Republic of the Philippines

Mindanao State University

Marawi City

College of Business Administration and Accountancy

Marketing Department

PRINCIPLES OF MARKETING
1st Semester, A.Y. 2020-2021 (1st Quarter Coverage)
Prepared by: Mr. Ralph Sumaylo Buca

1 The Field of Marketing

Marketing
- any interpersonal or interorganizational relationship involving an exchange.

- a process that provides needed direction for production and helps make sure that the
right goods and services are produced and find their way to consumers. (William
Perreault,et al)

- a social and managerial process by which individuals and groups obtain what they need
and want through creating and exchanging products and value with others. (Philip
Kotler, et al)

- a total system of business activities designed to plan, price, promote, and distribute
want-satisfying products to target markets to achieve organizational objectives. (William
Stanton)

Marketers -are people or organizations that wish to make exchanges

- take the initiative by trying to stimulate and facilitate exchanges

Market - any person or group w/ whom an individual or organization has an existing or potential
exchange relationship
- people or organization with wants to satisfy, money to spend, and the willingness
- the set of all actual and potential buyers of a product.

Need – a state of felt deprivation.

Want – the form taken by a human need as shaped by culture and individual personality.

Demands – human wants that are backed by buying power.

Customer Value – the difference between the values the customer gains from owning and using a
product and the costs of obtaining the product.
 Customer Satisfaction – the extent to which a product’s perceived performance in delivering value
matches a buyer’s expectations.

Marketing Mix (4 P’s)

1. Product – anything that can be offered to a market for attention, acquisition use or consumption
that might satisfy a want or need.
- a set of tangible and intangible attributes, including packaging, color, price, quality and
brand plus the seller’s services and reputation.

2. Price – the amount of money charged for a product or the sum of the values the consumers
exchange for the benefits of having or using the product
- the amount of money and / or goods needed to acquire some combination of another
good and its accompanying services.

3. Promotion – activities that communicate product and its merits to target customer and persuade
them to buy.

4. Place – all the company activities that make the product available to target market.

Products (what are to be marketed) can be: (1) goods; (2) services; (3) ideas; (4) person or people;
and (5) places.

Ways to Satisfy Human Needs

1. Exchange – the act of obtaining a desired object from someone by offering something in return. It is
the essence of marketing.
2. Coercion – enforcing threat or force
3. Production/supplication

2 Categories of Market
1. Consumers – motive of buying is for personal consumption
2. Industrial/business – motive of buying is for further processing or for use in conducting a
business

Transaction – a trade between two parties that involves at least two things of value, agreed-upon
conditions, a time of agreement, and a place of agreement.
Marketing Management – as the analysis, planning, implementation, and control of programs and
designed to create, build and maintain beneficial exchanges with target buyers for the
purpose of achieving organizational objectives.Also called demand management.
Demarketing – marketing to reduce demand temporarily or permanently, the aim is not to destroy
demand but only to reduce or shift it.
Marketing Management Philosophies (Concepts)
1. Production Concept – the philosophy that consumers will favor products that are available and
highly affordable, and that management should therefore focus on improving production and
distribution efficiency.
2. Product Concept – the idea that consumers will favor products that offer the most quality,
performance and feature, and that the organization should therefore devote its energy to making
continuous product performance.
3. Selling Concept – the idea that consumers will not buy enough of the organization’s product unless
the organization undertakes a large-scale selling and promotion effort.
4. Marketing Concept – a philosophy of business that states that customer want-satisfaction is the
economic and social justification for a firm’s existence.
- emphasizes customer orientation and coordination of marketing activities to achieve
organization’s performance objectives

Nature and Rationale

• All planning and operation must be customer-oriented
• All marketing activities in an organization must be coordinated
• Customer-oriented, coordinated marketing is essential to achieve the organizations
performance objectives

5. Societal Marketing Concept – the idea that the organization should determine the needs, wants
and interest of target markets and deliver the desired satisfactions more effectively and efficiently
than competitors in a way that maintains or improves the consumer’s and society well-being.

Marketing Vs. Selling

Selling Marketing

1. Emphasis on product 1. Emphasis on customers’ wants

2. Company first makes a product 2. Company first determines
& figures out how to sell it. customers’ wants & then
3. Management is sales volume figures out how to make &
oriented. deliver a product to satisfy
4. Planning is short-run oriented, those wants.
in terms of today’s products & 3. Management is profit-oriented.
markets. 4. Planning is long-run oriented, in
5. Stresses the needs of seller. terms of new products,
tomorrow’s markets, and future
growth.
5. Stresses the needs of
customers

Stages of Marketing Evolution

 1. Production-orientation stage - firms focused on internal operations; based on the belief that
customers will seek good quality products that are priced reasonably
2. Sales-orientation stage - “age of hard sell” ; firms resort to unscrupulous or fraudulent tactics of
selling
- widespread use of advertising & other promotional effort
- sales executives gain popularity

3. Marketing-orientation stage - companies are after customer want-satisfaction while earning

profit
- listening to customers as a student listens to a mentor
4. Social responsibility & human orientation stage – companies recognize that they should be
concerned about not only the buyers of their products but also other people
who are directly affected by their operation and with not only tomorrow but
also the long run
Considerations are:
• profit
• customers’ want satisfaction
• society’s interests

Total Quality Management (TQM) – is an approach in which all the company’s people are involved
in constantly improving the quality of products, services, and business processes.
Relationship Marketing – it is the process of creating, maintaining, and enhancing strong, value-
laden relationships with customers and other stakeholders.
Utility – the attribute in an item/ product that makes it capable of satisfying customer wants.

