The Concept of Marketing

Chapter one
An overview of principle of marketing

Many people consider marketing as a discipline that is only concerned about advertising and selling products. But a more profound
insight defines marketing as the analysis, forecasting, implementation, and control of marketing objectives, programs, and efforts to
create, build, and maintain symbols worth value exchanges and relationships with people for the achievement of organizational
objectives (Kotler P.9)
The major activities covered by the term marketing are

Information and research- ensuring that there is sufficient knowledge about the customers and their needs, as well as the
competition and their offerings.
Panning, designing, and producing products and services- ensuring that the product and services are matched to the needs of
the customer and where possible gaining a competitive advantage over other products.
Packaging- ensuring that the products are packed in a way that appeals to the customers.
Pricing- ensuring that the products are competitively priced taking its quality and market offer.
Promotion- having designed a good product and priced it accurately, the company needs to communicate the benefits to the
potential customers in a way that will attract them to buy it.
Distribution- the company, after creating awareness, should make the product available at the required spot to facilitate the
selling rate.
Prepared By: Mr. Abdi Mohamed Osman Prepared

By: Mr. Abdi Mohamed Osman Page 1
Marketings existence, without comprehending peoples need, is nothing but a vain trail. Whenever marketing organizations think that
they are performing according to an attainable desire of buyers, then it should keep in mind whether its activity is customer oriented.
In the above definition, there are some terms that ought to be discussed further. These are some additional marketing words or phrases
that need in depth explanation.
1.1 The concept of marketing

Different writers and professionals have defined marketing in various ways. Some of the most important of them are the following.
Marketing is the total business activity designed to plan, produce and price, promote and distribute products to the target
market to achieve company goals and objectives.
Marketing is the process of planning and executing the conception pricing, promotion, and distribution of ideas, goods and
services to create exchange that satisfy individual and organizational needs and desires.
marketing is a social and managerial process by which individuals and groups obtain what they need and wants through
creating and exchanging products and values with others.
it is a social and managerial process by which people obtain what they need and what they want through
creating and exchanging product and value with them. It is a social process because in their every day lives
people continuously interact with market vice versa.
It is a managerial process because it requires the decision of marketing manager and other responsible
individuals how to create demand, product and job as well. It is a process of planning and executing marketing
mix elements-conception, pricing, promotion and distribution of ideas, goods and services, to create exchanges
that will satisfy organization objectives and individuals it involved decision as:
What products should a firm offers to buyers

What price to charge to buyers
How to make the offerings available to buyers
When, where and how to communicate with buyers about the offering
In simpler terms, marketing is the process of identifying and satisfying customer needs with wants satisfying goods and services.
Core marketing concepts

I. Needs: - state of felt deprivation of some basic satisfactions-necessities such as the need for food, water, clothing, shelter,
warmth, sleep, oxygen, safety social belongingness, and esteem (the need for knowledge and power). They are basic because
they are necessary for the survival of human and other animals.
II. Wants: - are desires for specific satisfiers of needs. Wants are preference of needs. They are form taken by human needs as
they are shaped by culture and individuals personality. For instance an Ethiopian needs food and wants injera with doro wat
where as an American needs food and wants a hamburger, French frees and coke.
III. Demands: - are wants for specific products that can backed by an ability and willingness to buy them. Simply, when buying
power backs human wants are demands (i.e., given their wants resources, and willingness, people demand products with
benefits that add up the most value and satisfaction.
IV. Products: - any things that can be offered to a market for attention, acquisition, use or consumption that may satisfy human
wants or needs. It includes physical objects, services, person, place, organization and ideas. We can use terms for products,
such as offerings or solutions. Products can be
Tangible goods, such as all physical objects,

Intangible services, such as professional services, maintenance, place, organization, ideas, person,
financial and all personal services.
V. Value: - customers expectation of the overall performance of a product at a lower cost of acquisition and use. Consumer value
is the difference between the values of the customer gains from owning and using the product and the cost of obtaining the
product. It is the consumers estimate of the products overall capacity to satisfy his or her needs and wants. It determines the
customers product choice. Since each product involves a cost, the buyer will not necessarily choose only one product, which
costs substantially more than another similar or substitute products.
VI. Satisfaction: - when products performance exceeds the customer expectation, getting a facing of pleasure and happiness from
the consumption of valuable goods and services.
Customer satisfaction with a purchase depends on how well the products performance lives up the customers expectation with.
Customer satisfaction is a key influence on future buying behavior. Satisfied customers buy goods and services repeatedly and tell
other buyers about their good experiences. However, dissatisfied customers often switch to competitions disparage the product to
others.
We can say that our product value is the satisfaction of customer
requirements at the lowest possible cost of acquisition, ownership, and
use and with maximum treatment from the sellers.
VII. Exchange: - is the act of obtaining a desired product from someone by offering something in return. It is the basis of
marketing. Therefore, marketing occurs when people decide to satisfy their needs through exchanges process.
For potential to be occurred, the following conditions must be satisfied.
There must be at least two parties: the seller and the buyer.
Each party has something that is of value to the other party.

There should be communication and delivery capacity of each part.
There should be a need for freedom of each party to accept and reject the offers.
Each party should believe it is appropriate or desirable to with the other party.
Note. People can obtain products in one of the four ways: self production, such as hunting, fishing, or fruit gathering; coercion or by
forces, like wresting or stealing; begging; exchange, such as goods for goods, goods for money, services for money, etc. here the
concept of exchange usually leads to the market.
VIII. Transaction: - is a trade of value between two or more parties. Transaction is the return of exchanges, for the transactions is
occurred such dimensions as at least two things of value, agreed upon conditions, time of agreement and place of agreement.
Types of transaction: barter transaction and money transaction.
Note: transaction is transfer. Transaction is bi-directional where as transfer is unidirectional.
IX. Relationship: - is the outcome of marketing transaction where the marketers develop a long term satisfying relation with
different key parties, such as customers, suppliers, etc.
To build and maintain desirable exchange relationships with target involving product, services, idea or other object. Marketer has to
build strong social and economic relationship by delivering and promising superior customer value constantly.
X. Network: - is the outcome of marketing relationship with different stakeholders: customers, employees, suppliers, distributors,
and indirect participants.
XI. Market: - is a set of all actual and potential buyer of a product or service.
XII. Marketer: - is a person who is seeking an exchange and transaction to take place. Marketers must perform activities such as
planning and development, research, communication, pricing, distribution, promotion mixes.

XIII. Prospects: - is a person to whom an offer for exchange is forwarded. Prospecting is step in which the selling process, in which
the salesperson identifies qualified potential customers.
Marketing channel
Marketing channel: - to effectively serve target market, there are three kinds of marketing channels. One, communication channels
send and receive massage to and from target buyers and includes newspapers, TV, radio and others. Two distribution channels serve to
display, sell, or delivery the physical product or service to the buyer or user.
Three service channels serve to carry out transactions with prospect like warehouse, banks, insurance and others supply chain.
Competitions
Competitions: - competitions are all the existing rival products and substitutes that a buyer might consider to buy. The actual
competition of coca-cola is Pepsi while the substitutes are mineral water, canned juice and others. There are four level of competition
based on substitutability.
Brand competition: - those companies which offer similar products and services to the same customers at similar
prices. Dell computer is brand competitor of Microsoft
Industry competition: - all companies that offer the same product or class of products,. All computer hardware
manufacturers are competitors of Dell computers.
Form competition: - all manufacturing companies products that render the same service, mechanical, and electrical
type writer producers and hand held recording calculators producers are competitors of Dell computer.
Generic competition: - all companies that fight for the same dollar. Real state business, automobile producers and
others.

Marketing environment
The marketing environment comprises
a. Task environments: - immediate actors like suppliers, distributers, research agencies, etc, which facilitate the
accomplishment of objectives.
b. Broad environments: - consists of demographic environment, economic, natural, technology, political, legal and socio-
cultural environment upon which the management does not have a direct control.
Marketing programs
It is a set of marketing decisions that can be implemented in different situation, like
price (how much to sell), the nature and attribute
product (what to sell), market policy (where to sell),
promotion (how to make it known in the marker).
These are known as marketing mix or 4Ps and are related with a sellers idea while customer looks for 4Cs which are customer
solution, customer cost, convenience, and communication company orientations toward the marketplaces prior to designing and
implementation of marketing programs and efforts.

Company philosophy toward marketing management
To make a firm lucrative, marketing managers dictate different philosophy and formulate and overemphasize upon different principles.
Some principles have been so effective in the past and others are best at these dates in handling the customer. The principles customize
companies operation in light of their philosophy toward marketing. Some of the philosophies are:
A. The production concept: - the philosophy that consumer will favor products that are available and highly affordable and
that management should therefore focus on improving production and distribution efficiency.
B. The product concept: - the idea that consumers will favor products that offer the most quality, performance, and feature
and that the organization should therefore devote its energy to making continuous product improvements.
C. The selling concept: - the idea that consumers will not buy enough of the organizations products unless the organization
undertakes a large scale of selling and promotion effort.
D. The marketing concept: - the marketing management philosophy that holds that achieving organizational goals depends
on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and
efficiently.
E. The societal marketing concept: - when the firm s offer environmental friendly products and market them keeping the
welfare in mind, then the management team is considered as proponent of societal marketing.

Marketing and demand management
Marketing management involves managing demand that in turn involves managing customer relationship.
As discussed in the above introductory marketing terms, demand is need with a buying capacity. If a firm stretches due demand
handling strategy, then the firm is on its way to success. The traditional way of handling demand was like leaky bucket. Marketers try
to be thronged with multitude of new consumers. However after consumers become loyal buyers, the marketer ignores them and stop
accepting ideas and measuring their satisfaction. Unlike leaky approach, demand management serves what consumers look for no
matter when. There are eight diverse intensity of demand.
1. Negative demand: - A state of demand in which consumers do not like (do hate) the product. They hate not because it is not of
value but because of its absurd presentation. The solution here is marketers attitudinal adjustment by promotion, feature
redesigning and lowering price. This is known as conversional strategy change the mind of consumer.
2. No demand: - consumers neither like nor dislike the product. They are different towards the companys offer. The marketers
task here to create demand through stimulation.
3. Latent demand: - is a state where consumers are not satisfied with existing products. Consumers demand suppliers in advance
of their of their new product release. It needs a task of developmental marketing.
4. Falling demand:- is a condition where demand is declining due to different reason such as weak marketing program, fierce
competition, high price, and etc. strategies such as lowering price and building product good image should be build up and the
task is known as remarketing.
5. Irregular demand: - occurs a when demand is fluctuating. Marketers set high price and decrease advertisement during peak
period and lower price and advertise frequently in slack periods.
6. Full demand: - it is a state where demand and supply is equal. The marketer should see the marketing factors and adjust them
so that the trend will continue.

7. Overfull demand: - is a trend where demand is greater than supply. It is advised to increase price based on elasticity (response
of consumers). The objective here is not to destroy the demand.
8. Unwholesome demand: - it is a state where some part of the society like the product and others are against it . A marketer
should set a price like, attach cautionary label on the package and reduce explicit, positive, and direct promotion that might
smooth instigate conflict.
1.4 Customer development process
It is the process of attracting and keeping customers.
a. It begins with everyone who might conceivably buy the product or service of an organization and they are the
suspects.
b. From the suspects the company determines the prospects- those who seem to show interest in the products.
c. The prospects are then converted into first-time customers and
d. Then into repeat customers when customers are satisfied with their buy.
e. Repeat buyers become clients who are given preferential treatment by giving them hampers on occasions.
f. The next thing to do is to turn the clients into members by forming membership programmes that offer benefits to
customers who join.
g. Members become advocates because they trust and relay on the organization.
h. The advocates enthusiastically recommend the company or organization's products and services to others.
i. The final thing to do is to change the advocates into partners, who are loyal to the company, are comfortable and
would stay in the company for a very long time if not for life. Some may become inactive or drop out. Reactivate
dissatisfied customers through win-back strategies and win back only those customers who have strong profit

potentials.
Chapter two
Marketing environments
A companys marketing environment consists of the actors and forces outside marketing department that affect adversely or positively,
marketing managements ability to develop and maintain successful relationship with its target customers. The marketing environment
is made up of micro and macro-environment.
The companys micro environment
It consists of farces to the company that affect its ability to serve its customers, achieve its marketing objectives, and which are
controllable by management. Some of the actors in the microenvironment are:
I. The company
In designing marketing plans, marketing management takes other company group into account, such as, top management, finance,
research and development and other departments. The effect of each division can be maximal if the authority they are delegated is line.
A line authority is a decision maker while a staff authority is an advisor to the line department. Factors such as the procedure of
purchasing, quality inspection checkpoints for raw materials and components purchased from outside, and competence of the human
resource indirectly impact the marketing effort.

II. Suppliers
They provide resources needed by the companys system to produce its goods and services. The suppliers bargaining power might
adversely or fruitfully affect a company.
A suppliers group is strong if
It is dominated by few companies

Its product is differentiated or peculiar
The number of suppliers in the industry is few or if there is no other substitute competition
It imposes a threat of integrating forward
The buyer is not an important customer of the suppliers
Marketing manager must watch also supply availability and suppliers reliability. The former refers to the timely delivery of the right
quality and quantity of supplies while the later infers to the scale of the suppliers capacity. The financial, storage, and other factors
should be considered in determining the supplier.
III. Marketing intermediaries
The groups help the company to promote, sell, and distribute its goods to final buyers. It includes:
Resellers:- are distribution channel firms that help the company find final customers
Physical distribution firms: - help to stock and move goods from their points of origin to their destination.
Financial intermediaries: - include banks, credit associations, and companies, insurance companies, and other business that
help financial transactions or insure against the risk associated with the buying and selling process.
IV. Marketing service agents
They are the marketing research firms, advertising agencies, media firm, and marketing consulting firm which differ based on
creativity, quality, service, and price.
V. Customers
These groups influence the companys effort. The magnitude of their influence depends upon their nature. High dissatisfaction might
outcome extensive consequences from insignificant badmouthing up to pressing legal dealings. There are five types of customers:
Customer markets:- consists of individuals and households that buy goods and services for personal consumption
Business markets: - buy to further process or compound in the production process.
Resellers markets: - buy goods to resell at profit.
Government markets: - are made up of government agencies that buy goods to produce public service or transfer
to those who need the product. The government has three decentralized level that are interdependent. They are
federal, regional, and local. Each has their sphere of influence in determining the volume of purchase.
International markets: - comprises of those buyers outside of the sellers country boarder.
VI. Competitors
A company must provide greater customer value and satisfaction that is competitors. This micro environment factor is better discussed
the coming chapter. Managing competitors holds its own steps, identification of competitors, their objective; strategies and measuring
their reaction pattern are some of the condition to minimize impact of competitors movement.

