TOPI

C ONE

MARKETI
NG:
CREATI
NGVALUEANDCAPTURI
NGVALUE

1.0 I ntroducti
on:
Thist opi
c concent rates on descri
bing t
he mar keti
ng evol
ution,defini
ng
marketingandhow cust omerv al
uei screatedinor dertocapturev al
uefor
busi
nessor ganizat
ions( themarket
ingprocess).Itgoesfurt
hertol ookatthe
i
mpor t
anceofmar ket i
ngt oor
ganizati
onsandcust omers,thecoremar keti
ng
conceptsandt hemarket i
ngmanagementor i
entat
ions.

1.
1Learni
ngOut comes:
Thest
udent sandpar t
icipant swil
lbeabl et o:-
 Understanddef init
ionsofmar keting.
 Compr ehendt hemar keti
ngpr ocessandhowcust omer s’valueiscr eat
edby
busi
nessf ir
msi nor dert ocapturev aluef r
om cust
omer s.
 Understandthei mpor tanceofmar ketingtoorganizati
onsandcust omer s.
 Appreciatethecor emar keti
ngconcept sandhow i mpor tanttheyaref orthe
marketingfunct i
ont obepr acti
ced.
 Compr ehendt hev ariousbusi nessconcept s/ori
ent at
ions.
 Diff
erentiat
e t he di f
ferent mar keting management or ientat
ions or
phi
losophies.
 Understandandcr eat ecust omerv alueandcapt urev alueinf orm ofprofi
ts
andlongt er
mr elati
onshi ps.

1.2 MARKETI NGEVOLUTI ON

Man has al ways had needs t o satisf
y.The ear ly man methi s needs by
subsi stenceliv
ing.Forexampl e,peoplelivi
ngi nf orestscouldsat isf
ytheirneeds
byf eedi ngonwhatt hef orest
scoul dprovide.Itemsl i
kef r
uits,insect
s,animal s
andpl antrootsweresour cesoff ood.Thosel i
vingal ongwat erbodi esmett heir
needsbyeat i
ngwhatcoul dbehar vestedfrom t hewat erbodies.Thesei ncl
uded
i
temsl i
kef i
sh,animal sandsoon.Dur i
ngt hist imet herewasnoexchange
relationshipbetweent hesecat egoriesofpeopl e.
Wi tht i
me,manst artedmov i
ngawayf rom hi spl acesofabodet oexpl ore other
placesbey ond.Thisr esultedi nt
odi scoveringt hatpeopl el i
v i
ngi nforests,for
exampl e,sati
sfi
edt heirneedsdi fferentl
ycompar edt othosel ivi
ngalongwat er
bodi es.Thi sled tot he need t o exchange goods f r
om f orests with goods
har vestedfrom waterbodi estomeetandsat isfyman’ sneeds, acondi t
ionknown

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asbar t
ert rade.Howev er,t hi
smeansofsat isfyingman’ sneedscoul dnotl ast
l
ongduet ot hei nequal it
iesassoci atedwi thbar tert r ade.
Toaddr esst hepr oblemsofbar t
ert rade,mani nv ent edandi ntroducedmoney
i
nt ot heexchangepr ocess.Thi sledt ot hemoneyeconomywher eitemsl ikei vor y,
cowr yshel lsandpr eciousmet alswer eusedasamedi um ofexchange.Wi t
ht he
i
nt r
oduct ionofmoneyi ntot heeconomy ,andwi tht hei nvent i
onofmachi nes
duringt heindust ri
alr evolution, manr epl acedhumanl abourwi thmachi nesi nt he
product i
onofbasi cgoods.Theuseofmachi nesi nt hepr oduct i
onpr ocessl edt o
masspr oduct ionwher ethesuppl yfact orwaseasi lyaddr essed.
Wi t
ht ime,t heowner soff actorsofpr oduct ion( incl udi ngmachi nes)f oundt hat
theirpr oduct swer eonl ypi l
ingupi nt heirfact or i
eswi t
houtdemandf rom buy er s.
Thisf or cedf act oryowner st or ecruitempl oy eest ost ar tmov i
ngt heirproduct st o
l
ocalmar ketpl acesonspeci ficday swi t
ht hehopet hatt hepr oduct swoul dbe
sold.Becausepr oducer swer enotcl earast owhowoul dbuyt hei rgoods,sal es
wer e di sappoi nti
ngl yl ow.I n ot herwor ds,pr oducer s di d notf ir
sti dent i
f y
cust omer s'needsandwant sbef orepr ocedi ngt ot hepr oduct i
onst age
Today ,wi tht headv ancei nt echnol ogy ,cust omer sar ebei ngbombar dedwi th
mi l
lionsandmi l
li
onsofdi fferentpr oduct si nt hemar ket .Int hisaf fluentsoci et y
wel ivei n,t her ei snoscar cityofgoods/ ser vices(now t hef ocusofev er y
busi nessconcer nist ofirstunder standt hemar ketpl aceandcust omer s'needs
andwant sbef oregoi ngint opr oduci nggoodsandser vices) .Theadv ancementi n
technol ogyhas l ed t o massi v e pr oduct ion ofgoods and ser vices gl obal ly.
Howev er,thishasl edt oanot herpr obl em.I nst eadoft heuppl yf act orwhi chwas
addr essedasshownabov e,,ther ei st hepr obl em ofcr eati
ngdemandf ort he
availabl egoods( t
hedemandf actor ).Thei mpor tanceofcust omer sasdemand
creat orsbef ore pr oduct ion wasf irstr ealizedbyaneconomi stknownasAdam
Smi thi nt he1940s.Adam Smi thi nhi sbookt itl
ed’ ’Theweal thofnat i
ons’'
, stated
thatt he“ sol eandendpur poseofpr oduct i
oni sconsumpt ion” .Thi sconcept
calledf ort hepr oducer st ofirstdet er mineconsumerneedsandwant sbef or e
goingi ntopr oduct ion.Fr om t henont hemar ket ingf unct ionhasbeengi vena
promi nentr oleofcr eat i
ngdemandf ort hebusi nessor gani zations.

1.
3 MARKETI
NGDEFI
NED:

i
) TheChar
ter
edI
nst
it
uteofMar
ket
ing(
2006)def
inesmar
ket
ingas

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 “TheManagementfuncti
onresponsi
blef
orident
if
ying,
ant
ici
pat
ingand
sati
sfy
ingconsumerneedsandwantsprofi
tabl
y.
”

i
i
) Kotler(2010)def i
nesMar keti
ngas“ theprocessbywhi chcompanies
createv al
uef orcustomersandbui ldstr
ongcust omerr el
ati
onshi
pin
ordertocr eat
ev al
ue(profi
ts)fr
om customer sinretur
n.”
Pet
erDr ucker (
1998) also broadly defi
ne mar keti
ng as “ a socialand
manageri
alprocessbywhi chindivi
dualsandgroupsobt ai
nwhatt heyneed
andwantthroughcr eati
ngandexchangi ngval
uewi thothers.
”

i
v) Mar ket
ing i
s al
so def
ined as “
the management of exchange
r
elat
ionshi
ps.
”

Itisimpor tanttonot et hatmar keti

ng,mor ethananyot herbusiness
functi
on,dealswithcustomer s.Todaymar keti
ngmustbeunder stoodnot
i
nt heol dsenseofmaki ngasal e“tel
li
ngandsel l
i
ng”buti
nt henewsense
ofsat isfyi
ng customerneeds.I fa mar keterdoes a good j ob of
understandingconsumerneeds;dev elopsproductst
hatprovidesuperi
or
value;andset scustomer -dr
ivenpr i
ces,di
stri
butesandpromot esthem
effect
ively
,theseproductswillsel
lveryeasi
ly.

1.
4 THEMARKETI
NGPROCESS:

TheFi gurebel ow pr esentsasi mpl efiv

e-stepmodeloft hemar keti
ng
process.Inthef ir
stfourst eps,companiesworkt ounderst
andconsumer s,
createcustomerv alue,andbui ldstrongcustomerr el
ati
onships.Inthe
fi
nalst ep,compani esr eapt her ewardsofcr eat
ingsuperiorcustomer
valuebycapt uringv aluefrom consumer sint
hef orm ofsal
es,profi
tsand
l
ongt erm customerequi ty.

1.
4.1Fi
gur
e1.
1:Asi
mpl
emodel
ofmar
ket
ingpr
ocess:

Cr
eat
eval
uef
orcust
omer
sandbui
l
drel
ati
onshi
ps
Capt
urev
alue
1 2 3 4 5
Underst
a Designa Const ructa Buil
d Capture
ndthe custome Mar ket i
ng profi
table valuefrom
market rdri
v en progr amme rel
ationsh customers
j pl
aceand marketin t
Okh
ea
l
lt at
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t
] Typet
et
xoc
t][r
ea
T t
yee
p
Customer g deli
v ers create profi
tsand
t
ext
] needs str
ategy super ior customer customer
and deli
ght equity
 Wheni sCust omerv aluecr eat ed?
Itshouldbeemphasi zedt hatcust omerv aluecr eati
onshoul dbeapr iorit
y
foreveryoneint hebusi nessor ganizati
on.Val uecr eati
onbegi nsrightf r
om
thesuppl i
ersofei t
herr aw mat eri
alsorf inishedgoods.Forexampl e,the
procurementofpoorqual itymat eri
alsorfinishedgoods, orevenadel ayin
thesuppl yoft hesei tems,r educesv al
uef ort hecust omer s.Adel ayi n
receivi
ngprocur edgoods, mi smanagementoft hepr ocuredgoodsorev en
delaysi ndistributi
ng f i
nished goodst hr ought hei ntermediari
escoul d
hav enegativeef f
ectsont hecust omer.I fcompet it
orsdel i
versuper i
or
customerv aluebet tert hany ourcompany ,thencompanywi llhav elost
business tot he compet it
or s.Ev ery or gani zati
on shoul d ensur et hat
customerv aluecr eationt akespl aceatev er yst ageoft hevaluechai n.(see
i
llustr
ati
onbel ow) .

Fi
gur
e1.
2:Chai
nofVal
ueCr
eat
ion:
Company

Suppl
i
ers
I
nter
medi
ari
es Consumer
s

Compet
it
ors

1.
5 I
MPORTANCEOFTHEMARKETI
NGFUNCTI
ON:

1.
5.1 ToOrganizat
ions:
 Sell
ingtheproduct
s/ser
vices
 Promot i
ngcompanygoodsandser
vicesi
nthemar
ket

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  I
dentif
yingmar ketoppor tunitiesandthreats.
 Pri
cinggoods/ser vices
 Carr
y i
ngoutmar ketingr esearcht oobt aininf
ormati
onf
ordeci
sion
making.
 Part
ici
patinginnewpr oduct sdev el
opmentpr ocess.
 Col
lecti
ngi nf
ormationf rom t hemar ket
s.
 Col
lecti
ngdebt s.

1.
5.2 ToConsumer s:
 Demonst r
ati
ngt echnicalproductst ocustomers.
 Handl ingcust omercompl aints.
 Adv i
singconsumer s/cust omer sonpr oductusage/productl
ocat
ion.
 Deli
v eringgoodst oconsumer s.
 Trainingcust omer slikewhol esaler
showt odobusiness.
 Dissemi nati
ngvitalinfor
mat ionfrom theproducerstoconsumers.

Whycustomer smayf ai
ltobuyaCompany ’sgoods/serv
ices.
i
) Poorqual itygoods.
i
i) Highpr i
cesoft hegoods
i
ii
) Compet itors’superiorproducts
i
v) Poor/orl ackofgoodmar keti
ngst rategy
v) Bettertechnol ogyleadingtobet terandmor einnovati
vepr
oducts.
vi
) Lackof /adequat ei nf
ormat iontocust omers.
vi
i
) Lackof /ori nadequatemar keti
ngr esearch
vi
i
i) I nabil
it
yoft hesal esf orcet oadequat ely pr
esenttheproductto
customer s

1.
6.0 COREMARKETI
NGCONCEPTS:

1.
6.1 CustomerNeeds,WantsandDemands:
Themostbasi cconceptunderl
yi
ngmar keti
ngisthatofhumanneeds.
Humanneedsar est at
esoffeltdepri
vationofsomething.Theyi ncl
ude
basi
cphy si
calneedsf orf
ood,clothi
ng,war mth,ai
randsaf ety;social
needsforbel
ongi
ngandaf f
ect
ion;andindivi
dual
needsforknowledgeand
sel
fexpressi
on.Theseneedswer enotcr eat
edbymar keter
s;theyarea
basi
cpartofthehumanmakeup.

Want
sar
ethef
orm humanneedst
akeast
heyar
eshapedbycul
tur
eand

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 i
ndi vidualper sonalit
y.AMusoganeedsf oodbutwant spot atoes(embol i
)
whi l
eanI tesotneedsf oodbutwantmi lletdough( atapa).Want sar e
shapedbyone’ ssoci etyandar edescr i
bedi nt ermsofobj ectsthatwi l
l
satisfyneeds.Whenbackedupbybuy i
ngpower , wantsbecomedemands.
Givent heirwant sandr esour ces,peopl edemandpr oductswi thbenef i
ts
thataddupt ot hemostv alueandsat i
sfaction.
1.
6.2 Mar ketingOf fers–pr oduct s, servicesandexper iences:
Consumer s’needsandwant sar ef ul
fill
edt houghamar keti
ngof fer–
some combi nati
on ofpr oduct s,ser vices,i nfor mation orexper i
ences
offeredt oamar kett osat i
sfyaneedorwant .Mar keti
ngof fer
sar enot
l
imi ted to phy sicalpr oduct s.Theyal so i ncludeser vi
ces( acti
vit
iesor
benef it
sof feredf orsalet hatar eessent iall
yi ntangibleanddonotr esultin
theowner shipofany thing).Of f ersalsoi ncludeot herent i
ti
es,suchas
persons, pl
aces, organizations, i
nf ormationandi deas.

1.
6.3 Cust omerVal ueandSat isf
action:
Consumer susual lyf
aceabr oadar rayofproductsandser vi
cesthatmight
satisfyagi venneed.How dot heychooseamongt hesemanymar keti
ng
offers?Cust omer sform expectati
onsaboutt hev al
ueandsat i
sfacti
on
thatv ari
ousmar keti
ngof f
erswi l
ldeliv
erandbuyaccor di
ngly.Customers
buyv alue orpr oducts and ser v
ices ofv alue tothem.Pr oducts and
services witht he rightvalue lead to customersat isfacti
on.Sat i
sfi
ed
cust omers buy agai n and tellot hers aboutt hei
rgood exper i
ences.
Dissatisfi
edcust omersof t
enswi t
cht ocompet i
torsanddi spar
aget he
productt oothers.

1.
6.4 ExchangeandRel at
ionships:
Mar ket
ingoccur swhenpeopl edecidet osat i
sfyneedsandwant st hrough
exchanger elati
onships.
Exchange i st he actofobt ai
ning desi red object
sf r
om someone by
offeri
ngsomet hi
ngi nr et
urn.TheMar ketertriestobringaboutar esponse
tosomemar keti
ngof fer.
Mar ket
ing consi sts ofact i
ons t aken t o buil
d and mai ntain desirabl
e
exchanger elati
onshipswi thtargetaudi encesi nvol
vingapr oduct,serv i
ce,
i
dea,orot herobj ect.Bey ond si mply at t
racti
ng new cust omer s and
creati
ng transact i
ons,t hegoali st or etai
n customer sand gr ow t heir
businesswi ththecompany .Mar keterswantt obuil
dst r
ongrelati
onshi pby
consistentl
ydel i
veri
ngsuper iorcustomerv aluecompar edtot hoseoft heir
compet it
ors..

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1.
6.5 MarketsandSegment ation
Theconcept sofexchangeandr elati
onshipsl eadt ot heconceptofa
market.Amar ketist hesetofact ualandpot entialbuyersofapr oduct. A
marketi smadeofdi f
ferentneedsandwantorpr ef
erences.Tosat isfy
eachsetofsameneedsandwant sf ir
str equi
ressegment ati
on,apr ocess
ofdivi
dingal argemar ketint
osmal lersegment sorsub- markets.These
buyersshar eapar ti
cul arneedandwantt hatcanbesat isfi
edt hrough
exchanger elationships.
Marketingmeansmanagi ngmar ket stobr i
ngaboutpr ofit
ablecust omer
rel
ati
onshi ps.Howev er,searchf orbuy ers,identi
fyt heirneeds,desi gn
goodmar ketingof fers,setpricesf orthem,pr omotet hem andst oreand
deli
ver them. Act ivit
ies such as pr oduct dev el
opment ,resear ch,
communi cat i
on,di st ri
bution,pri
cing and ser v
ice are cor e mar keti
ng
acti
vit
ies.
.

1.
7.0 BUSI
NESSORMARKETI
NGMANAGEMENTORI
ENTATI
ONS.

Therearef
iveal
ter
nativ
econcept sunderwhi
chorganizat
ionsdesignand
car
ry outthei
rmar keti
ng st
rategi
es:the pr
oducti
on,pr oduct
,sell
ing,
marketi
ng,
andsociet
almarketi
ngconcepts.

1.
7.1 TheProductionConcept:
Theproduct i
onconcept“ hol
dst hatconsumer swillfavourproduct
sthat
areav
ailableandhighl
yaf for
dable.”Theref
ore,managementshoul dfocus
onimprovingproducti
onanddi stri
buti
oneffici
ency.Thisconceptisoneof
theol
destor i
ent
ati
onst hatguidessell
ers(Kotl
er,
2010) .

The producti
on concepti s st
il
la usefulphilosophyint wo ty
pes of
si
tuati
ons:-
 Thef i
rstoccur
swhent hedemandf orapr oductexceedsthesuppl
y.
Heremanagementshoul dlookforwaystoincreaseproducti
on.
 Thesecondsi tuat
ionoccurswhenthepr oduct’scostistoohi
ghand
i
mpr ovedproducti
vit
yisneededtobri
ngitdown.

N.B:Compani
esadopt
ingt
hisori
ent
ati
onrunamajorr
iskoffocusi
ngtoo
narr
owlyonthei
rownoperati
onsandlosi
ngsi
ghtoftherealobject
ive–

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 sat
isf
yingcust
omerneedsandbui
l
dingcust
omerr
elat
ionshi
ps.

1.
7.2 ThePr oductConcept:
ThePr oductConcept“ holdst hatconsumerswi l
lfavourpr oductsthat
offert
hemosti nqualit
y,perfor
manceandi nnovat
ivefeatures.
”Underthis
concept ,mar ket
ing str
ategy focuses on making cont i
nuous product
i
mpr ovement s.Compani eswhichembr acet
hisconceptforgetthefactthe
i
ti st he customert o define whatqualit
y,perfor
mance ori nnovat
ive
productf eat
uresandnott hecompanyt odoitontheirbehalf(Kotl
er,
2010)

1.
7.3 TheSelli
ng/SalesConcept:
Manycompani esfol
lowtheSell
ingConcept, whichhol
dst hatconsumers
wil
lnotbuyenoughoft hefir
m’ sproductsunlessitundertakesalarge
scalesell
ingandpromotioneffort
.” Theconcepti stypicall
ypract
iced
withun-soughtgoods–thosethatbuy er
sdonotnor mall
ythinkofbuying,
suchasinsuranceorbl
ooddonat i
ons(Kotl
er,
2010).

Mostf i
rmspr act
icetheselli
ngconceptwhent heyfaceov ercapacity
.
Theirai
mi stosellwhattheymaker atherthanmakewhatt hemar ket
wants.Suchamar keti
ngstr
ategycar
ri
eshi ghri
sks.I
tfocusesoncreating
sal
est r
ansacti
onsr at
hert
hanonbui l
dinglongterm,profi
tabl
ecustomer
rel
ati
onships.

1.
7.4 TheMar ket ingConcept :
The Mar ket i
ng Concept “ hol
ds that achieving or
ganizati
onalgoal s
dependsonknowi ngtheneedsandwant softargetmarketsanddel i
veri
ng
thedesiredsat isf
acti
onbettert
hancompet it
orsdo.”Undert hemar keti
ng
concept,mar ketersfocus on val
ue creati
on as pat hs to sales and
profi
ts(
Kot ler,2010).
Inst
eadofapr oduct–centred“makeandsel l”phil
osophy,themar keti
ng
concepti sacust omer–cent r
ed“senseandr espond“ phi
losophy.”The
j
obi snott of indther i
ghtcust
omerf ortheproduct,buttof i
ndther i
ght
productsf orthecust omers.

Thef
igur
ebel
owcont
rast
sthesel
l
ingandt
hemar
ket
ingconcept
s.

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  Thesel l
i
ngconceptt akesani nside–outper spect ive.Itstartswiththe
fact
ory,focusesont hecompany ’
sexi sti
ngpr oduct s,andcal lsforheavy
sell
i
ngandpr omot i
ont oobt ainpr of i
tabl
esal es.I tfocusespr i
maril
yon
customerconquest–get tingshor tt erm saleswi thl it
tleconcer nabout
whobuy sorwhy .
 Themar ket i
ngconceptt akesonout side–i nper spect i
ve.Themar ket
ing
conceptst artswithawel ldef inedmar ketf ocusi ngoncust omerneeds
and want s,and i ntegrati
ng al lt he mar keting act i
vit
ies thataf f
ect
customers.Int urn,ityiel
dspr of i
tsbydel iveringt her ightproduct/serv
ice
and creati
ng l asti
ng relationshi pswi ththe r ightcust omer sbased on
customerv alueandsat isfaction.

Fi
gur e1.
3:Thesel
l
ingandmar
keti
ngconcept
scont
rast
ed
Start
ing Focus Means Ends
Point

Fact
ory Exist
ing Sell
i
ng Profi
tsv
ia
Products promot
ion sales
v
olumes

TheSel
l
ingConcept

Mar
ket Cust
omer I nt
egrat
ed Profi
tsvi
a
Needs Marketi
ng Customer
TheMarket
ingConcept sati
sfact
ion

TheMar
ket
ingConcept

1.7.
5 TheSocietalMarketingConcept.
TheSocietalMarketingconceptquesti
onswhet herthepuremar ket
ing
conceptoverl
ookspossi bleconfli
ctbetween consumershort-
run wantsand
consumerlong-runwelfare.Isaf i
rmt hatsati
sfi
est heimmediat
eneedsand
wantsofatargetmarketalway sdoi
ngwhat’sbestforconsumer
sinthelongrun?

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Thesocietalmar ketingconcept .“ hol
dt hatmarketi
ngst rat
egyshoul ddeli
ver
val
uetoconsumer sinawayt hatmai ntai
nsorimprovesbot htheconsumersand
thesociety’
swel lbei ng”(
Kotler
,2010).Forexampl e,destroyi
ngf orest
sint he
nameofmaki ngfurnitur
eforcust omersorasoapf actorypoll
ut i
nganearbyri
ver
wil
lbef oughtbyt hesoci etyar oundt hefor
estorar oundt heriver
,assuch
market
ingact iv
iti
esdonott akeintoaccountthewel l
-beingoft hesoci
etywhere
suchmar ket
ingact i
vi
tiestakeplace.

The Fi gur
e 1. 3 below shows t hat compani es shoul
d bal ance t hree
consi
derati
onsinsetti
ngtheirmarketi
ngstrategi
es.Companypr ofi
ts,consumer
wants and societ
y’sint
erest
s/welf
are.Failure bythe companyt ot ake into
consi
derati
ont heconcernsofsoci et
yabouthow t hecompanymanagest he
envi
ronmentmay meetopposi t
ion from t he societ
y,especial
lyf rom t he
envi
ronmentali
stsandthecommuni ti
eswheret hecompanyissit
uated.

Fi
gur
e1.
4:Soci
etal
mar
ket
ingconcept

Soci
ety
(
Humanwel
far
e)

Consumers Company
(
Wantsat
isf
act
ion) (
Prof
it
s)

Thesoci
etalmarketing,holdsthatmar ket
ersmustnotonl
y
f
ocusoncust
omersati
sfacti
onbyi denti
fyi
ngt heirneedsandwant
sbutbyalso
f
ocusi
ngontheconcer
nsandsoci ety’
swelfare,includi
nghowthecompany
managest
heenvi
ronmentitoper
at esin.

j Okel
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 TOPI
C TWO

MARKETI
NG/BUSI
NESSENVI
RONMENT

I
ntr
oduct
ion:

Itisimportantforcompanies t
o moni
torthe changi
ng env
ironmentand
cont
inuousl
yadoptt
hei
rbusi
nessestot
hei
rbestoppor
tuni
ti
es.

Tot hecompany ’
smar ket
ersfall
sthemaj orresponsi
bil
i
tyofidenti
fyi
ngmajor
changesintheenv i
ronment.Themar ket
ingenvi
ronmentisconstant
lyspanni
ng
outnew opport
uniti
essuchasunt appedorunexploit
edmarkets,inbadaswel l
asingoody ears.Theseoppor t
unit
ieshavetobet appedusingthecompany ’
s
avai
labl
eresour
ces.

The market
ing envir
onmentalso spins outnew thr
eat
s such as for
eign
competi
ti
on,a civilstr
if
e,a deep recessi
on orcust
omers'shi
ftfr
om t he
company'
sproducts.

The mar keti

ng envir
onmentconsi st
s ofbot hthe micro as wellas macro
envi
ronment s.A businessconcernneedst ounderst
andt heimpactoft hese
envi
ronment alfor
cestoitsplansand act
ivi
ti
es.I
n addi
tion,
thecompanyneeds
al
sot oexploitext
ernali
nfor
mat i
oninordertomanageitsint
ernalenvi
ronmenti
f

j Okel
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i
thas t orespond successf
ull
ytot
he f
orces i
nthe ext
ernalmar
ket
ing
env
ironment
.