Types of Utility Created by Marketing

1. Form utility - physical or chemical changes that make a product more valuable
- associated with production

2. Place utility - exists when a product is readily accessible to potential customers

3. Time utility - having product available when you want it
4. Information utility - created by informing prospective buyers that a product exists
Image utility - emotional or psychological value that a person attaches to a product or
brand because of its reputation or social standing
- associated with prestige or high-status products

5. Possession utility - created when a customer buys the product (transfer of ownership)

2 The Dynamic Marketing Environment

Environmental monitoring - is the process of (1) gathering information regarding a company’s
external environment; (2) analyzing it, and (3) forecasting the
impact of whatever trends the analysis suggests.
System – a regularly interacting or interdependent group of items forming a unified whole.
Synergism – the cooperative action of discrete agencies such that the total effect is greater than the
sum of the effects taken independently.

Types of Environment
1. Internal environment
2. External environment

Levels of External Forces

1. Macro influences - affect all firms (e. g. demography, economic conditions, culture, etc.)
2. Micro influences - affect a particular firm (e.g. suppliers, mktg. intermediaries, customers)

External Macroenvironment
- forces are largely uncontrollable but are not totally uncontrollable

1. Demographics - characteristics of population, including such factors as size, distribution and

growth (e.g. age, gender, family size, income, social class, education, birth rate, etc.)

2. Economic Conditions
a. Stage of the Business Cycle
1. Prosperity - period of economic growth
2. Recession - retrenchment for consumers & businesses; a period where “we tighten our
economic belt”
3. Recovery - economy is moving from recession to prosperity
b. Inflation - rise in the prices of goods and services
c. Interest rates
3. Competition

Types of Competition
1. Brand competition - comes from marketers of directly similar products
2. Competition of Substitute products – comes from marketers of products that satisfy the same
needs
3. General competition

4. Social & Cultural Forces

 a. Emphasis on the quality of life

b. Changing Gender Roles

c. Physical fitness and health
d. A premium on time

5.Political & Legal Forces

a. Monetary & Fiscal policies
b. Social legislations & regulation
c. Government relationships with industries
d. Legislation related specifically to marketing

6. Technology
Technological breakthrough can affect the markets in three ways:
1. By starting entirely new industries
2. By radically altering, or virtually destroying existing industries
3. By stimulating markets and industries not related to the new technology

External Microenvironment
1. Market
2. Suppliers
3. Marketing Intermediaries – independent business organizations that directly aid in the flow of
goods & services between a marketing organization and its market
a. Middleman

b. Various facilitating organizations

Internal Environment
1. Marketing resources - marketing mix elements
2. Nonmarketing - company or plant location, research & development (R&D)
strength, company image, production facilities, financial
capabilities and human resource

Major marketing developments can be summed up in a single theme:

connections/connectedness.

Internet – a vast public web of computer networks that connects users of all types all around the
world to each other and to an amazingly large “information repository.”
- it makes up one big “information highway” that can dispatch bits at incredible speeds
from one location to another.

Connections with Customers

Today’s Marketing Connections
▪ Connecting more selectively
▪ Connecting for life
▪ Connecting directly
 Connections with Marketing Partners
Connecting Technologies
▪ Connecting with other
▪ Computer company departments
▪ Information ▪ Connecting with suppliers
▪ Communication and distributors
▪ Transportation ▪ Connecting through
strategic alliances

Connections with the

World Around Us

▪ Global connections
▪ Connections with values
and responsibilities
▪ Broadened connections

E-business: The use of electronic platforms-intranets, extranets, and the Internet- to conduct a
company’s business.
Intranet – a network that connects people within a company to each other and to the
company network.
Extranet – a network that connects a company with its suppliers and distributors.
E-commerce: Buying and selling processes supported by electronic means, primarily the Internet.
E-marketing: The “e-selling” side of e-commerce- company efforts to communicate about,
promote, and sell products and services over the Internet.

Targeted to consumer Targeted to businesses

s
 B2C B2B
Initiated by (business to consumer) (business to business)
business
C2C C2B
Initiated by
(consumer to consumer) (consumer to business)
consumer

E – Marketing Domains

▪ B2C – the online selling of goods and services to final consumers.

▪ B2B – using this trading networks, auction sites, spot exchanges, online product catalogs,
barter sites, and other online resources to reach new customers, serve current customers
more effectively, and obtain buying efficiencies and better prices.
Open trading networks – huge e-marketspaces in which B2B buyers and sellers
find each other online, share information, and complete transactions efficiently.
Private trading networks – B2B trading networks that link a particular seller with
its own trading partners.
▪ C2C – online exchanges of goods and information between final consumers.
▪ C2B – online exchanges in which consumers search out sellers, learn about their offers,
and initiate purchases, sometimes even driving transaction terms.