VII. Public
It is any group that has an actual or potential interest in or impact on an organizations ability to achieve its objectives.
Financial publics: - influence the companys ability to obtain fund. Development banks, investment houses, and private
banks which facilitate the firms ability to obtain funds are taken as financial public. Their difference with financial
intermediaries is that the later facilitate transactions while financial public grant loans. But both can happen at the same
time with the exception to insurance agents.
Media publics: - carry news features and editorial opinion. Newspapers, magazines, fm radio, TV, are good examples.
Here, while media publics affect that publicity of firms and its offer, media firms promote one products on paid terms.
Like that of financial publics and intermediaries, both media publics and firms might be found at the same time. A media
firm might advertise and carry news feature.
The companys macro environment
The company and other actors operate in a larger macro environment of forces that shape opportunities and pose threats to the
company. These forces are uncontrollable and determinant for its existence.
Demographic environment
It include size and growth rate of population in cities, regions, and nation, age regional characteristics and movements.
Age: - different countries hold a population composed of children, youth, and old aged bearing in mind that their percentage of
composition varies. What marketing importance do these have?

The very hypothesis marketers should set is whether the population experience increment of income. For some cheap and easily
available products like drinks, foodstuffs, and less expensive electronics equipment, there can be food prospect as they can be
purchased with minimum amount.
Educational level: - purchase decision of markets, by and large is dependent upon past experience, awareness, skill, knowledge, and
rationale of the buyer or advisor.
Educational system fosters individuals decision making process. A college graduate views life different than secondary school
student. As their exposure to life differs widely, High awareness strategy, distribution program, and effective segmentation are the
things that a firm should heed.
Gender composition: - economics define gender difference based on male/female ratio. How can it imply to principle of marketing.
The more female dominates purchasing culture change from certain areas to others. In state of increasing income and growing age,
marketers focus on some products designed for ladies, like apparel, cooking utensil, beauty kit, and other than male choice,
automobile, real estate and so on.
Population size, growth rate, and density: - population size (total people) makes market. Growth rate determines future population
size. Some countries swim in high growth rate of 4% while others pressure to dwindle their population growth rate almost to zero.
Such trends might lead the population to grow, in the former case, and to slow in the latter one. So based on multiple reasoning,
growth rates might make the market more tempting to invest or be ignored.
Density is defined as settlement per area which means how many people dwell in a square kilometer or mile. The most density
populated area costs less promotion and distribution cost than less densely populated area.
Social composition: - social stratification based on income, knowledge, access to information, and activeness to try new products are
often prevailing statuesque that shape up consumption, action, and purchasing decision.
Migration: - is the movement of people in space involving a change in residence. There are five types of migration as long as the
change is locked with geopolitical boundary.

Rural-Rural: - farmers move in search of new land or due to change in government policy. Sometimes rural dwellers might
shift to other rural areas due to environment degradation, draught and famine, and political instability.
Rural-Urban:- economic, quality of life differentials, and social spending inequality might be a group of reasons at one side
that force people to move from rural to urban. (students)
Urban-Rural: - retirees, unsuccessful urban migrants, periodic return migrations coinciding with peak agricultural activities,
are the possible rationales that migrate people back to their rural settlement.
Urban-urban: - employment transfer and promotion, wholesale trading, and many economical related matters might cause
such kind of movement. The term might be relocation if the movement is international and demand work and residence permit.
Ethnic (race) composition: - in different countries, this composition might implicate to various subgroups. As cultures and
subcultures diverge one from another, their marketing behavior upon purchasing goods and services also share similar behavior.
Economics environment
Market requires purchasing power as well as people. The available purchasing power depends on economic policies and trend of the
environment which in turn depends on
Income
GDP, GNP, disposable income, and so on are economic terms that may describe a nations aggregate favorable or unfavorable nature
of the economy. Companies should also heed fiscal policies which stimulate economic growth, allocate resources, and redistribute
income and wealth, and enhance effective mobilization of resources.
Growth and recession
They are opposite twin words which positively or adversely affect marketing environment respectively. Economic growth attracts
many a company from even highly developed nations. Recession or economic slowdown occurs when a highly growing economy,
because of many distractive factors, slows its pace.
Saving and debts

Generally people save an amount which they believe is remnant of their basic necessity. In a country where majority people earn less
$2 dollar, saving can not be realized. The saving culture of consumers are also depends on how burdened they are in their informal as
well as formal lifestyle. If the financial burden too heavy, people prefer to pay away than purchase products or save money.
It also has same well regarded long term contribution. The more customers save, the more amount of money companies get to their
investment.
Spending patterns
Areas where consumers spend are results of their cultural, personal, psychological, and social factors. With reference to the proportion
of where consumers spend, it is totally determined by their income level, social class, self image, and others.
Credit availability
It is more illustrative to take the credit availability of Sony Glorious (sole agent of Sony product on our country) and equatorial
business group beside companies offer products on credit, banks like Salama bank, Cac international bank and other government as
well as private banks offer credits to any customers which qualify their criteria of borrowing.
Prices
They are outputs of costs of business doing and profit margin. Price of a product, then, is result of cost of any factors such as cost of
raw material, acquisition, wage, transportation, and any other. Price is the amount of money customers have to pay obtain the product
Technological environment
Any technical change related with products produced from direct or substitute competition is categorized in such environment.
Computer hardware replaced mechanical type, washing machines extinct manual cleaning, wireless or mobile telephone are preferred
to fixed phones. All these are new changes which make life so simple and minimize time waste so that people invert in better
condition.
Natural environment

Markers need to be aware of the threat and opportunities associated environment. Natural environment might claim concern of the
public or government based on its characteristics of renewable or non renewable. The natural environment should be evaluated in light
of the following terms.
The increase cost of energy: - a nations investment in its infrastructure reduces costs of doing business. Investment in energy
alternatives (hydro dam, nuclear reactors, oil energy construction), road stretching, and telecommunication is a key
precondition in simplifying business environment and indirectly affect marketing division.
The shortage of row materials: - truly in accordance to economists suggestion, resources are scarce. A company holding,
such thought, works out to solve problems in many regards to maintain its existence. The choice might be either improving
existing products efficiency.
Increased population levels: - beside its demographic impact, growing population incite natural depletation. Companies
might sniff for resources which mean further depletion of virgin areas.
The changing role of government: - in many countries, government bodies design environmental friendly standards as
previous policies had negative impacts on citizens as well as government budget shifts.
Political and legal environment
The politics of a country are inevitably linked with government attitudes to business and to the freedom with which they are allowed
to operate. A marketing division should not only see superficial level of government commitment but also the political change that
may completely paralyze its function. A company specifically highlights the following profiles of political system of any part of
the world. A political environment analysis is inclusive of
What type of government is in power. Democratic? Socialist? Religious? Communist? Is it totalitarian, participative, or what?
What role does a political opposition play? Are they completely against the ruling party or can they compromise to work with
in market friendly polices?
How effective have the government economic polices been?
How is the government viewed in regional as well as international institution?

How fair and honest are government officials?
The marketing division should overview any political system in sight of such and any political-business relations.
The other issue might affect marketing performance is legal factors. Lows are suspected to quick change. Varying new conditions like
economic, political, or social events might force legislators to amend different legal terms or ratify new legal framework. Prior to
further investment a firm should observe any kind of legal framework in light of
What impositions exist against importing and exporting or local distribution particular to the firms products?
Are there constraint areas of investment and expansion?
What kind of license is needed?
What pattern of employment legislation exists?
What power and right do trade unions obtain?
Is there patent protection? If yes, in which area?
Is there anti-corruption legislation?
Cultural and social environment
Conducting business across or within national territories demands interaction with people who are made ups of set values, attitudes,
and expectations, and their social organization. A detailed analysis of the cultural environment is of crucial importance to marketers
and it is therefore fundamental to part of marketing task.
Marketers then ought to approach cultural in rigorous manner bearing to
Its pattern of social interaction; like identifying the role and importance of each social class.
Language and the scope that exists for any wrong meanings
Religion and its influence upon the acceptability of certain products
As a marketer prior to marketing of products, across cultural analysis is mandatory owing to dependency of customers purchase on
their cultural influence. A cross cultural analysis holds the following considerations.

Determine characteristics of behavior pattern; types of buying behavior, buying conflicts, and who makes purchase decision
are viewed here
Determine what broad cultural values are relevant to company-strong values about work, morality, religion, family relations
and so on.
Chapter three
3.1 model of consumer behavior
Consumers make purchase decision any moment. Marketers believe in identifying different causes of purchasing and their process.
What they buy, where they buy, how and how much they buy, when they buy, why they buy? These are reasons in hidden mind of
consumers which even a lie detector can not simply and factually present.
However, marketers attempt to influence consumers decision through pricing, promotion, place, and product management strategy.
There might be cultural, social, personal, and psychological facts in one side and micro and macro environmental factors in other side
which shape up consumer decision. Consumers assimilating all these facts, analyze, evaluate and finally rush to consumers analysis
model.
3.2 factors affecting buying behavior
The buyer characteristics influencing consumer-buying behavior consist of cultural, social, personal and psychological characteristics.

A. Cultural characteristics
Cultural factors exert the broadest and deepest influence on consumer behavior. They include culture, subculture and social class.
Culture
Culture is defined as a set of learned beliefs, values, attitudes, habits and forms of behavior that are shared by society and are
transmitted from generation to generation within that society. It is the complex of symbols and artifacts created by a given society
and handed down from generation to generation as determinates and regulators of human behavior. The symbols may be intangible
(attitudes, beliefs, values, language, religion) or tangible (tools, housing, products, works or arts). In short culture implies a totally
learned and handed down way of life.
Subculture
Each culture contains smaller groups or subcultures and each of these provides more specific identification and socialization for its
members. These subcultures can be identified in the form of nationality, religion, race and geographical location such as urban and
rural distribution.
Social class
Virtually all-human societies exhibit social stratification. Social classes are relatively homogenous and enduring divisions in a
society, which are hierarchically ordered, and whose members share similar values, interest, and behavior. Roughly, any society
can be divided into three major groups: upper, middle and lower classes.
Under normal conditions, social classes have several characteristics:
1. Persons within a given social class tend to behave more like.

2. Persons are ranked as occupying inferior or superior positions according to their social class

3. Social class is not indicated by any single variable but is measured as a weighted function of ones occupation, income,
wealth, education, value and so on.
4. Social class is continuous rather than discrete, with individuals able to move into a higher social class or drop into a lower
one.
Marketers want to focus their effort on one of a few social classes because social classes show distinct product and brand preferences
in such areas as clothing, home furnishings, leisure activity and automobiles.
B. Social characteristics
A consumers behavior is influence not only by broad cultural factors but also by social factors, such as the consumers reference
groups, family, and social role and statuses.
Reference groups
A reference group may be defined as a group of people who influence a persons attitudes, values, and behavior.
Each group develops its own standards of behavior that they serve as guides for the individual members. The members share these
values and are expected to conform to the groups normative behavioral patterns.
The small group that consumers belong or aspire to belong influence consumer behavior. These groups may include family, close
friends, neighbors, and fellow workers. Aspirational groups (such as sports, heroes and movie stars) also positively influence people in
which they are not members.
Family
Family group exerts the strongest and most enduring influence on our perception and behavior. The family is the most important
consumer buying organization society. Marketers are thus interested in the roles and relative influence of the husband, wife, and
children in the purchase of a large variety of products and services. Dominance of each member has different effects on the purchase
of goods and services.
Role and statuses

A person participates in many groups, such as family, clubs and organizations. A persons position in each group can be defined in
terms of role and status. A role consists of the activities that a person is expected to perform according to the persons around him or
her. People choose products that communicate their role and status in society. For example, a minister or company manager buys the
car, clothing, housing and others that best fit his role and status expected by the society.
C. Personal characteristics
A buyers decisions are also influenced by personal outward characteristics, notably the buyers age and lifecycle state, occupation,
economic circumstances, personality and self-concept.
Age and lifecycle stage
The goods and services that people buy change over their lifetime. The types of food and cloth people need changes with age. Peoples
task in clothes, furniture, and recreation is related to age. Marital status, presence or absence of children, and their ages also affect
buying decision. Marketers term these factors collectively as family life cycle.
Occupation
A persons occupation will lead to certain wants and needs for goods and services. Accordingly, the clothes, households, furniture,
recreational systems needs and tastes, etc. a manager for a certain corporation is different from the proletariat of the same corporate.
Economic circumstances
The buying decision that a person makes is tremendously affected by the economic conditions of the person. The income that he/she
earns, the attitude towards spending and saving the borrowing power and so on affects his/her buying decision.
Personality and self-concept
Personality is another factor that affects the buying behavior of a person. It describes the persons distinguishing character, traits,
attitudes and habits. A person can be creative or conventional, active or positive etc. the attitude of people or mental picture towards
himself or herself is also called self-concept or self-image. This people buy product which fit their assumed self-image.

