PRINCIPLES OF MARKETING Lecturer: Alexander Preko (PhD) Tel: 0241455462 1
PRINCIPLES OF MARKETING
Lecturer: Alexander Preko (PhD)Tel: 0241455462
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INTRODUCTION Q1. Why are you pursuing this course
of study? Plays an important role in society Vital to business survival, profits
and growth Offers career opportunities Affects your life everyday
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Why Study Marketing? Marketing Plays an Important Role in
Society Provides a delivery system for a complex
standard of living. The number of transactions go on everyday
in order to feed, clothe, and shelter a population is enormous and requires a sophisticated exchange mechanism.
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Marketing Is Important to Businesses profit and non profit organisations Contributes directly to achieving organisational objectives. Research or anticipate consumer needs and wants
Marketing provides the following vital business activities: Assessing the wants and satisfactions of present and
potential customers Designing and managing product offerings Determining prices and pricing policies Developing distribution strategies Communicating with present and potential customers
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Marketing Offers Outstanding Career Opportunities great percentage of the entire workforce
performs marketing activities. Offers career opportunities Increasing importance of the global
marketplace. Marketing Affects Your Life Every Day
We participate in the marketing process everyday.
Better informed customers Demand for customer satisfaction
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Con’t6
Q2. What do businesses generally hope to achieve in their objective or goal? survival, profits, and growth, etc.
Q3. What functions do businesses engage in to achieve these aims and objectives? Human resource activities Finance / Accounting Production / Operations Marketinga Etc.
Q4. What specific activities are undertaken under the marketing function? Marketing research Selling-personal selling, e-selling, cross and up selling Advertising, etc
Q5. What evidences of marketing do you see around you?At home, school, work Old traditional forms ( products in the local shops,
adverts on TVs, radio, mailbox) New forms (web sites, internet chat rooms, social
networks, interactive TV)
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What is Marketing? The AMA Definition
Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organizations and its stakeholders.
It can also be defined as the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society at large.
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Marketing
Product
Price
Place
Promotion
ExchangeExchangeA BA B
Delivering value
Communicatingvalue
Creating value Customer value and beneficial relationships
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A. The Concept of Exchange
The idea that people give up something to receive something
they would rather have.
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The Concept of Exchange
Necessary Conditions for
Exchange
At Least Two Parties
Something of ValueWorth, merit or importance
Communication and Delivery
Freedom to Accept or Reject
Desire to Deal With Other Party
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B. Customer Value
The ratio of benefits to the sacrifice necessary to obtain those benefits
It is also the emotional end results that customers anticipate
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Customer Value Requirements Offer products that perform Give consumers more than they expect Avoid unrealistic pricing Give the buyer facts Offer organization-wide commitment in
service and after-sales support
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The feeling that a product or service has met or exceeded the customers’ expectations.
It might also be perceived performance relative to expectations
Dissatisfied, satisfied, delightedloyalty
C. Customer Satisfaction14
Maintaining Customer Satisfaction
Meet or exceed customer’s expectations Focus on delighting customers Provide solutions to customer’s problems Cultivate relationships,
NOT one-time transactions
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Relationship Marketing
The name of a strategy that entails forging or creating
long-term partnerships with customers, suppliers, both individuals and
firms.
Some have defined marketing as managing profitable customer relationships
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Developing Relationship Marketing
RequirementsRequirementsfor for
Building Building RelationshipsRelationships
Who are your customers
What do customers value
How do they prefer to interact
What do they want to buy
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Building Long-Term Relationships18
Customer-oriented personnel Effective training programs Empowered employees Teamwork
Defining a Firm’s Business19
“Benefits” instead of “goods/services”
Ensures a customer focus Encourages innovation and
creativity Stimulates an awareness of changes
in customer preferences
What is Marketed? Goods – Physical or tangible goods or products.
e.g. Cars, Eggs etc Services – activities, benefits or satisfactions
offered for sale e.g. education, healthcare etc Events – Time based events e.g. Sports events,
Trade fairs etc. Experiences – Several Services and goods can
be orchestrated to create an experience that can be marketed.