Digitalization and
Connectivity

Customization The Internet The explosion of

and Age the Internet
Customerization

New types of
intermediaries

3 Strategic Planning and ForecastingForces shaping the Internet

Age
Planning - deciding now what we are going to do later, including how & when we are going to
do it
 Strategic planning - the process of developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing opportunities.
-it involves defining a clear company mission, setting supporting objectives,
designing a sound business portfolio, and coordinating functional strategies.

Mission - indicates in general term the boundaries for an organization’s activities.

- a statement of the organization’s purpose- what it wants to accomplish in the larger
environment.

Objective - desired outcome

Criteria for Worthwhile & Workable Objectives:
• Clear & Specific
• Stated in writing
• Ambitious, but realistic
• Consistent with one another
• Quantitatively measurable whenever possible
• Tied to a particular time period

Strategy - a broad course of action by which an organization intends to reach its objectives
Tactic - a means by which a strategy is implemented
- more specific, detailed course of action than strategy

Levels of Planning In an Organization

1. Strategic Company Planning

- SWOT analysis – identifying & evaluating an organization’s most significant strengths,
weaknesses, opportunities & threats

4 Essential Steps
1. Defining the organizational mission
2. Analyze the situation
3. Setting organizational objectives
4. Determining strategies to achieve these objectives

2. Strategic Marketing Planning

- top marketing executives set goals & strategies for an organization’s marketing effort

Steps in Strategic Marketing Planning

1. Conduct a situation analysis.

2. Develop marketing objectives
3. Determine positioning and differential advantage
 4. Select target markets and measure market demand
5. Design a strategic marketing mix

Target market - refers to group of people or organizations at which a firm directs a

marketing program
Situation analysis - the act of gathering and studying information pertaining to one or
more specified aspects of an organization
Positioning - refers to a product’s image in relation to directly competitive products as
well as other products marketed by the same company
Differential advantage - refers to any feature of an organization or brand perceived by
customers to be desirable and different from those of the competition
Differential disadvantage - any feature of an organization or brand perceived by
customers to be undesirable and different from those of the competition
3. Annual Marketing Planning
- Master blueprint for a year’s marketing activity for a specified organizational division or
major product

FORECASTING
Demand Forecasting - estimating sales of a product during some future period
Market share - refers to the proportion of total sales of a product during a stated period in a
specified market that is captured by a single firm
Methods of Forecasting Demand

1. Market factor analysis - assumes that future demand for a product is related to the
behavior of certain market factors & as a result, involves determining what these
factors are, & then measuring their relationships to sales activity

Market factor - an item or element that exists in a market, may be measured

quantitatively & is related to the demand for a good or service
2. Survey of buyer intentions - a form of sale forecasting in which a firm asks sample of
current or potential customers how much of a particular product they would buy at
a given price during a specified future period
3. Test Marketing - a firm markets its product in a limited geographic area, measures the
sales, & then from this sample, projects the company’s sales over a larger area
4. Past Sales & Trend Analysis
 5. Sales Force Composite - consists of collecting from all sales people estimates of sales for
their territories during the future period of interest

6. Executive judgment – obtaining opinions from one or more executive regarding future
sales

Strategic Business Unit - a separate division for a product or market in a multiproduct or

multi business organization

Market Penetration – a strategy for company growth by increasing sales of current products to
current market segments without changing the product

Market Development – a strategy for company growth by identifying and developing new market
segments for current company products

Product Development – a strategy for company growth by offering modified or new products to
current market segments

Diversification – a strategy for company growth through starting up or acquiring businesses outside
the company’s current products and markets.

Selected Planning Models

1. The Boston Consulting Group Matrix - an organization classifies each of its SBUs
according to two factors: its market share and the growth rate of the industry

- Developed by a management consulting firm, the BCG Matrix dates back at least 25 years.
- Using this model, an organization classifies each of its SBUs according to two factors:
a. Market share relative to competitors
b. Growth rate of the industry in which the SBU operates
- When the factors are divided simply into high and low categories, a 2 x 2 grid is created.

COMPANY’S MARKET SHARE

High Low

High STARS QUESTION MARKS

INDU

RATE
WTH
STRY
GRO

Low CASH COWS DOGS

▪ Stars. High market shares and high industry growth rates typify
SBUs in this category. But it requires lots of cash to remain competitive
in growing markets. Aggressive marketing strategies are imperative for stars to
maintain or even build market share.
 ▪ Cash cows. These SBUs have high market shares and do business in mature
industries. When an industry’s growth diminishes, stars move into this category. As
a result, cash cows can be “milked” to support other SBUs that need more
resources. Marketing strategies for cash cows seek to defend market share, largely
by reinforcing customer loyalty.
▪ Question marks (sometimes called problem children). SBUs characterized by low
market shares but high industry growth rates fit in this category. The question
surrounding this type of SBU is whether it can gain adequate market share and be
profitable. If “no”, then the SBU should be divested or liquidated. If “yes”, the firm
must come up with the cash to build market share. Appropriate marketing strategies
for question marks focus on creating an impact in the market by displaying a strong
differential advantage and, thereby, building customer support.
▪ Dogs. These SBUs have low market shares and operate in industries with low
growth rates. A company normally would be unwise to invest substantial funds in
SBUs in this category. Marketing strategies for dogs are intended to maximize any
potential profits by minimizing expenditures or to promote a differential advantage
to build market share. The company can instead say “Enough’s enough!” and divest
or liquidate a dog.