D. Psychological characteristics
The psychological factors that influence the buying behavior of an individual are motivation, perception, learning and beliefs and
attitudes.
Motivation
A person has certain needs. Some of the needs are biogenic that arise from biological states of tension such as the need for food, drink,
sex and others. Some of the needs are psychogenic which arise from psychological states of tension such as the need for social affinity,
recognition, respect and so on.
Motivational conflict
This trend happens because of two forces acting in opposite direction and there are three motivational conflicts.
Approach-avoidance motivational conflicts: - these occur when a consumer is considering both positive and negative
features of a single alternative. The consumer wishes to move toward the positive features but away form the
negative aspects of an object. Most products and services offer positive benefits to, engendering approach forces , at the
same time, they have several types of perceived risks such as performance risk, financial risk, and injury risks that can
endanger avoidance risks.
Approach-approach motivational conflicts: - this is when the consumer forces a choice between two alternatives and
concentrates only on their attractive feature. It is the most pleasant type of decision.
Avoidance-avoidance motivational conflicts: - this is a situation when the consumer faces a choice between two
behaviors with negative alternatives. The person is motivated to move away from both alternatives and is not likely to
purchase at all until perception of the situation is changed. Consumers are rarely forced to buy or use products that they
do not want to have. This type of conflict arises often in the areas of health care and household maintenance. For
example many consumers wish to avoid having severe pain and dental problems but also wish to avoid the risk of going
to the dentist.
Focus on motivation

.Motivation is a reason behind a course of action and is driven by needs.
These can be biological (such as hunger or thirst) or physiological (such as recognition or esteem). When these needs grow so the
person feels compelled to act-to seek satisfaction- it becomes a motive or drive. There many theories of motivation. There are many
theories of motivation. Three of these are described below.
I. Maslows hierarchy of needs
Maslow described as a set of five motivation levels, as illustrated in the triangle above. He believed that we first try to satisfy our
needs at the bottom level; the psychological needs. One we have achieved this, we move to the next level and the next and next until
we reach level5, the self-actualization needs.
We do return to satisfy a need at a lower level if that becomes important. For example if we are spending time with family-satisfying
our social needs (level 3) - our priority will be to get some painkillers if we develop a painful headache.
II. Freuds theory of motivation
Freuds theory recognizes the fact that our behavior is influenced by not only our conscious but also by our sub-conscious self as
illustrated below.
Our conscious self is that part of our Inner being of which we are aware; we are conscious or our thoughts and feelings. We are
unaware of the force within our sub-conscious self but they can still influence us. These forces may be part of our nature, they may
have been lodged there because of an incident at childhood or more recently and we may be aware of them if they appear in dreams or
things we may say or do accidentally. For example consider the man who buys an expensive, high quality watch. He may say that it is
because he likes precision and style but, in reality, he has a deep fear of being late. This is because, when he was seven years of age,
he arrived late at a big family ceremony and everyone laughed at him and made fun of him. He does not want to repeat this
experience.
III. Herzeberg satisfiers and dissatisfies

Herzberg contribution was one of the proponents of behavior management concept. His idea was divided into two groups: dissatisfies
that minimize or avoid dissatisfaction. Its implication is prospects buy products to avoid dissatisfaction of their day or referring to a
company offer; people acquire the product for fair price, good welcoming face and moody interview. The other groups are satisfiers
that surpass what is accepted as norm.
Offering products that raises eyebrow, delivering up to where consumers exactly are, and manufacturing products for entertainment
purposes are good example of satisfiers.
Perception
Even a person is motivated to act; he/she buying decision is affected by his/her perception of the situation. Two individuals may
perceive the same thing differently because people perceive what they want to perceive, they dont perceive what they see a certain act
or product but all of us may not perceive it.
Perception is a process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of
the world; we perceive things, situations using our five sense organs. However, each of us attends, organizes and interprets the sensory
information in an individual way.
This results in differences in perception that in turn results in differences in the buying attitudes and buying decisions.
Learning
As a factor influencing a persons perception, learning may be defined as changes in behavior resulting from previous experience
excluding the behavioral changes attributable to instinctive responses or temporary states of the person such as hunger of fatigue. Thus
most behavior is learned. Then the learning experiences that man has acquired in the similar conditions or different circumstances
affect the buying decision of the person.
Beliefs and attitudes
Through the learning process, people acquire their beliefs and attitude. These in turn influence their buying behavior.

A belief is a descriptive thought that a person holds about something. It may depend on real knowledge, opinion or faith. An attitude
involves a persons enduring favorable or unfavorable cognitive evaluations, emotional feelings or action tendencies toward some
object or idea. Attitudes involve thought process as well as emotional feelings, and vary in intensity. People have attitudes concerning
religion, politics, clothes, music, food and so on. They result in liking and disliking things, moving toward or moving away from them.
Attitudes function in peoples life to enable them to have a fairly consistent behavior toward similar classes of objects; thus they
economize in energy and though, and are very difficult to change.
3.3 Types of buying decision behavior
Based on the degree of buyer involvement and differentiation among brands, there are four buying behaviors:
Complex buying behavior
When the product is expensive, risky, purchased infrequently, and highly self-expressive, consumers may be highly involved.
They are highly involved in a purchase and perceive significant differences among brands. The consumer has much to learn about the
product category.
Marketers should make consumers aware of brand features and understand their information-gathering and evaluation behavior of
high involvement products. They first travel through learning process; develop belief, attitude, and then making a thoughtful purchase
decision.
Dissonance-reducing buying behavior
When consumers are highly involved with an expensive, seldom or risky purchase, but see cycle difference among brands, they might
experience after sales dissatisfaction.
The reason is they buy quickly and may recognize defects through process of usage or people criticize them for doing so.
Marketers attempt to contact buyers after consumers purchases to make sure whether the ____________enjoy with products and
assist to mitigate their bad feeling.

Habitual buying behavior
When products are less expensive and risky and consumers less aware and devoted to brands, the purchase behavior is going to be
habitual. Consumers are less involved in buying process or don not pass through the usual belief-attitude-behavior process. They buy
products out of irrational reasons and it can be impulse purchases. Marketers should advertise repetitively, charge less, manage
supermarket shelf properly so that more buyers throng and buy products.
Varity-seeking buying behavior
Consumers of such behavior reflect very low involvement and however with comprehensive perceived brand difference. Varity
seekers move from a brand to another in their purchase not out of dissonance but boredom.
Marketers either stock shelves or deliver on time or program sales promotion and less price strategy based on their company strategic
position in the market.
III.4 the buying decision process of consumers
The buying decision making process in problem solving approach consists of the following five stages. However, potential buyers can
withdraw at any state prior to the actual purchase and some stages can be skipped. A total state approach is likely to be used only in
certain buying situations such as in buying high priced products, infrequently purchased articles and first time purchase of a product.
The buying decision process involves the following steps.
1. Recognition of unsatisfied need
The process starts when unsatisfied need creates an inner tension. The need may have been dormant until it was aroused by an external
stimulus such as advertisement or sight of the product. Or it may be a physiological need. Or perhaps dissatisfaction with the present
product creates tension.

Once, the need has been recognized, often consumers become aware of conflicting uses for their scarce resources, time, priority,
approval by the family and reference groups etc.
2. Identification of alternatives
Once a need has been recognized and the conflict solved, both product and brand alternatives must be identified. Different products
may satisfy a certain need. Suppose person wants to buy an entertainment good. This can be a video, TV, tape recorder etc. if mans
choice is tape recorder, depending on his ability to buy,
He has still to choose on among several brands such as sharp, national, Sanyo, and Aiwa etc.
Preconditions to influence the search for alternatives are
a) Time and money cost

b) The information the consumer has acquired from past experience and other sources
c) The amount of the perceived risk if a wrong selection is made.
3. Evaluation of alternatives
After all the reasonable alternatives have been identified, the consumer has to evaluate each alternatives with respect to certain
qualities of product such as shape, color, effectiveness, probability, comfort, cost, tastes, size, operation system, etc. depending on the
nature of the product.
4. Purchase decision
After searching for and evaluating alternatives, the consumer must decide whether or not to buy. Once the alternatives are evaluated,
the consumer forms a ranked set of preferences among the alternatives. Normally the consumer develops purchase intention before
making a purchase decision, unless certain factors intervene between forming a purchase intention and purchase decision. The factors
that influence purchase intention and attitude of others are anticipated and unanticipated situation factors.
The extent to which the attitude of another buying participant affects ones purchase intention depending on intensity of the other
persons negative attitude toward the consumers preferred alternative, and the consumers motivation to family income, expected total

cost of the product, and expected benefits sought from the product. Sometimes these conditions may not happen as expected and affect
the purchase intention. The purchase intention may also be affected by unanticipated and unexpected situation factors, such as
uncrowned condition, attractive store appearance, and services when the consumer is bout to act. The decision of any individual to
modify post, or avoid a purchase decision is heavily influenced by the perceived risk because consumers assume risk when deciding to
buy a certain product.
5. Post purchase behavior
After purchasing the product, the consumer will experience some level of satisfaction or dissatisfaction. The degree of satisfaction or
dissatisfaction is of great importance to marketers because consumers will engage later based on post purchase actions. The buyers
feeling after the sale can influence repeat sales and what the buyer tells others about the products.
Chapter four
Analyzing competitors
4.1 identifying competitors
The company, in order to have strong position, has to know the relative importance that a competitor places on current profitability,
market share growth, cash flow, technological leadership, service leadership, and other goals. Competition can be in different aspects
Based on concepts of competition, competition can be of two kinds
I. Industry concept of competition: - an industry is a group of firms that offer a product or class of products that are closely
substitutes for one another. Industries are classified according to number of sellers; degree of product differentiation; presence
or absence of entry barriers; cost of structure; degree of vertical integration; and degree of globalization.
II. Market concept of competition: - competitors are companies that satisfy the same customer need. The customer and
company can be actual and potential.
Based on different factors, competitors are categorized into three.
I. Based on the firms strength on resources like finance, manpower, and raw material. We can
categorize competition as strong if they do have strategic firm position on the listed resources. If companies do not have
strength in resources, we call them weak competitors.
II. Based on product similarity, likeness of strategies and objectives we can categorized competitors into distant competitors if
they produce least resembling products. We call them close competitors if they produce products which are similar in size,
color, and other factors or follow similar strategies.
III. Based on rules of industries are categorized companies into friendly (well behaved) if they follow the rules of the industry and
into aggressive (disruptive) if they breach the rules of the industry.
Competitors should be assessed in their strength and weakness perspective. The following criteria some points that any rivalry is
scrutinized.
4.2 Assessing competitors objectives, strategies, strength and weakness
Competitors define their dream of achievement periodically. Their action, resource, and achievement are towards the desired target.
The objective can further be discussed as quality leadership, technological upgrading or introduction, service specialization, market

share maximization, and mix of all these. They can be either of short or long term. The time defines how fast that competitor may
react and on what strategies does it heed.
The strategies might generally be overall cost leadership (cost minimization), differentiation (variety products offering), or focus
(riche specialization).
The best characteristics of objectives are
It should be specific and measurable: the company should define its technological objective by defining specifying what
level of technology it wants to achieve when, and how, of course with how much it takes.
It should cover key result area: which departments are directly affected or related with new technology introduction like
marketing division in collecting customer suggestion about the new product., R and D department in developing the idea,
procurement division in selecting specifications, finance in granting funds, and quality division in approving the product or
indirectly influenced sales division( sales people should be trained about the new product latter on), security, and other division
to keep the idea out of the easy access of competitors.
It should be challenged but realistic: checking out whether the current human inventory (level of skilled, semi
skilled, unskilled manpower) can or can not develop the idea and achieve actually the target.
It should be tailored with rewards: the firm should design bonus, gain sharing, and promotional program to
instigate workers for further contribution of the firms success in market share and profitability.
Another point of competitor analysis is identifying a firms strength and weakness in light of competitors. Attacking a competitor at
its strength may have tragic repercussions. As strategic and wit competitor, any firm should demark its pros and cons and where to
attack (not to attack) its competitor by analyses of points of strength and weakness.
4.3 identifying reaction pattern
Companies react differently to competitive assaults. Some are slow to respond others respond only to certain types of attacks. Others
respond to any assault. The following pattern describe better what can a company be. Companies can respond either of the categories.

A. Laid back: competitors those are ignorant or slow in responding towards any attack of promotional, price-oriented, or
marketing -strategies are assigned as part of laid back reactors.
B. Selective: competitors who fight against same assaults on promotion but not interested in price war, new product release but
not deleting old products.
C. Tiger: competitors those are active for any attack and direct resources against any possible rival mobilization.
D.
E. Stochastic: unpredictable competitors those are reacting in some points but not always. Such rivals might respond suddenly
when they are equipped with financial strength and human resource. However, there lack of concern or being unvigilant might
force them to be categorized in this group.
4.4 designing the competitive intelligence system
There are four main steps in designing on competitive intelligence system.
A. Setting up the system: calls for identifying important types of competitive information, identifying the best sources
of this information, and assigning a person who manage the system and its services.
B. Collecting the data: primary sources or secondary published items might be used as a source of information.
C. Evaluating and analyzing the data: we should check the accuracy, relevance, and reliability of the information that
we collect.
4.5 identifying competitors strategy
Strategic groups are groups of firms following the same tactic in a given target market that any company considered earlier.
Firms competing in a given target market differs in their objectives and resources based on the roles that firms play in the target
market. We divide competitive strategies into four:
Market leaders strategies
A market leader is a company which may be the pioneer, particularly in new and growing markets. The leader has dominant market
share and usually leads the other firms in price changes, new product introductions, distribution coverage, and promotion spending. By

virtue of its successes, competitors forces on the leader as a company to challenge, imitate or avoid snatching its profit and market
share.
Market challenger
Firms that are second, third or lower are categorized in this group. They can challenge the leader and other competitors in an
aggressive bid for more market share. The challenger may launch different strategies, which serve as offensive mechanism. They
design offensive strategies that are means of attacking so that they take first place of leaders.
Market follower

It present me-too product: A hard fight might lead both leaders and challenger in dangerous position. The market follower can learn
from the leaders experience and copy or improve on the leaders products and programs usually with much less investment.
Market followers strategies
A. Counterfeiters: duplicate the leaders product and package and sells it on the black market or through disreputable
dealers.
B. Cloner: manufactures the leaders product, name and packaging with slight variations. Example it is quite common
to look at brands like Philips and Philibs, Nike and Neke and other brands.
C. Imitators: copies something from the leader but maintain differentiation in terms of packaging, advertising, pricing
or location.
D. Adapter: takes the leaders products and adapts or improves. They may choose to sell at different markets.
Market Nicher
These firms specialized in serving market niches instead of pursuing the whole market, or even large segments these firms target
segments. Niches try to find one or more market that are safe and profitable. A nicher can specialize along any of several markets.
Nichers strategies
A. End users: those companies who contact the final buyer. Example service firms who make only market
assessment.
B. Consumer size: firms who serve a big but specialized segment. Example: production of only children clothes.
C. Geographical market: companies who serve spatial segments like producing for east Africa and South
Africa.
D. Quality price: those firms who produce high quality product and sell it at expensive price. Firms might
specialized on producing on A or B grade
E. Service nicher: companies that render service only
4.6 establishing strategic business units and strategies

Most companies operate several businesses. They often define their business in terms of product. Large companies normally manage
different business which are known as strategic business units as each requiring its own strategy. SBUs have three characteristics:
1. It is a single business or a collection of related business that can be planed separately.