Lear
ningout
comes

Att
heendoft
hist
opi
cbot
hthest
udent
sandt
hepar
ti
cipant
swi
l
lbeabl
eto:
-

 Understandthefactor
st hatmakeupbot htheinternalaswellast heext
ernal
envi
ronment.
 Understandthei
mpor tanceofunderst
andingthemar keti
ngenvironment.
 Lear
nhowt oconvertexternal
thr
eatsi
ntomar keti
ngoppor t
unit
ies.
 Apprehendthemet hodsusedt oexaminetheexternalenvi
ronment

Techni
ques/
model
sofanal
yzi
ngt
hemar
ket
ingenv
ironment

i
) Market
ingr
esear
ch
Thi
si sthe method ofcol
lect
ing,r
ecor
ding and anal
yzi
ng dat
a and
r
eport
ingf
indi
ngsonanymarket
ingprobl
ems.

i
i
) SWOTAnal ysis:
Thi sr
equir
esanalyzi
ngthecompany’sint
ernal(
contr
oll
abl
e)
fact
orsthatareeit
herstrengt
hsorweaknessest otheform aswel
las
exter
nal(uncontr
oll
abl
e)factor
sthatareeit
heropport
uni
ti
esorthr
eat
sto
thecompany.
. .

i
i
i) PESTEL–DAnal ysi
s:
Thi
si nvol
vesexaminingtheext er
nalenvir
onmentalforcesandthese
are:pol
it
ical,
economi c,
social/cult
ural
,technol
ogy,ecologi
cal(ornatural
envir
onment)aswel l
ast helegalanddemogr aphi
cforces.

i
v) Marketi
ngI nf
ormati
onSy st
em (
MKI S)
This consi
sts of the peopl
e,equi
pment
s and pr
ocedur
es for
coll
ect i
ng,eval
uat
ing,anal
yzi
nganddist
ri
buti
ngi
nfor
mat
iontomarket
ing
decisionmakers.

THEI
MPORTANCEOFTHEANALYSI
SOFBUSI
NESSENVI
RONMENT

j Okel
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 Bycar
ryi
ngoutbusi
nessenv
ironment
alanal
ysi
s,t
hecompanyi
sabl
eto:
-

i
) Cl
ear
lyi
dent
if
yanymar
ketoppor
tuni
ti
esandexpl
oitt
hem.

i
i
) Cl
earl
yident
if
yanyt
hreat
sthatt
hreat
ent
hecompany
’sf
utur
e
Pl
ans.

i
i
i) Est
abli
shthecompetit
ors’st
rengt
hsandweaknessandbeabl
e
tostr
ategi
zeaccor
dingly.

i
v) Makeinformati
on–basedmar ketingdeci
sions
v
) Designgoodmar ket
ingplansthatareeasytomanageand
achievesetobjecti
ves.
v
i) Understandgovernmentplansthatmayaf fectf
utur
epl
ansthe
Company .

Theor
gani
sat
ion’
sint
ernal
andext
ernal
env
ironment
s

Fi
gur
e2;
1

Ext
ernal Marketi
ng
Env i
ronment
i
) Micro–env ironment
 Customer s
Ext
ernalMar keti
ng Int
ernal  Suppl i
ers
Envi
ronment envi
ronment
i
) Macr o-
env i
ronment
 Compet i
tor
s
 Pol i
ti
calfactors  Int
ermedi ar
ies
 Economi c,,  Publics
 Social/Cul tur
al,,
 Technol ogical,,
 Ecological /Natural
envi
ronme
1 . ntCompany
 Legal factors

j Okel
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 1.COMPANY”
SINTERNALENVI
RONMENT

Eachbusinessneedst oevaluateitsstr
engthsandweaknesses
peri
odi
call
y .Thef ol
l
owi nginternalenvir
onmentalf
actor
sneed
tobeev aluatedtodet erminewhet hertheyarestr
engths or
weaknesst ot heorganizati
on. Identi
fi
edweaknesseshavet o
conver
tedintostrengths.(
seef i
gure2;2below)

Mar
ket
ing

 Companyr eput ation.

 Marketshare
 Quali
tyreputat i
on
 Servi
cereput ati
on
 Manufacturingcost s
 Dist
ri
butioncost s
 Promotionef fecti
v eness
 R&Dandi nnov at
ion
 Geographical cover age

Fi
nance

 Cost/avail
abi
l
ityofcapi
tal
 Prof
it
abil
it
y
 Fi
nancial
stabi
li
ty

Manufact ur
ing
 Facil
i
ties
 Economi esofscal
e
 Ablededicatedworkforce
 Abil
it
yt odeli
verontime
 Technicalmanufacturi
ngski
l
l

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 Or
gani
zat
ion

 Vi
sionarycapableleader
shi
p
 Dedicatedemployees
 Fl
exibil
i
t y
/responsiv
e

Other aut hors consider a company '

si nter
nalenv ironment as
consisti
ngof :money ,
materi
als,
men( humanlabour),mi
nutes,machi
nes
andmanagement .
Thepur poseofanal yzi
ngthecompany ’
sstrengthsandweaknessi s
toconv ertweaknessesi ntostrengths.Str
engthsar ethenmat ched
againsttheexternalopport
uniti
esidenti
fi
ed.Seei l
lust
rat
ionbelow.

Fi
gur
e2;
2
St
rengt
hs
Weaknesses I
nter
nal
Conv
ersi
on

Ext
ernal
Oppor
tuni
ti
es Conv
ersi
on Thr
eat
s

Iti
st heresponsi
bil
i
tyofthecompany ’
smanagement,i ncludi
ngthat
i
treducesormi ni
mizesit
sweaknesswhi leimprovi
ngonitsstr
engths
i
nor dernotonlytoexpl
oitt
heavai
lableopport
uniti
esbutalsotof
ight
anythreatsli
kecompeti
ti
onintheexternalenv
ironment
.

2.COMPANY’
SEXTERNALMI
CRO-ENVI
RONMENT
j Okel
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Everycompany ’
s primarygoali st o profi
tabl
yser v
e and satisfy
speci
fi
c needs ofchosen mar kets.To car ry outthi
st ask,the
companyli
nksi t
selfwithasetofsuppl iersandasetofmar keti
ng
i
ntermedi
ari
es tor each it
st arget cust omers.The suppl i
ers/
company/mar keti
ng/i nter
medi ar
ies/cust omerschaincompr i
ses
thecor
emar keti
ngsy st
em ofthecompany .
The company ’
ssuccess wi llbeaf f
ectedbyt woaddi t
ion groups,
namely;asetofcompet i
torsandasetofpubl ics.(
Seef i
gure2; 1
above;
)

a)
.Company

The mar ket

ing/sal esdepar tmentconsi st
ingofbr andmanager ,
mar keti
ngresearcher
s,adv erti
singandsal espr omoti
onspeci
alists,
sales
manager s ,sales representati
v es and so on .The mar keting
departmentisresponsiblefordev el
opingmar ketingpl
ansforallthe
existi
ngproductsandbr andsaswel lasdevelopingnewproductsand
brands.

Themar ket
ingmanagement,i
nformulati
ngmarket
ingpl
ans,takes
i
nto account
theot hergroupsinthecompany,suchast opmanagement,and
accounting.Alloft
hesegroupsconstit
utet
hecompany’sinter
nal
micro-envir
onment

b)
. Suppl
i
ers

Supplier
sarebusinessf i
rmsandi ndi
vidualswhopr ovi
deresources
neededbyt hecompanyandi tscompet it
orstoproducegoodsand
serv
ices.
Developmentsinthe“ suppl
i
ers”envir
onmentcanhav easubstantial
eff
ectont hecompany ’
smarketi
ngoper ati
ons.Marketi
ngmanager s
needt owatchpr
icetrendsofthei
rkeyinputs.

c)
. Mar
ket
ingi
nter
medi
ari
es(
Middl
emen)

These arefir
mst hatai
dthecompanyinpromotion,sel
li
ng,and
di
stri
but
ing i
ts goods tofi
nalbuy
ers.Theyincl
ude middl
emen ,
j Okel
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physi
caldist
ribut
ionf
ir
ms,
mar
ket
ingser
viceagenci
es,
andf
inanci
al
i
ntermediari
es.

d)
. Cust
omer
s

Acompanyl inksitselfwi thsuppl iers andmi ddlemensot hatitcan

eff
icient lysuppl yappr opri
ate pr oduct sand ser v
icest oitst arget
mar ket s.It
st argetmar ketcanbeone( ormor e)ofthefoll
owingf ive
ty
pesofcust omermar kets;-
 Consumermar kets–i ndiv i
dual andhousehol dsthatbuygoods
andser v i
cesf orper sonal consumpt i
on.
I ndustrial mar ket s– or gani zati
ont hatbuygoods/ser vi
ces
neededf orproduci ngot hergoods/ser vicestomakepr ofit
s.
 Resel l
ermar kets– or gani zat i
ont hatbuygoods/ser vicesi n
or dertoresellthem atapr ofit.
 Gov ernmentandnon-pr of itmar ket
s– t hesebuygoodsand
ser vi
cesi nor dert oproducepubl icservi
ces.

Int
ernat
ionalmarkets–buy ersfoundabroad,incl
udi
ngf
orei
gn
customers,producers,
resell
ersandgovernments.

e)
. Compet
it
ors

Thecompet i
tiveenvi
ronmentconsistsnotonlyofother
companiesbutalsoofmor ebasict
hings.Thebestwayfora
companytogr aspthefullrangeofitscompetit
ioni
st otake
t
hev
iew
pointofabuyer.

f
). Publ
i
cs

Notonlydoesacompanyhavet
ocontendwi
thcompeti
tor
sin
seeki
ngtosati
sfyt
argetmar
ket
s,buti
tmustal
soacknowledge
a
l
argersetofi
nter
est
edpubl
i
cs.Apubl
iccanbedef
inedasany
gr
oupt hathasanactualorcompany’
sabil
it
ytoachievei
ts

j Okel
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][Ty
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 obj
ect
ives.

Apubl
iccanf aci
li
tateorimpedeacompany ’
sabili
tyt
oachievei t
s
obj
ect
ives.Good/successf ulr
elat
ionshi
pswithit
skeypublicsis
i
mportant
.Publi
cs i ncl
ude the medi a, f
inanci
al inst
it
utions,
community,
activ
istsandsoon.

3. EXTERNALENVI
RONMENTOFTHEBUSI
NESS

The business exter

nalenvi
ronmentconsist
sofbot hthe
mi
croand
macroenvi
ronment
.Themicroenvi
ronmenthasalr
eadybeen
handl
ed.

MACRO–ENVI
RONMENT
Therear
esixmajorfor
cesthatmakeupt hemacr oenv i
ronment.
These are demogr
aphic, economic, natur
al , technologi
cal
,demogr
aphi
c poli
ti
cal,aswell
associal/cul
tur
alfor
ces.

a)
. Demogr
aphi
cenv
ironment

Thef i
rstenvir
onmentalfactofint
erestt
omar keter
sispopulat
ion
becausepeopl emakeupmar ket
s.Market
ersar ekeenl
yinter
ested
i
nt he
sizeoft hewor l
d’spopulati
on:itsgeographicaldi
str
ibut
ionand
densi
ty;
mobi l
i
tyt r
ends,agedi str
ibut
ion;bi
rth,marri
age,anddeat hrat
es;
and
raci
al, et
hnic,andrel
i
giousstruct
ure.

b)
. Nat
uralenv
ironment

Thedeteri
orati
ngconditi
onoft henat uralenvi
ronmenti sbound
tobeoneoft hemaj ori
ssuesf acingbusinessandt hepubl i
cin
the 2005s.Inmanywor ldci t
ies,airandwat erpollut
ion
havereached dangerousl evels.Thereisgreatconcer n
aboutindustr
ialchemical
s creati
ngahol eint heozone
l
ayerthatwi l
lproducea“ greenhouse ef
fect
”,namel y,a

j Okel
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 dangerouswar
ningoft heear t
h.Mar ket
ersare equal
ly
concernedwi
ththedi st
ri
but
ionpatternsofr aw mat
eri
alscost
of energy ,level
s of polluti
on and r ol
e government in
envi
ronmenti
nenv i
ronmentprotect
ion,etc.

c)
. Pol
i
tical
env
ironment

Marketi
ngdeci si
onsar estronglyaffectedbydev el
opment sin
the politi
calenvir
onment .Thi senv ir
onmenti scomposedof
l
aws,
governmentagenci esandpr essuregr oupst hatinfluenceand
l
imit
vari
ousor gani
zati
onsandi ndividualsinsoci et
y .Poli
tical
envi
ronmentwi ll
includet ypeofr egimeofacount r
y, poli
ti
cal
syst
em i nplaceinpl ace(e. gdemocr at i
c,sociali
sm ,dict
ator
ial
,
et
c)
andgov ernmentlegislati
onr egulat
ingbusi ness.

d)
. Economi
cenv
ironment

Marketsrequi
rebuyi
ngpoweraswel l
aspeopl e.Theeconomi
c
env
ironmentconsi
stsoff
actorsthataffectconsumer
pur
chasingpowerandspendingpatterns.

Marketer
smustpaycloseatt
ent
iont
omajortrendsand
Consumerspendi
ngpatt
ernsi
nthemarket
s.Thef ol
l
owingar
eof
gr
eatconcer
ntomarketer
s;

Economi
cgr
owt
handi
ncomedi
str
ibut
ion.

i
) I
nter
estr
ateschar
gedbymoneyi
nst
it
uti
ons

i
i
) Exchanger
ates

i
i
i) Rat
eofi
nfl
ati
on

e)
. Soci
al/cultur
alenvi
ronment
The societ
ythatpeoplegrowupshapest heirbasi
cbeli
efs,
val
ues,andnorms.Peopl eabsorb,al
mostunconsciousl
y,a
worl
dviewthatdefi
nest hei
rrelati
onshi
ptothemselves,
to
j Okel
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 other
s,tonatur
e,andt ot heuni
ver
se.Thesesoci
alf
act
ors
i
mpacton
thefi
rms’
market
ingdeci
sions

Soci alsetupi nsoci ety,l

ikeopi ni
onleaders,familystructures,
referencegroups,et car eofgr eatint
eresttomar ket
ers.They
i
nfluence the buy ing deci sions ofconsumer s.
Forexampl e,
parentsmayi nfluencet hebuy ingdeci
sionsoft heirchildrenor
anel derperson( opinionl eader)mayswaybuy ingdecisi onsof
acommuni tywher etheyl ive.
Culturalbel
iefs,customst raditi
onsandcul t
uralvaluesinf l
uence
consumerbuy ing deci sions.Forexampl e,t
he Baganda t ri
be
believeinthei rt ot
emswhi char eani
mal sandt heydon’ teat
thoseani mals.
f
). Technol ogi
cal env i
ronment

Themostdr asti
cf orceshapi ngpeople’
sl i
vesist echnology.
Everynewt echnologyi saforcefor“creati
vedest r
ucti
on” .For
exampl e ,t ransi
stors hurtt he vacuum – t ube i ndustry
,Xerographyhur tthecar bon–paperbusi ness,autoshur tthe
Railroads,andt el
evisionhurtsthe movies.Nowt heinternetis
hunti
ngt hepr i
ntmedi aintermsofgivingnews.

Thecompany ’
sgrowthrateisaffectedbyhowmanymaj ornew
technologiesar ediscovered.Eacht echnol
ogycreatesmaj or
l
ong–r unconsequencest hatarenotal waysfor
esee-able.The
cont r
aceptivepill
,forexampl e,l edtosmal l
erfami l
i
es,mor e
wor ki
ngwi v
es,andl ar
gerdi screti
onaryincomesr esult
ingin
higherexpendi tur
esonv acati
ont r
avel,durabl
egoods,and
otherthings.

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 TOPI
CTHREE

MARKETI
NGRESEARCH

Intr
oduct i
on:
This chapt erconsists ofi nf
ormation forcompet i
ti
ve advantage,mar ket
ing
researchandi nformati
on,theorganizati
on’smar ket
inginf
ormat i
onr equi
rements
andmar ketingresear
ch.Italsohandl estypesofmar keti
ngresearchobj ect
ives,
thescopeofmar ket
ingr esearch,thei mport
anceofmar keti
ngr esearch,the
mar keti
ngr esearchpr
ocessandmar ketinginf
ormationsystem.

Learni
ngOut comes:
Boththest udentsandpar ti
cipantswillbeableto;
 Appr eciatetherel
ev anceofmar ket i
nginfor
mat i
on.
 Compr ehendt heroleofinformationinmar keti
ngmanagement .
 Under standt hedefi
niti
onandt y
pesofmar keti
ngresearch.
 Compr ehendt hestepstaket ocarryoutmar ket
ingresearch.
 Under standt hecomponent sandf unct
ionsofmar keti
nginfor
mati
onsy
stem.

1. Infor
mati
onf orCompet i
ti
veadvantage
Infor
mati
oni samar keti
ngasset.Iti
mpact sonperfor
mancei nsev
er al
way
s:-
 Ithel
pstoincreaseresponsi
venesstocustomerdemands.
 Ithel
pstoidentif
ynewcust omeroppor t
uniti
esandnewproduct/ser
vice
demands.
 Ithel
psanti
cipatecompet i
ti
veatt
acksandt hreat
s.

Fir
msar ebecomingincreasi
nglyawar eofthecompetit
iveadvant agethatmaybe
achievedthroughtheuseofi nfor
mat ion.I
nformati
onsystemscanaf fectt
heway
thef i
rm approachescust omerser vi
ce– t heveryessenceoft hemar ket
ing
concept– andcanpr ovideadv antageov ercompetit
orappr oaches.Super i
or
customerser vicecanonl ybeachi evedbybei ngabl
et oanticipateandsat i
sfy
customerneeds.I nordertomeett hisobjectiv
e,i
nfor
mat i
onwhi chi sup-t
o-date,
accurate,r
elevantandti
mel yisessential
.

j Okel
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Themor einfor
mat i
onthatafir
m canobtainaboutcompetit
or sandcust
omers,
themorei tshouldbeabletoadoptit
spr oduct/serv
iceofferingstomeett
he
needsofthemar ketpl
acethr
oughstr
ategi
essuchasdi f
fer
entiation.

Goodi
nformat
ionsyst
em mayal
tert
hewaybusi
nessi
sdoneandmaypr
ovi
de
or
gani
zat
ionswit
hnewopport
uni
ti
es.

2. Marketi
ngManagementandI nfor
mation:
I
nformati
onisrequi
redbymar ket
ingandsalesmanagementf
oranal
ysi
s,
pl
anning,i
mplement
ationandcontrol
(APIC)

.
1.2 Analysis,Planning,Implementati
onandCont rol:
Tocar ryoutmar ketingmanagementact ivi
ti
es,market
ingmanager
sneed
accurate, ,
rel
iabl
eandt i
melyinf
ormation.Theyneeditto;
 Antici
pat echangesi ndemand.
 Intr
oduce, modi fyordiscont
inueproductsorservi
ces.
 Evaluatepr ofi
tabil
i
t y
.
 Setpr i
ces
 Under t
akepr omot ionalact
ivi
ty.
 Planbudget s
 Cont r
ol costs.

2.
2. TheOr ganizat
ion’
smar ketingI nf or mationr equirement s:
Her eisal otofquest ionst hatmar keti
ngmanager smi ghtneedanswer ed.
a) Mar kets.Who ar e ourcust omer s? Whatar el ike? How ar e buyi
ng
decisionsmade?
b) Shar eoft heMar ket.Whatar et ot alsalesofourpr oduct?How doour
salescompar ewithcompet itor’
ssal es?
c) Pr oduct s.Whatdocust omer sthi nkofourpr oduct ?Whatdot heydowi t
h
i
t?Ar eourpr oduct si na“ growt h”or“ decline”st ageoft heirli
fecycl
e?
Shoul dweext endourr ange?
d) Pr ice:How doourpr i
cescompar ewi t
hot her s,higher ,average,lower
?Is
themar ketsensit
ivet opr ice?
e) Di stri
but i
on.Shoul d we di stribut e di r
ect l
y,i ndirectly orbot h? What
discount sarerequired?
f) Salesf orce.Do wehav eenough/t oo manysal espeopl e?Ar etheir
terri
toriesequaltot hei rpot ent i
al ?Ar et heycont actingther ightpeopl
e?
Shoul dwepaycommi ssion, straightsal aryorbot h?

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g) Adverti
sing.Doweuset heri
ghtmedi a?Dowecommuni catetheright
message?I tiseffecti
ve?
h) Customerat ti
tudes.Whatdot heythi
nkofourpr oduct/f ir
m /service/
deli
very
?
i
) Compet i
tor’
sact i
v i
ti
es.Whoareourcompetitors?Aret heymor eorl ess
successfulbusinesses?Whyaretheymoreorlesssuccessf ul
?
j
) Envir
onment alf actors:what f
actor
si mpact on mar keti
ng planning
(PESTELf act
ors)?

3. Mar keti
ngResearch:
3.
1. Marketi
ngResearchdef i
ned:
Marketi
ngis“thecollecti
on,anal
ysi
sandcommunicati
onofinf
ormat
ion
undert
akentoassistdecisi
onmakinginmar
ket
ing”(
AlanWi
lson,
2002)
.

Kotl
er(
2010)def ines market
ing r
esear
ch as “the sy
stemati
c desi
gn,
col
lect
ion,analy
sisandreport
ingofdatarel
evanttoaspecif
icmarket
ing
si
tuati
onsfacinganorgani
zati
on.”

3.
2. Mar keti
ngr esearchobjectives:
Ar esearchermustsetr esearchobjecti
ves.Amar ket
ingresearchpr oj
ect
mighthav eoneoft hr
eet ypesofobj ecti
ves.Theobject
iveofexpl orat
ory
researchi st ogat herpr eli
minaryinformationthatwil
lhelpdef i
net he
problem andsuggesthy pothesi
s.Theobj ectiv
eofdescri
pti
ver esearchis
to describe t hi
ngs,such as mar ketpot enti
alfora productort he
demogr aphic and at ti
tudes ofconsumer s who buyt he product.The
objecti
veofcausalr esearchi stotesthypothesesaboutcauseandef f
ect
rel
ationships.

3.
3. TheScopeofMarket
ingResear
ch:
Togivey ouanideaoft hescopeofmar
ket
ingr
esear
ch,t
hev
ari
ous
componentsar
esummar i
zedbelow;

Researchtype Appli
cati
on
Marketresear
ch  Forecasti
ng demand ( new and exi
sti
ng
pr
oducts)
 Salesforecastbysegment s
 Analysisofmar ketshar
es.
 Mar kettr
ends

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  I
ndust
ryt
rends
Pr
oductr
esear
ch  Li
kelyacceptanceofnewpr oducts
 Productextensi
on
 Brandnamegener at
ionandt est
ing
 Producttesti
ngofexi
stingproducts.
 Packagingdesignst
udies.
Pr
iceResear
ch  Costanal ysis
 Profitanalysi
s
 Compet i
torprices(anal
ysi
s)
 Mar ketpotential
 Salesf or
ecast( vol
ume)
 Cust omerper cepti
onofpri
ce.
 Effectofpr i
cechange
 Creditterms
Di
str
ibut
ionr
esear
ch  Planni
ngchannel decisi
ons
 Designandlocati
onofdi st
ri
buti
onchannel
s
 I
nhousev ersusout sourcedlogi
sti
cs
 Channelcoveragest udi
es
 Export/i
nternati
onal st
udies
Sal
espr
omot
ionr
esear
ch  Analysistheef f
ect sofcampaigns.
 Moni tor
ing / anal ysi
s adv ert
isi
ng media
choice.
 Evaluati
onsofsal esfor
ceperformance.
 Publicimagest udi es
 Studiesofpr emiums,coupons,competiti
ons,
contests,discount s.
 Compet itoradvertisi
ngstudi
es.

4. Th
3. eMarketi
ngResearchPr ocess:
TheMar
ket
ingr
esear
chprocesshasf
ivest
epsasi
ndi
cat
edbel
ow;

i
) Defi
ningthePr
oblem andResearchObject
ives:
Thetaskofdefi
ningtheresearchprobl
em isthesol
eresponsi
bil
it
yoft op
marketi
ngmanagersandr esearcher
swhohav etoworkcl
oselytogether
.
Defi
ningthepr
oblem andresearchobject
ivesisoft
enthehardeststepin
ther
esearchpr
ocess.

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 Thest atementoft heproblem andr esear
chobject
ivesguidest heentir
e
researchprocess.Iti
simpor t
antthattheareawheretheproblem exist
sin
mar keti
ngisclearl
yidenti
fi
est osaveont imeandcostofcol lecti
ngdata
onlyinthespecifi
careaofthei dent
if
iedprobl
em.

i
i
) Devel
opingtheResearchDesi
gn/Plan:
Thenextstepint hemarketi
ngresear
chpr
ocessistodev el
opt
hepl
an
thatwi
llgui
det heresear
chexer
cise.Anumberofdeci
sionshav
etobe
madeont hefol
lowing:
Ty
pesofdat
atobecol
l
ect
ed.
a) Secondar
ydata–Thisisinf
ormationthatal
readyexi
stssomewhere,
hav
e
beencoll
ect
edforanotherpurpose.Thecollect
ionofsecondar
ydatai
s
knownasDeskresear
ch.

b) Pri
marydata:Thi
sinf
ormati
oncoll
ect
edf ort
hespeci
fi
cpur
poseathand.
Thecol
lect
ionofi
salsoref
err
edtoasfiel
dresear
ch.

Resear
chAppr
oaches:
Resear
ch appr
oaches f
orgat
her
ing pr
imar
ydat
aincl
ude obser
vat
ion,
surv
eysexper
iment
s.

a) Observ at
ionalResear
ch:
This approach invol
ves gather
ing primar
ydat a byobser v
ing r
elevant
people,act i
ons,andsituati
ons.For eexamplear esear
cherwishingt o
knowt hel eastnumberofJapanesecanbr andsonUgandansr oadsmay
chooset opositi
onresearchassi
st ant
satmajorroadjuncti
onsinKampal a.
Theirtaskwi l
lbetoobserveandr ecor
deachbr andofcarsontheroads.

b) SurveyResearch:
Thisisthemostwi delyusedr esearchmethodforprimar ydatacol l
ect
ion.
This met hod i s sui t
able f or descri
pti
ve i
nformat ion. Consumer s’
knowledge,atti
tudes,preferencesorbuy i
ngbehav i
orcanbef oundoutby
askingthem dir
ectly.Theuseofquest i
onnair
esorper sonalint
erviewscan
helpinf i
ndingaboutconsumer sinsight
s.Themaj oradv antageoft his
methodi sthati
tisf lexi
ble–i tcanbeusedt oobtainmanydi f
ferentki
nds

j Okel
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 ofi
nfor
mat
ioni
nmanydi
ff
erentsi
tuat
ions.

c) Experi
mentalResear
ch:
Experi
mentalresear
chi sbestsuit
edf orgatheri
ngcasuali
nfor
mati
on,
unli
keobservati
onresearchand surv
eyr esearchwhi
char esui
ted f
or
expl
orator
yanddescript
iver
esear
chrespecti
vely
.

