Chapter five Marketing
v Marketing is the process of conducting transactions or
exchanges between social units (individuals or organizations) with the aim of
satisfying human needs or wants. It involves activities designed to generate
and facilitate these exchanges.
v Marketing can be carried out by both business firms and
non-profit organizations, and it encompasses the marketing of goods, services,
ideas, people, and places.
v Marketing involves identifying and satisfying customers'
needs and wants, understanding the market, competition, and selling processes
to achieve business objectives.
Marketing aims to answer important
questions such as:
·
Who are my
customers?
·
What are my
customers' needs and wants?
·
How can I
satisfy my customers?
·
How can I make a
profit while satisfying my customers?
Core Concepts of Marketing
v Need: refers
to a fundamental requirement for survival and well-being. It encompasses
necessities such as food, clothing, shelter, safety, and belonging.
v Want: is
a desire for a specific product or solution that can fulfill a need. Wants are
influenced by societal factors and can vary among individuals and cultures.
v Demand: are
wants for specific product that supported by the ability and willingness to purchase a
particular product, indicating purchasing power. Wants become demand when
supported by purchasing power
v Product: Anything
offered to fulfill a need or want, encompassing tangible goods, services, or
intangible ideas.
v Value: means
the consumer perception of a product's ability to satisfy needs, considering
acquisition, ownership, and usage costs.
v Cost: Cost
refers to the expenses incurred to create, produce, distribute, and acquire a
product.
v Exchange means the act of acquiring a desired product by
offering something in return, involving the transfer of goods, services, or
ideas.
v Transaction means the process of trading values between two
parties, typically involving the exchange of money for a product or service.
v Market a collective of potential customers who share a
specific need or want and possess the willingness and capability to engage in
exchanges to satisfy those needs or wants.
Importance of marketing
Utility in marketing refers
to the perceived value or usefulness that a product or service provides to
customers in satisfying their wants and needs.
v Form
utility is linked to production and involves making changes
(physical or chemical features) to a product that increase its value.
v Place
utility exists when a product is easily accessible to
customers. This emphasizes the significance of strategic product placement,
distribution channels, and retail locations
v Time
utility focuses on making a product available when customers
want it. This implies the importance of efficient inventory management,
production planning, and supply chain logistics.
v Information
utility emphasizes the role of informing buyers about a
product's features and benefits. This is achieved through advertising,
promotional activities, and effective communication strategies.
v Possession
utility is created when a customer purchases a product and
gains ownership of that product.
Marketing philosophy
1.
The Production Concept:
·
Consumers favor
widely available and low-cost products.
·
Focus on high
production efficiency and wide distribution.
·
Applicable in
situations of high demand or cost reduction needs.
2. The
Product Concept:
·
Consumers favor
products with quality, performance, or innovative features.
·
Focus on
creating superior products and continuous improvement.
·
Assumes buyers
appreciate well-made products without significant customer input.
3. The
Selling Concept/Sales Concept:
·
Assumes
consumers won't buy enough without aggressive selling efforts.
·
Employ
aggressive selling and promotional efforts.
·
Particularly
relevant for unsought goods or excess production capacity.
4. The
Marketing Concept:
·
Focus on
understanding and satisfying customer needs and wants.
·
Integrate
marketing activities to deliver superior value to customers.
·
The marketing
concept has been expressed in many colorful ways:
Ø Meeting needs profitably
Ø Find wants and fills them
Ø Love the customers, not the product etc.
5. The
Societal Marketing Concept:
·
Consider
customer needs, wants, and societal well-being.
·
Deliver desired
satisfactions while preserving or enhancing consumer and societal well-being.
·
Address
environmental, resource, economic, and social concerns.
6. Relationship
Marketing:
·
Build long-term,
satisfying relationships with customers, suppliers, and distributors.
·
Focus on
customer experience rather than customer satisfaction and retention of customer
loyalty.
·
Aim to create a
marketing network for enhanced competitiveness and success.
