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Essentials of Marketing
Essentials of Marketing
Fifth edition

Editor:
Michael Cant

rrr;-.-
~
JUTA
 Essentials of Marketing

First publisded 1999

Second edition 2004
Third edition 2010
Fourth edition 2013
Fifth edition 2016
Reprinted 2017
Reprinted 2018
Reprinted 2019

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 Contents

Preface..................................................................................................................... ix
AuthorTeam ........................................................................................................... xi
Chapter :1: The basics of marketing ................................................................... 1
1.1 Introduction..................................................................................................... 1
1.2 What marketing is ............................................................................................ 2
1.2.1 Gaps between produ~tion and consumption..................................... 3
1.3 Universal functions or activities of marketing................................................ 5
1.3.1 The primary function of marketing..................................................... 5
1.3.2 Facilitating or auxiliary functions ....................................................... 5
1.3.3 Exchange functions.............................................................................. 6
1.4 Different marketing orientations .. ...... ............ .... .... ...... ........................ ...... .. .. 6
1.4.1 Production orientation_........................................................................ 6
1.4.2 Product orientation.............................................................................. 7
1.4.3 Sales orientation .................................................................................. 7
1.4.4 Marketing orientation (pure marketing concept) .............................. 8
1.4.5 Societal orientation ............................................................................. 9
1.5 Relationship marketing ................................................................................... 10
1.5.1 A broader view of the market.............................................................. 10
1.5.2 Expansion of the market offering ....................................................... 10
1.5.3 A bigger market.................................................................................... 11
1.6 Core aspects of marketing............................................................................... 12
1.6.1 Marketing is about customer need fulfilment.................................... 12
1.6.2 Marketing involves an exchange......................................................... 13
1.6.3 Marketing involves product, price, place and promotion ................. 14
1.6.4 Marketing can be performed by both marketers and individuals..... 15
1.6.5 Marketing can happen in a variety of settings ................................... 15
1.6.6 Marketing helps create value .. .... ...... .... .. .......... ...................... ........ .... 15
1. 7 The marketing function within an organisation............................................. 16
1. 7.1 The place of the marketing function .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 16
1.8 The management tasks in marketing.............................................................. 18
v 1.8.1 Planning ............................................................................................... 19
t--- 1.8.2 Implementation................................................................................... 19
l.----1.8.3 Control.................................................................................................. 21
1.9 The technological revolution in marketing .................................................... 21
1.9.1 Interactive and internet marketing..................................................... 22
 Essentials of Marketing

1.9.2 Broadband............................................................................................ 22
1.9.3 Wireless ................................................................................................ 23
Summary ................................................................................................................... 23
References................................................................................................................. 23

Chapter 2: The marketing environment........................................................... 26

2.1 Introduction..................................................................................................... 26
2.2 Components of the marketing environment.................................................. 27
2.3 The variables in the micro-environment ................ ............ ........ .... ................ 28
2.3.1 Mission of the business ....................................................................... 29
2.3.2 Selection of the target market ............................................................. 30
2.3.3 Marketing objectives ........................................................................... 31
2.3.4 Resources, sldlls and abilities .... ...... .... .. .... .... .... ............ ............ ...... ... 33
2.3.5 The marketing instruments ................................................................. 33
2.4 The variables in the market environment .............. .... .. .... .. .... .. .. .... .. .. ............ 34
2.4.1 Suppliers .............................................................................................. 35
2.4.2 Consumers ........................................................................................... 35
2.4.3 Competitors .... ........... .... .... . ... ...... .... ..... ....... ... . ... . .. .. ......... ... ... ... ....... ... 36
2.5 The variables in the macro-environment ....................................................... 37
2.5.1 Political and legal environment.......................................................... 38
2.5.2 International environment ................................................................. 38
2.5.3 Physical environment .......................................................................... 39
2.5.4 Technological environment ........ .... ..... ...... ........ ... ... ... ........ .... .. .... ... ... 39
2.5.5 Economic environment....................................................................... 40
2.5.6 The socio-cultural environment ......................................................... 41
2.6 SWOT analysis ............. .... .... ...... .... .... ..... ....... ... ... .............. ...... ........... ....... ..... . 42
2.6.1 Strengths .............................................................................................. 42
2.6.2 Weaknesses ......... .... ..... ..... . ...... .. .................. ... ......... ................ ...... ... ... 42
2.6.3 Opportunities ..... ........... ..... ... .... ..... ............. ... ... . ... ........ ...... ... . ............ 42
2.6.4 Threats ................... .... .... ..... .... ..... ... ... .... .... ... ...... . .. ...... ..... ........ ............ 43
2.7 Environmental scanning................................................................................... 43
Summary ................................................................................................................... 44
References .. ...... ...... ...... ............ .. ....... ... ... . ......... ........ ............ .. . ....... .... .. .. .. ............ . . .. 44

Chapter 3: The international marketing environment ................................. 46

3.1 Introduction..................................................................................................... 46
3.2 Defining international marketing ..... ............................ .................................. 47
3.3 External factors influencing the international marketing environment....... 48
3.3.1 Social/cultural factors ......................................................................... 49
3.3.2 Economic development ...................................................................... 51
3.3.3 Technological development .... ....................... ..................................... 53

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 Contents
----------

3.3.4 Political/legal structures ..................................................................... 53

3.3.5 Demographic make-up ....................................................................... 54
3.3.6 Natural resources ................................................................................. 55
3.4 International decision-making process.......................................................... 55
3.5 Deciding whether to enter international markets.......................................... 56
3.6 Deciding which markets to enter.................................................................... 57
3.6.1 Marketing mix strategies ..................................................................... 57
3. 7 Deciding how to enter the markets ........ .......... .... .. .. ............ ................ ...... .. ... 58
Summary ................................................................................................................... 59
References ... ... ... ... .. .. ... .. .. .. .. .. ..... .. ... .. .. ....... .. ... ... ... .. .. .. .. .... .. .. .. .. .. .... .. .. .. .... ... .. ...... .. ... 60

Chapter 4: Marketing research .......................................................................... 62

4.1 Introduction ........................."'.
·, ..... .. ...... ............. ..... ...... .... .. ................ .... ...... .. .. 62
4.2 The importance of marketing Ieseflrch in decision-maldng ......................... 63
4.2.1 The value of marketing information ................................................... 63
4.2.2 Marketing research and the marketing mix ...... ........................ ......... 65
4.2.3 Marketing research and the macro-environment.............................. 66
4.2.4 Marketing research identifies and defines marketing opportunities
and problems ....................................................................................... 67
4.2.5 Marketing research monitors marketing performance ..................... 67
4.2.6 Marketing research improves understanding ofthe marketing
process.................................................................................................. 68
4.3 The marketing information system (MIS) .............. .......... .... .. ........ .... ...... ...... 68
4.3.1 Characteristics of valuable information............................................. 68
4.3.2 Information management ................................................................... 69
4.3.3 Components of a marketing information system .............................. 69
4.4 Marketing research ...... . ......... .... ... ....... ............. ... .. ............... ... .. .. ...... .... ...... .... 73
4.4.1 Steps in the marketing research process ............................................ 74
4.5 Market potential and sales forecasting............................................................. 99
4.5.1 Levels of market measurement ........................................................... 100
4.5.2 Relevant markets for measurement .................................................... 101
4.5.3 Market and sales potential .................................................................. 101
4.5.4 Estimating market and sales potential ................................................ 102
4.5.5 Market and sales forecasting ............................................................... 103
4.5.6 Forecasting methods ........................................................................... 104
4.6 Analysing and using marketing information .................................................. 105
4.6.1 Customer relationship marketing ....................................................... 105
4.6.2 Distribution and use of marketing information ................................. 105
4.7 International marketing research ................................................................... 106
4.8 The impact ofthe internet on marketing research ......................................... 106
4.8.1 Advantages of internet surveys ........................................................... 107

vii

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 Essentials of Marketing

4.8.2The role of consumer-generated media in marketing research ........ 107

4.8.3Behavioural targeting .......................................................................... 108
Summary ................................................................................................................... 108
References ................................................................................................................. 108

Chapters: Consumer behaviour ........................................................................ 110

5.1 Introduction ..................................................................................................... 110
5.2 Individual factors influencing consumer behaviour ..................................... 112
5.2.1 Motivation ............................................................................................ 112
5.2.2 Perception ............................................................................................ 116
5.2.3 Learning ability .................................................................................... 119
5.2.4 Attitudes ............................................................................................... 121
5.2.5 Personality ........................................................................................... 123
5.2.6 Lifestyle ................................................................................................ 124
5.3 Group factors influencing consumer behaviour ............................................ 125
5.3.1 Family ................................................................................................... 125
5.3.2 Cultural group ...................................................................................... 127
5.3.3 Social class ........................................................................................... 128
5.3.4 Reference groups ................................................................................. 129
5.3.5 Opinion leaders ................................................................................... 129
5.4 Consumer decision-maldng process .............................................................. 130
5.4.1 Types of decision-maldng ................................................................... 130
5.4.2 Phases in consumer decision-maldng ................................................ 130
5.4.3 Adoption of new products ................................................................... 131
Summary ................................................................................................................... 132
References ................................................................................................................. 132

Chapter 6: Market segmentation, targeting and positioning .................... 134

6.1 Introduction ..................................................................................................... 134
6.2 Segmentation, targeting and positioning defined .......................................... 134
6.3 The advantages of market segmentation ........................................................ 135
6.4 The disadvantages of market segmentation ................................................... 136
6.5 Market segmentation and mass marketing .................................................... 136
6.6 Using RFM segmentation to segment a market ............................................. 137
6. 7 Prerequisites for market segmentation .......................................................... 138
6.8 Bases for segmenting consumer markets ....................................................... 139
6.8.1 Geographic segmentation ................................................................... 141
6.8.2 De1nographic segmentation ................................................................ 142
6.8.3 Psychographic segmentation .............................................................. 147
6.8.4 Behaviouristic segment~tion .............................................................. 150

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 Contents

6.9 Bases for segmenting business markets ......................................................... 151

6.9.1Geographic location ............................................................................ 152
6.9.2Type of organisation ............................................................................ 152
6.9.3Customer size ....................................................................................... 152
6.9.4Product usage ...................................................................................... 152
6.10 Why segmentation fails ................................................................................... 152
6.10.1 Business reasons .................................................................................. 152
6.10.2 Implementation issues ........................................................................ 153
6.10.3 Performance issues .............................................................................. 153
6.11 Targeting .......................................................................................................... 153
6.11.1 Criteria for selecting potential target markets ................................... 153
6.11.2 Targeting market segments ................................................................. 156
6.12 Product positioning ......................................................................................... 157
6.12.1 Product positioning maps aid decision-making ................................ 158
6.12.2 The positioning process ....................................................................... 159
6.12.3 Positioning methods ............................................................................ 161
6.12.4 Con1mon positioning errors ................................................................ 162
6.13 Repositioning ................................................................................................... 162
Summary ................................................................................................................... 163
References ................................................................................................................. 163

Chapter 7: Integrated marketing ....................................................................... 166

7.1 Introduction ..................................................................................................... 166
7.2 The marketing process ............................................................................... .' ..... 167
7.3 Marketing orientation ..................................................................................... 168
7.4 The marketing environment ........................................................................... 169
7.5 Obtaining and using marketing information ................................................. 171
7.5.1 Perspectives on consumer behaviour ................................................. 173
7.6 Target market selection and positioning ................................ :....................... 175
7.7 Integrated marketing communication (IMC) ................................................ 176
7.7.1 The need for integrated marketing communication .......................... 176
7. 7.2 Elements of integrated marketing communication ........................... 177
7.8 The new marketing communications model ................................................. 177
7.9 Steps in developing effective marketing communications ............................ 178
7.9.1 Identifying the target audience ........................................................... 178
7.9.2 Determining the communication objectives ..................................... 178
7.9.3 · Designing a message ............................................................................ 179
7.9.4 Choosing media ................................................................................... 180
7.9.5 Collecting feedback ............................................................................. 181
7.10 The marketing mix ........................................................................................... 181
7.10.1 Product decisions ................................................................................ 182
7.10.2 Pricing decisions .................................................................................. 183

ix
Essentials of Marketing

7.10.3 Distribution (place) decisions ............................................................. 183

7.10.4 Promotion decisions ............................................................................ 184
Summary ................................................................................................................... 186
References ................................................................................................................. 187

Chapter 8: Strategic marketing ......................................................................... 189

8.1 Introduction ..................................................................................................... 189
8.2 Strategic marketing management ................................................................... 189
8.2.1 The meaning of strategic marketing management ............................ 189
8.2.2 Strategic versus tactical planning ....................................................... 190
8.3 Planning ........................................................................................................... 191
8.3.1 The nature of planning ........................................................................ 191
8.3.2 The marketing planning process ......................................................... 192
8.4 Implementation ............................................................................................... 193
8.4.1 The importance of implementation .................................................... 194
8.5 Control ............................................................................................................. 195
8.5.1 The nature of control ............................................................................ 195
8.5.2 Steps in the evaluation and control process ...................................... 195
Summary ................................................................................................................... 199
References ................................................................................................................. 199

Index ......................................................................................................................... 200

X
 Preface

Marketing is that function in the organisation that has been tasked with identifying
customers' needs and wants, establishing which segments or target markets to
serve based on the identified needs and available resources, and designing the
appropriate products to be offered at the right time and place. This is, however, not
all that marketing is; it is also the philosophy that governs the business and provides
direction to all in the organisation, in order to satisfy customers' needs and to ensure
that the service and experience of customers is such that they are satisfied.
However, this is not possible without all the departments in the organisation
working together to ensure that the total value delivery process provides exceptional
value to customers. Everybody in the organisation, therefore, needs to be focused
on the customer in order to provide this superior value. Decisions have to be made
based on the impact it will have on the customer and the organisation.
Marketing is not just advertising and selling- there is much more to it. There first
needs to be an understanding of what the customer wants and then to find solutions
to these wants that will satisfy customers through the quality, service, and superior
value offered.
Marketing is not limited to businesses - it takes place all around us. Businesses,
politicians, churches and individuals all use marketing. Doctors, churches and
lawyers have all realised the value of marketing and are implementing these
essentials in their businesses on a daily basis.
It is important that all of these organisations know what the marketing
environment is and what marketing entails, which factors influence consumers'
behaviour, how to do proper market research and how to segment the market. All
these tasks are performed in order to understand what will satisfy customers' needs,
which in turn influences the decision on what specific product(s) and/or service(s)
to offer, where they should be offered and at what price, and how customers should
be informed about these offerings.
Essentials of Marketing, 5th edition, is aimed at providing a broad-based
knowledge of what marketing is and how to use it in order to create value. It is
structured in a logical and systematic manner to provide student marketers with
an understanding of the underlying principles of marketing, as well as changes and
developments in the field. Case studies, which students should find particularly
interesting, are used to explain and demonstrate the theory. This book, which
is ideally suited for a modular course in marketing, will provide students with an
excellent foundation to enable them to formulate marketing strategies in the real
world.
 Essentials of Marketing

The authors are all specialists in their fields and embody this knowledge in the theory.
Their extensive practical experience in the field ensures that this lively text achieves a
good balance between the academic and practical approaches to marketing.
Enjoy Essentials ofMarketing, 5th edition, and apply these principles in your own
environment.

MC Cant
November 2016

xii
 Author Team

ProfMC Cant, Professor in Marketing, Unisa.

R Machado, Senior Lecturer: Department of Marketing and Retail Management,
Unisa.
L Manley, Lecturer: Department of Marketing and Retail Management, Unisa.
 Chapter 1

The basics of mar~eting

Learning objectives . ~-'- ·;·;~. ::·. ' ~-.;, .

After you have studied this chapt~~>y6&.should be able to:

11 understand and explain what marketing is
11 explain the concept of marketing
111 be aware of what type of marketing activities there are and describe them
11 understand and explain the five maih marketing orientations
11 identify the core aspects of marketing
11 understand and explain the marketing process
1!1 discuss the marketing mix elements
11 explain the marketing function in an organisation
11 explain the value of marketing to the consumer.

1.1 Introduction
As consumers, we are constantly involved and affected by what happens around us
- in our daily lives as well as in business. It is therefore safe to say that marketing
i,s a central part ofthe dailylives of everybody- individuals and businesses alike
- and that as a society, we are not only bombarded with sales calls, e-mail pitches,
television commercials, catalogues, social media such as Twitter and Face book, and
more, 1 but about half of every rand we spend pays for marketing costs. Marketing
costs are widespread and include a range of activities, such as research, product
development, packaging, transportation, storage, advertising and sales expenses to
name a few. Therefore, if you as the consumer develop a better understanding of
marketing, you will not only become a better-informed consumer, but you will also
understand the buying process better and be able to negotiate more successfully
with sellers. What's more, you will also be better equipped to demand satisfaction
when the goods and services you buy do not meet the standards promised to you by
an organisation.
_lYiarketing_has many: functions, but the f!?~:t]lill:ke1ing_play.s .· withi.Q~f!.!l.
...QI!,Lanisation is..§.tron_g!y:_influenced by i~philosophy ~~~lh..~...E!.O.c.f!l.£~i.~?..~.:.
(-orientated
= organisation
- - does
- - not place emphasis on the desires_,....and needs.. ___
_.. . _____ of _the
 Essentials of Marketing

___!!l,il.!.ketp_la~<'l.P.ut focuses QD..tl:l.~__Qig<l.l1l~~!igl?:'s il!-!ernal capabilities. An organisatio_l!

____\Y.!th !!JJ..!:.Qduct ~~ti.Qn..£Q~_ntrates ~n :erovidi~~~~­
that focus on innovation, design and quality. 2 A sales-orientated organisation believes
that high sales volumes produce high profits··and rnerefore"r~'2~~~~:~n,~_t.4'~:·b:~"fu;:ftnat
i~di_vid1.1~I~:wm buy more products iHorceful·srrr?s~fe'CEn1ques.ar~ utilised. A mafkeF
orientation,· ~n-th~--o"th.-er-1iaria;-Hwlien·an·argaiiisaUoii j5Iace·s its ·core-foci.i's on
~~ti;i}ring-organisatioiialobJecfiveswhHe·also··satisfying·cus'fBiii~Llii~il~~~~ct~w~il1:8'~
a
i~stly,' an organi~atio~ can talc~ ~n "8ode1:ai !;1a~k~t-orlentate-;:'rphilosophy, whereby
the organisation goes beyond a pure marketing orientation to include consumers'
wellbeing and long-term best interests.
The coreaims pfll1arketing are_ to ~n§weth?-t customers' needs_ and wants are
understbod, Irl_et and satisfied, and i~ o'~cl;~~to.ricwe~e this, a market~r m~~a~·to have'-
an understanding of the target market that the o~~anisation wishes t() serve. In order
to understand the market, the marketer will need to follow a process. This process is
the marketing process and comprises the following:
·"' !--~nderstandins..Efthe organisation's missio_~.and the role that marketing plays
in fulfilling it
L.-· • setting marketing objecti~§.
"'"''fl • scanning the environment
,..-/ • developing and implementing a marketing strategy by selecting a ta~_g~!.!D.!'!rke!_

\..-~•
.. developing and implementing a marketing mix
~

"""/ • implementing the strategy

1,./ 11 designing performance measures
L-- • evaluating marketing efforts and making changes if needed.
By ensuring that customers' needs and wants are satisfied a marketer will realise a
mutually satisfying exchange between the customer and the organisation. However,
in order to achieve such an exchange, marketers need to ensure that the marketing
mix- which comprises the product or service, pricing, promotion and distribution-
meets the needs of the market.
The above concepts will be discussed in greater detail in this chapter so as to
provide a basic understanding of what marketing is all about, the new ways in
which marketers are getting their messages across to consumers, and the value that
marketing creates for the organisation and the consumer.

1.2 What marketing is

Marketing covers a diverse and wide range of aspects and functions, which makes
it difficult to find one definition that suits all. If you were to ask people what they
understand marketing to mean, you would most likely get many different responses. 3
Too often people only_ see marketing _as consisting ·af advertising or selling, 4 while
others seem to think that marketing has something •to do With the· availability of

2
 Chapter 1- The basics of marketing

products in store, making sure there is sufficient stock on hand for future sales and
for the display ofproducts. 5 Marketing includes all these activities and many more. 6
What is more important, however, is that marketing actually begins long before a
prod~~t·i;-pj"~~~d o~-a sh~lf. 7 Before--a pro-ciuct is_ 'plaf€Jd_itn.a .shelfrattention P1J!§l
J?.t:: giy?rijo_analy_silig ciistomer needs, and gaining the necessary information so
-that the organisation can -d-esign and· pioduc·e-go'ocfs"an~d s-~-~-vi~~~ th~t--!Ue~(buyer _
expectations and customer preferences, thus eD.suring that relationships are cr~ated
and maintained with customers and suppliers. 8 Therefore, according to Kotler and
Armstrong, sound marketing is vital to the success of all organisations and must
be seen as such by all dealing with the customer, be it directly (eg salesperson) or
indirectly (ie finance and administration). 9
Essentially, marketing can be seen to be made up of two parts. Fi!:t>-1 marketing ____ ~ ---..,._ ~-

.i1:Ut!1.!!W.:!JJdfl.LlLP.b-l!g_sophy or a management orientation that aims to retain and

_grow c.~t£:lPt_£~t~me~·-th~'OugilCI~"ii;~~Y,~-~ti~-i~~ti'~~~;ct"'10"-attract~e~:~~i!9.IEers---~
-_b:y---_r;omising ___ bett;,:i~ii:ii:m~iJi'OcliiCis-..oi .. servrces:'~ 6 _..secandi:Y;---m.~keting i;-·a"'
• ' - • ~·.,,~••><• ...._r_-,,•P-<• -- - • •o••- , -- -."'<-

combination of actions and processes used to deliver this philosophy. 11

In a broad sense, marketing can be defined as a managerial and social process
in which organisations and individuals acquire what they need, want or desire
through the creation and exchange of value with others. In a narrower context,
marketing can be seen as _Q.1lils!1!1K.I?rofitable and V?-b:t.<.tbl.!L~2L<;:~ge relationships
_j{iilijii~!£e12--:rb.~~~~~-:!~~~}\!~ik:-~!Iiii~t\~~~P-<:i~uQn..neJlng§...m'E.i~1i!ig _ _~~}~
-~£lt~:ity, s Elt _QfJJJstitll.tiog§1 _e_n c;t_PF.Q£~~~~-eyJQLQI~-g_ting~--~9J!!IDUnicating, ..deliy_~~ng1
and exchanging offerings that have value for customers, clients, partners, and
society at large: 13 Therefore, according to this definition, the goal of marketing is to
dey,~lop.r~~gt~RB,~l;,ig~~J,~"'2XgtHl~~"~i~~-T~.lL~tmu~r~.f!£1_Q..QlheL~!.ttitte.~.Ql£!L~f[~gL!.l:~
organisation. 14
··-· .... ---_-,,....

A more simplistic and slightly more traditional definition is that marketing: 15

• discovers consumers' needs and wants
• creates goods and services that meet these needs and wants
• prices, promotes and delivers goods and services that meet these identified needs
and wants.
In order to fully understand the importance of marketing, one must first understand
that there are various gaps between the production of a product and the consumption
of that product by a purchasing consumer, and it is the function of marketers to assist
in closing these gaps. The following section identifies possible gaps between the
production of a product and customer consumption.

1.2.1 Gaps between production and consumption

The place where a product is produced is not necessarily the place at which
it is consumed and this results in gaps in the marketing process. According to
Nieuwenhuizen, several types of gaps can be distinguished: 16

3
Essentials of Marketing

• S~gap. This is a geological space that exists between a consumer and

manuf;ct'li.Ter. For example, maize is grown in certain geographical areas, but
consumed locally and internationally.
• ·-'Ft.r.r.u;:.,.,Sf!:£~ This is the gap between the time of production and the time of
consumption. Bananas, for example, are only grown at specific times of the year,
but kept by distributors in cold storage to be distributed throughout the year. 17
• l!Jiprmation gap. For the market to be able to use or buy a product, they need to
bei~{;;m~d'Ofthe product or service. If a new hotel was to open in a town, it will
be of no use if the market is not informed about it, where it is located, its tariffs
and so forth. 18
• Ownership gap. When buying a car, the buyer only becomes the owner once the
c;;js ;;gf;t~~~~d-in his or her name. This means the ownership is transferred to the

--
buyer of the product.
Iii Value gap. This is the gap that sellers and buyers must bridge in order to agree on

an acceptable exchange -that is, an exchange that is regarded as offering value to

both parties. If a buyer regards a price of Rl25 000 for a car to be acceptable, he
or she will more than likely purchase the car. TI1is means that the value the buyer
places on the product is the same as that placed by the seller.
The gaps described above are a constant battle for organisations to overcome and,
as transporting products and conveying information are becoming increasingly
complicated owing to an increase in customer demand, opportunities have been
created for the specialised services of intermediaries, who bridge the gap between
buyer and seller and act as go-betweens for participants who are no longer in close
contact. There are three mainldnds of intermediaries:
1. l:IJ1E.dlemen are directly: in_volved in ~g title of products that are later sold
to others. The first middlemen were probably hawkers who traded in a variety
of products and also conveyed vital information about potential markets and
desirable new products. They later made way for large wholesalers and retailers to
facilitate exchanges between buyers and sellers. House and Home, for example,
can be seen as a middleman for a wide variety of house and home products
offered to. customers under the same roof.
2.__Sales ir!J._ermediaries are agents who do not take title of products they sell. They
provide and are paid for services to facilitate the sales process.
3. Auxiliary enterprises are not directly involved in the transfer of title but provide
support services to facilitate the selling process. Examples include Transnet,
advertising agencies and commercial banks.
This section explained the gaps that exist between the producer and the consumer;
the following section addresses the functions marketing has in assisting to close
these gaps. '

4
 Chapter 1- The basics of marketing

1.3 Universal functions or activities of marketing

According to Cant, Van Heerden and Ngambi, marketing fulfils a number of
functions or performs a variety of activities, and these activities can be categorised
into three groups: primary, auxiliary /facilitating and exchange activities. 19 Marketing
functions or activities can be defined as those activities used to transfer the market
offering to a buyer. The eight universal functions of marketing that are performed by
manufacturers, retailers or intermediaries are briefly discussed below. 20

1.3.1 .Ihe-pcimaqt-:func;.tion of marketing~ 1

The primary marketing activity is_tr.ansport and its aim is to deliver the product to the
customer in the fastest. most efficient and safest way possible. This function involve-;'
moving goods from a seller to where they are purchased or needed by a buyer. This
can be done by means of road, air or sea transport, or via a pipeline, or even by
means of animals, such as donkeys. Each of these methods has its advantages and
disadvantages.

1.3.2 ...E.aJ;iljtatio.g or auxiliary fu~S 22

These functions include the following:

• $.tQ[J!lg. This is a function that entails holding_goods in a temporary locationJ,
such as a warehouse, until the goods are needed. For example, petrol is stored in
tanks and made available as and when needed. Many types of products are stored
either in raw or processed form to be made available as and when requiredj for
example, wheat is stored in silos until it is forwarded to mills to be processed.
• Standardising and grading. This refers to measures set in place to ensure tha!
products or services are manufactured or provided in such a way as to meet
mles and standards set by governments. These rules and standards usually refer
to quality and quantity and reduce or eliminate the need for the inspection of
products. Potatoes, for example, are graded according to specific criteria into
small, medium and large, as well as washed or unwashed potatoes. This makes
it easier for a buyer to distinguish between the varieties and at the same time be
assured of a certain minimum standard.
• Financing. This is considered a function as funding may occur between channel
members. Sellers such as retailers may offer credit to customers, or wholesalers
may offer credit to retailers in order to make it possible for them to buy their
products. This provision of financing comes at a cost in terms of interest that has
to be paid. It is therefore important that these costs are kept as low as possible.
For example, very few people can purchase houses and cars with cashi most
people require financing from a bank to be able to afford these expensive items.
• Risk taking._ There 'is always a risk that the products or services on offer by a
seller may not be in demand by the consumer. It is necessary for organisations to
continuously try to match their supply of goods and services to those they estimate

5
 Essentials of Marketing

the consumers will want, based on their knowledge about the consumers' needs
and wants as identified via their research, and other beliefs about consumers.
• Securing marketing information. This function entails sellers gathering
,.-information about consumers in otder to know who and where potential buyers
are. Once the collected information has been analysed, this helps marketers
to understand why certain consumers purchase particular products, at certain
locations, at certain intervals and in a certain manner. Alternatively, gathered
information provides insight on what customers seek from product offerings.

:1.3.3 Exchange functions 2 3

The third category of marketing functions refers to the actual exchange between
the parties who are buying and selling. Here ownership is transferred between the
parties: the buyer and seller.
• Buying. This is critical as marketers should seek to buy products that consumers
will find appealing. Understanding consumers' buying behaviour is key to the
buying function, as buying creates time, place and ownership utilities.
• Selling. This sets out to match the organisation's offerings to the needs of
consumers through promotional sales, advertisements of products or services or
through the use of personal sales techniques.
These activities, however, do n?t stay constant over time, but are influenced and
affected by a range of factors and the prevailing marketing orientations of the time.
The different marketing orientations that have evolved over time are discussed in
more detail in the following section.

:1.4 Different marketing orientations

The way an organisation acts in its marketing activities is largely influenced by that
organisation's marketing orientation. The type of orientation the organisation follows
will influence the overall actions in the organisation. ~i:efi.ta~
production, product, sales/selling, marketing or societaL orientation. Each of these
orientations is discussed brrefiybelow. - · --

:1.4.:1 Production orientation

Companies that are production orientated base their orientation on the belief th~
• the most favoured products are those that are low in cost and readily avail~. An
organisation with a production orientation should, therefore, focus on ways to speed
up the production and distribution ofits products. It should also focus on the internal
capabilities ofthe organisation and not on the needs of the market. The starting point
for these organisations is, therefore, to ask themselves what they are good at, what
expertise they have and what they can manufacture at low cost. This orientation may
be useful in some situations, but it lacks the ability to focus on building relationships
between sellers and buyers through satisfying consumers' needs. 24

6
 Chapter 1- The basics of marketing

The production orientation can be summarised as follows: 25

• focus lies on increasing production and internal capability
II cost reduction and control
11 increase in profits as a result of an increase in sales.

The major shortcoming of this orientation is that it does not consider whether the
goods and services it produces also meet the needs of the market.