Experi
mentsinvolv
esel ecti
ngmat chedgr oupsofsubjectsgivi
ngt hem
di
ffer
entt r
eatments,cont r
oll
ing unrel
ated fact
ors,and checking for
di
ffer
encesingroupresponses.
Forexample,beforeaddinganew beerbr andcall
ed“senator
”Uganda
breweri
eshadt ot esttheef fect
sonsal esoft hr
eediff
erentpricesit
pl
annedt ochar
geamongt helowincomeear ners.

ContactMet hods:
Ther esearchercanaf f
ectdat
afr
om t herespondentsbymail
,tel
ephone,
personalinter
viewsoronli
ne.
a) Mail:
Mailquest i
onnairescanbeusedtocollectvastamountsofdataatalow
costperr espondent.However
,mailquesti
onnair
esarenotveryfl
exi
ble–
al
lrespondent sanswerthesamequestionsinafixedor
der.

b) Telephoneinterv
iewi ng:
Thisi soneoft hebestmet hodsf orcollecti
ng data.Speedi
lyand it
providesgreaterf lexi
bil
i
t yt
hanmai lquestionnair
es,int
ervi
ewshelpt he
i
nterv i
ewertoexpl oredeeperint
other espondentsinsi
ghts.However,
with
tel
ephonei nter
viewi ng,thecostperrespondenti shigherthanwithmail
quest i
onnai
res.

c) Personali
ntervi
ewing:
This may involve bothi ndividualand group int
erv
iewing.Indiv
idual
i
ntervi
ewinginvolv
est al
kingwi thpeopleinthei
rhomesorof fi
ces,onthe
str
eet,orinshoppingmal ls.Thist y
peofinter
viewisnotonlyfl
exibl
ebut
tr
ainedinterv
iewscangui dei ntervi
ews,expl
aindif
fi
cultquest
ions,and
explor
eissuesast hesit
uat i
onrequires.

However,i
ndi
vi
dualpersonalinter
views ar
erat
her mor
e expensi
ve
comparedt
otel
ephonei
nter
views.

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 GroupI nterv
iewingconsistsofinvi
ti
ngsevent otenpeoplet omeetwi t
h
theinterv
iewertot alkaboutaproduct
,serv
iceororganizat
ion.Thisgr
oup
i
sal soknownasaf ocusgroup.Thi
sgroupisalsoknownasaf ocusgr
oup.
Focus gr oup i
nterviewi
ng helps t
o gainfresh i
nsight
si nt
o consumer
thoughtsandf eeli
ngs.

e) Onli
nemar ket
ingresearch:
Thedev el
opmentofi nternethascomewi thonlinemar
keti
ngr esear
ch–
i
nternetsur
veys,onl
inepanel s,
experi
mentsandonl i
nef
ocusgroups.
Onli
nemar ket
ingresearchcant aketheform ofWebasasur v
eymedi um;
i
tcani ncl
udeaquest ionnair
eoni tsWebsi t
e,orusee-
mail,webl i
nksor
webpop–upst oinvi
tepeoplet oanswerquesti
ons.

Resear
chI
nst
rument
s:
Amar ket
ingr
esearcherhastwomajorinst
rumentstousei
ncapt
uri
ng
dat
a.Thesear
e;questi
onnai
reandmechani
calequi
pment
.

a) Questi
onnair
es:
Thisis a documentcontaini
ng st
atements ofquesti
ons wit
h spaces
provi
ded forthe r
espondenttof i
l
lhis /herpr efer
red answer
s.The
questi
onnair
eisbyfarthemostcommoni nst
rument.Questi
onnai
resare
veryf
lexi
ble.

Typesofquestionnai
res:
i
) Open–endquest i
onsall
ow r
espondent
st oanswerinthei
rownwords.
Questi
onslike;whatisyouropini
onofourbr and?OrwhenIchoosemy
favor
it
ebrandt hemostimpor
tantconsi
derat
ionis……………

Open–endquesti
onsareespeci
all
yusef
uli
nexplorat
oryr
esear
ch,when
ther
esear
cheri
stryi
ngtofi
ndoutwhatpeoplethinkbutnotmeasuri
ng
howmanypeopl
ethinki
nacertai
nway.

i
i
) Closed– endquestions:ontheot
herhand,pr
ovi
deanswer
sthatar
e
easiert
oint
erpr
etandtabul
ate.

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b) Mechani
cal
equi
pment
s:
Primarydatacanalsobecaptur
edusingmechanicalequipmentsuchas
camer as,
recor
dersandpeopl
emetersandscanner
stomoni tororcapt
ure
whatpeopl earesayingordoi
ng.Theseequipmentscant henbeei t
her
playedbackoranaly
zedtomakeconclusi
onaboutpeopl
e’sactions.

Sampl
i
ngPl
an:
Marketingresear
cher
susuall
ydraw conclusi
onsaboutl
argegr oupsof
consumer sbystudyi
ngasmal lgrouporsampl eofat otalconsumer
populati
on.Asampleisasegmentofthepopul
ati
onsel
ect
edf ort
hestudy
torepresentt
hepopul
ati
onasawhole.

a) Samplingunit
:whoistobesurveyed?Forexampl e,t
ostudythedeci
sion–
making processforaf amil
yTV setpur chase,shouldtheresearcher
i
nter
v i
ew thehusband,wif
eorchi l
dren?Whati nfor
mationisneededwi l
l
gui
det her
espondentstoformthesampl i
ngunit.

b) Sampl
esize,
Howmanypeopleshoul
dbesurveyed?
Lar
gesamplesgiver
eli
abl
eresul
tsthansmallsampl
es.Howev
er,l
arge
sampl
esareusual
l
ymorecost
lycomparedt
osmal l
sampl
es.

c) Sampl ingpr ocedures.Howshouldthepeopl

einthesamplebechosen?
The peopl et of or
m t he sample maybe chosen usi
ng ei
therofthe
foll
owingsampl ingprocedures;
Quasi –r andom sampl i
ng
e.g;
 Sy st emat i
csampl ing
 St ratifiedsampl ing
 Mul tistagesampl i
ng
Nonr andom sampl ing:
e.g.
 Quot asampl ing
 Cl ust ersampl i
ng


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3. Datacol
lecti
on
Thisi
st hethirdstageoft hemar keti
ngr esear chpr ocess.Thepr i
mar y
data is collected by the r esearcher ei ther by di str
ibut
ing the
questi
onnairestobef il
ledinori ntervi
ewingt her espondentsdi r
ect
ly.
Theproblemsmayi ncl
udet hefoll
owing:
a)Somer espondentsgivi
ngwr ongorbi asedi nf ormati
on
b)Somer espondentsfail
ingtoreturnquest ionnai res
c)Somequest ionnai
resbeingf i
l
ledinbyun- targetedpeopl e
d)Somer espondentsbeingdiffi
culttocont act
e)Insomecasest heresearchermayber est rictedtogetconf ident
ial
i
nformation.

4. Dataanalysi
s
Thisstageinvol
vescleaning.sort
ing,codi
ngthedataandt
henfeedingit
i
ntothecomput erforprocessingandanalysi
susingacomput
erprogram
l
ikeStati
sti
calPackageforSocialScient
ist
s(SPSS).

5 PresentationofFi ndings
Thisfinalst ager equiresther esearchertopresentt
heresearchfindi
ngsi n
form ofa r esearch r eportt ot he top managers oft he fir
m t hat
commi ssionedt her esearch.
Dependi ngonwhatwasagr eedoni ntheagreement,aprel
iminaryreport
mayf irstbepr esentedfollowedbyaf i
nalone.
Ther epor twilldefinit
elyincludet ables,char
tsandgraphs.Thereportwi l
l
incl
udeconcl usionsandr ecommendat i
ons.Pr
esentat
ionmaybei nform
ofawr i
ttenandboundr epor tandal soinpower-poi
nt

3.7 Th eResear chBr i

ef:
TheResear chbrief:
Itisimpor t
antformar keti
ngexecut i
vest oknow t hatint heabsenceofaf ull
y
fl
edged mar keti
ng research depart
mentt o handleal lresearch workf ort he
organizati
on,exter
nalresearchagenci esmaybehi redt ocarryoutther esearch
wor k.Inthelat
tercaset heheadofmar keti
ngdepar t
mentmustpr eparef orthe
attenti
onoft heresear
chagency ,ar
esearchbr i
efwhi chisadocumentpr epared
byanor gani
zati
oncommi ssioningresearch.Typicall
yitcont ai
nst hefollowing
sections;Background,Rat i
onale,Budget,Timescal e,objecti
ves,met hodsand

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r
epor
ts.Thebudgetf
orobv
iousr
easonswoul
dnotber
eveal
edt
oagenci
es.

Thekeytogoodresearchi
nfor
mation,whet
hercoll
ect
edbyani
n-housesect
ion
oranext
ernal
agency,l
i
esinthequali
tyoft
heresear
chbri
ef.

a) Background:Thi
scov ersrel
evanti
nfor
mat
ion aboutt
hecompany
,it
s
productsandser
vices,
itsmar
ketpl
ace.

b) Rati
onal
e.Howtheneedfori
nformat
ionar
oseandwhatt heuser
sintend
todowit
hthei
nfor
mationwhentheyhavei
t(whatdeci
sionswil
lbetaken)
.

c) Budget:I
ngeneral t
hebenef i
tsofcoll
ectingit,butbenefitsinpar
ticularare
notalwayseasyt oquantif
y.
Inanycase,t
hebudgetwi ll
affectt
hescal eandt ypeofi nfor
mationsear ch
thatcanbecar r
iedout.Thisitem wil
lprobablynotber evealedt
oext er
nal
suppli
erssi
ncet heywi llberequir
edt opr esenttheirresearchpr oposals
thatwilli
ncludet hef eesand expensesofcar r
ying outt her esearch
exerci
se.

d) Timescale:
Quit
eobv iousl
y,i
fthedeci
sionshav
etobemadebySept emberthenthe
i
nformati
onneedst obecollect
edandanal
yzedbef
orethen.Onceagain
thi
swillhaveanimpactont hescal
eandty
peofinf
ormationsear
chthat
canbecar ri
edout.

e) Objecti
ves:
Thepr eci
ousneeded,setoutascl earl
yaspossibl
e.Forexample,“
To
creat
eawar enessby75per centamongt het
argetmarketinthenext
twelvemonths.
”Theobject
ivesshoul
drelat
eonl
ytother
ational
e.

f
) Met
hods:Thi
sneedonl
ybeoutline,set
ti
ngout
,forinst
ance,t
hescal
eof
t
heresear
ch,t
hemixofquanti
tativ
eandquali
tat
iveinf
ormati
onneeded,
t
hesegmentsoft
hemarkett
obei ncl
uded.

g) Repor
ts:
Howthefinali
nfor
mat
ionshoul
dbepr
esent
ed.Consi
der
ati
onsher
emi
ght

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 i
ncl
udest y
leofreports,degr
eeofsummar i
zat
ion,useofchart
s,t
abl
es
andgraphsandt abl
es,formatforquant
it
ati
veinformat
ion(e.
ginExcel
spr
eadsheets,
foreaseoftwitt
eranal
ysi
s).

TheResear chProposal :
Uponr eceivi
ngt her esearchbrieffr
om thecl i
ent,ther esearchagency
embarks on t he exercise ofwr i
ti
ng a research proposalwhi ch i
sa
documentpr epared and submi tt
ed tothe clientbyt he agencywho
recei
ves the br ief
.Ty pi
call
y content
s ar e as follows;Backgr ound,
Objecti
ves,Appr oachandMet hod,Report
s,Timi ng,Feesandexpenses,
PersonalCVs, Relevantexperi
enceandCont r
actualdetail
s.

a) Backgr ound:
This sets outthe agency’s under
standing ofthe cli
entcompany ,it
s
productsandser vi
cesandi t
smar ketplace,anditsunderstandi
ngofwhy
theresearchisrequi
red(I
ftheyhav emisunderstoodthesituati
onitwi
l
lbe
cleart
ot hecli
entattheoutset).

b) Object
ives:
Thesewi l
lprobablybemuchthesameasthosei
nthebri
ef,alt
houghthe
agency’
sunder st
andingofr
esear
cht
echni
quesmayhav
ehel pedtodef
ine
them moreprecisel
ystil
l
.

c) ApproachandMet hod:
Howt heagencypr oposestocar r
youttheresearch,whatmet hodswillbe
used,wher ethesampl ewil
lbet akenfrom.Inot herwor dst
hecov erthe
sortoft opi
csl i
ket ypesandsour cesofdat a,areasofquant it
ati
veand
quali
tati
vedat a,ther esear
chi nstr
ument( questionnai
re)tobeusedi n
capturi
ngdataandt hesamplingplan,asappropri
at etot
hesituat
ion.

e) Timing:
How l ongtheresearchwi l
ltakeandhow i
twi
l
lbebr
okendowni
nto
separatest
agesifappropr
iate.

j Okel
l a[
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][Ty
pe
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]
f
) Feesandexpenses:
Ther esear
chagencywi l
lhavetobreakdowntheworkl
oadandassign
costsandf eesagainsteachit
em.Theclientwi
l
llookatt
hesefeesand
expensesto seei ftheyf i
tinthebudgetesti
matesappear
ing i
nthe
researchbr
ief.

g) PersonalCVs:
Theagencyhast ogi
v eper
sonalCVsoft
her
esear
chper
sonnelexpect
ed
tocarryoutt
heexer
cise

h) Relev
antexper i
ence/References:
Theagencywi l
lwishtoassurethecli
entt hatiti
scapableofcarr
yingout
the research,so itwi l
li ncl
ude infor
mat ion aboutsimil
ar proj
ects
undertakenint hepast,andpossibl
yr eferencedetail
s(prev
iouscli
ents
whoar ewilli
ngtotest
if
ytot hecompetencyoft heagency.

i
) Cont r
act
ualdetai
ls:
Cont r
act
ualdetail
swi llsetouttheagency ’ster
msoft r
adeandcl ari
fy
mat t
ersaboutowner shipoft hedat acollect
ed,right
sofr espondent
s,
professi
onalresponsibil
i
tiesofr esearcher,and themut ualri
ghtsand
responsi
bil
it
iesofresearchersandclients.

4. MARKETI NGINFORMATI ONSYSTEMS( MkIS)

Defi
nit
ion:Mar ketingInformationSy stem consi st
sofpeopl e,equipment
andpr oceduresf orcoll
ecting,recor di
ng,ev aluati
ngandanal y
zingdat a
anddist r
ibut
inginformationt orelevantmar ketingmanager sfordeci si
on
making.
Fi
gure:bel ow showst hattheMkI Sbeginsendswi thinformati
onuser s-
marketing manager s,internaland ext ernalpar tner
s and ot hers.The
marketing manager s use t he informati
on f orcar r
ying outmar keti
ng
management( MM)whi chi nvol
v ed:Analysis,planning,implement ati
on
andcont rol(
APIC).

Fi
gur
e1:
Market
ing
Market
ingInfor
mati
onSystems
j Okel
l a[
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ext] [Typetext
][ pe manager
Ty s
t
ext
]
 Anal
ysis
 Pl
anning
 Ext
ernal
Env
ironment
I
nternal Market
ing I
nfor
mat
 TargetMarkets Records Resear
ch t
ion
Syst
em Syst
em f
low
 Competit
ors
 I
ntermedi
aries Dat
a
 Publi
cs Fl
ow
 Macrofactors
Market
ing Deci
sion
I
ntel
li
gence Support
Syst
em Syst
em

As shown inf igur

e abov e MKI Sis bui
l
df rom diff
erentsystems.Ty pi
cal
componentsare( 1)
Ii
nternalrepor
ti
ngorrecor
dssy st
em (ii
)Marketi
ngresear
ch
syst
em (i
i
i)Mar keti
ngI nt
ell
igencesyst
em,and( i
v)Deci
sionSupportSystem or
Anal
yti
calSupportSystem).

Int oday’
senv i
ronmentmar keti
ngmanager scannotoper ateunlessthereisl
ots
ofi nfor
mat ioncomi ngf r
om mar keti
ngresearch,databases,secondarysources
ofal ldescri
pt i
ons,salesfigures,customersurveys,environmentalscanningand
soon.
Thi spartoft heMKI Sut i
l
izesi nt
ernalrecor
dsoft hecompany–t heinformati
on
on cost s,pr oductschedul es,or ders,sal
es and some t ypes off i
nancial
informationr elat
ingtocustomer s(suchascr edi
trati
ngs)
Customerser v i
cedata
(a)I
nternal Repor
tingsy st
em  Ser vi
cer ecords
Outbounddata  C ust
ome r
 Finishedgoods compl ai
nts
I
nventoryr
ecords  Hel p–l i
necal l
s
 War ehouseInvent
ory
records.
 Shippingrecor
ds.
Sal esandMar keti
ng
 Mar keti
ngleadand
prospectdat a.
Marketi
ng  Sal escommi ssion
Decisi
on recor ds.
Producti
onandOper ati
ons Making  Quot at
ionsyst em
data recor ds.
I
nboundlogisti
csdat a
 Pr oducti
onschedules  Bidsreceiv
e d .
j Okel
l a[
oWaat Ty
pet
ext
] [ Typet ext][Ty pe
anddelays.  Purchasingand
t
ext]
 Pr oductcost
s. accounts
 Qual i
tycontr
olrecords  Payablesyst ems.
 Receivi
ngsy st ems
b) Mar
keti
ngInt
Amarket
inga

(
b)Market
ingI
ntel
li
gencesystem
Market
ingI
ntel
li
gencesystem i
sasetofpr ocedur
esandsourcesusedby
market
ing managersto obtai
n everyday inf
ormat
ion aboutpert
inent
dev
elopmentsi
nt hemakingenvi
ronment.

Thissystem col
lect
sandstoresev ery
dayi nfor
mationaboutt heext
ernal
envi
ronment – i nfor
mati
on such as i ndustryr eports,competi
tor
s
str
engthens and weaknesses.I nformati
on collected here abovea
companyt obuil
damor eaccurat
epr of
ileoftheexternalenvi
ronment
.The
datamayt akethef or
m ofpresscut t
ingsandi nformationderi
vedfrom
websit
es.

c) Mar ketingresear chsy st

em:
Thissy st em usesmar keti
ngresear
chtechniquestogather
,eval
uat eand
reportf indi
ngsi nor dertomi ni
mizeguesswor kinbusi
nessdecisions.A
companymi ghtusemar keti
ngresear
chtopr ovi
dedetai
l
edinfor
mat ionon
newpr oductconcept s,att
it
udestomarketingcommunicati
onmessages,
test
ingadv ert
isingeffecti
venessandunderstandi
ngcustomerpercepti
ons
ofser v
icedel ivery.

d) DecisionSupportSystem (Analyti
cal Marketi
ngSy st
em)
Thiscompr i
sesanal
yticaltechniquest hatenablemar ket
ingmanager st o
makef ul
luseoftheinformat i
onpr ovidedbytheot herthr
eesour ces.This
analysismayr angefrom simpl ef i
nancialrat
iosandpr oject
ionstosal es
patt
er nsto mor ecompl exst atist
icalmodel s,spreadsheetsand ot her
exercisesinextr
apol
ation.

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 TOPI
CFOUR

CONSUMERBEHAVI
OUR
Int
roduction:
Thischapt erdeal
swi ththosemajorf actor
sthati nf
luenceconsumerbuy ing
behaviour.Market
ersareeagert
olearnandunder st
andt hesefact
orssi
ncetheir
success i n meet
ing customersati
sfacti
on partl
y depends how bestt hey
understandtheunderl
yi
ngfactor
sthati
nf l
uencecustomer sbuy
ingdeci
sions.

Learni
ngOut comes:
Bothstudentsandpar ti
cipantswillbeableto;
i
) Under standthefactorsthatinfl
uenceconsumerbuyingbehaviour.
i
i) Under standt hebuy i
ngpr ocessesforbothindi
vi
dualandor ganizat
ional
buy ers.
i
ii
) Dev elopmar keti
ngstrategiesbasedonanunderstandingoftheconsumer
buy i
ngbehav ior.
i
v) Desi gnstrat
egiesthathelpbuy ingconsumerswhenunder goi
ngt helayi
ng
process.
v) Under standthemaj orparti
cipantsi
nt heor
gani
zat
ional buy
ingprocess.

ConsumerBuy i
ngBehavi
ourdef
ined:
Consumerbuy i
ngbehavi
orcanbedef i
nedas“ t
hedecisi
onpr ocessesandacts
ofi
ndiv
idual
sinvolv
edinbuyi
ngandusingproductsorser
vices.
”(Dibbetal
2001)
orConsumersbuy ingbehavi
ouris“thebehaviourconsumerexhi bi
tsbefor
e,
dur
ingandafterbuyi
ngandusingaproductorservi
ce.
”

Whyst udyconsumerbuy i
ngbehaviour?
Marketersareint
erestedinunder
standingwhatt
hei
rconsumersbuy,wherethey
buyf r
om,whent heybuy ,whytheybuyandhow t heybuy.Answerstot hese
questi
on assistmar ket
ersto design theappr
opr
iat
estrat
egiesthatlead to
customersatisf
acti
on.

Fact or
si nfl
uenci ngconsumerbuy ingbehav i
our:
Consumerbuy ing behaviouri si nfluenced by cultural
,soci al,per sonaland
psy chologicalfactors.Soci alclassi sacul tur
alfactor;socialf actorsinclude
referencegr oups,opinionl eadersandt hef amil
y.Age,occupat ion,economi c
cir
cumst ancesandl i
festy
lear eal lexampl esofper sonalfactors.Psy chological
factorsincludemot i
vati
on, perception,learni
ng,bel
iefsandat t
itudes.

j Okel
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 Model ofBuy
erBehavi
or(St
imulus-ResponseModel)
:
Thecent r
alquesti
onformarketer
si s;How doconsumer srespondtovar
ious
mar ket
ingef
fort
sthecompanymi ghtuse?Thest art
ingpointi
st hest
imul
us–
responsemodelofbuy
erbehaviourshowni nt
hemodel bel
ow.

Env
ironment
Market
ing OtherSt
imul
i
st
imuli
 Pr
oduct Cult
ural
 Pr
ice Economic
 Pl
ace Technol
ogical
 Pr
omoti
on

Theabov
eFi
gur
eshowst
hat mar
ket
ingandot
herst
imul
ient
ert
heconsumer
’s

Bl
ackbox”andpr
oducecer
tai
nresponses.

Mar
ket
ersmustf
igur
eoutwhati
sint
hebuy
er’
sbl
ackbox.

Thecor
epr
ocessofconsumerbuy
ingbehav
iouri
sinf
luencedby
:

1. Cult
uralFact
ors:
Defi
nit
ionsofCulture:
(
a)Cult
ure comprises oft he val
ues,atti
tudes,beli
efs,ideas and other
symbolsinthepatternofli
feadoptedbypeoplethathel
pt hem t
oint
erpret
andcommuni cati
onasmember sofsociety(CI
N,2007).

(
b)Cul
tur
eist
hesetofval
ues,
percept
ions,
want
sandbehavi
oursl
ear
nedby
amemberofsoci
etyfr
om famil
yandotheri
mpor
tanti
nst
it
uti
ons(Rot
ter

j Okel
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t
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]
 2010)
.

Cult
ureisthemostbasiccauseofaper
son’
swant
sandbehav
iour
.Human
behavi
ouri
slar
gel
ylear
ned.

Eachcult
urecontai
nssmal l
ersubcultures,orgroupsofpeopl ewit
hshar edv al
ue
syst
emsbasedoncommonl if
eexperiencesandsi tuati
ons.Subculturalgroups
canbedef inedintermsofr el
igi
on,ethniccharacteri
sti
cs,raci
alcharacteri
sti
cs
andgeographicalareas,al
lofwhi chfurtherinfl
uenceat t
it
udes,tastes,taboos
andli
fest
yle.

Culturether ef
oreinfluencesbuyingbehav iour,andv ar
iesfr
om countrytocount ry
orfrom onegr oupofpeopl etoanot her.Forexampl einUgandanet hnicgroups
buydi ff
er entlocaldr i
nksbecauseoft heirculturaldif
fer
ences.Bagandaf rom
centralregionpr efer“MwengeBi gere”or“ Tonto”asopposedt oWesternet hnic
groups( Bany ankole,Batooro,BakigaandBany oro)whopr efer“Obushera”ort he
Easterntr i
balgroups( It
esoBami a-Bagwe, Bagishu,Jopadhola)whodr i
nkal ocal
brewcal led“ Malwa”,whil
eet hi
nictribesint henor ther
npartoft hecountryprefer
Li
raLiratoanyot herlocaldri
nksment ionedher e.

2. SocialFactors:
Aconsumer ’
sbehav ioural soisinfl
uencedbysocialf
actor s,suchast he
consumer ’ssmal lgroups, famil
yandsocialrol
esandstatus.
Manysmal lgroupsi nfl
uenceaper son’sbehavi
our.Groupst hathavea
di
recti nf
luenceandt owhi chaper sonbelongsarecalledmember ship
groups.Incont rast,referencegroupsservedir
ect(
facetof ace)orindi
rect
pointsofcompar isonorr ef
erenceinf or
ming aperson’sat t
it
udesor
behaviour.

Opini
onLeaders:
Opini
onleader
sar et
hoseindiv
idualswhor einf
orcemar ket
ingmessages
andtowhoot herslookforinformationandadv ice.Inaddit
ion,opi
nion
l
eadersmaycommuni cat
eamar ket
ingmessaget ot hosemember softhe
groupwhomayhav emissedtheor i
ginalmessage.

Thefami
l
y:
Anot
hermaj
orsoci
ali
nfl
uencei
sthef
ami
l
y,par
ti
cul
arl
ywi
thr
egar
dtot
he

j Okel
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] [
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ext
][Ty
pe
t
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]
 rol
esandr elat
ivei
nfl
uenceexertedbydiffer
entfami
l
ymember s.Research
hasindicatedthreepatter
nsofdeci sionmaki ngwit
hinthefamilyand
i
dentif
ies the sorts of products categor
ies wi
th each i
st ypicall
y
associ
ated.

a) Husbanddomi nated:Li
feinsurance,cars,t
elev
isi
onandland.
b) Wifedominated:washingmachi nes,ki
tchenware,car
pet
sandnon
l
ivi
ngroom furnit
ure.
c) Equal
:li
vi
ng–r oom f
urnit
ure,holidays,
housingandenter
tai
nment
.

RolesandSt atus:
A per son belongs t o manygr oups,f amil
y,clubs,organi
zat
ions.The
person’spositionineachgr oupcanbedef i
nedintermsofbothr ol
eand
status.Ar ol
econsi st
soft heactivi
ti
espeopl eareexpectedtoper f
orm
according tot he persons around t hem.Each r ole car
ri
ed a status
refl
ectingthegeneral esteem giv
ent oitbysociety.
Peopl eusuall
ychoosepr oductsappropriatetothei
rrol
esandstatus.

