MGT153

Marketing is a process of planning and

executing conception, pricing, promotion and
distribution of ideas, goods and services to
create exchanges that satisfy individual and
organizational objectives
(The American Marketing Association, 1985)

Marketing can be defined as the actions of firm

to plan and execute the design, pricing,
distribution and promotion of products
(Madura, 2007)

Marketing is a social and managerial process

by which individuals and groups obtain what
they need and want through creating,
offering, and exchanging products of value
with others
(Kotler,1994)

Needs, Wants, and Demands

Marketing:
The

managing of profitable relationships

Satisfying customer needs

Needs:
Felt

deprivation

Wants:
Form

of needs shaped by culture

and personality

Demands:
Wants

backed by buying power

Marketing Management

Market:
Set of actual or potential buyers

Marketing management:
Choosing target markets
Building profitable relationships with them

Demarketing:
Reduce, not destroy
demand
Temporarily or
permanently

Marketing Management Orientations

Production concept
Product concept
Selling concept
Marketing concept

Societal Marketing Concept

Determine needs/wants of target markets

Deliver desired satisfactions
More efficiently and effectively
Maintain or improve consumers
and societys well-being

Selling
Buying
Storing
Transporting
Financing
Securing Information
Grading & standardization
Assuming risk

Marketing mix is defined as:

The mixture of controllable marketing

variables that the firm uses to pursue the
sought level of sales in the target market

Marketing mix is a combination of four

important elements. They are product,
price, place(distribution) and promotion,
that is created to reach a particular target
market

The Four Ps of the Marketing Mix

A product is a combination of attributes that

creates customer appeal: style, design
utility, packaging, color, size and prestige
(Kotler, 1994)

Product can be classified into two categories;

Industrial

goods
Consumer goods

Industrial Goods
An

industrial goods are goods that a business

firm buy to make other products, or they are
used in the firms operation or production
processes

Consumer Goods
They

are goods meant to be used by

consumers or individuals
They are purchased by customers for their
own use and consumption

Consumers goods can be classified into four

types. They are:
i.

Convenience goods
all types of goods that customers purchase
frequently, used up quickly and purchase with a
minimum effort in
comparison for its price or
quality
e.g. cigarettes, newspaper
It can be divided into three types
a) Staples goods
b) Impulse goods
c) Emergency goods

ii.

Shopping goods
Goods that customers buy only after comparing
its price, quality, style and suitability
e.g. furniture, clothing, electrical appliances

iii.

Specialty goods
Goods with unique characteristics or brand
identification for which a significant group of
buyers are willing to make a special purchasing
effort, or wait for sometimes to get the goods
that they really want
e.g. car, house

iv.

Unsought goods
Goods that consumers do not know about or
know about but they do not normally think of
buying
e.g.

New products such as smoke detectors,

food processor

Product Line & Product Mix

o

Product line is a set of related products or

services offered by a single firm

Product mix is assortment of products

offered by a firm

Creating New product

Many new products are improvement of existing

products. This can cause existing products to
become obsolete. Two types of obsolescence are
identified:

Fashion obsolescence
Technology obsolescence

Steps necessary to create new product

Develop a product idea

Assess the feasibility of the product idea
Design and test the product
Distribute and promote the product
Post audit

Product Differentiation
Is

the effort by a firm to distinguish its

product and services from competing products
Unique

product

Unique

packaging

Unique

branding

Family branding
Producer brands
Store brands
Generic brands

Price is the amount of money a person is

willing to pay for a good or services they
want or desire

Pricing is a pricing decision

should be taken into account
profit margins and the probable
pricing response of competitors

Pricing Strategies
a) Pricing

for the existing product

- Pricing above prevailing market prices for

similar products
- Pricing below market prices
- Pricing at or near market prices
b) Pricing

for new product

- Skim pricing
- Penetration pricing

Pricing Methods
a)