Marketing
Information Systems
A marketing information system (MIS) is
crucial for firms to organize and disseminate information to marketing
managers. This system involves people, equipment, and procedures designed to
gather, analyze, evaluate, and distribute timely and accurate information to
support marketing decision-making.
Marketing
Research
Marketing research is
a systematic and objective approach to identify, collect, analyze, and
disseminate information to aid management in decision-making related to
marketing problems and opportunities.
Functional
Roles of Marketing Research:
1. Descriptive
Function: Gathers and presents statements of fact.
2. Diagnostic
(Analytical) Function: Explains data.
3. Predictive
Function: Specifies how to use descriptive and diagnostic
research to predict outcomes of planned marketing decisions.
Components of Marketing Research:
v Market
size: Number or value of units sold in a given period.
v Market
share: Specific corporation's share of the market size.
v Market
penetration: is a strategy to enter
a market with current products and gain better market share by reducing price
of product.
v Brand
equity research: Assessing how favorably consumers view a brand.
v Buyer
decision processes research: Understanding
what motivates people to buy and their decision-making process.
v Customer
satisfaction research: Assess customer satisfaction through various
research methods.
Customer Satisfaction Research:
v Distribution
channel audits: Assess distributors and retailers' attitudes toward
a product or brand.
v Marketing
effectiveness and analytics: Building models and
measuring the effectiveness of marketing activities.
v Mystery
Consumer or Mystery shopping: Researcher acts as a
shopper to evaluate quality control or competitors' products.
v Positioning
research: Understanding how the target market perceives the
brand relative to competitors and what it stands for.
v Price
elasticity testing: Determine customers' sensitivity to price changes.
v Sales
forecasting: Predicting expected sales levels based on demand and
other factors.
v Segmentation
research: Identify demographic, psychographic, and behavioral
characteristics of potential buyers.
v Test
marketing: Small-scale product
launch to gauge acceptance before wider market introduction.
Marketing Research Process
1. Step
1: Define the research purpose or objectives
2. Step
2: Research Design Formulation
3. Step
3: Gather at this stage secondary data,
4. Step
4.Gather Primary Data
5. Step
5: Data Processing and Analysis
6. Step
6: Report Preparations and Presentation
Marketing
Intelligence
Market intelligence is
the systematic process of gathering, analyzing, supplying, and applying
qualitative and quantitative information about the external market environment.
v It
used to determine current and future market needs.
v It
helps identify changes in the business environment that may impact the market.
Importance
of Marketing Intelligence
·
Foster market
and customer orientation.
·
Identify new
opportunities.
·
Facilitate smart
segmentation.
·
Offer early
warnings of competitor moves.
·
Minimize
investment risks.
·
Gain quicker,
more efficient and cost-effective information for decision-making.
Ways to Undertake Marketing
Intelligence:
v Unfocused
scanning: Gather useful information without a specific
purpose.
v Semi-focused
scanning: Narrowing the range of media scanned based on
preferences.
v Informal
search: Limited and unstructured attempt to obtain
information for a specific purpose.
v Formal
search: Purposeful and systematic search for information,
usually carried out by the manager.
Competitive
Analysis
Competitive analysis involves
determining the strengths and weaknesses of competitors and designing
strategies to capitalize on opportunities or address threats posed by
competitors.
Uses of
Competitive Analysis:
v Understand competitive advantages/disadvantages.
v Gain insights into competitors' past, present, and
future strategies.
v Provide an informed basis for developing future
strategies.
v Helping forecast returns from future investments.
Steps of
Competitive Analysis:
1. Identify Competitors:
2. Gather Information About
Competitors:
3. Gathering Information on
Competitors:
4. Analyzing the Competition:
5. Develop Pricing:
The Marketing
Mix 4 P‟s of Marketing and Marketing Strategies
The marketing mix,
are key variables that a marketing manager can control to influence consumer
behavior. They include:
1. Product: Refers
to goods or services produced for sale. Products should align with customer
needs and wants.