3. Personalfactor
s:
Buyers’decisi
onsal
soareinfl
uencedbypersonalcharacter
ist
icssuchas
the buyer’
sage,gender,occupati
on,economicsi t
uation,li
fest
yle and
personali
tyandsel
fconcept
.

AgeandLi f
eCy clestage:
Peopl echanget hegoodsandser vi
cest heybuyov ertheirli
feti
mes.Age
i
s par t
icul
arl
yr elevantto such pr oduct s as clothes,furnit
ure and
recreati
on.Howev er,consumpt i
onmayal sobeshapedbyt hestageofthe
fami l
ylifecycl
ewi thinwhichani ndiv
idualfall
s.Forexampl e,inUganda,
olderwomenpr eferwearingaki ndofdr esscall
ed“ Gomesi”whilethe
youngerwomenandgi rl
spr ef
erdresses,skir
tsandbl ouses.

Occupation:
APer son’soccupati
onaffectsthegoodsandser v
icesbought
.Ordi
nar
y
workerst endtobuysecondhandcl othes,wher
easexecuti
vesbuymore
busi
nesssui ts(
part
icul
arl
yinAfri
ca).
Thetaskf ormarket
ersistoidenti
fyt
heoccupationalgr
oupsthathav
ean

j Okel
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][Ty
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 abov
eav
eragei
nter
esti
nthei
rpr
oduct
sandser
vices.

Economicsituati
on:
A person’s economic sit
uat
ion aff
ect
s productchoi ce.Market
ers of
i
ncome–sensi ti
vegoodswat chtrendsinpersonalincome,savi
ngsand
i
nterestrat
es.Dur i
ngrecessi
onmostcust omerscutont hei
rbudgetfor
nonessentialgoodswhi l
eineconomicboom periods,theyt
endnottobe
pri
cesensiti
veandi ncr
easeontherangeofgoodst heybuy.

Lif
est y
le:
Peoplecomi ngf r
om thesamesubcul ture,socialandoccupat ionmany
havequi tediff
erentli
fest
y l
es.Lifestyl
ei saper son’spat t
ernofl i
ving
expressedinhisorherpsy chographics.Itinvol
vesmeasur ingconsumer s
majoract i
vi
ti
es( wor
k,hobbies,shopping,spor t
s,socialevents)
,i nt
erests
(f
ood,f ashi
on,famil
y,recr
eation)andopi nions(aboutt hemselves,soci al
i
ssues, busi
nessproducts.
)

Personal
ityandsel fconcept:
Eachper son’
sdi str
ictpersonali
tyi
nf luenceshisorherbuy ingbehav i
our.
Personal
ityref
erst otheuni quepsy chologicalchar
acter
ist
icsthatleadto
rel
ati
vely consistent and l ast
ing r esponses t o one’s envir
onment .
Personal
itycan beused i n analyzing consumerbehav i
ourf orcertai
n
productorbrandchoi ces.

Theideaist
hatbr
andal
sohavepersonal
it
yandthatconsumer
sar
eli
kel
y
tochoosebr
andswit
hper
sonal
i
tiesthatmatcht
hei
rown.

A brand per
sonal
i
tyist hespeci
fi
cmi
xofhuman t
rai
tst
hatmaybe
at
tri
butedtoapart
icul
arbrand.

4. Psychologi
calFactor
s:
Aper son’
sbuy i
ngchoicesf orpr
oductsandservicesarefurt
herinfl
uded
byfourmaj orpsychol
ogicalfact
ors.Mot
ivat
ion,percept
ion,l
ear
ning,and
bel
i
ef sandatti
tudes.

1.Moti
vati
on:
Motiv
ati
onhasbeendef i
nedasaninnerst
atet
hatener
gizesandchannel
s
behavi
ourtowards goal
s.While a moti
ve( ordri
ve)a need thatis

j Okel
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 suffi
cientl
ypressingt odirecttheper
sontoseeksat
isf
action.Mot i
v at
ion
ari
sesf rom perceiv
edneeds.Theseneedscanbeoft wot y pesbiogenic
andpsy chogenic.Biogeneticneedsari
sef r
om physi
ologicalstatesof
tensi
on such as hunger ,thir
stand di
scomfort
,whereas psy chogenic
needsar i
sefrom psy chol
ogicalstat
esoftensi
onsuchast heneedf or
recogniti
on,esteem orbelonging.

Abraham Maslow soughtt oexpl

ainwhypeopl earedrivenbypar ti
cul
ar
needsatpar t
iculartimes.Maslow’sansweri st hehuman needsar e
arr
angedinl i
erachy,asshownbel ow,f r
om t hemostpr essingatt he
bott
om tothel
eastpr essi
ngatthetop.
Selfact ualizationneeds
(sel
f–dev el opmentandr eali
zation)
Self–est eem needs
(sel
f–est eem, r
ecognit
ion,status)
Soci alneeds
(senseofbel onging,l
ove,affecti
on)
Safet yneeds
(secur i
ty,pr otecti
on,cl
othing)
Phy siol
ogi cal needs
(Hunger ,thir st)

Maslow’sHierarchyofNeeds
AccordingtoMasl ow,t heneedsincl
udephy si
ologi
calneeds,safetyneeds,
socialneeds,esteem needs,andsel fact ual
izat
ionneeds.A persont r
iest o
sati
sfythemosti mpor tantneedsf
ir
st.Whent hoseneedsaresatisfi
ed,theywi l
l
stopbei ngmot i
vatorsandt heper
sonwi llthent ryt
osat i
sfythenextmost
i
mpor tantneeds.Onceaneedi ssati
sfi
edi tstopsmot i
vati
ngt heindiv i
dual
person.Inst
ead,unsatisfi
edandmor epressingneedscomesupt omot i
vatet he

j Okel
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persont
oact.Bot
hphy si
ologi
calandsecur
ityneedsareknownashy
gieni
c
needswhi
let
hel
astneedsareref
err
edtoaspschogei
nicneeds.

Marketers need toident

if
ythose needs t
hatare noty etsat
isf
ied so t
hat
st
rategiesaredevel
opedtosat
isf
ythem wi
thther
ightproduct
sandservi
ces.

2. Per ception:
Per ceptionisdef i
nedast heprocessbywhi chpeople, select,organizeand
i
nter pretsensor y sti
mul iinto a meani ngfuland coher entpi cture.A
mot i
vatedper sonisreadyt oact .Howt heper sonacti si nfl
uencedbyhi s
orherown per cepti
on oft he si t
uation.Peopl elear n byt he f l
ow of
i
nf ormat ionthrought heirfivesenses:si ght,hearing,smel l,touchand
taste.Howev er,eachofusr eceives,organizesandi nterpretsthissensor y
i
nf ormat ioninani ndi
vi
dualway .Peoplecanf orm diff
er entper cepti
onsof
the same st imulus because oft hree per ceptualpr ocesses:sel ecti
ve
attention,selecti
vedistort
ion,andsel ectiv
er etenti
on.Peopl ear eexposed
toagr eatamountofst imulieveryday .Iti
si mpossiblet opayat tentionto
allthesest imuli
.

Select
iveatt
ent
ioni
sthetendencyforonetoi
nter
preti
nfor
mat
ioni
naway
thatwil
lsuppor
twhattheyal
readybeli
eve.

Sel
ecti
vedistor
ti
onmeanst hatmar
ketersmusttrytounderstandthe
mind–set sofconsumersandhow thesewi
llaf
fecti
nter
pretati
onsof
adver
ti
singandsal
esi
nfor
mation.

Peopl eal so wi
llfor
getmuchofwhatt heylear
n.Theyt endtoret
ain
i
nfor mationthatsupport
st hei
ratt
itudesandbeli
efs.Becauseofsel
ect
ive
retenti
on,consumer sarel i
kel
yt oremembergoodpoi nt
smadeabouta
brandt heyfavourandforgetpoint
saboutcompet i
ngbrands.

Becauseofsel
ecti
veat
tenti
on,distor
ti
onandr
etent
ion,mar
ket
ersmust
workhardt
ogetthei
rmessagesthrough.

3. Learni
ng:
Learni
ng descr i
bes changes i
n an individual’
s behaviorarisi
ng from
experi
ence.Whenpeopl eact,t
heylear n.Theor i
esaboutl earni
ngst at
e
thatlearningisther esul
toftheint
er playoff i
vefactors:
(i
)Dr i
ves,(i
i)
sti
mul i
(ii
i)cues,
(iv
)Responsesand(v)Rei nforcement.

j Okel
l a[
oWaat Ty
pet
ext
] [
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ext
][Ty
pe
t
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]
 A driv
ei sast ronginternalforcei mpel li
ngact ion.A drivebecomesa
mot i
vewheni tisdirectedt oapar t
icularst i
mul usobject(thepr oduct)
.
Cuesar eminorstimuli(
suchaswhen,wher eandhowseei ngt heproduct
i
nact ion,foodar omaoranadv erti
sement )t hatdeter
mi nest heperson’s
responses.Oncet hepr oductisbought ,Iftheexper i
encei sr ewarding
them t heresponset ot hepr oductwi l
lber einfor
ced,maki ngar epeat
purchasemor elikel
y.Mar keter
smust ,t hereforebuil
dupdemandf ora
productbyassoci ati
ngitwi t
hst rongdr i
ves, usingmotivati
ngcuesandby
provi
dingposi t
iverei
nforcement.

4) Beli
efsandAtti
tudes
Abel i
efisadescri
pti
vethoughtthatapersonhasaboutsomethi
ngKotler
(1991)Throughdoingandl earni
ng,peopl
eacquir
ebelief
sandatti
tudes.
Thesei ntur
n,infl
uencetheirbuyi
ngbehav i
our
.Beli
efsareimport
antt o
mar ket
ersasthebel i
efthatpeoplehav eaboutproductsmakeupt he
brandimagesofthoseproducts.

An atti
tude descr ibes a per son’s endur ing f
avorable orunf avorable
cogni
tiv
eev aluati
ons,emot i
ons,f eel
ingsandact i
ont endenciest owar ds
someobj ectori dea( Kotler,1991) .Atti
tudesleadpeopl etobehav ei na
fai
rl
yconsi stentwayt owar dssimi l
arobjects,byensuringthatt heydonot
havetoi nterpretandr eactt oev eryobjecti naf r
eshway .Attit
udesput
peopl
ei ntoaf rameofmi ndofl ikingordi sl
iki
ngthings,ofmov i
ngt owar d
orawayf r
om t hem.Mar ketersshoul densur ethattheirproductsf itinto
peopl
e’sexi sti
ngattit
udesgener ally,andt henrel
atethem tot hemar ketin
questi
on.

ThePur chaseDeci sion:

Purchasedeci sionsar eofsev er
altypes,complexdeci
sionmaki ngmay
occurinhi ghi nvolvementpurchases(forexample,pur
chasi
ngi ndust
ri
al
products),whi ch are ones thatarev eryimportantt
ot he consumer.
Simplerdeci sion maki ng occursinl ow invol
vementpurchases (for
example,pur chasing consumer pr oduct
s) which are not seen as
parti
cul
arlyimpor tantoriti
srepeti
ti
ve.

TheI
ndi
vi
dual
Buy
ingdeci
sionpr
ocess:
j Okel
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oWaat Ty
pet
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] [
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][Ty
pe
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]
 Thepr ocessofdeci sionmaki ngbegi nswithinfor
mat i
onsearch,which
l
eadst otheevaluati
onofal t
ernativ
es.Themar keter
scanaimt oinfl
uence
both oft hese processes.Af termaki ng t
he purchase,t
he consumer
exper
iencessat i
sfacti
onordi ssati
sfacti
on,ei
therofwhichi
nfl
uencest he
possi
bili
tyofrepeatpur chases.

Compl exdeci
si
onmaki ngi npurchasingbehav i
ourcorrespondsneatl
y
withthegeneralstagesi nt hebuyingpr ocessasi denti
fi
edbyKot l
er
(2010).Thi
smodeli srelev
antt othetopicofmar keti
ngcommuni cat
ion
process.
(Compar
et hi
s pr ocess witht hat of Organi
zati
onalBuying
Processshownaheadandnot ethedi
fferences)

1. Needr
ecogni
tion:
Theprocessbegi nswhent hebuy errecogni zesaneedorpr oblem.
Thiscanbet ri
ggeredbyi nt er
nalst i
mul i
,suchasl ackofsoci al
esteem oraconv incing adv erti
sement .I ft heneed ar
isest oa
thr
esholdleveli
twillbecomeadr i
v e.
 Thet askfort hemar keterist oident i
f yt
hecir
cumst ances
and stimulithatt riggera par t
icularneed and use t he
knowledgetot ri
ggerconsumeri nterest.

2. Infor mat i
onsear ch:
Oncear oused,t hecust omerwi llsear chf ormor ei nformat ionaboutt he
product st hatwi llsatisfytheneed.Thei nformationsear chst agecanbe
divided i ntot wo level s.Thef i
rst,i shei ghtened attention,wher et he
cust omersi mply become mor er ecept i
v et oi nfor
mat ion aboutt he
part i
cularpr oductcat egor y
.Thesecondst ageisact i
veinformat i
onsearch.
 Modi fyi
ngt hebr and:Redesi gningt heproductsot hatitoffersmor eofthe
attributes t hatt he buy erdesi res ( Kotler1991) .This cal l
ed real–
posi ti
oni ng.
 Alt eringbel iefsaboutt hebr and:Kot l
err ecommendst hatt hiscauseof
actionbepur suedi ft heconsumerunder esti
mat esthequal i
ti
esoft he
brandandcal l
sitpsychol ogicalrepositioning.
 Alter i
ngbel iefsaboutcompet it
or’sbr ands:Thi scauseofact ionwouldbe
appr opriatei ftheconsumermi stakenl ybel i
evest hatitact uallyhas,and
canber efer
r edtoascompet it
iver epositi
oni ng.

I
tshoul
dbenot
edt
hataMar
ket
ershoul
dav
ailasmuchi
nfor
mat
ionas
j Okel
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pet
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] [
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][Ty
pe
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 possi
bleabouthis/herproduct
s/ser v
icest
othecustomersearchi
ngf
or
i
nformati
on.Personalsel
li
ng,advert
isi
ngandsalespromotion,i
ncl
udi
ng
di
rectmarket
ingarekeytoprovi
dingtheneededi
nfor
mation.

3. Ev
aluat
ionofAl ternativ es:
 Theconsumerusest heav ail
abl einf
ormationtoar r
iveatasetof
fi
nalbr andchoi ces.How doest heconsumerchooseamongt he
alt
ernativebr ands?TheMar keterneedst oknow t hatev aluati
ng
purchase al t
er nat i
ves depends on t he i
ndivi
dualconsumerand
specifi
cbuy i
ngsi t
uation.I
nsomecases,consumer susecar eful
calcul
ations and l ogicalt hinking.At ot her t
imes,t he same
consumer sdol ittl
eornoev aluati
ng,inst
eadtheybuyoni mpulse
and r ely on i nstit
ution.Somet i
mes consumer s make buy i
ng
decisi
onsont hei rown;somet imestheyturnonf r
iends,consumer
guides,orsalespeopl eforbuy ingadvice.

 Marketer
s should study buyer
st ofind outhow t hey act
uall
y
eval
uatebrandalt
ernati
ves.Ift
heyknowwhatevaluat
ionprocesses
goon,mar keter
scant akestepstoinfl
uencethebuy er
’sbuy i
ng
deci
sion.

4. PurchaseDeci sion:
Hav i
ngev al
uat edt her angeofbr andchoi cestheconsumermayhav e
for
medapur chasei ntenti
ont obuyt hemostpr eferredbrand.However,
somef actorscoul dintervenebetweent hepurchasei nt
enti
onandt he
purchasedeci sion.Thef i
rstfactorist heatti
tudeofot hers.A str
ong
negativ
eopi ni
onr egardi
ngt hebrandchoi cemayi nfluencetheconsumer
to change hi sorhermi nd.Otherf actorscoul di ncl
ude a change i
n
fi
nancialci r
cumst ancessuchasr edundancy,orci rcumstancesinwhich
someot herpur chasebecomemor eurgent.

 Market
ers need t
o movef astenough,where possibl
e,to hel
p
consumer
smadepur chasedeci
sionst
hatfav
ourtheirbrandchoi
ce.

5. Postpurchaseevaluation/behav i
our:
Havingpurchasedt hebr andtheconsumerwi l
lexperi
encesomel ev elof
sati
sfact
ionordissat i
sfyi
ngaction,dependingont heclosenessbetween
the consumer’s pr oduct expectati
ons and t he product’
s perceived
perf
ormance.Thesef eelingswillinf
luencewhet hert
heconsumert alks
j Okel
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][Ty
pe
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]
 favourablyorunfav
ourablyaboutthebrandtoot her
s.Thelargerthegap
between expectati
ons and performance,the greaterthe consumer’
s
dissati
sfacti
on.Thi
ssuggest sthatmarket
ersshouldpr omiseonlywhat
theirbrandscandeli
versothatbuyersar
esatisf
ied.

Almostal lmaj orpurchases,howev er,r

esul ti
ncogni tivedissonanceor
di
scomf ort(disharmony ,imbalanceordi sequili
brium)int hemi ndoft he
buyercausedbypostpur chaseconf li
ct.
 Mar keter s need t o avoid di scomf ort among t he consumer s.
Cust omersat i
sfact i
oniskeyt o buildi
ngpr ofit
abler el
ati
onships
wi t
hconsumer s–t okeepingandgr owingconsumer sandr eaping
theirconsumerl ifeti
mev alue.Satisfi
edcust omer sbutapr oduct
again,t al
kf avour ablyto ot hers aboutt he product ,pay less
attenti
on t o compet i
ng br ands and adv ert
isi
ng,and buyot her
product sf r
om thesamecompany .

Or
gani
zat
ional
/Busi
nessBuy
ingPr
ocess:

Unli
ke i ndi
v i
dualpur chasing pr ocess explained abov e,or gani
zat
ional
purchasing pr ocess in mor e complicated,i nvolv
ing severaldecision
maker s.Eachpar ti
cipantbr ingsintot hepr ocessper sonalf act
orslike
experience,educat i
on,prof essionalcapabili
ties,personali
ty,andsoon.
Thest epsi nvolv
edinor gani zati
onalbuy i
ngpr ocessare: (Compar ethem
withI ndivi
dualBuy ingPr ocessunderBuy er’sBl ackBoxandnot et he
dif
ferences)

(
i) Probl
em identi
f i
cation/defi
nit
ion
Thefir
ststepi sf ortheorgani
zati
ontorecogni
zeapr oblem orneedt
hat
canbesat isf
iedwi thaproductprobl
em orservice.Forexample,when
MakerereUniv ersit
yBusinessSchool(MUBS)st artedexperi
enci
ngload
sheddi
ng,maki ngi tdi
ffi
cultt
oconductev eni
ngl ect
ures,i
tdecidedto
acqui
reagener ator
.

(
ii
) General
needdescripti
on
Thenextstepafterrecogni
zingthepr
obl
em istopr
epar
eagener
alneed
descr
ipt
ionthatgivesgeneralchar
act
eri
sti
csandquant
it
yoft
heneeded

j Okel
l a[
oWaat Ty
pet
ext
] [
Typet
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][Ty
pe
t
ext
]
 productorser
vice.I
nthecaseofMUBS,i thadtoinv
olvei
tsengi
neerto
definethet
ypeofgener atort
hatwoul
dbesuitabl
eforthepur
pose.For
example a big generator wit
h a str
ong Horse Power (
HP) was
recommended.

(
ii
i) Productspecif
icat
ion
Thenextst episfortheor
gani
zati
ontodeci
deontheproduct
’st
echni
cal
speci
ficat
ion,i
nmostcasesusingtheval
ueanal
ysi
sengi
neeri
ngt
eam.

(
iv) Suppliersearch
Thebuy ingfirm nowcarri
esoutasuppl iersearchtofi
ndt hesuppli
erwith
the bestof fersi nterms ofqual i
ty,price,deliv
eryt i
me and so on.
I
nf or
mat ionaboutpotenti
alsuppli
ercanbegotf rom t
radedirector
ies,
the
i
nt er
netorcal l
ingothercompani esf orr ecommendat i
ons.I ncaseof
MUBS,t heinter
netplayedav it
alrol
ei nsuppl yi
nginf
ormat i
onaboutt he
typesuppl i
ersforthegenerat
ors.

(
v) Proposalsol
ici
tat
ion
The proposalsolicit
ati
on stage the companyoror gani
zat
ion i
nvit
es
quali
fi
edsuppli
erst osubmitt hei
rrespect
ivepr
oposal
s,inmostcasesin
form ofprofor
mai nvoi
ces.Thepr oposalmaybeaccompani edwi t
ha
catal
ogueand/ orapr i
celi
st.

(
vi) Suppli
erselecti
on
Themember soft hedecisionsmaki ngunit(DMU)orbuy i
ngcentercome
toget
hert or evi
ew thei ndividualproposal
sand t hen sel
ectt hebest
suppli
er.Theselecti
onexer cisewi l
lbebasedonspecificcri
ter
iadrawnin
advance.Thecr i
teri
aorat t
ri
but eswilli
ncl
udeproductorser v
icequal
it
y,
pri
ce,reput
ation,del
iver
yt erm, honestcommunicat
ion,andsoon.

(
vii
) Theorderpl
acement
Aft
erther i
ghtsuppli
er(
s)hav eselected,thenextst agei stheorder
pl
acementwi t
ht he chosen suppli
er(
s).Forl ocalpur chases,a l
ocal
pur
chaseorder(
LPO)wi l
lhavetobepr epared,detail
ingoutt hequal
i
ties
oftheproductneeded,thetotalvalueoft hepur chase,andanyot her
i
temsagreeduponbetweenthev endorandthebuy er.

(
vii
i
) Per
for
mancer
evi
ew

j Okel
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][Ty
pe
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]
 Thi
sist helaststageoftheor ganiz
ati
onalbuyi
ngpr ocess.Iti
nvolv
est he
buy
err evi
ewingt hesupplierperfor
mance.Theper formancer ev
iew may
l
eadtot hebuy er’
srepeatpurchases,modif
y,ordroptherelati
onship.I
tis
adv
isablethatt hesell
ershouldmoni t
orthefactorsusedbyt hebuy erto
makesur et hosef actor
st hatfallshor
tofexpect edper for
mancear e
i
mprovedupon.

ThePar
ti
cipant
s/Pl
ayer
sinor
gani
zat
ional
Buy
ingPr
ocess:

I
ti simportantformarketer
st oknow andappreciatethedi ff
erentrol
es
played bydecision makersin organi
zati
onalpurchasing process.The
foll
owingar ethediff
erentrolesorparti
ci
pantsthatgeti nvolvedinthe
buyingprocessforbigorganizati
ons.Theymakeupt hebuy i
ngcentreor
decisi
onmaki ngunit(
DMU) .

a) Ini
ti
ator s:Thesecoul dbet heuser soft hepr oductt obepr ocuredorcoul d
bet hepr ocurementdepar tment .Theset riggerof ftheneedt o buya
product .
b) Inf
luencer s:Thesecoul dof fi
ci alswhowi eldpoweri nthebuy ingprocess.
Theycoul d bet hechi efaccount ant ,userdepar t mentsorpur chasing
offi
cials.Theyi nfluence the t ype ofpr oduct( brand)t o buyand t he
supplier.
c) Users:Thesear et hedepar t ment sneedi ngt hepr oductt obepr ocur ed.
Theymayi ni
tiatet heneedt obuyt hepr oduct ,i
ndi cat
ingr easonsf ort he
purchaseandper hapst hespeci fi
cationsoft hepr oduct .
d) Decider s:Thesemayor ganizat i
onalof fi
cialswi thaut hori
tyandmandat e
todeci deonwhatt obuyornotbuy .I nmostcasesdeci dersar et he
account ingofficers/financial controll
er si nthef i
rm.
e) Gatekeeper s:Thesear eof ficialsresponsi blef ormanagi ngt heflow of
i
nformat i
oni ntoandoutoft hef i
rm.I nformat ionandcommuni cat i
ons
Technol ogyManager s,Per sonalsecr et ari
est o Manager sorev en t he
purchasi ngof f
icerswhor ecei v equot ationsf r
om i nterest
edsuppl iersf al
l
undert hiscategor y.

Market
ingoff
icial
sneedtoundert
her ol
eorr ol
eseachManageri nthe
f
ir
m playsinthebuyi
ngdeci
sionpr
ocess.ThishelpsMarket
erstotar
get
t
her i
ghtdeci
sionmakerswi
ththeproducts.Market
ersmust,dur
ingthe

j Okel
l a[
oWaat Ty
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] [
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][Ty
pe
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 pre-approachst age,getasmuchi nfor
mationaspossibl
eabouteach
partici
panti nthe buy i
ng pr ocess.The infor
mati
on mayincl
ude thei
r
atti
tudes,inter
ests,expert
ise,authori
tyheldandthenat
ureoft
heproduct
eachpar ti
cipantsprefer
s,andwhy .

Buyingsit
uati
ons:
Consumer sareforcedwit
ht hr
eetypesofbuy
ingsi
tuat
ionswheyt hey
decidetoenterabuy ingpr
ocess.Thebuyi
ngsit
uat
ionsare:new t
ask,
str
aightbuy,
andmodi f
iedr
e-buy.

i
) Newt ask:
Thi
si sabuy ingsituati
onwher eacust omerdeci
dest obuyapr oductor
ser
viceforthef i
rsttime.Thisinvol
vesmanychal l
engest othecustomer
si
nceheorshehasnopr iorknowledgeofwher etogett heproductor
ser
vice.Besides,thereisuncert
aint
yast owhethertheproductorservi
ce
wil
ldeli
vertheexpect edval
ue.

Mar ket
ersneedt oprovi
deallthenecessaryinfor
mati
ontoenabl
ethe
potenti
alcustomermakeinf
ormeddecisi
ons.Inf
ormati
onont
hetechni
cal
aswel last hebenef
ici
alaspectsoftheproductmustbegiventothe
customer.

i
i
) Str
aightbuy:
Thisisabuy i
ngsituat
ionwher eacust
omeri sfami
li
arwit
htheproduct,i
ts
att
ri
butesaswel lasitssuppli
er.Thecustomerneedsasli
tt
lei
nformation
aspossiblesi
ncet hi
sisar outi
nebuy.
Marketer
s,howev erstil
lneedt oprovi
det othecustomeranyadditi
onal
i
nformationthatcanr eassurethebuyeraboutthebenef
it
sofcontinuing
tobuytheproductorser vi
ce.

i
i
i) Modi f
iedr
e- buy:
This buyi
ng si t
uati
on is wher e a customer,makes changes int he
specif
icat
ionsoft heproductneeded.Thesi t
uat
ionmayal soinvol
vethe
sel
lermaki ngchangesint hepr oductit
self
,incl
udingchangesinpri
cing,
channelsofdi st
ri
buti
onandev enpr omoti
onalmessages.Thisleadsthe
customerrequiri
ngmor einfor
mat ionaboutthepurchase.

