesmanship and other
promotional activities. In general, high quality salesmanship is a must for small businesses
because of their limited ability to advertise heavily.

PRODUCT

A product is an object or a service that is mass produced or manufactured on a large scale with a
specific volume of units. In marketing, a product is anything that can be offered to a market that
might satisfy a want or need. In retailing, products are called merchandise. In manufacturing,
products are purchased as raw materials and sold as finished goods. Commodities are usually
raw materials such as metals and agricultural products, but a commodity can also be anything
widely available in the open market.

The wider concept of a product is: anything tangible or intangible, favourable or unfavourable,
that a consumer attributes to a purchase. This includes the form, function, psychological utility
and benefits (real or perceived) in products or services. Marketing functions are developed
around these packages of attributes. Consumers perceive these attributes within two broad
classifications: Consumer goods and Industrial goods
Find out What Customers Need

To be successful in business you must have the products or services your customers want.

Customers buy goods and services to satisfy different needs. For example:

 Cold drinks satisfy a need to feel cool in hot weather

 Bicycles to satisfy a need for transport
 Radio satisfy a need for news and entertainment
 Clothes satisfy a need to wear something comfortable and need to feel attractive
 Etc

When you understand customers’ needs, you can decide what goods or services to provide.

Customers change their needs:

Always listen to what your customers like and do not like. When their needs change, change
your products and services to satisfy the new needs and increase your sales. Do more market
research.

Provide what your customers want:

Customers want to look at different products so that they can choose what they like best. For
example:

 Some customers want a different design, colour, or taste

 Some customers need a high quality and are willing to pay extra for that.

Checking the Suitability of Product

1. The Product:

(a) Technical Evaluation: Raw material, design, variety of models, types, sizes, shapes,
colours, previous changes, alterations and improvements, adaptation to standards, origin,
(imported/local), durability.
 (b) Appraisal of Quality: Strengths, efficiency, performance, appearance, suitability, easy to
use.
(c) Legal protection: Designs, patent rights, licenses

2. Package/presentation:

(a) Technical Evaluation: Design, shape, materials used, closure, resistance to climate
conditions, (heat, humidity, etc) easy and reliability of packing and packaging during
shipping, handling, storage, display, adaptation to official regulations.
(b) Attractiveness: size, shape, colour convenience, quality impression, design of label.
(c) Identification: shape, colour, label, trademark.
(d) Information: product prescription, ingredients, instructions for use
(e) Service: type of service offered by competitive products – delivery, installation,
conditioning, parts and accessories, education in use, repairs, returned goods.

3. Brands and Trademarks

(a) A trademark is distinguished word, symbol or device which identifies a product with a
particular manufacturer or distributor or service and has a legal protection against
imitations.
(b) A brand is a term or name which can be uttered and like the trademark it is used to
distinguish products. A well known brand will often accomplish the function of a trade
mark.
(c) Brands and Trade marks are important elements of a product.
 They can be transferred internationally and with them the perception of the quality of the
products can often be maintained
 Consumers all over the word want quality products which will enhance their personal
prestige at an affordable price. For example: Brands like ROAMER, RADO, TIMEX,
CASIO and SEIKO are what consumers in various countries look for when purchasing
wrist watches.
  Brands and trademarks are an essential aid in exporting and they help to penetrate foreign
markets. However, it might be better to go the rout of developing local brand names.
Local names conducive to local culture might make them more acceptable to each
country’s consumers. (E.g. Kilimanjaro drinking water)
 There has been a trend in recent years towards trade mark piracy in order to confuse the
consumers and take advantage of the known brands market share. This piracy has
occurred by both imitation and false labeling or by use of relatively similar symbols and
wording. Trademark suits are usually taken against culprits.
 A growing problem nowadays is counterfeiting the unauthorized use of a brand by a
competitor. For instance, Levi Straus brand has been counterfeited in Europe and Asia.
This had led to arrest in a number of countries and consequent confiscation of thousands
of pairs of falsely labeled jeans.

Classifications of Products

1. Consumer Goods:

These are goods that are bought by individuals for personal use. Consumers will always be
encouraged by distribution methods that make purchasing convenient and enjoyable. Consumers
will also consider packaging, forms, colour and price to reinforce their individual perceptions of
value.

Consumer behaviour is predicted primarily on the type of products being sold, but the total
package of product attributes determines consumer perceptions. It is useful to further
differentiate consumer products as: convenience, shopping, specialty, unsought or new goods.

i). Convenience Products

These are well understood items that most buyers need little information about. They are items
commodities in the sense that there are many substitutes, prices are usually undifferentiated and
little time is spent by consumers to comparison shopping. Examples include: soft drinks,
gasololine, toothpaste, chewing gum and cereals.
Brand recognition is often the only way to differentiate commodities from one another, so
manufacturers will spend a great deal of money on national advertising.

Yet at the retail level very little promotion effort will be exerted, and prices among competing
brands will be similar.