2. It has its own set of competitors.
3. It has a manager who is responsible for strategic planning, performance, and control
There are two models of managing SBUs, they are generally known as portfolio matrix
The Boston consulting group portfolio matrix
It invites two factors that measure the strength or weakness of the business firms strategy. These are:
1. Business growth rate: historical based comparison of the firms degree of influence and rate of return.
2. Relative competitive position on market share: firms in similar market share the number of customers according to their
quality, price and degree of awareness created. Depending on those two factors, the Boston consulting group designed the
following matrix.
The growth-share matrix
Various firms or business units under corporate unit can be subcategorized as stars, question marks, cash cows, and dogs, as depicted
below the matrix. Each does have its own characteristics.
A. Question marks: business units in this division are characterized by higher growth rate and low competitive
position. As lower market share leads the firm to dwindling yearly sales trend, which affects the business unit
negatively, the top management team should diagnosis their move prior to making any major business decision.
The top executives should watchdog the market situation and discuss over the justification of discarding or
maintaining under question mark business unit. If positive long run signals are realized, the firm should make a

new investment to cure its weakness. One thing that top managers should know is that there must not be any unit in
the question mark in any nick of time. If there is, it is a litmus paper for the firms failure.
B. Star: tremendous amount of capital and finance should be invested in such business, as it is characterized by
growth rate and competitive position. Competitors do chase stars as they can be taken as role model. To
defend its position financial inflow might be expanded. This implies that stars are not necessary profit-centered
areas, though there might be some.
C. Cash cow: this stage consists of firms with matured products. The unit should stretch strategies to exploit large
amount of revenue and net income as much as and as fast as possible since the length of cash collection period is
unknown. The top executives should think twice about expanding for new market target for the product is heading
towards uncertainty. Plus, there is no need of promoting reinvestment in the business as the return can not exceed
or offset maturation restricts the business units earning.
If the corporate level manages other business units in its hand, which are in stars and question marks, business
units in cash cows can help as financial sources.
Star Question
M mark
G
R
Cash cows Market Share

Relative Dogs
D. Dogs: the life for any business might come to an end because of different internal or external rationales. The
corporate level can identify such units when it observes a failing growth rate and competitive position. These
business units are sources of loss i.e. cost exceeds profits. The rational can be many; poor management system,
culture of the society (sausage in Ethiopia), or else poor public image in the eyes of the society. Its not
strategically accepted to reinvest in such business. If it is done, return will be quite frustrating.
Strategic business unit (SBUs) strategies

The business unit compelling situation in being in one of the four sectors call for an effort in pursuit of four strategies:
1. Build: building is appropriate for question marks whose market share must grow if they are to become stars.
2. Hold: it is appropriate for strong cash cows if they are to continue yielding large positive cash flows.
3. Harvest: the objective of the harvest strategy is to increase short term cash flow regardless of long term effect.
Chapter five
Segmentation, targeting, positioning
In appealing to consumers test and preference, marketers segregate people with money into different factors based on multiple
variables. How marketers are managing demand satisfaction? Of course, through market segmentation.
B. market segmentation
It is dividing up total market into subgroups based on variables like income, spatial consideration, age, and other factors. Patterns,
basis, levels, and procedures of segmentation in modern marketing.
Pattern of segmentation
There are three different patterns of segmentation considering dispersion of preference through out the market.
Homogeneous preference: all consumers have the same preference. The market shows no natural segments. We would predict that
existing brands would be similar and cluster around the middle of the scale.
Diffused preference: consumer preferences may be scattered throughout the space (market).
The market might reveal distinct preference, clusters called natural market segments. The first firm in this market might position in the
center hoping to appeal to all groups. Or position in the largest market segment that we call concentrated marketing or develop several
brands each positioned in a different segment.
Basis of segmentation
The commonly used basis for segmenting the consumer market may be grouped into four major categories.
Geographic segmentation: it calls for dividing the market into different geographical units, such as: nation, state, regions, countries,
cities, neighborhoods, zone, route or territory.
Demographic segmentation: the market is divided into groups on the basis of demographic variables; such as age, sex, family size,
family cycle, income, occupation, education, religion, race, generation, nationality, or social class.
Psychographics segmentation: buyers are divided into different groups on the basis of life style and/or personality. People within the
same demographic group can exhibit very different psycho graphic profile. The three psychographic segments are
Swingers- who seek up-to-date or fashionable offers

Status seekers- buy goods that reflect their status
Plain Joes- buy ordinary commodities.
Such a basis is a little bit difficult to identify and hence the marketing research has to carry out a better job identity and make
promotion.
Behavior segmentation: buyers are divided into groups based on their knowledge of, attitude toward, use of , response to a product.
They are:
I. Purchase occasions: buyers can be distinguished according to occasions they develop a need, purchase a product, or use
a product.
II. Benefits: buyers can be divided according to the benefits they seek from the product.
III. Users status: markets can be segmented into groups of non users, ex-users, potential users, first time users, and regular
users.
IV. Usage rate: marketers can segment users into groups of light, medium, and heavy users.
V. Loyalty status: a market can be segmented by the varying degrees of loyalty to brands, stores and other entities. We can
divide it into four groups.
1. Hard core loyal- consumers who buy one brand all the time.
2. Split loyal- consumers who are loyal to two or three brands.

3. Shifting loyal- consumers who shift favoring one brand to another.
4. Switchers- consumers who show no loyalty to any brand
Market segmentation procedures
Step 1- survey stage: the researcher conducts exploratory interviews and focus groups discussion to gain insight.
Step 2- analysis stage: the researcher applies factor analysis to the data or removes extreme variables then applies cluster analysis to
create a specified number of segments.
Step 3- profiling stage: each cluster is profiled in terms of its distinguishing character and given a name based on a dominant factor.
Level of segmentation
Market segmentation can be carried out in six levels
Mass marketing the sellers engage in mass production, distribution, promotion, of one product for all buyers.
Segment market a market segment consists of large identifiable group. A company that practice segment marketing
recognizes that buyers differ in their wants, purchasing power, geographical location, buying attitudes, and buying
habits. The company should try to isolate some brand segments that make up a market.
Nich marketing a nich is more narrowly defined group, typically a small market whose needs are not being well served.
Marketers usually identify niches by dividing
Local marketing target marketing is increasing taking on the character of regional and local marketing. Which
marketing programs being tailored to the needs and wants of local customer groups(trading areas, neighborhoods, even
individual stores).
Individual marketing the ultimate level of segmentation leads to segment of one, customized marketing or one to
one marketing.
Self-marketing it is a form of individual marketing in which the individual customer take more responsibility for
determining which product and brand to buy.
Conditions for effective segmentation

A number of conditions should be fulfilled for segmenting serving segments.
1. The basis for segmenting must be measurable and data must be accessible.
2. The market segment itself should be accessible through existing marketing institutes, channels of distribution,
advertising media, companies sales force, and so on with a minimum of cost and waste.
3. Each segment should be large enough to be profitable. The market must be viable and has attractive profit.
4. Differentiable the segments are conceptually distinguishable and respond differently to different marketing mix
elements and programs.
5. Actionable effective programs should be formulated for attracting and serving the segments.
5.2 market targeting
Marketing targeting refers to screening of potential market segments on the basis of determinant factors. The screening mechanism
might take different steps to hold on best and profitable segments such as
The amount of sales, growth rate trend, and profitability.

The ingredients actors in the market like the intensity of competition and substitutability and the influence of buyers and
suppliers over the firms operation.
Financial and other resources of a firm and its objectives.
Any firm ought to overview such factors prior to selection of market segments. Then, approaches to decide which and how many
segments to serve will be solicited. There are four strategies to reach target markets.
Undifferentiated (mass) marketing
It is a strategy of producing one product and offering it to all customers. It stresses on mass production, distribution, and promotion.
Undifferentiated marketing was more effective in old marketing concept.
It works effectively in the grand marketing strategy, that is market aggregation. Even though such kind of marketing strategy provides
advantage of economic of scales, its drawbacks outweighs. Such strategy cannot be effective when there are floods of differentiated
offerings from competitors and cutthroat competitions.

Compan
y MarketOffer
Differentiated marketing
A strategy of identifying different market segments and serving them with respective products in accordance with peoples demand.
Such strategy creates more and customers satisfaction. However, a marketing manager should realize the higher cost for research and
development and producing, modifying and managing that the various products require.
Offer Market 1
Compa 1
ny Market 2
Offer
2
Market 3
Offer
3
Concentrated marketing ( Nich marketing)
A strategy to direct (redirect) resources towards serving a single, big, and large market segment. Such kind of marketing works out
when there is resource limit and the firm is small.
Micro marketing
It is about targeting potential customers in big segment based on occupation, residential area, or lifestyle. It might even go up to
individuals.

Example: when a firm chooses to serve only chief executive officers among customers whose income is above 300$.
5.3 product positioning

On specific attributes- Sony battery can position as rechargeable.
On the benefits the firm offers- Rubber shoe soles are healthy to leg muscles.
According to usage occasions- soft drinks can be positioned as hot seasons drink.
Against a competition- power detergent compare its cleaning quality with others.
Away from competitions- the company mentions its similarity with competitors but shows what the new offer is about. But the
offer is not compared against.
Different product classes- cooking vegetable oils are positioned against butter, others against local oils.
To implement strategies, competitive advantage should be identified on what lines of differentiation can a firm focus. They are four.
Human resource differentiation
Through recruiting, selecting, and training of competent people, a firm can exalt its advantage in the sight of customers.
Product differentiation
Products can be differentiated on along various degrees. Some are highly standardized and others are highly differentiated.
Companies stress on consistency of a brand features, durability of expensive items, reliability of good will, or repair ability of goods.
There are also other points of differentiation like
Performance-does the product operates in better way than a competitor?

-what unique characteristics does it have?
Features- what kind of looks can a firm offer similar to or different from competitors?
Style and design- is the design and model of the products different?

Service differentiation
In highly product-saturated market, firm found product differentiation to be difficult, so they opt to focus to specialize in service
rendering. Firms often render service such as:
Careful and quick delivery: a customer can receive products at his or her door by just ordering through internet
or dialing through telephone.
Installation: a company may transport and fix the entire purchased parts and machineries, even it may go up to
repairing the installed items.
Customer training service: after selling technologically advance and complex products, there is a need for
technical explanations. So sellers give training or consultation guidelines and practice to buyers.
Chapter six
Product and service management
6.1 product management

A traditional definition of product is taken as any physical, tangible, and functional characteristics of a good or service. However, in
today market, a product can be a person(soccer players), organization( privatized firms), Idea( business plan or project proposal),
places(leased land), objects( Items), services( medication or barber), or mixes of these elements.
Product can be defined as anything (goods, services, Idea, person, and institution) which consists of tangible and intangible values that
satiate customers and is offered in expectation of money or unit of monetary value. According to Theodore Levitt product should be
viewed into four levels as shown in figure 6.1:
Potential product
Augmented product
Expected product
Generic product
The Generic product
The rough, and nature a consumer seeks to buy is assumed as generic product. Buyers seek the core benefit a product can offer. A type
writer, for instance, is needed for typing. A TV set to transmit visual message.
These are the basic benefit that a product serves. The other fact might be when a product is sold in market place in its raw form. A kilo
of wheat, maize, soybean, and so on are purchased without being packed in flashy wrapper.
The expected product

It refers to additional requirements that should be tailored with the generic product. When people buy TV, they do not pick up
rectangular set which transmits murky picture. They want to identify colored, specific inch, remote controlled, clear sound, and
connectable set. The expected benefits once were one-of-a-kind luxury but through the course of technological and competitive
improvement, they are taken as standards. A top, consumers develop a lot of expectations about their generic product to reflect such
kind of extra benefits.
The Augmented product
The degree of customers satisfaction is attained, if they find out consistent performance out of a purchased products. Suppliers thrive
to offer beyond not only consumers satisfaction to the level of delight by producing extra unique products but also high above what
competitors offer, image, design color, and packaging of products with installation, delivery, credit, image, guarantee, service of the
company are augmentation mechanisms that consumer markets demand. What should be bore in mind is that is that todays augmented
products might be tomorrows expected product.
The potential product
Everything that might be done to attract and hold customers is potential product. Looking to new tangible or intangible products that
are value adding can be taken as part of promising strategy which lures customer away competitors. Gift delivery within thirty minutes
on birthday, wedding, or any social celebrations or developing a TV set programmed to skip frequent advertisements is a new line.
Firms undertake research and development programs to identify potential products and excel competitors in the long run.
6.1.1 product classifications
Marketers classically distinguish two essential factors to broadly categorized products into varying types.
A. Durability and tangibility
Based on durability and tangibility, product can be classified into three groups.

Non-durable goods:- are tangible items that are purchased and consumed within short period of time and
in one or few uses. They are characterized in experiencing frequent purchases. Eg. Pen, soap,
gum, etc.
Durable goods: - are tangible items that normally survive for longer period of time many uses. E.g
television, radio, table, cloth.
Services: - any activity or benefit that one party can offer to another is essentially intangible and does not
result in the ownership of anything. Eg hairdressing, traingin, medical treatment.
B. Ultimate use
On the basis and purpose of purchase and use of products, they are divided into two
I. Consumer products
They are goods destined for personal consumption of the ultimate user. Under such category, there are other
classed of consumers product based on how consumers go about buying them and whether or not the buyer
perceives a need for the good or service.
Convenience product
Goods and services that consumer wants to buy with a minimum of comparison and buying effort,
frequently immediately.
Example include candy, chewing gum and soap. Convenience products are usually low priced and readily available. Consumers are
not permanently loyal to one broad. Since the prices are too low, trial purchase are made with little financial expenditure. Consumers
are unwilling to tour through shops to make such a small purchase. Frequent advertising (aggressive promotion) and making
convenience goods readily available (location) are the possible strategies that most marketers apply. They can further be considered by
dividing them into three sub-categories:
Staples: are products which consumers buy them reqularly and suppliers replenished constantly. Eg. Milk, butter and cheese, teff, etc.
Impulse: are purchased suddenly and in spun of sight or habit. Eg. Cigarettes, soft drinks etc.
. Emergency: are goods purchased in unexpected and urgent needs. Eg. Umbrella in rainy season, repair kit, first aid kit, etc.
Shopping products
These are goods that consumers buy after comparing quality, warranty, price, design, images, and other factors. Consumers plan
before purchasing such kind of items. They spend much effort and time in collecting and making comparisons.