Persons – Efforts designed to cultivate attention, interest and preferences in an individual(s) eg. Celebrities, Politicians, Artists
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Con’t What is Marketed? Places – attempts to attract customers to particular
areas, especially in tourism. Properties – Intangible rights of ownership of either
real property (real estate) or financial property (stocks and bonds)
Organizations – Marketed to build a favourable image in the mind of the public.
Information – Information can be produced and marketed as a product e.g. in schools, books, CDs etc.
Ideas – Social issue, cause or idea eg. Literacy,
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MARKETING PHILOSOPHIES(ORIENTATIONS)
(LECTURE 2)Strongly influence the role of marketing
and marketing activities within an organization.
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Marketing Marketing PhilosophiesPhilosophies
Production
Product
Selling
Marketing
Marketing Philosophies
Societal Marketing
Holistic Marketing
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Marketing Philosophies Production orientation
This concept holds that customers will favour products that are widely available and highly affordable and that management should focus on improving production and distribution efficiency
It is a useful concept when demand for a product exceeds supply and when improved productivity can bring the cost of the product down.
There is however the tendency to overlook real customer needs
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Con’t Product orientation
This concept holds that customers favour products that offer, the most quality, performance and innovative features
Company focuses on product improvements
May lead to marketing myopia
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Marketing Philosophies Selling orientation
This concept holds that customers, if left alone, will not buy enough,
Need to undertake large scale selling and promotions,
Marketing orientation This concept holds that achieving organizational
goals depends on determining the needs and wants of target markets, and delivering the desired satisfactions more effectively and efficiently than competitors do.
Instead of “make and sell” you “sense and respond”
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• The Marketing orientation– Rests on four pillars which are Target market, Customer
Needs, Integrated Marketing and Profitability This concept rests on four important factors or pillars. i) Target Market – The marketing orientation takes the
view that it cannot serve the whole market. The Market is therefore segmented, and the segment(s) it can best serve is identified and targeted
ii) Customer Needs – The marketer must seek to correctly understand the customer needs within the target market. Some needs the customer will state, others he may not state or may not be aware of at all. The marketer must therefore do a balancing act between responsive, anticipative and creative marketing. *needs (states of felt deprivation), wants and demands
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iii) Integrated Marketing – All departments and individuals within the company must work together to serve and satisfy the customer. All the activities and tasks the organization undertakes must be coordinated from the customer’s point of view.
iv) Profitability – The ultimate purpose of the marketing concept is to help organizations achieve their objectives, very often profits. A company will continually make profits by creating long term customer relationships based on creating superior customer value and thereby satisfying its customers better than its competitors.
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Societal marketing orientation This concept holds that the organizations task is
to determine the needs, wants and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the customers and society’s well being (SCR)
Holistic marketing orientation everything matters 4 components: integrated marketing, internal
marketing, performance and relationship marketing.
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Relationship Marketing RM -Marketing to establish, maintain, and
enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met Long-term orientation, Commitment and fulfillment of promises, Customer share, not market share, Customer lifetime value, Two-way dialogue, and Customization.
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What then is the difference between marketing and selling?
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What then is the difference between marketing and selling?
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Selling Orientation Organization's focus is inward on the firm's needs Business is defined by its goods and services offered Product is directed to everybody Primary goal is profit through maximum sales volume Goals are achieved through intensive promotion
Marketing Orientation Focus is outward on the wants and preferences of customers Business is defined by benefits sought by customers Product is directed to specific groups (target markets) Primary goal is profit through customer satisfaction Goals are achieved through coordinated marketing
Sales vs. Marketing Orientations
Organization’sFocus
Firm’sBusiness
ForWhom?
Primary Profit Goal?
Tools to Achieve
Selling goods and services
Everybody Maximum sales volume
Primarily promotion
InwardSales Orientation
Marketing Orientation
Outward Coordinated use of all marketing activities
Customer satisfaction
Specific groups of people
Satisfying wants and needs
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THE MARKETING ENVIRONMENT
LECTURE 3 (MICRO ENVIRONMENT)
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The Marketing Environment Definition
Actors and forces (or elements) outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.