::1..4.2 Product orientation

When following a product orientation, companies believe that consumers will
favour products that offer the most in performance, innovation and quality. This
orientation focuses marketing strategy on maldng continuous improvements to
products; organisations with a product orientation see this as their main focus as
opposed to the view of the customer. 26 They assume that by continuously improving
their products and through innovation, consumers will keep buying their products.
This is true and applicable in some instances, particularly in the technological field.

A company that follows a production orientation chooses to ignore their customers'

needs and focus only on efficiently building a quality product. This type of company
believes that if they can make the best 'mousetrap', their customers will come to them.
Source: study. com/ academy /less on/ sales- orientation-definition-exam ples-quiz.html
(Accessed 11 May 2016).

For many years, cellular phone companies and computer companies have been
extending themselves in order to have better products on the market, with new,
improved features. This seems to work very well for this market segment.
The product-orientated company can be summarised as follows: 27
11 It assumes that gogd:.::c9..1lC!liU' products will sell themselves.
• Improvingprod-ti';~_and_qu~li-tY_~~~iQI are the company's core focus.
• .. Quality.pr_ogys;Js.l~_Q.JQJ:\.!2)!1:~~-~!Jn ~~~e_~ and a su?sequent increase in profits.

:1..4.3 Sales orientation

Companies that focus 100% of their marketing efforts on selling their products use
a sales-orientated market~ng strategy. These companies are so focused on selling their
'"i]roduCts·t6tlielf'c~J'i;'~~;~-s,th.;'t1:h~y pay little attention to other areas of marketing
such as market research or surveying their customers to measure their level of
satisfaction. A company that uses a sales-orientated marketing strategy makes the
following assumptions regarding their customers:
• Everyone is a potential customer.

7
Essentials of Marketing

• Their customers do not want to spend their do liars to buy what the company has
to offer.
• Their customers will buy more products and services if they use aggressive sales
techniques in order to persuade them to buy.
• High sales volumes equal high profits for the company.
Source: http:/ /study.com/academy/lesson/sales-orientation-definition-examples-quiz.html
(Accessed 11 May 2016).

When a company decides to follow a sales orientation, it believes that forceful sales
techniques will make people buy more goods and services, and higher sales result in
higher profits. To a company that follows a sales orientation, marketing is understood
as selling things for the collection of money. The fundamental problem with a sales-
orientated company is that it may have a lack of understanding of the needs and
wants of their consumers. Sales-orientated companies often find that, despite having
an excellent selling force, they cannot convince consumers to buy products that they
simply do not want or need. 28
Sales orientation can be summarised as follows: 29
• The focus is on clearance of stock.
...- .......~~:..>
-"""'~ --~·· ,__,_,,'-",...._.,...... ~ •.-.....,.,.•.u,. ...... ~

• Companies make use of a f.m:.cfifllL§~!es and promotion strategy.

• Companies earn profits through quici~~-;a"l~sofhigh·~;I~ili'~s: .-

:1.4.4 Marketing orientation (pure marketing concept)

A marketing orientation is a very simple and appealing orientation, as it states that
socially and economically the justification of an organisation's existence lies in
satisfying consumer needs and wants while simultaneously meeting organisational
objectives. A company with this orientation understands that for a sale to occur an
aggressive sales force is not always necessary, but that a sale is more dependent on
an individual's decision to purchase. 30 According to McDaniel, Lamb and Hail~ the
marketing concept/marketing orientation includes the following: 31
• The company focuses o:q. thEUY.:?rH(l .. ?.!lcl..ng~_dLCl.f. ~?:0.:~-~!.!1--~E.~to distinguish its
products from the offerings of competitors.
• It focuses on integrating allJhe organisational functio11s. to satisfy the needs and
f ,_ ·- . - -,_ ---"'""-•"""'·-,./

wants of the market.

• The company)ocus~-~t.9.:rl achieving_theJong_:-term goals and objectives of the
~---m:gapJ_s.ation.,.by satisfying'~';;;~~;;~~:~~..;;~~d~-~~-~t;~;;t;·;~p-~;;Ih!y;;;:ctTE;'gally.
The secret to success lies in delivering a consistent, unique experience to one's
customers, which competitors cannot match, but also offerings that satisfy the
preferences and intentions of one's targeted market. However, in order to do this,
marketers require an understanding of their customers, as well as the distinctive
capabilities that enable their company to execute strategic plans - keeping in mind

8
 Chapter 1 - The basics of marketing

their newly formed understanding of their customers. Lastly, marketers must be able
to deliver a desired experience by using all integrated organisational resources. 32
In order for an organisation to be considered market orientated it would need to obtain
information on its customers, markets and competitors, and evaluate this information
from a business perspective. It would also have to identify how to deliv~ .. ~~p~~:~or .
.c~sc~?~-~E-~~~~ as well as conduct specific actions to provide value to the target market. 33
According to Cant et al, the essence of the (pure) marketing concept can be broken
up into three basic principles: 34
1. Consumer orientation. This means that all actions an organisation takes should
be directed towards the satisfaction of customer needs and wants. The customer
can be seen as a dictator, in other words, the aim or objective of the organisation
is to delight the customer. In customer-orientated businesses, the requirement
of a customer comes first. Customers can be seen as the focal point of decision-
making, whereby all other functional areas are geared towards the satisfaction of
customer needs and wants.
2. Profit orientation. In the process of meeting customer needs and wants (customer
orientation) the company will aim to meet its primary objective, namely
maximising profits. By providing a product that satisfies a customer's needs and
wants the business will be able to fulfil its own aims and goals.
3. Organisational integration. This refers to an integrated whole, a group of units
that works together to achieve a shared objective. In other words, all functional
departments and people in an organisation should work together to achieve the
successful marketing of the market offering of the business. ~Uactivities should be
to
integrated so as to satisfy customer needs and want~, and achieve a satisfactory
rate of return on investment. It takes only one person to undo all the good work
the others have done and to lose a customer.

1.4.5 Societal orientation

The societal marketing orientation queries whether or not the marketing concept/
orientation avoids possible clashes between the short-term wants and the long-
term well-being of customers. This orientation holds that a marketing strategy
should provide value to customers in a way that sustains or enhances both the
customer's and society's well-being. Such an orientation focuses on sustainable
marketing, environmentally friendly and socially responsible marketing that can
meet the consumer's and business' present needs while ensuring the ability of
future generations to meet their needs. 35 Companies should learn to balance three
considerations in setting marketing strategies, namely company profits, consumer
wants and societal interests.
According to Cant, societal marketing orientation, also referred to as social
responsibility, is 'a concept that maintains that businesses are part of the larger society
in which they exist and are accountable to society for their performance: Marketers,

9
 Essentials of Marketing

therefore, should strike a balance between targeting customers' needs and wants,
and the long-term financial goals of the business. The way in which businesses often
demonstrate social responsibility is by spending large sums of money on projects
contributing to the welfare of the community at large.
Another example of societal orientation is when organisations use green
marketing. 36 Green marketing is the development and implementation of marketing
programmes that are designed to enhance an organisation's environmental image.
The following list summarises the different market orientations and their main areas
offocus:
• A production orientation focuses on"wh£t!h.~9.!:&C1EI.~~-!~9}~-~,~~~~~Jhf!Lf~~
~·
be considered.....supe1:ior tcLo.ther_.productsJn_tb.fLWilrlc_~_S,
.. ,_, -· -- .-.-.·· ,?....
-"'-•~'""'-.,...""·"""~'.,_• ..;.,_~--'"" ".>tt.~:..<l'

• A product orientation focuses on what the organisation can design that will make
it the best in the market.
• A sales orientation focuses on developing the best sales methods.
• A market orientation looks at what consumers are demanding.
• A societal orientation asks what consumers are demanding, and at how the
organisation can benefit society.
Although marketing has been part of business for many years, according to Kurtz,
four prominent eras have stood out; this indicates that marketing has been an
evolving concept. 37 In the 1920s, a production orientation was prominent, after
which a sales orientation took centre stage until the beginning of the 1950s, when
a marketing orientation gained stature as the way for businesses to go, with a later
focus on society as a central part of the marketing orientation. Today, however, not
only are marketers wishing to satisfy both consumer and organisational needs, but
they are actively focusing on building relationships with customers (and suppliers).
Relationship marketing is discussed in greater detail in the next section.

1.5 Relationship marketing3 8

1.5.1 A broader view of the market3 9
As seen in the previous section, marketing is a concept that was developed over time to
include the organisation's objectives, as well as the satisfaction of consumers' needs
and wants. Logically, it followed that the next step of this evolution was relationship
marketing. Relationship marketing places its main focus on sustaining and building
long-term relationships with government, suppliers, customers (both present and
potential) and the public, as well as organisational employees. Relationships with
these stakeholders are critical to the survival and growth of any organisation.

1.5.2 Expansion of the market offering4o

Different marketing strategies need to be used for different customer acquisitions
and retentions and this fact is acknowledged by relationship marketing. According to

:1.0
 Chapter~- The basics of marketing

the relationship marketing philosophy and approach, the four traditional marketing
instruments (product, place, promotion and price) are no longer enough to ensure
full customer satisfaction. Therefore the traditional marketing mix needs to be
extended to include people and processes.
11 People. These are the employees who should be well trained in serving customers
and who should realise that job satisfaction correlates directly with organisational
success.
11 Processes. These are the essential parts of the production, administration and
marketing functions.

::1..5.3 A bigger market4~

A wider view of the market is observed through relationship marketing. When one
looks to the total market, it is evident that there are smaller groupings that influence
the marketing effort to a greater or lesser degree. These groupings could include,
among others, an organisation's current and potential customers and suppliers. It is,
therefore, important for an organisation to maintain close relationships with at least
the more important groupings.
A wider view of the market can be taken as stated above, but relationship marketing
also requires that organisations adapt to an individual customer approach once they
have finalised the market they will serve.
Organisations are adapting to micro-segmentation because of three important
changes that have rendered traditional segment-based marketing inappropriate.
These changes are as follows:
1. Consumers have higher expectations as they have become more knowledgeable
and sophisticated.
2. There has been a dramatic and constant change in technological development.
3. There is an increase in competition between products and vendors.
A change in company focus is evident in the explosion of the recent trend to
market for a segment that consists of one consumer. One example is the use of a
mass customisation approach by companies that cater for the individual needs of
consumers through the use of new technology. Handling customer complaints is an
important facet of an internal marketing programme.
Some car manufacturers have a customer-care number with a direct line to
the managing director. It is important for companies to research the reasons for
complaints. The best and cheapest solution is to ensure that there are no complaints;
well-founded complaints must receive immediate attention. There must be ample
opportunities for customers to direct complaints to responsible people who are able
to take appropriate corrective action, and in so doing prevent the loss of customers.
Consumers who are reluctant to complain, but who rather choose to avoid the
unsatisfactory product or situation in future, are a grave threat to successful
marketing. Consumers who are unhappy and who receive no satisfaction can also
 Essentials of Marketing

directtheir complaints to the many consumer-action programmes in the mass media,

creating unwelcome negative publicity for the organisation: Relationship marketing
is, in fact, the essence of a market-driven approach to marketing management. It was
mentioned previously that marketing philosophy is an evolutionary process, which
will probably continue, necessitating further adaptations in marketing thinking.

1.6 Core aspects of marketing

In order for an understanding of marketing to be achieved, several core marketing
aspects need to be in place. Figure 1.1 illustrates these aspects.

Marketing

Can happen in a of settings

Value creation

Figure 1.1 Core aspects of marketing

1..6.1 Marketing is about customer need fulfilment

In order for marketing to be effective and successful it is imperative that marketers
understand the marketplace in which they provide their offerings and that they
understand consumer needs and wants in particular, as this is one of the most
important aspects of marketing success. 42 One of the most simple underlying
concepts of marketing is that all humans have needs. A human need can be seen
when an individual feels a state of deprivation. These needs may I?e physical, such
as when someone needs food, warmth or safety; or social needs, such as the need to
feel like they belong, or the need for affection; or individual needs, such as a need
for an education or self-actualisation. Wants, on the other hand, are needs that are

1.2
 Chapter~- The basics of marketing

influenced by an individual's personality, as well as by society. Wants are shaped by

the society in which one lives; when wants can be backed by an individual's buying
power, wants become demands. Successful companies will go to great lengths to
acquire more knowledge of their customers and will try to understand their needs,
wants and demands better than their competitors. 43 However, in order for customers'
needs, wants and demands to be satisfied, marketers need to go through the
marketing process in order to understand customer expectations and be able to fulfil
these expectations in order to capture value from the customer in return.

:1.6.1...:1. The marketing process

The marketing process is a sequence of activities an organisation will follow in order
to create value for customers, as well as build strong customer relationships in order
to capture value from customers in return. This process consists of:
• knowing what customers want and the market in which you operate
11 maldng sure a marketing strategy is in place to meet customers' needs
11 ensuring that the value for customers is exceeded in the integrated plan

II developing profitable relationships and creating customer happiness

• generating value from customers to create profits and customer equity.
The first four points show that a company will work towards understanding the
target market, design a customer-focused marketing strategy, strive to create ,.
customer value and attempt to build strong customer relationships. The final point
expects the company to reap the rewards of creating customer value that is superior.
Through creating value for customers, organisations will, in turn, capture value from
customers in the form of sales, profits and long-term customer equity. 44 According to .,...'I'>" \); '"'<!';
f!

Cant, in essence, the marketing process encompasses numerous issues that have t~L . A.

be attended to, based on market needs and organisational objectives. '%~' \ >.) ~.
Once again, from the marketing process it is evident that forming a relationship) \.
,.--.., 't,."
with one's customers plays a vital role in achieving organisational goals. The ...._..,
i'.-"='
·-. ..J
·)~ .{';'..t~

Y'.P
following section addresses the exchange that occurs between the customer and the !':I \
u '
organisation.

:1.6.2 Marketing involves an exchange

The next core aspect to be addressed is exchange. In essence, marketing is all
about an exchange process, whereby two or more parties provide the other with
something of value so as to satisfy a need. Sometimes individuals can exchange
tangible goods such as deodorants, clothes, a house or a boat for money. In other
situations, individuals exchange intangible services such as a manicure or personal
training classes for money. 45 Therefore, an exchange can be seen as the trade of an
item or service that has value between a buyer and the seller so that each benefits
as a result. As illustrated in Figure 1.2, a seller will provide products or services and
then communicate and facilitate the delivery thereof to the customer. It is then the

~3
Essentials of Marketing

customer or buyer who completes the exchange by giving the seller money and
information. 46

Figure 1.2 Exchange: underpinning of seller-buyer relationships

Source: Adapted from Grewal, D & Levy, M. 2008. Marketing: Avenue of the Americas. New
York: McGraw-Hill Irwin, p 6.

In order for an exchange to take place the following five conditions need to be met: 47
1. At least two parties must be present.
2. All parties must have something of value that could interest the other party.
3. Communication and delivery are possible from each party.
4. Acceptance or rejection of the offer is possible from both sides.
5. Both parties need to believe that it is desirable to trade with the other.
Even if the conditions exist as indicated, it does not mean that an exchange will take
place, but these conditions are all necessary for an exchange to occur. 48

1.6.3 Marketing involves product, price 1 place and promotion

In order to create a successful exchange between a consumer and an organisation,
an ideal marketing mix needs to be in placei that is, a mix that meets the needs of the
customer and the profit objectives of the organisation.
A marketing mix comprises a product, place (distribution), price and promotion.
Figure 1.3 illustrates the importance of the marketing mix elements within exchange.

f communicate··
- . --

v····
\.
value'>
c<, :'c.'c:

Figure 1.3 Marketing mix elements within exchange

Source: Adapted from McDaniel, C, Lamb, CW & Hair, JF. 2011. Introduction to marketing.
11th ed. Mason, OH: South-Western Cengage Learning, p 4.

14
 Chapter 1- The basics of marketing

The four Ps within the marketing mix create value in the following ways: 49
1. Product. Create value: offering consumers a variety of goods, services or ideas,
which serves to satisfy their needs.
2. Price. Capture value: this is everything a buyer will give up in exchange for a
product. It must also be perceived by the customer as something of value.
3. Place. Deliver value: this is all the activities necessary to get the product to the right
consumers when needed and to the place where the customer needs the product.
4. Promotion. Communicate value: communicating the value of the product to
consumers. Marketers use promotion as a means to communicate with the
market. It is used to inform, persuade and remind existing and potential buyers
of products or services in an attempt to influence their opinions or to prompt a
response.

1.6.Lt Marketing can be performed by both marketers and

individuals
Marketing is generally associated with organisations selling to consumers, which can
be seen as B2C (business-to-consumer) marketing. However, other forms of marketing
exist, such as B2B (business-to-business) marketing, which entails selling of goods
and services between organisations, and C2C (consumer-to-consumer) marketing,
which involves consumers selling among consumers, for example, consumers selling
merchandise on websites such as Bid or Buy or OLX. Marketing can also occur on
an individual basis, such as when one applies for a job. 5° The applicant researches
the company on the internet and adapts his or her CV to better match the needs or
requirements of the company.

:1..6.5 Marketing can happen in a variety of settings

It is a common misconception that marketing is merely incorporated into a business
to enhance the profitability of the company. For profit-seeking organisations this is
correct, but marketing works equally well for consumers in the non-profit sector.
Also, the consumer's decision depends on the type of decision that has to be made.
Think of when you decided which university you were going to attend. Your selection
could have been based on the opinions of family members or friends, or it may
have been based on convenience and/ or the university's reputation in the market
and the programmes it offered. Many non-profit organisations such as museums,
religious institutions or charities rely on marketing activities to communicate with
their constituents. In the same way politicians rely on marketing to 'sell' their ideas
to their constituents. 51

1.6.6 Marketing helps create value

There is a well-known saying that 'beauty is in the eye of the beholder: The same
principle applies in marketing, where value is what the customer attaches to a

~s
Essentials of Marketing

specific product offering. A customer is normally willing to pay a certain price if he or

she considers it to offer a value that is in line with the priCe being charged. Customers
want products or services that meet their specific needs or wants and that are offered
at competitive prices. The challenge for a company is to establish what the needs of f<
the customer are and then aim to provide those goods and services in such a way
that they make a profit and customers see them as being value for money. 5 2 There
are different forms of value and some of these, as identified by Fahy and Jobber, are
discussed below. 53

1..6.6.1. Four forms of customer value5"

There are essentially four forms of customer value:
1. Price value. Price is one of the most powerful motivators for consumers to
purchase an organisation's products. To a large extent consumers are motivated
by the fact that the product is perceived as being cheaper than a competitor's
product, especially if it is a product that is price sensitive. Many companies such
as Pep Stores and Ackermans see themselves as value retailers offering products
at lower prices but of a good quality in terms of the market they serve.
2. Performance value. While many consumers compare prices and want the lowest
price, others compare product performance and want the best-performing product.
Customers that gain value here are those who look for innovative design, modern
features and are generally attracted to products by their functionality and quality.
3. Emotional value. A major challenge faced by marketers is how to differentiate
very similar products in the minds of the consumer. You may find that a specific
brand of vehicle is nearly double the price of a similar model of a different make
because marketers have established an emotional link to their brand. This leads
to the consumer attaching a certain emotional value to the better-known brand.
4. Relational value. A further important factor that a consumer will evaluate and to
which they will attach a value is that of the service quality they receive after they
purchase a product. When a consumer finds a product or service that satisfies
their needs in all respects, they may be willing to stay with this provider for a long
time. This relationship could build up over time and as this relationship develops,
trust becomes established between the provider and purchaser, eventually
leading to a loyal customer.

1.7 The marketing function within an organisation

1.7.1 The place of the marketing function
There are at least seven different departments that function in today's large
organisations, and the marketing department plays a fundamental role in
organisational success owing to its contribution to profits and the relationship the
department forges with consumers. The managers· who head these departments
 Chapter 1- The basics of marketing

must continually work together to ensure that organisational goals and objectives
are achieved. A typical functional organisational structure is shown in Figure 1.4.
,--
L____ Ge_ne_r_al,m_a_-n_a_g_er_:__ _
·.
_c__j

,----'---1'!,--H-,-u_,_m_a_n_'! ~-- . w-~~l~~-i:~: I

- Operations jj resources 1! Financia_l· . if Purchasing 1 ·-Information -~ Marketing
management I!.. .
management I'11 management 1i management i management
· _,, d .. . •
management
~-------'i'-1- - - - - - ' '----~-.J ~ - - -- ! ••. _·_ ___, ' - - - - - - - '

Figure :1..4 A typical functional organisational structure

Source: Cant, M. 2010. Marketing: An introduction. Cape Town: Juta, p 14.

The functions of these departments are described below:

II The operations function. This is the function whereby raw materials are converted
into manufactured materials and finished products, usually in a factory setting.
111 The human resources function. This function deals with selecting, training and
utilising personnel.
11 The financial function. This function plays the key role in acquiring, utilising
and controlling the organisational funding that is needed to ensure the smooth
running of the organisation. The core role is the acquisition and application of
funds for the profitability, liquidity, solvency and continuity of the organisation.
• The purchasingfunction. This department ensures that the necessary materials for
production are bought at the right places, at the right times, in the right quantities
and at the right prices.
• The public relations function. This function ensures that the organisation's image is
favourable in the eyes of those whose opinions are important to the achievement
of overall business objectives. Although this function is not included in Figure 1.4,
some large multinational corporations may have this as a separate department.
Generally this function will report to the marketing function.
II The information function. This department ensures that sufficient internal
information is made available for planning and control.
• The marketingfunction. This department is responsible for generating sales and is
also in charge ofthe marketing process.
• General management. This is not a separate function as such, but is more of an
integrated aspect of all functions. It refers to top, middle or lower management
that has to plan, organise and control the entire organisation- as per the different
functions.
In practice there are also other functions and structures, and indeed other names
may be used. It is important, however, to realise that the tasks of the different
functional departments must be performed in both large and small organisations.

J.?
Essentials of Marketing

The resources (capital) and abilities of various functionaries determine the existence
and size offormal departments. In very large multi-product organisations there may
be even more divisions than those shown in Figure 1.4. There may, for example, be
a marketing director directing several marketing managers for different products
or product ranges. The marketing director provides leadership and coordinates the
activities of several different marketing departments. There are also many different
organisational structures that can be identified, of which the functional structure
is only one example. Examples of other organisational structures include matrix
structures and line and staff structures, to name but a few. What does a manager
do? Some workers might think that managers spend their working hours sitting and
talldng while there is real work to be done! However, there are three management
tasks that must be performed by the management team. More about these tasks is
provided in the section that follows.

1.8 The management tasks in marketing

The American Marketing Association describes marketing management as:
the process of setting marketing goals for an organisation (considering internal
resources and market opportunities), the planning and execution of activities to meet
these goals, and measuring progress toward their achievement.

It also notes that this is an ongoing and repetitive process within a planning cycle
to enable an organisation to continuously adapt to internal and external changes
in an organisation. 55 These changes continuously create new problems and new
opportunities. Therefore, with effective management, an organisation can stay ahead
of competition by using changes in the company environment to its advantage. The
management task consists of a continuous process of planning, implementing and
controlling marketing activities.
According to Cant, marketing management performs the following functions: 56
• identifies threats and opportunities in the marketing environment
• identifies opportunities which can be employed in terms of internal strengths
and weaknesses
• collects marketing data
• selects a specific target market
• decides which products are to be produced so as to satisfy consumer needs
• decides what the selling price of the products will be in order to reach the
profitability objective
• decides which specific distribution channels to utilise
• decides which marketing communication methods to utilise in order to inform,
remind and persuade consumers
• decides on the selection, training, remuneration and motivation of marketing
personnel

~s
 Chapter :1- The basics of marketing

• leads and organises the activities of the marketing department

• controls the marketing process.
These responsibilities are part of the three management tasks, which are summarised
in Figure 1.5.

, .· ·.·.. PI~OO;~g , . ·.•..• 1 Implementation· Control .~

Rec.·o·9 n. is·e··()ppo
..r·t·.u·n.·. itie·s·····•.•
and threats ·.· .·.· .· . .. .··.
• Organise and
coordinate the
• Set standards
and p~rformance .·
I
Ill Set efficient global · .activities
.· II measurement

NL __
._ - -

management schemes Provide leadership

for corporate objectives in planning and ·
•• Make a decision on implementation of
the marketing tools marketing strategies
and secure sufficient
employees
I
___l

Figure :1..5 The management tasks of marketing management

Source: Adapted from Cant, M. 2013. Marketing: An introduction. Cape Town: Juta, p 25.

:1.8.:1 Plannings7
A key function of marketing management entails the examination of various
marketing opportunities and the choice of ways of utilising these to counter
marketing threats and achieve marketing objectives. This means planning. Adaptive
planning is a framework for organising information, analysis, issues and opinions that
form part of strategic decision -making. A situation assessment is done to identify the
internal and external factors impacting the organisation, as well as the organisation's
past performance concerning these factors. Next, creative and strategic solutions are
conceptualised to address these factors.
Marketing decisions therefore begin with the identification and evaluation
of marketing opportunities and threats, and internal strengths and weaknesses.
Contingency planning is another 'element' of planning that entails developing plans
to provide an alternative to the main plan in the event that an unlikely, but possible,
external factor has an impact on the original plan. It is the 'what will we do if ... ?' of
planning. The contingency plan 'deals not with unforeseen events, but with events
that were foreseen but considered unlikely to occur:ss

:1...8.2 lmplementations9
Organising and coordinating calls for the creation of an organisational structure best
suited to the implementation of the marketing decisions in order to achieve marketing
objectives. Marketing activities are grouped rationally and individual divisions and
managers are tasked with carrying them out. Finally, the levels of authority, areas of
responsibility, lines of communication and methods of coordination between the
divisions and individuals are determined. Cooperation is achieved by integrating

1.9
 Essentials of Marketing

the interests of divisions, individuals, consumers, investors, suppliers and the

community as a whole.
Figure 1.6 shows a typical organisational chart of the different divisions in the
marketing department under the leadership of the marketing manager.

Manager: New product ~

development -~--J
,-----·-
1 Manager: Marketing planning and
L . ___.information
Marketing manager
,-· --·------,
f - - - - - - - - - - - + - -1_. ____M!_~ag~!~.~~vertisi~-~ j
·--~

Manager: Sales

Figure :1..6 Functional marketing organisation

Source: Adapted from Cant, MC, Van Heerden, CH & Ngambi, HC. 2013. Marketing
management: A South African perspective. Cape Town: Juta, p 26.

Leading involves a wide range of tasks, such as staffing, communicating and

motivating. From a marketing viewpoint, leading embraces all the marketing
decisions with regard to putting preparation (planning, organising, coordinating,
controlling) into practice. Briefly, once the marketing strategy has been formulated,
people have to be found to perform the required marketing activities (staffing); they
have to be instructed as to what they should do and told how well they are doing
it (communicating); and a positive attitude towards work and the organisation
must be carefully cultivated and maintained (motivating). Leading is, therefore, of
paramount importance in the effective performance of the other management tasks.
Over time, a few contemporary leadership styles have emerged: 60
• Contingent reward leadership is a leadership style where management closely
supervises personnel and facilitates all staff activities and tasks.
• Laissez-faire leadership is the opposite of contingent reward leadership in that
management is minimally involved in the daily activities of personnel, leaving
people to rely on to their own devices.
• Management-by-exception leadership is a leadership style where managers
intervene only when personnel's performance standards have not been met.
• Transformational leadership is a leadership style where leaders use inspiration and
charisma; they seek to stimulate the sales personnel intellectually and treat each
employee as an individual. The ultimate goal of transformational leadership is
to move personnel beyond their own self-interests towards those of the organisation.

20
 Chapter :1.- The basics of marketing

::1..8.3 Control 61
Controlling or evaluating is the regulatory task of marketing management, and its
purpose is to align actual performance with marketing plans. In order to exercise
control, it is essential first to set standards; this requires determining what has to
be controlled and where marketing control is necessary. Secondly, actual marketing
performance has to be measured and compared with these standards. Thirdly, the
differences between actual performance and standards have to be evaluated. Finally,
if necessary, corrective measures should be taken to ensure that future performance
is in line with marketing plans.
If marketing management tasks are not properly performed:
• purchasing management will not know which raw materials and components to
purchase
II public relations management will not lmow how to perform or improve its liaison
function
• financing management will not lmow how much funding is required
II human resources management will not lmow how many people to employ.

::1..9 The technological revolution in marketing 62

Innovation and developments in marketing have taken place over the past few years
and are increasing at a fast pace. These are led by recent innovation and developments
related to the internet, websites and social networks. Some marketing approaches
even utilise cellular networks to promote offerings directly to users' cell phones.
Through these approaches, marketers aim to communicate directly with their
potential customers on a more personal level than was previously possible. Through
the use of modern technology, marketers seek to integrate consumers' lives with
organisational brands and, in so doing, enrich the consumer's experience with the
branded products. Unbeknown to most consumers, marketers are continuously
hard at work behind the scenes performing activities that are aimed at capturing
consumers' undivided attention. 63
The revolution in technology has paved the way for fast and accurate storage,
transfer, retrieval and even presentation of information; all this is achieved through
the use of the internet, computer networks or any other electronic wireless devices. 64
Advances in technology force marketing to adapt and change on a continuous basis.
The internet. has become a new medium through which to advertise because it
is estimated that more than half of all US households own at least one computer.
Online advertisements are extremely dynamic and can be tailored to reach
specific geographical areas. For instance, a site can be set up for zoned advertising
programmes, which are able to target customers within a certain radius of a specific
store. 65

21
Essentials of Marketing

Through the use of technology, organisations or individuals can open up whole new
markets. For example, cell phones allow individuals to keep in touch with the rest of
the world without the restraints of a landline or pay phones. 66

1.g.:1 Interactive and internet marketing

Computer and telecommunications resources, when combined, are used to write
software that can be tailored to an individual's needs or preferences. This combination
of computers and infrastructure, such as phone lines or fibre-optic cables, facilitates
the transfer and sharing of data in real time at a low cost. Information availability
is vast through the use of the internet; internet users have access to worldwide
resources for any and all desired information. Certain services are available on the
internet that allow individuals to pay accounts, make phone or video calls or even
send and receive documentation via e-mail.
Using the internet or the World Wide Web offers opportunities that were not
possible 15 to 20 years ago. These benefits include speedy access to information (a
few seconds compared to days or weeks), users have more control over the type of
information they receive, and they are able to filter the relevant from the irrelevant
information more quicldy. The information is easily updated by site owners and this
can be done in a very short period of time. 67
• Interactive marketing is a communications concept that allows buyers to control
the amount of information marketers send, but furthermore allows marketers to
customise their communication with their markets. Interactive marketing is a
useful tool for consumers as it allows them immediate access to key product
information they may require, which they can access when it is needed.
Furthermore, it allows customers to come to the organisation for information,
thereby creating an opportunity for one-on-one marketing. Electronic
communications media thus allow marketers to build relationships between
the consumer and the technology and customise information based on the
audiences' interests. 68
• Internet protocol television (IPTV) is an interactive technology that allows for a
two-way digital broadcast signal to be sent through a cable network or telephone
or even a broadband connection to the consumer. The importance of this
interactive technology is that it allows marketers and consumers to embrace one
another. 69
• Interactive promotions allow the consumer to be in control. Consumers can get
information on how to use the product (tips), access consumer service queries
and, most importantly, they can express what they do or do not 1ike.7°

1.9.2 Broadband
Broadband technology can deliver large amounts of data at once as it is an 'always-
on' internet connection that runs at 200 kilobytes per second or more. Broadband

22
 Chapter 1- The basics of marketing

internet makes marketing even faster than before, thereby allowing consumers to
access information and make payments quicker. 71

:1.9.3 Wireless
More and more people are starting to make use of wireless technology, be it connecting
a laptop to the internet or using a handheld computer. Wireless technology provides
many challenges and opportunities to marketers.
Wireless advertisements are also a medium that offers opportunities to companies
to be more direct and focused in targeting certain audiences. 72

Summary
A business does not operate in isolation, and many factors contribute to a company's
success. Marketing is a managerial process aimed at satisfying the needs and
wants of customers, which are met by creating the correct products and services.
Marketing operates within a dynamic global environment, and is continually facing
new challenges. The success of the marketing concept is now widely understood,
spurring growth in non-profit marketing as these organisations begin to use the
tools and techniques of marketing management. The environment is changing as
well, with almost every company being affected by rapid globalisation. The changing
world economy, which has been sluggish for several years, has resulted in more
difficult times for consumers and marketers.
These challenges are intensified by demands that marketers conduct all of their
business with stronger emphasis on ethics and social responsibility. Taken together,
these changes define a new marketing landscape. Companies that succeed in this
environment will have a strong focus on the changing marketplace and a total
commitment to using the tools of marketing to provide real value to customers.