Cost-plus pricing
Set the price at the production cost plus a certain
profit margin

b)

Target return pricing

Set the price to achieve a target return on investment

c)

Value-based pricing
Base the price on the effective value to the customer relative to
alternative products

d)

Psychological pricing
Base the price on factors such as signals of product quality,
popular price points and what the consumer perceives to be fair

Price Discounts
a) Quantity

discount
b) Cumulative quantity discount
c) Seasonal discount
d) Cash discount
e) Trade discount
f) Promotional discount

Competition Based Pricing

1) Going

rate pricing

The firm bases its price largely on competitors

prices with less attention paid to its own costs
or demand
2) Sealed-bid

pricing

This method is usually used when firms bid for

jobs basing price on expectation of how
competitors will price rather than on a rigid
relation to the firms cost or demand

Promotion is method of communication by

which business organizations inform,
persuade and influence customers or
potential customers to buy their products or
services

Promotional Mix
Advertising
Personal

selling
Sales promotion
Public relations

Advertising
It

is a non personal sales presentation

communicated through media or non media
forms to influence a large number of
consumers and it is involved payment

Reason
Brand

for advertising:

advertising
Comparative advertising
Reminder advertising
Institutional advertising
Industry advertising

 Forms

of advertising reaches its audience:

Newspapers
Magazines
Direct

mail
Yellow pages advertising
Out-of-home advertising
Television
Radio
Internet
Telemarketing
Transportation
Specialty

Personal Selling
It

is a personal sales presentation used to

influence one or more consumers

Six
o
o
o
o
o
o

steps of personal selling process

Identify the target market

Contact potential customers
Make the sales presentation
Answer questions
Close the sale
Follow up

Sales Promotion
The

set of activities that is intended to

influence consumers

Types

of sales promotion

Rebates
Coupons
Displays
premiums

Public Relations
Action

taken with the goal of creating or

maintaining a favorable public image

Three

types of public relations

Special events - some firms sponsor a special

event

News release - a brief written announcement

about a firm provided by that firm to the media

Press conference an oral announcement about a

firm provided by that firm to the media

The advantages and disadvantages of

promotion mix
Promotion Method

Advantages

Disadvantages

Advertising

reaches a large number

of customer

- can be expensive
- not personalized

Personal selling

Provides personalized
attention

Difficult to reach a
large number of
customers

Sales promotion

Offers various incentives

for consumers to
purchase products

May not reach as many

consumers as
advertising

Public relations

Inexpensive method of
enhancing the image of
the firm or its products

Provides only a limited

amount of promotion
because news release
and press conferences
may not always be
covered by the media

It is a process of getting products from the

producers moved to the users or the buyers

It involves transferring product ownership

from the producers to consumers

Producers can sell their products directly to

customers but as the market grew so big,
channels of distribution came into assistance

A market segment is a group of individuals or

firms, within a market, that share one or
more common characteristic

Market segmentation is the process of

dividing the total market into groups of
people with relatively similar product needs
(Ferrel & Hirt, 1993)

Consumer Market Segmentation

Business Market Segmentation

Requirements for Effective Segmentation

1)

Measurable
Size, purchasing power, and profiles can be
measured

2)

Accessible
Segments can be reached

3)

Substantial
Large enough to be profitable

4)

Actionable
Programs can be developed to attract and serve
the segments

A distribution channel is the path a good follows from

producer to the consumer

Companies or producers may work with marketing

intermediaries to bring their products to the market

Marketing intermediaries include wholesalers and

retailers

The common distribution channel use:

Direct channel
One-level channel
Two level channel

Direct Channel
It

happens when a producer deals directly

with customers without using intermediaries
e.g. online shopping, catalog shopping,
telemarketing and television shopping
networks

 Advantages
1)

The producer receives the full difference

between the manufacturers cost and the price
charged to the customer

2)

The producer has full control over the price to

be charged to the customer

3)

The producer avoids the markups charged by

intermediaries

4)