The marketing Environment consists of a MICRO and a MACRO Environment.
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Micro-Environment Members of the value delivery system
and consists of the following:1. The Company2. Suppliers3. Competitors4. Marketing Intermediaries5. Customers6. The Publics
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The Company• The interrelated groups within the company
constitute it internal environment
• All these functions must “think customer”
• Decisions are made within the strategies and plans made by top management
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Suppliers Form a link in the overall customer value
delivery system
Supply availability and costs
Should be treated as partners in creating and delivering customer value
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Competitors Direct competitors and indirect
competitors
Local and foreign competitors
Competitor analysis
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Marketing Intermediaries Firms that help the company to promote, sell
and distribute its products to final buyers They include
Resellers, (Retailers and wholesalers) Help the company find customers or make sale to them Selecting and partnering
Physical distributing firms Move stock from one origin to another
Marketing service agencies Help the companies market the product
Financial intermediaries etc. Includes banks, insurance companies, credit companies
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Customers 1. Consumer Markets2. Business Market3. Reseller Markets4. Institutional Markets5. Government Markets6. International Markets
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Publics This is any group that has an actual or
potential interest in your products or services, or impact on, an organizations ability to achieve its objectives.
Seven types of Publics are identified.1. Financial Publics2. Media Publics3. Government Publics4. Citizen Action Publics5. Local Publics6. General Public7. Internal Publics
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MACRO ENVIRONMENT
LECTURE 4
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Macro-Environment1. Demographic environment2. Economic environment3. Technological environment4. Political and legal environment5. Natural environment6. Cultural environment
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Demographic environment The study of human populations in terms of
size, density, location, age, gender, race, occupation and other statistics
Relevant Issues Population size and growth trends eg. China Changing Age structure. Eg less older people The changing family and households
Traditional hh, men at home, working mothers, single mothers
Each group has distinctive needs and buying patterns
Rising number of educated people Increasing diversity- disabilities, races, gay Geographic shifts in Population
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Economic Environment Factors that affect consumer purchasing
power and spending patterns Subsistence/ emerging economies ,
developing and industrial economies Some of the relevant variables are
Income levels and distribution Changes in purchasing power Cost of living Savings and borrowing patterns Interest rates GDP etc.
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Technological Environment Accelerating pace of change
Technology can also make some products absolute.
Unlimited opportunities for innovation Delivering new ways in the performance of
business activities, etc. Producing new products
It creates new markets/industries/segregations
High R&D budgets Increased regulation
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Political and Legal EnvironmentRelevant issues include: The type of Government system in place
e.g. democracy, socialism etc. Increased Legislation regulating business
and business activities – to protect businesses, consumers and society at large
Special Interest Groups, Consumer Society etc.
Companies decide to comply, not to comply, fight regulations they deem unjust, or take advantage of opportunities they present.
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Natural Environment Availability of raw materials Increased cost of energy Increased Pollution Increased Government intervention in
natural resource management.
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Cultural Environment Institutions and other forces that affect society’s basic
values, perceptions, preferences and behaviours Core beliefs
Have high degree of persistence Beliefs passed on from parents, relative, friends They are reinforced by schools, religious bodies, etc. Shape specific attitudes in day to day activities
Peoples’ view of themselves. – serving themselves vrs serving others eg. adventurers and yourself Peoples view of others Peoples view of organizations Peoples view of society – patriots, malcontents, reformers Peoples view of nature – ruled, harmony , mastery Peoples view of the universe.
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Secondary beliefs Are open to change Marketers have the chance of changing
sec. beliefs
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How do we respond? Reactive approach
*we always don’t have control over the environment
Proactive approach Lobby Lawsuits Advertorials Invention
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MARKET SEGMENTATION
(LECTURE 5)
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Markets Traditional perspective
A physical place where buyers and sellers gathered to exchange goods.
Economic perspective A collection of buyers and sellers who transact
over a particular product (e.g. housing market) Marketing perspective
Marketers view sellers as constituting the Industry and buyers as constituting the market.