References
1. Kotler, P & Armstrong, G. 2012. Principles of marketing. 14th ed. Harlow: Pearson
Education, p 29.
2. Ibid, pp 33-34.
3. Boone, LE&Kurtz, DL. 2012. Contemporary marketing. 15th ed.Mason, OH: South-Western
Cengage Learning. Available from: http:/ /books.google.co.za/books?id=-e0Yt7AxEVOC
&printsec=frontcover&dq=marketing&hl=en&sa=X&ei=CwfrT6uCDsOlhAfPvsDJBQ&v
ed=OCD4Q6AEwATge#v=onepage&q=marketing&f=false (Accessed 27 June 2012), p 7.
4. Pride, WM & Ferrell, OC. 2012. Marketing. 16th ed. Mason, OH: South-Western Cengage
Learning, p 4.
5. McDaniel, C, Lamb, CW & Hail~ JF. 2011. Introduction to marketing. 11th ed. Mason, OH:
South-Western Cengage Learning, pp 3-4.
6. Pride & Ferrell, op cit, p 4; McDaniel et al, op cit, pp 3-4.
7. Boone & Kurtz, op cit, p 7.
8. Ibid.

23
Essentials of Marketing

9. Kotler & Armstrong, op cit, p 28.

10. Kotler & Armstrong, op cit, p 28; McDaniel eta!, op cit.
11. McDaniel eta!, opdt, pp 3-4.
12. Kotler & Armstrong, op cit, p 29.
13. American Marketing Association (AMA). 2012. Dictionary. Available from: http://www.
marketingpower.com/_layouts/Dictionary.aspx?dLetter=M (Accessed 2 July 2012).
14. Clow, KE & Baack, D. 2010. Marketing management: A customer-orientated approach.
Thousand Oaks, CA: Sage Publications, p 6.
15. Ibid.
16. Nieuwenhuizen, C. 2007. Business management for entrepreneurs. Cape Town: Juta,
pp 90-91.
17. Du Toit, M. 2011. Fundamentals of sales and marketing. Cape Town: Juta. Available from:
http://books.google.co.za/books?id=uAXRf554IiUC&printsec=frontcover&dq=fundam
entals+of+sales+and+marketing&source=bl&ots=OyX_1X4Un4&sig=PEowG8PXR_dZ42
mbleU1spPsl1g&hl=en&sa=X&ei=p98QUNuhH86YhQf094GACw&ved=OCDEQ6AEwA
A#v=onepage&q=time%20gap&f=false (Accessed 26 July 2012), p 4.
18. Cant, MC, Van Heerden, CH & Ngambi, HC. 2013. Marketing management: A South
African perspective. 2nd ed. Cape Town: Juta, p 5.
19. Cant et al, 2013, op cit, p 7.
20. Kurtz, DL. 2008. Principles of contemporary marketing. Mason, OH: Thomson South-
Western, p 24; Cant, M. 2010. Marketing: An introduction. Cape Town: Juta, p 6.
21. Kurtz, op cit, p 23; Cant, op cit, p 6.
22. Cant eta!, op cit, p 7; Kurtz, op cit, p 23.
23. Kurtz, op cit, p 22.
24. Kotler & Armstrong, op cit, p 33.
25. Lancaste1~ G & Massingham, L. 2011. Essentials of marketing management. New York:
Routledge, p 4.
26. Kotler & Armstrong, op cit, p 34.
27. Lancaster & Massingham, op cit, p 5.
28. Lamb, CW, Hair, JF & McDaniel, C. 2011. MKTG 4. Mason, OH: South-Western Cengage
Learning, p 5.
29. Lancaster & Massingham, op cit, p 6.
30. McDaniel eta!, op cit, p 5.
31. Ibid.
32. Ibid.
33. Ibid.
34. Cant eta!, op cit, p 12; Cant et al, op cit, p 10.
35. Kotler & Armstrong, op cit, p 39.
36. Cant et al, op cit, p 14.
37. Kurtz, op cit, p 8.
38. Cant et al, op cit, p 15.
39. Ibid, pp 15-17.
40. Ibid, p 16.
41. Ibid.
42. Grewal, D & Levy, M. 2008. Marketing: Avenues oftheAmericas. New York: McGraw-Hill
Irwin, p 6.

24
 Chapter 1 - The basics of marketing

43. Kotler & Armstrong, op cit, p 30.

44. Armstrong, G & Kotler, P. 2011. Marketing: An introduction. lOth ed. Harlow: Pearson
Education, p 33.
45. Kurtz, op cit, p 8.
46. Grewal & Levy, op cit, p 6.
47. McDaniel et al, op cit, pp 3-4.
48. Ibid, p 4.
49. Grewal & Levy, op cit, p 7, p 10 & p 11.
50. Ibid, p 12.
51. Grewal & Levy, op cit, p 13.
52. Ibid, p 15.
53. Fahy, J & Jobber, J. 2012. Foundations of marketing. 4th ed. New York: McGraw-Hill, p 7.
54. Ibid, pp 7-8.
55. American Marketing Association (AMA), op cit.
56. Cant et al, op cit, p 24.
57. Cant et al, op cit, pp 24-25.
58. Ibid; AMA, op cit.
59. Cant et al, op cit, pp 25-26.
60. Ibid, p 25; AMA, op cit.
61. Cant et al, op cit, p 27.
62. Kurtz, op cit, pp 18-21.
63. Kotler & Armstrong, op cit, pp 28-29.
64. Kurtz, op cit, p 18.
65. Ibid.
66. Ibid, p 19.
67. Ibid.
68. Ibid.
69. Ibid, p 20.
70. Ibid.
71. Ibid.
72. Ibid.

25
 Chapter 2

The marketing envirpnment

Learning objectives
After you have studied this chapter, you should be able to:
iii identify and explain the components of the micro-environment
• explain and demonstrate how these variables in the market environment will
influence the business
• demonstrate the impact the macro-environment can have on a business
• conduct a SWOT analysis.

2.1 Introduction
It has been said that the only constant in business is change. One need only look at
the events that have happened in South Africa since December 2015 to realise the
effect these factors have on the economy, and the environment in which businesses
operate. By nature, environments are dynamic and change all the time. Decisions
taken today may be revised tomorrow owing to changes in the environment in
which businesses operate. For example, the decision by the President to change' the
Minister of Finance in December 2015, had such a knee jerk and negative impact on
businesses locally and internationally, that this decision was reversed only two days
later - but only after damage worth billions of rands had been caused! Exchange
rates change on a daily basis, the oil price fluctuates, as does the gold price, and
it is the responsibility of management to be aware of these changes and the ways
in which they may influence the business. In some instances, the impact of certain
changes will affect some companies or industries more severely than others.
The environment in which a business operates encompasses internal and external
factors or variables. Furthermore, this environment is constantly changing, which
means that the business has to monitor these variables constantly to determine their
impact on the business, its customers and its competitors. On the one hand, society
depends largely on businesses to satisfy its wants and needs. Businesses, on the other
hand, depend on their environment to supply them with resources such as labour,
capital and raw materials. Businesses and society, t,herefore, influence each other
through this exchange and depend on each other for their existence. 1 This mutual

\ '.
 Chapter 2- The marketing environment

dependence makes it important that businesses establish sound relations with the
community and vice versa. The outside environment is, however, very complex and
the business has little or no control over most of the variables in it.

2.2 Components of the marketing environment

A wide range of factors have an impact on the way businesses do business and the
organisations have either some or no influence on these factors. The marketing
environment basically refers to all the variables or factors that have a direct impact on the
marketing activities of the organisation, and these variables or factors may be either
controllable or not controllable. The marketing environment consists of three sub-
environments or components and these environments are interrelated and affect
each other. The three components are as follows:
1. The micro-environment refers to the internal variables that can be controlled by
management, such as the staff to be appointed, funds to be used, the mission
statement and the marketing objectives of the organisation.
2. The market environment refers to forces outside the business, such as consumers,
competitors and suppliers. This environment can be influenced or partially
controlled by management.
3. The macro-environmentrefers to the external forces, which the individual business
cannot influence, but which directly or indirectly influence the business, such as
economic, political and technological factors.
The three components of the marketing environment are illustrated in Figure 2.1.

'.II . Consumers ..·..

_11 . Cof'!lpetitor~.
• Suppliers

STRENGTHS
Micro-environment

II The mission
111 Marketing objectives·. . . .
11 Resources, skills and abilities
11 Marketing instruments

WEAKNESSES

Figure 2.1 The three components of the marketing environment

Source: Adapted from Cant et al, 2013. Marketing management: A South African perspective.
Cape Town: Juta, p 35.
27
Essentials of Marketing

The variables and forces as indicated in Figure 2.1 influence the business and
constitute the marketing environment. For a business to succeed, management
must be aware of the effect these variables have on the enterprise, and they must
also have sufficient knowledge to steer the business in the right direction. Marketing
management should, therefore, not only look inwards at the micro-environment
to identify internal environmental variables, but it should also look outwards to
identify the external variables that affect the business. Marketing management must
recognise the effect of these variables on decision-maldng and conduct a SWOT
analysis to identify internal strengths and weaknesses and external opportunities
and threats. This chapter will focus on these three environments and will also pay
attention to the steps involved in conducting a SWOT analysis.

2.3 The variables in the micro-environment

The micro-environment consists of the forces close to the business that affect its
ability to serve its customers. 2 Marketing management on its own does not exercise
direct control over all the variables in the internal environment, as this environment
is made up of various functional areas. Usually, the marketing manager is a member
of top management and is able to influence decisions regarding the use of resources.
Similarly, the functional heads of finance, human resources and so on, can and do
influence the decisions of the other functional heads. The marketing manager has
direct control only over the activities of the marketing department, and particularly
the marketing instruments. The marketing instruments and activities are, therefore,
under the direct control of the marketing manager. Table 2.1 lists the internal
variables that are the responsibility of the marketing department.
Table 2.:1. Variables in the micro-environment controlled by marketing management

.VARIABLES

Business 11 Mission and strategy: describes why the business exists 1 what the
aim goals are and how it works by directing all actions/activities
Target • Size: is the business targeting the whole population or one or more
market segments?
• Characteristics: what are the main features of the selected target
group (gender1 age 1 education/ etc)?
Marketing • Profit: how much gross profit is the business aiming to make per line
objectives or item?
• Customer orientation: the business's main focus is to satisfy the
needs and wants of the consumer
• Survival and growth: keep up with changing demands by either
developing new products or cutting products ,,,.
 I •.

Chapter 2- The marketing environment

VARIABLES . ELEMENTS

11 Sales and market share: increase market share through

differentiation 1 adding new lines or spreading to other geographic
locations
11 Brand extensions: add complementary items
Resources, 11 Internal analysis: review the business's strengths1 weaknesses and
skills and capabilities of finances, facilities and product knowledge
abilities
Marketing 111 Product or service: determine the quality and sizes available and
instruments level of service needs
11 Distribution: how the product or service reaches the consumer
through retailers 1 wholesalers, selected stores or mail orders
11 Price: decide which pricing strategy to use and how much the
product or service will cost the consumer
11 Marketing communication: decide which medium will be used to
communicate the desired message to the consumer

2.3.1 Mission ofthe business

A business is not defined by its name, statutes or articles of incorporation - it is
defined by its mission statement: A mission statement defines the fundamental,
unique purpose of a business and identifies its products or services and customers. It
is a declaration of the 'reason for being' by a business. 3 For an organisation to be able
to set clear and realistic business objectives, it needs to be certain about its-mission
and purpose. A business simply cannot survive if it does not'.;know where it is going
and what products or services it will offer.
The mission statement provides a concise statement of the current product
market position (products offered and markets served) of the business. It also gives
clear guidelines on where the resources of the business should be applied to achieve
this mission. A mission defines the fundamental purpose that sets a company
apart from others of its type and identifies the scope of its operations in product
and market terms. The mission of a business is defined by a customer's satisfaction
with its products and/ or services. Defining the mission, therefore, starts with a clear
description of its customers. Questions that need to be answered when formulating
the mission are as follows:
11 Who is the customer?
II What does the customer buy?

II Where is the customer located?

11 How does the customer buy? rJ

II How can the customer be reached?
• What does the customer regard as value for money?

29
Ess.entials of Marketing

A company's vision and mission statements should clearly l:Je more concerned with
its customers than with other processes or problems.

SAB
To be the most respected beverage company in the world. 4
SEDA
To be the centre of excellence for small enterprise development in South Africa. 5
UN/SA
Towards the African university in the service of humanity. 6

2.3.2 Selection ofthe target market

In line with the mission and objectives of the company, a target market must
be selected. This target market must be big enough for the company to meet its
stated objectives and to ensure the long-term survival and growth of the business.
Sometimes a company will deliberately focus on a smaller segment of the market
(niche market) that shows potential and that the company can exploit profitably with
its available resources. Each market selected has specific characteristics, which the
marketer must be aware of in order to develop his or her marketing strategy to secure
the highest possible return. An example follows.
Thandi sells sports shoes in a market that can be divided into four segments
based on customers' reasons for purchasing the sports shoes: elites, keeping fit,
daily comfort and fashion. After conducting an analysis, Thandi determines that the
'daily comfort' segment best meets the above-mentioned requirements. Table 2.2
illustrates the factors that influence the selection of a target market,?
Table 2.2 Factors influencing the selection of a target market

Size This segment would be the biggest segment Good

Growth rate This is a mature market and therefore will not have a Poor
big growth rate
Profit margins This segment is expected to produce only moderate Poor
profit margins as there is likely to be a lot of
competitors
 Chapter 2- The marketing environment

Competitors This segment is likely to have a lot of competitors, Poor

including indirect competitors
Distribution The consumer preference of this segment is most Good
channels likely to be department stores and discount stores
Strategy This is likely to be an easy market development Good
strategy to implement
Resources This segment could be marketed with existing Good
products at existing retailers, making it relatively low
cost
Capability The main concern, which is minor for this segment, Good
would be gaining access to the department stores
and discount stores
Role of brand The brand would easily hold its own in the general Fair
marketi however, the concern would be the eroding
ofthe existing brand equity if introduced into the
market
Overall Rating: Good
assessment

2.3.3 Marketing objectives 8

The mission and objectives set out the reason for the existence of the business. An
objective can be defined as something the organisation wants to achieve over a
set period of time. If there are no specific and definite objectives to aim for, there
is no reason to exist. The objectives of a business are, therefore, directly linked to
the mission statement. The mission leads to a hierarchy of objectives, such as the
organisation's objectives, marketing objectives, financial objectives and production
objectives. All objectives need to meet five requirements:
l. They should relate to a single, specific topic. An objective should not be vague,
for example: 'To increase market share: This is a vague objective, as you need to
know what it was originally in order to make a comparison.
2. Objectives should relate to a result, rather than an activity to be performed.
3. Objectives should be specific and measurable. This means that the objective must
be stated in specific terms, for example, 'to increase market share from 12% to
17% in 6 months:
4. Objectives should be challenging but achievable. All too often managers
set objectives that are not reasonable and if not attained, can demoralise

31
Essentials of Marketing

both management and employees. It is thus important not to set unrealistic

objectives.
5. Objectives should be set within a timeframe (usually one financial year).
This definition implies that different kinds of objectives are encountered at different
levels of the organisation. The next two sections will look at the organisation's long-
term and short-term objectives.

2.3.3.1. Business or long-term objectives

'The first group of objectives is the business objectives or long-term objectives.
These objectives present a picture of a certain desirable future for the business.
The objectives also serve as a standard or norm according to which the actual
achievement or performance can be measured. Top management, which usually
includes the marketing manager, financial manager and human resources manager,
is responsible for setting business objectives.
According to Peter Drucker, there are eight major areas in which a business should
set its objectives. These objectives refer to the whole enterprise, and are as follows: 9
l. Market standing. A business should decide which products and services it wants
to sell and to whom it wishes to sell them. The business should also target the
share of the target market it aims to capture.
2. Productivity. This is the ratio of the inputs and outputs of a business. Objectives
with regard to productivity improvement can be set in several areas, such as work
methods, machinery and equipment advances, and increased worker efficiency.
3. Innovation. A business that plans to remain competitive in today's environment
should be innovative, and should plan new products.
4. Physical and financial resources. Objectives should be established with regard to
plant equipment and supply of raw materials. Objectives should also be set in
terms of how financial resources are to be generated and utilised.
5. Profitability. Profit is the reward for the capital investor or the entrepreneur. Profit
objectives should be set in terms of a particular financial index, for example, 'to
achieve a return on investment (ROI) of 21 % during the next financial year:
6. Manager performance and development. Businesses should set objectives that
relate to the quality of management performance and ensure the development of
people at all levels of management.
7. Worker performance and attitudes. Objectives should be set regarding factors
such as output per employee and quality of product.
8. Public and social responsibility. Objectives should be set that will address the
public and social responsibility initiatives of the business.

32
 Chapter 2- The marketing environment

2.3.3.2 Functional or short-term objectives

The second group of objectives are the functional objectives. Functional objectives
refer to those objectives set by functional managers in each functional area, for
example, marketing objectives for the marketing department. These are medium- or
short-term objectives.
As mentioned previously, the marketing objectives relate directly to the business
objectives ofthe company. The most important marketing objectives are as follows:
II Profit. To maximise profitability and to achieve the highest possible rate of return

on investment (ROI).
II Customer orientation. This marketing objective has been discussed as the first
principle of the marketing concept. It was emphasised that the marketing strategy
must be based on the satisfaction of customer needs and wants. If this is not
achieved, the business will cease to exist.
II Survival and growth. Marketing management must continually strive to survive,
particularly in difficult circumstances. It should, furthermore, encourage growth
by promptly responding and adapting to the ever-changing environment.
Ill Increase in sales and market share. A large market share relative to that of

competitors ensures a high sales volume and lower unit costs with regard to
production and marketing.
Ill Efficiency motive. All companies strive for efficiency. For example, non-profit

organisations strive towards maximum efficiency instead of increasing market

share or sales.
• Marketing instrument objectives. Other marketing objectives can be set for the
different functions in the marketing department, depending on environmental
circumstances.

2.3.4 Resources, skills and abilities

The resources, skills and abilities ofthe organisation are controllable elements of the
micro-environment and are employed to take advantage of external opportunities
and to counter threats. The strategic use of these elements is important, and is the
responsibility of management. These resources include available capital and the skills
needed to create an effective organisational structure in which employees are able to
function to the best of their abilities. They also include the marketing skills needed to
compete successfully in the marketplace. Having an efficient marketing information
system that supports decision-maldng, as well as experience and intuitive foresight,
are internal strengths that will put the organisation a step ahead of its competitors.

2.3.5 The marketing instruments

The marketing instruments are under the direct control of marketing management.
How these instruments are used, however, depends on the market to be targeted
and the expected impact of the macro-environmental factors on the organisation.

33
 Essent(als of Marketing

Marketing management has to take decisions regarding these instruments against

this background and with other environmental factors in mind. The marketing
instruments are also known as the marketing mix or the four Ps of marketing. They are:
l. Product. Which product or products can be offered to meet the perceived needs
of the consumer, given the resources and skills available in the company, as well
as the broader business climate or environment? A restaurant selling home-made
pizzas may tie in with the experience of the owner, as well as the demand from the
market for home-made pizzas.
2. Price. The price of the product must reflect its value to the consumer. Another
aspect to consider is the relative price versus quality level that the product
maintains against competing products. When setting the price, marketing
management has to consider the economic climate, customers' willingness to
pay a specific price, prices of competitors' products and so forth. In an area where
there are many people unemployed, prices will most likely reflect this scenario
and be lower.
3. Place. Customers' buying patterns will determine where a product should be
available. Management must decide which outlets should carry the product,
based on whether these outlets will reach the organisation's customers. A bakery
will try and sell its products at every cafe and garage it can, as it is more convenient
for customers to purchase it at these outlets.
4. Promotion. Promotion concerns the marketing communication methods used to
inform the target market of the product. This decision is made by the marketing
manager and will be influenced by factors such as the target audience to be
reached, cost and frequency of media.
How these instruments are combined will determine whether the consumer buys a
market offering or not. 1he business must ensure that it has the right product, at the
right price at the right place (at the right time) and that the product is promoted by
informing the target market about the product and where and how to obtain it. These
four variables are discussed in more detail later in this book.

2.4 The variables in the market environment

The market environment refers to those elements or variables that may be influenced
by the organisation but which cannot be controlled by the organisation. This
environment is the second environment shown in Figure 2.1 and is located just
outside the micro-environment.
The market environment always has two sides: a supply side and a demand side.
On the supply side are all the other businesses offering similar products to the
market (competitors). There are also the suppliers who market their own products or
services to the business. Manufacturers and wholesalers are usually the suppliers on

34
 Chapter 2- The marketing environment

the supply side of the market. On the demand side are all the possible consumers of
the products, services or raw material components the business offers. The marketer
purchases merchandise from its suppliers and sells it to consumers.
To understand the interaction between the business and its market environment,
we need to examine the variables in the market environment more closely.

2.4.:1. Suppliers
Suppliers are businesses and individuals who provide the resources the business
needs to produce its goods and services. 10 It has become increasingly important
for organisations to ensure that their sources of supply meet their requirements in
terms of delivery, quality, price and so forth. Having the right supplier may mean
the difference between success and failure for the organisation, as suppliers are an
important link in the organisation's overall customer 'value delivery system: Without
reliable suppliers, the business will not be able to meet its obligations to customers.
In South Africa, the purchasing function is increasingly being managed as part
of the overall supply chain. The purchasing function is, therefore, regarded as part
of a supply process. It includes all the activities in the materials flow chain, starting
with the supplier, and includes all intermediate activities up to the stage at which the
requirements are delivered to the end-user in the business.
The supply of materials and services is extremely important as it has a direct
influence on the profit of the business and the price charged to customers. A large
part of the cost of a product is directly related to the purchase of materials, which can
ultimately mean the difference between success and failure. If the organisation pays
too much for its supplies, it will not be competitive and therefore, it will not be able to
survive. Ultimately, this will influence the acceptability of the product in the market.

2.4.2 Consumers
Without consumers the business is nothing and therefore consumers are the focal
point of the business. Everything about consumers - their needs, purchasing
power and behaviour patterns - are of primary importance to any business, and
consequently consumers require an in-depth analysisY The topic is touched on
briefly here, as consumers and consumer behaviour will be dealt with in detail at a
later stage.
In simple terms, a market can be defined as consisting of people with needs who
have money to spend and the willingness to spend that money. It is the responsibility
of marketing management to analyse the consumer market in order to see how it
functions. Changes in the market composition or changes in consumer needs may
create certain opportunities that, if taken advantage of, could influence the long-
term growth and survival of the business.

35
Essentials of Marketing

Businesses operate in five types of customer markets. 12 These markets are as follows:
1. Consumer markets are individuals and households who buy goods and services
for personal consumption.
2. Industrial markets or business-to-business markets are made up of organisations
that buy goods and services for further processing or for use in their manufacturing
processes.
3. Reseller markets buy goods and services and resell them at a profit.
4. Government markets are made up of government agencies that buy goods and
services in order to produce public services or transfer these goods and services
to others who need them.
5. International markets are foreign buyers, including consumers, producers,
resellers and governments.

2.4.3 Competitors 2 3
Competition can be defined as a situation in the market environment in which several
businesses offer similar ldnds of products or services and compete for the business
patronage of the same customer. 14 Any business that offers a product or service is
constantly faced with competition. In most instances, competition determines the
price at which a product can be sold. It is essential that the business does not define
its market too narrowly, as this may limit its target market. It is also important to
realise that consumers have many different needs, which means they will be trying
to satisfy as many of these needs as possible with their limited resources. This means
the pool of competitors is great, until such a time as the customer decides which
need to fulfil.
As soon as the consumer decides to buy a specific product, the competition
moves to product competition. In Thandi's case, this would be other shoe retailers.
Competition also has positive aspects. It can help to keep excessive profits
in check, stimulate higher profitability, promote better service and encourage
technological innovation.

2.ft.3.:t. Competitive market structures

The number of businesses that sell a product may affect the strength of the
competition. When many businesses sell a particular product, price considerations
and product differences are more important than when only one business sells
that product. Furthermore, the number of businesses selling a similar product
determines the structure of the market. The advent of the internet has also led to
a change in the total competitive structure. One of the fastest growing advertising
mediums is advertising on the internet. Table 2.3 compares some characteristics of
the four general types of competitive market structures.
 Chapter 2- The marketing environment

Table 2.3 Characteristics of competitive market structures

¥"·-- ,__,,__
c' -- -. • :_ ~'-·-
' -:• _- ,- -- _c,· ·:-; ,:--:-- ,
·-.
,,-c_ -•,
__
MA~KCETSTRUCTl)RE •• _- -__ -_._- -_- --:- EXAMPLE -- _--
___ ___

'-

Monopoly: there are no competitors and Eskom

there are no substitutes available
Oligopoly: there are a few competitors Cellular network providers
and there are a few differentiated products
available
Monopolistic competition: there are Variety of breakfast cereals
many competitors and there are many
differentiated products
Perfect competition: there are an unlimited Fresh produce goods
number of competitors and there are many
products with little differentiation

These competitive market structures can be described briefly as follows:

11 A monopoly exists when a business is marketing a product that has no real
substitutes. The company essentially has complete control over the supply of the
product. In South Africa monopolies are discouraged, but in some instances the
government has allowed them.
11 An oligopoly exists when there are relatively few businesses marketing a particular
product, and they control much of its supply. Products in oligopolistic competition
may be homogeneous (similar), such as coal or steel. On the other hand, they
may be differentiated (having real or perceived differences), such as motorcars or
cigarettes. The furniture and motor industries are examples of oligopolies.
• Monopolistic competition is found when a large number of businesses market the
same or similar products. Each business attempts to differentiate its products to
convince consumers that its products are better compared to those of competitors.
• Perfect competition is the ideal situation, but it does not exist. If it did it would be a
market with an unlimited number of sellers, not one of which could significantly
influence the price or supply of the products. The closest example of perfect
competition is the market for agricultural products, sold informally at road stalls
or at farmers' markets.
?
I
2.5 The variables in the macro-environment

___________
The third and last component of the marketing environment in which a business
operates is the, macro-environment.
_____.,- The macro-environment refers to those factors

or variables in the environment over which the individual business has no control
and on which it has little effect. These factors influence the business and need to
be monitored constantly as they continually change. These variables are found just
outside the market environment.

37
Essentials of Marketing

The macro-environment is dynamic in that it changes rapidly and in today's global

society the impact of such changes may be felt very quickly. The result of this
interaction is often a changed business environment with new opportunities and
new threats.
The different variables in the macro-environment will be discussed in the
paragraphs that follow.

2.5.:1 Political and legal environment

One of the single most important influencers of the marketing environment is
political stability in a country. If there are doubts about political stability, particularly
of developing countries, reaction from investors and tourists can be immediate.
This is usually reflected in negative trends in the exchange rate and the number of
foreigners visiting a country. During the first few months of 2016, the international
rating agencies downgraded South Africa's status and left the country on the verge
of junk status, which can and will result in serious contractions in the economy. The
various political blunders made by government, including 'Nenegate' have resulted
in the value of the rand dropping by more than 30% against the US dollar. During
early 2016, the rand dropped to its lowest exchange rate against the US dollar, and
touched briefly at Rl6 to the dollar. If one compares this to the exchange rate only
four years ago (2012) when the rand was around R8 to the dollar, the impact is clear.
Management must also be aware of international laws and regulations that
regulate businesses and abide by these rules. In addition, businesses need to keep
up to date with changes in legislation, at both national and provincial levels. After
South Africa entered a new political era in April 1994, regulatory bodies made
sweeping amendments to implement change. Political measures guide the economy
in a specific direction. If, for example, the government of the day wants to increase
the level of exports, regulatory guidelines need to reflect this. Decisions taken by
government have an impact on the running of businesses and cannot be ignored
at will. Individual companies can do little about this and will have to adapt to these
changes if they are passed through parliament and become law.

2.5.2 International environment

The internet, e-commerce and communication technology have made the world a
global village. In the past, news travelled slowly and reaction was even slower. Today,
communication is instant. What happens anywhere in the world is reported virtually
immediately and people and markets react to these events instantaneously. It is now
much easier to source suppliers for products than it was in the past and competitors
are not limited to local stores or outlets, as seen in the exponential growth of online
shopping.
The changed political dispensation has opened new doors for South African
businesses- both big and small- but these doors can be seen as a threat or opportunity.
 Chapter 2- The marketing environment

South African businesses now compete on an equal footing internationally, which

benefits both importers and exporters. However, new markets are opening up in
countries such as China, India and Russia.
Businesses that intend marketing their products abroad and those intending
to import goods must understand all the relevant regulations and conditions that
apply in the countries with which they do business. They should also be aware of
the implications of any cultural differences that may impact on trade. Organisations
such as the Industrial Development Corporation (IDC) and the Department of Trade
and Industry (DTI) can assist businesses in this regard.