Market
ersneedtoprovi
dethetypeofinf
ormat
ionr
elat
edt othechanges
i
ntheproduct.Thi
stypeofinf
ormati
onisnotasmuchr equi
redaswhen

j Okel
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][Ty
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 buy
ersar
efor
cedwi
thanewt
ask.

FACTORSI
NFLUENCI
NGORGANI
SATI
ONALBUYI
NGDECI
SIONS

Organizat i
onalbuy ingdecisionsar einfluencedbyanumberoff act
or s:
Envir
onment al,Or ganizat
ional,I
nterpersonal andIndivi
dualfactors.
a)Env i
ronment alfactors
Business/ organi zati
onalbuy er
sar ehi ghlyinfl
uencedbyf act orsint he
currentandexpect edeconomi cenv ironment,suchas,t heeconomi c
outlook, t he l evelofpr i
mar y demand,and t he costofmoney .
Shor tagesofkeymat er
ialsareanot herfactorbusinessor ganizations
consi der.Forexampl e,insi t
uat i
onsofscar city,compani esusual ly
purchaset heirr equir
ement sinl argerquant it
iest ocushionof fli
kel y
delay sinsuppl y.Businessbuy ersalsoar eaffectedbyt echnol ogical,
polit
ical,and compet it
ivef orces.Fi nal
ly
,cul t
ure and cust oms do
strongly af fect or ganizati
onal buy i
ng behav i
or, especi all
y i n
i
nter nati
onalmar keti
ngwher ecul turalandcust omsdi f
ferencesar e
promi nentlyev ident.

b)Organi zati
onalfactors
Every busi ness or gani
zat
ion set s objecti
ves,pol i
cies,procedur
es
structures,andsy stems.Mar keter
shav e,therefor
e,tobef amil
iarwit
h
thesef orces.Quest i
onssuchas:Howmanypeopl eareinvol
vedinthe
buy i
ngdeci sion?Whoar ethey ?Whatar etheircri
ter
ia?Whatar ethe
company ’spoli
ciesandlimitsoni t
sbuy ers?

c)I
nterpersonalfactor
s
Thebuy ingcenterinanor gani
zat
ioni
scomposedofmanypar ti
cipants
whoi nfluenceeachot her,andther
efore,i
nterper
sonalfactorsal so
i
nfluencet heorganizat
ionalbuyi
ngprocess.Forexample,str
ongl inks
betweent hepr ocurementmanagerandt hef i
nanci
alcontroll
ermay
pl
ayabi ginf
luenceinwhatcouldbepurchasedf ort
hebusiness.

c)Indi
v i
dualfact
ors
Everypar t
ici
pantinthebusinessbuy i
ngpr ocessbri
ngswi t
hhim/ her
personalmot i
ves,percept
ions,and preferences,
.These indi
v i
dual
factorsareaffectedbypersonalcharact
eri
sticssuchasage,income,
education,professi
onalidenti
fi
cat
ion,and so on . Forexample,an

j Okel
l a[
oWaat Ty
pet
ext
] [
Typet
ext
][Ty
pe
t
ext
]
 engi
neerwil
lmostli
kel
ybemorei
nfl
uenti
alwheni tcomestodeci
ding
ontechni
calpr
oduct
scompar
edtootherpar
ti
cipantswit
houtt
echni
cal
ski
ll
s.

TOPI
CFI
VE

SEGMENTATI
ON,
TARGETI
NGANDPOSI
TIONI
NG

I
nt roduct
ion:
Thischapt erconcentr
atesonthemarketi
ngstr
ategymar ketsegment ati
on,
targeti
ng, di
ffer
enti
ati
onandposit
ioni
ng.Undermar ketsegmentation,major
basesf orsegment i
ngconsumerandbusinessmar ketsarehandled.Various
typesoft argeti
ngaredealtwi
thaswellastheposi
t i
oningstr
ategies.

Learni
ngOut comes:
Bothstudentsandpar ti
cipant swil
lbeableto;
 Under standtheimpor tanceofsegment ingbothconsumerandbusi ness
markets.
 Appr eciat
ethev ar
iousbasesofsegment at
ion.
 Under standhowcompani esident
ifyatt
ract
ivemar ketssegment
sandchoose
amar ket–targeti
ngst rategy.
 Compr ehendhowcompani esdiff
erenti
ateandposi t
ionthei
rpr
oductsinor
der
t
ohav eacompet i
ti
veadv ant
ageint hemarketplace.

1Mar ketSegment ation:

Itisimpor tantf oranybusi nesscompanyt of i
rstaskthesimpl equesti
on; what
cust omer swi ll
thecompanyser ve?beforet hi
nkingoftakingitsproductsor
ser v
icest oanyt argetmar ket.
Kot l
er( 2010)def i
nesmar ketsegment ationas‘ ’
thedivi
dingamar keti
ntoa
smal lergroupswi thdistinctneeds, characteri
sti
cs, orbehaviourt
hatmi ght
requi resepar at
emar ketingst r
ategiestoent er
.”TheChar t
eredInsti
tuteof
Mar ket i
ng( UK)def i
nesmar ketsegment ati
onas“ t
hesubdi v
idingofamar keti
nto
disti
nctsubset sofconsumer s,wher eanysubsetmayconcei vabl
ybesel ectedas
at argetmar kettober eachedwi thadi sti
nctmar keti
ngmi x’
’.

j Okel
l a[
oWaat Ty
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] [
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][Ty
pe
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]
Marketingactivi
tyi
smor eeffect
ivei
fgroupsofcustomerscanbeident
if
iedand
t
argeted.Mar ketsegmentat
iongroupspotenti
alcustomer
saccordi
ngto
i
denti
fiablecharacter
ist
icsr
elevantt
otheirpur
chasingbehavi
our
.

I
mportanceofsegment i
ngmar kets.
Bysegment i
ngofmar ket ingt hecompanyi sabl eto:-
i
) Identif
ypr ofi
table/pot enti
alsegment sandt argetthem wi thright
mar keti
ngmi xv ariables.
i
i) Satisfyeachmar ketsegmentwi thther ightproduct/ser vi
ce.
i
ii
) Ut il
izemor eeffect ivel
yandef fi
cientl
yt hescar ceresour ces.
i
v) I ncreasesal esv olumesi nceeachsegmentwi llberecei vi
ngthet i
ght
product/ser vi
ceandhencel eadingt ocust omersat isfacti
on.Alsomor e
thanonesegmentcanbet argetedleadi ngtosev eralmar ketsbeing
targeted.
v) Increasedpr ofi
tswi t
ht heincreaseofsal es,mor eprofitsareli
kelyIfcosts
arepr operlycont rolled.
vi
) Expansionoft hemar ketshare.
vi
i
) I ncreasebenef itst oconsumer sbypr ov i
dingpr oductfeaturesmor e
closelymat chingt heirneeds( Kot l
er)
.
vi
ii
) Enabl et hef i
rmt oi dent if
ythosegr oupsofcust omerswhoar emostl ikely
tobuy .Thisenabl est hef i
rmt obemor ef ocused( Kot l
er)
i
x) Pr ov i
degr eatercust omerchoi cebygener at
ingav arietyofproductswi thi
n
apar ti
cularclassf rom whi chconsumer scanchoose( Kot l
er).

TheI
mpor tanceofelementsofmar ketsegment ationareasf oll
ows;
a) Whi lethetotalmarketconsistofv ariedgr oupsofconsumer s,eachgroup
hascommonneedsandpr eferences, andmaywel lreacttomar ketsti
muli
(productandser v
ices)i
nt hesameway .Forexampl e,themar ketfor
perfumesmi ghtbesegment edaccor dingt osex.Womenmi ghtseem to
preferper
fumesofapar t
icularodourorsmel landbot t
ledesign.The
men’ smarketmightfurt
herbesub- dividedbyageori ncome, forexample.
Eachsubdi vi
sionofthemar ketwi l
l showi ncreasinglycommont rai
ts.

a) Eachmar ketsegmentcanbecomeat ar
getmarketf
oracompany .
Segmentationshouldenabl
eacompanyt of
ormulat
eaneffect
ive
marketi
ngst r
ategyforsel
li
ngtoeachgroup.Obj
ecti
vescanthenbe
devel
opedwi thref
erencetotar
getsegments.

Requi
rement
sforef
fect
ivemar
ketsegment
ati
on.

j Okel
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] [
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][Ty
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]
 Ther
earemanypossibl
echaracter
ist
icsofbuyerswhi
chcouldbechosen
assegment
ati
onvar
iableandav ari
etyofcri
ter
iawhi
chcanbeusedto
i
denti
fyt
hemosteff
ecti
v echar
acteri
sti
csforuseinmarket
.

a) Measurabi
lit
y:
Thi
sisthedegreetowhichinf
ormat i
onexi stsoriscosteff
ecti
vel
y
obt
ainabl
eont hechar
acter
ist
icsofinterest.Absenceofinfor
mationona
marketsegmentmakesitextr
emel ydiffi
culttodeci
deont hequanti
tat
ive
out
comef rom suchasegmentiftargeted.

b) Subst antial
it
y :
Thisr eferstothedegr eetowhi cht hesegment sarelargeenought ooffer
profitablereturns.Forexample, whilstalargenumberofpeopl ei
nasoci al
group-t herichcoul dbeidenti
fied, t
heirpotent
ialprof
it
abil
it
ytoar etai
ler
owni ngasmal l shopinaruralar eaisli
kelytobelessinthelongrunt erm
thanasmal l
ergr oupofpoorv i
llagers.Thislat
tergroupmightbewor t
h
targeting,usingspeciall
ydev i
sedmar keti
ngappr oach,
.Whereasthe
formermi ghtnotbe.

c) Accessi
bili
ty:
Thusref
er stothedegr eetowhicht hecompanycani dentifyand
communi catewit
ht hechosensegment s.Thuswhil
stal awncut t
erdeal
er
maybeabl etoaccesspot ent
ialcorporatecustomers,bydi r
ectmailor
tel
e–sales, i
denti
fyingindivi
dualcustomer swithf
ami l
yi ncomeinexcess
ofUshs,2,000,
000perannum woul dnotbeeasy .

d) Actionabil
it
y:
Effecti
veprogrammescanbedesi gnedforatt
racti
ngandservingthe
segment s.Forexample,
althoughonesmallai
rli
neident
if
iedsevenmarket
segment s,i
tsstaffwastoosmalltodev
elopseparatemarket
ing
programmesf oreachsegment s.

e) Diff
erenti
ati
on:
Thesegment sar econceptual
l
ydist
ingui
shableandr
esponddiffer
ent
lyto
diff
erentmarketi
ngmi xelementsandprogrammes.Ifmalesandfemales
respondsimilar
lytosaleofbathi
ngsoap,theydonotconsti
tut
eseparate
segment s.

Segment
ingConsumerMar
ket
s
j Okel
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oWaat Ty
pet
ext
] [
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][Ty
pe
t
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]
 ConsumerMar ket
scanbesegment edbyl ocat ion,demogr aphy ,bysocial
classorbyl ifestyl
e.
BasesofSegment ingConsumerMar kets:
1. Geogr aphicSegment ation: Thisty peofsegment at
ionisbasedonl ocation
andmaybei mportantt or esel l
ers, whoneedt oknowaboutt hedi f
ferent
groupsofcust omer swi thint heircat chmentar ea.Forexampl e,CocaCol e
Inter
national hassegment edi tsgl obal mar ketasf ollows; Nor thAmer ica,
SouthAmer ica, Af
rica,theMi ddleEast ,Europeandt heFarEast . The
obv i
ousadv antaget ocust omer si sconv enienceofaccess.
2. Demogr aphicSegment ation:
Demogr aphyi sast udyofpopul ationandpopul ati
ont rends.
Thet otalsizeoft hepopul ati
ondef i
nest het otalpossibl elev elofdemand
forapr oduct .Thepopul at ionisusual lybrokendowni ntogr oupsdef ined
bydemogr aphi cchar acteristicssuchasage, sex(gender )educat i
onl ev el
,
i
ncomeandsoon.Thet ot alsizeofeachsegmentwi llsuggestpossi ble
l
ev el
sofdemandf orcor respondi ngpr oduct s.

3. Psychographi cSegment ati

on:
Psychographi c orl if
e style segmentati
on seeks t o cl assi
fy groups
accor
dingtotheirv alues,opi
nions,personal
i
tycharact
eristi
csandi nt
erests.
Lif
estyl
eref erstodisti
ncti
veway sofl
ivi
ngadoptedbypar t
icular
communi tiesorsub–sect ionsofsociet
y.Iti
nvolvesfactorssuchas
mot i
vat
ion, personali
tyandcultureanddependsonaccur atedescripti
on.
Whenagr ouphasbeeni dentif
iedandcharacter
ized,product scanbe
tai
lor
edandpr omot edforthisparti
cul
argroup.

4. Benefit
sSoughtSegmentat
ion:
Thisform ofsegment
ati
oni
sbasedont
hedi
ff
erentbenef
it
ssoughtby
customergroups.

j Okel
l a[
oWaat Ty
pet
ext
] [
Typet
ext
][Ty
pe
t
ext
]
 Benef
it
ssoughtsegment
ati
onoft
het
oot
hpast
emar
ket

Segme Pri
nci
p Demogra Speci al Brand Personali
ty Li
fest
nt al phi
c behav iou favou Character
i yl
e
name benef
it str
engt
h ral red st
ics Chara
s char acter ct
erist
i
stics i
cs
The Flavour Chi
l
dren User sof Colga Hi
ghself Hedon
sensor
y , spear mi n te i
nvol
veme i
sti
c
segmen produc t str
ipe nt
t t fl
av oured
appear toothpast
ance e
The Bright
n Teens, Smoker s Macle High Act
ive
Soci
abl essof Young ans soci
abi
l
ity
es teeth peopl
e Ult
ra
Bri
te
The Decay Large Heal
th Crest High Conse
worr
ies preven famil
ies User
s hypochond rv
ativ
ti
on ri
asis e
The Price Men Heavy Brand High Value
i
ndepen User
s son autonomy ori
ent
dent sale ed
segmen
t

j Okel
l a[
oWaat Ty
pet
ext
] [
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ext
][Ty
pet
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]
Adopt
edf
rom CI
M

Int
hisform ofsegment
ati
on,
iti
susual
forv
ary
ingcust
omergr
oupst
oshar
esamebenef
it
sfr
om t
hepr
oductor
ser
vice.

j Okel
l a[
oWaat Ty
pet
ext
] [
Typet
ext
][Ty
pet
ext
]
 Benefi
tsegment at
ionmaybebasedonsoughtorusager ates(seeabove)
.
I
nsegment ingthemar keti
ntermsofbenef
it
ssought
,thereisneedto
i
dentif
ycommonchar acter
ist
icswhi
chthecust
omerrequir
esfrom the
productorserv
ice.

I
ndiv
idualscanbecategori
zedbyusagepatternswhethert
heyareli
ght
,
medium orheavyuser
sofapr oductorser
vice.Forexampl
e,banksand
ot
herfi
nanciali
nsti
tut
ionssegmentthei
rcustomersinthi
sway .

5. Behavioursegment at i
on:
AccordingtoKot l
er( 2010)Behav i
ouralsegment ati
ondi v
idesbuyersint
o
groupsbasedont heirknowledge.attit
udes,uses, orr
esponsest oa
product.Manymar ketersbel
ievethatbehav i
ourv ari
ablesarethebest
star
ti
ngpoi ntofbui l
dingmar ketsegment s.Behavioursegment at
ionmay
bebasedon: occasions,benefit
s,userstatus,userrates,l
oyal
ty,stat
us
andattit
udest owardst heproduct.

Segment
ingTheI
ndust
ri
alorBusi
nessmar
ket
s:
Sever
alsegmentati
onschemesforindust
ri
almar
ket
sexi
stanymaybe
usedincombinat
ion.I
ndust
ri
almarketsmaybesegment
edusingav
ari
ety
ofbasessuchasthefoll
owi
ng.

a) ByLocat
ion:
Manybusinesssect
orsar
econcent
rat
edinpart
icul
arl
ocat
ions(e.g
wel
dingi
nKat we–asuburbofKampala,
softdr
inkscompaniesin
NamanveorNakawa.

b) CompanySize:eit
herbyturnov
eroremployees.Thi
scam giv
eagood
i
ndicat
ionofthei
rneedforcert
ainpr
oductsandservi
ces.Lar
ge
companiesconsumermor erawmateri
alscomparedtosmallerones.

b) Usagerates:
Heav y,medium orli
ght
.Thismorerel
evanti
nrawmat er
ial
s
andpartsmar ket
s,andthemar ketf
orsomeindust
rial
serv
icessuchas
tel
ecommuni cati
onandt r
avel.

c) Industri
alCl
assif
icat
ioni
ndicat
esthenatureofthebusi
nessandmay
provideausefulmethodtoclassi
fysal
esleads.Thebusi
nessesmaybe
classif
iedbythei
rmai nt
ypeofeconomicactivi
ty.

Okel
l
owaat
a
d) Productuse: Ani ndustri
al organizati
onmaybuyaf leetofcarsforuseby
i
tssal esforce,ortohireoutt othepubl i
cast hebasisforit
sservi
ce.
Differentusesar eli
kelytobeassoci atedwit
hdi f
ferentneeds.
2. Mar ketTarget i
ng:
Hav ingcarri
edoutasegment ati
onexer ci
se,thenextstepistoselect
targetmar kets.Limit
edr esour ces,competit
ionandl argemarketsmakei t
i
nef fecti
veandi nappropriateforcompani estoselltotheent i
remarket;
thatis,everymar ketsegment .Forthesakeofef fi
ciencythatmustselect
targetmar kets.

Atargetmarketi
sasetofbuy er
swhosharecommonneedsor
char
acteri
sti
csthatthecompanydeci
dest
oservewit
hspecif
icproduct
s
andservi
ces.
Marketi
ngmanager smaychooseonethef
oll
owingpoli
cyopt
ions.

a) Undi
ff
erenti
atedmar ket
ing:ai
mst oproduceasingl
eproductandgetas
manycustomer saspossibletobuyi
t.Segmentati
onisignor
edand
pr
oductdif
ferenti
ati
onisl ef
tout.

Pr
oduct Mar
ket

Mostmoder
nmarketer
shavestr
ongdoubtsaboutt
hisst
rat
egy.
Dev
elopi
ngapr
oductthatwi
l
lsati
sfyal
lconsumer
sisdif
fi
cul
ttomake.

b) Concentr
atedMarket
ing:attemptstopr
oducetheidealpr
oductfora
si
nglesegmentofthemar ket(e.
gtheHammerv ehicl
esorRoll
sRoyce
car
saremeantfortherichsegmentofsociet
y).

c) Diff
erent
iatedMarket
ing:att
empt stoint
roducesev er
alv
ersi
onsofa
product(
throughproductdif
ferenti
ati
on)eachai medatadif
fer
entmar
ket
segment( f
orexample,eachsof tdr
inkbrandproducedbyCocacola
companyai msataspeci f
icsegmentoft hemar ket
).
Pr
oductA SegmentA

Pr
oductB SegmentB

Pr
oductC SegmentC

Pr
oductD SegmentD

Okel
l
owaat
a
 Byofferingpr oductandmar ket i
ngvari
ati
onst osegment s,companies
hopef orhighersal esandast rongerposi
tionwi thi
neachmar ketsegment.
Thisstrategyalsomi nimizesr i
skfai
lur
ebyt hecompanies.Howev er,
dif
ferentiatedmar ketingincreasesthecost sofdoingbusiness.
a) Customi zedMar ket i
ngt hi
sat temptstoproduceat ai
l
or–madepr oduct
tobedel iveredtoaspeci f
icconsumer .Forexampl e,tai
l
or–madecl othes
aremadet omeett hecust omer ’
sspecifi
cationsandneeds.Her emass-
productionandmassmar ketingisnotapplicable.

Tail
or–made Indi
vidual
orspeci
fi
c
product customer

The choi ce between t hese f orms ofappr oaches wil

ldepend on t he
foll
owingf act or
s;
i
) Thedegr eetowhi chthepr oductand/ort hemar ketcanbeconsi der
ed
homogeneous.
i
i
) Howf art hecompany ’
sr esourcesar eov erextendedasaconsequenceof
dif
ferentiatedmar keting.Smal lfir
ms,f orexampl e,mayper form bett
erby
concent rati
ngononl yonesegment .
i
i
i) Howf arthepr oductisadv ancedi ni t
sl i
fecy cl
e.Ifiti
sintheearlystages,
segment ati
onandt argetmar ket i
ngi sunl ikel
ytobepr of
it
able,because
eachsegmentwoul dbet oosmal l.
 Thepot entialbenefitofsegment ationandt argetmar ket
ingisthattheseller
wil
lhav ei ncreased awar eness oft he pr oductdesi gn and development
sti
mulatesdemandi npar t
icularsect i
onoft hemar ket.Alsotheresourcesof
thebusinesswi l
lbemor eef fecti
velyempl oyed, si
ncetheorganizati
onshoul d
bemor eabl et omakepr oduct swhi cht hecust omerdemands.

3. Positi
oning:
Apr oductorbrandpositi
onist hewaythepr oduct/brandisdef i
nedby
consumer sonimport
antat tr
ibutest
heplacet heproductoccupi
esinthe
consumer smindsrelativ
et ocompet i
ngpr oducts.Accordi
ngt oKotl
er
(2010)product
sarecr eatedinthefact
ory,butbrands arecreat
edinthe
mind.

Posit
ioni
ngSt
rat
egi
es:
Productsmaybeposi
tionedi
nthemar
ketbyemphasi
zi
ngav
ari
etyof

Okel
l
owaat
a
 factorssuchas;
a) Positioni
ngbyspeci f
icproductf eatures:Themostcommonappr oacht o
positi
oning,especiall
yf orindustri
alpr oducts.MostCaradv ert
isement s,
forexampl e,stresst hecombi nati
onofpr oductfeat
uresav ai
lableand
usuallyalsost r
essgoodv aluef ormoneyaswel l
.Thepr oductfeatures
mayi ncludeautomat icdoors,safetybelts,numberofseatsandsoon.
b) Positioni
ngbybenef i
ts,sol
utionsorneeds:Benef it
sareemphasi zed.This
i
s gener al
l
y mor e effect
ivet han posi ti
oni
ng on pr oduct featur
es.
Phar maceutical
s compani es posi tion their pr
oductst o doct or
s by
stressingeff
ectivenessandsi deef f
ects.

c) Positi
oni
ngforspeci
ficusageoccasi
ons:si
mil
artobenef
itposi
ti
oni
ngbut
thi
susest heoccasionofusageast hemainbasisfortheposit
ioni
ng.
Chickenareposi
ti
onedasagoodmeal fori
n–lawsinUganda.

d) Posi
ti
oningforUserCat
egor
y:Mostexpensi
vecar
sar
eposi
ti
onedf
ort
he
hi
ghclasspeopl
e.

b) Posit
ioni
ngagai
nstacompeti
ngproduct
:
Stat
ementsinadvert
sli
ke“Ourpr
oductissecondt
ooneor“
ourbr
andi
s
thesecond–best”ar
etoocommon.

f
) ProductClassdisassoci
ati
on:
Thisi sal ess common basisf orposi t
ioni
ng,butef fecti
ve when
i
ntroducinganew pr oductcl
ear
lydisti
nctfr
om standardproductsi
nan
establ
ishedproductcategory
,e.gOr gani
cal
l
ygr ownv eget
ablesagai
nst
othervegetabl
es.

Posi
ti
oningorPercept
ual
Maps
Abasicpercept
ualmapposi
ti
onsbr
andsi
nper
cei
vedpr
iceandper
cei
ved
qual
i
tyterms.

Hi
ghPr
ice

Cowboy Pr
emium
Brands Br
ands

Hi
gh
Low Qual
i
ty
Qual
it
y
Okel
l
owaat
a
 Economy Bargai
n
Brands Brands

LowPr
ice
Pri
ceandqual i
tyareclearl
yimportantel
ement sinev er
ymar ket
ingmi x,buti
nthe
customer ’
sopinion,theycannotbeconsi deredi ndependentvari
ables.A“ hi
gh”
pri
cewi llalmostalway sbeassociatedwithhighqual it
yandl ow pri
cewi thlow
quali
ty.Ev ery
bodywoul dl i
ke to buya bar gain brand,butt he problem to
overcomei soneofbel i
ef;wi
llcustomersacceptt hatahighqualit
ypr oductcan
beof f
eredatlowpr i
ce?

Gapsint hemar ket :

Throughmar ketresearchconsumer sperceptionsandopti
onscanbedet er
mined
toshow cust omer sl ocatecompet it
ivebr andsonamat r
ix.Gapsi nthemar ket
i
ndicatingmi ssingy etpr ef
erredbrandsbyexi st
ingcust
omer scanbei denti
fied
onaposi t
ioningorper ceptualmap.Interestedcompaniescanf il
lthegapswi th
the prefer
red br ands.Such gaps ar et he mar ketopport
unit
ies thatcan be
exploi
ted.

Okel
l
owaat
a
 TOPI
C SI
X

PRODUCTSANDSERVI
CES
Int
roducti
on:
Thischapterlooksatthemar
keti
ngmixt het
acticaltoolsthatmarket
ersuset o
i
mplement
Marketi
ngst r
ategiesanddel
i
versuperi
orcustomerv al
ue.Weshal lstudyhow
companiesdev el
opandmanageproductswil
lhav etobemade.Theni nthenext
chapter
st hatf oll
ow,we willl
ook atpr i
cing,di str
ibut
ion,and mar ket
ing
communi cat
iontools.

Learni
ngOut comes:
Thestudent sandpar ti
cipantswi llbeablet o;
 Compr ehendt heproductdev elopmentpr ocess.
 Under stand t he productcl assi fi
cat
ions and t he str
ategi
c deci
sions t
hat
marketersmaket oachiev ethei rcompani esobj ecti
ves.
 Di f
ferenti
at ebet weenpr oduct s,servi
cesandexper i
ences.
 Dev elopbr andi ngstrat
egiesandunder standt her ol
eofbrandi
ng.
 Under standt heroleofpackagi nganddi fferenttypesofpackages.
 Appr eciatet hechar act
eristi
csandmar ket i
ngr equir
ementsofservi
ces.