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Con’t A MARKET can therefore be defined as
the set of all actual and potential buyers of a product or services. It can also be defined as the individuals and / or organizations that have the desire and the ability to purchase a particular product
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Con’tOther important Definitions are: - INDUSTRY – A group of firms which
offer product(s) that are close substitutes for each other. That is the set of all sellers of a product or service.
POTENTIAL MARKET - The set of customers who profess some level of interest in a particular product.
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QUALIFIED AVAILABLE MARKET – The set of customers who have interest, income, access and qualification for a particular product.
SERVED MARKET – The part of the qualified available market that the company decides to pursue. Also known as the targeted market.
PENETRATED MARKET – The set of customers who have already bought a particular product.
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The Concept of Segmentation, Targeting and Positioning Mass marketing Using the same product, promotion and
distribution for all customers it is the process of subdividing a market
into distinct subsets of customers that behave in similar ways and/or have similar needs.
A Market Segment is a relatively homogenous collection of prospective buyers
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When is mass marketing appropriate? The total market is too small to divide
into different segments The total market has few differences in
customer needs and wants When it is operationally difficult to
develop distinct products and/or marketing programs to reach different customer groups or segments.
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Why segment markets? It helps in the design of marketing programs that
are most effective for reaching homogenous groups (segments) of customers
It also helps in the identification of opportunities for new product development
Helps in the strategic allocation of the organizations resources.
The organization may face less competition, if fewer competitors are focusing on the same segment
By going after segments, organizations serve their consumers better, and receive maximum rewards
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Bases for Segmentation1. Segmenting Consumer markets
Demographic Geographic Buyer Behaviour Psychographic
2. Organisational Buyers (Business Buyers) Geography Type of organisation Product application
3. Multiple Segmentation Bases The use of more than one variable Eg. Demographic and geographic
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Bases for Segmentation1. Segmenting Consumer markets
Demographic (age, sex, income, education, social class, lifecycle, religion, nationality and race)
Geographic (location, region, country, climate)
Buyer Behaviour (loyalty status - promiscuous nomads, immovable, loyal susceptible, buyer readiness stage, benefits sought, marketing factor sensitivity, usage rates)
Psychographic (personality and perceptions) Lifestyle (attitude, interests and opinions)
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Segmenting Organisational Markets2. Organisational Buyers (Business Buyers)
Geographical location Size (scale of operations) Type of industry Usage rate Structure of procurement (centralized or
decentralised) State of decision process Organisational policies/pre-disposition Type of organisation Type of buying situation (re-buy or new task) Product application
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Multiple Segmentation Bases
3. Multiple Segmentation Bases The use of more than one variable Eg. Demographic and geographic
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Requirements for effective Segmentation Measureability Substantiabilility Actionability Accessibility Differentiability
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Market Niches
A niche is a more narrowly defined group (or small market) whose needs are not well met.
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Con’t NichesAn Attractive Niche is characterized by – Customers with a distinct set of needs Customers who are willing to pay a premium
price for their needs to be met. The niche does not attract many competitors The niche must have size, profit and growth
potential. The Niche Marketer gains certain distinctive
competencies and economies through specialization.
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TARGETING
(LECTURE 6)
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Targeting A Target Market can be defined as the
part of the qualified available market the organization decides to pursue.
How do you evaluate market segments? Segment attractiveness Business strengths/Company fit
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Targeting Segment Attractiveness
Size of Segment Growth Potential of Segment Competition within the segment
Company Fit Organisational resources and strengths Cost of reaching the segment Objectives
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Targeting Approaches1. Single segment concentration
Economies of scale Strong market presence Specialisation Entrants of competitors Changes in the segment
2. Selective specialisation1. Greater sales volume2. Diversification
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Con’t1. Full market coverage
Undifferentiated marketing cost
Differentiated marketing
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Lecture 773
PRODUCT POSITIONING
(LECTURE 7)
Product Positioning Product Positioning refers to the
development of a distinct image for the product or service in the mind of the consumer; an image that will differentiate the offering from competing ones. Fizzy
A Product’s Position is the place the product occupies in the consumers mind relative to competing products.