Examples are furniture, electric, appliance, and cloths.
They are divided into two categories
Homogenous: consumers consider them as similar in quality but differ in price. Eg. Electrical appliances.
Heterogeneous: consumers usually focus on product features than prices. Eg. Fashionable clothing and
furniture.
Specialty products
They are consumer goods with unique characteristics and identified brands. They are expensive goods and buyers are willing to
expend much purchasing effort and money.
The responsibility of marketers is to promulgate their location and of buyers is to invest time to buy without comparing brands as it is
identified and prestigious brand.
Eg. Sony television agent advertise sometimes just to address its whereabouts
Unsought products
They are consumer products about which consumers do not think of buying them or do not know whether the goods exist. A strategy
of aggressive advertisement is needed to create awareness. The good example is aggressive promotion and deployment of insurance
industry.
II. Industrial products

These products are goods purchased to facilitate the achievement of industrys or organizations profit or non profit-oriented
objectives. Different authors have different approaches in categorizing industrial products. Some divide them into six
classes(installations, accessory equipments, component parts and materials, raw materials, suppliers and business services) and others
put them into three broad domains sub-elements I.e. materials and parts (raw materials and manufacture material and parts) capital
items (installations and accessory equipment), and supplies -------------------------
The groups of industrial products are
Materials and parts: are products that become, through manufacturing process or as parts, part of the final product of buyers. They
hold raw materials and manufactured material and parts.
Raw materials: agricultural goods (like milk, cotton, beef, wheat), renewable (lamber, eucalyptus) and non-renewable
resources (such as copper, iron ore, and alumimum) fall in this category.
Manufactured material and parts: manufactured parts get into the finished product without any physical or chemical change while
manufactured materials usually are processed further. Berta construction might buy cement from mugger but need mixing with water
and other materials for construction. This is a case of manufactured material. In contrary, Moenco, an excusive
importer of Toyota automobile, might buy tire from Hancock, now this is a manufactured parts.
Capital items: are industrial products that have direct influence on the industrial scale of productions or operations. It consists of:
Installations (specialty of the industrial market): are long lived goods which involve large sums of money. Their
purchases involve major decisions of higher managing executives. Negotiation over purchasing process, technical terms and reference,
after sales service, and other managerial, financial, and technical matters take longer period of time as they are intractable facts to
make purchase decision. Good example of installations are machineries for factories, are machineries for factories, Boeing airplane for
Ethiopian airlines, factory plants, and office buildings.
Accessory equipments: are goods less expensive and shorter lived than installation and assist in the operation process. Fax machines,
computers and lift truck are examples of accessory equipment. The firm, beside quality and after sales service, ought to consider the
price of the accessory in relative to other companies.

Supplies and services: are industrial products that do not directly influence the firms operation or are not part of finished products at
all. They are tangible products which can be seen separately.
Supplies (convenience products of industrial market): a firm takes less effort and money to purchase; they are taken as routine
aspect of purchasing.
They are regular expense items that are necessary in the firms daily operations. They can be categorized as maintenance, repair, and
operating.
A. Maintenance items: such as brooms, fluorescent, bulbs, mop etc.

B. Repair items: welding and fixers in repairing items.
C. Operating supplies: pens, fax papers, and others.
Business services: intangible industrial products which facilitate their operational process. A service includes maintenance, legal
advising, consulting, leasing, and advertising. These can be classified as:
A. Maintenance and repair services

B. Business advisory service such as managerial, legal and other.
Buying pattern of industrial goods
Overt buying behavior in the industrial market differs significantly from consumer behavior in many ways. These differences item
from the differences in the products, markets, and buyer-seller relationships.
Direct purchase
In most cases of industrial goods direct marketing from the producer to the industrial user is common, especially when the order is
large and the buyer needs technical assistance.

Infrequency of purchase and size of orders
Industrial goods are generally purchased infrequently, usually once in many years, and in large quantity. Smaller parts and materials to
be used in the manufacture of a product may be ordered on long-term contracts. So, an actual selling opportunity exists only once a
year.
Length of negotiation period
The period of negotiation in an industrial sale is usually much longer than in consumer market sale. The reasons are the followings:
Several executives are involved in the buying decision.

The sale often involves a large amount of money.
The industrial goods are purchased on specifications and are mode to order.
Reciprocity
This is the policy in which organizations products from each other. Many companies establish trade relations to make effective use of
this powerful selling tool.
This is usually seen in firms marketing homogeneous basic marketing products such as oil, steel, rubber, chemicals and paper
products.
Demand for product servicing
The users desire for excellent service is a strong industrial motive that may determine buying patterns. Frequently, a firms only
attraction is its service because the product itself is so standardized that it can be purchased from any other company. The service can
be either presale or postsale.
Quality and supply requirements

Adequate supply and uniform quality product are of great value in the industrial buying. Variations in the quality of purchased
materials goes into finished products and can cause considerable trouble for the manufacturers. Adequacy in quality has paramount
importance to quality.
Leasing instead of buying
Today industrial firms are expanding leasing arrangements including heavy construction equipment, delivery trucks, machine tools
and other items generally less expensive than the evaluation has considered cost benefit analysis before deciding to purchase the
airplanes, which were found to fly higher, faster, further, and quieter with great fuel efficiency than previous B737 model. The new
purchase would increase the number of Boeing airplanes of Ethiopian airlines from its present three possessions to 15.
6.1.2 Product features
The presence or absence of some product elements such as brands, packaging, labeling, product design, color, product quality, product
warranty, product service, and product differentiation might put a product along the line of Theodroe Levittas level.
6.1.2 Brand
A brand is a name, item, symbol, sign, design or combination of these that identify products of a firm and differentiable them from
those of competitors. Branding is an intrinsic aspect of product strategy, for it adds great value to a product. It can take of three forms
Brand name: the part of a brand, which consists of word, letters and/or numbers, which cab be vocalized. Eg. Omo,Toyota, Coca-
cola, Pepsi, etc.
Brand mark: the part of a brand that can be recognized but not utter able. It can appear in the form of symbol, design, distinctive
coloring or lettering.
Trade mark: a brand or part of brand that has been given legal protection so that the owner has exclusive rights to its use. After
companies identify their trade mark, they entail a term tm or R
Importance of a brand

Why does a firm need to brand its product? What if they are presented in their raw or generic form?
Branding is more preferred than unbranded goods because
1. The brand makes it easier for the seller to process orders and track down problems.
2. The sellers brand name and trademark provide legal protection of unique product features.
3. Good brand help to build the corporate image because it advertises the quality and size of the company.
4. Brands make it easy for customer to identify products or services.
Requirements of a good brand

A good and preferable brands do have desirable qualities. Among the desirable qualities or a brand the following are very
important. A good brand should:
1. Be easy to pronounce, recognize and remember
2. Be distinctive
3. Suggest something about the products benefits or characteristics
4. Suggest about the product qualities such as action or use
5. Have possibility of registration and legal protection
6.1.2.2 Packaging
Packaging is a marketing process and feature concerned with the design and production of the container or wrapper for a product. The
container or wrapper is called the package. In recent times packaging has become a potential marketing tool because it can create
convenience value for the consumer and promotional value for the producer or seller. Packaging is closely related to labeling and
branding because label often appears on the package and the brand typically on the label.
Importance of packaging
Packaging was production-oriented activity in most companies, preformed mainly to obtain the benefits of protection and
convenience. There are three reasons for packaging.
1. Packaging serves several safety and utilitarian purposes. It protects a product on its route from the producer to the final
consumer, even while it is being stored by middlemen and used by the customer.
2. Packaging may implement a companys marketing program. The packaging is an important method of communication with the
customer by identifying the brand and providing ingredients and directions, which represent an image of the brand. The package
differentiates a product from that of competitors by its design, color, shape and materials. Therefore packaging can act as silent
salesman.
3. Well-packaged products may increase profit possibilities in that it stimulates customers to pay more just to get special package.
Besides, an increase in ease of handling or reduction in damages or losses again increases profit by cutting marketing costs.
Policies of packaging
Packaging can be managed through advocating policies that can be best-fitted to corporate mission, divisional target and functional
objectives. There are four packaging policies that assist marketing division achieve their dreams.
1. There are two important reasons for changing the packaging: to combat a decrease in sales and to expand a market by
attracting new groups of customers. A new package may be used as an major appeal in advertising. For it acts as a
silent salesman.
2. Packaging the product line policy
This is also called family packaging: it involves the use of identical packages for all products for a company, or the use of packages
with some common feature. When new products are needed to a line, promotional values associated with the old products extend the
new ones. In short, family packaging is usually sued when the products are of similar quality and the company has goodwill.
3. Reuse packaging policy
Companies design and promote a package that can serve other purposes after the original contents have been used. Sometimes a
company may recollect the package to reuse it for similar purpose. The Ethiopian Beverage factories are good example.

4. Multiple packaging
This refers to the packaging system in which we can place a number of quantities required for similar purposes. It is also called
quantity packaging because it is the practice of placing several units in one container or package. Motor oil, table tennis balls, and
other numerous products are packaged in multiple units.
Development of a new package
The fact that packaging pollutes ecosystem is a conflicting matter against consumers desire for convenience (in the form of thruway
containers). Polyethrane plastic (PEP) package, for instance, that Aqua industry used in one simples example. Thus, to offset these
conflicting interests marketers have developed two conditions.
Development of a package system in which the decay time is shorten.

Development of repurchases system of the package
Developing the package for a new product requires a large number of decisions. The first task is to establish the packaging concept.
This is the definition of what the package should basically be or do for the particular product. This is because a package may be
introduced for either one or more of the previously mentioned importance of packaging. Another important decision regarding the
component elements such as package design, size, shape, materials, color, brand mark, etc.
Each packaging elements must be harmonized with the other packaging elements; size suggests certain things about material,
materials suggest certain things about colers and so forth. The packaging elements also must be guided by decisions on pricing,
distribution, advertising and other marketing elements.
After a package is designed it must be put through a number of tests.
1. Engineering tests: to ensure that the package stands up under normal conditions.
2. Visual tests: to ensure that the script is legible and the colors harmonious.
3. Dealer tests: to ensure that dealers find the package attractive and easy to handle.

4. Consumer tests: to ensure favorable consumer response.
6.1.2.3 Labeling
Label is part of a product that carries verbal information about the product of the seller. The essence of label is expository by nature
because it expresses some features of the product such as ingredients, weight measure, use, warning, performance, etc. and sometimes
it also includes advertising messages. A label may be part of a package, or it may be a tag attached directly to the product. Typically,
there are three kinds of labels.
1. Brand labels: simply the brand alone applied to the product or to the package.
2. Grade labels: a label which identifies the quality with a latter, number or word.
3. Descriptive label: it gives objective information about the use, construction, care, performance or other features of the
product. Sometimes it is called informative label
6.1.2.4 Product design
The marketing significance of design has been recognized for year in the field of consumer products, starting from big items like
automobiles and refrigerators to small products like fountain pens. A good design of a product can improve its marketability in many
ways. The typical importances of a good design are the following:
1. It can make the product easier to operate.

2. It can upgrade the quality and durability of the product.
3. It can improve product appearance and reduce manufacturing costs.
4. It can generate new uses for a product.
6.1.2.5 Color
Marketing management has to consider how colors of a product might be socially, and psychological. Also, its geographical
implication should be understand. Color is often a determinant factor in a customers acceptance or rejection of a product, particularly
products such as a dress and automobile because different people have different interpretations.
The impact of color on a firms activities depends on knowing the right color of a product and when to change it. The careful use of
color can increase sales and workers productivity.
6.1.2.6 Product quality
Product quality is the most important and probably the most difficult of the entire image building features to define. Quality can be
expressed in many ways among which is reliability and durability of a product. Reliability is the measure of assurance whether the
intended performance matches with the actual performance of a product and this can be expressed in terms of right or wrong but not in
terms of good or bad. Thus, reliability and product quality are directly proportional. As a measure of quality, durability also refers to
the measure of life span of a product, and is expressed in terms of calendar time or usage time of the product.
It also refers to the degree of products excellence or superiority and ability to perform its functions. It consists of defective free and
consistency in addition to reliability and durability.
Regarding quality issue, marketers are advised to be proactive in quality assurance rather than reactive. A firm can correct defective
product after receipt of complaint from customers. However, such measures might strike its good will badly. A product should initially
be defective free so that profit margin can be high and customer values are improved. It asserts that quality is not a task for only
quality department but a responsibility for the entire companys division.
6.1.2.7 Product warranty
Warranty refers to the compensation the seller promises to give the buyer in case the product is not found to perform up to a
reasonable expectation. Warranty is often given either in the form of expressed or implied in which the former refers to the warranty
explicitly stated in terms of written or spoken information while the latter be applied in a belief that firm is responsible for the product
it produces. The importance of explicit warranty is that it mainly protects the seller from the buyers claims. However, the scope of
warranty is broadening to cover the concept of implied warranty. It is the idea that warranty was intended, although not stated, by the
seller if the product is not found to perform up to a reasonable expectation as the seller is responsible in manufacturing and marketing.
Therefore, warranty is part of the bundle satisfactions a buyer receives when buying a product.
6.1.2.8 Product service

Service policies are important elements of marketing programs for many industrial products such as computers. It is necessary to
provide installation, repair services, and training for customers personnel. Appropriate service policies not only facilitate initial sales,
but also help in keeping products sold. Stimulating repeat sales, and build customer goodwill.
6.1.2.9 Product differentiation
Product differentiation involves developing and promoting knowledge of differences between a firms product and those of
competitors. It is usually used for reasonably standardized items(including cigarettes, matches, gasoline, and etc) and for products
with psychological trivial differences that are fairly homogeneous in its demand for a product.
6.1.3 Product mix policies and strategies
Product mix also called product assortment is defined as the set of all product lines and items that are offered for sale by a company.
This definition in turn requires defined product lines and product items. Product line is a group of products within a product mix
intended for essentially similar uses and possessing reasonably similar physical characteristics. Product item is distinct unit within a
product line that is distinguishable by size, appearance, or some other attributes.
The structure of the product mix has dimensions of both breadth and depth. The number of product lines carried measures its breadth;
its depth, by the assortment of size, colors, and models offered within each product line.

Major product mix strategies
Expansion of product mix
Aim of expansion is to generate maximum profit by increasing the number of lines and/or the depth within a line. The newly added
products may be related or unrelated to the existing products.
Contraction of product mix
A firm may decide to contract its present product mix to hold few promising products to generate maximum possible profit either by
eliminating an entire line or by reducing the assortment within a line.
Alteration of the existing product mix
Earlier we have stated that products have life cycles, thus, a firm should cope with the changes in the needs and wants of customers.
As an alternative to developing a new product a firm may alter its existing product mix by redesigning the product (improving the
quality, durability and reliability), changing the packaging system and by changing the usage of the new materials. Redesigning of a
product is the key to the renaissance of the industrial product; and packaging to consumer goods.
Positioning the product
A products position is the image that the product projects in relation to competitive products or possible substitutes marketed by the
same company. Product positioning is creating a products place in the market depending on how the consumer perceives.
Product positioning is carried out in two ways.
Direct on stance positioning: refers to positioning a certain product at an upper hand believing that the product is superior to other in
terms of suitability, quality, and durability, etc.
Me too stance positioning: a firm may also position its product side by side with competitive products and other products of the
company believing that the product has no any significant differentiating feature.