2. The General Electric Business Screen - developed by General Electric Company

- It appears to be very similar to the BCG matrix. It also involves two factors and results in a
grid. But, as we shall see, the two models are different in significant respects.
Two factors: market attractiveness and business position.
- Market attractiveness should be judged with respect to market growth rate, market size,
degree of difficulty in entering the market, number and types of competitors, technological
requirements, and profit margins, among other criteria.
- Business position –encompasses market share, SBU size, strength of differential
advantage, research and development capabilities, production capacities, cost controls, and
management expertise and depth, among others.

BUSINESS POSITION

High Medium Low

High INVEST INVEST PROTECT
ATTRACTIVENESS
MARKET

Medium INVEST PROTECT HARVEST

Low PROTECT HARVEST DIVEST

- The best location for an SBU is the upper left cell because it points to (1) the most attractive
market opportunity and (2) the best business position to seize that opportunity.
- In contrast, the worst location is the lower right cell, for the opposite reasons.
 • Invest strategy. SBUs in the three cells in the upper left of the grid should receive ample
resources. To strengthen and build these kinds of SBUs, bold, well-financed marketing
efforts are needed.
• Protect strategy. Resources should be allocated selectively to SBUs along the diagonal
running from the lower left to the upper right of the grid. This somewhat defensive
approach helps an SBU maintain its present market position because it generates cash
needed by other SBUs.
• Harvest strategy.Because they lack an attractive market and a strong business
position, SBUs in the two cell just below the three-cell diagonal should not receive
substantial new resources. Instead, expenditures should be curtailed to maximize any
remaining profits. An alternative is to sell these SBUs.
• Divest strategy. SBUs in the lower right cell do not have much going for them. Hence,
an SBU in this location should not receive any resources. Probably, the best approach
is to eliminate it from the organization’s portfolio by selling it or, failing that, shutting it
down.

3. Porter’s Generic-Strategies Model - developed by Michael Porter

4. Product-Market Growth Matrix

- It was first proposed by Igor Ansoff.
- There are four product-market growth strategies:
1. Market penetration. A company tries to sell more of its present products to its
present markets. Supporting tactics might include greater spending on
advertising or personal selling.
2. Market development. A firm continues to sell its present products, but to a new
market.
3. Product development. This strategy calls for a company to develop new
products to sell to its existing markets.
4. Diversification.A company develops new products to sell to new markets. This
strategy is risky because it doesn’t rely on either the company’s successful
products or its position in established markets. Sometimes it works, but
sometimes it doesn’t.

PRESENT PRODUCT NEW PRODUCTS

PRESENT Market Penetration Product Development

MARKETS

NEW Market Development Diversification

MARKETS

Product-Market Growth Matrix

4 Marketing Research and Information
 Marketing research - is the development, interpretation and communicationofdecision-
oriented information to be used in the strategic marketing process
Factors That Contribute to the Need for Marketing Research
1. Competitive pressure
2. Expanding markets
3. Cost of a mistake
4. Growing customer expectations

Main Sources of Information

1. Marketing Information System - consists of people, equipment, and procedures to gather,
sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing
decision maker.
An Ideal MIS:
➢ Generates regular reports and recurring studies as needed.
➢ Integrates old and new data to provide information updates and identify trends.
➢ Analyzes data using mathematical models that represent the real world.

MIS Limitations
•It is not always obvious what information is needed on a regular basis to make better
decisions.
• Gathering, organizing and storing data and disseminating reports customized to the
needs of many managers can be extremely expensive.
• Possibly most important, an MkIs is not well suited to the solution of unanticipated
problems.
2. Syndicated Services - regularly scheduled report that are produced and sold by research
firms.
3. Decision Support System (DSS) - a procedure that allows a manager to interact with data
and methods of analysis to gather, analyze and interpret information
4. Data Base - a set of related data that is organized, stored and updated in a computer
c. Single-Source Data - a data gathering method in which exposure to television
advertising and product purchases can be traced to individual households

Information Overload: “In this oh so overwhelming Information age, it’s all too easy to be buried,
burdened, and burned out by data overload.”
Marketing Research Procedure
1. Define the objective
2. Conduct situation analysis
3. Conduct informal investigation
4. Plan and conduct formal investigation
5. Analyze data and report results
6. Conduct follow-up
Hypothesis - a tentative supposition that if proven would suggest a possible solution to a problem
Informal investigation - consists of gathering readily available information from people inside and
outside the company

Sources of Information
1. Primary data - new data gathered specifically for the project at hand
a. Survey method - consists of gathering data by interviewing people
• Personal interview - face-to-face method of gathering data
➢ Mall intercept - interviews conducted at shopping centers, airports and
parks
➢ Focus Group - an interactive interview of 4-10 people to generate
concepts and hypotheses that can be tested on large, representative
samples of people
• Telephone interview
• Mail survey - mailing questionnaires to potential respondent, asking them to complete it
and having them return it by mail

b. Observation method - involves collecting data by observing theactions of a person