Entrepreneurs probably have few opportunities to introduce products in commodity markets.

Convenience goods have low margins and are distributed by major competitors in well
established markets.

Nevertheless, there are many aspiring entrepreneurs who try to enter convenience markets with
new products. Generally, they have no idea of the competition and fail quickly. Those few who
succeed usually have a specialized place, a segment of consumers who look for something
different in commodities like: soaps, toothpastes and soft drinks. For example, all natural sodas
and other soft drinks were established through carefully selected health food stores. They do not
compete with Coca-Cola or Pepsi but being unusual soft drinks, they have attracted a select
clientele. E.g. Anjari, Healtho,------

ii). Shopping Products

These are items that engage a consumer’s mind in active planning. Consumers will consciously
think about their purchases. They will make comparisons, consult consumer buying guides, and
be significantly influenced by promotions.

Shopping products include: video cassette recorders (VCRs), home appliances, microcomputers,
furniture, clothing, and sports equipment etc. major purchases such as automobiles and houses
also fall into this category.

Product features become extremely important to consumers. The following are some of the
shopping product image: Their function, the product quality, reliability, service-after-sale,
reputation of retailers, credit availability, warranties, access to repair facilities, credit availability,
packaging, and many other factors augment the product image.
Shopping products tend to have larger margins and are sold through fewer outlets than
convenience goods. Larger margins help offset lower sales volumes and heavier expenses for
promotion, and it is in this category of products that entrepreneurs have been most successful
because consumers react to unusual products or those distributed and promoted in unusual ways.

iii). Specialty products

These are items with unique characteristics that consumers consider buying only rarely. For
example: a luxury car, an expensive fur coat, or a private airplane. When consumers decide to
buy one of these items, they will search intensely to locate a satisfactory seller. Consumers do
not typically engage in comparative shopping or scan advertisements for good prices. They are
concerned with quality. Substitute will not do and consumers expect superb service.

From the entrepreneur’s point of view, inventory is expensive and sold with very high margins
and those who can establish specialty market do extremely well.

iv). Other (unsought) Products

These are products which are not easily classified into one of the three categories. They are those
things which are often essential but do not constitute a motivated purchasing effort by
consumers. For example: mortuary services, coffins, cemetery plots, flower vases, preventive
dentistry, buying an encyclopedias etc. Customers try to avoid such purchases. Some of these
products or services are not marketed, there is little price competition, and their enterprises exist
with little or no advertising. At the other extreme, some require aggressive promotion and are
price sensitive e.g. Life insurance policies.

v). New products

They are items that are unknown due to lack of advertising or are new products that take time to
be understood. For example: when microcomputers were first introduced they fell into this
category.

Differences between all types of consumer goods

S/N Types of consumer Description
goods
1 Convenience products Commodities or common services, have low margins,
have many competitors: e.g. toothpaste, soap etc
2 Shopping products Major items or services with higher margins and
competitors, differentiated products and services: e.g.
furniture, VCR, microcomputers etc
3 Specialty products Expensive items with unique characteristics, have few
competitors or substitutes: e.g. fashion clothes,
antiques, luxury vacations, jewels etc
4 Other products Essential services having intangible value, those
consumers may avoid: e.g. legal services, funeral
services, estate planning etc
5 New products Unknown or new items that take time to be understood
due to lack of advertising: e.g Aha toothpaste, Rungu
products etc

2. Industrial Products

Industrial products are those products sold to other organizations as raw materials, equipment,
component parts, process materials, supplies and services. There are five categories of industrial
products: direct materials, indirect materials, capital equipment, contracted services, and
maintenance, repair and operating supplies (MRO)

i). Direct Materials:

These include raw materials, subassemblies, and component parts used in production. For
example: steel for cars, plastic resins for toys, aluminum alloy for aircraft and grains for cereals.

These materials offer few opportunities for entrepreneurs. Yet there are thousands of
subassemblies and components essential for manufacturing that do offer opportunities.
Entrepreneurs must have excellent distribution systems to assure on - time deliveries of high –
quality materials.

Consider a product with very simple materials such as a textbook. The printing company or firm
that actually create a book must have huge rolls of paper, cover materials, special inks, materials
for printing plates, and various art materials used directly in the production of the text and cover.
ii). Indirect materials:

These are supplies used in manufacturing and “process” materials used in conversion methods to
create products. Book publishers, for example, need editing pencils, art pens, camera films, ink
filters, imprinting materials and similar supplies, since these are consumed in actual production
process, they are classified as materials.

Entrepreneurs are less likely to have opportunities in indirect materials because, like consumer
commodities, indirect materials have many substitutes, low margins and well established
vendors.

iii). Capital assets:

These are major equipment including production machinery, inventory- handling equipment,
telecommunications equipment, computers, and similar assets. Industrial marketing requires
extensive technical capabilities, often team efforts by vendors, and months of negotiation.