Whati sapr
oduct
?
Apr oducti
sdefi
nedasanythi
ngt hatcanbeoffer
edtoamar ketf
orat
tent
ion,
acquisi
ti
on,
useorconsumpt
ionthatmightsat
isf
yawantorneed.

Okel
l
owaat
a
Becauseoft heimpor t
anceint hewor l
deconomy ,wegivespecialattenti
ont o
ser
vices.Servi
cesareaf orm ofpr oductt
hatconsist
sofactiv
iti
es,benef i
ts,or
sat
isfact
ionoffer
edforsalethatareessent
ial
l
yintangi
bleanddonotr esulti
nt he
ownership of any thi
ng. Exampl es are air
li
ne, banki
ng, hotel, wi r
eless
communi cat
ion,t
ransport
.

Experi
ences:Apar
tfr
om companiesof f
eri
ngproduct
sandser vi
ces,t
heyal
so
creat
eandmanagecustomerexperi
enceswitht
hei
rbrandsorcompany.

ProductandServi
cesLevel
s:
Eachl ev
eladdsmor ecust omerv al
ue.Thepr oductlev
elsare:corebenefi
t,
generi
c( phy
sical
)pr
oduct,expect
edpr oduct
,augmentedproductandpotent
ial
product
Potenti
alpr
oduct

Augment
edproduct
Expect
edproduct.
Generic(
actual
)product
Corebenefit

i
) Corebenef
it
:
Themostbasi cl
evelisthecor ebenefi
t,whichaddressesthequest i
on.
Whati sthe buyer real
ly buying? A hotelguestpay ing for room
accommodationi
sactuall
ybuying“rest
”or“sl
eep”notaphy si
cal
r oom.

i
i
) GenericProduct:
Att hesecondl evel
,productpl
annersmustt urnthecorebenef i
tinto
actualorgenericproduct
.Inthecaseofhot el
,thecorebenefi
t(restor
sleep)canonlybeof f
eredbytheconstr
ucti
onofphy si
calst
ruct
ures-the
rooms,.Marketer
sneedt odevel
opproductandservi
cesfeat
ures,desi
gn,
aqualityl
evel
,abrandnameandpackaging.

i
i
i) Expectedpr oduct:
Thethirdlevel,t
heexpectedproductref
erstothespecif
icfeat
uresor
serv
icescust omerexpectthepurchasedproducttohave.Ahotelguest
whopay sf oraroom expectstheroom tohavecleanbeddi
ngs,air
condit
ionersandbat htabs.Theserequi
rementsform par
tofproductthe

Okel
l
owaat
a
 hot
elguesti
sbuy
ing.

i
v) Augment edproduct:
Productplannersmustbuil
danaugment edpr
oductandexpectedpr oduct
byoffer
ingadditional
consumerser
vicesandbenefi
ts.Thesemayi ncl
ude
warrant
ies,aft
ersalesser
vices,
del
i
veryandcredi
t,andproductsupport.

v
) Potentialproduct :
Fi
nally,theout erleveloftheproductisthepot enti
alpr oduct
.Inthecase
ofahot el
,ther
eshoul dber oom forexpansionoft hehot elpr
emises,wi
th
addit
ionalbui l
di ngsandot herservi
cest hatdifferent
iatethathoteland
off
ermor edistinctserv
icesthancompetitors.

Cl
assi
fi
cat
ionofpr
oduct
sandser
vices:
Productscansimpl ybecl assifi
edasdur abl
eornon–dur abl
egoods.Howev er
,a
betterwayofcl assif
y i
ngpr oductsistoputt hem i
ntotwobr oadclassesonthe
typesofconsumer st hatuset hem –consumerpr oductsandindust
rialpr
oduct
s.
Broadly defi
ned,pr oduct s also incl
ude othermar ket
able enti
ti
es such as
experiences,
organizations,persons,pl
acesandideas.

i
) CONSUMERPRODUCTS:
Consumergoodscanbecl assifiedasfollows;
a) Conveniencegoods:Thesear egoodst hatarefrequentl
ybought ,i
nmost
casesforul t
imateuseorconsumpt ion.Ar ewi del
ydistri
butedf orthe
conveni
enceofbuy erstofindt hem easi l
y.Theweeklygr oceri
esar ea
typi
calexample.Ther eisaf urtherdi
stincti
onbetweenst aplegoodslike
breadandpot atoes,andimpul sebuys,likethebarofchocol at
et hatyou
pickup att he supermarketcheckout .Br and awareness is extr
emely
i
mpor t
antinthissector.

b) Shoppinggoods:Thesearemor edurablei
tems,li
kef urni
tur
eorwashing
machines.Thissortofpurchasei susual
lymadeaf teragooddealof
advanceconsult
ati
ons,pl
anni
ngandshoppi ngaround.Consumersusuall
y
l
ookf ort
heproduct’
sstyl
e,pr
ice,perf
ormance,durabi
l
ityandqual
it
ywhen
deci
dingtopurchase.

Okel
l
owaat
a
c) Speciali
tygoods:Theseareitemslikejewel
ler
yormor eexpensiv
ei tems
ofclothi
ng.Consumer snor
mal l
ybuytheseitemsforspeci
aloccasionsor
purposes,andusuall
ylookforsty
le,
fashion,
pri
ceandquali
ty.

d) Unsoughtgoods:Thesearegoodsthaty oudi
dnotreal
i
zey ouneeded!
Theyaresel
dom bought
.Typical
exampleswoul
dbecemeter
yplot
s,grave
st
ones,coff
ins,
andli
fei
nsurancepol
icy
.

I
I) INDUSTRI ALPRODUCTS:
Thesear eproductsthatar
epur chasedforfurt
herprocessi
ngorforusei n
conducti
ngabusi ness.Thus,thedisti
ncti
onbetweenaconsumerpr oduct
andani ndustr
ialproducti
sbasedont hepurposeofwhi chtheproductis
bought.Ifaconsumerbuy sasal oncarf orpersonaluse,thecari sa
consumerpr oduct.Ifthesameconsumerbuy sthesamecarf orusei n
speci
alcarhire,t
hecari sanindustri
alproduct
.

Cl
assi
fi
cat
ionofI
ndust
ri
algoods:
a) Inst
allati
on,e. g.maj oritems ofpl antand machi neryli
ke a f act
ory
assembl yli
ne.
b) Accessor i
es, suchasapr i
nterforPCs.
c) Rawmat eri
als: f
orexample,cotton,met al
,wood, cof
feebeans,e.t.
c.
d) Component sandspar eparts:Exampl esareHeadl amps,tires,gearbox,
tubes.
e) Supplies:e.
g.of fi
cestati
onary,cleani
ngmat eri
als.
f) Business/I ndustri
alservi
cese. gmai nt
enanceandr epai
rser v
icesand
businessadv isoryservi
ces,comput errepai
r.

ProductandSer viceat
tri
but
es:
Dev elopi
ngapr oductorservi
ceinvol
vesdefiningthebenef i
tsthatitwi
l
l
offert ot he consumer.These benefi
ts ar
et hen communi cat
ed and
deliveredbyproductat
tri
but
essuchasqual i
ty,productfeat
ures,styl
eand
design.

NEW PRODUCTDEVELOPMENT( NPD:

I
nnovat
ion i
st he l i
fe bl
ood ofa successf ulorgani
zat
ion and the
managementofinnovati
oniscentr
altothi
ssuccess.
a)Sour
cesofNewPr oduct
s:Anewpr oductmaybedev el
opedasar esul
tof

Okel
l
owaat
a
 atechni
calbreakthr
ough,orasaconsequenceofchangesi nsoci ety,or
si
mplytocopyandcapi t
ali
zeont hesuccessofexisti
ngpr oducts.They
maytherefor
ebear eact
iveresponsetocompet i
ti
veinnovati
on.
b)Managementhowev ercan adopta pr oact
ive approach to pr oduct
devel
opmentbyest abl
i
shingr esear
chanddev elopmentdepar t
ment st o
l
ookintoideasfornewproducts.

Whati
sanewpr oduct?
 Onethatopensupanentir
elynewmar ket
 Onethatrepl
acesanexi
sti
ngpr oduct
.
 Onethatbroadenssi
gni
fi
cantl
yt hemarketf
oranexi
sti
ngpr
oduct
.

Anol
dproductcanbenewi fiti
s
 Int
roducedt oanewmar ket
.
 Packagedi nadif
fer
entway
 Ifadif
ferentmarket
ingapproachi
sused
 Ifamarketingmixvari
ablei
schanged

Product–Mar ketmatri
ces:
Thepr oduct–mar ketmat r
ixi
susedtocl assi
fyaproductorev
enabusiness
accordingtothefeaturesofthemarketandt hefeatur
esofthepr
oduct.The
mar ketandthefeatur
esoft hepr
oduct.Themostwi del
yusedappr
oachesare
theBost onConsulti
ngGr oup(BCG)growt h– sharematri
xandtheGener al
Electr
ic(GE)Busi
nessScreen.

i
) TheBCGMatr
ix
Hi
gh
St
ar Probl
em
Chil
d
(Quest
ion
Mar
k)

Mar ket
growt h CashCow Dog
rate

Low
Hi
gh Low

Okel
l
owaat
a
 Marketshare
Thematrix,i
ll
ust
rat
edabove,classi
fi
espr oduct
s( busi
nesses)onthebasi
sof
thei
rmarketshar
erelat
ivet
othatoftheircompetit
orsandaccordi
ngtotherat
e
ofgrowt
hi nt
hemarketaswhole.

Onthebasi
softhi
sclassi
fi
cat
ion,
eachproductorst
rat
egi
cbusi
nessuni
t(SBU)
wi
ll
thenfal
li
ntooneoffourbr
oadcat
egor
ies.

a) Problem chi l
d( orquest ionmar k):asmal lmarketshar ebuti nahi gh
growt hindust r
y.Thegener i
cpr oducti sclearl
ypopul ar.Butcust omers
suppor tforthecompanybr andi slimited.Asmal lmar ketshar eimpli
es
thatcompet i
torsareinast rongposi ti
onandt hatifthepr oductistobea
strongposi ti
onandt hati fthepr oducti stobesuccessf ulitwil
lrequi
re
subst anti
alfunds,andanewmar ketingmi x.I
fthemar ketl ooksgoodand
thepr oductisv i
able,t
hent hecompanyshoul dconsiderabui ldstrat
egyto
i
ncr easemar ketshare,Thi swoul dr equirethecommi tmentt of undsto
permi tmor eactivemar keting.Ifthef ut
ur el
ookslesspr omi si
ng,thenthe
companyshoul dconsidert hepossi bil
it
yofwi t
hdrawingt hepr oductfr
om
themar ket.Thepr oblem chi l
dissomet i
mesr ef
erredt oast hequest i
on
mar k.

b)St
ar:Thi sisapr oductwithahighmar ketshar
ei nahighgrowthindustry
.
Byimplication,t
hestarhasapot enti
alforgenerat
iveearni
ngscurr
entl
yandi n
thefuture.Howev er
,att hi
sstagei tmayst i
l
lrequiresubst
anti
almar ket
ing
expendituret omaintai
ni t
sposi t
ion,butwoul dprobablyberegardedasa
goodinv estmentforthefutur
e.

c) CashCow:ahi ghmar ketsharebuti namat uresl ow growthmar ket

.
Typicall
y,awel lestablishedproductwi thahi ghdegr eeofconsumer
l
oy alt
y.Thecashcow wi llnor
mal l
ymakeasubst anti
alcontri
but
iont o
overallprof
itabi
l
ity.Theappr opri
atestrategywillvaryaccordingtot he
precisepositi
onoft hecashcow.I fmar ketgr
owt hisreasonablystrong
thenahol di
ngst r
ategywi l
lbeappropri
ate,buti
fgrowt hand/orshar eare
weakeni ng,
thenahar vestingst
rategymaybemor esensi bl
e.Cutbackon
mar keti
ngexpenditur
eandmaxi mizeshort–term cashflow.

d) Dog:Aproductcharact
eri
zedbylowmarkertshar
eandl owgrowth.Again,
ty
pical
l
yawel lestabli
shedproduct
,butonewhi chisapparentl
ylosing
consumersupportandmayhav ecashdisadvant
ages.Theusualstr
ategy

Okel
l
owaat
a
 wouldbetoconsi
derdivestmentunl
esscashfl
ow posi
ti
onisstr
ong,i
n
whi
chcasetheproductwoul dbeharvest
edi
ntheshort–term pr
iort
o
del
eti
onfr
om t
heproductrange.

i
i
) TheGener alElectr
icBusi nessScreen(GEBS):
Thebasi cappr oachoft heGEBusi nessScreeni ssimilartothatofBCG
matrixbutitt r
iestoav oidthecrit
ici
sm lev
eledagai nstthetechniqueby
i
ncludingabr oaderr angeofcompanyandmar ketfactor
si nassessi
ngthe
posit
ionofapar t
icularpr oductorproductgr oup.Themat r
ixclassi
fi
es
products( or busi nesses) according t
oi ndustry attr
acti
veness and
Companyst rengths.

I
nv est Devel
opf
or
I
nv estf or Select i
vel
yFor I
ncome
St
rong
Growt h growt h
Inv est Dev elopSelect
ivel
y Harvestor
Select i
vely Fori ncome di
vest
Av
erageAndBui ld
Dev elop Har
vest Di
vest
Select i
vely.
Weak Bui ld on
Str
engt hs

Attr
act
ive Average Unatt
ract
ive
Industryat
tract
iveness
Typi
calexamplesofthef act
orswhichdeterminei
ndust
ryat
tract
ivenessand
companystrengt
hsaret hefoll
owi
ng;

a) Industr
yatt
ract
iveness:Marketsi
ze,marketgrowth,compet
iti
vecli
mat
e,
stabil
i
tyofdemand, easeofmarketentr
y,indust
rycapaci
ty,
level
of
i
nv est
ment,nat
ureofr egul
ati
on,pr
ofi
tabil
i
t y
.

b) Companyst rengths:Relat
ivemarketshare,company/image,
product
ion
costs,
financi
alstrengths,
productquali
ty,di
str
ibut
ionsyst
ems,contr
ol
overpri
ce/mar gi
ns,benefi
tsofpatentprotect
ion.

Okel
l
owaat
a
NEW PRODUCTDEVELOPMENTPROCESS
Thesear
eeightmaj
orst
epsi
nthenewpr
oductdev
elopmentpr
ocess.

I
dea I
dea Concept Market
ingst
rat
egy
gener
ati
on Scr
eeni
ng development dev
elopment
and
test
ing

Busi
ness Product Test Launch
anal
ysi
s devel
opmen Market
ing Commer ci
ali
zat
ion
t

i
) Ideagener ati
on:
New pr oductdevelopmentst art
swi thideagenerati
on–t hesystemati
c
sear ch fornew pr oducti deas.These ideas mayor gi
natefrom both
i
nt ernalandext er
nalsour ces.Inthesesourcesmayi ncl
udeempl oyees,
top execut iv
es and f ormalr esearch and developmentpr ogrammes.
Ext ernalsourcesincludedistri
butorsandsuppli
ers,compet i
tor
s,onl i
ne
collaborati
vecommuni ti
esandcust omers.

i
i
) Ideascreeni
ng:
Thepurposeofi deagenerati
onistocreat
eal argenumberofi
deas.The
purpose oft he succeedi
ng stages istor educe t
hatnumber.Idea
screeni
nghelpsspotgoodi deasanddroppooronesassoonaspossi
ble.

i
i
i) ConceptDev elopmentandTest i
ng:
Anat t
ract
iveideai sthendevelopedint
oapr oductconcept .Apr oductidea
i
sani deaf orapossi bleproductthatthecompanycanseei tselfofferi
ng
tot hemar ket.Apr oductconceptisadetail
edv ersi
onoft heideast atedin
meani ngfulconsumert er
ms.Thepr oductconceptmaybei nf orm of
prot ot
ypesf r
om whi chthebestconcepti schosenaf terconceptt esti
ng–
testingnewpr oductconceptswi t
hagroupoft argetconsumer st ofindout
i
ft heconcept st est
edandchosenhav estr
ongconsumerappeal .

i
v) Market
ingSt
rat
egyDev
elopment:
The nextst
ep isthe market
ing st
rat
egy dev
elopmentt
hati
nvol
ves

Okel
l
owaat
a
 desi
gni
nganinit
ialmarket
ingstrat
egyf ori
ntroduci
ngt henewpr oductto
thetar
getmarket.Themar ket
ingst r
ategyst at
ementconsi stsofthree
part
s(a)t
hetargetmarket(b)theplannedv alueproposit
ion,and(c)the
sal
es,mar
ketshareandprofi
tgoalsforthefi
rstfewy ears.

v
) BusinessAnal y
sis:
Thenextst ageistoev aluatethebusi
nessatt
racti
venessoftheproposal
.
Business analysi
si nvolves a rev
iew ofthe sal
es,costs,and profi
ts
project
ions fora new pr oducttof i
nd outwhet herthey sat
isf
yt he
company ’sobjecti
ves.Iftheydo,theproductcannow mov et othenext
stage.

v
i) ProductDevelopment:
The nestst age isthe productdev el
opment,dev
elopi
ng t
he product
conceptintoaphy si
calproductinordertoensurethatt
heproductidea
canbet ur
nedi nt
oawor kabl
emar keroff
eri
ng.

TheR&Ddepar t
mentwi l
ldev
elopandtestoneormorephysi
calv
ersi
ons
ofthepr oductconcept
.Thebestversi
onwi l
lthenbet
akenonf orf
inal
product
ion.

v
ii
) TestMar keti
ng:
Ifthepr oductpassesconceptandpr oductt ests,thenextst epi stest
mar keti
ng,thest ageofnew pr oductdev elopmenti nwhi chthepr oduct
andmar keti
ngpr ogrammear et estedi nr eali
sti
cmar ketsetti
ng.Test
Mar keti
ng givest he Marketerwi l
lexper i
ence mar keti
ng the product
beforegoingtot hegr eatexpenseoff ullintr
oduction.Itl
etsthecompany
testt heproductandi tsentir
emar ketingpr ogramme– t argeti
ngand
positi
oning,advertisi
ng,di
stri
buti
on,pr i
cing,brandingandpackagi ngand
budgetlevels.

v
ii
i) ProductLaunchandCommer ci
ali
zati
on:
TestMar ket
ingoffer
smanagementt herequir
edinformati
onneededt o
makeaf i
naldeci
sionaboutwhet hert
olaunchthenewpr oductandgoa
headwi t
hcommer ci
ali
zat
ion,int
roduci
nganew pr oductint
ot hetar
get
market.

Okel
l
owaat
a
THEDI
FFUSI ONANDADOPTI ONOFI NNOVATI ON:
Thedi ff
usionofnewpr oductref
erstothespreadofi nformati
onaboutt he
producti nthemar ketplace.Adopt
ionistheprocessbywhi chconsumer s
i
ncor poratet henew pr oductintotheirbuying patterns.Thediffusion
processi sassumedt of ol
lowsimil
arshapetot heproductLifeCycl
e( PLC)
curve.Adopt ionist houghtt ofol
low anormalbel lshapeddi stri
bution
curve.Thecl assi
fi
cationofadoptersi
sshownbel ow;

I
nnovat
ors Ear
ly Lat
e
2.
5% Ear
ly Major
it
y Major
it
y
Adopt
ers 34% 34% Laggar
d
18.
5% 16%
Ti
meofadopti
onofi
nnovati
ons

Ear
lyadoptersandi nnovat
orsar
ethoughtt
ooperateas“opini
onleader
s”
andaretheref
oretargetedbycompani
esinordert
oinf
luencetheadopti
on
ofaproductbytheirfri
ends.

THEPRODUCTLI FECYCLE:
TheProductli
fecycl
e(PLC)Modeldescri
best
hepr ogressofapr oduct
fr
om i
ntroduct
iont
odisconti
nuat
ioni
nt er
msofsalesandpr of
itabi
l
ity
.It
canof
fersomeguidanceint
hemanagementofmarketingandproducti
on.

ThePLCasser t
st hatproducts,l
ikehumanbei ngsareborn(i
ntroduced),
grow tor eachmat uri
tyandt henenteroldageanddecl i
ne(ordie).The
profi
tabil
i
t yandsal espositionofapr oductcanbeexpect edtochange
overtime.ThePLCi sanattemptt orecogni
zedist
inctst
agesinproduct’
s
saleshistory.Hereistheclassicrepr
esentat
ionofPLC.

Okel
l
owaat
a
Sales/
Profi
ts

Sal
esCur
ve

I
ntr
oduct
ion Gr
owt
h Mat
uri
ty Decl
ine Ti
me
Seni
li
ty`
Pr
ofi
tCurv
e

a) I
ntr
oduct ion:
Anewpr oducttakesti
metofi
ndacceptanceandt her
ei salsol
it
tl
egr
owth
i
nsal es.Unitcost sar
ehighbecauseofl ow output
;t her
emaybeear l
y
t
eethingpr obl
emswi thpr
oducti
ontechnologyandpr icesmaybehighto
r
ecov erproducti
onandsalespr
omot i
oncost s.Theproductfort
imebei
ng
i
sal ossmaker .

b) Growt h:
Saleswi l
leventuall
yr isemor esharplyandt hepr oductst art
st omake
profit
.Asproductrises, uni
tcostsfal
l
.Sincedemandi sstrong,pri
cestend
tor emainfai
rl
yst ati
cf oratime.Howev er,t
hepr ospectofcheapmass
producti
on and a st rong mar ketwillatt
ractcompet i
tors so thatthe
numberofpr oducer si sincreasi
ng.Wi t
ht hei ncreasei n competiti
on,
producersmustspendal otofmoneyonpr oducti mprovement ,sales

Okel
l
owaat
a
 pr
omotionanddi
str
ibut
iont
oobt
ainadomi
nantorst
rongposi
ti
oni
nthe
market
.

c) Matur i
ty:Therateofgr owt hslowsdownandpr oductreachesaper i
odof
matur i
tywhichispr obablythelongestperi
odofasuccessf ulproduct
’sli
fe.
Eventuallysal
eswi llbegint odeclinesothatthereisanov ercapacityof
productioninthei ndustry.Sev er
ecompet i
ti
onoccur saspr ofi
tsfal
land
somepr oducer
sl eavet hemar ket.Theremainingproducersseekmeans
ofpr olongi
ng thepr oductlif
ebymodi fyi
ng itand searching fornew
mar ketsegments.

d) Decl
i
ne:Manyproducersarereluctanttoleav
ethemar ket,
alt
houghsome
i
nevi
tabl
ydobecauseoffall
ingpr ofi
ts.I
faproductremainsonthemarker
t
oolong,i
twil
lbecomeunpr ofitabl
eandt hedecl
inestageinit
slif
ecycle
t
hengiveswaytoa“senil
i
ty”stage.

Cr
it
ici
smsoft hePLC:
a) St agescannoteasi lybedefined.
b) Somepr oduct shav enomat uri
typhaseandgost rai
ghtfrom gr owt ht
o
decline.Ot hershaveasecondgr owthperi
odaf t
eraninit
ialdecline.Some
hav ev i
rtuallynoi ntr
oductoryperiodandgost rai
ghtintor apidgr owt
h
phase.
c) St rategicdeci si
onscanchangeapr oduct’
sl i
fecyclebyr epositi
oninga
productint hemarket,i
tsli
fecanbeext ended.
d) Compet i
tionv ar
iesindiff
erentindust
ri
esandt hestrat
egicimplicati
onsof
thepr oductl i
fecyclewil
lvaryaccordi
ngtot henatur
eofthecompet it
ion.

Thestrat
egi
cimpli
cati
onsoft hePLC.
Thestrat
egi
cimpli
cati
onsoft hepr
oductli
fecy cl
emightbeasfoll
ow;
Vari
able Intr
oduction Gr
owt h Matur
ity Decline
Customers  I ni
ti
al  Cust omers  Mass  Cust omer s
customer s increase i n mar ket
. are
will
i
ngt opay. number and  Mar ket sophist
icate
 Hi ghpr i
ces. soar esales. saturat
ion. d buyersof
 Cust omer s  Repeat – product
need t o be buying. they
convinced  Mar ket
s underst
and
aboutbuy i
ng. become well.

Okel
l
owaat
a
 segment
s.
Market
ing  High  High Pr
oduct  Initi
allypoor  Co
i
ssues adverti
si ng adv ert
ising qual it
y. pr
and sal
es cost s sti
ll Pr oduct ha
promot ion high,butasa desi gn and m
costs. % of sal es, dev elopmen qu
 High pr i
ces cost s are tar ekeyt o di
possible. fall
ing. success.No an
 Distr
ibution  Pricesf all
i
ng. standar d te
problemat i
c  Mor e productand di
distri
but or
s. frequent  Qu
desi gn i
m
changes.  Pr
re
m
i
m
Compet
it
ion  Few or no  Mor e  Compet it
ion  Compet it
ors
competi
tor
s compet i
tors at it
s graduall
y
enter the keenest on exist f r
om
mar ket. pri
ces, themar ket.
 Bar riers to branding,  Exitbarri
ers
entry can be servicing, can be
i
mpor tant. customer s, i
mpor tant.
packagi ng
e.t
.c.
Pr
ofi
tmar
gins  High pr ices  Hi ghpr i
ces.  Fal li
ng  Sti
ll low
butlosses to  Hi gh pri
ces but pri
ces but
hi
gh f
ixed contribution goodpr ofit
. fal
ling
cost
s. mar gin and  Mar ginsdue profit
s as
i
ncreasi ng to high sales
profit sales volume
mar gins. volume. fal
ls, since
High P/ E r at
ios  High pr i
ces total
for quoted i
n some cont r
ibut
ion
compani esint he mar ket fal
lt owards
growthmar ket. segment s. the levelof
fi
xedcot s.
 Some

Okel
l
owaat
a
 i
ncr easesi n
prices may
occuri nt he
l
atest age.
Manufact
uri
ng  Ov ercapacity  Under  Optimum  Ov er
and  High capacity capacity
. capacity
Dist
ri
buti
on product i
on  Mor et owards  Low l abour because
cost s. mass skil
l
s mass
 Few production  Dist
ributi
on product i
on
distribut
ion and l
ess channels techniques
channel s reli
ance on ful
ly sti
llused.
 High l abour skil
ledlabour. developed  Di stri
bution
skillcontentin  Distri
bution but l
ess channel s
manuf actur
e channels successful dwi ndl
ing.
fl
our i
sh and channels
getti
ng might be
adequat e cut.
distr
ibuti
on is
a key t o
mar keti
ng
success.