The producer obtains firsthand feedback from

customers

 Disadvantages
1)

The producer must perform all of the

distribution functions, so it must hire more
employees and use additional resources, which
increase its costs

2)

The need to perform all the distribution

functions can cause the manufacturer to lose
its focus on production

3)

A manufacturer the deals directly with final

customers may have to sell on credit, which
can be costly and exposes the firm to the risk
of bad debts

One-level Channel
One

marketing intermediary is between the

producer and the customer
a) Merchants - Intermediaries who become
owners of the products and resell them
b) Agents bring together buyers and sellers
without assuming ownership of the goods they
help distribute

Two-level Channel
Two

marketing intermediaries are between

the producer and the customer

Number of Intermediaries

PLC consists of four stages that a product

may go through when being marketed by the
firm

The four stages are

1)
2)
3)
4)

Introduction phase
Growth phase
Maturity phase
Decline phase

Product Life Cycle

Introduction
Require

high promotional expenditures and

visibility
The most productive time to advertise the
product
Characterized by high cost relatively low sales
volume
Advertising program aimed at stimulating
primary demand
High percentage of failure

Growth
Product

and service been accepted by consumers

Making the market attractive to competitors
Promotional expenditures remain high
Promotional emphasis on selective buying
motives by trade name rather than try the
product.
Number of outlets increase
More competitors enter the marketplaces
Economies of scale are realized and price decline
some

Maturity
Is well establish in the marketplace
Sales may still increasing but at much slower rate
They are very competitive especially with respect to
price
Firm try to determine ways to hold market share
They are now leveling off and try to diversify

Decline
Many product stay at saturation stage for years
Obsolescence product will be replace by new products
Demand obviously drop, advertising cost low and smaller
number of competitor
No longer in the consumer idea to go

Summary of PLC

The consumer market consists of all the

individuals and households who buy or
acquire goods and services for personal
consumption

Consumer buying behavior is the output of

how individual or household consumers
behave or the decision making on buying any
goods or services

Types of Consumer Buying Behavior

Routine

response/programmed behavior

Buying

low involvement frequently purchased

low cost items
Need very little search and decision effort
Purchased almost automatically
Limited
buying

decision making

product occasionally
Requires a moderate amount of time for
information gathering

 Extensive

decision making/Complex

High

involvement
Unfamiliar, expensive and/or infrequently bought
products
Spend a lot of time seeking information and
deciding
Impulse
No

buying

conscious planning

Factors Influencing Consumer Behavior

Culture:
Basic

values, perceptions, wants and behaviors

Learned from family and important institutions

Subculture:
Group

of people with shared value systems

Based on common life experiences and situations

Canadian subcultures of interest:

Native

Canadians
Ethnic groups
French Canadian

Social class

Social factors:
Groups:

reference, membership, and aspirational

groups
Opinion leader
Family
Roles and Status

Personal factors:
Family life cycle
Occupation
Economic situation
Lifestyle: activities, interests, and opinions (AIOs)
Personality and self-concept: brand personality

Psychological factors:
Motivation: needs and motives, Maslows Hierarchy
of Needs
Perception: selective attention, distortion, and
retention
Learning: drives, stimuli, cues, responses, and
reinforcement
Beliefs and attitudes

Consumer buying Decision Process

Need recognition:
Triggered

by internal or external stimuli

Must reach an intensity high enough to become a
drive

Information search:
Memory

(internal) search
External search: personal, commercial, public,
experiential sources of information
Word-of-mouth sources are most influential

Evaluation of alternatives:
The

process of evaluating information to make a

decision
Attributes and importance weights are chosen
Alternatives compared against the criteria

Purchase decision:
Attitudes

of others and unexpected situational

factors
May come between purchase intention and
decision

Post-purchase behavior:
Relationship

between consumer expectation and

perceived performance
Cognitive dissonance
Customer satisfaction is key to customer loyalty