• Personal observation - a person observes the actions of another person or group of
people
• Mechanical Observation - some type of machine or other mechanical device
observes and records the actions of a person or group of people

c. Experimental method

Experiment - a method of gathering primary data in which the researcher is able to observe
the results of changing one variable in a situation while holding all other conditions
constant
Laboratory experiment - an experiment in which the researcher has complete control over the
environment during the study but, as a result, it is unnatural and perhaps
unrealistic
Field experiment - an experiment in which the researcher has only limited control of the
environment because the study is conducted in a real-world setting

Fundamental Considerations in Preparing Forms for Gathering Data

1. Question wording
2. Response format
3. Questionnaire layout
4. Pretesting
2. Secondary data - are available data, already gathered for some purpose
 Sources of Secondary Data
• Libraries
• Government
• Trade, professional, & business associations
• Private business firms
• Advertising media
• University research organizations

Marketing Intelligence - process of gathering & analyzing publicly availableinformation about the
activities & plans of competitors

5 Market Segmentation and Target Market Strategies

Market segmentation - process of dividing a market into groups of similar consumers and
selecting the most appropriate group(s) for the firm to serve
Benefits of Market Segmentation
1. Management can do a better job and make more efficient use of its marketing resources by
tailoring marketing programs to individual market segments.
2. Medium-sized firms can grow rapidly by developing strong positions in specialized market segment

Conditions for Effective Segmentation

1. Basis for segmenting must be measurable.→ the firm is able to measure its size and
characteristics
2. Market segment must be accessible.→ can be reached through existing marketing institutions
3. Market segments must be large enough to be profitable

Two Broad Categories of Market

1. Ultimate consumers – buy goods or services for their own personal or household use in order to
satisfy strictly nonbusiness wants
2. Business Users – business, industrial, or institutional organizations that buy goods or services
to use in their own organizations, to resell, or to make other products

Bases for Segmenting Consumer Markets

1. Geographic
• Continents
• Country
• Regions, city, town climate
 • Urban or rural
2. Demographic
• Age
• Gender
• Family size
• Income or social class
• Religion
3. Psychological
• Personality type
• Lifestyle (achievement-oriented, sociable, etc.)
• Values – reflection of our needs adjusted for the realities of the world in which we live
in.
4. Buying Behavior
• Benefits desired
• Usage rate (non-user, light, medium & heavy users)

Guidelines in Selecting a Target Market

1. Target markets should be compatible with the organization’s goals and image.
2. The opportunity represented in the target markets should match with he company’s resources.
3. An organization should seek markets that will generate sufficient sales volume at a low enough cost
to result in a profit.
4. A company ordinarily should seek a market where there are the least and smallest competition.

Target Market Strategies

1. Market- Aggregation/ Mass Market/ Undifferentiated Market Strategy
- The organization treats its total market as single unit- as one mass, aggregate market
- Customers are considered to be alike in terms of needs and wants
- One program, broad target
- Also called Shot-gun approach
2. Rifle approach
- total market is treated as consisting several smaller segments with differences,
significant enough that one marketing mix will not satisfy everyone or even a majority
of the market
- Separate programs, pinpointed target
a. Single-segment strategy - choosing one segment from the total market as target market
b. Multiple-segment strategy - selecting more than one segment as targetmarket

Bases for Segmenting Business Market

1. Company size - small, medium, large relative to industry
2. Purchase quantity - small, medium, large account
3. Product application - production, maintenance, product component
4. Organization type - manufacturer, retailer, government agency, hospital
5. Location- northern, southern, eastern & western Mindanao
 6. Purchase status - new customer, occasional purchaser, frequent purchaser, non-purchaser
7. Purchase criteria- price, service, and reliability of supply

6 Consumer Buying Behavior

Consumer buyer behavior – the buying behavior of final consumers- individuals and households
who buy goods and services for personal consumption
Consumer market – all the individuals who buy or acquire goods and services for personal
consumption
Buying Decision Process
1. Need Recognition. The consumer is moved to action by a need. A need may arise internally,
e.g. when you are hungry. A dormant need may be aroused by external stimuli.
2. Choice of an involvement. Determines how much effort to exert in satisfying it.
3. Identification of Alternatives. Alternatives should be capable of satisfying a need.
4. Evaluation of Alternatives. A consumer must evaluate before making a decision.
5. Purchase and Related Decisions. After searching and evaluating the consumer must decide
whether to buy a series of related decisions must be made regarding features, where and when
to make the actual transaction, method of payment and delivery issues.

Patronage Buying Motives – the reasons why a consumer chooses to shop at a particular
store, e.g. locationconvenience, service speed, prices, store
appearance, sales personnel, mix of other shoppers.

The level of satisfaction is determined when a consumer compares the performance

expected from a product with the performance experienced in the product.

6. Post-purchase Behavior. The consumer seeks reassurance that the choice made was the
correct one.
Cognitive Dissonance – the anxiety created by the fact that in most purchases the
alternative selected has somenegative features and the alternatives not
selected have some positive features.
Level of Involvement
1. High-involvement – purchases that entail all six stages of buying-decision process.
2. Low-involvement – consumer is comfortable with the information andalternatives readily
available.Ex Impulse Buying – purchasing with little or no advance planning
Factors Affecting Buying Decision
1. Information

Two Categories of Information

 1. Commercial Information – all of the communications directed to consumers by
organizations and individualsinvolved in marketing (e.g. manufacturers,retailers,
advertisers and sales people)
2. Social Information – all of the communication among family members,friends, and
acquaintances about products (e.g. word of mouth communication, observation and
experience by a product owned by someone else)

2. Social and Group Forces

1. Culture – a complex of symbols and artifacts created by a society and handed down
from generation to generation as determinants and regulators of human behavior.
2. Subculture – groups in a culture that exhibit characteristic behavior patterns sufficient
to distinguish them from other groups within the same culture.
3. Social Class – ranking within a society determined by the members of society.
4. Reference Group – a group of people who influences a person’s attitudes, values,
and behavior.
5. Family – a group of two or more people related by blood, marriage, oradoption living
together in a household.