2.5.3 Physical environment

Natural resources such as water, coal, oil, gold and other minerals are not available
in infinite quantities. Businesses must be aware of these limitations as various
factors can lead to a shortage of raw materials and rising costs. In some instances
the supply of an ingredient for a specific pharmaceutical product has become so
scarce that the product's price has sky-rocketed or it has been removed from the
market. All businesses need to be aware of the availability of raw materials used in
the manufacturing process as this can and will have an effect on the regular supply
of the product. There is general consensus that oil reserves will run out in about 25
to 30 years. Companies that manufacture motor cars, engines and so forth will have
to start looldng seriously at alternative sources of energy to power their machines.

2.5.4 Technological environment

The one area in which change has been taldng place at an alarming pace and virtually
on a daily basis (some even say an hourly basis) is technology. One need only look
at the increasingly sophisticated features on cell phones, the growing use of the
internet, new applications of software and better and faster computer hardware to
realise how rapidly technology is changing. These advances manifest in all areas of
business, including advertising media, in the development of new products, delivery
of products and many other ways. Most products that are bought today, with the
exception of a few basic commodities, have originated over the past 70 years. The
most recent inventions, which have already become 'indispensable' in modern
society, such as laser surgery, silicon protein molecules, fibre optics, and 80 % of
the medicines available today, are products that have been developed in the past
five to 10 years! These extreme changes in the environment are largely a result of
technological innovation.
Technological innovation may be described as the process that expands people's
capacity. It originates in research and development by enterprises and the state. It
results not only in new machinery or products but also in new processes, methods
and even management approaches, which in turn bring about changes in the
environment. There is at present, worldwide, renewed pressure on the development

39
Essentials of Marketing

of renewable and alternative energy which will affect all spheres of business once it
is commercialised. Technological innovation also has an impact on other
environmental variables. Economic growth is affected by the number of new
inventions and also by social change. For example, the introduction of a new product,
such as cell phones, causes major changes in the way people live. Environmental
variables, in turn, have an impact on technology, so that the process of innovation
and change is constantly repeated. 15

2.5.5 Economic environment

The most visible and recognisable variable in the macro-environment is the
economy. It can be said that the economy is the heartbeat of a country as it affects
every consumer and business. Mismanagement of the economy by any government
can lead to serious complications on a global scale for that country.
The economic forces in a country in general and in the specific area in which a
business operates will have certain implications for the business. Management must
be aware of these economic forces, as any changes will bear upon other variables
in both the market environment and the micro-environment. The economic
environment includes the following:
• Inflation. The inflation rate in a country has a direct influence on consumer
prices and spending. In South Africa, the fiscal policy of the government aims
to keep inflation between 3% and 6%, but since the end of 2015 this has become
increasingly difficult to maintain; inflation for 2016 is forecast to be above 6,8 %,
and this with an expected GDP ofless than 1 %.
• Interest rates. Since 2009 the interest rate has been dropping steadily, but this
has changed and since 2015 the interest rate has increased by 2% - with the
expectation that this trend will continue well into 2017. Businesses set up with
borrowed funds are particularly sensitive to interest rate fluctuations. A sharp
rise in the interest rate can easily result in a business being unable to meet its
commitments. At the time of writing in 2016, many countries still have an interest
rate of between 0,5% and 1% because of the economic climate and the continued
economic crisis in many countries. By keeping interest rates low, government
wants to encourage businesses to use the money to grow their businesses and, in
so doing, encourage economic growth.
• Unemployment. As a result of the worldwide recession since 2009, nearly one
million South Africans have lost their jobs, bringing the unemployment figure
to nearly 40% of the economically active population in the country. During the
first few months of 2015 alone, an additional 500 000 South Africans lost their
jobs or became unemployed. This state of affairs has a direct effect on consumer
expenditure and the demand for products and services. In such times, people
tend to cut back on more expensive products and postpone purchases of durable
goods for as long as possible.

40
 Chapter 2- The marketing environment

II Consumer income. The structural changes in the income of the various consumer
groups are of great importance to businesses, since they give rise to changed
·spending patterns with regard to products and services such as food, clothing,
housing and insurance. As mentioned above, during hard economic times people
have less money to spend (or have less disposable income).
• Exchange rate. In the past few months, the rand worsened against other
currencies, and in May 2016 was trading at an average of about R15,15 to the US
dollar. A weak rand means that imports are more expensive, but exports earn
more money than would be the case if the exchange rate was lower. The prices
of petrol and diesel, for example, are directly linked to the price of oil per barrel
and are adjusted on a monthly basis. This means that as the price of oil increases,
for example, as a result of a weak exchange rate, the price of petrol and diesel
are adjusted accordingly. The exchange rate, therefore, has a direct influence on
transport costs, the cost of imported goods and raw materials. Companies need
to be aware of the impact of these fluctuations on their products and services.
a Monetary policy. Another variable affecting all businesses is the government's
monetary policy. This policy regulates the money supply, interest rates and the
level of the rand relative to other currencies. Fiscal (taxation) policy affects both
businesses and consumers through tax reforms and the level of taxation.
Ill The business cycle. The business cycle also plays an important role in the
performance of businesses. During a downward turn in the business cycle,
less disposable income is available. This has a negative effect on business. The
business reacts by buying fewer products from the manufacturer. In other words,
a decrease in stock is a direct result of a downward turn in the business cycle.
It is clear from the above discussion that economic trends require continuous and
vigilant attention from management.

2.5.6 The socio-cultural environment16

The integration of the South African population since independence in 1994, the
focus on women in business, black economic empowerment (BEE), and other
actions have led to changes in all areas of business. The socio-cultural environment
has an impact on marketing techniques, media used, types of advertisements,
organisational structures and products designed and offered for sale across all types
of businesses and industries.
Social and cultural change is strongly influenced by the economy and technology.
Social trends directly affect marketing strategies as they help to determine consumer
needs and purchasing decisions. These trends include demographics, lifestyles,
cultural values and sub-cultural influences. (Demographics describe the objective
characteristics of an individual, for example, age, education, occupation, income
and marital status.) Consumers' lifestyles are defined by their activities, interests and _
opinions. For example, a consumer may have a social lifestyle, a health-conscious

4~
Essentials of Marketing

lifestyle, a liberal or conservative lifestyle. Cultural values can be defined as beliefs

shared by a large number of people in a society, which lead to common patterns of
behaviour. Sub-cultural influences involve the values and behaviour that distinguish
sub-cultures from society as a whole.

2.6 SWOT analysis

A SWOT analysis is a useful instrument for helping managers to identify the internal
strengths and weaknesses of a business and the external opportunities and threats
it faces.
A SWOT analysis is based on the assumption that an effective strategy maximises
the strengths and opportunities of a business and minimises its weaknesses and
threats. Strengths should be matched to opportunities and threats should be seen
as challenges. However, not all factors in a SWOT analysis are of equal value. The
aim is, therefore, to identify those critical factors that can have a major effect on
the business. Management should then build on vital strengths, correct obvious
weaknesses, exploit significant opportunities and avoid potentially disastrous
threats. The components of a SWOT analysis are discussed in more detail below.

2.6.:1. Strengths
A strength is a resource, skill or other advantage relative to competitors and the
needs of the market that the business serves or expects to serve. It is a distinctive
competence that gives the business a competitive advantage in the marketplace. A
distinctive strength is more than what it can do; it is what it can do particularly well.
Strengths may exist with regard to financial resources, image, market leadership,
buyer or supplier relations, expertise, sldlls and intuitive knowledge. In many
industries the service, efficiency and personal attention offered to customers make
a crucial difference in gaining leverage in the marketplace. Businesses that deliver
superior service over their competitors have a real competitive strength.

2.6.2 Weaknesses
A weakness is a limitation or deficiency in resources, sldlls and capabilities that
seriously impedes effective performance. Weaknesses are areas that a business
needs to improve, should it not want its competitors to gain competitive advantage.
Facilities, financial resources, management capabilities, marketing sldlls and brand
image can be sources of weaknesses. For example, a business short of cash cannot
afford to undertake a large-scale marketing communications campaign.

2.6.3 Opportunities
An opportunity is a favourable element within a business environment that can
be exploited by management. The identification of promising opportunities is
an absolute prerequisite for the profitability, survival and growth of a business.

42
 Chapter 2- The marketing environment

Identification of a previously overlooked market segment, changes in competitive

or regulatory circumstances, technical changes, and improved buyer or supplier
relationships could present opportunities.
An opportunity should not be assessed in isolation, but should be evaluated
on the ability of the business to capitalise on the opportunity. This implies that
the business must have adequate resources to support the action required to take
advantage of an opportunity.

2.6.4 Threats
A threat is a major unfavourable element within a business environment that can
lead to the failure of a product or service, or ultimately the business itself. It is the
responsibility of management to identify any such threats, real or potential, and to
take the necessary steps to counteract these threats.
Threats can take different forms, for example, changes in the consumer market, an
unexpected increase in competition, problems with suppliers, punitive legislation,
recession or an unfavourable rate of exchange. These threats should not be accepted
as a matter of course, but should rather be seen as challenges or possibly even as
opportunities.

2.7 Environmental scanning

Environmental scanning is the measurement, projection and evaluation of change in
the different environmental variables.
In order to adapt to changes in the environment, the internal and external
environments should be monitored continuously. We have seen that a SWOT analysis
can be a useful tool to shed light on those environmental variables that in some way
either have a positive or negative impact on the success of the business.
The importance of environmental scanning or analysis may be summed up as follows:
• It helps the business to capitalise early on opportunities, rather than lose
opportunities to competitors. In other words, it helps the business to obtain a
'first-mover' advantage by taldng action before the competition.
• It provides an early signal of impending problems or threats, which can be
defused if recognised well in advance.
• It sensitises a business to the changing needs and wants of its customers.
• It provides a base of objective information about the internal strengths and
weaknesses of a business that determine its ability to counter threats or utilise
opportunities.
• It improves the image of the business by showing that it is sensitive and responsive
to its environment.

43
Essentials of Marketing

Monitoring the internal environment (in other words, analysing internal strengths
and weaknesses) is part of the strategic management process. It should take place
while management keeps an eye on the external environment. It is not important
whether the internal or external analysis is done first. It is, however, of the utmost
importance that this exercise is undertaken regularly. It is very important to do a
thorough internal analysis, as it is only then that workable strategies can be developed
and realistic objectives formulated.
The following two pertinent questions can be asked:
1. How does management identify strengths and weaknesses?
2. How should strengths and weaknesses be evaluated?
For top management to identify the strengths and weaknesses in the micro-
environment, it needs to isolate the key success factors for the business. These success
factors will depend on conditions in the industry, the market and the position of the
business in that industry and market.
Finally, what methods can be used to scan the internal and external environments?
Marketing research methods are used to analyse environmental variables. These
methods are controlled by the marketing department.

Summary
This chapter describes the micro-, market and macro-environmental variables.
Marketing activities take place in this environment and are influenced by
environmental factors. Businesses should continually adapt themselves to the
changing environment. The marketing environment should be closely monitored
by means of a SWOT analysis. Internal strengths and weaknesses should be
pitched against external opportunities and threats in the continuous battle against
competitors.
Few businesses have the necessary resources, sldlls and abilities to serve the
total mass market. For this reason, smaller sub-markets or segments are identified
and suitable markets are selected as target markets. The products of the business
are positioned in a niche in the market where they are protected, to a degree, from
competitors.

References
l. Cronje, G De J, Du To it, GS & Motlatla, MDC. 2000. Introduction to business management.
5th ed. Cape Town: Oxford University Press, p 56.
2. Kotler, P & Armstrong, G. 1996. Principles of marketing. 7th ed. Englewood Cliffs, NJ:
Prentice Hall, p 71.
3. Strydom, J, 2004. Introduction to marketing 'management. 3rd ed. Cape Town: Juta, p 22.
4. Vision and values. nd. Available from: http:/ /www.sab.co.za/sablimited/content/sab-
vision-mission-values (Accessed 16 August 2016).
5. SEDA: Who are we. nd. Available from: http:/ /www.seda.org.za/ ABOUTSEDA/Pages/
WhoweAre.aspx (Accessed 11 May 2016).

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 Chapter 2- The marketing environment

6. Towards the African university in the service of humanity. 2010. Available from:
http://www. unisa.ac.za/ contents/ courses/ calendars/2010/pdf7 /7 _20 1O_e.pdf
(Accessed 16 August 2016).
7. Market segmentation study guide. 2012. Selecting a target market example. Available
from: http:/ /www.segmentationstudyguide.com/understanding-target-markets/target-
market-selection/selecting-target-market/ (Accessed 15 October 2012).
8. Strydom, op cit, p 22.
9. Bennett, JA (ed). 1994. Managing tourism services. Pretoria: Van Schaik, pp 178-179.
10. Strydom, op cit, p 24; Kotler & Armstrong, op cit, p 72.
11. Ibid, p 25; Strydom, op cit, p 44.
12. Ibid, p 25; Strydom, op cit, p 26.
13. Ibid,p27.
14. Strydom, op cit, p 44.
15. Cronje eta!, op cit, pp 73-74.
16. Etzel, MJ, Walker, BJ & Stanton, WJ. 1997. Marketing. 11th ed. New York: McGraw-Hill,
p 37.

45
 Tne internatiori!al 1
marketing environ ment

Learning objectives
After you have studied this chapter, you should be able to:
II understand and explain the difference between local and international
marketing
• identify and discuss the external factors influencing the international marketing
environment
• explain the steps in the decision-making process
• discuss the deciding factors for entering the international marketing
environment
• identify and discuss the marketing mix strategies marketers can use
• identify and explain the market-entry strategies an international marketer
can use.

3.1 Introduction
We live in a global world where distance is a mere click away. Gone are the days
when companies only had to be concerned about competitors in their own country
and not be too concerned about what happens in the rest of the world. The days
when businesses could consider their country of origin as the only country in which
business could be conducted are long gone. Organisations operate in a global market
with global players where borders are no deterrent for trade. Owing to technological
advances the placing of an order is a click away, no matter where in the world the
purchaser happens to be, and as a result the competitive environment has become
far more intense. Because of these advances many other changes are taking place in
the business landscape, such as more complex management structures, strategies
and tactics, communication methods and technological innovations. The term
'globalisation' has a new meaning in the business context, referring to endless
mobility and competitiveness in the area of socialisation, commerce and academia.
International marketing is no longer just a decision companies need to make; it has
become essential for any organisation to consider and evaluate the possibility of
international marketing. 1
 Chapter 3- The international marketing environment

Although the global market is becoming smaller, geographical distance and the
difficulty of functioning in numerous markets where risk and doubt are elevated
mean that the necessity for knowledge and understanding become more significant. 2
The international marketing environment is continuously evolving and growing at a
much faster pace than ever before, and it has reached the stage where all marketing
managers in to day's competitive environment are affected by international concerns.
Consequently, the marketing manager of today who does not understand various
markets lacks the skills necessary to be a modern, professional marketing manager. 3
It stands to reason that marketers need to possess knowledge about and an
understanding of the international marketing environment in which they operate
in order to ensure survival and profitability. This chapter introduces the various
concepts of international marketing, providing an understanding of the challenges
of this marketplace and how international marketing activities differ from those
required when operating solely in a local market. The six external factors affecting
the international marketing environment are also discussed, as are the factors to
consider when deciding to enter the international market. Which specific market to
enter, as well as the most effective way of reaching the intended market successfully,
are also examined.

3.2 Defining international marketing

In order to define international marketing and put it into perspective, the differences
between international marketing, global marketing and domestic marketing must
be explained.
Some marketers see international marketing as simply selling across national
borders. This is very simplistic and does not come close to identifying or capturing
the intricacies involved. Marketing across national borders may suggest that an
organisation is actively responding to an unsolicited foreign order, or it can indicate a
company that is allocating most ofits resources to foreign market activities. 4 Clearly,
the term 'international marketing' involves a wide range of different activities and
commitments.
International marketing, according to Doole and Lowe, 'involves operating in
various foreign markets in which the uncontrollable variables and the controllable
factors (in the form of cost structures, opportunities for advertising and distributive
infrastructure), differ significantly between markets, countries and nationalities: 5 In
other words, international marketing occurs when the marketing performances of
the organisation include activities, interests or operations in more than one country
and when there is some ldnd of authority or management of these activities from
outside the country.
Global marketing, on the other hand, is when an organisation manages,
integrates and organises all the different marketing programmes into a considerable
global endeavour. Here, the main aim of the company is to accomplish a degree of

47
 Essentials of Marketing

synergy in the overall international marketing effort, in order for the organisation
to capitalise on the different exchange rates, tax rates, labour-rates, skill levels and
market opportunities that prevail in these different markets. 6
Domestic (local) marketing involves the organisation influencing a series of controllable
variables (such as price, advertising, distribution and product or service attributes) in
largely uncontrollable external environments that are made up of different economic
structures, competitors and legal structures within a specific political or geographic
country's boundaries. 7
This means that domestic (or local) marketing consists of marketing activities and
operations within one country only (for example, one's home country, South Africa).
In short, international marketing can be defined as 'the practice of planning aria
accomplishing business across national boundaries to generate exchanges that satisfy
the objectives or needs of individuals and organisations. The fact that a transaction
takes place across national borders highlights the difference between domestic and
international marketing field complexity, and intensity may vary significantly.' 8
The international market is influenced by a number of external factors that are
discussed in the next section.

3·3 External factors influencing the international marketing

environment
When deciding to compete on an international platform the marketer needs to be
aware of and evaluate the external factors that can and will have an influence on his
or her marketing actions.

I Natur-•l "::~CC] [ Td-echn ologicatl

1
1
_1

L-~-~/m'" l
/
/'
"'·''·-
External factors: \

1
~ ---~. i
-----J)o~( Political/legal
J \
Economic 1--l international \+------:
development environment ) _s_t_ru_ct_u_re_s_j

/-~Cc
I
_ _,
I
,-----~c.__

Social/cultural Demographic
factors i make-up J
Figure 3.1 Six external factors facing international markets
Source: Adapted from McDaniel, C, Lamb, CW & Hair, JF. 2011. Introduction to marketing.
Mason, OH: South~ Western Cengage Learning, p 161.
 Chapter 3- The international marketing environment

The main differences between the local and international marketing environments
are the multi-dimensionality and complexity of the different countries, with different
nationalities, races, cultures and religious beliefs. 9 1t must also be noted that all (or
most) of the external factors that are applicable domestically are also applicable in
an international context. These external factors include social/cultural variables,
economic development, technological advances, political/legal structures, the
demographic make-up of different countries and natural resources. 1° Figure 3.1
illustrates the various external factors that can have an effect on an organisation
operating in internatio~al markets.
It is clear from Figure 3.1 that the same factors are applicable in a domestic
market although the impact, interpretation and finer details will differ from country
to country. Each factor is discussed briefly below.

3·3·:1 Social/cultural factors

One of the major obstacles in international marketing lies in the social and cultural
differences between nations - and a failure by marketers to ensure that they
understand these cultures before embarldng on new international business ventures.
The social differences that exist between nationalities and the various cultural
situations of consumers affect the perceptions and buying behaviour patterns
of people. 11 A failure to become acquainted with the social and cultural values of
a nation can affect an organisation operating in the international marketplace to
such an extent that the business venture can be doomed. Countries have their own
customs, standards and taboos, and marketers must understand how social and
cultural factors affect the consumers' behaviour in the market(s) in which they wish
to operate. 12
As mentioned before, there are many additional complexities and problems that
marketers face when marketing internationally, which originate from the differences
in the cultural and social environment. Table 3.1 indicates the major differences
between operating in local and international markets.
Table 3.1 Comparison between local and international marketing
·.
LOCAL MARKETS INTERNATIONAL MARKETS

Language Particular native language Foreign language and

and known ethnic groups multicultural groups

Market Fairly homogeneous markets Fragmented and

heterogeneous markets

Stability Rather stable business Several unstable business

environment environments that might be
very profitable Ill . .

49
Essentials of Marketing

Currency Particular and notorious Currencies and exchange

currency rates fluctuate

Financial climate Relatively consistent Variety of financial climates

that fluctuate

Data collection Accurate and easily Complex as it is a bigger and

obtainable more diverse market and a
bigger budget is allocated for
a bigger workforce

Effect on the An entity has minimal effect Weakening of resources by

environment on the environment bigger organisations in small
countries

Governmental Moderate interference from High governmental

interference government interference that controls
business plans

Political factors Somewhat unimportant Vital

Vital Known and understandable 'Rules' for doing business

'rules' for doing business are different, unclear and
unknown

Management Management is familiar with Management is sometimes

sharing responsibilities and independent and
using financial controls unreasonable with budget
and controls

Source: Adapted from Lancaster, G & Massingham, L. 2012. Essentials of marketing

management. New York: Routledge, p 490.

Central to all cultures is the set of values that the citizens or specific ethnic groups
share and which determine what is socially acceptable or not. Culture underlies
family values, educational systems, religion and social classes. Being aware of these
values and the effect they have on preferences and behaviour makes it possible for
marketers to formulate appropriate strategies and action plans. An organisation that
does not understand a country's culture is bound to fail. A lack of knowledge about
different cultures leads to misunderstandings, inadvertent impoliteness and even
incompetence. 13 Cultural and social diversity includes language barriers, ethical
concerns, different belief systems, religion, changes in the demographic profile, and
interpersonal relationships with others. These dissimilarities between countries and
across cultures have a considerable impact on the way in which a product might be
utilised in a market, the brand name selected, as well as the advertising campaign. 14

so
 Chapter 3- The international marketing environment

• The Swedish furniture giant IKEA somehow agreed upon the name 'FARTFULL'
for one of its new desks.
• There are several examples of companies getting tangled up with bad
translations of products due to the word 'mist'. We had 'Irish Mist/ (an alcoholic
drink), 'Mist Stick' (a curling iron from Clairol) and 'Silver Mist' (Rolls Royce car)
all flopping as 'mist' in German means dung/manure.
• 'Traficante', an Italian mineral water, found a great reception in Spain's
underworld. In Spanish it translates as 'drug dealer'.
• In 2002, Umbra, the UK sports manufacturer, had to withdraw its new trainers
(sneakers) called the Zyklon. The firm received complaints from many
organisations and individuals as it was the name of the gas used by the Nazi
regime to murder millions of Jews in concentration camps.
11 Sharwoods, a UK food manufacturer, spent £6 million on a campaign to launch
its new <Bundh> sauces. It received calls from numerous Punjabi speakers telling
them that 'bundh' sounded just like the Punjabi word for 'arse'.
• Honda introduced their new car 'Fitta' into Nordic countries in 2oo~. If they had
taken the time to do some cross-cultural marketing research they may have
discovered that 'fitta' was an old word used in vulgar language to refer to a
woman's genitals in Swedish, Norwegian and Danish. In the end they renamed
it 'Honda Jazz'.
• Here is a nice cross-cultural example of the fact that all pictures or symbols
are not interpreted the same across the world: Staff at the African port of
Stevadores saw the 'internationally recognised' symbol for 'fragile' (ie broken
wine glass) and presumed it was a box of broken glass. Rather than waste space
they threw all the boxes into the sea!
Source: Adapted from http:/ /www.commisceo-global.com/component/easyblog/cross-
cultural-marketing-blunders (Accessed 11 May 2016).

It is clear from these examples that mistakes are made by the best of companies
and are not limited to those who are new to the notion of international marketing.
Marketers have to recognise that these variations exist in the diverse regions and
cultures in which they operate and adapt their offerings accordingly.

3.3.2 Economic development

The level of economic development in a country has a direct impact on the planned
actions and offerings of marketers. If a country is in a downward spiral, unstable,
or not sound, the risks associated with entering that market are compounded. For

s~
Essentials of Marketing

example, any company that considers investing in South Africa will acquaint itself
with the prevailing economic conditions and political pressures in this country, and
the risks these circumstances pose to the long-term success of the investment to be
made. 15 Therefore, it is important that international marketers consider the economic
climate of the country in which they wish to operate. International economies
have grown at a fast pace since the early 2000s, with China leading the way. 16 This
has, however, changed since the economic crisis that began in 2008. A number of
countries, most notably Greece, Spain and Portugal, experienced serious economic
problems in 2012. These problems are still continuing in 2016 and are further
exacerbated by the migrant crisis that has hit Europe. Even China has experienced a
slowdown in economic growth- from over 10% per annum before 2008 to about 6%
in 2016. A marketer ultimately has to try and forecast the problems of the changing
growth in economies, as well as evaluate and gauge the possible impact on his or her
company. 17• 18
According to Kotler and Armstrong, there are two economic factors that a
marketer needs to consider to determine whether the economic environment of a
country is attractive or not. 19 These are the country's industrial structure and income
distribution.
1. Industrial structure. This includes aspects such as the survival of the economy
(subsistent economy), raw materials, emerging economies and industrial
economies that shape the product and service needs, income levels and
employment levels of that country.
2. Income distribution. Industrialised countries include low-, medium- or high-
income households. A company needs to decide which of these groups it
will target. In addition to the issues previously mentioned, the prospective
international marketer needs to take note of a country's general economic issues,
such as interest rates, exchange rates, unemployment and taxation. Since 2008,
interest rates have dropped to very low levels with some countries offering only
1 %, and consequently consumers are increasingly borrowing money for capital
investments such as housing. While this has meant an increase in sales and
profits for certain industries such as construction and furniture retailers, the level
of consumers' debt is rising because consumers are borrowing too much and
spending too much on credit. According to Fahy and Jobbe1~ 'direct and indirect
taxes is another factor international marketers need to consider before marketing
internationallY: Direct taxes are taxes on income and wealth (such as income tax
and capital gains tax), while indirect taxes are included in the price of the goods
and services consumers buy, for example, Value Added Tax (VAT), which have an
effect on their buying behaviour. 20

52
 Chapter 3- The international marketing environment
··----··-----·-----·--------·-----------------·-----------------------·--·-

3·3·3 Technological development

The advances in technology have an impact on businesses all over the world. In
fact, the lack of technology and technological advancement may seriously impede
one's business in a particular country. Many developing countries are not capable
of accommodating the latest technology within their business environment because
of infrastructurallimitations. This affects the international marketer who will find it
difficult to conduct business with that country. Think of the internet and the speed
with which information can be sent and then consider how an inability to handle
internet transactions would slow down business.
Many developments in technology have taken place in recent years, which
has led to an increase in the competitive environment of the business world and
changed how business is conducted. One only has to look at the evolution that has
taken place in the field of electronic communication to understand the opportunities
these developments provide to the marketer. The use of tablets has changed the way
businesses operate, maldng desktop PCs virtually obsolete, and with Wi-Fi freely
available, offices have become a 'nice to have' for many people. Today's executive
is able to conduct his or her business from coffee shops or the beach thanks to
electronic connectivity. Organisations can communicate from any place around the
world using a range of electronic media such as Skype. Cell phones have become
central to connectivity, while landlines are falling in popularity. These changes
in technology affect all areas of the marketing process and, as a result, should be
considered by marketers who aspire to operate internationally. In other words,
marketers need to establish whether the channels and means exist to communicate
with the international market( s) effectively and immediately. 21 , 22

3·3·4 Political/legal structures

No company can do business in another country without acquainting itself with
the laws of that country- as one has to abide by that law. Not knowing the laws
of the country in which you operate or do business is no excuse if these laws are
broken. Political forces are described by Fahy and Jobber as 'the close connections
that politicians and senior business people often have: 23 Politics is essentially linked
to a government's attitude to business and the freedom within which it allows
firms to operate. Conducting business in the international environment exposes
companies to various risks- especially in countries that have unstable governments.
In Africa, for example, there are a number of countries where businesses are at
risk of nationalisation and government interference, such as Zimbabwe, and this
must be factored into any decisions being made. This political arena suggests that
the international marketing environment is not a stable area and the tendencies of
governments to change regulations can have a huge effect on international strategies,
presenting both opportunities and threats. 24

53
Essentials of Marketing

Numerous issues face marketers in international markets where they have to

comply with the smallest of issues that pertain to a particular country, for example,
legal issues regarding food labels such as listing the ingredients used and the size
of the lettering. In the case of pharmaceutical products, these types of rules and
regulations are extremely strict and severe. Organisations also need to consider a
foreign country's financial laws and regulations, especially if they want to take their
profits in a currency that is of higher value to them. 25 Examples of legal structures
that influence international marketers include the following: 26
• tariffs that are levied on the goods entering a country
• limitations to or quotas on the amount of a specific product that may enter
another country
• exchange control, which is the law that compels a company earning foreign
exchange from its exports, to sell the foreign currency to a control agency (such
as a central bank)
• trade alliances (or market groupings), which occur when numerous countries
agree to work together to form a common trade area to enhance trade opportunities
• trade agreements.
While certain international markets are fairly accessible to international marketers,
there are many countries, such as China and India, which are less accessible. India, for
example, has strict import quotas, currency restrictions and various limitations that
make it challenging to operate in that country. In a similar way, there are a number
of countries that have a more open approach, which makes their markets much more
accessible to international marketers. Countries such as Singapore and Thailand
actively encourage international investors and provide them with incentives and
favourable operating conditions in order to lure them to their respective countries.
Another concern when investigating the possibility of entering international
markets is the political stability in a country- and the prognosis for it staying like that
in future. The government in Greece is very unstable due to economic factors such as
government overspending and mismanagement, which has resulted in an increased
risk of doing business in that country. 27
It is important that an organisation worldng in international markets 1:1ssesses
the countries in which it operates (or desires to operate) to measure the economic
and political risks and to ensure it understands the irregularities and features of the
market it desires to develop. 28

3·3·5 Demographic make-up

The demographic make-up of a country refers to variations in the population and
presents opportunities for marketers in the form of growth opportunities. It is not
enough for a marketer to know the population size of a particular country; more
details are needed in order to decide whether to enter a market or not. Information
on the dispersion of the population in metropolitan and rural areas, and the

54
 Chapter 3- The international marketing environment

composition of the population in terms of income, sex, age, employment, education

and so forth are needed. This is because urban markets might not be easily accessible
or there may be a big gap between the older generation and the younger working-
age population which can have an enormous impact on the economy, businesses
and competitiveness of the individual country. 29 Globalisation has also given rise
to increased demographic effects, namely population migration between countries
and the rise of the middle class in countries with a low GDP per capita. 30

3.3.6 Natural resources

There is not an abundance of raw materials in the world and in some countries the
scarcity levels are much higher than in others. With the world population continuously
increasing due to advances in medical science, which enables people to live longer,
there are huge pressures on limited natural resources. Countries in the Middle East,
for example, have flourished because of the large quantities of oil in those regions -
oil which other countries are forced to buy. In the early 1970s the price of oil was a
few dollars a barrel, but in 2012 it fluctuated between US $95 and US $125 a barrel. In
2016 it dropped below US $45 a barrel. This plays havoc with a country's economic
growth. Saudi Arabia has, for example, experienced a huge drop in revenue in the
first half of 2016 due to the drop in oil prices, and even replaced its energy minister
to try and swing this reversal of fortunes. Countries such as Indonesia, Mexico and
Venezuela were able to borrow heavily against oil reserves in order to develop more
rapidly, but today they are experiencing serious economic problems due to the lower
oil prices. 31
The next section briefly discusses the key steps in the decision-making process to
determine whether operating in the international environment will be feasible for a
local organisation.