Important considerations:
·
What
products/services are offered?
·
Why were these
products chosen?
·
Do the products
align with customer preferences?
·
Are there
slow-selling products in the inventory?
·
Are customer
needs changing?
2. Pricing: Involves
determining the cost of a product or service. Balance the need to attract
customers with the need to generate profit.
Considerations:
·
Know your costs.
·
Understand
customer price sensitivity.
·
Be aware of
competitors' pricing.
·
Enhance price
attractiveness through strategies.
3. Place: Encompasses
distribution and getting your products or services to customers. Distribution
methods include direct selling, retail distribution, and wholesale
distribution.
Considerations:
·
Ensure
accessibility to customers.
·
Evaluate direct
and indirect distribution channels.
4. Promotion: Involves
informing customers about products and services to drive interest and sales. Promotion
channels include advertising, sales promotion, publicity, and personal selling.
Considerations:
·
Utilize various
promotional tools.
·
Create awareness
and interest.
·
Encourage
immediate sales through promotions.
What Is Marketing Strategy?
A marketing strategy is
a methodical and organized approach adopted by an organization to concentrate
its limited resources on the most favorable opportunities that enhance sales
and establish a lasting competitive edge,
Marketing strategy
encompasses various elements, including product development, promotion, distribution,
pricing, and relationship management.
1.
Pricing
Strategies:
v Price Skimming: A
pricing strategy involving setting the initial product price at the highest
level customers willing to pay, targeting a market segment attracted to
quality, exclusivity, or innovation. Effective when demand is relatively inelastic.
v Penetration Pricing: is
a strategy where prices are set lower than competitors to enter a market
quickly, gain market share, and stimulate sales. Quality must match or exceed
competitors. Suitable in markets with elastic
demand.
v Cost-plus Pricing: A
method where the product price is determined by adding a specified profit
margin to the total cost of production. It ensures that all costs are covered
and a profit is achieved.
v Mark-up Pricing: A
pricing approach involving adding a predetermined percentage (markup) to the
production cost to determine the selling price. It simplifies pricing decisions
by focusing on a consistent markup percentage.
v Competition-Oriented Pricing:
A strategy where pricing decisions are primarily influenced by competitors'
pricing strategies. This approach considers the prevailing market conditions
and aims to position prices relative to competitors.
v Odd-Even Pricing: is a psychological pricing tactic where prices are
set at odd numbers just below round figures (e.g., $49.95 instead of $50.00).
This creates a perception of a lower price, leveraging consumer psychology to
increase sales.
2.
Promotion
Strategies:
Promotion involves the communication of a company and its
products to customers. Promotional strategy
involves selecting a target market and formulating an appropriate mix of
promotional elements to influence it.
v Advertising it is a Paid form of nen personal and one-way
communication to a mass audience promoting an organization, product, or idea by
an identified sponsor.
v Personal Selling Two-way communication between a buyer and seller, often face-to-face, designed to influence purchase decisions.
v Public
Relations directed at shaping and influencing perceptions of
various stakeholders, including customers, shareholders, suppliers, employees,
and the public about the company's product.
v Sales
Promotion is a short-term incentive like discounts and free
samples to arouse customer interest and prompt immediate purchases.
3.
Distribution
Strategies:
For product-focused
companies, effective distribution strategies are essential for success,
maximizing sales and profits. However, challenges and pitfalls may hinder the
establishment and maintenance of effective distribution strategies. Some
identified problems include:
v Unwillingness to establish different distribution
channels for different products.
v Fear of utilizing multiple channels, especially
direct or semi-direct sales, due to concerns about distributor loyalty or
inter-channel cannibalization.
v Failure to periodically revisit and update
distribution strategies.
v Lack of creativity and resistance to change.