Trading up and trading down
As product strategies, trading up and trading down involve, essentially, an expansion of the product line and change in product
positioning. Trading up refers to adding a highly priced prestigious product to a line in the hope of increasing the sales of existing low-
priced products. This is effected in the sense of providing security to the low-priced items by the high prices items.
A companys offer to the market place often includes some service. The service component can be minor or a major part of the total
offer. A company may also decide to trade down by adding a lower-priced item to its line of prestige products. It is designed to
facilitate the sales of low priced items believing that people who cannot afford the original prestigious product will want to buy the
new one.
6.2 Service marketing
6.2.1 Definition and scope
Services are those separately identifiable, essentially intangible activities that provide want-satisfaction, and that are not necessarily
tied to the sale of a tangible product. A service may or be produced with or without attachment of tangible goods. However, when such
use is required, there is no transfer of title (permanent ownership) to these tangible good. As Kotler define
A service is any set of performance that one party can offer to another that is essentially intangible and does not result in the
ownership of anything. Its production may or may not be tied to a physical product. A company can offer its market along a
continuum of tangible-intangible value. The service component can be minor or a major part of the total offer. Five categories
can be distinguished:
1. Pure tangible good: offer consists primarily of a tangible good such as soap, toothpaste, or salt. No service accompanies the
product.
2. Tangible good with accompanying services: the offer consists of a tangible good accompanied by one or more services to
enhance its consumer appeal.

3. Hybrid: the offer consists of equal parts of goods and services: for example, people patronize restaurants for bother their
food and services.
4. Major service with accompanying minor goods and services: the offer consists of a major service along with additional
services and/or supporting goods. For example, airline passengers are buying transportation service. However, the trip includes
some tangibles, such as foods and drinks and airline magazines.
5. Pure service: the offer consists primarily of a service. Examples include baby-sitting, psychotherapy and massages.
Service might take different forms on bases of skill of personnel, clients presence, ultimate need, and objectives. In light of these
factors, it can be managed into four broad aspects.
o First, services vary as to whether they are equipment based (automated car washer, ending machines) or people based (window
washing, accounting services). People based services vary by whether they are provided by unskilled, skilled or professional
workers.
o Second, some services require the clients presence, but car repair does not, if the client must be present, the service provider
has to be considerate of his or her needs. Thus beauty shop operators will invest in their shops dcor, play background music
and engage in light conversation with client.
o Third, services differ as to whether they meet a personal need (personal services) or a business need (business services).
Service providers typically develop different marketing programs for personal and business markets.
o Fourth, service provides differ in their objectives (profit or no profit) and ownership (private or public).
6.2.2 Characteristics of service and their marketing implications
Services have four major characteristics that greatly affect the design of marketing programs: instability, inseparability, variability and
perishable. Each characteristics demands strategy to fully exploit opportunities appropriately, satisfy customers, and disregard any
possible flaws
Intangibility
Unlike physical products, service are intangible, they cannot be seen, tested, felt or smelled before they are bought. To reduce
uncertainty, buyers will look for signs or evidence of the service quality.

These signs will draw inferences about quality of service. The quality depends on the place, people, equipment, communication,
material, and price that the service provider deliberate
Therefore, the service providers task is to manage the evidence to tangible the intangible. Whereas product marketers are
challenged to add abstract ideas, service marketers are challenged to put physical evidence and imagery on their abstract offer.
Inseparability
Services are typically produced and consumed simultaneously. This is not true of physical goods, which are manufactured, put into
inventory, distributed through multiple resellers, and consumed later. If a person renders the service, the provider is part of the service.
Since the client is also present as the service is produced, provider-client interaction is a special feature of services marketing. Both
the provider and the client affect the service outcome.
In the case of entertainment and professional services, buyers are highly interested in a specific provider. When clients have strong
provider preference, price is raised to ration the preferred providers limited time. Services often cannot be separated from the person
of the seller. Moreover, some services must be created and dispensed simultaneously. For example, dentists create and dispense almost
all their services at the same time. From marketing stand point, inseparability frequently means that direct sale is the only possible
channel of distribution, and sellers services cannot be sold in many markets. This characteristics also limits the scale of operation of a
firm. One person can repair only few autos in a day or treat few patents.
Variability (heterogeneity )
It is impossible for a service industry, or even an individual seller of services, to standardize output. Each unit of the service is
somewhat different from other units of the some service. For example, an airline does not give the same quality of service on each
trip. All repair jobs a mechanic does on automobile are not of equal quality.
An added complication is the fact that it is often difficult to judge the quality of a service. It is particularly difficult to forecast the
quality in advance of buying a service. A person pays to see a football game without knowing in advance whether it will be an exciting
one or a dull performance.

Since services depend on who provides them and when and where they are provided, they are highly variable. Service buyers are
aware of this high variability and frequency talk to others before selecting a service provider. Service companies should therefore pay
particular attention to the product-planning stage of their marketing programs. From the beginning marketing must do all it can to
ensure consistency of quality and to maintain high levels of quality control. Services firms can take three steps toward quality control.
The first is investing in good human resource selection and training. The second step is standardizing in service performance process
through out the organization. Preparing service blueprint that depicts the service events and process in a flow chart, with the objective
of recognizing potential service need to be focus points.
Third step is monitoring customer satisfaction though suggestion and complaint systems, customer surveys and comparison-shopping
so that poor service can be detected and corrected.
Perish ability and fluctuating demand
Services cannot be stored, some doctors charge patients for missed appointments because the service value existed only at that point.
The perish ability of service is not a problem when demand is steady because it is easy to hire people in advance. When demand
fluctuates, service firms have difficult problems.
For example, public transportation companies have to own much more equipment because of rush-hour demand than they would if
demand were even throughout the day.
Unused electric power, empty seats in a stadium, and idle mechanics in a garage all represent business that is lost forever.
Furthermore, the market for services fluctuates considerable by season, by day of the week, and by hour of the day. The combination
of perish ability and fluctuating demand offers product-planning, pricing and promotion challenge for idle plant capacity in off
seasons. In an attempt to level demand, telephone companys offer low prices (rate) at right and on weekends.
6.2.3 Marketing mix for services
The starting point for a marketer of services, like in case of physical object, is to analyze the why of customer behavior. These should
be a trial to discover the motives, reasons for, or the objectives of buyer behavior. After such studies, four Ps for services are going to
be recommended.
Product decision
By and large, everything that applies to tangible products in the areas of product policy suts services. The product planning and
development processes are the same. It is also directly related with the market purchasing power growth. With respect to market
segmentation and product differentiation as applied to service marketing, the marketer must skillfully combine them (market
segmentation and product differentiation) into package. The airlines industry and hospitals have appropriately segmented their markets
based on classes; 1st,2nd, and 3nd. Even a stadium, segmentation is practiced through locality differentiation, seat quality and whether
or not the area has a roof on it.
Price decisions
In general, when setting the price, it is more prudent to consider not only the intensity of demand but also the cost of producing the
service as well the prevailing degree of competition. In many service concerns, uniform prices tend to prevail again, given the nature
of services, price reductions may not increase demand in many cases. For instance, if there are empty seats, it is not possible to
postpone the match and offer it at a lower price later.
Channels of distribution
As far as distribution is concerned, the only major issue is the transfer of ownership from the producer(seller) to the buyer is unlikely
possible. Or the transfer is done when a provider get into franchise agreement with proper assessment of franchisees capacity to
deliver qualified service. It is safe to conclude, therefore, that the distribution of services differs considerably from that of physical
objects.
Promotion decisions
The promotion of a service entails the use of advertising, personal selling, sales promotion and publicity. However, the desire of many
service customers for a personal relationship increases the importance of personal selling.
Personal selling or salesmanship is thus the backbone of service although advertising is also widely used particularly in the hotel
industry.

Chapter seven
New product development and product life cycle strategies
7.1 New product development
What is a new product? Are the new models that auto manufacturer introduce each autumn new products? If a firm adds a wrinkle-
remover cream to its assortment of womens cosmetics, is this new product? Or must an item be totally new concept before we can
label it as a new product?
Here, we need not seek a very limited definition. Instead, we can recognize several possible categories of new products. What is
important, however, is that each separate category may require quite different marketing program to ensure a reasonable probability of
market success.
Three recognizable categories of new products are as follows:
1. Products that are really innovative: products that are truly unique. Examples would be a har-restorer or cancer cure-products
for which there is a real need but for which no existing substitutes are considered satisfactory. In this category we can also
include products that are quite different from existing products but satisfy the same needs. Thus television t a great extent
replaced radio and movies, plastic compete with wood and metals, and solar power competes with outer energy sources.
2. Replacements for existing products that are significantly from the existing good: instant coffee replaced organic coffee in
many markets; then freeze-dried instant replace instant coffee. Dry cereal manufacturers introduce new cereals and often
discontinue manufacturing existing ones as they no longer fulfill sales and profit expectations. Annual model changes in autos
and new fashions in clothing belong in this category.
3. Imitative products: those are new to a particular company but not new to the market. The company simply wants to capture
part of an existing market with a me-too product. Perhaps the key criterion as to whether a given product Is new is how the
intended market perceives it. If buyers perceive that a given item is significantly different(from competitive goods being
replaced) in some characteristic(appearance, performance), then it is a new product.
7.1.1 Rationale for new product development

The social and economic justification for the existence of a business is its ability to satisfy customers. A firm meets this basic social
responsibility to society through its products or services. And this can be accomplished with the help of new product innovation.
Product innovation is essentially important for the following reasons.
1. The justification of a firms existence
Organizations exist as far as they satisfy the needs of their consumers. It is worthwhile to mention that consumer behavior is
dynamic in that human needs are unlimited. Thus the firm should cope with the emerging new needs of its customers. When the
life cycle for a certain product is to end, customers develop a new need that calls for new product innovations.
2. Maximum use of resources
The fact that the supply of many of our natural resources are limited and irreplaceable points out clearly the importance of careful
new product development that requires efficient and effective use of available resources.
3. Product is a basic profit determinant
New products are essential of sustaining a firms expected rate of profit. As a product goes through all five stages of its life cycle,
the profit starts to decline in the late stages unit it becomes zero. Thus the introduction of a new product at the proper time will
help to maintain the firms desired level of profits.
4. New products are designed not only to maintain the profit but also to increase their profits and have greater market share.
7.1.2 New product development
It has been said that nothing happens until somebody sells something. This is not entirely true. First, there must be something to sell a
product, a service, or an idea. From inside or outside the must come up with the germ of a product idea because the idea itself can be
marketer.
There are some general steps that a marketer need to preassume about new product development In each stage, management must
decide whether to move on to the next stage, abandon the product or seek additional information.
Generation of new product idea
New product development starts with an idea. The search for product ideas should be systematic and acknowledged and reviewed
promptly. The of product ideas can be internal to the organization, such as salesmen, executives and production personal or any other
internal member of the organization. A firm can also obtain new product ideas from external source, such as customers, competitors,
middlemen, private research organizations, science and technology institute, and inventor and trade associations.
The fact that supply of natural resources are limited and irreplaceability clearly points out the importance of careful new product
development plan that requires efficient and effective use of available resources.
Screening of ideas
The purpose of idea generation is to create pool of good ideas. The purpose of idea screening is then to make a preliminary survey on
the ideas and remain with seemingly potential good ideas. In this stage the generated ideas are screened and evaluated to determine
which ones warrant further study. Here great care should be taken not to accept wrong idea, and reject the right ideas. Otherwise we
are aggravating the risk of innovations.
Analysis of ideas or business analysis
In business analysis, the company further goes to analyze and evaluate the right ideas. In this stage, management
A. Evaluates the ideas with respect to company resources.

B. Identifies product features.
C. Estimates market demand and the products profitability.
D. Establishes program to develop the product.

These first stages are referred to as concept testing. This is pre-testing of the product idea, as contracted to later pre-testing of the
product itself and its market.
Product development
At this stage the product idea is converted into actual sample physical product, known as prototype. The product is not directly to be
sent to the production department; rather pilot models or small quantities are manufactured to designated specifications for prototype
testing. Laboratory tests and other necessary technical evaluations are made to determine the production feasibility.
Market testing
Market tests and commercial experiments are conducted in a limited geographic area to ascertain the feasibility of full-scale
production and marketing program. At this stage all necessary adjustments are made after the findings. Then management must take a
final decision regarding whether or not to market the product commercially.
Commercialization
Here, marketers fully promote, distribute, and sell their new products. This is passage of presenting to consumers tangibly with high
financial company expenditure cost and trotting to reach at break even point. Every marketing strategy is intensive and sound to attract
customers toward and a long way of trotting to reach at beak even point. It demands marketing strategy which is intensive and sound
to attract customers.
7.2.3 Target market assessment for new product
The firm, before releasing the new product, should assess the target market as it is made up of people with various philosophy of
buying. Let us look at some characteristics of buyers for new products.
Different groups of people have different intensity of risk tolerance, initiation, confidence for new products.
These are grouped into five: innovators, early adopters, early majority, later majority, and laggards based on adoption of innovation.
Innovators
Genuine innovators are those who are prepared to take off the new product into growth stage. Even though prices are too high, early
adopters buy new products, as there are new features either from competitors or the same marketer. In addition, early adopters own
such products bearing in mind they are still fashionable, socially acceptable, and successful.
Venturesome ness: the willingness and desire to be daring in trying something new and different
Social integration: frequent and extensive contract with others in ones area
Cosmopolitan: point of view extending beyond the immediate neighborhood or community
Social mobility. Upward movement on the social scale
Privileged ness: attitude and possession of money(less risks to try something new)
Early majority
These groups share behavior of early adopters but at later points of the growth stage. They want to be fashionable but are followers
rather than leaders. Even though early
Majority purchases products from the total industry and maximize the industry sales, the amount shared by sole company might be
small owing to stiff competition. The cutthroat competition results in decreasing rare of sales.
Late majority
Overwhelmed by the positive evidence of the reliability and consistence of new products, they think that they tend to be old fashioned
and skeptical. During the mature stage most remaining consumers-later majority-will become customers.
Laggards
At last stage of maturity and decline stage, some consumers buy in bulk and old-fashioned products as the goods and services are out
of the markets majority preference. These groups might be acquired at lowest price and anywhere.
7.2 The product life cycle