3·4 International decision-making process

The same as when selecting and developing domestic marketing strategies,
international marketing strategies should be planned by taking all the relevant
aspects into consideration. The key steps in the process in order to plan and
implement international marketing programmes and strategies successfully are
listed below. 32 The organisation should:
• decide on the extent and degree to which it wants to enter international markets
• determine the markets in which it wishes to operate, which markets offer the best
opportunities, and which specific markets it is able to enter
• decide on the best method to enter the international market
• consider which marketing mix strategies to employ and how to apply the
marketing mix components
• consider factors such as the organisational systems and procedures that will be
most suitable for a particular product.

55
Essentials of Marketing

These important areas of the international marketing decision-making process will be

integrated in the discussion in the remainder of this chapter. Besides these key areas,
the decisions made by the organisation should be based on a careful evaluation of
markets, including the market size, customers' needs and competitor activity. 33 The
next section briefly discusses how a marketer should decide whether or not to enter
the international marketing environment with his or her products and/ or services.

3·5 Deciding whether to enter international markets

Entering a foreign market is not the only way for a company to grow and survive.
Many companies operate solely in domestic markets and are very profitable. Others
have a need to go global for various reasons, which include growth, expansion,
capitalising on opportunities or survival. For many types of businesses, for example,
small businesses, it might be easier and safer to operate only in their own country, as
they will not have to learn and understand another country's market, culture, politics,
language and laws. It may also be too costly for them to enter another market. Other
organisations may have to consider marketing internationally in order to succeed
because their strategic position in specific markets is strongly affected by their global
position. 34
There are many reasons why companies decide to enter the international market.
Kotler and Armstrong indicate three ofthese: 35
1. International competitors enter the domestic market and offer an improved and
cheaper product or service. Consequently, the local company might decide to
attack these competitors by offering its products in the competitors' markets.
2. The local company's customers enter foreign markets due to expansion, which
requires the local company to serve these customers.
3. The international marketplace might provide an organisation with better
opportunities and an increased chance of being successful.
In order for a company to make the decision of whether or not to enter the
international market, it should evaluate its abilities in terms of knowledge and
resources. It also needs to ascertain whether it is feasible to enter the international
market, bearing in mind that it needs to understand the preferences and purchasing
behaviour of consumers in the countries it intends to penetrate. The company will
also need to evaluate its ability to offer a competitive product in terms of quality,
price and customer service. For example, the exchange rate and import duties of
a country may render the product uncompetitive due to the high selling price. The
business culture and the way business is conducted will also play a role in a company's
decision regarding whether to enter or not. Lastly, the impact of regulations on the
organisation and the political environment will have to be considered. 36

s6
 Chapter 3- The international marketing environment

3.6 Deciding which markets to enter

After a company has decided to sell its products or services on an international level,
it needs to make a decision regarding which markets it would like to enter. Based on
the company's evaluation of its own competencies, resources and strengths, it must
decide to what extent it wants to enter these markets. If the company has limited
resources, it may initially adopt a strategy of limited exposure in foreign markets.
On the other hand, if the company has the capability and resources it may decide
to enter a number of countries. Whatever the circumstances, companies must make
sure their policies and international marketing objectives are well thought out and in
place before trying to operate internationally. 37
After deciding on how many markets to enter, the company needs to decide on
the type of country it wants to enter. A danger that international marketers face is
entering too many countries, too soon, without the necessary capabilities, experience
or resources, which may result in them being unable to establish a foothold in any
country effectively. Sometimes the best option is to begin by firmly entrenching
itself in one country and then, when the time is right, enter the next country. The
attractiveness of a country can be affected by many factors, such as the product,
geographical factors, income, population size and political climate. 38
The various marketing mix strategies to consider before operating in an
international market are discussed next.

3.6.:1 Marketing mix strategies39

As previously mentioned, the marketing and promotional mix strategies are similar
in local and international markets, with only a few differences. In international
markets, the 'place' element of the marketing mix is crucial in many respects and is
more likely to include specialised intermediaries in the channels of distribution. The
distribution channels will also probably vary because of the geographical distances
between countries, which make distribution more complex. In terms of pricing, the
marketing manager has to consider exchange rates when quoting prices, as well
as import duties, local restrictions and matters such as currency regulations and a
provision for export credit guarantees.
Keegan (in Lancaster & Massingham) proposes five strategies for marketing
internationally: 40
1. Straight extension of the current product or brand. In this case, a product is
introduced into international markets without making any changes to the physical
productj it is exactly the same as in the local or domestic market. Examples of
these products are Coca-Cola, Lacoste shirts and Guess jeans.
2. Product adaptation. A local product that is marketed internationally adapts the
logos and advertising themes of the international brand, changing the product to
make it more appropriate, for example, for another country's climate or religious
values. An example is the different McDonald's offerings provided in different

57
Essentials of Marketing

countries: McDonald's in India sells more spicy food, whereas fish is popular in
Norway, so McDonald's in Norway sells McLaks (salmon burgers).
3. Communication adaptation. The marketer changes the promotional strategy, not
the product. This is generally very important as the promotional material must
be based on the culture and values of the particular country. For example, the
humour used in a South African context is understood by South Africans but will
probably not be understood or appreciated by foreign consumers who are not
familiar with the South African environment.
4. Dual adaptation. The organisation adapts the product to the international
market and adapts the commercial message. Therefore, the product as well as the
promotional strategy (advertising campaign) is changed in order to reflect the
values and culture of the country to be entered.
5. Product invention or re-invention. This entails changing the product and promotional
strategy considerably in order to meet customer needs. This implies a total change
from what is offered in the domestic market and will be based on extensive
research in the foreign market in order to meet that market's requirements and
needs.
These five strategies are summarised in Table 3.2.
Table 3.2 Keegan's five strategies for international marketing

STRATEGY FOR INTERNATIONAL PROMOTIONAL --

PRODUCT
MARKETING STRATEGY' ADAPTATION

Straight extension Same Same

Product adaptation Same Different

Communication adaptation Different Same

Dual adaptation Different Different

Product invention (Re)invention

Source: Adapted from Lancaster, G & Massingham, L. 2012. Essentials of marketing

management. New York: Routledge, p 497.

The next section briefly discusses the different ways in which a marketer can enter
the selected international market successfully.

3·7 Deciding how to enter the markets41

Once an organisation has made a decision to enter the international marketing
environment and established which market(s) to enter, as well as the size of the
market, the next step is to decide on how this will be accomplished. According to
Kotler and Armstrong, international marketers can choose from among the following
key strategies to enter international market(s) in the most efficient and cost-effective
manner:

58
 Chapter 3- The international marketing environment

11 Exporting. This is the simplest and least complicated way to enter a foreign market
and entails selling locally produced goods in another country.
• ]oint venturing. Local organisations and foreign companies decide to join forces,
resources or sldlls to produce or market products and services internationally.
This is becoming a popular option for many companies. Local expertise in the
foreign market is secured and the cost and risk of entering the market are reduced.
11 Licensing. A relatively simple way for a manufacturer to enter the international

market is by entering into a licence agreement with a company in the foreign

market. The licensee buys the right to use the company's manufacturing process,
trademark, patent, trade secret, or other items of value at a price which can
be either a set fee, a commission structure or royalty fees. The licence holder
maintains control over its products and the quality and standards in order to
protect the brand. For example, ABI in South Africa holds the bottling rights
to Coca-Cola in South Africa; this is a licensing agreement between Coca-Cola
in the USA and ABI. This method allows an organisation to gain entry into an
international market with little risk or uncertainty.
• Partnerships. These can be formal or informal relationships and involve an
agreement between companies in different countries to work together to market
or manufacture a product. A formal partnership entails having a legal agreement
with an international partner to market or manufacture a product. An informal
partnership refers to an understanding between parties regarding specific issues
where there is a tacit agreement in place without formalising the partnership. These
are generally formed on a basis of trust or mutual agreement on specific issues.
• Franchising. This has become a popular and widely used method to enter
an international market. International franchise agreements are the same as
domestic agreements, with the exception that they must meet the commercial
laws of the country to which the organisation is franchising. In South Africa there
are numerous examples of franchises that have been operating successfully for
many years. These include KFC, Wimpy and McDonald's to name but a few. These
are all strong brands, which makes it easy for franchisees or entrepreneurs to
implement and establish in South Africa.

Summary
With the emergence of a more open world economy and the advent of faster
communication, transportation and financial flows, national economies across the
globe are increasing their interdependency and interconnectedness. Understanding
and appreciating the international marketing environment is essential for marketers
to be successful in the international arena.
This chapter dealt with the significance of the international marketing
environment and provided an understanding of it, which is necessary for marketers
operating globally. The various concepts of international marketing were introduced,

59
 Essentials of Marketing

providing an understanding of the complexity of the international marketplace

and how international marketing activities differ from those used when operating
solely in local markets. The six external factors affecting the international marketing
environment were then discussed. The chapter concluded with the factors marketers
need to consider when deciding to enter the international market, together with the
most effective way of reaching the intended markets successfully.

References
1. McDaniel, C, Lamb, CW & Hair, JF. 20ll. Introduction to marketing. Mason, OH: South-
Western Cengage Learning, p 143.
2. Doole, I & Lowe, R. 2008. International marketing strategy: Analysis, development and
implementation. 5th ed. Mason, OH: South-Western Cengage Learning.
3. Lancaster, G & Massingham, L. 2012. Essentials of marketing management. New York:
Routledge, p 485.
4. Czinkota, MR & Ronkainen, IA. 2007. International marketing. 8th ed. Mason, OH:
Thomson South-Western, p 4.
5. Doole & Lowe, op cit, p 6.
6. Ibid.
7. Ibid.
8. Czinkota & Ronkainen, op cit, p 4.
9. Doole & Lowe, op cit, p 7.
10. McDaniel et al, op cit, p 150.
11. Doole & Lowe, op cit, p 7.
12. Kotler, P & Armstrong, G. 2012. Principles of marketing. 14th ed. Harlow: Pearson
Education, p 581.
13. McDaniel eta!, op cit, p 150.
14. Doole & Lowe, op cit, p 8.
15. Ibid.
16. Doman, D. 2010. Disastrous international marketing failures and how to avoid them.
Available from: http://www.nfrontier.co.uk (Accessed 28 June 2012).
17. Kotler & Armstrong, op cit, p 580.
18. McDaniel eta!, op cit, p 152.
19. Kotler & Armstrong, op cit, p 580.
20. Fahy, J & Jobber, D. 2012. Foundations of marketing. 4th ed. London: McGraw-Hill,
pp 33-34.
21. Ibid.
22. Doole & Lowe, op cit, p 17.
23. Fahy & Jobber, op cit, p 41.
24. Doole & Lowe, op cit, p 15.
25. Kotler & Armstrong, op cit, p 581.
26. McDaniel et al, op cit, pp 154-155.
27. Kotler & Armstrong, op cit, p 581.
28. Doole & Lowe, op cit, p 16.
29. McDaniel et al, op cit, p 160.
30. Fahy & Jobber, op cit, p 36.

6o
 Chapter 3- The international marketing environment

31. McDaniel eta!, op cit, p 161.

32. Lancaster & Massingham, op cit, pp 493-494.
33. Ibid.
34. Kotler & Armstrong, op cit, p 584.
35. Ibid.
36. Ibid.
37. Ibid.
38. Ibid.
39. Lancaster & Massingham, op cit, p 497.
40. Ibid.
41. Kotler & Armstrong, op cit, pp 586-589.

6~
 ..,..---

Chapter 4

Marketing research

Learning objectives
After you have studied this chapter, you should be able to:
11 explain the role of marketing research in decision-making
• identify, understand and explain the components of a marketing information
system
• explain and illustrate the steps in the marketing research process
• refer to the important role of the internet in marketing research
• give an overview of market potential and sales forecasting.

4.1. Introduction
The fact that the business world has become more globalised and that technology
has changed the way we do business means that market research has become more
important than ever before. An organisation needs to be aware of the changes
taldng place and the impact of these changes on its customers and operations, and
should know how to react to changes in the environment. This requires research -
organisations have to conduct market research to understand how these changes
will affect their business. Advancements in technology have resulted in vast amounts
of information being available and businesses need to be able to follow a process to
secure this information. This will enable an organisation to identify its customers
and design products and processes that maximise value for them all. 1 As a result,
customers win and businesses win. 2
In order to be successful and to adapt to the ever-changing market environment,
a company needs reliable and relevant information to be able to aid decision-
maldng. The worst thing that can happen to a company is to make decisions based on
information that is incorrect or irrelevant. This may lead to money and other resources
being wasted. The ability of a company to gather usable information ensures that it
remains competitive, not only locally but also internationally. In fact, information is
the engine that drives today's global marketplace. Companies succeed by knowing
what consumers want, and when and where they want it - and by knowing what
competing companies are doing about it. A sophisticated database of marketing
 Chapter 4- Marketing research

information is a vital component in the strategy of cutting-edge companies that pull

ahead and stay ahead in the race for customers.
All successful companies, be they big or small, rely on information from their
markets in order to survive. Such companies have paid attention to the consumers'
wants and needs, and conceived a product (or service), price, promotion and
distribution methods that have satisfied them.
All computer and mobile phone companies will monitor trends and technology
developments in order to stay ahead of competitors and be competitive. The company
relies on consumer research and marketing information from various sources to stay
on top of what product benefits, features and services customers all over the world
desire and will accept.
It may not be difficult to obtain information, but it is crucial for a company that the
correct information is obtained. Some information regarding a company's consumers
and conditions in the marketplace is easy to obtain, while other information requires
the company to conduct in-depth research to make informed marketing decisions.
By monitoring daily customer activity, for example, marketing managers can respond
very quickly to changes in consumers' needs and buying patterns that could mean
the difference between the success and failure of marketing plans.
Marketing researchers are increasingly maldng use of the internet for a variety of
marketing research purposes. The range of information that is available either for free
or at a relatively low cost is staggering and is growing at an alarming rate. Finding the
right piece of information on the internet can be extremely complicated and time-
consuming, as much information is hidden between layers of other information,
which may or may not be relevant.
In many instances, customers themselves are not aware of their reasons for
behaving in a certain way or why they purchase certain products and, therefore,
may not be able to provide any insight. Similarly, an employee may not realise
that he or she possesses vital customer information, which could be of value to the
organisation. 3
In this chapter, we look at the ldnds of information marketers need and how
they gather and use that information to develop marketing strategies that make
a difference. In this discussion, we focus on the marketing information system,
marketing research, market potential and sales forecasting.

4.2 The importance of marketing research in decision-making

4.2.:1. The value of marketing information

DEFINITION: Marketingrese~rch.

Marketing research can be defined as the systematic and objective search

for, and analysis of, information pertaining to the identification and solving
of any problem or opportunity in the field of marketing.
Essentials of Marketing

The key words in this definition are: systematic, objective and analysis. Marketing
research seeks to set about its task in a systematic and objective fashion. This means
that a detailed and carefully designed research plan is developed in which each
stage of the research is specified. Such a research plan is only considered adequate
if it specifies: the research problem in concise and precise terms, the information
necessary to address the problem, the methods to be employed in gathering the
information and the analytical techniques to be used to interpret it. 4
We know that marketing is the performance of all activities necessary for the
conception, pricing, promotion and distribution of ideas, goods and services to
create exchanges that satisfy individual and organisational objectives. In order for an
exchange to take place there should be atleasttwo parties who have or offer something
of value to each other. Marketers need to ensure that they offer the appropriate goods
or services to the correct people who purchase them at the correct place and price.
In order to achieve this, marketers must use the right promotional tools and it is
essential that management has the correct information at the appropriate time; this
is the task of marketing research.
In terms of the consumer-orientation principle of the marketing concept,
companies strive to identify the group of people most likely to buy their product (the
target market) and produce goods or services that will meet the needs of the target
customers most effectively. But how does a company know what consumers' needs
and wants are? Obviously, marketers must have information about consumers'
needs and wants if they truly are to endorse the marketing concept. Identifying target
market needs and opportunities is the task of marketing research.
Quality, and customer service and satisfaction have become the key competitive
weapons of the early twenty-first century. 5 The adverse economic conditions
prevailing since 2008, and still prevailing in 2016, have resulted in a renewed focus
on customer service as a means for companies to differentiate themselves from
competitors and to survive the economic turmoil that the new millennium has
brought. The key to quality, customer service and satisfaction is marketing research;
it is the mechanism that enables companies to determine the type and forms of
quality that are important to the target market. By meeting customers' expectations
in terms of quality, service and satisfaction, a company will be able to retain its
customers. The ability to retain customers is based upon an intimate understanding
of their needs- an understanding that comes from research in the marketplace.
Marketing research also needs to provide information to the organisation with
regard to applying the marketing mix elements, evaluating any changes in the
environment and their impact on the organisation, and seeking out threats and
opportunities in the environment that require a response.
The value of marketing information cannot be underestimated, but at the same
time it is not an exact science. Marketers should look at the value of market research
from a cost-benefit approach. The cost of market research is fairly easy to estimate as
agencies or research houses who perform these tasks can give an accurate costing on
 Chapter 4- Marketing research

a project-by-project basis. A company's own department will also be able to perform

this task. However, estimating the benefits that are· likely to arise from a marketing
research project in monetary terms is virtually impossible. At best, the benefits will
be largely a judgement call; the value of the research will lie largely in the reduction
of uncertainty when a certain decision has to be made.
In any cost-benefit analysis these dimensions of the value of marketing research should
not be forgotten. Resource availability may also impinge upon the potential usefulness
of a marketing research project. This is likely to be true particularly in research projects
that are designed to uncover market opportunities. While marketing research is a good
way to uncover such market opportunities and is often successful in doing so, the
usefulness to the firm of the research will be greatly limited if the resources (eg budget,
personnel, management, time) are not available to make use of the information. It is
possible for marketing research projects to be successful in terms of fulfilling their brief
but for this information to be useless to the firm if it is not, or cannot be, used and acted
upon in the way intended. 6

In brief, market research adds value to businesses by: 7

11 identifying consumers' needs
• helping companies to plan ahead, for example, in terms of future offerings, or
new markets to enter
11 ensuring that the business will focus on the identified needs of the consumers
11 making it possible to improve its competitive advantage.

4.2.2 Marketing research and the marketing mix

Marketers must also implement plans, called marketing strategies, that satisfy
consumers' wants and needs. Within the marketing department, a marketing mix
must be created based on the marketing concept. This mix is the unique blend of the
four Ps (product, price, promotion and place) designed to reach a specific group of
consumers (target market). 8 What combination of the four Ps will best take advantage
of an existing marketing opportunity? This may sound simple, but consider some of
the questions that confront marketing managers as they design marketing strategies.

Market research is a crucial tool used to identify new information about customer
preferences 1 trends 1 competitor strategies or changes in the external environment.
Accurate and useful information can give organisations a real advantage in building :
• and maintaining customer loyalty. Researchers should consider all the factors that···
could affect buying behaviour1 not just product related issues. ,.,.
 Essentials of Marketing

~;ggr~(lf~~~,~~~"psychological factors such as consumer reference gr~u;~lRg~~~~h'ri~

,~~~~flu.~o.ce on the products customers will buy to gain the approval offri~W~~·-qr~i
~d~HUly n1embers. Branding 1 a product's image, also determines a product's pqsitlc:)r1:~i
:·~ rn.'tho~ mind of the consumer. ", ~~::~·-- -
3

;J'Jbcial and economic changes in the external environment are two of the biggeir:~;
· ·intluencers in determining and identifying customer behaviour trends and patterns: ..
Customer behaviour and buying patterns along with social/economic trends should ·
be monitored in order to help marketers understand how they should design and
develop the marketing mix for their target market.
The marketing mix is key when communicating with an organisation's target
market. It is, therefore, important that the market researchers, of ABC motors
for instance, are able to answer the following questions relating to the four Ps by
collecting the correct information from the company's customers:
• Which car dealerships were visited most often?
• Which motor car had the highest sales for the period?
• Which social-media channels, television programmes, radio stations orwebsites
were used most frequently?
• What was the average price customers were willing to pay for a new motor car?

4.2.3 Marketing research and the macro-environment

Marketers operate in a turbulent, ever-evolving environment and need the right
information to implement an effective marketing strategy, as any change may alter
the appeal of a marketing strategy. As such, marketers' needs for information are
never-ending. Information about the social, cultural, economic, political and
technological environments are of particular importance to marketing management
in its decision-maldng.
In the deteriorating world economic climate still prevailing in 2016, information
pertaining to these environments and its impact on the company and its customers
has become extremely important. Changes taldng place in the social and cultural
environment, for instance, must be monitored on a continuous basis. For example,
as the population ages, some companies are developing or redesigning products and
services to cater for the older market. Computer keyboards have been developed
with large-print key-top labels, making it easier for older people with deteriorating
eyesight to use them more easily. Information on the effect of economic factors will
also affect marketing decisions. Owing to the world economic slowdown, many
companies have abandoned their more expensive ranges of products for more
economical ones that are affordable to their customers. Marketers use marketing
research to keep abreast of these changes.

66
 Chapter 4- Marketing research

Marketers must develop and implement strategies based on sound information, and
those strategies must be revised constantly as required by changing environments.
This means marketers constantly need information provided by marketing research.
Without this, it is difficult, if not impossible, for management to make sound decisions
or to implement the marketing concept properly.

4.2.4 Marketing research identifies and defines marketing

opportunities and problems
To identify and define marketing opportunities means to define those wants and
needs in the market that are not being met by the competition. Opportunities and
problems are everywhere, but decision-makers need information to help identify
and define them adequately. This information is acquired by way of conducting
continuous research.

. M.e~rketing.resear(h:•lc!entlfication ()fmarket.opp()rtuf'lities

Many individuals in today's society tend to have irregular eating times and are
seldom able to get to a store within the designated retail times in the week.
Woolworths has thus identified this consumer need for longer shopping hours by
introducing Woolworths products at Engen petrol stations, thereby allowing the
busy individual to get healthyWoolworths produce at a time that is most convenient
to them. This strategy has allowed Woolworths to tap into a new market segment
because previously non-purchasing consumers now purchase merchandise from
Woolworths because it is convenient and the fact that no other stores are open so
·late or so early.

Before developing a strategy, a company needs to be sure of the direction in which

it wants to go and the best way to get there. This requires market research so that
the company can strategise and identify any opportunities or problems. 9 Once the
company has recognised a problem or identified a potential opportunity, market
research can help clarify the situation. Management needs to gain insight into the
underlying factors causing the situation. If there is a problem, it needs to establish
what happened and why. If an opportunity exists, management may need to explore,
refine and quantify the opportunity. If multiple opportunities exist, research may be
conducted to help with setting priorities. 10

4.2.5 Marketing research monitors marketing performance

Monitoring marketing strategies once they are implemented is a way of maintaining
control over the success of a new product or service. Any control system requires
feedback of information to management, which is what marketing research does,
allowing a comparison between actual performance and desired performance
standards.
Essentials of Marketing

t •. 2.6 Marketing research improves understanding of the marketing

process
Marketing research conducted to expand basic knowledge of marketing is known
as basic research. Typical of such research would be attempts to define and classify
certain marketing phenomena and to determine optimum methods for carrying
out marketing activities, for example, studies to determine optimum returns on
promotional expenditures or the operating characteristics of the most profitable
firms within an industry.
Basic research attempts to expand knowledge and is not aimed at a specific
problem. Basic research hopes to provide further confirmation for an existing theory
or to learn more about a concept. For example, basic research might test a hypothesis
on high-involvement decision-maldng or consumer-information processing. In the
long run, basic research helps to broaden understanding about the world.
Most marketing research is conducted to improve understanding of the
marketplace, for example, to find out why a strategy failed or to reduce uncertainty
in management decision-making. All research conducted for such purposes is called
applied research.
Marketing research is not the only source of information available to decision-
makers. Information is also supplied by other components of the marketing
information system (MIS) of which marketing research is one.

4·3 The marketing information system (MIS)

4·3·1 Characteristics of valuable information 11
Not all data is valuable to decision-makers. Useful data becomes information
and helps a business manager to make decisions. Useful data can also become
intelligence. Four characteristics determine how useful data may be, namely its
relevance, quality, timeliness and completeness:
1. Relevance refers to how pertinent the data is to the situation at hand.
2. Data quality is the degree to which data represents the true situation. High -quality
data is accurate, valid and reliable and represents reality faithfully. Sometimes
researchers will try to obtain the same data from multiple data sources in order to
verify its quality.
3. Information must be timely in order for an organisation to make the right
decision at the right time. Computerised information systems can record events
and dispense relevant information soon afterwards. A great deal of business
information becomes available almost at the moment a transaction occurs.
Timeliness means that the data is current enough to still be relevant.
4. Information completeness refers to having enough correct information in order to
be able to make decisions.

68
 Chapter 4- Marketing research
-----------

4.3.2 Information management

Data and information are not the same. Information is data that has been converted
into a useful form for decision-maldng in order to solve a problem. It is relevant,
timely, accurate and cost-effective, and it reduces risk in decision-maldng. Marketers
face an immense volume of raw data generated internally and externally. If this data
is to be useful, the data flow must be managed.
Marketers must consider the cost of collecting and converting data into
information when specifying their informational needs. Seldom will they have all the
information they want. The cost of additional information must be weighed against
its value for planning, implementing and controlling marketing operations.
The MIS mainly serves the company's marketing and other managers, but may
also provide valuable information to external partners, for example, suppliers or
marketing service agencies. A good MIS balances the information marketers would
like to have against what they really need and determines its feasibilityY
The company's sales force should also be trained in intelligence gathering. Its
close contact with the market can make it a useful data source for manufacturers,
retailers and wholesalers. Too often salespeople are trained in selling techniques
only. Many companies develop an MIS to gather, sort, analyse, store and distribute
relevant and timely marketing information to managers continuously. The MIS
should monitor the marketing environment to be able to provide information in
order for the company to have a better understanding of customers and make key
marketing decisions. 13
The MIS is part of a company's overall information network that integrates
electronic records from all the company's functional areas. The purpose of an
MIS is to help marketing managers make better decisions. It guid,e,s the planning
process and leads to meaningful marketing goals and objectives. }laving the right
information available at the right time also enables managers to make on-the-spot
decisions when unforeseen events threaten to derail the marketing plan.
An MIS can be defined as a system for generating and managing a flow of
information for marketing decision-making.

4·3·3 Components of a marketing information system

Marketing information systems differ according to the type of company and industry.
A small company usually has a simple MIS and a large company has an· extensive
one. A simple MIS, as illustrated in Figure 4.1, consists of two data components:
routine data and special purpose data.
For a local independent retailer, the routine data component would include, for
example, routine information from internal sources such as sales, stocks, debtors
and creditors. From external sources, information such as local population growth,
competitive activities and trade association statistics can be collected on a regular

6g
Essentials of Marketing

basis. The special-purpose component includes marketing research, for example,

where a retailer engages a marketing research organisation to determine the feasibility
of a particular retail space in a new shopping centre (external marketing research).
The retailer conducting certain research projects independently, for example, a
survey among existing customers to determine their degree of satisfaction with its
services, constitutes internal marketing research (launched from internal sources).

Data
--

I
I
Routine Specific-purpose
data data
I I
I
Internal External Internal External
! environment environment
I marketing
research
····--·""''""'""' ""''"'""'
marketing
research

Figure 4.l. A simple marketing information system

Source: Adapted from Martins, JH, Loubser, M & VanWyk, H de J, 1996. Marketing research: A
South African approach. Pretoria: Unisa Press, p 14.

Large companies that have the necessary resources usually operate an extensive
MIS. The major components of an extensive MIS and the interaction among its
components are indicated in Figure 4.2.

l
i Internal reporting subsystem
-----~ --~,----

I Ma~~~~;~; intellige~c~
· subsystem
Statistical
subsystem
Il Marketing research
subsystem

_~r--->>-__ _j
L..___..... o( > __j

Figure 4.2 An extensive marketing information system

The four major components of an extensive MIS as indicated in Figure 4.2 are:
1. an internal reporting subsystem
2. a marketing intelligence subsystem
3. a statistical subsystem
4. a marketing research subsystem.
These four components will now be discussed in more detail.

70
 Chapter 4- Marketing research

4·3·3·1. The internal reporting subsystem

Various reports are prepared internally by companies and contain information about
the historical performance results of the company,_Ib~.Y~§sistinidentifyingi~p()rtant
OJ2J2!?.!:.t!:!!litL~<~
~-- . f,
•.f:.!!d
-
threats timeously.
....,._• ._____
-~ .. ....... -
Key reports ema~~t;· f~~;;·~~~;-g ;the.;s·;the·
~.,-- ~------

accounting department, the production department, the sales department and the
quality-control department. These include reports on accounting, production, sales,
engineering and goods returned. Internal data can provide a strong competitive
advantage and deeper insights into customers, their needs, wants and behaviours.
Many companies focus on building an extensive database from various sources
within the company's network in order to meet its information needs. Information
in the database comes from a variety of sources: the marketing department provides
information on customer demographics, psychographies, sales transactions and
website visits; the accounting department keeps records of sales, costs and cash
flows that are used to prepare financial statements; and the sales department reports
on resellers' reactions and competitor activities. 14
Internal databases are usually cheaper and quicker to access than other
information sources, however they do present some challenges. Firstly, data ages
quicldy; therefore, keeping the database relevant and up-to-date takes a lot of
effort. Secondly, databases may be incomplete or in the incorrect form if data was
originally collected for another reason. Lastly, highly sophisticated equipment and
techniques are required in order to manage the large amount of data being gathered
and produced by the company. 15
Let us look at how a large company can use internal records to make marketing
decisions.