Pr oductPor
tfol
ioPlanni
ng:
Productportfol
i
oplanningaimstoachieveaportf
oli
oofpr
oductswhichfitwell
togetherinf
inanci
al,market
ingandproduct
iont
erms.Newproductdevel
opment
i
s anot heraspectofpr oductport
foli
o managementand is aboutbrini
ng
i
nnov ati
onsuccessful
lytomarket.

Acompany’
spr
oductmix(orpr
oductst
atementorpor
tfol
i
o)i
sal
lthepr
oduct
l
i
nesandit
emsthatt
hecompanyof
fer
sforsal
e.

Char
act
eri
sti
csofaCompany’
sproductl
ine
Widt
h Numberofpr
oductl
i
nes
Dept
h Aver
agenumberofi
temsperpr
oductli
ne.

Okel
l
owaat
a
Lengt
h Thetotalnumberofproductvar
iat
ionsofacompany
Consi
stency Cl
oseness of items in product range i
nt er
ms of
market
ingorproduct
ioncharact
eri
sti
cs.

Theproductmixcanbeext endedi nanumberofway s:

 Int
roducingvari
ati
onsinmodel sorstyle.
 Changingthequali
tyofpr oductsoff
eredatdiff
erentpricel ev
els.
 Dev el
opi
ngassociateditems,suchasapai ntmanuf acturerintr
oducingpaint
brushes.
 Dev el
opi
ngnewpr oductst hathavel
itt
letechni
cal ormar keti
ngrelat
ionshi
pt o
theexist
ingrange.

BRANDI NG:
Brandingisaf
orm ofpr
oductdi
ff
erent
iat
ionandcanhel
ptocr
eat
ecust
omer
l
oy al
ty.

ABr
and:

Def
ini
ti
on:Abrandi
saname, term,si
gn,sy
mbol ordesi
gni
ntendedtoi
denti
fy
t
heproductofasel
l
erandtodi f
fer
enti
atei
tfrom t
hosecompeti
tor
s(CI
M, 2006)
.
I
tamountstoapromiseofconsist
entqual
it
yandv al
ue.

A companyhas fourchoices when i

tcomes to dev
elopi
ng brands.I
tcan
i
ntr
oduceli
neext
ensions,
brandextensi
ons,
mul
ti
brandsornewbrands.

a) Li
neext ensi
ons:Thi
soccurswhenacompanyextendsexi
sti
ngbrand
namest onewf or
ms,col
our
s,si
zes,i
ngr
edi
ent
sorf
lav
oursofanexi
sti
ng
productcat
egory.

Okel
l
owaat
a
 Br
andDev
elopmentSt
rat
egi
es:

Productcat
egory
Exi
stng Li
i ne Brand
extension ext ensi
on
Br
andname
New Multibrands Newbr ands
Existing New
Exi
sting New
b) Br andExtensi
ons:Thisst
rategyinvol vesext
endingacur r
entbr
andname
tonew
ormodifi
edpr oduct
sinanew cat egor y.Abrandextensi
ongivesanew
product
i
nstantr
ecogniti
onandfasteraccept ance.

c) Mul t
ibrands:Thi
si nvolv
esintr
oducingaddi t
ionalbrandsi nthesame
category.Amajordraw backofmul t
ibrandingisthateachbr andmi ght
obtainonlyasmal lmarketshar
eandnonemaybepr ofi
tabl
e.Howev er
,
mul t
ibrandi
ngoffersawayt oestabl
i
shdi f
ferentfeaturesandappealt o
dif
ferentbuyi
ngmot i
ves.I
tal
soall
owsacompanyt olockupmor eresell
er
shelfspace.

e) Newbr ands:Thi
si nvol
vesacompanycr eat
inganewbr andnamewhenit
entersanew pr oductcategoryf
orwhichnoneoft hecompanycurrent
brandnamesar eappr opr
iateorwhentheexisti
ngbrandnameiswaning
andanewbr andnamei sneeded.Thi
scanr esul
tinacompanyspr
eading
i
tsr esourcestoothin.

I
mpor
tanceofbr
andi
ng:
Brandingisaf orm ofproductdifferent
iati
on.
a) Brandi denti
tyconveysalotofi nformationveryquicklyandconcisel
y .This
helpscust omerstoidentif
yandsel ectgoodsorser vi
ces,andsohel pst o
createcust omerloyaltytothebr andhel pstocr eatecustomerl oyalt
yt o
thebrandwhi chismeansofi ncreasingormai ntai
ningsales.
b) Adv er
tisi
ngneedsabr andnamet oselltocustomer s,andadvert
isi
ngand
brandingar ecloselyr el
atedaspect sofpr omot i
on,hemor esi mi l
ara
product( whetherindustri
algood orconsumergood)i sto compet ing
goods,t hemor ebr andi
ng isnecessar yto createasepar at
epr oduct

Okel
l
owaat
a
 i
dent
it
y.

c) Br
andi
ngl
eadst
oar
eadi
eraccept
anceofamanuf
act
urer
’sgoodsby

d) Whol
esal
ers and ret
ail
ers.
These fi
nd i
teasi
ert
o accepta br
anded
pr
oduct
sfrom r
especti
veproducer
s

e) I
tfaci
l
itat
essel
f–selecti
onofgoodsi
nsel
fser
vicest
oresandalsomakes
i
teasi
erforamanufactur
etoobtai
ndi
spl
ayspaceinshopsandstor
es.

f
) I
treduces t
he i
mpor
tance ofpr
ice di
ff
erent
ial
s(pr
ice di
scr
imi
nat
ion)
bet
weengoods.

g) Br
and loyal
tyin cust
omers giv
es a manufact
urermor e cont
rolov
er
market
ingstr
ategyandhi
schoiceofchannel
sofdist
ri
but
ion.

h) Otherpr oduct scanbei nt

roducedintoabr andrange“ pigback”ont he
arti
clesalreadyknownt othecustomer(butil
l–willasforwellasgoodwil
l
foronepr oductinabr andrangecouldbet r
ansf
erredtoallot
herproducts
i
nt her ange).Addingpr oductstoanexi sti
ngbrandr angeisknownas
brandext ensionstr
ategy.

i
) I
teasest
het
askofper
sonal
sel
l
ing.

j
) Brandingmakesmar ketsegment
ati
oneasi
er.
Ar angeofproductsunderonebrandmaybedev
elopedt
omeetspeci
fi
c
needsofcategori
esofusers.

Brandst r
ategi
es:
Brandingstr
at egy Descript
ion Impli
es
Familybranding Thepoweroft hef amilyI mage of f amil
y and
namet ohelpproducts. br andappl i
cati
onacross
arangeofgoods.
Brand ext ension ( or Addingnew pr oductst o Highcustomerl oyal
tyto
str
etching) thebrandrange. exist
ingbrand.
Multibrandi
ng Diff
erent names f or Consumer s make
simil
ar goods ser vi
ng r andom pur
chases
simil
arconsumergoods. acr ossbrands.

Okel
l
owaat
a
e) Famil
yBrandi
ng:Thepowerofthef
amil
ynametoassistal
lpr
oduct
sis
bei
ngusedmoreandmorebylar
gecompani
es,
suchasToyot
a.

f
) Br
andExt ension:newadditi
onstotheproductrangearebenef
ici
alf
ortwo
mainreasons.
 Theyr equirealowerlevelofmarketi
nginvestment(par
toftheimage
alr
eadybei ngcreated)
 Theext ensionofthebrandpresent
slessrisktoconsumerswhomight
bewor riedabouttryi
ngsomethingnew.

Mult
i–br anding:theint
roductionofanumberofbr andsthatallsati
sfy
ver
ysimil
arproductcharacteri
stics.
 Thiscanbeusedwher el i
ttl
eornobr andl
oyal
tyi
snoted,therati
onale
beingtorunal argenumberofbr andssoasto pi
ckupbuy er
swhoar e
constantl
y

 changingbr ands.
 Thebestexampl ei
swashi ngdetergents.

PACKAGI NG:
Packaging involv
esdesigning and produci
ng t
hecontai
nerorwrapperfora
pr
oduct .Thepr i
maryfunct
ionoft hepackageistohol
dandprot
ecttheproduct
,
Howev er,i
nr ecentt
imesnumer ousf actor
shavemadepackagi
nganimpor t
ant
marketingtool.

Ty
pesofpackages
 Primarypackage:Thisisacont
ainerorwr
apperimmediat
elypr
otecti
ngthe
product.I
tistheinner
mostcont
ainert
otheproduct
.Atoot
hpast
et ubeisan
example.

 Secondarypackage:Thi
si s a contai
nerorwrapperar
ound t
he pr
imar
y
package.Apackagecont
aini
ngtoothpast
etubesi
sagoodexampl
e.

 Shi
ppingpackage:Thisi
ncludeshuge/largecont
ainer
susedt
omov
elar
ge
quant
iti
esofgoodsfrom onedest
inat
iontoanot
her.

Funct
ionofPackagi
ng:

Okel
l
owaat
a
a) Protectionofcont entsduringdistributi
on
b) Sell
ing,as t he desi gn and l abeling serve promot i
onalobjecti
ves of
providi
ngi nformat ionandconv ey ingani mage.
c) Userconv enience, asanai dtost orageandcar ryi
ng,suchasaer osolcans
andhandypacks.
d) Secur i
ty,f or exampl e smal lv aluablei t
ems ar e packaged inl arge
containerst odetershopl if
ting.
e) Choiceofof fer
ingf orexampl eCocaCocacomesi nv ar
ioussizesand
packages.
f
) Compl iancewi t
hgov ernmentr egul at
ionsforexampl e,byprovi
dingal i
st
ofingredientsandcont entsbywei ghtasi nfoodpackaging.
g) Conv eniencei ntranspor t
ationofgoodsf rom oneplacetoanother.

Thequali
ti
esofagoodpackage:
c) Ther angeofsi zesandv ari
etiesshoul dbemi nimizedi nor dertokeep
downpur chasi ngpr oductionanddi st ri
butioncost s,butitshoul dsuccess
inmaki ngt hepr oductattractiveanddi sti
nctivetot het ar
getconsumer .
d) I nindustrieswher edistri
but i
oni sal argepar toft otalcosts,packagingis
animpor tantissue.Packsshoul ddof ourthings:-
i
) Protect,pr eserveandconv eyt hepr oductt oitsdest i
nati
oni nadesi red
condi
ti
on.
i
i) Fitintot hepr act i
cesofmechani zedhandl ingandst or
agesy stemsand
usev ehiclespacecostef fect
ively
.
i
ii
) Bespaceef f
icient,butalsoat t
ractiv
easdi spl ayitems.
i
v) Conv eypr oducti nformationtoshopper seffectiv
el y.

c) Packagingi sanimpor tantai

dt oselli
ng.Wherea pr oductcannotbe
dif
fer
entiatedbydesigntechni
ques, t
hepacktakesoverthedesi
gnsell
ing
funct
ion.Thi sis cr
ucialwheret here ar
e no realpr
oductdiff
erences
betweenr i
valbr
ands,orinthecaseofcommodi ti
essuchasflour
.

i
) Apackshoul dhelpt opromot etheadvert
isi
ng/brandimage.Inaddit
iona
l
ogoshoul dbecl earl
yi denti
fi
ableont hepackage,t oappl
ycust omer
brandloyalt
yt oarangeofpr oducts.
i
i) Shape,colourandsi zeshoul drel
atetocustomermot i
vati
onforvalueor
qual
i
ty.
i
ii
) I tshouldbet heappropri
atesizefortheexpecteduseroftheproduct(for
example,fami l
ysi
zepacket sofdrinksorfood)
.
i
v) Somemaybedesi gnedtopr omoteimpulsebuyingsuchassnackfoods.

Okel
l
owaat
a
v
) Aconv eni
encepack( t
ubes,aer
osols)shouldbepr ovi
dedwherethisisan
i
mpor t
antattr
ibute.
v
i) Packagingshouldmaintai
nproductquali
tystandards.
v
ii
) I
tshouldattr
actat t
ent
ionofpotent
ialcust
omer s,whereappr
opr
iate.

Packagingmustappealnotonlyt ocustomer,butal
sot oresel
l
ers.Aresell
er
wantsapackagedesi gnthatwi l
lhelptoselltheproduct
,butalsoonet hat
mini
mi zest
heli
keli
hoodofbreakage,orwhichext
endsthepr
oduct’
sshel
fli
fe,or
makesmor eeconomicuseoftheselfspace.

Labeli
ng:
Evenwhenproductsar
ebr andedandpackagedproperl
y,thesearet
imewhenit
maybenecessaryt olabelthem.Label
sr angefrom simpletagsatt
achedt
o
productst
ocomplexgr
aphicsthatar
epartofthepackage.

Funct
ionsofLabel
s:
i
) Theyareusedt oident
if
ythepr oductsorbrand.
i
i) Theydescri
bet heseveralthingsabouttheproduct–whomadei t,wher
e
itwasmade, i
tscontents,
howt ouseitsaf
ely.
i
ii
) Theyhel ptopr omotethebr and,supporti
tsposit
ioni
ngandconnectwit
h
customers.

Okel
l
owaat
a
 SERVI
CES:

Theext ensionoft heservi

cesect orandt heappl i
cationofmar ketpr
inci
ples
acrossmanypubl icsectorandex-publ
icsectororganizations,hasmadeal arge
numberofser vi
ce provi
ders much mor e mar keti
ng – consci ous.Servi
ces
Marketngdi
i ffer
sfrom themarketi
ngofphy sical/tangiblegoodsinanumberof
cruci
alway s,andf i
vespecif
iccharact
eri
sticsofser vi
cesmar ket
inghavebeen
proposed.

Def
ini
ti
onsofSer v
ices:
i
) Servi
cesare“ thoseseparat
elyident
if
iabl
ebuti nt
angibl
eact i
vi
ti
esthat
provi
dewant–sat i
sfacti
onandt hatarenot,ofnecessi
ty,t
iedto,orin
extr
icabl
efrom, t
hesaleofaproductoranot
herservi
ce(Cowell
,1995)

i
i
) Serv
icesare“anyacti
vi
tyorbenef
itt
hatonepar
tycanof
fert
oanothert
hat
are essenti
all
yi nt
angi
ble and do not r
esul
ti nthe owner
ship of
anyt
hing”(Kotl
er,
2002).

The market
ing ofserv
ices f
aces a numberofdist
inctprobl
ems,and as a
consequence,
the
appr
oachadoptedmustbev ar
iedandparti
cul
armar
keti
ngpracti
cesdev
eloped.

Char
act
eri
sti
csofSer
vices:

1. I
ntangi
bil
i
ty:

Okel
l
owaat
a
Amajorcharact
eri
sti
cofser
vices–t
heycannotbeseen,t
ast
ed,f
elt
,hear
dor
smell
ed
bef
oretheyar
ebought.

Int
angi
bil
it
yist helackofphysicalsubst
anceinser
vicedeli
ver
y.Clear
ly,t
his
creat
es
dif
fi
cul
ti
esandcani nhi
bitt
hepropensit
ytoconsumeaserv
ice,si
ncecustomers
arenot
sureofwhattheyar
econsuming.

Theconsumerneedsi
nformati
ontoform groundsf orj
udgment ,
andtocutdown
ri
sk.
The market
erwishes t
o make the choice oft he productsaferand make
consumersfeelmorecomf or
tabl
eaboutpay ing forsomet hi
ng t
hathasno
physi
calf
orm.

Thei
ntangibi
l
itymaybecounter
edintwoways:
 Bytheconsumerseekingopi
nionsfr
om ot
hercustomers.
 Byt hemar ket
erof
fer
ingtheconsumersomethingtangi
blet
orepr
esentt
he
purchase.

Market
ingI
mpli
cat
ions:
Deal
ingwit
hthepr
oblemsmayi
nvol
vesst
rat
egi
est
oenhancet
het
angi
bil
i
ty.

a) I
ncreasingthelevel
oftangibi
l
ity
:
Whendeal i
ngwi ththecustomer,st
affcanusedphy
sicalr
epr
esent
ati
ons
orill
ustr
ati
onst omaket hecustomerf eelmor
econfi
dentastowhatis
thattheser
v i
ceisdeli
ver
ing.

b) Focusing the att

enti
on oft he cust
omeron the pri
nci
palbenef i
ts of
consumpt i
on.Thiscouldtakethef or
m ofcommunicat
ingthebenefit
sof
purchasingtheservi
cesothatthecustomervi
sual
i
zeditsappropr
iat
eness.
Promot i
onandsal esmateri
alcouldprov
idei
magesorrecordsofprevi
ous
customerexperience.

e) Dif
ferenti
ati
ngt heserv
iceandr eput
ati
onbuil
ding.Thi
sisachievedby
enhancingpercepti
onsofserv
iceandvaluet
hroughoff
eri
ngexcell
encein
thedeliver
yoft heser
viceandbypr omoti
ngv al
uesofquali
ty,serv
ice

Okel
l
owaat
a
 rel
iabi
li
tyandval
ueformoney
.Thesemustbeattachedasval
uest o
brands,whi
chmustt
henbemanagedt
osecur
eandenhancet
hei
rmarket
positi
on.

2. I
nsepar
abi
l
ity
:
Amajorcharact
eri
sti
cofser
vices–theyareproducedandconsumedat
t
hesamet i
meandcannotbeseparat
edfrom t
heirpr
ovider
s.

Aserviceoftencannotbeseparat
edf r
om theprovi
deroftheservi
ce.The
perf
ormance ofa ser vice of
ten occur
s att he same inst
antas i t
s
consumpt i
on.Thinkofri
dingonabusorat tendi
ngadisco.Neit
herexist
s
unti
lactual
lyconsumedbyt hepur
chaser.

Mar ketingI
mpl i
cati
ons:
Prov i
sion of a ser vi
ce may not be separ abl
ef rom the pr ovi
der.
Consequent l
y,incr
easingi
mpor tanceisatt
achedtov al
uesofqual i
tyand
rel
iabili
tyandcust omerserviceet hi
cwhi chcanbet r
ansfer
redt othe
serviceprovi
sion.Thisemphasizestheneedforcust
omeror i
entat
ion,hi
gh
qualitypeopl
eandhi ghqual
itytrai
ningfort
hem.

3. Het
erogenei
ty/Var
iabi
l
ity
:
A maj orcharacteri
stics ofser v
ices--t heirqual i
ty may var
y great
ly,
dependi ng on who pr ovides t
hem and when,wher e and how.Many
servicesfaceapr oblem ofmai ntaini
ngconsi stencyinthestandardof
outputabi l
ityofqual i
t yisdeli
veryi sinev i
table,useoft henumberof
factorswhichmayi nfluenceit.Thismaycr eat
epr obl
emsofoper ati
ons
management .Forexampl e,itmaybedi f
ficultorimpossibl
et oat
tai
n:-

a) Preci
sestandardizat
ionoftheservi
ceoffered:
Thequali
tyoft heservi
cemaydependheav i
lyonwhodeli
ver
stheserv
ice
andwheni ttakesplace.Booki
ngahot elroom maywellbequit
edif
fer
ent
duri
ngweekday sthanonahect i
cweekend, andwi
l
lvar
yaccordi
ngtothe
staf
fmember sdeal i
ngwiththecl
ient.

b) Inf
luenceorcont
roloverper
cept
ionsofwhatisgoodorbadcustomer
servi
ce.Fr
om thecust
omer’sper
spect
ive,i
tisv
erydi
ff
icul
ttoobt
ainan

Okel
l
owaat
a
 i
deaoft
hequal
i
tyofser
vicei
nadv
anceofpur
chase.

Marketi
ngImplicati
ons:
Iti
snecessaryt omoni torcustomerreacti
onsconst
antl
yandt
omai ntai
n
anatti
tudeandor ganizati
onalcul
tur
ewhi chemphasi
zesthr
eet
hings;
 Consist
encyofqual i
tycont r
ol.
 Consist
encyofcust omerser vi
ce.
 Eff
ectiv
estaffselecti
on, t
rai
ningandmot i
vati
on.

Marketi
ngI mplicat
ions:
TheMar keti
ngst af
fneedst odot hefoll
owing;
 Setclearandobj ecti
vequali
t ymeasures.
 Standardizeasmuchaspossi bl
ewithintheservi
ce.
 Obser v
eandappl yt heParet opri
nciple(80percentofdi f
fi
cult
iesar ise
from 20 per cent of dif
ficult
ies ari
se from 20 per cent of ev ents
surroundingthepr ovi
sionoft heservi
ce).Theref
ore,i
denti
fyandr espond
mostcl oselyt
ot hesepotentialt
roublespots.

4.Pe r
ishabili
ty:
Amaj orcharacter
ist
icofservi
ces-t
heycannotbest or
edf rom l
atersaleor
use.
Servi
cescannotbest ored.Theyareinnatel
yperishabl
e.Per for
manceata
musicconcer tortheservi
ceofal ectur
erconsistsoft heiravai
labi
li
tyfor
peri
odsoft i
me, andiftheyarenotoccupied,t
heser vi
cet heyoffercannot
beusedlater.

MarketingImplicat
ions:
Thispresentsspecifi
cmar keti
ngprobl
ems.Customerneedsi ntheseoper
at i
ons
dependsonst affbei
ngav ai
labl
ewhent heyareneeded.Thismustbebal anced
againstt he need to minimize un necessar
y expendi
ture on st af
fwages.
Anti
cipatingandr espondi
ngt olevelsofdemandi s;thereforeakeypl anning
pri
orit
y.Therear etwori
sks;
 Lowl evel
ofdemandwi ll
beaccompaniedbysubstanti
al f
ixedcost.

Okel
l
owaat
a
 Excessdemand mayr
esul
tinl
ostcust
omert
hrough i
nadequat
eser
vice
provi
sion.

Pol
ici
es mustseek t
o match demand wi
th suppl
ybypr
ice v
ari
ati
ons and
pr
omot i
onst
osti
mulat
eoff–peakdemand.

5. Own ershi
p:
A majorcharact
eri
sti
c ofservi
ces-theydo notr esul
tinthe owner
shi
p of
owner
shipofanythi
ngtangi
bleaf
tert
heirconsumpt
ionbythecust
omers.

Servi
cesdonotr esul
tinthetransferofpropert
y.Int hecaseofpur
chasinga
product
,thereispermanentt
ransferoftit
leandcontrolovert
heuseoftheitem.
Anitem ofserv
iceprovi
sioni
sof t
endefinedbythelengthofti
meiti
savail
able.

Mar keti
ngImplicati
ons:
This mayv er
ywel llessen t
he perceiv
ed customerv al
ue ofa ser vice,and
consequentlymakef orunfavour
ablecompar isonswithtangiblealternativ
es.
Attemptshav ebeenmadet o over
comet hi
spr obl
em bypr ovidi
ngsy mbol i
c
tangibl
eitemswhi chcanbet akenawayandkept .Pens,Keyr
ings,carbrochur es,
attendancecert i
fi
cates,gol
fumbr el
las,areallexamplesofsy mboli
ct angi
ble
i
temsof t
engivent oconsumersofser v
ices.

Theextendedmar keti
ngmixforservi
ces:
Anextendedmar keti
ngmi xhasbeensuggestedf
orser
vicesmar
ket
ing.Booms
andBitnersuggestedanaddit
ional3ps.Her
e,wehav
etakenanappr
oachwhich
anal
ysesanaddi t
ional3ps.

Thest andar
d4Pappr oachtothemarket
ingofpr
oduct
sshoul
dbeext
endedf
or
ser
vicesbyt headdit
ionofthreemor
ePs.
 Peopl e
 Pr ocess
 Phy si
cal
evidenceorambience

i
) Peopl
e:
Servi
cesareprovidedbypeopleforpeople.i
fthepeopl
eprov
idi
ngtheservicear
e
notupt ostandard,theser
v i
ceisspoil
ed.Inthecaseofabusservice,acheap
far
e,acleanvehicleandafrequentser
vicecanbespoil
edbyarudedriver
.

Okel
l
owaat
a
Asaconsequenceoft
heimport
anceofpeopl
e,ser
vicemar
ket
ingor
gani
zat
ions
hav
ecert
aincommonareasofemphasi
s.

a) Selecti
onandTr aini
ng:Staf
fwit
hattitudefordel
iver
ingserv i
cetoahigh
standardshouldbesel ect
edandallstaffshoul
drecei
v ethoroughongoi
ng
trai
ning.Allt
raini
ngshouldemphasizet heimport
ancet othecustomerof
satisf
actoryserviceand,byimpl
icat
ion,itsimpor
tancet othesuccessof
theserviceorganizati
on.

b) Internalmarketi
ngt opromot et hecultureofservicewithinthefir
m.Not e
thati nter
nalmar keti
ng relates tot he promotionalofa hi gh levelof
customer s awar eness thr oughoutt he organi
zation,using mar ket
ing
communi cat
iont echniquest ochangecul tur
eanddel iv
ert r
aini
ng.The
conceptofi nternalmar keting means t he promot i
on ofa mar ket
ing
orientati
onthroughoutt heor ganizat
ion.

c) Ensur i
ngconformancewit
hstandar
ds.
1.Behavior
2.Dressandappearance
3.Procedures
4.Modesofdealingwitht
hepubli
c

d) Automati
ngprocedureswherepossibl
e.
e) Constant
lyaudi
ti
ngstaffper
formanceandbehavior
.
f) Ext
endingthepromotionoftheservi
ceanditsquali
ti
esint
othedesi
gnof
ser
v i
ceenvir
onments,andtheengineeri
ngofinteract
ionsbet
weenstaf
f
andcustomersandamongt hecustomersthemselv
es.

i
i
) Process:
Processr efer
stohow acust omeract uall
yrecei
vedapr oduct ,andis
l
inked to communi cat
ion and the medium oft r
aini
ng consci ousness.
Servi
cesar eusuall
yprovi
dedi nanumberofsequent i
alsteps.Thisisthe
process.Theser vicecan bespoi l
ed orenhanced atanyst ep inthe
sequence.To mi nimize human er rorand otherhuman weaknesses,
servi
ceor gani
zat
ionshaver esor
tedtoaut omati
ngthepr ocessofser vi
ce
deli
very.Thisi
scommoni nt hebankingsectorworl
dwide.

i
i
i) Phy
sical
evi
dence:

Okel
l
owaat
a
 Physicalev i
dencer eferst ot angi
bleitemswhi ch f aci
li
tatedeli
veryor
communi cationoft heproduct .Physi
calev i
dencei sani mpor t
antremedy
fortheintangibi
li
tyofthepr oduct.Thismaybeaphy si
calit
em associat
ed
witht heser vi
cei t
self
,( Forexampl ecr editcardswhi chr epr
esentthe
servi
ceav ail
ablet ocustomer s).Buil
tupbyi dentif
icati
onwi thaspecifi
c
i
ndividual(a“li
steni
ng”bankmanager )ori ncorporat
edi ntothedesignand
specifi
cati
onoft heser v
iceenv ir
onment, i
nv ol
vingthebui l
ding,l
ocati
onor
atmospher e.