Marketing
Channels:
Marketing channels
involve individuals and organizations in the process of making products
available for use or consumption by consumers. It plays a crucial role in the
effective and efficient distribution of products.. Marketing channels are
categorized into:
v Direct Channels: Producers
and end users directly interact.
v Indirect Channels: Intermediaries,
such as merchant wholesalers, retailers, dealers, agents, brokers, and
manufacturer's branches and offices, are involved.
Factors to consider
when selecting the best channel for a distribution strategy include:
v Company Factors: Financial,
human, and technological capabilities.
v Market Characteristics: Geography,
market density, market size, target market.
v Product Attributes: Perishability,
value, and sophistication.
v Environmental Forces: Factors
like competition, technology, and culture.
Selling and
Customer Service:
The
Concept of Service:
Service refers to any activity undertaken to fulfill a
customer's needs. It encompasses any act or performance that one party can
offer to another, which is essentially intangible and does not result in
ownership. Services may or may not be tied to a physical product.
Distinctive
Features of Services:
1. Intangibility: Pure
services cannot be defined in terms of physical dimensions; customers cannot
see or feel them before purchase.
2. Inseparability: Production
and consumption of services are inseparable; the 'sale' occurs just before
both.
3. Variability: Services
are highly variable, depending on who provides them, when, and where.
4. Perishability: Services
are produced and consumed at the same point, becoming perishable right after
use.
Characteristics
of Service:
1. Situational: What
is considered good service can vary for the same customer on different
occasions.
2. Difficult
to Measure: Measurement of service is challenging, as higher
expectations lead to increased customer expectations.
3. Subjective: Acceptable
service for one customer may not be equally acceptable to another.
4. Influenced
by the Service Provider: Effective expectation
setting by the service provider can influence customer satisfaction.
The
Concept of Customer:
A customer is
a person or organization that purchases a product or service either for use or
for resale. Customers can be internal (e.g., members of the organization) or
external (customers from outside).
Strategic
Activities for Quality Customer Service Delivery:
To ensure consistent,
efficient, and excellent customer service delivery, organizations should focus
on key strategic activities:
1. Establishing a Clear
Customer Service Strategy:
2. Ensuring the Right People
are in Place:
3. Establishing Clear Service
Delivery Processes:
4. Continuous Improvement:
5. Participatory Management:
Customer Handling and Satisfaction:
Customer handling and
satisfaction are crucial for the success of organizations. Managers and
employees must collaborate to enhance service delivery programs, ensuring
satisfaction among existing customers and transforming them into potential
customers. The following principles are expected from successful service
providers:
1. Significance of Customer Satisfaction:
v Poor or defective service can lead to the loss and
bankruptcy of organizations.
v Organizations often invest heavily in increasing
market share but must prioritize not losing a single customer.
2. Retaining Existing Customers:
v Organizations should consider customer satisfaction
as a top priority.
v Poor customer handling can result in the loss of
existing customers, impacting sales and profitability.
v Major reasons for losing customers include poor
service, poor quality, and rude behavior.
v Customer retention requires effort, time, and
financial investment.
3. Attracting New Customers:
v Organizations striving to increase market share must
attract new customers.
v Attracting new customers is directly linked to
keeping existing customers satisfied.
v Losing customers due to poor service and an uncaring
attitude is avoidable with proper efforts.
Considering
Customers as an Invaluable Asset:
v The value of one customer is infinite, encompassing
sales in their lifetime and customers generated through word of mouth.
v Customers are the most precious asset, and
organizations should focus on both immediate and future profits.
Reducing
Customer Complaints:
v Each complaint gives a chance to enhance the quality
of products and services.
v Resolving complaints quickly is crucial; 91% of
customers with major complaints decide not to return, but quick resolution can
bring back 82% of them.
v Customer satisfaction is a valuable investment with
returns through referrals, repeat purchases, decreased operational costs, and
increased profits.
5.8.4.3 Place Yourself in The Customer’s Shoes:
v While organizations have the right to choose
customers, compromising on service quality is not a luxury.
v Parting ways with unwanted customers should be done
tactfully, keeping in mind the principle of treating customers as you would
want to be treated.