Salespeopl_e record orders

Salespeople record orders on their laptops or tablets and this information is sent via
modem to the company headquarters, which notifies the warehouse to expedite
delivery. The information recorded during this process- customer's name, location,
goods ordered, prices, delivery location, method of delivery, date, and so on -
·becomes the information ingredients in the internal reporting system. The internal
reporting subsystem ensures that information generated is recorded, stored and
made available for retrieval by managers.

4·3·3·2 The marketing intelligence subsystem

This subsystem consists of_p_~Q.ll:t2Lqp.d...§.QYLCfl..LWh~eb_y...m.anagemen:tJ2.btain~_
informs.!iQrl___~~ncerning current and relevant occurrences in the marketing
...enYirm:!-.m!P..!; ~.--.~---·-"'''"·----~~-·-···----·'"~··..·-~"'·~---·-··----~··..~·--~~---····-.-.,.--.~ ...-..........-.................... _,....... .
Whereas an internal reporting system focuses on results, the intelligence system
focuses on happenings in the marketing environment. The marketing intelligence
. ..
n-..- ---~--~.,-- --·--··-·-··-··-------- -~----·~--~------····~~;~~~~=-~·--~~--- .--....-·=-~~~-~-~-=---·-....,.,·~-~~- ~~=~ ~

7~
 Essentials of Marketing
-·-·-·---··---··--·----
. -·----··--·--·--------·-·---------·-·---·--·--·-··---·----·-·-

subsystem includes both informal and formal information-gathering procedures.

r..:-..i.TJ1o.rmg,LJnJ.o.r.J11.(J,.t.i.Ql1.:gtJ1h.gr_iflg__f2!Q..9£IlJJ:.!}}§... involve such activities as scanning
newspapers, magazines and trade publications. f.llL.WfJ.LiJJ,jo.rmatioJ:J,;:gatherir~:_g
..!!E!JJ!Jli.e:;.may be conducted by staff members who are assigned the specific task of
looldng for anything that seems pertinent to the company or industry. They then edit
and disseminate this information to the appropriate members of the company.
Competitive marketing intelligence collects and analyses information about
consumers, competitors and developments in the marketplace that are publicly
available. The goal of competitive marketing intelligence is to improve strategic decision-
maldng by gaining insight into the consumer environment, assessing and tracking
competitors, and providing early signals for opportunities and threats that may arise. 16
Good marketing intelligence helps marketers gain insight into their consumers
and how they talk and interact with their brands. Social media has made it
easier for people to share opinions, ideas and complaints and ensure two-way
communication. 17
Companies need to monitor competitors actively in order to track their moves.
Competitors usually reveal information through their annual reports, business
publications, press releases, advertisements and web pages. Marketers can gain
insight into their strategies, new product launches, new or changing markets and
their strengths and weaknesses. 18
Marketing intelligence works both ways, however, as competitors can just as
easily gather information about their rivals. Many companies are now finding ways
to protect their own information. Although it is legal to gather competitive marketing
intelligence, whether this is always ethical is debatable. 19

Some companies find it advantageous to purchase information from specialist

organisations on a regular basis. In South Africa, International Business Information
Systems (IBIS), which has an association with the internationally reputable
ACNielsen, is well known for the retail audits it regularly conducts. This information
includes aspects such as market share, retail prices, inventory levels and marketing ·
communications.

4·3·3·3 The statistical subsystem

The statistical subsystem is a composition of a statistical database and the application
of advanced statistical procedures and techniques. The purpose of this system is
to create projections, scenarios and models, which provide a better grasp of the
alternatives for decision-maldng. Decision-making always takes place in conditions
of risk and uncertainty. With this subsystem, an attempt is made to quantify the
probable results of various possible actions of marketing management.

72
 Chapter 4- Marketing research

A variety of statistical data series are stored and regularly updated in the statistical
subsystem. This serves as a basis for the application of statistical techniques (with
multiple variables), forecasting techniques and the creation of models. These models
allow companies to ask 'what if' questions.
Answers to these questions are then immediately available for decision-maldng.
A model can, for example, illustrate the probable effect of a change in consumer
price on consumer behaviour.

4·3·3·4 The marketing research subsystem

The marketing research subsystem gathers information not collected by the other
MIS component subsystems. Marketing research studies are conducted for a specific
situation facing the company. It is unlikely that other components of MIS have
generated the particular information needed for the specific situation. This is why
people in the industry sometimes refer to marketing research studies as ad hoc
studies. 'Ad hoc' is a Latin term meaning 'with respect to a specific purpose: Marketing
research projects, unlike the other components of the MIS, are not continuous- they
have a beginning and an end. This is why marketing research studies are sometimes
referred to as 'projects:

Marketingresearch studies/proble~s 0

a A company that suspects a change in consumer preferences would investigate

this problem by means of a marketing research project.
• A bank may wish to measure its competitiveness. Marketing research is then
conducted.
• A company may want to develop customer profiles for its target market:
Marketing research is then employed.
• An advertising agency may need to know more about the scheduling of
advertisements and can use marketing research to solve this problem .
.• A manufacturer of cosmetics may need to know w~ich packaging would be -
the most acceptable and conducts marketing research among customers to
accomplish this.

We will now focus on one component of the MIS, namely marketing research.

4·4 Marketing research

Some of marketing management's most important decisions rely on information
gathered by research that specifically addresses the decision-maker's concerns.
Some marketers conduct limited, low-cost research projects by searching the MIS
database and gathering the required information. More typically, the marketer has a
problem that requires very specific information and must rely on marketing research
to gather data systematically.

73
Essentials of Marketing

Large companies such as Unilever have extensive marketing research capabilities

to conduct their own research. Depending on the information required and the
complexity of the research problem, companies such as ACNielsen, Markinor and
BMR (Unisa) may be hired to conduct all or part of the research.

The internet is a powerful tool for identifying research companies that provide ·
particular types of services and for conducting a preliminary review of these
companies. Most research companies' sites are e-mail enabled. Therefore,
once buyers have identified likely candidates through preliminary research and
evaluation, they can send an e-mail to these organisations, requesting additional
information. A few companies even have RFP (requests for proposal) forms on their
sites, which permit the research buyer to submit an RFP via e-mail. In this way, one
can review the services offered by marketing research companies.

4·4·1. Steps in the marketing research process

The marketing research process is a series of carefully thought-out steps designed to
attain a specific objective. This section looks at the different steps in the marketing
research process.
There are various reasons why marketing research is undertaken. Consider the
following.
. . . . --, _- .- -. . -. _: - ..

Reasohswhr,ll)arketing research needsto be coridude~. ·

a Top management delegates the marketing management to investigate the

possibility of an attractive marketing opportunity.
• Marketing management must develop a marketing strategy for a new product.
• There is a decline in demand for the company's products, and marketing
management is instructed to determine the cause and recommend remedial
action.

As we can see, each of these reasons is in some way unique, and the procedures
followed in the research process of each will vary to some extent. For example, the
research process in the case of an investigation into a decline in sales will differ from
an investigation into the development of a marketing strategy for a new product.
Although the research processes or procedures may differ for different types of
problems or opportunities, a marketing research investigation consists of two parts:
a preliminary marketing investigation and a formal marketing investigation. Both
investigations may need to be conducted, but if the problem is solved during the
preliminary investigation, a formal investigation will not be required. However, for

74
 Chapter 4- Marketing research

the formal investigation to be conducted satisfactorily there needs to be a preliminary

investigation.
The marketing research process may be viewed as a number of consecutive steps
undertaken to obtain the required marketing information. Although authors differ
on the number of stages involved in the research process, they all agree that some
basic stages should be included. Figure 4.3 reflects a logicalll-step approach to the
marketing research process, which is discussed thereafter in detail.

[___ - ,____ st~ :1.: Identify and define the problem or op~rtuni-~---,---_i

I
L ______ --~---
Step 2: Formulate hypotheses
----,-------··----··---·····-·····
~
__j.
.

objectives------------~'
L_--------
Step 3: Determine the research

D_e_t_e-rm~~~~~-at_a_n~ee_d_s · - - - - -
_S_t_e_p_4_:

--,----L____:____--,-----,-------,
I
Steps: Select the method of collecting information
_j
---~
Step 6: Design the form for collecting the information

!_-·_-_:___-_·__ Step 7: Determine the extent of the formal inves_t_ig_a_ti_on_____ ~

r----- Step 8: Select, train and control the interviewers

L_______________~--------~-.----~-----------------~

Step g: Fieldwork

Step :1.0: Data processing I

[
_ Step :1.:1.: Communicate information to the decision-maker
· · · · · · _ c . _ · ·-
· - - - ' - - - ' - ' - ' - - - - - - - - " - - - - - - - - - - - - - - '

Figure 4·3 Steps in the marketing research process

Source: Cooper, DR & Schindler, PS. 2011. Business research methods. 11th ed. New York:
McGraw-Hill, p 11.

75
Essentials of Marketing

Step 1: Identify and define the problem or opportunity

This first step in the preliminary marketing investigation entails a clear definition
of the nature and extent of the problem or opportunity. Often there is only a vague
feeling that 'something is wrong' and management has at its disposal contradictory
pieces of information, reports, opinions and symptoms, such as a decline in sales
figures. In order to take appropriate action, it is essential to know more about the
problem or opportunity. Thus, the real nature and extent of the problem should
be determined. For example, if a decline in sales has been discovered, further
investigation (by means of small-scale research) may reveal that the decline is
restricted to a particular area, for example, Pretoria.
Typical problems (or opportunities) that may require a marketing research
investigation are the following:

Problems (or opportunities)that mustbe investigated

• Which of two package designs best conveys the desired image for the product?
• More general information for a planning decision is required.
• A brand manager who is planning to change packaging may want to know the
features of packaging that appeal to consumers.
• Owing to changes that occur in the company's external environment that are not
controlled by the company, a marketing manager is faced with the questions:
'Should we change the existing marketing strategy/ and if so 1 how?'
• Marketing research may be needed to evaluate the marketing mix alternatives.
11 Marketing research may be needed to establish and evaluate new market
opportunities.

Once a problem has been identified, the marketing researcher is approached.

The first responsibility of the researcher, whether from internal staff or an outside
consulting company, is to work with the marketing manager to define the problem
precisely. The proper definition of a problem also provides guidance and direction
for the entire process.

Harder when:
• the situation is recurring or routine • the situation appears new
a dramatic change occurs • change(s) in the situation are subtle
symptoms are isolated • symptoms are scattered
• symptoms are consistent. • symptoms are ambiguous.
 Chapter 4- Marketing research

In an attempt to define the exact nature of the problem or opportunity and to gain a
better understanding of the environment within which the problem has occurred, it
may be necessary to conduct small-scale research.

'Biuel3ank.i~ a fioaricial institution that provides customers fron1 arouodth,e9orl<:l

.With r~faii banking services and financial assistance. Some oftheirbankingservic~s'­
include_.pfoviding current accounts, savings accounts, financial cover;Tnyestrf1et:Jt'
_ por;tf~li()~and credit. They also have a strong focus on students asthey:~qn.stitut~;
' aJarge):lnd very important segment ofthe market.
stu.dents choosing a bank for the first time are a new market segment'fd; the~/
banking industry. The student's experiences with a bank can influence their future
--decisions of staying with that bank or changing banks. Blue Bank hopes to tar~~t,;,
more student customers and retain them, by focusing on their needs. In ordecto_
provide the correct offer, they have used market research to identify students' •
specific needs.
Two key aspects were identified and analysed before starting the primary research·-·
process: who their key customers should be and what the needs of these key
customers are.
Blue Bank then conducted qualitative research. This type of research provides ·
information on consumer perception. It attempts to identify how customersfeel
about the organisation's products and services, what customers like and what they
do not like, and what new product or service they would like on offer.
Using this information, Blue Bank developed a new, enhanced student account .
. offer. This was then tested with a sample of 250 of their current student acC.ot.mC'
holders. Students were asked to fill out questionnaires when they opened up a neW''
·- account and were also sent questionnaires online. This sample group provided the )
·oank with qualitative feedback regarding what motivated students to choose ~
~J:>ecific bank and whether or not to stay with that particular bank in the long runY·
Secondary research was also used to analyse consumers' past behaviour/rhis' .
.. type .Of research uses data that has been previously researched and publish(;!P and
irlciudes market research reports, sales figures, competitor marketing li'l:~i--$1Jyrg ;
- <:~.Tld.government publications. :"='//.
Therest.ilt~pXthe research conducted showed the following: - •
· · i·J ·.
· - ~-~~·:·
--~;·:-~ • __o

•• tv)Ost stddents- needed or depended on financia I assistance tC>'furtber theil~.

-, ~tOd[~,~~\c' \.;_ ~( :>·"'''' ;)

. • Theypreferredto h13ve separate accounts to manage theiFSfucfe'nfloaris~~lid ._,

their spending money.. - -. . ";.;;..-

77
Essentials of Marketing

~j
~;,•Students needed laptops and other electronic goods and relied on different 'c'
forms of credit to acquire these goods.
; • Incentives that were offered were seen as part of the deal and were not a ;
motivating factor for students when choosing a bank.
c' Source: Adapted from http:/ /businesscasestudies.co.uk (Accessed 16 August 2016).
Step 2: Formulate hypotheses
In this step, specific factors that can be identified as influencing factors or the causes
of the problem or opportunity are identified. From this group of factors, some are
selected which are considered important enough to be further investigated. These
are called hypotheses. Hypotheses can thus be seen as tentative solutions or actions
for the problem or opportunity. A hypothesis is a theory that has to be tested or
proved to confirm the assumptions. A formal hypothesis has considerable practical
value in planning and designing research. It forces researchers to be clear about
what they expect to find through the study, and it raises crucial questions about
data required. When evaluating a hypothesis, researchers should ensure that the
information collected will be useful in decision-maldng.
For example, let us assume that a company experiences a decline in sales. There
are many factors or variables that may be the cause of this.
If all these possible causes need to be investigated, several research projects
would have to be undertaken. Further investigation, however, may reveal that only
one of the possible causes should be investigated, for example, a change in consumer
preferences. This will then be translated into a hypothesis for further investigation.

P~ssible causes of adedi Me in sales

• Certain actions by competitors, for example, price discounting.

• A change in consumer preferences.
• The employment of an inefficient marketing mix strategy.
• A combination of all these variables.
One or more of these may be identified as the possible cause(s) of the decline in .
· salesi in other words, one of these statements may be termed the hypothesis.

Confirming or rejecting the hypotheses is a crucial phase of the research project.

During this process, new information may come to light and it may be necessary to
redefine certain problems (or hypotheses). The following example illustrates how a
problem can be redefined.
 Chapter 4- Marketing research

,_
. ~~:;~~--~- ,-_~·_.-." -~ ·, ::-:.·- :_ ---

The sales manager of a local potato-chip manufacturer notices that sales are
declining, and interprets the problem as ineffective advertising (hypothesis),
The researcher is therefore asked to investigate the effectiveness ofthe company's
. _advertising. In talking to salespeople, wholesalers and retailers of the company's _
-· products, the researcher discovers that support for the product began to decline-.
when a rival company introduced a new product that gave them a larger margin
on sales. Retailers are, therefore, making more profit by selling the rival's product -
Thisgives the researcher a new perspective on the problem. An investigation of•<
·advertising effectiveness will not help solve the problem. This hypothesis must
·_-_then be rejected and redefined as competitive pricing and profit margin tactics.

Step 3: Determine the research objectives

Once the problem has been identified and clearly defined, and hypotheses
formulated, the researcher can determine the objectives of the research project.
These objectives are stated in terms of the precise information necessary to solve the
marketing problem. The objectives must relate directly to the hypotheses formulated
during Step 2. In fact, the hypotheses become the research objectives. For example:
11 Hypothesis 1: The competitive pricing and profit margin tactics have a negative
effect on company profit.
11 Objective: To determine whether the competitive pricing and profit margin
tactics have a negative effect on company profit.

A decline in sales in one of the company's products has been established (in other
words, the symptom). The problem has been identified and defined, and one
hypothesis has been formulated, namely that consumer preferences have changed.
The research objective in this case could be to investigate competitive pricing and-
profit margin tactics.

Well-formulated objectives serve as a road map for developing the research project.
They also serve as a standard, which enables managers to evaluate the quality and
value of the work.
Were the objectives met and do the recommendations flow logically from the
objectives and the research findings? Objectives must be as specific and unambiguous
as possible. Putting the objectives in writing avoids the problem of wondering
whether the information that has been received is, in fact, what is required.

79
 Essentials of Marketing

In general, a research investigation will have one offour basic objectives as indicated
in Figure 4.4.

I • • · ·· •Objectives ·
L__~.- - - - - ' - - - - - - - - -
]

II Explore Describe-
Test
r--- I
I ·_. P~ediCt I
L
hypotheses
L.___ _ _ _ _ _ j L_____j
Figure 4·4 The four basic objectives of a research investigation

These four objectiveswill now be described in more detail.

11 To explore. The primary objective of exploratory research is to provide insight into
and an understanding of the problem confronting the researcher (as explained
earlier). 20 Once the problem has been clearly defined, exploratory research
can be useful in identifying alternative courses of action. Researchers conduct
exploratory research when they need more information about the problem,
when tentative hypotheses need to be formulated more specifically, or when
new hypotheses are required. 21 Because exploratory research is aimed at gaining
additional information about a topic and generating possible hypotheses to test,
it is described as informal research.

EXAMPLE: Exploratoryresearch

This consists of
• visiting a library to read published secondary data
• asking customers and salespeople their opinions about a company and its
products, services and prices
• simply observing everyday company practices.
The researcher investigates whatever sources he or she desires, to the extent that
he or she feels is necessary, in order to gain a good understanding ofthe problem.

• To describe. Descriptive research is necessary when knowledge about a particular

market or marketing aspect is vague. It includes research designed to provide
answers to questions regarding the who, what, when, where and how of a topic.
For example, an enterprise that is considering entering the hospitality industry
may have identified the conference market as one of its target markets. This
market, however, needs further clarification and must be described more clearly.
Descriptive research may also be necessary where the nature of the competition
in a particular industry is vague. Soft-drink marketers also use this type of
research to describe the characteristics and wants of different market segments.

Bo
 Chapter 4- Marketing research

111 To test hypotheses (causal research). If the objective is to test hypotheses about the
relationship between an independent and a dependent variable, the researcher
engages in causal research. Causal research would be used in the following
example.

What would happen to sales if prices were reduced? Price is the independent
variable- that is, the factor being manipulated. The sales level is the dependent
variable that will be affected when the independent variable (price) is changed
(price is reduced).
What would happen to customer awareness of the product if advertising were to
be increased? Advertising is the independent variable, while customer awareness
is the dependent variable that will be affected when the independent variable
(advertising) is changed (advertising increased).
Therefore, causal research is used to obtain evidence of cause-and-effect
relationships. It attempts to determine the extent to which changes in one variable
cause changes in another.

ExAMPLE: Causal researchversus'descriptive research·.

Descriptive research may suggest that a price reduction is associated with increased
sales of a product, but it does not definitely suggest that a decrease in price was
the actual cause of the sales increase. Sales may have increased because of other
factors, such as an increase in customer buying power or a decline in competitors'
marketing efforts.
Causal research, on the other hand, tries to show either that the price cut
(independent variable) is the cause of increased sales (dependent variable) or that
the price cut is not the cause of increased sales. This requires the researcher to keep
all factors other than price and sales constant- at best, a difficu It task.

111 To predict. Predictive research is conducted to forecast future values, for example,
sales income, market share and retail orders. Political pollsters use predictive
research to forecast how many people will vote for a particular candidate in an
upcoming election. Businesses engage in sales forecasting to predict sales during
a specific time period, for example a financial year.

Step 4: Determine the data needs

In this step, the research objectives must be translated into specific data needs. This
means determining what information is required and from which sources it can
 Essentials of Marketing

be obtained in order to test the hypotheses so that the problem can be solved. An
example follows.

Suppose the SAPS wants to establish what steps it can take to improve the quality of
recruits. The information necessary to satisfy this research objective might include:
• a detailed description of recruiting incentives currently being offered by the
SAPS
11 young people's attitudes toward existing recruiting incentives offered by the
SAPS
• the demographic and lifestyle characteristics of current police enlistees who are
high achievers
• a detailed description of recruiting activities currently in use at recruiting centres
• . a forecast of unemployment rates for the next decade.

In determining the type of data needed, the problem (Step 1), the hypotheses (Step 2)
and the objectives (Step 3) must be considered, Specific data will be needed in order
to confirm or reject each hypothesis that has been formulated.
Researchers distinguish between primary and secondary data - see Table 4.1.
Table 4.:1. Differences between primary and secondary data
'.

PRIMARY DATA SECONDARY DATA

Primary data are data that are observed Secondary data are data that already
or collected directly from first-hand exist, gathered by someone else for some
experience. other purpose but which may be relevant
to the problem at hand.
Primary data relate specifically to the When using secondary data 1 researchers
research problem at hand. must always consider their relevance,
accuracy1 credibility and timeliness.
Primary data are expensive and require a Secondary data are usually cheaper and
lot of time. require less time.
Primary data can come from internal Secondary data can come from
or external sources. The major internal internal or external sources. The major
source is company personnel. Retailers, internal source is company records.
wholesalers, customers and competitors Public libraries, trade associations and
are important external sources. government publications are important
external sources.
Source: Adapted from Armstrong, G & Kotler, P. 2012. Marketing: An introduction. Boston, MA:
Pearson, p 124.
 Chapter 4- Marketing research

As emphasised above, secondary data should be sought and researched during the
preliminary investigation, and all efforts should be made to solve the problem at this
stage. Secondary data collected must clearly relate to the hypotheses formulated
earlier.

Examples of internal sources of information are a firm's own records (for example,
sales figures and accountancy records) research reports, in-house experts and
experienced sales staff. External sources include trade associations such as the SA
Chamber of Business, government departments such as the Department of Trade
and Industry and Statistics SA, advertising agencies, consultants and syndicate
reports.

In the last few years, the rapid development of the internet has promised the
elimination of much of the drudgery associated with the collection of secondary
data.
The internet allows computers (and the people who use them) to access data,
pictures, sound and files throughout the world without regard to their physical
location or the type of computer on which the data can be found. The World Wide
Web (also called the Web or www) is one component of the internet, which was
designed to make transmission of text and images as easy as possible.
If you know the address of a particular website that contains the secondary data that
you are searching for, you can easily access that address by following the correct
procedure. Sometimes, however, it can require some hard work and trial and error
to find data on the Web. However, as long as you have an internet connection, you
have access to a multitude of sources of information.
'
If the secondary information obtained can provide enough clarification about the
hypothesis, it can be accepted or rejected during the preliminary investigation.
The problem may, therefore, be solved at this stage and it may be resolved not
to proceed to a formal marketing investigation. However, if it is felt that the
problem has not been solved, or if further information is clearly required, a formal
investigation must be conducted. In the following example, the data required and
possible sources of data are indicated to test certain hypotheses

A useful website that provides a basic introduction to the internet and search
engines is www.learnthenet.co.za.
Essentials of Marketing

~· • ·~=·. -- - -. - _/:'~c_.-~.~.

Advantages -- -"·~~<?_.

• A large range of information is provided.

·• Information can be accessed rapidly.
·. • Information can be obtained easily.
• Research costs can be reduced.
Limitations
• The accuracy of the information can be questionable.
• The author of a particular article may be anonymous.
• Useful information can possibly be missed if wrong key words are used.
• Information overload may occur.
• It can be time-consuming.
• Organisations may be sensitive about providing information over the internet.

Steps: Select the method of collecting the information

The researcher can gather primary data through observation, experimentation, focus
groups and surveys. These methods will be discussed in more detail.
The observation method involves systematically recording the behavioural
patterns of people, objects and events to obtain information about the phenomenon
of interest. The observer does not question or communicate with the people being
observed. Information may be recorded as the events occur or from records of past
events. The disadvantages of this method are the cost of waiting for the phenomenon
to occur and the difficulty of measuring the phenomenon in a natural setting. For
example, a manufacturer of breakfast cereals who wants to study the attention-
producing value of new packaging might station observers with cameras and
recorders in supermarket aisles where the cereal is displayed. The observers would
monitor shopper's the reactions directly.
Other examples of observational research are as follows:
. .

EXAM~LE: ObsE!IVational research 2 s •..

A museum director wanted to know which ofthe many exhibits was most popular:
A survey did not help. Visitors seemed to want to please the interviewer, and usually
said that all the exhibits were interesting. Putting observers near exhibits to record
how long visitors spent at each one did not help either, since the curious visitors
stood around to see what was being recorded, therefore distorting the value of the
exercise.
 Chapter 4- Marketing research

Finally, the museum floors were waxed to a glossy shine. Several weeks later, the
floors around the exhibits were inspected. It was easy to tell which exhibits were
most popular based on how much shine had worn off the floor.
A shopping centre developer wondered if one of his shopping centres was attracting
customers from all surrounding areas. He hired a company to record the registration
numbers of cars in the parking lot. By using this information, the addresses of all
shoppers were then obtained and plotted on a map. Very few customers from
one particular area were visiting the centre. The developer then aimed direct mail
advertising at that area and generated a great deal of new business.

Observation may be more objective than a survey because no questions are asked.
The observation method focuses on what people do (direct observation) or on what
they did (indirect observation), not on what they say they do or did. Observers,
however, can interpret only the behaviourtheywitness directly, and this interpretation
may be inaccurate or biased. A shopper may pick up a package of cereal, examine
it and walk away without buying it. The shopper may have wanted to purchase the
cereal but may not have had enough money to buy it. An observer, however, might
interpret this behaviour as lack of interest in the product.
In other words, we do not know why the shopper left the package. Some things,
such as motives, simply cannot be observed.
Artificial observation is often used and is done byway of mechanical or electronic
equipment such as the use of the AMPS Peoplemeter II to monitor viewing patterns
of selected households in South Africa. 26
Experimentation research involves testing something in controlled conditions.
Conclusions are then drawn about the wider environment. This involves the gathering
of primary data by manipulating an independent variable (such as advertising or
price) to observe the effect of the change on a dependent variable (such as sales). 27
By attempting to hold all other factors constant while manipulating price, it might
be possible to estimate how many units of a product would be demanded at various
prices. Researchers often conduct experimentation in a field setting, which is realistic
but difficult to control, and it is almost impossible to ensure that test conditions will
be the same as those in the real market. Most basic scientific studies in business
ultimately seek to identify cause-and-effect relationships.

;ExAMPlE: Experi111~ntatiqpiri afield setting ·

An advertising manager wants to test the effectiveness of a proposed newspaper

advertisement and selects two cities similar in population characteristics, income
distribution and so on. One is the control city and i:he other the test city. ,,.

ss
Essentials of Marketing

The advertisement appears in the test city's newspaper but not in thafof the
control· city. After the advertisement appears 1 sales of the product are recorded 1
with any difference in sales being attributed to the advertisement.
Three assumptions are made in the above situation. Firstly/ it is possible to find two
or more similar cities. Secondly/ the control city's environment can be controlled.
Thirdly1 test conditions are the same as those that will exist when the advertisement
is run in the real market. However1 locating two almost identical cities for testing
is not always easy. Also1 if a rival withdraws its product in the control city1 sales of
the researcher's product might increase. If test city sales are lower than those in
the control city1 the researcher might incorrectly conclude that the advertisement
is ineffective. Thus1 it is almost impossible to ensure that test conditions will be the
same as conditions in the real market.

Let us look at how experimentation research helped to solve the following problem: 28

EXAMPLE: Mars chocolate bars: A sweet success

Mars chocolate bar company was losing customers to other sweets and snacks
companies1 and wanted to identify the reason. Surveys showed that many
customers thought that the Mars bar1 which was not being sold in a larger size1 was
too small. They also did not want to pay more for a larger bar. Mars's marketing
manager wanted to know if making its chocolate bar bigger would increase sales to
offset the higher cost. To decide 1 the company needed more information.
Mars carefully varied the size of Mars bars sold in different markets. Otherwise 1
the marketing mix stayed the same. Researchers then tracked sales in each market
to determine the effect of the different sizes. They saw a significant difference
immediately. It was clear that the added sales would more than offset the cost of
a bigger Mars bar. Marketing managers at Mars 1 therefore, made a decision that
took them in the opposite direction to other sweets companies1 and to a focus on
bigger chocolates.

A focus group is the simultaneous involvement of a small number of research

participants (usually eight to ten) who interact at the direction of a moderator in
order to generate data on a particular issue or topic. This is widely used in exploratory
studies. The goal of a focus group is to draw out ideas, feelings and experiences about
a certain issue that would be obscured or stifled by more structured methods of data
collection. The use of a small group allows the operation of group dynamics, and aids
in maldng the participants feel comfortable in a strange environment.
Focus groups have been useful in understanding basic shifts in consumer
lifestyles, values and purchase patterns. Usually, focus group members share

86
 Chapter 4- Marketing research

homogeneous characteristics such as similarities in age (they may all be in their

early 30s), job situations (they may all be sales managers), family composition (they
may all have pre-school children) or even leisure pursuits (they may all play tennis).
By conducting a group that is as homogeneous as possible with respect to
demographic and other characteristics, the researcher is assured that differences in
these variables will be less likely to confuse the issue being discussed. The focus group
can furnish qualitative data on such things as consumer language; emotional and
behavioural reaction to advertising; lifestyle; relationships; the product category and
specific brand; and unconscious consumer motivations relative to product design,
packaging, promotion or any other facet of the marketing programme being studied.
It must, however, be remembered that focus group results are qualitative and not
perfectly representative of the general population, which limits the reliability of this
type of data collection.

- ExAMPLE: Questions iri f()C:Us gr()lfp aisfus~i()ns 2 9

The following are examples of questions that may be asked during a focus group
discussion. Assume the discussion is about department stores.
11 What kinds of department stores are there?
11 What department stores are you familiar with?
11 Which department store is best; worst and why?
11 When shopping for a gift in a department store, what is important?
11 What is a high-quality product in your terms?
11 How much time do you spend in a department store on average per month?