Like human beings, consumers or industrial products develop via four stages: introduction, growth, maturity, and decline stages.
However products depict different kinds of graphical illustration of their life cycle based on their nature.
The product life cycle graph differs for instance; for fashionable, fads (those that are introduced soon and die soon), or generic
products (any product). It would be easy to look at their life cycle trend.
Product development
It begins when a firms identifies and works on a new product concept (idea). Sales trend is zero and costs accumulate over the
specified period of time.
Introduction
In this stage, the product is launched in to the market through full-scale production and marketing program. However, sales trend is
low and promotional and distribution expenses are high. As a result, profit is either negative or low. There can also be relative high
percentage of defective products vis--vis other stages. After identification of product weaknesses and failures, strategies for
elimination should be designed. Promotional activities emphasize on the type of product rather than the brand.
Growth stage
It is a stage where sales increase at an increasing rate due to favorable word of mouth and effective advertisement. Plus, existing and
attracted customers visit stores to purchase the product due to different exceedingly positive feature a product comprises of. When a
firm promulgates successful annual profit margin, competitors fight to scramble through their release of new product features and
extensive and intensive distribution. So, it would be advisable to promote, distribute and improve products in organized ways. Profit is
high as economics of scale is experienced over promotional and unit manufacturing cost. At this stage, manufacturing and distribution
efficiency are the key elements for success. Selective advertising is required emphasizing on its own brands advantages. Profits may
tend to decrease at the end of the growth stage.
Maturity stage

Introduction Growth Maturity Decline
At the beginning of maturity stage unlike growth stage, sales
Characteristics Low increase but at a decreasing rate due to increasing
promotional budget(implies cost grows up), existence of
Sales Low Fast Growth Slow Growth Decline
stiff competition and price war, and upping R&D (research
Benefits Negligible Peak levels Declining Low or zero and development) budget. These all factors are maximum
and make sales trend plateau and profit zero. At last, sales
Cash flow Negative Moderate High Low
start declining which minimizes a firms short-run profit.
Customers Innovative Mass market Mass market Laggards
A responsible marketing manager modify
Competitions Few Growth Many rivals Decliningnumber
The market: in search of new users
Responses The product: improve quality, features or style.
The marketing mix
Strategic Expand Market Productivity Productivity
focus market penetration Decline and possible abandonment stage
Marketing High High(declining Low low
The final fate of any product after a specified period of time
expenditures percentage)
is death(which refers to declining sales and profits,
Marketing Brand Brand Selective selective sometimes the latter can be negative(which means loss).
emphasis Awareness preference
The reason of declining sales might be
Distribution Patchy Intensive Selective Selective
Stiff competition
Price High Lower Rising Rising Customers preference of other brands
New technological break through
product Basic improved Differentiated Rationalized
Chapter eight

Price strategies and programs
Price has operated as the major traditional determinant of user choice traditionally. Although non-price factors have become more
important in recent decades price still remains on of the most important element determining market share and profitability. Different
companies set the price haphazardly as based on cost.
The company must set its price in relation to the value defined and perceived by the customer. The firm has to consider many factors
in setting its price policy. To do this there are six steps:
8.1 steps in pricing
Step 1s selecting the pricing objective
The company first decides where it wants to position its market offering. The clearer a firms objectives, the easier it is to set price. A
company can pursue any of five major objectives through pricing.
a. Survival: if a firm is exposed to overcapacity and intense competition and it can not sustain anymore, it can dictate survival
pricing. The company stays in business as long as prices cover its variable and some fixed costs. Survival is a short run
objectives; in the long run, the firm must be cautions how to add value.
b. Maximize their market profits: many companies estimate the demand and costs associated with alternative prices and choose
the price that produces maximum current profit, cash flow, or rate of return on investment. In focusing current performance,
the company may sacrifice long-run performance by ignoring the effects of other marketing mix-variables, competitions,
reactions and legal restraints on price.
c. Maximize their market share: companies believe that a higher sales volume will lead to lower unit costs and higher long-run
profit. It can also be know as market penetration pricing. Firms, if they are followers of such strategy, set the lowest price,
asserting the market is price sensitive. The following conditions should be considered when a company introduces low price.
1. The market is highly price-sensitive and a low price initiates market growth.
2. Production and distribution costs fall with accumulated production experience.
3. A low price discourages actual and potential competition.
d. Market skimming pricing: a company favors setting high prices to skim the market. To experience it, the following
conditions should be satisfied.
1. A sufficient number of buyers have a high current demand.
2. The unit costs of producing a small volume are not so high that they cancel the advantage of charging high price.
3. The high initial prices do not attract more competition to the market.
4. The high price communicates the image of a superior.
e. Partial cost recovery: non-profit and public organizations may adopt this pricing objective known that rely on private gifts
and public grands to cover the remaining costs.
Step 2: determining demand
Each price will lead to a different level of demand and therefore have different impact on companys marketing objectives. Prior to
going any further, the first issue to discuss about is to understand what affects price sensitivity of buyers.
Customers are more price-sensitive to products that cost a lot of bough frequently and low cost items. They are less price-sensitive to
low cost items or items they buy infrequently. They are also less price-sensitive when price is only a small part of the total cost
obtaining, operating and servicing of the product over its life time companies prefer less price sensitive customers. The following lists
of factors are associated with lower price sensitive
The product is more distinctive.

Buyers cannot easily compare the quality of substitutes.
Buyers are less aware of substitutes.
The expenditure is a small part of the buyers total income.
The product is used in conjunction with assets previously bough.
The product is assumed to have more quality prestige, or exclusiveness.
Buyers cannot store the product.
Most companies make some attempt to measure and estimate demand. They use different methods.
The first involves statistically analyzing past prices, quantities sold, and other factors to estimate their relationships. The data can be
longitudinal (overtime) or cross sectional (different location at the same time).

The second approach is to conduct price experiments. An alternative approach is to change different prices in similar territories to see
how sales are affected. However, a company must do this carefully not to alienate customers.
The third approach is to ask buyers to state how many units they would buy at different proposed prices but buyers might understate
their purchase intentions at higher prices to discourage the company from setting higher prices.
Marketers need to know how responsive, or elastic, demand would be to change in price. If demand hardly changes with a small
change in price, we say the demand is inelastic. If demand changes considerably then demand is elastic. Demand is likely to be less
elastic under the following conditions.
1. There are few or no substitutes or competitors.

2. Buyers do not readily notice higher change in price.
3. Buyers are slow to change their buying habits.
4. Buyers think the higher prices are justified.
If demand is elastic, sellers will consider lowering the price. A lower price will produce more total revenue. Price elasticity depends on
the magnitude and direction of the contemplated price change. It may differ for a price decrease (cut) versus a price increase.
Finally, long-run price elasticity may differ from short-run elasticity. Buyers may continue to buy from a current supplier after a price
increase, but they may eventually switch from suppliers in long run. Here demand is more elastic in the long-run than in the short-run,
or buyers may drop a supplier after being notified of a price increase but return later.
Step 3: estimating costs
A company wants to change a price that covers its cost of producing, distributing, and selling the product including a fair return for its
effort and risk.
A companys costs take two types of costs in relation to levels of production

a. Fixed costs (overhead): are costs that do not vary with production or sales revenue. A company must pay bills each month
for rent, salaries and so on.
b. Variable costs: cost varies directly with the level of production. These costs tend to be constant per unit produced. They
are called variable because their total varies with the number of units produced.
Total cost consists of the sum of the fixed and variable costs for any given level of production. Average cost is the cost per
unit at that level of production.
Step 4: analyzing competition costs
Though prices and offers within the range determined by market demand and company costs, the firm must also take the competitors
costs, prices, and possible price reaction into account. The firm should first consider the nearest competitors price. If the firms offer
contains positive differentiation feature not offered by the nearest competitors price, their worth to the customers should be evaluated
and added to the competitors price. If the competitors offer contains some features not offered by the firm, their worth to the
customer should be evaluated and subtracted from the firms price. At this moment the firm can decide whether it can change more,
the same, or less than the competitor. The firm must be aware, however, that competitors can change their prices in reaction to the
price set by the firm.
Step 5: selecting a pricing method
Companies select a pricing method that includes one or more of three considerations:
The customers demand schedule.

The cost function.
Competitors prices.
Seven price-setting methods can be applied keeping the aforementioned three factors into account.
1. Make up pricing: adds a standard mark up to the products cost
Advantage of mark up pricing

Sellers can determine costs much more easily than they can estimate demand.
By tailoring the price to cost, sellers simplify the pricing task.
Prices tend to be similar where all firms in the industry use this pricing method.
Many people feel that cost-plus pricing is fair to both buyers and sellers.
Disadvantage of mark up pricing
It ignores current demand, perceived value, and competition.

Companies introducing new product often price it high to recover their costs as rapidly as possible.
2. Target return pricing
The firm determines the price that would yield its target rate of return on investment (ROI)
Target return price= unit cost+ desired return x invested capital
Unit sales
Suppose the manufacturer has invested 1 million birr in the business and wants to earn a 20 percent ROI. The target return price is
given by the following method.
The expectation here in selling 50,000. What would happen if sales do not reach at 50,000? The manufacturer can prepare a break-
even chart.

The break even point is a point where a firm earns zero profit or total revenue and total cost equalize.
Marketers should consider the following points
a. The marketer needs to consider different prices and estimate their probable impacts on sales volume and profits.
b. The manufacturer should also lower its fixed or variable costs because lower costs will decrease its required break even
volume.
3. Perceived-value pricing
Perceived value is made up of several elements such as the buyers image of the product performance, the channel deliverable,
warranty, quality, customer support and other attributes such as the suppliers reputation, trust worthiness and so on.
Attribute Standard offer XYZ company Added

value
Premium offer
Quality Defective less Defective less the 2% 1.4
Than 5%
Delivery Within a week Within a week 0.15

System Supply Supply also spare part 0.80
products
Innovation Like R&D High level R&D 2.00

support support
Retraining Initially Retrain on request 0.40
Service Through main Locally available 0.25
Office
Price 100 $/kg 105 $/kg 5.00
Value pricing
Consumers consider some brands to have high quality. The price is higher than other products owing to their superior value.
Going rate pricing
It bases its price largely on competitors prices. The firm might charge the same, more or less than major competitor(s). where
costs are difficult to measure or competitive response is uncertain, firms feel that going price is a good solution because it is
though to reflect the industrys collective wisdom.
Group pricing
When a consumer finds a desired product in the internet(market space), he or she will see the current pool price.
Auction
The use of auction is to dispose of excess inventories or used goods while they are functional or can be recycled. There are
three types of auctions:

Ascending bids (English auctions): the seller puts up an item and bidders raise the offer price until the
top price is reached.
Descending bids (Dutch auctions): one seller and many buyers, or one buyer and many sellers. An
auctioneer announces a higher price for a product and when slowly decreases the price until a bidder
accepts the price.
Sealed bid auctions: would-be suppliers can submit only one bid and cannot specifically know price
offers of other participants as they are sealed in envelope.
Step 6: selecting the final price
In selecting the final price, the company must consider additional factors, including:
a. Psychological pricing: many consumers use price as an indicator of quality when looking at particular product buyers carry
minds a reference price formed by noticing current prices, past prices, or buying process. Sellers often manipulate these
reference prices.
b. Gain and risk sharing pricing: buyers may resist accepting a sellers proposal because of a high-perceived level of risk.
c. The influence of other marketing mix elements: the final price must be take into account the brands quality and advertising
relative to competition.
d. Company pricing policies: the must be consistent with company pricing policies. At the same time, companies take punitive
actions for missed or canceled schedules. Lufthansa charge $150.00 to postpone the flight date.
e. The impact of price on other parties: how will distributors fell about? Will the sales force be willing to sell at that price?
How will competitors react? Will suppliers raise their prices when they see the companys price?
8.2 adapting the price
There are several ways of price adaptation strategies
1. Geographical pricing: refers to a company decision making process which determine different price list of products to
different customers at different locations. The company charge higher prices to distant customers to cover the higher shipping
costs.

2. Price discounts and allowance: most companies will adjust their list price and given discounts and allowances for different
reasons. The following lists are included under this topic.
a. Cash discount: a price reduction to buyers who pay promptly example 2/10, net 30 which means that
payment in due within 30days and that the buyer can enjoy a deduction of 2 percent by paying the bill within 10
days.
b. Quantity discount: a price reduction to those who buy large volumes. Example $10 per unit for less than 100
units; $9 per unit for 100 or more units. Quantity discounts must be offered equally to all customers and must
exceed the cost savings to the seller.
c. Functional discount: also called trade discount is a form of discount offered by a manufacturer to trade channel
members if they will perform certain functions such as selling, storing, maintenance, and installation.
d. Seasonal discount: a price reduction to those who buy merchandise or services out of season.
e. Allowance: an extra payment designed to gain reseller participation in special programs. Trade in allowance is
granted for turning in an old item when buying a new one. Promotional allowance reward dealers for
participating in advertising and sales support programs.
3. Promotional pricing: companies can use several pricing techniques to stimulate early purchase:
Loss-loader pricing: sellers drop the price on well known brands to stimulate additional sale.
Special event pricing: sellers will establish special prices in certain seasons to draw in more customers.
Low interest financing: instead of cutting its price the company can offer customers with low interest.
Cash rebate: companies or manufacturers refund percentage of the purchase price of a product to consumers
who send proof of purchase to the offer money back to encourage purchase of the manufacturers products
within a special time period.
Longer payment terms: sellers stretch loans over longer periods and thus lower the monthly payments. The
good example can be land lease and condominium payment.
Warranties and service contracts: companies can promote sales by adding a free or new cost warranty or
service contract.
Psychological discounting: involves setting an artificially high price and then offering the product at
substantial saving. For example, when $300, now 299.