Household – consist of single person, a family, or any group of related persons

who occupy a housing unit.
3. Psychological Factors

1. Motivation – individual’s awareness of tension within himself which stirs him to action
aimed at relieving the tension

Motive – a need sufficiently stimulated to move an individual to seek satisfaction.

3 Levels of Buying Motives
1. Buyers recognize and are quite willing to talk about it.
2. They are aware of their reasons for buying but will not admit them to others
3. The buyers cannot explain the factors motivating their buying actions.

Classification of Motives
1. Needs aroused from physiological states of tension
2. Needs aroused from psychological states of tension

Theory of Motivation
Abraham Maslow coined the idea that a person has a hierarchy of needs and that
each level must be well satisfied before a person is motivated at the next higher
level.
2. Perception – process of receiving, organizing and assigning meaning to information or
stimuli detected by our five senses.
 Types of Selectivity
1. Selective Attention – we pay attention by exception
2. Selective Distortion – new information will be distorted to conform to the
established belief.
3. Selective Retention – we retain only part of what we have selectively
perceived.

3. Learning – changes in behavior resulting from observation and experience.

Stimulus –Response-Theory – learning occurs as a person (1) respondsto some

stimulus by behaving in a particular way, and (2) is rewarded for a correct
response or penalized for an incorrect one.

5 Factors Fundamental to Learning

1. Drives – internal or external forces that require the person to respond in some
way.
2. Cues – signals from the environment that determines the pattern of response.
3. Response – behavioral reactions to the drive and cues.
4. Reinforcement – results when the response is rewarding.
a. Positive – involves experiencing a desirable outcome as aresult of
engaging in the behavior.
b. Negative – occurs when a behavior allows a person to avoid an
undesirable outcome.
5. Punishment – an individual’s pattern of traits that influence behavioral
responses.

4. Personality – an individual’s pattern of traits that influence behavioral responses.

Psychoanalytic Theory of Personality – Sigmund Freud contended that there are
three parts to the personality:
• Id – houses the basic instinctive drives.
• Superego –the conscience accepts moral standards and directs the
instinctive drives into acceptable channels.
• Ego – conscious, rational control center that maintains a balance between
id and superego.

5. Self-concept / self-image – the way we I see ourselves

• Actual self-concept – the way you see yourself
• Ideal self-concept – the way you want to be seen or would like to see
yourself.
 6. Attitudes – is the learned predisposition to respond to an object or class of objects in a
consistently favorable or unfavorable way.
7. Situational Influences – temporary forces associated with the immediate purchase
environment that affects behavior.
1. When consumers buy / Time dimension – buying is influenced by season, week,
day or hour.
2. Where consumers buy / Physical and Social surroundings
Physical Surroundings – are the features of a situation that are apparent
to the senses, lighting, smells, weather and sounds.
3. How consumers buy / Terms of the purchase
4. Why consumer buys / Objective of the purchase
5. Conditions under which consumers buy/ States and Moods

7 The Business Market

Business Market – all business users or organizations that buy goods andservices for one of the
following purposes:
• to make other goods and services
• to resell to other business users or to customers
• to conduct the organization’s operations

Business Marketing – marketing of goods and services to business users

Components of Business Market
1. Manufacturing Market
2. Agriculture Market
Agribusiness – farming, food processing firms and other large scale farming-related
enterprises
3. Reseller Market – one segment of the business market, consisting of wholesaling and retailing
middlemen that buy products for resale to other business users to consumers.
4. Government Market – includes national and local units buying for government institutions such
as schools, offices, hospitals and military bases.
5. Services Market – all transportation carriers and public utilities and the many financial, insurance,
legal and real estate firms
6. “Non-business” business Market – includes such diverse institutions as churches, colleges and
universities, museums, hospitals and other health institutions, political parties, labor parties,
labor unions, and charitable institutions.
7. International Market – the activities of an organization to market its products in two or more
countries.

Characteristics of Business Market Demand

1. Demand is derived. The demand for a business product is derived from the demand for the
consumer products in which that business product is used.

2 Significant Implications:
1. To estimate the demand for a product, a business marketer must be very familiar with
how it is used.
2. The producer of business product may engage in marketing efforts to encourage the sale
of its buyer’s products.

2. Demand is inelastic. The demand for many business products isrelatively inelastic, which means
that the demand for a product responds very little to changes in its price.

Elasticity of Demand – refers to how responsive demand is to a change in the price of a

product.
3. Demand is widely fluctuating.
4. Buyers are well informed.

3 Reasons:
1. There are relatively few alternatives for a business buyer to consider.
2. The responsibility of a buyer is in an organization is ordinarily limited to a few products.
3. For most consumer purchases, an error is only a minor inconvenience.