A relatively new development in group interviews is the online or cyber focus group.
A number of organisations offer this as a means of conducting focus groups on the
internet.
Research firms build a database of respondents via a screening questionnaire on
their website. When a client approaches them with a need for a particular focus
group, they access their database and identify individuals who appear to qualify.
E-mails are sent to these individuals, asking them to log on to a particular site
at a particular time scheduled for the group. A moderator runs the group by
typing questions online for all to see. The group operates in a chat-room type of
environment so that all participants see all questions and responses. The complete
text of the focus group is captured and is available for review after the group session.
Essentials of Marketing

Survey research is the gathering of primary data from respondents by mail, by

telephone or in person. Survey research can be highly structured or unstructured. In
a structured survey, all respondents are asked the same list of questions in the same
way. In an unstructured survey, interviewers are free to ask their own questions to
encourage respondents to reply as they wish. Three types of data are usually sought
in survey research: facts, opinions and motives. These types of data are explained in
the box below.

EXAMPLE.: Types ()f aata in survey rese'arch

• In a factual survey, respondents are asked questions such as: 'What type of car
do you drive?'
• In an opinion survey, respondents are asked to give opinions, although they
believe they are reporting facts. An example of an opinion survey question is:
'What type of toothpaste tastes better?'
• In a motivational survey, respondents are asked to interpret and report their
motives. These surveys ask 'why' questions such as: 'Why do you holiday in Cape
Town every year?'

Step 6: Design the form for collecting the information

The next step is to design a form or instrument whereby the information is collected.
Mechanical and electronic devices and questionnaires are two types of research
instruments used for the collection of primary data.
Mechanical and electronic equipment includes instruments such as galva-
nometers, tachistoscopes, cameras, and electronic and mechanical meters. These
instruments range from simple counting meters (for example, to count the number
of people passing through a turnstile) to sophisticated reaction-measurement
instruments (for example, to record emotional reaction to a specific advertisement).
Some researchers use personal computers to conduct interviews. Many researchers
believe that respondents will reveal more private information via a computer than
they will in a face- to-face interview.
Questionnaires are the most common method for gathering primary data. In
designing a questionnaire, researchers must exercise great care in deciding which
questions to ask, their content and phrasing, the wording, sequencing and formatting.
The first important aspect of the questionnaire is question content and phrasing. It
is important to keep the wording of questions simple, clear and concise to fit in with
the vocabulary level of the respondents.
In surveys conducted among the South African population, for example, questions
should be worded in such a way that all respondents are able to understand them,
whether English is their first, second, third or even fourth language. Therefore, it is
important to have a clear idea of the target population.

88
 Chapter 4- Marketing research

In designing the wording of a question, leading questions, which may suggest

or imply certain answers, should be avoided as this could be construed as a cue
in the question as to what the answer should be. Often the question can reflect
the researcher's viewpoint. A biasing question includes words or phrases that are
emotionally coloured and that suggest approval or disapproval, for example: 'Do
you agree or disagree with the South African Dental Association's (SADA's) position
that advertising pre-sweetened cereal to children is harmful?' The mere suggestion
that an attitude is associated with a prestigious organisation such as the SADA can
seriously bias the respondent's reply.
Another important aspect is the sequence of questions. 30 This can influence the
nature of the respondents' answers and cause serious errors in the survey findings. It
is advisable to use the funnel approach by moving from the general to the particular,
since a change of subject may disturb the logical flow of the interview, unless there
are links between subjects.
The first questions should, therefore, be simple and should attempt to generate
interest, their main intention being to put the respondents at ease and motivate
them to react to the succeeding questions without suspicion. Sensitive questions (for
example, income, qualifications and age of the respondent) should be positioned as
near to the end of the questionnaire as possible.
The question format- that is, the form in which the questions are presented - is
also very important. Open-ended questions such as 'How do you feel about women in
politics?' do not provide respondents with a choice of answers; instead, respondents
formulate their own answers in their own words. Dichotomous or closed questions,
such as 'Do you think women should be allowed to be in combat positions?' give
respondents all the possible answers to each question (usually 'yes' or 'no') and
they simply choose one. Ambiguous and leading questions should be avoided, while
personal questions, for example, the respondent's age, should be placed at the end
of the questionnaire.
Consider the points discussed in these examples .

. E)(AM PLE:. Ouestiqn,. typ~s

Avoid vague or leading questions: 'What type of drink do you like (The word
'type' is vague. Do you mean the brand?
The flavour?)
Avoid sensitive questions: 'How old are you?'i 'How much do you
earn?'
Provide ranges for sensitive 'How old are you?' ~8 or under, ~9-25,
questions: 26-30 (tick one) ,,,..

8g
Essentials of Marketing

·~what isyour income bracket?'

R1ooo-:-Rsooo per month, Rsooo-R1oooo
per month (tick one)
Avoid leading questions: 'Do you prefer lowsugar, healthy drinks as
opposed to high sugar, unhealthy drinks?'
Provide an open-ended question When I buy a drink, the most important
and/or ask for a word association: thing is ...
An energy drink is .. .
A low-fat drink is .. .
Provide a rating scale: The taste of Coca-Cola is:
1 =Great, 2 = Fairly good,
3 = Not good, 4 =Terrible

Validity and reliability should always be considered in questionnaire development.

Validity refers to the degree to which a study accurately reflects or assesses the specific
concept that the researcher is attempting to measure. Reliability is concerned with
the accuracy of the actual measuring instrument or procedure.
Pretesting of the questionnaire is essential if the researcher is to be satisfied that
the questionnaire will perform its various functions. The questionnaire is tested on
a small sample of respondents to identify and eliminate potential problems - this
helps to reveal errors while they can easily be corrected. It should be tried out on
a selected group similar in composition to the one that will ultimately be sampled.
There are various contact methods. When the questionnaire has been designed,
a decision must be made on how to contact the survey participants. Survey research
data can be obtained from mail, via e-mail, telephone or personal interview. Table
4.2 shows the relative advantages and disadvantages of various surveys, some of
which are discussed below.
• !vfail survey. This is a relatively low-cost self-administered study both delivered
and returned via mail. For mail surveys, a questionnaire is mailed to possible
respondents, and the completed questionnaire is returned by mail to the
researcher. Mail surveys are flexible in their application and relatively low in
cost, but the major disadvantage is the problem of non-response error. When
the geographical area to be covered is large, time is not a major factor, and the
questionnaire is relatively short, a mail survey is favoured. Respondents can
answer at their convenience, and there are no personal interviews to bias the
results. Mail and fax questionnaires are particularly versatile in reaching all types
of people in remote geographical areas. E-mail is another form of mail survey that
is gaining ground; however, its use is, of course, limited to those respondents who
have e-mail.

go
 Chapter 4- Marketing research

11 Telephone survey. In a telephone survey, an interviewer asks the respondents

questions over the telephone. This type of interview is efficient and economical,
and, compared to the personal interview, reduces the potential for bias. The basic
limitation of the telephone interview relates to the limited amount of data that can
be obtained. Technological advances are maldng telephone surveys less costly
and time consuming; many research firms are worldng with data entry terminals.
The interviewers read questions on a video screen and enter the respondents'
answers on a computer.
II Personal survey. In a personal survey the interviewer asks questions of the

respondents in a face-to-face situation. The interviewer's task is to contact the

respondent, ask the questions and record the responses. Face-to-face interviews
may cause respondents to bias their responses because of a desire to please
or impress the interviewer. It is also an expensive method involving extensive
planning and control. However, the personal interview method renders the best
response in most cases.
• Internet survey. In an internet survey, respondents are recruited over the internet
from potential respondent databases developed by the research finn or via
conventional means. Specific target individuals may be contacted by telephone
or mail and asked to access a particular web location to complete the survey. This
survey has certain similarities to a mail survey in terms of its basic advantages
and disadvantages. However, in the cyber survey there is the potential for
interactivity and the ability to expose respondents to various stimuli (for example,
print advertisements, audio for radio advertisements, product and packaging
designs and so on). Cyber surveys have the following advantages: speed, cost
effectiveness, broad geographic scope, accessibility and tracking. However, there
may be sample control problems with internet surveys.

9~
\.D Table 4.2 Characteristics of various types of survey research m
Vl
N Vl
ro
,.,.
=>

'~~V=~s~ri '·:· ;;,);

'DdoR~TO-DOOR MALl.INTERCEPI TELEPHONE .. .POSTAL SURVEY a;·
Vi"
·.PERSONAL AND PERSONAL
'' :
INTERVIEW·
...,
0
iNTERVIE~ INTERVIEW \.·
:$;
..,
OJ

Speed of data Moderate to fast Fast Very fast Slow-the Instantaneous A"
(J)
!:!".
collection researcher has no =>
lQ
control over the
return of question-
naires

Geographic Limited to I Confinedi urban I High High Worldwide

flexibility moderate bias

Respondent Excellent I Moderate to low I Good Moderate- a poorly Varies depending

cooperation designed question- on the website
naire will have low
response rate

Versatility of I Quite versatile I Extremely versatile I Moderate Highly standar- Extremely versatile
questioning dised format

Questionnaire Long Moderate to long Moderate Varies depending Modest

length on incentive

Item non-response I Low I Medium I Medium High Software can

ensure none

Possibility for I Lowest I Lowest 1 Average Highest- no None

respondent interviewer
misunder- is present for
standing cl a rifi cation .....
 DOOR-T<l~DOOR ·. •· .......··.. ·• . . •· .· .· ·...··1 TEtEPI:IONE. p()STALSURVE~ ·.<!. WEB~BA~ED,
I
'PERSO~~~ /·........... ·.•·.·.···.•; ~N.D r~~S.ONAL, .; I~TERVIEW• ' SURVEY ,.· .•
.INTERVIEW/ .. INTERVIEW
-

Degree of High High Moderate None- interviewer None

interviewer's is absent
influence on
answers

Supervision of Moderate Moderate to high High 1 especially Not applicable Not applicable
interviewers with central
location
interviewing

Anonymity of Low Low Moderate High I Respondent can

respondent be anonymous or
known
Ease of call back or Difficult Difficult Easy Easy1 but takes time I Moderate
follow-up

Cost Highest Moderate to high Low to moderate Lowest I Low

Special features Visual materials Taste tests 1 viewing Fieldwork and Respondents can Streaming media n
:::r
may be shown or ofTV commercials supervision of answer questions at may provide Ill
....
u
demonstratedi possible data collection their conveniencei graphics and ....
Ill

extended probing is are simplifiedi they have time to animation ~

I
possible quite adaptable reflect on answers ~
to computer ....
Ill

technology "!:!".
Ill

::J
\.0
Sources: Adapted from Zilanund, WG, Babin, BJ, Carr, JC & Griffin, M. Business research methods. lOth ed. Mason, OH: South-Western Cengage ;:;;
Vl
Learning; Lamb, CJ, Hair, JF, McDaniel, C, Boshoff, C & Terblanche, N. 2008. Marketing. 3rd ed. Cape Town: Oxford University Press Southern Ill
....
Ill
\.D
w Africa, p 32. n
:::r
Essentials of Marketing

Step 7: Determine the extent of the formal investigation

In this step, the extent of the formal investigation must be determined. This focuses
on the design of the sampling plan. Sampling involves selecting representative
units from a total population. Marketers can predict the reactions of a total market
or market segment by systematically focusing on a limited number of units. This is
called sampling. However, we must first clarify some of the terms that are relevant to
sampling.
The group that the marketer is interested in knowing something about is referred
to as the population or universe. Sometimes a population is small enough that
marketers or researchers may study all of the members of the population in order
to learn whatever it is they are interested in establishing. In such cases, the whole
population or universe can be investigated.
When the population or universe is extremely large, it may be more convenient to
study a subset of the population, called a sample. A sample is therefore a set of items,
called units, selected from the population .

. EXAMPLE:Acensus

A study on the opinions of marketing lecturers at residential universities regarding

the introduction of a new marketing module as part of the curriculum can be
conducted among all lecturers as the population is relatively small, and a complete
list will be available.

If the expenditure of households in Soweto is being researched, the researcher may

include all the households in Soweto, in which case a census is taken (the sum total
of all households in Soweto). However, the researcher may decide to interview only
some of these households, for example :1.0% of the households, which is termed a
sample.
A shoe manufacturer, who wanted to study the brand preferences of all teenagers
between 13 and 16 years of age 1 found it almost impossible to research all of them
and decided to draw a sample of 2 soo teenagers. '

When researchers establish a sample, it is crucial to select respondents who will

represent the population of interest. This is known as a sample frame.
The sample size refers to how many respondents should be incorporated in
the study, and is an important consideration for researchers. No fixed rules exist
concerning the number of units to be included. However, there are general norms
and guidelines in this regard. Samples that are applied in consumer research can

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 Chapter 4- Marketing research

often be less than 1% of the population, on condition that a probability sample and
statistical formulae are used. In the case of industrial research, however, larger
samples are used because the number of industrial clients is considerably smaller
than in the case of final consumers.
In this step of the research process, a decision is needed about the type of
sample. A good sampling plan will produce a sample that is representative of the
characteristics of the population from which it is drawn. Two basic types of samples
are probability (random) samples and non-probability (non-random) samples.
A probability (or random) sample is a selection in which each element in
a population has a known chance of being included through strict statistical
procedures. It is the best way to ensure a representative sample. The following random
sampling methods can be employed: simple random sampling, stratified random
sampling and cluster sampling. Simple random sampling involves a probability
sample in which each element has a known and equal chance of selection.

To draw a simple random sample of 10 flats from a block of flats, the researcher
should incorporate the flat numbers into a list ofthe total population (all flats). Flat
numbers will then be drawn at random until the prescribed sample size has been
reached.

In the case of stratified random sampling, the population is divided into mutually
exclusive subgroups (strata) on the basis of common characteristics. The basis
used for stratification (for example, age, income, occupation and gender) must be a
characteristic relevant to the research project.

Assume that a research population consists of :1.00 elements or people of which

so% are male and so% are female. If a sample of 10 elements was drawn using the
simple random sampling method, it is possible that it would consist of three males
and seven females. Even though all the sampling procedures were followed exactly,
the sample does not represent the population. As the sample size increases, the
sample will become more representative of the population.

In cluster sampling, the procedure is different. Simple random sampling treats each
population element individually, while stratified sampling treats elements in groups
of the population individually. In the case of cluster sampling, the population will
be grouped into clusters, and only some of the groups will be randomly selected for
study.

95
Essentials of Marketing

The grouping of clusters is done according to ease or availability, and should be

heterogeneous (different) within subgroups and externally homogeneous (similar).
-~- __t -::--.-- -J-, . ' -- -

Suppose you were studying leisure activities of people in the population and you
believed that age was relevant. You would stratify the population by age. People in
a particular stratum would be of similar ages, and each stratum would differ from
the others with respect to age. You could then use simple random sampling to
select sampling units from each stratum. Clearlyyou would need more information
·on the population to select a stratified sample than to select a simple sample.

A non-probability (or non-random) sample is a selection in which not every item in

a population has a known chance of being included because researcher judgement
enters into the selection. The sample's representativeness depends on how good
the researcher's judgement is. Non-probability sampling can take two forms:
convenience sampling and judgement sampling. In the case of convenience sampling,
the sampling units are chosen simply on the basis of convenience.

EXAMPLE: Convenience sampling

Convenience sampling is used in the case of on-the-street interviews, for example,

asking people in a supermarket their opinions about a new brand of detergent,
or conducting taste tests on cheese. People who are not at the same place as the
interviewer, and people who are not in that particular supermarket at the time
when opinions or taste reactions are being sought, do not have a chance of being
included in the sample.
___ .,.-r

In the case of judgement sampling, units are chosen on the basis of the researcher's
opinion as to their representativeness.

Examples of judgement sampling include selecting a sample of salespeople for

their opinions as input to preparing a sales forecast, and selectingcities in which
to test-market new products. The representativeness of these samples depends on
the researcher's judgement in selecting the sampling units.

Step 8: Select, train and control the interviewers

In this step of the marketing research process, the research design is implemented;
that is, the data is collected. Data collection is often the most expensive aspect of the

g6
 Chapter 4- Marketing research

research process, and the possibility of error is high. Interviewers should be selected
carefully and trained thoroughly. An important control task also has to be performed.
Before selecting interviewers, it is advisable to establish specific selection criteria.
These will depend on the nature of the questionnaire, the type of respondent to
be interviewed and factors relating specifically to the investigation. For example,
experienced interviewers are required for questionnaires that include open-ended
questions, which require probing.
Interviewers need training to ensure that they all administer the questionnaire
in the same manner so that the data can be collected uniformly. The training should
cover maldngthe initial contact, asking the questions, probing, recording the answers
and terminating the interview.
Control of the interviewers should be exercised continuously. The potential
for error in data collection is very high. To help ensure that the research design
is being implemented correctly, the researcher must monitor and control every
phase of its implementation. In a personal interview survey, for example, it
is important to monitor the fieldwork. The researcher might take a sample of
completed questionnaires and call the respondents to verify that they were, in fact,
interviewed.

In a research investigation into the marketing knowledge of supermarket retailers,

the interviewers were given the following instructions:
• Speak to the store owner/manager/person in charge of the store upon entering
the store.
• Identify yourself.
• Explain what you are doing.
• Hand the respondent the letter of introduction, or read it aloud if necessary.
• Complete the front page (name of store, owner, and so on).
• Ask all the questions.
• Record responses by following the instruction below each question - for
example, tick more than one item if necessary.
• Do not influence the respondent when asking the questions.

Step 9: Fieldwork
During this step, the information is collected from the respondents. Various problems
may occur during the interviewing process, such as non-response error, respondent
bias and interviewer bias, which are discussed in more detail below.
• Non-response error. A great percentage of respondents may not respond to
the research. Non-response errors occur when the results obtained from the
respondents who participated in the research are in contrast to what the results

97
 Essentials of Marketing

would have been if all the respondents who were initially selected in the sample
participated in the research.
• Respondent bias. Interviewers should do their best to obtain answers that are
honest and as accurate as possible. Some respondents may be inclined to pre-
empt the interviewer by providing answers which they think the interviewer is
looking for. Overcoming this bias should be addressed when the interviewer is
trained.
• Interviewer bias. Interviewer bias can take many forms, for example, their
tone of voice, age, gender or way of interviewing may unconsciously result in
bias. Conscious interviewer bias can also occur. For example, the interviewers
may complete the questionnaires themselves. This type of interviewer bias can
be limited by thorough training, selecting highly motivated interviewers and
exercising strict control during the fieldwork.

Step 10: Data processing

When the fieldwork has been completed, the data must be processed. Data processing
entails editing and coding the collected data to facilitate analysis. Editors go through
completed questionnaires to eliminate those answered by the wrong respondents
and to check for readability of the responses. Editing also involves setting up
categories for the data in accordance with the research design. Coding assigns the
data to proper categories as explained in the box below.

.·Categoriesfor data

' For example, in a survey of cigarette smokers to determine brand usage/ the
: categories might consist of brands, types of cigarettes (filtered, unfiltered,··
menthol), city size, household income and gender of respondent.
Proper categories for the brands may include the following:
.• Stuyvesant 20s might be coded brand number 1.
·'· • Satin Leaf Lights 30s might be coded brand number 2.
Proper categories for the cities may include the following:
· • Cities consisting of 20 ooo people or less might be coded city size number 1.
• . Cities with one million or more people, number 2, and so on.

Sometimes questionnaires are pre-coded by printing the codes on the questionnaires,

which assists data -entry personnel to enter responses directly from the questionnaire.
/
Data-processing·activities are usually done by means of computers, so the data is
often put into a computer-readable form and then read into a computer file and
stored.
Data analysis is done next. This is the process of editing and reducing accumulated
data to a manageable size, developing summaries, looking for patterns and applying

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 Chapter 4- Marketing research

statistical techniques. Data-analysis techniques should be planned in advance

of data collection as part of the research design. For example, more data might be
collected if computers are used than if the analysis is done manually.
More sophisticated data-analysis techniques may also be used as the researcher
moves beyond the description of the data to complex statistical analysis of them.
Cross-tabulations are often used to show how one variable relates to another. For
example, two-way tabulations provide answers to such questions as: 'What is the
relationship between gender and brand loyalty in the motor vehicle market?'

' There is a tremendous amount of statistical information and advice available on~
the internet. The Web is a very useful source of information for the selection of
appropriate statistical techniques for a particular problem, the proper use of
different statistical techniques and emerging statistical techniques. In addition, ·
news and special-interest groups can be an excellent source of information and ··
; advice regarding the proper use of statistical procedures.

Step 11: Communicate information to the decision-maker

The final step in the research process involves interpreting the findings and
communicating this information to the marketing manager. Communication problems
between researchers and marketing managers often arise because of their different
backgrounds and work environments. Inevitably, the written research report is the
document that management will use as its information source in maldng a decision.

Some companies and research companies publish marketing research reports

on the internet. This is extremely simple to do because the latest versions of the
major word-processing, presentation graphics and spreadsheet packages, such as
Microsoft Office and Lotus SmartSuite, are easy to use. The fact that reports are.-
available on the internet means that qualified users worldwide have instant access
to these documents. Users can view the marketing research reports on screen and
also have full access to supporting audio, video and animation features. Theycan
save the reports for future reference or for more careful analysis at a later stage.
Complete reports or portions of reports can be printed out in hard copy if desired.

4·5 Market potential and sales forecasting

In this last section of the chapter, we deal with a specific element of marketing
information, namely market potential and sales forecasting. This is a specialised
field, and therefore we will look at only some basic concepts and procedures. 32

99
Essentials of Marketing

When an enterprise observes a newmarket trend based on the information obtained

from marketing research or the MIS, it is essential that the current size and future
potential of the new market demand be determined. Knowledge of market sizes and
probable growth patterns provides the basis for selecting attractive markets and
helps in the formulation of appropriate marketing strategies for those markets.
The extent to which plans can be successfully implemented depends not only on
managers' abilities to set and implement strategies, but more fundamentally on their
ability to predict the market accurately. This means two things: first, assessing the
market potential (that is, worldng out how big the total market is) and, secondly,
forecasting sales (that is, calculating how big a slice of that market the organisation
can obtain).
Market potential focuses on the current size and characteristics of the market,
whereas sales forecasting looks at the future market situation.

4·5·1. Levels of market measurement

The size of a market (in other words, the potential or demand) can be measured on
different levels, and it is important to state clearly beforehand what type of market is
involved. Market measurement can be determined by consumer level, product level,
geographic level and time level. Marketing managers must clearly define the required
level of measurement as this would impact directly on the formulation of resulting
marketing decision-making. Consider the following example of the possible levels of
market measurement for Coca-Cola.

Possible
---.
levels of market measurement for Coca~Cola .
-- -

• Consumer level. This is the most popular level of demand measurement used..as
it provides information on the number of final consumers defined in different
market segments. Coca-Cola would, for example, be interested in the demand ·
for Coca-Cola in schools, at sports meetings and among fitness fanatics.
• Product level. On the product level, an enterprise can measure consumer
demand for one brand or for all of its brands in a given product category. As
most markets are targeted by various formats of the same product1 the demand
measurement can be expressed in terms ofthe total number of current buyers
for each product type. Coca-Cola 1 for example 1 would be interested in the sales
of all soft drinks in the RSA- sales of Coca-Cola 1 sales of Coke Light1 sales of
··.Tab and so on.
• Geographic level. On the geographic level 1 the total market can be divided·
into geographical segments and it is thus possible to express the demand.
measurement in geographic terms. Coca-Cola may be interested in certain .
areas1 such as the Cape metropolitan area 1 KwaZulu-Natal 1 the RSA ~11d
southern Africa. ·.,,..

100
 Chapter 4- Marketing research

11 Time level. A demand measurement should also be specific in terms of the time
of purchase 1 and should provide information on the sales over different time
periods. Coca-Cola may be interested in monthly sales1 seasonal sales and
annual sales.

4.5.2 Relevant markets for measurement

The different types of markets which can be measured are not all relevant to a specific
enterprise. It depends on whether the enterprise is actively involved or interested in
the particular market. It is thus necessary to distinguish the relevant markets that can
be used to estimate market potential:
111 Total market (also referred to as the market potential) pertains to all actual

and potential buyers of a product type if it is generally available and offered for
purchase, whether or not consumers have the ability to buy the product. For
example, the total market for Coca-Cola is the whole of the RSA.
a Available market refers only to those actual and potential buyers of a product
who have the interest, income and ability to buy the product at a particular point
in time (for example, metropolitan areas where consumers are able to buy the
product because of its availability and theirlevel of income).
11 Target market is that part of the available market at which the company has .
chosen to direct its marketing activities (for example, the 16- to 35-year-old
age group). The target market for Coca-Cola may include only those parts of
the metropolitan population that fall into particular age groups and lifestyle
categories.
• Penetrated market refers to the number of consumers who have already bought
the product. Coca-Cola's penetrated market refers to that portion of the target
market that has already bought the product.

4·5·3 Market and sales potential

The concepts 'market potential' and 'sales potential; which are ways of estimating or
measuring market and sales potential, are discussed below.

4·5·3·:1.. Market potential

Market potential is concerned with what is possible; in other words, it focuses on
the current size of the market. Market potential is the maximum possible sales of a
specific product in a specific market over a specific period for all sellers in the industry.
It assumes that all sellers are presenting their maximum marketing effort under a
given set of environmental conditions. Market potential thus sets an upper limit for
industry sales. This definition of market potential raises problems when calculating
a figure for market potential, as it involves many assumptions about competitors
and the environment, and because it needs a precise definition of 'the market: In
addition, methods of quantifying the variables concerned are required.

101
Essentials of Marketing

Market potential data help in evaluating which opportunities the marketer should
pursue, for example, in determining which market segments to target. Such data also
help in deciding the level of marketing effort that should be allocated to the various
segments and in providing benchmarks for evaluating performance in selected
segments.
-~ -,-::._,:- .
,

In the early 1ggos, the traditional toy industry reviewed its definition of the market,
following a report that children were leaving the traditional toy market at an
increasingly younger age, and that their needs, wants and consumption choices
were broadening. This means that toy manufacturers are competing directly with
clothing, trainers, videos, electronic games, and so on, for children's disposable
income. Toy manufacturers now have to consider themselves in the youth gift
market, not just the toy market.

4·5·3·2 Sales potential

Even after the potential has been estimated for the market as a whole (market
potential), a company will need to determine its own sales potential - that is, the
share of the market that it could reasonably capture. Sales potential is the upper limit
of sales that a firm could possibly reach for a specific product in a specific market over
a specific time period. It is based on a maximum level of marketing effort and an
assumed set of environmental conditions. A company's sales potential, therefore,
is the share of market potential that it might capture if it maximised its marketing
effort. Sales potential is, therefore, partly a result of the company's marketing effort
and its success in attracting and holding customers.
Having a clear idea of market and sales potential provides a useful input to the
marketing planning process. It is especially important for planning selling efforts
and allocating resources. The allocation of sales-force effort and the establishment
of distribution point and service support centres, for example, can reflect sales
potential rather than actual sales, thus allowing scope for expansion. Similarly, sales
potential can also be used to plan sales territories, quotas, sales force compensation
and targets for prospecting.

4·5·4 Estimating market and sales potential

The methods used for estimating market and sales potential depend on how new or
innovative the product or service is, and how mature the market is. We distinguish
between the breakdown methods and build-up methods.
• Breakdown methods. The most common breakdown method used to estimate
market and sales potential is total market measurement. This begins with any
total industry or market data that may be available from secondary research. This

102
 Chapter 4- Marketing research

information is then broken down to market segment level and, thereafter, to the
company's own sales potential. This method relies heavily on the availability of
a long series of data on industry sales volume and consumption by segments
within that market, but rarely is such complete and detailed data available.
Potential is thus often estimated from what data is available and then adjusted to
take account of the current marketing environment. Once market and segment
potentials have been established, sales potential can be derived by estimating
competitors' relative market share and then calculating how this might change as
a result of expected actions, for example, a new product launch.
11 Build-up methods. There are three main methods for estimating reliable market
and sales potential figures: census, survey and secondary data:
o The census method is based on a detailed consideration of every buyer and
potential buyer in a market. This may be difficult in mass consumer markets,
but is more feasible in industrial situations. The market potential is effectively
the sum of all the potentials estimated for individual purchasers.
o The survey method is more widely used in consumer markets where a
representative sample of consumers is asked about purchase· intentions.
This information can then be used as a basis for calculating total market or
sales potential. The main problem, however, is that respondents might not be
truthful about their intentions.
o Secondary data can be used to establish sales and market potential. Internal
sales records can be used to predict individual customers' purchasing on the
basis of past behaviour. In this approach, the sales potentials are produced
first and the market potential is then derived from those figures.

4·5·5 Market and sales forecasting

The terms market forecast and sales forecast must be defined before we consider the
development of a sales forecast.
• Market forecast. This is an estimate of the expected sales of a specific product in a
specific market over a specific time period for all sellers in the industry. It is based
on an expected level of industry effort and an expected set of environmental
conditions. In other words, the market forecast is the portion of market potential
that is expected to be realised.
• Sales forecast. This is an estimate of the number of units a firm expects to reach for
a specific product in a specific market over a specific time period. It is based on an
intended level and type of marketing effort and an expected set of environmental
conditions.
Marketing often plays a central role in preparing and disseminating forecasts. This
is perhaps one of its most important functions, as the sales and market forecasts
provided are the basis of all subsequent planning and decision-making within most
areas of a company.
 Essentials of Marketing

These include:
• ·a car manufacturer wanting to forecast the demand for each model in the
product line
• a tour operator wanting to forecast the demand for specific destinations
• a university wanting to forecast numbers of full-time 1 part-time and overseas
students by programme offered.

The forecast is the starting point for all subsequent decisions. If this is not done
correctly, the whole company can encounter major capacity or cash-flow problems.

Some problematicforecasting·situations·

• In fashion markets it can be very difficult to forecast what styles are going
1

to sell and in what quantities 1 hence the popularity of 'end of season' sales as
retailers try to sell off surplus stock.
• Holiday companies and airlines also find forecasting difficult and often sell off
surplus holidays or seats on aircraft at discounted rates. This continues until
actual departure dates.

There is no such thing as a rigid or absolute forecast. Different forecasters using

different forecasting methods are almost certain to reach different results. Forecasts
should, however, share some common characteristics. They should:
• be based upon historical information from which a projection can be made
I!!! look forward over a specific, clearly defined time period
• make clearly specified assumptions, since uncertainty characterises the future.