Discriminatory pricing: it occurs when a company sells a product or service at two or more prices that do not reflect a promotional
difference in costs. Lists of such type of pricing are:
Customer segment pricing: different customer groups are charged different prices for the same product or service. Eg.
Museums often charge a lower admission fee to students than workers.
Product form pricing: different versions of the product are priced differently but not proportionately to their respective
costs.
Image pricing: some companies price the same product at two different levels based on image differences. For
example, a perfume manufacturer can put the perfume in one bottler, given it name and image and price it at $15 and
can put the same perfume in another bottle with different name and image and price it at $30.
Channel pricing: a product might be priced different in different channels differently. Ambo water might be priced
differently in local outlets, restaurants, and hotels than five star hotels.
Location pricing: the same product is priced differently at different locations even though the cost is low.
Time pricing: prices are varied by season, day , or hour.
Chapter nine
Market channels
Point of production Marketing channels Point of consumption 9.1 Definitions of marketing channels
Farmers chickens Selling the eggs at his His neighbors buy and The marketing (or distribution) channels refer to the activities,
home and at the local
Lay eggs Eat the eggs parties and channel structure required to transfer a product from its
market point of production to its point of consumption. Table links mrkt
Highly complex chn
Channel involving 9.2 marketing channel functions
Oil extracted from Much money,
The North Sea International Used by car drivers in

Transport, many Addis Ababa
Different
Companies and
Agencies
The following functions may need to be undertaken, as part of the marketing channels, either by the producer itself or by marketing
intermediaries so that the channeling is effective:
Information: gathering, analyzing and distributing information focuses on

The target customer market, what are their needs? Where are they buying?
Competitors marketing activities.
The current economics of the marketing channels, new entrants, new technology.
Promotion: developing and spreading persuasive communications about products and special offers. (e.g. Advertising)
Contact: finding and communicating with prospective buyers.
Matching supply and demand: shaping and fitting the offer to the buyers needs including activities such as manufacturing,
grading, assembling, and packaging. Producers (e.g. fish processors) make only a few products (e.g. tins of tuna, sardines) but
in very large quantities. However, when they enter their local shops consumers want a broad selection of products in small
quantities. Thus the marketing channel must divide up the products so that consumers can purchase in customized manner.
Negotiation: reaching an agreement on price and other terms of the offer, so that ownership or possession can be transferred.
Physical distribution: transporting and storing goods from point to origin to point of destination
Financing: acquiring and using funds to cover the costs of the channel work. After sales support-providing for training,
advice, repair and other assistance after the product has been sold.
9.3 channel structure
The channel structure represents all organizations through which a product passes between its point of production and consumption. It
also indicates the role which they play in helping the producer to undertake the above functions.
Of course the producer could do all of these functions by itself but for certain products it is much more cost-effective to pay for these
functions to be undertaken by another party company. 3nd parties will generally have expertise, contacts and equipment allowing them
to be much better and cheaper than the producer.
Different companies in different industries will generally provide these functions through different mechanisms. Two of these are
given below.

Direct versus indirect channels
Marketing channels can broadly be divided into two: direct and indirect channel. Direct channel of distribution refers to the
manufacturer sells directly to consumers without using any intermediaries whereas indirect channel of distribution refers to the
producer sells its products through the use of intermediaries.
Direct channel
Direct channel is the shortest channel a producer uses in distributing its product in the market. Here, the products move from the
producer directly to the consumer without involvement of any intermediaries. For this reason direct channel is also know as zero-level
channel. The most commonly used methods of direct channel are the following.
Door-to-door selling
The manufacturer employs its own salesmen to approach the customers and convince them to buy the products. These salesmen
usually go door-to-door in order to sell the product. That is, they bring the products to the doorsteps of the customers. Eg. Unilever
sells its OMO door-to-door in selected kebeles.
Manufacturers sales branches
Manufacturers open sales branches to sell their products directly to customers. The sales branches may be opened at different locations
where customers might be found. Eg. Anbessa shoes factory has sales branches where it can sell its products.
Direct mail
This is means of direct distribution of products to customers by dispatching them through the post. Unlike door-to-door and sales
branches, personal contact between the seller and the buyer is avoided since the product is mailed through the post. All types of
products are not suitable for mail order. For example, the products should not be too heavy or bulk. Direct mail most commonly used
to distribute such products as newspapers and magazines. E.g. Magazine and newspaper publishers dispatch to their subscribers by
direct mail.
Indirect channel
Under indirect channel of distribution, the producer sells its products through the use of intermediaries such as wholesalers, retailers,
and agents.
Wholesalers
Wholesalers are merchants who as intermediaries between the producers and retailers or other industrial buyers. They buy products in
large quantities from producers for the purpose of reselling them in smaller quantities to the retailers. Wholesalers do not sell their
products t individual customers.
Retailers
Retailers are businesses that are involved in selling goods directly to final consumers for their personal use. They usually buy products
from the wholesales or sometimes from producers to sell to the consumers either in retail stores or in streets. Eg. Hadiya supermarket,
the form Tana department store, and several kiosks are found closer to sell the items to residential houses.
Agents
Agents represent manufacturers on a relatively permanent basis to perform selling and other facilitating functions. They offer from
wholesales and retailers in that they do not take titles to goods; that is, they do not own the goods they sell since the manufacturer
retains the titles. Agents are common in impact and export trade. Eg. Sony Glorious, is an agent to Sony electronics products,
equatorial business is agent to Samsung.
9.4 flows in marketing channels

When a marketing channel has been developed, a series of flows emerges. The term flow is descriptive of movement and it provides
the links that tie channel members and other agencies together in the distribution of goods and service. The following are the major
flows in marketing channels.
Product flow
Refers to the actual physical movement of the product from the manufacturer through all of the parties who take the physical
possession of the product; that is, from its point of production to final consumers. Here transportation companies are involved in
shipping the product from the manufacturer to the wholesales.
Negotiation flow
Represents the interplay of the buying and selling function associated with the transfer of title to the manufacturers products. As you
will see in figure the transportation company is not included in this flow because it does not participate in the negotiator functions.
Ownership or title flow
It shows the movement of the ownership title to the product as it passed along from the manufacturer to find consumers. Here, again,
the transportation company is excluded because it does not take title to the product nor is it actively involved in facilitating its transfer.
Information flow
It refers to the exchange of information by all parties that participate in the marketing channel. The transportation company reappeared
in this flow since the manufacturer may obtain information about shipping schedules and rates, and the transportation company may in
turn seek information from the manufacturer about when and in what quantities it plans to ship the product.
Promotion flow
Refers to the flow of persuasive communicator in the form of advertising, personal selling, sales promotion and publicity. Here,
advertising agency is included in the flow because it is actively involved in providing information flow. The two-directional arrow
between the manufacturer and the advertising agency is meant to show that the manufacturer and advertising agency work together
closely to develop promotional strategies.
Payment flow
It refers to the buyers payment of their bills to the sellers through banks. In this flow, banks are included because they play an
important intermediary role in facilitating payment transfer between buyers and sellers.
9.5 channel levels
Channel levels refer to the group of channel members to which a set of distribution tasks has been allocated. Given a set of distribution
tasks that must be performed to accomplish a firms distribution objectives, the channel manager must divided hot to allocate or
structure the tasks. Thus, the structure of the channel will reflect the manner in which the channel manager has allocated these tasks
among member of the channel.
The most typically mentioned dimension of channel structure is channel length-that is, the number of flows of intermediaries in the
channel. Accordingly, the following figure portrays channel structure for consumers goods.
Zero-level channels (M C)
This is a direct channel where a producer uses no intermediaries. Manufacturers of heavy installations like airplanes, ships, or
generators may use such channels where buyers need a lot of services from manufacturers. It is commonly used in consumers market.
One-level channel (M-R-C)
Under this channel an intermediary is used. Therefore, it is an indirect channel of distribution. Although it is not common, retailers
may sometimes avoid wholesalers to buy products directly from producers. Emergence of retail chains or supermarkets led to the use
of this channel.
Two-level channel (M-W-R-C)

This is the traditional channel of distribution which is most commonly used in consumer goods market. Consumer convenience good
such as sugar, soap, soft drinks, and so on are normally distributed through such channels.
Three-level channel (M-A-W-R-C)
This is the longest channel of distribution where several levels of intermediaries are involved. It is common in import and export trade.
9.6 intensity of distribution
Intensity of distribution refers to the number of intermediaries used at each channel level. This intensity of distribution is categorized
into three, ranging from exclusive to intensive distribution.
Zero-level one-level two-level three-level

Manufa Manuf Manuf Manuf
cturer acture acturer acture
r rAgent
Retaile
Retail
r
er Whole
Whole saler
saler
Consum Consu
Retaile
er mer
Consu r
mer
Exclusive distribution
Consu
mer
Exclusive distribution involves severely limiting the number of intermediaries that handle the companys goods or only one
intermediary is used in a particular market area.

It is used when the producer wants to maintain a great deal of control over the service level and service outputs offered by the
resellers. Often, exclusive distribution involves exclusive dealing arrangement, in which the intermediaries agree not to carry the
products or brands of competitors.
By granting exclusive distribution, the producer hopes to obtain more aggressive and knowledgeable selling. Exclusive
distribution tends to enhance the products image and allow higher profit into the producer.
Such strategy of distribution requires greater partnership between the producer and the intermediary. This strategy is common in
the distribution of automobiles. Eg. The Noble and Trustworthy PLC is on exclusive distribution of Hydro fertilizer and Gillette,
MOENCO is an exclusive distribution of TOYOTA automobiles in Ethiopia and SM trading is an exclusive distribution of
Ambassador Garment Factorys suits.
Selective distribution
Selective distribution strategy involves the use of more than a few but less than all of the intermediaries who are willing to carry a
particular product. Such strategy is used both by new companies and already established ones that are looking for distributors. The
company does not attempt to obtain as many intermediaries as possible, rather, it tries to develop a good business relations wit
selected intermediaries and expect better than average selling effort. Selective distribution enables the producer to gain adequate
market coverage with better control and lesser cost than intensive distribution. Eg. Summit Beverage sells its soft drinks at first
only in selective five star hotels.
Intensive distribution
In this strategy of distribution, the places the goods or services in as many intermediaries as possible. When the consumer requires
a great deal of location convenience, it is important for the manufacturer to offer greater intensive of distribution.
This strategy is generally used for consumer convenience goods such as tobacco products, soap and so on. Producers move from
exclusive to more intensive distribution to increase the coverage sales.
The intensity of distribution dimension is a very important aspect in structuring distribution channel because it is often a key factor
I the companys basic marketing strategy and it also reflects the companys overall corporate objectives and strategies.
A marketing strategy that wants to flood the market with a product requires a channel that stresses a very high level high level of
distribution intensity. Manufacturers of chewing gum, for example, have used an intensive distribution channel to make their
product available at virtually every retail outlet where consumers could buy chewing gum. On the other hand, a marketing strategy
that focuses on carefully chosen target markets, such as producers of Wrist Watches, require a high degree of selective in their
channel of distribution.
In general, if a companys basic marketing strategy emphasizes mass market for its products, it will most likely have to develop a
channels structure that stresses intensive distribution. On the other hand, a marketing strategy that stresses narrow segmented
marketing will most probably require an exclusive distribution channel. Eg. Pepsi distributes its products in every outlet available.
Intensive dimension
Intensive selective
exclusive
Number of intermediaries
Many few
one
9.7 variables affecting channel structure
There are a number of variables that are likely to influence the channel structure. These variables can be categorized into four
groups.
Market variables
Market variables are the most fundamental variables affecting the channel structure. There are four basic subcategories of market
variables that are particularly important in influencing channel structure.

Market geography: refers to the geographical size of markets and their physical location and distance from the producer.
The general rules for relating market geography to channel structure is stated as follows: the greater the distance between the
producer and its markets, the higher the probability that the use of intermediaries and the less expensive than direct distribution
will be.
Chapter ten
10.1 Definition of promotion
In this chapter, matters and issues related with promoting a product will be discussed. Prior to profound explanation of the subject,
what does promotion mean?
Promotion is the function of information, persuading and influencing the consumers purchase decision.(Boow &
Kurtz p. 556)
It is a marketing tool that aware, persuade, and make them willingly exercise their power to own a good idea or service. It also
comprises of different bled of tools, such as advertising, sales promotion, personal selling and publicity.
Any strategy, objective and where it takes should be defined before fully enacted. In cognizant of such principle, promotion holds
the following objectives:
Provide information
Increase demand
Differentiate a product
Appreciate the products value
Maintain positive sales trend
Build up companys good image
Attack a competitors product through direct or indirect means
Help salespeople in facilitating sales

10.2 Promotional mix
Promotion comprises of different blend of tools which are known as promotional mix. They help to achieve the aforementioned
collection of objectives in one way or another. They are advertising, personal selling, sales promotion and publicity.
10.2.1 Advertising
It is any paid, purposive, non-personal communication and presentation of message of goods, ideas, service, generally, products by a
known entity (sponsor).
When a sponsor decides to advertise either of its tangible or intangible offerings, it considers different targets to hit such as:
What are the reasons of adverting?

What are the matters that should be included?
How much can be allocated?
Which media of communication can be selected?
Does it (advertising) achieve its intended objectives?
As kotler suggested the above questions are known as the 5Ms (mission, message, money, media, and measurement).
A. Advertising objectives-mission
Advertising can take different forms relying on three factors. A firm determines its advertising objectives based on past experience
market share, position, and other conditions such as its good will and the market perception.
In light of the range of advertisement coverage, two broad types of advertising can be identified
Product advertising is a non-personal presentation of message; to sell a product (good, services, idea, organizations, person).

Institutional advertising is concerned with releasing message about good will philosophy and discharged social responsibility of a
company, person, region, or government institution.
In perspective of primary objective of the message; there are three types of advertisement:
Informative advertising: is applied during introductory stage of a new product. It also works when new additional uses and parts
are installed in old product. It is


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The Concept of Marketing

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Chapter one

An overview of principle of marketing

The major activities covered by the term marketing are

Prepared By: Mr. Abdi Mohamed Osman Prepared

1.1 The concept of marketing

What products should a firm offers to buyers

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How to make the offerings available to buyers

Core marketing concepts

Tangible goods, such as all physical objects,

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For potential to be occurred, the following conditions must be satisfied.

Each party has something that is of value to the other party.

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Note: transaction is transfer. Transaction is bi-directional where as transfer is unidirectional.

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price (how much to sell), the nature and attribute

product (what to sell), market policy (where to sell),

promotion (how to make it known in the marker).

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1.4 Customer development process

It is the process of attracting and keeping customers.

c. The prospects are then converted into first-time customers and

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The companys micro environment

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A suppliers group is strong if

It is dominated by few companies

III. Marketing intermediaries

IV. Marketing service agents

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The companys macro environment

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Growth and recession

Saving and debts

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Political and legal environment

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Cultural and social environment

Marketers then ought to approach cultural in rigorous manner bearing to

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3.1 model of consumer behavior

3.2 factors affecting buying behavior

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Under normal conditions, social classes have several characteristics:

1. Persons within a given social class tend to behave more like.

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Role and statuses

Age and lifecycle stage

Personality and self-concept

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I. Maslows hierarchy of needs

II. Freuds theory of motivation

III. Herzeberg satisfiers and dissatisfies

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Beliefs and attitudes

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3.3 Types of buying decision behavior