Determinants of Business Market Demand

1. Number of Buyers
2. Purchasing Power
Activity indicator of buying power – a market factor that is related to sales and
expenditures (e.g. measures of manufacturing activity)
3. Buying Motives

Major Types of Buying Situations

1. New-task buying – first-time purchase of a major product; more peopleare involved and
information needs are high and the evaluation of alternatives is difficult.

2. Straight rebuy – a business buying situation in which the buyer routinely reorders something
without any modifications; low-involvement purchase with minimal information needs and no
great consideration of alternatives.

3. Modified rebuy – somewhere between the other two in terms of time and people involved,
information needed and alternatives considered.

Systems Selling – buying a packaged solution to a problem from a single seller, thus avoiding all
the separate decisions involved in a complex buying situation.
Buying Center – all the individuals and units that participate in the business buying-decision
process.
 • Users – the people who actually use the business product
• Influencers – the people who set the specifications and aspects of buying decisions
• Deciders – the people who make the actual buying decision regarding the business product
and the supplier
• Gatekeepers – the people who control the flow of purchasing information within the
organizations as well as between the firm and potential vendors.
• Buyers – people who interact with the suppliers, arrange the terms of sale, and process the
actual purchase orders.

Buying Patterns of Business Market

1. Direct purchase
2. Nature of relationship
3. Frequency of purchase – because of this buying pattern, a great burden is placed on the
advertising and personal selling programs of industrial sellers.
4. Size of order
5. Length of negotiation
Some reasons of extended negotiations:
a. several executives are involved in the buying decision
b. sale often involves a large amount of money
c. industrial product is often made to order, and considerable discussion is involved in
establishing the exact specifications
d. bids are often involved (as in construction work), and the seller needs time to prepare
careful estimates
6. Reciprocity arrangements
7. Demand for service
8. Dependability of supply
9. Leasing instead of buying

8 Product Planning and Development

Product - a set of tangible and intangible attributes including packaging, color, price, quality and
brand plus the seller’s services and reputation
- Broadly defined, products include physical objects, services, events, persons, places,
organizations, ideas, or mixes of these entities.

Services –any activity or benefit that one party can offer to another that is essentially intangible and
does not result in the ownership of anything.

Classification of Products
1. Consumer products - are intended for use by household consumers for non-business purposes

2. Business products - are intended for resale, for use in producing other products, or for
providing services in an organization

Three Levels of Product

Augmented product

Actual product

Core product

Classification of Consumer Goods

1. Convenience goods - a tangible product that the customer usually buys frequently, immediately,
and with a minimum of comparison and buying effort.
2. Shopping goods - consumers want to compare quality, price, and perhaps style in several
stores before making a purchase
Ex. furniture, clothing, used cars, major appliances…etc.

3. Specialty goods - consumers have strong brand preference and are willing to expend
substantial time and effort in locating the desired brand

4. Unsought goods - a new product that the consumer is not yet aware of or he is aware of but
does not want right now

Classification of Business Goods

1. Raw materials - business goods that become part of another tangible product prior to being
processed in any way
2. Fabricating materials and parts - business goods that become part of the finished product
after having been processed
Fabricating materials undergo further processing (e.g. yarn being woven into cloth, flour
made into bread)
Fabricating parts are assembled with no further change in form (e.g. zippers on clothing
and semiconductor chips in computers)
3. Installations - manufactured products that are an organization’s major, expensive and long-
lived equipment
4. Accessory equipment - tangible products that have substantial value and are used in an
organization’s operations
5. Operating supplies - characterized by low peso value per unit and a short life and that aid in an
organization’s operations without becoming part of the finished product

Social Marketing. The design, implementation, and control of programs seeking to increase the
acceptability of a social idea, cause, or practice among a target group.

PRODUCT INNOVATION
Importance of Product Innovation
1. Requirement for growth
2. Increased consumer selectivity
3. High failure rates

Categories of New Product

1. Products that are really innovative
2. replacements that are significantly different from existing products
3. Imitative products that are new to a particular company but not new to the market

New Product Strategy - is a statement identifying the role a new product is expected to play in
achieving corporate and marketing goals

Stages in the Development of New Products

1. Generating new-products ideas – the systematic search for new-product ideas.
2. Screening ideas – screening new-product ideas in order to spot good ideas and drop poor
ones as soon as possible.
3. Concept Development and Testing
 Product Concept – the idea that consumers will favor products that offer the most
quality, performance, and features and that the organization should
therefore devote its energy to making continuous product improvements.
Concept testing – testing new-product concepts with a group of target consumers
to find out if the concepts have strong consumer appeal.

4. Marketing strategy development – designing an initial marketing strategy for a new product
based on the product concept.
5. Business analysis- a review of the sales, costs, and profit projections for a new product to
find out whether these factors satisfy the company’s objectives.
6. Product development – developing the product concept into a physical product in order to
ensure that the product idea can be turned into a workable product.
7. Test marketing – the stage of new-product development in which the product and marketing
program are tested in more realistic market settings.
8. Commercialization– introducing a new product into the market.