There is a more lucrative market for entrepreneurial firms in accessory equipment. Accessories
are capital assets, but this category includes smaller- ticket items such as small electrical- tools,
drafting tables, engineering instruments, computer peripheral equipment, etc. this list can be
quite extensive and there are always new products coming to market that enhance productivity.

iv). Contracted services:

A broad range of profession consulting activities are contracting services, including engineering
design work, marketing research, advertising, management systems consulting legal services,
accounting and labour relations services.

There are many opportunities to market contracted services because industrial firms often make
use of contracted services rather than full time departments. E.g. Janitorial (gatekeeper) services
and corporate accounts are some of the emerging fastest growing service industries in the United
Republic of Tanzania.
Entrepreneurs must have solid promotional programmes, and reputation of the firm together with
that of the entrepreneur will always weight more than the perceived basic value of the service,
because the entrepreneur is selling “intangibles”

v). Maintenance, Repair and Operating (MRO) Products

Maintenance, Repair and Operating (MRO) supplies constitute a significant market. These
products include light bulbs, paper towels, toilet papers, computerized billing forms and
hundreds of similar items. These are vital supplies that no company can do without. Most MRO
products are commodities in the sense of having many substitutes and there are usually many
suppliers competing for limited sales.

Landing these contracts can be lucrative for entrepreneurs especially if a venture can establish a
reputation for reliable services.

Other Products Considerations:

Classification and market place of products will determine packaging and labeling requirements.
Often packaging is more critical and expensive than the product itself, and depending on the
intended customer, product labeling can be extremely detailed. Packaging customer goods, for
instance, establishes brand awareness and product image. For example; laundry detergents are
differentiated visually by their packages and canned soups by their colour schemes. Consumer
labels provide distinctive names and brand identification. Packaging and labeling must also
comply with Tanzania Food and Drug authority (TFDA) regulations, safety codes established by
the Consumer product Safety Commission and specific packaging methods and information
disclosure for hazardous materials, foods, medications and protection against tampering.

Methods of distribution will also affect packaging and labeling. Individual light bulbs packaged
for retail sales will have brightly coloured protective containers with one to four bulbs to a pack,
and packaging is often more costly than the products.

The same light bulbs sold as MRO products may be bulk parked in dozens and boxed by the
gross. These containers will have minimum product information, simple labels, and protective
but colourless boxes. Usually bulk packaging is relatively inexpensive compared with retail
packaging requirements.

The Product Life Cycle

 Like human beings products have a life cycle. The product life cycle is an important tool
for product planners and for marketers in general.
 The PLC attempts to recognize distinct stages in the sales history of the product
 By identifying the stages that a product is in or may be headed towards companies can
formulate better marketing plans

The general pattern of the product life cycle looks like this:

Sales 2. Growth
3. Maturity and
Saturation
1. Introduction

5. Decline

Maturity and
saturation

Time
1). Introduction stage

This stage starts when the new product is first made available for purchase.

Characteristics

 Profit are negative and low because of low sales and heavy distribution and promotion
expenses
 There are only few competitors
 Firms focus their selling on those buyers who are readiest to buy, usually higher income
groups
Market strategy in the introduction stage

 A rapid –skimming strategy: This consists of launching the product at high price and a
high promotion level
 A slow-skimming strategy: This consists of launching the product at high price and low
promotion level
 A rapid penetration strategy: This consists of launching the product at a low price and
spending heavily on promotion
 Slow penetration strategy: This consists of launching the new product at a low price
and low level of promotion. Low prices will encourage rapid product acceptance and the
company keeps its promotion down in order to realize more net profit.

2). Growth Stage

This is marked by a rapid rise in sales. It is a period of rapid market acceptance and substantial
profit improvement

Characteristics

 New competitors enter the market attracted by large profit

 New product features are introduced by competitors
 Sales increases
 Profit increases

Market strategy in the growth stage

 The firm improves product quality and features

 It enters new distribution channel
 It shifts some advertising from buildings products awareness to bringing about product
conviction and purchase
 It lowers prices at the right time to attract next layer of price sensitive buyers.
 3). Maturity and Saturation Stage.

This is a period of slow down in sales growth because the product has achieved acceptance
by most of the potential buyers

Market strategy in the saturation stage

The company should seek to expand the market for its brands by converting non-user enter new
marketing segments

 Improve quality
 Improve style
 Price cut
 Penetrates to more outlets
 Increase advertising expenditure
 Etc

4). Decline Stage

The sales for most product forms and brands eventually decline

Market strategy in the decline stage

 Identifying the weak products

 This involves dropping a product from the line
 Some firms will abandon; declining earlier than others
 The remaining firms will enjoy an increase in sales and profits
 The drop decision

When a product has been singled out for elimination, the firm faces some further decisions.

 It has an option to selling or transferring to someone else or dropping it completely

 The firm should decide when the product should be dropped
  Management will also want to provide a stock of replacement parts and services to sketch
over the expected life of the most recently units

COSTING