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Positioning Maps Marketers often prepare perceptual positioning
maps, showing consumer perceptions of the brand vrs competing products on important customer dimensions.
A means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds
These show consumer perceptions of their brands vrs competing products on important buyer dimensions.
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Positioning Strategy Development1. Identify possible value differences and
competitive advantages2. Choose the right competitive
advantages How many differences to promote Which differences to promote
3. Select overall positioning strategy
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Examples of Product Positioning Strategies
More for more More for same More for less Same for less Less for much less
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THE MARKETING MIX
(LECTURES 8,9,10,11)
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Product
PRODUCT DECISIONS
LECTURE 8
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The MarketingMix The marketing mix refers to the
controllable marketing variables that the firm or Marketer puts together to satisfy a target market or group. The four basic variables are; The Product The Price Promotions Place.
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PRODUCTSDefinitions• A product is anything that can be offered
to a market for attention, acquisition or consumption.
• A product mix is the full set of products for sale by an organization.
• A product line: - This refers to groups of products that share common characteristics, customers or uses.
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PRODUCT LEVELS82
PRODUCT LEVELS/ CUSTOMER VALUE HIERARCHY
First Level: - This is the fundamental level and is referred to as the CORE BENEFIT. This refers to the benefit the customer is really buying.
Second level: - This is referred to as the BASIC PRODUCT. Here the core benefit is turned into a product.
Third level: - This is the EXPECTED PRODUCT that is the set of attributes and conditions buyers normally expects when they buy this product. E.g., a hotel guest expects a clean room, fresh towels etc.
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Fourth level: - At this level, the marketer may provide an AUGMENTED PRODUCT, which exceeds customer expectations. Here marketers seek to differentiate their products based on factors including packaging, customer service, advertising, delivery arrangement etc.
Fifth level: - This is the POTENTIAL PRODUCT. It consists of all the possible augmentations and additions the product might undergo in the future. This is where marketers search for new ways to satisfy their customers and distinguish their products.
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Product Classifications
1. Tangibility Intangible products (services -
*characteristics) Tangible products ( durables, non
durables)2. Type of Customer
Consumer products Industrial products
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CharacteristicsIntangibility: This implies that services cannot be seen, tasted,
felt, heard, or smelt before they are purchased. The marketer must therefore make the service
tangible in some ways. E.g. organized routines, the people, physical evidences, etc
Inseparability: Services are produced and consumed
simultaneously, i.e. at the same time. This implies that services cannot be separated from their producers or customers. Therefore both the producer and the customer can affect the outcome.
Marketers may adopt strategies like training their providers well, and also establishing procedures for the provision of the service.
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Variability: Service quality depends on who provides them, when,
where and how they are provided. Services are therefore very variable.
The variability can be reduced by establishing processes and procedures for the provision of services.
Perishability: Services cannot be stored for later sale or use. In other
words service value exists only at a particular point in time, and when not utilized it perishes.
Marketers must find ways to match demand and supply. Some of the strategies used include differential pricing, and peak time efficiency routines e.g. hiring part time staff at peak periods, etc.
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Tangible Products88
Industrial ProductsA. Material and Parts: - These are products that
enter a manufacturer’s product completely.Raw Materials: - These are unprocessed items like
farm products e.g. wheat, fruits, livestock etc and natural products e.g. crude oil, gold, etc.
Manufactured Materials and Parts: Component materials are further processed
before becoming part of the final product. (e.g. cement)
Component parts enter the final product with no further change in form. (small motors, tires etc).
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B. Capital Items:-These are long lasting products that facilitate the buyers production activities. They include Installations e.g. buildings, assembly lines etc, and Accessory Equipment e.g. hand tool, calculators. These products do not become part of the finished products.
C. Suppliers and Services: - These are short lasting goods and services that facilitate developing and managing the finished product. They do not enter the finished products at all.
Suppliers include operating suppliers e.g. paper, lubricating oils etc. Repair and maintenance suppliers e.g. paint, light bulbs,
nail etc. Business services include maintenance and repair services
e.g. computer repairs, and Advisory services e.g. legal, Accountancy.