Servi
cequali
ty:
Servi
cequali
tycanbedef i
nedast hedif
fer
encebet
weenwhatcust omers
expectand whatt heyperceivethemselv
esto ber eceivi
ng.Impr
oved
servi
ce qual
it
yl eads t
o higherprof
it
s and i
s a keyt ask f
orservi
ce
marketer
s.

Dimensi
ons/Component
sofServi
ceQual
it
y:
Ther
earef i
vegener
iccr
iter
iat
hatcust
omersusei
nev
aluat
ingser
vice
qual
it
y.

1.Tangi bles:Physi
cal faci
li
ti
es,equi
pment,appear
anceofpersonnel.
2.Rel i
abili
ty:abili
tyt o perform the promised serv
ice dependably and
accurat
ely.
3.Responsi v
eness:wi l
li
ngness to hel
p customers and provide prompt
servi
ce.
4.Assur ance:knowl edgeandcour tesyofempl oyeesandt heirabil
ityto
conveyt r
ustandconf i
dence.
5.Empat hy:cari
ng,indivi
duali
zedatt
enti
on,welcoming.

Okel
l
owaat
a
 CHAPTERSEVEN

PRI
CING
Int
roduction:
Themai nmat eri
aldealtwithinthischapterrel
atest oprici
ng.Thisi sone
ofthemosti mportantanddi f
fi
cultpart
sofbusi nessdeci si
onmaki ng,and
i
snor mallycont r
olled ata high lev
el.Ther ear emanyf act
orst o be
consideredwhenset t
ingpr i
ces,from theexi stenceorot her
wiseofa
prevail
i
ng mar kerpr i
ce,through the real
it
yofbr eakeven analysisto
vari
ousr ulesandt humb.Allofthesefactorsareconsi der
ed.

Learni
ngOut comes:
Bothstudentsandpar ti
cipantswillbeablet o:
 Under standthedynami csassociatedwithpricesetting.
 Setpr ici
ngobj ect
ivesdependi ngonwhatt hef i
rm wi shestoachieve
wit
hapar t
icul
arpri
ce.
 Under standtheeffectsofpr i
cesensi t
ivi
tyonconsumerdemand.
 Know and choose t he mostappr opri
atef actors affect
ing pr
ice
deci
sions.
 Desi gnandi mplementt heappropr i
ateprici
ngst rategies.
 Under standtheimpor tanceofbr eakdownanal ysi
s.

Def
ini
ti
onsofPr
ice:
Pri
cecanbedefinedas“ameasur eofthev alueexchangedbyt hebuyer
fort
heval
ueofferedbythesell
er”(CIM,2007).Kotl
er(2010)def
inesprice
as“Theamountofmoneychar gedforapr oductorservi
ce’orpr
iceis“the
sum ofal
lval
uest hatcust
omersgi veupi nordertogainthebenefit
sof
havi
ngorusi
ngapr oductorser
vice.”

Al
ter
nat
ivePr
iceTer
ms:
Theter
m pri
cecanbeexpressedinseveralot
herter
ms.Thesei
ncl
udet
he
fol
l
owing;tui
ti
on,r
ent,inter
est,fee,fare,tol
l
,salar
y,wage,bri
be or
commissi
on.

TheRol
eandI
mpor
tanceofPr
ice:
a) Pr
ici
ngi
stheonl
yel
ementoft
hemar
ket
ingmi
xwhi
chgener
atesr
evenue

Okel
l
owaat
a
 rat
herthancreati
ngcost s.
b) Ithasani mportantroleasacompet iti
vetooltodiffer
entiat
eapr
oduct
andanor gani
zationandt her
ebyexpl
oitmarketoppor
tuni
ties.
c) Pri
ceai mst opr oducet hedesir
edlevelofsalesinor dertomeetthe
object
ivesofthebusinessstrat
egy.

Wher earePri
ceschar ges?
Pricesar echar
gedbet weensel l
ersandbuyer
satvar
iouspoi
ntsinthe
chainofdist
ri
bution.Pricesar echargedbet
ween:
i
) theorigi
nalsuppli
er-andt hefinalcust
omerorawhol
esal
eroragentora
ret
ail
er.
i
i
) awhol esal
eroragent–andar et
ail
er.
i
i
i) Aretail
er–andt hefinal customer.

Thepri
cepai dt oar et
ail
erbythefinalcust
omer ,sayfortel
evi
sionset
,
mightt
hereforebebasedont woconstit
uentpr
icespaidbetween:
i
) Themanufact ur
erandtheelect
roni
cgoodswhol esal
er
i
i
) Thewholesalerandtheretai
l
er.

Forinstance,bot
ht hewhol
esal
erandtheretail
ermayaddaper centage
mark-upt othepri
ceatwhichtheypurchasedt het
elev
isi
onandt hese
mark-upswi l
ldet
erminet
hepri
cetothef
inalcustomer
.

Pr
ici
ngObj
ect
ives:
Althoughpr i
cingcanbet houghtofasf ulf
il
li
nganumberofr ol
es,inov eral
l
termsapr iceai mstopr oducet hedesir
elevel ofsal
esinor dertomeett he
objecti
vesoft hebusinessst rategy.Theultimateobjectiv
eofpr i
cing,as
withotherel ement sofmar keti
ngmi x,istopr oducethedesi redlevelof
salessot hatt heor ganizat
ioncanachi evei tsspecifi
edobj ecti
ves.Two
broadcat egor i
esofobj ect
ivesmaybespeci fi
edforpr i
cingdeci sions.
Theyar emut uallyexcl
usive,butt heyar
edifferentnonethel
ess.

a) Maximizi
ngpr ofi
ts:Thisisconcer
nedwi t
hmaxi mizi
ngther et
urnson
asset
sori nvest
ment s.Thi
smayber eal
izedevenwi t
hacompar at
ivel
y
smallmarketsharedependi
ngonthepat
ternsofcostordemand.

b) Mai
ntai
ning ori
ncreasi
ng mar
ketshar
e:Thisinv
olv
es maintai
ning or
i
ncr
easi
ng the customerbase whi
ch may r
equi
re a di
ff
erent
,mor e

Okel
l
owaat
a
 compet it
ive appr oach to pricing,whi let he companywi t
ht he lar
gest
mar ketsharemaynotnecessar ilyearnthebestprofit
s.
Note:I
tisimpor t
antt hattheabov est at edobjecti
vesareconsistentwithoveral
l
corporateobj ect i
vesandcor por atestrat
egies.Otherpr i
cingobjecti
ves
incl
ude:
c) Achi evingat argetr etur
noni nv est ment
.
d) Meet i
ngorpr eventingcompet ition.
e) Posi ti
oningt hepr oductofacer tainquali
ty.Ahighpriceindi
catesthatthe
productisofahi ghqual i
ty.
f) EnablingtheCompanysur v
ivei nt ougheconomi cti
mes.
g) Mai ntaini
ngt hest atusquo,thati smaintai
ningthecur r
entlevelofsales/
profit
swhi cht hefirmi scomf ortabl ewi
th.

Factor
stoconsi
derwhensett
ingpr
icesforgoods/ser
vices
Acompany’spri
ci
ngdecisi
onsarei
nfluencedbybot
hinternalandext
ernal
fact
ors.
a) I
nter
nal
fact
orsi
nfl
uenci
ngpr
ici
ngdeci
sions.

i
) Mar ketingobj ecti
ves:
Bef oresettingt heprice,thecompanymustdeci deonitsstrategyforthe
product .Ift hecompanyhassel ect
edi tstargetmar ketandposi tioni
ng
caref ul
ly,theni tsmar ket
ingmi xst r
ategy,includingpri
ce,wi llbef ai
rl
y
straightforwar d.Iftheobj ect
iveistocapt ureal ar
gemarketshar e”then
thepr i
ceisl i
kelytobel ow inor dertoat tr
actasmanycust omer sas
possi bl
e.I ft hemar keti
ng objecti
vei s“ t
o capt ureand servet her i
ch
sect i
onoft hesocietyonl y.
”thenahi ghpr i
cewi l
lbesetsincet herichare
ablet opayt hehighpr i
ce,solongasapr oductqual i
tyi
sequallyhigh.

i
i
) Costs:
Costssett he floorf orthe pri
ce thatthe companycan charge.The
companywant st o charge a pri
ce thatboth cover
s allit
s costsfor
producti
on,dist
ri
but i
onandsel l
ingtheproductanddel i
ver
saf ai
rrateof
retur
nf orit
sef fortandr i
sk.Thereforeacompany ’
scostsmaybean
i
mpor tantel
ementi nitspri
cingstr
ategy.

Total
Cost
s:
Thesear
ethesum oft
hef
ixedandv
ari
abl
ecost
sforanygi
venl
evelof

Okel
l
owaat
a
 pr
oduct
ion.

b) Ext
ernal
fact
orsaf
fect
ingpr
ici
ngdeci
sions:
i
) MarketDemand:Bef or
eset t
ingpr
ices,themarket
ermustunder
standthe
rel
ati
onship bet
ween price demands f ori
ts pr
oduct
.A high market
demandf oraproductat
tract
sahighpr i
cewhereasalowdemandleadsto
alowpriceset.

i
i
) Compet i
tor
sCosts,pricesandoffer
s:
Insett
ingitspri
ces,thecompanymustal soconsidercompet
itor
s’cost
s
and pri
ces and possible competi
torr
eacti
ons tothe company’
s own
pri
cingmov es.A high pr i
ce,hi
ghmar gi
nst r
ategy
,however,maystop
competit
orsordri
vet hem outofthemar
ket.

i
i
i) I
ntermedi
ari
esObjecti
ves:
Thecompanymustal soconsi derwhati mpactitspri
ceswi l
lhaveto
i
ntermedi
ari
es.How wi l
l
,f orexample,whol
esaler
sandr et
ail
ersreactt
o
var
iouspr
icesofproducers?
Thecompanyshouldsetpr icest
hatgiver
esel
ler
saf ai
rpr
ofi
t.

i
v) Governmentpolicy/inter
ventions:
The gov er
nmenti s anotheri mpor
tantexternalinf
luence on pr
ici
ng
deci
sions.Somegov ernment shavepoli
ciesthatdemandcompani esto
putintoconsiderati
oncertainfact
orswhenset ti
ngpri
ces.Thisi
st ypi
cal
wherethereisgov er
nmentcont rol
l
edeconomics.

v
) Economi ccondit
ions:
Thesehav east rongimpactont hef i
rm’sprici
ngstr
ategies.Economi c
fact
orssuchasboom orr ecession,inf
lat
ionandinter
estr atesaffect
pri
cing deci
sionsbecauset heyaf f
ectbotht hecostsofpr oduci
ng a
productandconsumerperceptionofproduct’
spri
ceandvalue.

Pr
ici
ngmet
hods/
Str
ategi
esorAppr
oaches:
Ther
earesever
alpr
ici
ngmethodsorappr
oachesthatbusi
nessfi
rmsuse
toar
ri
veatt
herequi
redpr
icesoft
hei
rgoods.Theseincl
udethef
oll
owi
ng;

i
) Cost–BasedPr
ici
ng:
Thesimpl
estpri
cingmet
hodi
sthecost– pl
uspr
ici
ng.Thi
sinv
olv
es

Okel
l
owaat
a
 addingast andardmar k–upt ot
hecostoft heproduct.Thismet hodis
popularbecause;
 Sell
ersaremor ecer tai
naboutcost sthandemand.Byt yi
ngt hepriceto
cost,sell
ers simpl i
fy pr
ici
ng – they do nothav eto make f r
equent
adj
ustment sasdemandchanges.
 Whenal lfi
rmsi nt heindustr
yuset hi
spr i
cingmethod,pri
cest endt obe
si
mi l
arandpr i
cecompet i
ti
onisthusminimized.
 Manypeopl efeelthatcost–pl uspr
ici
ngisf ar
etobothbuyersandsel l
ers.

i
i
) Percei
ved–Val uePr i
cing:
Percei
ved-Value pri
cingusest hebuyer’
spercepti
onsofthev al
uenotthe
sel
ler’
scosts,ast heyast hekeyt oprici
ng.Thecompanyset si
tstar
get
pri
cebasedonconsumerper cept i
onsoftheproducevalue.Thetar
geted
val
ueandpr icethendr i
vedecisionsaboutproductdesi
gnandv al
uecosts
canbei ncur
red.

i
i
i) Compet i
ti
on–BasedPr ici
ng:
Consumer swil
lbasetheirjudgment soft heproduct svalueont hepri
ces
thatcompetit
orschargeforsi mil
arpr oducts.Onef orm ofcompet i
ti
on–
basedprici
ngisthegoing–r at
epr i
cingormar ket–r at
epr i
cing,i
nwhich
af i
rm basesitspri
celargelyoncompet i
tor’
spr i
ces,withlessat t
enti
on
paidtoit
sowncost sordemand.

i
v) Demand–BasedPr i
cing:
Herefi
rmsappl
yingademand-basedpr i
cingtosetthei
rpri
cesbasedon
thedemandf
ortheproduct.Ahighdemandwil
latt
ractahighpri
cewhi
lea
l
owdemandwi l
ll
eadtoaf ir
m sett
ingal
owpr i
cefori
t’spr
oduct(s)
.

(
v) Value–BasedPr i
cing:
Thisinvol
vessetti
ngaf ai
rl
ylowpriceforahi
ghquali
tyof
fer
ing.I
tinv
olves
re-
engineer
ingthecompany ’
soperati
onstobecomeal ow costproduct
wit
houtsacr i
fi
cingquali
tytoatt
ractalargenumberofval
ue–consci ous
customers.

NewPr
oductPr
ici
ngst
rat
egi
es:

Okel
l
owaat
a
 Pri
cingstr
ategiesusual l
ychangeast hepr oductpassest hr
oughitsl
ife
cycl
e .The i ntroducti
on stage i
s especial
ly challengi
ng.Companies
bri
ngingoutanewpr oductfacet
hechallengeofsettingpricesfort
hefi
rst
ti
me.Theycanchoosebet weent wobr oadstrat
egies:mar ketski
mming
pri
cingandmar ketpenetrat
ionpri
cing.

a) Market–Ski mmi ngPr i

cingStrat
egy:
Thisstrategyi
nvolvesset ti
ngahighpri
cetar
geti
ngatt hecream (ther i
ch)
ofsociety,theri
chwhoar eprepar
edtobuyinnov ati
ons( new product s)
.
Marketski mmingmakessenseonl yundercertainconditions.First,the
product’squali
tyandi magemustsuppor tit
shi gherpr i
ce,andenough
buyersmustwantt hepr oductatthathi
ghpr i
ce.Second,t hecost sof
producing a small
erv olume cannotbe do hi
gh t hattheycancelt he
advantageofchangi ngmor e.
Thir
dly,compet i
tor
sshoul dnotbeabl etoentert hemar keteasi lyand
undercutthehighprice.

b) Market–Penet r
ati
onPri
cingStrat
egy :
Rat
hert hansetti
ngahi ghinit
ialpricet oski
m of fsmallbutpr ofi
tabl
e
marketsegments,companiesusemar ket–penetr
ati
onprici
ng.Theyseta
l
ow init
ialpri
ceinordertopenet r
at et hemarketquickl
yanddeepl yto
at
tractalar
genumberofbuy ersquicklyandwinalargemar ketshare.

Sever
alcondit
ionsmustbemetf orthislow-pri
cestrategyt
owor k.Fi
rst
themarketmustbehi ghlypri
cesensi
tivesot hatalow-pr i
ceproducers
moremar ketgrowt
h.Second,producti
onanddi str
ibuti
oncostsmustf al
l
assalesvolumeincreases.Thi
rdl
y,t
hel ow pri
cemusthel pkeepoutt he
competi
ti
on.

Ot
herpr
ici
ngst
rat
egi
esi
ncl
ude;

c) Product–l inepri
cing:
Thisinvolvesmanagementdeci dingont hepri
cestepstobesetbetween
vari
ouspr oductsintheli
ne.Thepr i
cestepsshouldtakei
ntoaccountcost
dif
ferences between t he productsint he l
ine.They should mor e
i
mpor tantl
yaccountf ordi
ffer
encesi ncustomerpercept
ionsofthevalue

Okel
l
owaat
a
 ofdi
ff
erentf
eat
ures.

d) Earl
yCash–Recov erypri
cing:
Thistypeofpr i
cing st
rategyinv
olvesmanagementsett
ing a pr
ice–
marginthatenabl
est hecompanyr ecov
eri
tsinv
estmentmoneyqui ckl
y
enoughtoavoidri
sks.

e) Psychologi
calPrici
ng:
I
nt hi
s pri
cing str
ategy,consumer
s usual
l
y per
cei
ve hi
gher– pr
iced
productsashavinghigherqual
it
y.

f
) Competit
ivePri
cing:
Thi
sprici
ngst r
ategywi
llinv
olv
epri
cesbeingsetbasedoncompet
it
ors’
pri
cesorgoing–r at
epr
icesint
hemarket
.

g) Pricediscri
mi nation(ordifferenti
alprici
ng)
Thisi nvolv
esset ti
ngdi ff
er entpr i
cesf orthesamepr oductdirectedt o
differ
entmar kersegment s.Forexampl e,abot t
leofbeersellsatshs.
5,000/=inSher at
on, shs3,000=i nSpekehot eland2, 500/
=inlocalbar sin
andar oundKampal a.
Thedangeri st hatpr i
cecut st oonebuy ermaybeusedasanegot i
ating
l
ev erbyanot herbuy er.Thi
scanbecount er
edint hreeways;
 Buy er
scanbespl i
tintoclear lydefi
nedsegment s,suchasov erseasand
home.
 Ownbr anding,wher epackagi ngischangedt othatofasuper mar ket,i
sa
variat
ionont his.
 Bulkbuy ingdi scount sandaggr egatedr ebateschemescanf avourl arge
buy er
s.

Pri
cesensi
ti
vit
y:
Mostlowincomeearnerswil
lbesensiti
vet opriceincreaseswhil
ehighincome
earner
swil
lnotreactnegat
ivel
ytopr
icei ncreases.Instead,r
ichcustomerswi
l
l
assumethatpri
cei
ncreasemeansapr oporti
onal i
ncreaseinproductqual
it
y.

Customerwil
lbepri
cesensi
ti
vewhen;
 Incomesdrop
 Jobsar el
ost
 Infl
ati
onsetsi
n

Okel
l
owaat
a
Resear
chonpr
icesensi
ti
vi
tyhashadsomei
nter
est
ingr
esul
ts.

a) Customer shav eagoodconceptf oraj ustpri

ce”af eelforwhatisabout
therightpr i
cet opayforacommodi ty.
b) Unless a r egul arpurchase i sinvolv
ed,cust omer s search f
orpr ice
i
nformat ionbef orebuying,becomingpriceawar ewhenwant i
ngtobuybut
forgetti
ngsoonaf ter
war ds.
c) Customer swillbutatwhatt heyconsidertobeabar gainpr i
cewithoutful
l
regardforneedandact ual pri
ce.
d) Forconsumerdur abl
esi ti
sthedownpay mentandinstallmentpri
cerather
thant ot
al pri
cewhi chisimpor t
anttothebuy er.
e) I
nt imesofr ai
si ngpri
cest hepriceimaget endstolagbehi ndthecurrent
pri
ce, whichindicatesar esentmentofthepr i
ceincr
ease.

Breakdownanalysis:
Breakdown analysisi s a usefulappl i
cation ofmar ginalcost i
ng.Bef orea
companystartstomakeapr ofitdur i
ngatradingper iod,itmustf i
rstearnenough
contri
but
iontocov eritsfi
xedcost s.Thev olumeofsal esatwhi cht hi
soccur sis
knownast hebr eakdownpoi ntandmaybeexpr essedi nuni tsorv alue.Atthis
volumeofsal es,revenuejustcov ersfi
xedcost spl usv ariablecost sandt his
i
mpl i
esthatcontri
butionatthispoi ntequalsfixedcost s.Ast otalcontri
butionat
thi
spointequalsfixedcosts.Ast otalcont
ributionperuni tt i
mesnumberofuni ts
sold,t
henumberofuni t
sofsalesr equir
edt obr eakev enisequal to.

Total
fixedcost
s:
Example:
Pri
ceperunit shs8/
=

Expect
edsal
es 10,
000uni ts(sh8/=x80,
000/
=)
Vari
abl
ecost shs.5/=peruni
tpr
oduced
Fi
xedcost
s shs.21,000/=

Requi
red:
ComputetheBr
eakev
enPoi
nt

Sol
uti
on:
Thecont
ri
but
ionperuni
tisshs(
8-5)=3/
=

Okel
l
owaat
a
Contri
buti
onr
equi
redt
obr
eakev
en = f
ixedcost
s=21,000/
=
BreakdownPoi
nt(
BEP) = 21,
000÷3/ ==7,
000unit
s

I
nrev
enue,
BEP = (
7,000X8/
=)=56,
000/
=

Salesaboveshs.56,000/
=wi l
lresul
tinprofi
tofshs.3/=peruni
tofaddit
ional
sal
es,andsalesbelow shs.56,000/
=willmeanal ossofshs.3/=perunitfor
eachunitbywhi chsalesfallshortof7,000uni
ts.Inotherwords,pr
ofi
twi l
l
i
mpr oveorworsenbytheamountofcontri
buti
onperunit
.

7,
000unit
s 7001uni
ts
Revenue 56,
000/= 56,
008/=
Lessvar i
abl
ecost
s 35,
000/= 35,
005/=
Contri
bution 21,
000/= 21,
003/=
Lessfixedcost
s 21,
000/= 21,
000/=
Prof
it 0/
=(breakdown) 3/=

Thesalesrev
enuer equi
redt
obr
eakev
encanbecal
cul
atedbydi
vi
dingf
ixed
cost
sbytheC/Srat
io.

Exampl e:
Intheexampl eabov etheC/Sr at
ioi s3/ ==37.5%
8/=
Atapr i
ceofshs8/ =perunit,
thisrepr esent
s7,000unitsofsales.
Thecont ri
buti
on/sal esrat
ioisameasur eofhow muchcont ri
but
ionisearned
from eachsh1ofsal es.TheC/ Sr ati
ois37.5%int heaboveexamplemeanst hat
foreveryShs1ofsal es,acont r
ibutionof37. 5centsisearned.This,i
norderto
earnat otalcontr
ibuti
onof21, 000/ =andi fcontr
ibuti
onincreasesby37.5cents
pershs.1ofsal es,salesmustbe;
Shs1 x21, 000 =56, 000/=
37.5cents

TheProcessofsett
ingt
heprice:
Priceset
ti
nginvol
vescompl exdecisi
ons.Howev
er,t
herei
sagener
alprocess
thatmanyfir
msf oll
ow,especial
lywhenaf i
rmisset
ti
ngthepr
icef
orthefir
st
ti
meaf t
erdevel
opi
nganewpr oduct
.

Okel
l
owaat
a
i
) Sel
ecti
ngthePrici
ngObject
ive
Thecompanyf i
rstdeci
deswherei twant
stoposi
ti
onitsmar ketoffering.
Fi
vemaj orobject
ivesare;surv
ival,maxi
mum curr
entpr of
it,maximum
marketshar
e,maximum marketskimmingandpr
oduct-quali
tyleadership.

i
i
) Deter
miningDemand:
Eachpri
cesetwi l
lleadt
oadi ff
erentlevelofdemandandwi llther
efore
have a dif
fer
entimpacton a company ’
s marketi
ng obj
ect
ive.A low
demandwi llinmostcases,leadt o sett
ingal ow pr
ice,whil
eahi gh
demandleadstoahighpri
ceofthedemandpr oduct
.

i
i
i) Est
imati
ngCost s:
Demandset sacei l
ingonthepri
cethefi
rm canchargeforit
spr oduct
.
Cost
ssett hefloor.Thefi
rm want
stochar
geapr i
cethatcover
sitscosts
ofpr
oducing,distr
ibuti
ng,
andsell
i
ngthepr
oduct,
incl
udingafai
rreturnon
i
tseff
ortandrisk.

i
v) Anal yzingCompet i
t or
scosts,pricesandof fer
s:
Withi ntherangeofpossi bl
epr i
cesdet erminedbymar ketdemandand
companycost s,thef i
rm musttakecompet it
orscosts, pri
cesandpossible
pri
cer eacti
onsintoaccount.Ifthefirm’soffercontai
nsf eatur
esnot
offeredbyt henear estcompetit
or s,i
tshouldev al
uatet hei
rworthtothe
customerandaddv al
uetothecompet it
or’
spr i
ce.Ifthecompet i
tor
’soffer
cont ainssomef eaturesnotofferedbyt hefirm,thefirm shoul
dsubtract
theirv aluef
rom it
sownpr i
ce.Nowt hefir
m candeci dewhet heri
tcan
char gemor e,t
hesameorl essthant hecompet i
tor
.

v
) Selecti
ngaPr i
cingMet hod:
Thef oll
owi ngar esomeoft hepr
ici
ngmet
hodsf
rom whi
cht
osel
ectt
he
preferr
edmet hod;
 Mar k-
uppr i
cing
 Target–r eturnpricing.
 Perceived–v aluepr ici
ng
 Value–basedpr i
cing
 Going–r atepr i
cing
 Auct i
on–t ypepr i
cing

Okel
l
owaat
a
v
i) Selecti
ngt heFi nalPrice:
Prici
ngmet hodsnar r
owt herangefrom whichthecompanymustsel ect
i
tsf i
nalpri
ce.I nsel ecti
ngtheprice,t
hefir
m mustconsi deraddi
ti
onal
factor
s,includingt heimpactofot hermarketingact
ivi
ti
es,thefi
rm’s
pri
cingpolicies, gai
n-andr i
sk–shar ingpri
cing,andtheimpactofpriceon
otherparti
es.

Okel
l
owaat
a
Okel
l
owaat
a
Okel
l
owaat
a