Producer’s Criteria for New Products

1. There must be adequate market demand
2. The product must satisfy key financial criteria
3. The product must be compatible with environmental standards
4. The products must fit into the company’s present marketing structure

New Product Adoption and Diffusion

Adoption Process – set of successive decisions and individual makes before accepting an
innovation

Diffusion– the process by which an innovation spreads throughout a social system over time.

Stages in Adoption Process

Awareness - Individual is exposed to the innovations, become a prospect
Interest - Prospect in interested enough to seek information
Evaluation - Prospect judges the advantages and disadvantages of a product
Trial - Prospect adopts the innovation on a limited basis
Adoption - Prospect decides whether to use the innovation on a full scale basis
Confirmation - Prospect becomes a user who immediately seeks assurance that decision
to purchase the product was correct

Adopter Categories
1. Innovators – a venturesome group that constitute about 3% of the market and are the first to
adopt an innovation.
2. Early Adopters – about 13% of the market- purchase a new product after innovators but sooner
than other consumers. It includes more opinion leaders
 3. Early Majority – includes more deliberate consumers who accept an innovation just before the
average adopter in social system. They represent about 34% of the market.
4. Late Majority – a skeptical group of consumers who usually adopt an innovation to save money
or in response to social pressure from their peers. They rely on their peers as sources of
information.
5. Laggards – 16% of the market- are consumers who are bound by tradition and hence are last
to adopt innovation. Their point of reference is what was done in the past.
6. Non-adopters

Innovation Characteristics Affecting Adoption Rate

1. Relative Advantage – the degree to which an innovation is superior to currently available products
2. Compatibility – the degree to which an innovation coincides with cultural and experiences with a
prospective adopters
3. Complexity – the degree of difficulty in understanding or using an innovation
4. Trialability – the degree to which an innovation may be sampled on some limited basis
5. Observability– the degree to which an innovation actually can be seen to be effective

9 Product Mix Strategies

Product mix - the full list of all products offered for sale by a company. It is also called product
assortment.

Dimensions of Product Mix

1. Breadth - measured by the number of product lines carried
2. Depth - the variety of sizes, colors and models offered within each product line.

Product line - a group of products that are closely related because they function in a similar
manner, are sold to the same customer groups, are marketed through the same
types of outlets, or fall within given price ranges.

Product-Mix Strategies
1. Positioning the product- developing the image that a product projects in relation to competitive
products and to the firm’s other products

• Positioning in relation to a competitor

• Positioning in relation to a product class
• Positioning by price and quality
• Positioning in relation to product use
• Positioning in relation to a target market
 • Positioning by product attribute

2. Product-mix expansion

• Line extension - adding a similar item to an existing product line with the same brand name
• Mix extension - to add a new product line to a company’s present assortment
➢ Related product, same brand
➢ Unrelated product, same brand
➢ Related product, different brand
➢ Unrelated product, different brand
3. Trading up and trading down

Trading up - adding a higher price product to a line to attract a broader market

Trading down - adding a lower price product to a company’s product line
4. Alteration of existing products - a strategy of improving an existing product
5. Product-mix contraction - carried out by either eliminating an entire line or by simplifying the
assortment within a line

The Product Life Cycle - consists of the aggregate demand over an extended period of time for all
brands comprising a generic product category

1. Introduction stage - a product is launched into the market in a full scale marketing program
- sometimes referred to as Pioneering stage and is the most risky and expensive
because substantial pesos must be spent in seeking consumer acceptance of the
product
2. Growth stage/ market-acceptance stage - sales and profits rise, often at a
rapid rate

3. Maturity stage - sales continue to increase, but at a decreasing rate

4. Decline stage - is inevitable for one of the following reasons:
a. The need for the product disappears
b. A better or less expensive product is developed to fill the same need.
c. People simply grow tired of the product, so it disappears from the market.

Length of the Product Life Cycle

1. The product gains widespread consumer acceptance only after an extended introductory period.
2. The entire life cycle begins and ends in a relatively short period of time.

Fad - a product or style that becomes immensely popular nearly overnight and then falls
out of favor with consumers almost as quickly.
3. The product’s mature stage lasts almost indefinitely.

Planned Obsolescence and Fashion

Planned obsolescence - making an existing product out of date and thus to increase the market for
replacement products

Types of Planned Obsolescence

• Technological or functional obsolescence
- significant technical improvements result in a more effective product
• Style obsolescence(fashion or psychological obsolescence)
- superficial characteristics of a product are altered so that the new model is easily
differentiated from the previous model and people become dissatisfied with it
• Postponed obsolescence
- Technological improvements are available, but they are introduced until the
market demand for present models decreases and a new market stimulus is
needed.

Nature of Style and Fashion

Style - a distinctive manner of construction or presentation in any art, product, or endeavor
(singing, playing, or behaving)

Fashion – any style that is popularly accepted and purchased by successive groups of people over
a reasonably long period of time

Fashion Adoption Process

- a series of buying waves by which a style becomes popular in a market; similar to
diffusion of an innovation.

Fashion Cycle
- represents the introduction, rise, popular culmination, and decline of the market’s
acceptance of a style.

Theories of Fashion Adoption

• Trickle-down – fashion cycle flows downward through several socioeconomics levels
• Trickle-across – cycle moves horizontally and simultaneously within several
socioeconomic levels.
• Trickle-up – style first becomes popular at lower socioeconomic levels and then flows
upward to become popular among higher levels.