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Product Life Cycle The stages of growth and sales in the life
of a product or The various stages a product goes
through from the time of its introduction until it is eventually withdrawn from the market Introduction Growth Maturity Decline *characteristics, objectives and strategies
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Branding A BRAND:- is a symbol, design, name, term, or
combination of these that uniquely identifies a seller’s product and distinguishes it from that of competitors. A BRAND NAME: - is that pat of a brand (including
numbers, letters and words) that can be voiced (e.g. Pepsi).
A BRAND MARK: - is that part of a brand that can be seen but not voiced (usually a symbol or design.)
A TRADE MARK: - is a brand name and / or brand mark that the seller has exclusive legal rights to use.
A TRADE NAME: - is the legal name of an organization. (Rather than a specific product) e.g. BMW.
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BENEFITS OF BRANDING
Importance of Brands to Consumers Identification of the source of the product Assignment of responsibility to product
maker Risk reducer Search cost reducer Promise, bond, or pact with product maker Symbolic device Signal of quality
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Importance of Brands to Firms To firms, brands represent enormously
valuable pieces of legal property, capable of influencing consumer behavior, being bought and sold, and providing the security of sustained future revenues
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PACKAGING Packaging refers to the activities of
designing and producing the container or wrapper for a product.
Packages in which product are served serve several purposes including Functional Purposes Promotional Purposes Informational Purposes Product Feature
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Price
PRICE
(LECTURE 9)
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Pricing Strategies/Approaches1. Cost-based
2. Value-based
3. Competition-based
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Pricing Decisions Price can be defined as the amount of money
charged for a product or service or The sum of the values that consumers
exchange for the benefits of having or using a product or service.
Factors influencing pricing decisions include Organisational considerations Cost considerations Customer considerations Competitor considerations Industry considerations• Other external factors
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Cost-based pricing Cost-plus
Break even pricing
Target return pricing
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Competition-based pricing Going rate pricing
Below the market pricing
Sealed bid pricing/Auction
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Value-based pricing Perceived value pricing
Value pricing
Prestige pricing
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PLACE DECISIONS(DISTRIBUTION CHANNEL)
LECTURE 11
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A Distribution channel is the set of independent organizations involved in the process of making a product or service available for use or consumption by the customer
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Marketing Channel Functions
1. Information: - Intermediaries may be involved in gathering and distributing marketing research about the forces in the marketing environment needed for planning and facilitating exchange
2. Promotion: - Developing and communicating effective promotions about products.
3. Contact: - Finding and communicating with prospective customers.
4. Matching: - Shaping and fitting the offer to the customers peculiar needs. This may include activities such as assembling and packaging.
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Con’t 5. Negotiation: - This involves reaching an
agreement on price and other terms of sale with the customers.
6. Physical Distribution: - This includes transporting and storage of products
7. Financing: - Acquiring the finances needed to cover the costs of channel work.
8. Risk taking: - Assuming the risk of carrying out channel work.
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Channels Decisions1. Channel Structure
Direct channel Indirect channel
2. Channel Levels
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Channel management decisions
1. Selection financial strength – reputation – competencies cooperativeness – location – other products carried future growth potential etc
2. Training3. Motivation• Training and capacity building programs, higher margins,
cooperative promotions, display allowances, sales contexts etc.
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Channel Decisions4. Evaluation
Under performers may need to be retrained, motivated or terminated
5. Modifying channel arrangements the channel is not working as expected change in customer buying patterns, new competitors etc.
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PROMOTIONS
(LECTURE 10)
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Promotional Objectives The promotional efforts is used to
Support sales increases To inform buyers about the benefit and features
of products. To encourage trial of products To create awareness To remind (about benefits they enjoy by using
the product.) To reassure customers To create an image To modify attitudes
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Promotional Mix
Advertising Sales promotions Personal selling Publicity/Public Relations Direct marketing
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The Promotional Mix112
Con’t Public relations
Credibility Cost Ability to reach specific groups Image building
Publicity Credible, less costly and high exposure rate Timing and accuracy
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