4.5.6 Forecasting methods

There are several forecasting methods. Rather than relying on only one, planners
often use a number of methods. We shall briefly consider the sales-force survey,
expert survey and time-series analysis.
• Sales1orce surveys can provide a wealth of information. Sales representatives
are asked to provide forecasts on customers, dealers, accounts and so on. The
sales force is a valuable source of expert opinion, since representatives are in
close contact with customers on a daily basis and will learn of likely changes in
purchasing intentions early. The main disadvantages of these surveys are bias
and naivety.
• Expert surveys can be used by bringing outside expertise into the sales-
forecasting process. This is a sales-forecasting method that involves the
participation of people outside the firm who have specialised knowledge and

104
 Chapter 4- Marketing research

experience in the market under consideration. This includes economists,

consultants and retired executives.
111 Time-series analysis is a means of using historical data to predict the future.
Analysis of historical data can reveal patterns in the organisation's sales figures.
These patterns include trends, cycles, seasonality and random factors. In the case
of trends, for example, extrapolation of data on a straight- or curved-line basis can
give a broad view of the general direction in which sales are moving. Cycles reflect
periodic changes in patterns over a period of time. Seasonality - that is, shorter-
term fluctuations around an overall trend- may be observed on a daily or weekly
basis if that is what the organisation requires. Any forecast must make allowances
for random factors such as strikes, riots and civil commotion (especially in the
insurance industry).

4.6 Analysing and using marketing information 34

Information gathered from internal databases and through competitive marketing
intelligence and marketing research requires additional analysis in order to gain
insight to improve decision-maldng. This section discusses customer relationship
management and the distribution and use of marketing information.

4.6.:1. Customer relationship marketing

Customer relationship management (CRM) is managing detailed information about
individual customers and carefully managing touch points to maximise customer
loyalty. Ideally, companies should capture information at every single customer
touch point, including customer purchases, sales personnel interactions, service and
support calls, website visits, satisfaction surveys, credit and payment interactions
and market research studies. The aim of CRM is to understand customers better in
order to enhance customer service and develop deeper customer relationships.
CRM uses sophisticated software and analytical tools that integrate information
from all touch points, conducts in-depth analysis of the information and uses the
results to build stronger customer relationships.
CRM analysts create data warehouses and then apply data mining techniques
to retrieve customer-related data. A data warehouse is an electronic database that
stores multitudes of customers' information in one central, accessible location. Data
mining is the process of gathering and retrieving relevant information.

4.6.2 Distribution and use of marketing information

The marketing information system (MIS) must make information readily available
when it is needed, otherwise the information will have no value if it cannot be used
to gain customer insight and make better marketing decisions. In some cases, this
means providing managers with regular performance reports, intelligence updates
and results ofresearch studies. But marketing managers may also need non-routine

105
Essentials of Marketing

information for special situations and last-minute decisions, such as inventory levels
of a certain product that is selling faster than expected. Information distribution is
about storing information in a database and maldng it available in a timely, user-
friendly way.
Intranets and internal CRM systems are examples of internal information systems
that provide access to research information, customer contact information, reports,
shared work documents, employee and other stakeholder information.
Extranets are information systems that enable people outside the organisation,
such as key customers and value-networking members, to access their account
information, arrange purchases, and check inventories or product availability and
other data on demand.
With technological advances, marketing managers can now gain direct access to
information systems at any time and almost anywhere through wireless networks,
which allow quicker and more direct access.

4·7 International marketing research3s

When marketing across international frontiers, there are added complexities that
need to be taken into consideration. The process of marketing research and the
availability and quality of secondary data may vary, and there may be differences in
social and marketing practices, political and commercial institutions and languages.
Conditions vary in each country; one cannot assume that because a product or
service was a success in one country, it will be successful in another, even if the
countries have similar customers, lifestyles and languages.
Even within a country, regional variations may require different marketing
strategies to be implemented. For example, in South Africa, different strategies are
sometimes used in different provinces, such'as Gauteng and KwaZulu-Natal.
When defining potential export markets, marketers should take the following factors
into consideration:
• geography: the distance required to deliver the goods and the method of delivery
• economic zones or trading blocs: eg developed countries or BRICS countries
• political conditions: eg Zimbabwe and Sudan have unstable conditions.
This makes international marketing research a more complex process and increases
uncertainty.

4.8 The impact of the internet on marketing research3 6

About one-fifth of the world's population is online and internet data collection is
rated as having the greatest potential for further growth. There are various reasons
for the success of internet marketing research:
• Business intelligence can be accessed easily, resulting in better and faster
decision-making.

~06
 Chapter 4- Marketing research

• It improves a company's ability to respond to changes in the market and to

customer needs.
11 It decreases the time and costs spent on research activities such as mailing, data
entry and reporting.
Marketing researchers use the internet to administer surveys, conduct focus group
and observation research, and perform various other types of marketing research.

4.8.1. Advantages of internet surveys

Some of the advantages of internet surveys are discussed below.
• Rapid development, real time reporting. Internet surveys can be sent out to
thousands of respondents and completed simultaneously, and results can be
posted as the returns arrive.
• Reduced costs. Data collection costs contribute the largest amount to any
traditional market research budget. With internet surveys, even if the number of
respondents increases, there will be little or no increase in expenditure.
11 Personalisation. Internet survey questions can be highly personalised for greater
relevance to each respondent; this not only speeds up the response process but
also results in personalised data.
• Respondent participation. Internet surveys can be filled out whenever it suits
the respondent and are quicker to complete, which leads to higher participation
rates.
• Wider reach. Certain groups are difficult to reach using traditional research
methods, such as top professionals, but these people are well presented on the
internet; therefore using online surveys increases the likelihood of reaching them.

4.8.2 The role of consumer-generated media in marketing research

Consumer-generated media (CGM) are media that consumers generate themselves
and share among themselves, such as blogs, message boards and forums, online
opinion/review sites and services, shared videos and photos and podcasts. Face book
and Twitter are the most current and relevant forms currently used by society. CGM
can be viewed by marketers but cannot be controlled by them, and it is for this reason
that they are more trusted than traditional forms of advertising and promotion. Firms
use sophisticated data mining and other technologies to track what is being said
or shown and about whom. Companies can focus on specific issues and concerns
highlighted by CGM, such as:
• What is the hype about a certain issue, trend, product or piece of news?
• Who is active online and what are they saying?
• Are the current trends becoming bigger or seen as a warning sign of changes that
are likely to occur?
• What are the key motivators influencing and affecting consumers' behaviours?
• What are consumers' moods and emotions towards a topic or brand?
 Essentials of Marketing

4.8.3 Behavioural targeting

Behavioural targeting started as a simple process, where web sites placed cookies on
users' browsers to track which websites they visited, the time they spent on each
page and the number and types of searches they made. The objective was to track
users in order to match them with adverts for products and services that they would
most likely purchase. Today, behavioural targeting combines a consumer's online
activity with psychographic and demographic profiles gathered from databases.

Summary
In this chapter, we focused firstly on the information needs of marketers and how they
gather and use that information to develop marketing strategies. More specifically,
we dealt with the MIS.
We also looked at the factors involved when a company decides to conduct
marketing research, and the research techniques available to gather the specific
information it needs. The steps in the marketing research process were dealt with
comprehensively. We looked at the important role of the internet in marketing
research. We also examined market potential and sales forecasting, a specific element
of marketing information, and briefly looked at the importance of international
market research. Finally, the impact that the internet has on market research was
discussed.

References
1. Zikmund, WG, Babin, BJ, Carr, JC & Griffin, M. 2010. Business research methods, lOth ed.
Mason, OH: South-Western Cengage Learning.
2. Zikmund et al, op cit.
3. Zikmund et al, op cit.
4. Marketing research and information systems. nd. Published by: Network and Centre for
Agricultural Marketing Training in Eastern and Southern Africa. http:/ /www.fao.org/
docrep/w324le/w324le02.htm (Accessed 11 May 2016).
5. McDaniel, C & Gates, R. 2007. Marketing research essentials. 6th ed. San Francisco, CA:
John Wiley & Sons.
6. Business dealings. 2012. The value of marketing information. Available from: http:/ I
businessdealings.net/the-value-of-marketing-information/ (Accessed 10 July 2012 ).
7. Business case studies. 2012. New products from market research. Available from:
http:/ /businesscasestudies.co.uk/kelloggs/new-products-prom-market-research/
Introduction.html#lX2220 (Accessed 10 July 2012).
8. McDaniel & Gates, op cit.
9. Zikmund et al, op cit.
10. Ibid.
11. Ibid.
12. Ibid.
13. Ibid.

:1.08
 Chapter 4- Marketing research

14. Armstrong, G & Kotler, P. 2012. Marketing: An introduction. 11th ed. Boston, MA: Prentice
Hall.
15. Ibid.
16. Ibid.
17. Ibid.
18. Ibid.
19. Ibid.
20. Ibid.
21. McDaniel & Gates, op cit.
22. Lamb, CJ, Hair, JF, McDaniel, C, Boshoff, C & Terblanche, N. 2008. Marketing. 3rd ed.
Cape Town: Oxford University Press Southern Africa, p 32.
23. Cant, MC (ed). 2005. Marketing research. 2nd ed. Cape Town: New Africa Education,
p 78.
24. Ibid.
25. Strydom, TW (ed). 2004. Introduction to marketing. 3rd ed. Cape Town: Juta.
26. Cant, MC, Strydom, JW, Jooste, CJ & DuPlessis, PJ. 2006. Marketing management. 5th ed.
Cape Town: Juta.
27. Schoell, WF & Guiltinan, JP in Cant, MC (ed). 2004. Essentials of marketing. 2nd ed. Cape
Town: Juta.
28. Strydom, op cit.
29. Cant, 2005, op cit, p 122.
30. Ibid.
31. Adapted from Cant, 2005, op cit, p 90.
32. Schoell & Guiltinan, op cit.
33. Brassington, F & Pettitt, S. 2006. Principles of marketing. 4th ed. Harlow: Prentice Hall.
34. Zikmund et al, op cit.
35. Ibid.
36. Ibid.

109
 Chapter 5

Consumer behaviour
'

Learning objectives
After you have studied this chapter, you should be able to:
• define what consumer behaviour is
• demonstrate an understanding of what motivation is and how to apply it in
marketing messages
• explain the perception process and the marketing implications of perceptual
defence
• illustrate the use of the components of attitudes and how attitudes can be
changed
• explain the characteristics of personality and its value to marketers
• explain the nature of lifestyle
• explain decision-making in the family in terms offamily roles and family types
E explain the nature and implications of culture
• illustrate the implications of different social classes
• explain the different reference groups
• illustrate the types of decision-making and the decision-making process
• understand the stages of adopting a new product and the categories of adoption
of new products.

5.1 Introduction
Any business revolves around the customer. If a business does not have a customer,
there will be no business. Furthermore, in order to be sustainable and to be profitable
it is imperative that the business meets and satisfies the needs of its customer base.
However, in order to be able to do this, the business must understand what drives its
customers. Marketers must understand which factors have an impact on customers'
buying decisions, what sources they consult, how they perceive certain things,
what motivates them, and so forth. Consumers have become more globalised and
knowledgeable due to the advances in technology, and marketers must not only be
aware of these changes, but also be aware of how these technologies can be used to
influence consumer buying decisions.
 Chapter 5- Consumer behaviour

Consumers are constantly bombarded by various marketing actions either via digital
and social media, or advertisements in newspapers, on radio and TV, by family and
friends and many other stimuli, which leads to certain actions and reactions or
behaviour. This behaviour is lmown as consumer behaviour. When someone does his
or her shopping, he or she is a consumer who is satisfying certain needs. Marketers,
in order to meet their goals and targets, need to be aware of customers' needs. They
need to lmow the needs and preferences of customers and why they have those
needs and preferences. When this information is lmown, marketers can try to satisfy
these needs with their particular products.
A customer's buying decision is not determined by only one factor, but by a
number of factors. The study of consumer behaviour is concerned with all the
activities and influences that occur before, during and after the purchase itself.
Therefore, it includes not only the buyers and consumers of products, but also those
who influence the buying decision.
In this chapter we first look at the determinants of consumer behaviour, namely
the individual factors and the group factors that influence behaviour. Then we deal
with the consumer decision-maldng process. Figure 5.1 provides an overview of
what consumer behaviour is.

DEFINITION: Consumer b~haviour ·

It is the study of the processes involved when individuals or groups select, purchase,
use or dispose of products, services, ideas, or experiences to satisfy needs and
desires. 1

-···---------------------l
1 Individual · i
factors I Buying Purchase
Motivation j
Perception 1 decision decision
, ··-······---··-······-······---······· I process_ Product choice

I
... ., ......................- ...... .... Learning ability
Other stimuli i
.,

Marketing I Problem Brand choice

stimuli Economic I Attitude ..
1 Personality I recognition
. lnfor"mation
Dealer choice
Purchase
Producers and Technological :
services l Political jl ~~~~-----C-1 search
Evaluation of
amount
Purchase

'· ·- ~- o-~:_t ~. - ·- ~- ~- ·i- ~ 1

Group factors alternatives timing
_ __ _ __ :_ _ _t_ _ _i_o_ _ _n_ _ _ _ _ j IColtoc,l .. The family
Cultural group
Purchase
decision
Payment
method
Social class Post-purchase
Reference behaviour
groups (...,-·~·--~~---··"·---~

Opinion leaders

Figure 5.1 Model of consumer behaviour

Source: Adapted from Kotler, P & Keller, KL. 2009. A framework for marketing management
integrated with PharmaSim. 4th ed. Upper Saddle River, NJ: Prentice Hall, p 92.
Essentials of Marketing

The individual factors in Figure 5.1 are also referred to as internal determinants or
basic determinants of consumer behaviour. Consumers' needs, motives, attitudes,
perception and learning abilities, and personality determine their consumption
decisions and behaviour. However, consumers do not live in isolation and are
influenced by other factors as well. These factors include cultural and social influences
from the external environment, which also shape an individual's behaviour. These
external determinants are also known as group factors and include the cultural
group, reference groups, the family and the social-class system. If marketers wish to
formulate a successful marketing strategy (consisting of product, price, promotion
and distribution strategies), they need to be familiar with the influence of internal
and external determinants on the behaviour of consumers in a specific target market.
Let us first investigate the individual factors that influence consumers' buying
behaviour. Note that a customer's buying decision is not determined by only one
factor but mostly by a number of factors.

5.2 Individual factors influencing consumer behaviour

Individual factors refer to those factors that are inherent in human behaviour. Why
do consumers buy certain products? Why do they buy these products at certain
stores? Why do they buy certain products at certain times? How do they buy? It is not
easy to understand all these questions, as many factors can and will influence the
decisions made by customers.
Although we have a fair understanding of which factors influence behaviom~
our knowledge of how these factors interact to influence behaviour is limited. The
human mind is often compared to a 'black box'; we know the inputs (stimuli) and the
outputs (responses), but not the inner workings (processes) of the mind with respect
to the transformation of inputs and outputs.
Human needs, more particularly consumer needs, are the basis of all modern
marketing. Needs are the essence of the marketing concept. The key to a company's
survival, profitability and growth in a highly competitive marketing environment
is its ability to identify and satisfy unfulfilled consumer needs better than the
competition. Marketers who base their offerings on recognition of consumer needs
find a ready market for their products or services.
We will discuss the six individual factors shown in Figure 5.1, the first of which is
motivation.

5.2.1. Motivation
If we know what motivates a person to buy a product, it is easier to sell to that person,
as the marketing message will be directed at the motivating factor. To understand
motivation is to understand why consumers do what they do. People do things for
a reason or purpose. They may be motivated by a need to feel loved by others, to
protect their feet from damage when rock climbing, to relax in a movie theatre or

~~2
 Chapter 5- Consumer behaviour

to merely quench a thirst. Marketing students are taught from day one that the goal
of marketing is to satisfy consumers' needs. However, this insight is useless unless
we can discover what these needs are and why they exist. Motivation is what moves
people to action.
Marketers need to look behind the behaviour' in order to understand the
1

consumer's motives. When retailers examine buying choices, they find unsatisfied
needs. Needs are the basic sources of buyer behaviour, but they have to be stimulated
before the consumer is driven to action.

e FNB realised that it is a hassle for people to always have to go into the bank to
change things, or even if people wanted to change from one bank to another.
They have now made it possible to make these changes online with little hassle
-and even offer people the opportunity to contact one of their consultants to
come to their home to assist with a switch over.
1111 The fact that petrol stations stay open 24 hours a day, seven days a week, is
a result of demands by customers who want continuous access to petrol.
(Previously, in the late :1.970s and :1.g8os petrol stations closed at 5 pm on
weekdays and :1. pm on a Saturday. Hard to believe!)

To have a need is one thing, but to want to do something about it is another matter.
When a person wishes to satisfy a need, we call this motivation. There is, thus, a close
relationship between needs and motives. Needs lead to motives; a motive is a need
sufficiently stimulated to move an individual to seek satisfaction. For example, if ·
people are hungry, they will be motivated to buy some food.
The driving force mentioned in the above definition is produced by a state of
tension, which exists as the result of an unfulfilled need. Individuals strive to reduce
this tension through behaviour that they expect will fulfil their needs and relieve them
of the stress they feel. 1he specific goals they select and the patterns of action they
undertake to achieve their goals are the result of individual thinking and learning.
Motives can be classified in various ways, and these classifications offer the
marketerusefulinsightinto human behaviour. Two classifications that are particularly
relevant to the marketer are Maslow's hierarchy of needs, and the economic and
emotional classification.

'A need is an imbalance between the consumer s actual and desired states. A
1

person who recognizes or feels a significant or urgent need then seeks to correct
the imbalance.' 2
 Essentials of Marketing

' •· '· r - •

'Motives are inner states that direct a person toward the goal of satisfying a need.
The individual takes action to reduce the state oftension and return to a condition
of equilibrium.'3

5.2.1..1. Maslow's hierarchical classification of needs

Abraham Maslow identified specific human needs and classified them in a hierarchy
of importance. At the bottom level are the most basic needs. Higher-order needs do
not emerge before the lower-order needs have been reasonably satisfied. The lowest
order needs are physiological, which help to ensure the survival of the individual.
The highest level is reflected in the desire for self-actualisation. According to this
theory, the individual is motivated to fulfil whichever need is most strongly felt at
any given moment.
Maslow's hierarchy of needs is shown in Figure 5.2.

I '\\
I \
I \
/1 \
I \
f \
! \
/! \
I \
I Self-actualisation \\
I needs
/ Self-development and \
/ realisation '\
/
I ·Esteem needs \
/ Self-esteem; recognition, \
/ status .\\
/
/ Social needs \
// Sense of belonging, love \

I
\
Safety needs
I Security,protection
I

Figure 5.2 Maslow's hierarchy of needs

Let us look at each need in more detail:

• Physiological needs. The need for food, water, sleep and sex are physiological
motives. Hunger impels the consumer to purchase food.

:1.14
 Chapter 5- Consumer behaviour

111 Safety needs. These needs are aroused after physiological needs have been
minimally satisfied and include the need for safety, health and security. The use
of security fences and burglar bars at people's houses is an attempt to meet this
need.
• Sense of belonging or social needs. These needs are reflected in a desire for
love, friendship and group acceptance. Many products, such as cosmetics and
deodorants, are purchased because of social motives.
11 Esteem needs. These needs include the desire for status, superiority, self-respect
and prestige. 'TI1ese needs impel consumers to purchase luxury products as
symbols of status and success. A luxury car such as a Mercedes Benz can be seen
as fulfilling this need.
II Self-actualisation. This involves the desire for self-fulfilment; to become all that
one is capable of becoming. Few people are in a position to satisfy this need. An
example is to become the best tennis player or artist, or to obtain a university
degree.
These needs are often used in advertising to appeal to specific consumer motives.
Consider the following marketing examples, and how they have been tailored to
each level of Maslow's hierarchy:
• Physiological needs. Albany bread - Feel the freshness'
1

• Safety needs. ADT Alarms - We are here to protect you'

1

• Social needs. SPUR People'

1

• Esteem needs. Stand out from the crowd' in your BMW

1

• Self-actualisation. Be all you can be'; a whisky advertisement shows a man

1

making his own fly-fishing lures and showing the patience and detail required.

EXAMPLE: Motives leading to behavipi.Jr.

Heinrich, a chartered accountant, has just finished his articles, and wants to
emigrate. He is now motivated to draw up his CV and forward it to recruitment
specialists worldwide to assist in his quest to secure a job overseas.
The type of houses people live in, the cars they drive, the clothes they wear and
the very food they eat are often selected because symbolically they reflect the
individuaPs self-image while satisfying specific needs. A woman buying a Guess
handbag and sunglasses perceives herself as sophisticated and trendy, while a
student battling to make ends meet buys a bicycle to peddle to university and back.

s.2.1..2 Economic and emotional classification of motives

Consumers are not always motivated by physiological needs in decision-making.
When a person purchases products, he or she is also concerned about such aspects
Essentials of Marketing

as price, quality, performance and reliability. A person can satisfy these economic
motives by applying economic criteria in decision-making. See the examples below.
Economic motives are rational in nature and often expressed by the advertiser in
quantifiable terms.

Economic motives
'Buy one and get the next one at half price!'
Emotional motives
The consumer who buys an expensive car might not easily concede that the
underlying motive was the need for recognition (esteem motive) - he might
rationalise by alleging that the reason for the purchase was the maintenance plan
(economic motive) ofthe product.

Emotional motives represent those motives that involve emotions and correspond
with Maslow's social and esteem needs. Remember, satisfaction of emotional needs
is not a rational act- it is almost impossible to make any decision on a purely rational
basis as emotional motives invariably influence the consumer's decision. People
are usually reluctant to admit that their buying behaviour is influenced by economic
motives.

5.2.2 Perception
Perception is influenced by what we have learned. The way in which we perceive
things is influenced by what we know about them, in other words, what we have
learned about them.

- ..

DEFINITION: Customer perception

Customer perception refers to the process by which a customer selects, organizes,

and interprets information/stimuli inputs to create a meaningful picture of the
brand or the product. This is done through a number of senses- sight, hearing,
smell, touch and taste.4

Perception can be a very difficult thing to change once it is engraved in the mind of
the consumer. If the consumer perceives a shop to be expensive or bad on service
and quality, it will be extremely difficult to change this perception. For decades,
marketers have been asking questions such as: What makes a consumer prefer one
supermarket to another, or one brand of beer to anothe1~ or a specific type of car?
Why does a consumer prefer to shop at Woolworths and not Pick n Pay, or vice versa?

116
 Chapter 5- Consumer behaviour

The answers can usually be found in the way a consumer perceives the available
brands or stores.
Consumers are exposed to marketing communication stimuli such as advertising,
store displays and packaging, and the perceptions that come from these stimuli
often act as triggers and influences in buying behaviour. Consumers make decisions
and take actions based on what they perceive to be reality; hence it is important
that marketers understand the whole notion of perception so that they can more
readily determine what influences consumers to buy. Knowledge of the principles of
perception enables the astute marketer to develop messages that have a good chance
of being perceived and remembered by the target consumers.

A 16-year-old boy sees Beast Mtawarira, the Sharks rugby player, endorsing a
specific deodorant. His interpretation is that the deodorant makes him smell good
for longer and makes him more manly to the ladies, so he buys the deodorant.

5.2.2.:1. The perception process

Now that we know what the nature of perception is, we can examine what occurs
during the perception process. The perception process consists of four distinct steps,
namely exposure, attention, interpretation and recall.
Exposure
Initially, perception begins with exposure to stimuli. Exposure occurs when the
stimuli come within range of one of the five primary receptors, namely vision,
hearing, taste, smell and touch. Most of the stimuli to which an individual is exposed
are deliberately selected, that is, certain stimuli are sought out, others are avoided
and the meaning of some is distorted. This is lmown as selective exposure.
To ensure that consumers in their target market are exposed to a marketing
message, marketers often put advertisements in unconventional places where there
will be less competition, for example, on the backs of shopping trolleys, on walls in
sports stadiums, and even in restrooms, where the marketer has a 'captive audience:
Retailers use shelf position and amount of shelf space to ensure consumers are
exposed to certain brands. Point-of-purchase displays also attract attention to sale
items. Stores are designed with highly visible shelves and overhead signs to make
locating items as easy as possible.

While listening to the radio, a listener quickly makes a phone call while the
advertisements are playing.

117
Essentials of Marketing

Attention
Attention is activated when one or more of the sensory receptors are stimulated
and the resulting sensations are processed in the brain. The individual is exposed
to more stimuli than he or she can process. Therefore he or she has to be selective
in attending to marketing and other messages. This is known as selective attention.
Thus, the stimuli will be processed only when the individual makes a deliberate
effort. Normally a person will attend to a stimulus if he or she is interested in it.
For example, someone who rarely notices motor car advertisements will become
very much aware of them when he or she is planning to buy a new car. The physical
characteristics of the stimulus likewise determine whether a person's attention will
be activated. The marketer attempts to overcome consumers' selective attention so
that they will attend to the marketing message.

Larger stimuli are more likely to receive attention than smaller ones. An advert on
radio that has a sudden loud noise or irritating voice is more likely to be noticed
than one that is read in an even tone and at the same pitch. The use of a loud noise,
for example, is to gain the attention of the listener who might otherwise not have
noticed it.
Sudden silences in TV advertisements, drastic changes in music, sudden changes
from black and white to colour and the way in which prices are announced and
displayed, all serve as methods of enhancing attention.

Interpretation
Interpretation is the meaning that people assign to sensory stimuli. Just as people
differ in terms of the stimuli that they perceive, the eventual assignment of meaning
to these stimuli varies as well. Two people can see or hear the same event, but
their interpretations of it can differ like night and day. Consumers usually interpret
information on the basis of their own attitudes, beliefs, motives and experiences,
known as selective interpretation. They often interpret information in a manner
that supports their own position. Marketers rely heavily on symbols in marketing
messages to promote the correct interpretation. See the example below.

The placement of the 'eco' or 'green' sign on products, ranging from fuel to food
products, shows that the company supports the protectionofthe environment and
hopes to enhance the products appeal because of this act.

u8
 Chapter 5- Consumer behaviour

Recall (or memory)

Consumers do not remember all the information they see, hear or read even after
attending to and interpreting it. Selective recall refers to the fact that consumers tend
to forget the marketing message. To ensure full and correct recall of the message,
as well as appropriate purchasing action, the marketer must use point-of-purchase
promotion to remind the consumer of the message and product. See the following
example.

Marketers often use symbols, rhymes, jingles and associations that assist in
the learning and memory process. Eveready puts pictures of its pink bunny on
packaging to remind consumers at the point-of-purchase of its creative advertising.

5.2.3 Learning ability

Any facet of a person's behaviour is dependent on what he or she learns and
remembers about objects and situations. How individuals learn is of immense
importance to the marketer who wants consumers to learn about his or her particular
products.
The definition of learning makes it clear that an individual learns as a result of
acquired knowledge or experience.

'Learning, in a marketing context, refers to immediate or expected changes in

consumer behaviour as a result of experience.'s

5.2.3.1. Elements of learning

All individuals learn, but not all individuals learn the same things, nor do they learn
at the same speed or in the same way. The basic elements of learning are stimulus,
response and reinforcement. These elements are found in all learning.
Stimulus
The first requirement of learning is a stimulus. The consumer can be stimulated by
physical things such as products, brands and size, or intangibles such as service and
quality. Once the consumer has perceived the stimulus (object), he or she must be
motivated to seek the object before learning occurs. The stronger the motivation, the
quicker the consumer learns. See the following example.
 Essentials of Marketing

Because Lauren is keen to become a professional squash player1 she is motivated to

· learn all she can about squash~ She will probably google all she can on the correct
equipment1 the types of racquets and what makes a good player.

Response
A response is any action, reaction or state of mind that results from a particular
stimulus or cue. The same response to a stimulus may occur several times before
one can say that the response is learned. Cues stimulate response: the marketer who
provides consistent cues, as in advertising messages, to a consumer may succeed in
creating a favourable image of his or her product in the consumer's mind.

Reinforcement
Reinforcement increases the likelihood that a particular response will occur in the
future as the result of particular cues or stimuli. A positive reinforcement is a pleasant
experience, while a negative reinforcement involves the avoidance of an unpleasant
experience. See example below.

EXAMPLE: Positive and negative reinforcement

• When someone buys a new car at a dealership and is treated well 1 when all
details are explained clearly and properly1 and the dealership makes a big show
of handing over the car1 it will leave a positive impression on the buyer. This will
influence the buyer to tell others about the dealership as well as considering
them again in future. This is positive reinforcement.
• A person who goes to a hairdresser for a colour tint1 cut and blow wave and
walks out with hair the wrong colour because of an overdose of peroxide is not
likely to return. This is negative reinforcement.

Repetition
Repetition is the act of repeating past experiences. Learning is enhanced by
performing the same action several times. This is why repetitive advertising is
effective in communicating positive images. Coca-Cola, for example, is one of the
best-known brands on the market worldwide, but still keeps on advertising. This is
because they realise the value of repetitive advertising and reinforcing the product
message. See the following example.

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 Chapter 5- Consumer behaviour

Test yourself. Next time somebody suggests that you buy cool drinks for a braai or
party, the first question most likely will be 'Coke and what else?/ You may not even
buy Coca-Cola, but it has become ingrained in our minds because of the repetitive
advertising.

5.2.4 Attitudes

A consumer attitude can be defined as a learned predisposition to behave in a·

consistently favourable or unfavourable way towards market-related objects,
events or situations.

Every time you are asked whether you like or dislike a product or an advertisement,
you are being asked to express your opinion. For example if you say that you prefer
1

Super Sun Maize, this means that you have a positive attitude towards it. If you say you
do not like smoldng you are in fact saying that you have a negative attitude towards
1 1 1

it. The marketer therefore has to try to influence the attitudes of the consumer/ for
example, by means of advertisements. See the example below.

A person who does not, for example, like a specific type of motor car has a negative
attitude towards that brand. He or she will not even read advertisements for this
type of car and would never consider buying it.

5.2.t,..1. Components of attitudes

An individuars attitude is regarded as having three components: the cognitive/
affective and behavioural (conative).

Cognitive component
The cognitive component of attitude refers to a person's knowledge and perceptions/
which may be acquired through direct experience with the product and other sources
of information. Most of our attitudes towards objects involve a number of beliefs.
(See the example below.) It is important to note that beliefs need not be correct or
true; they need only to exist.

:1.2:1.
Essentials of Marketing

We may believe that CocacCola is popular with younger people, contains a great
deal of caffeine, is competitively priced and is made by a large company. The total
configuration of beliefs about this brand of cold drink represents the cognitive
component of an attitude toward Coca-Cola.

Affective component
This component of attitude has to do with the consumer's feelings or emotions with
respect to the focus of the attitude. It captures the overall assessment of a product
by a consumer. The evaluation may be a mere general feeling developed without
cognitive information about the product.

EXAMPLE: Emotions influencing overall reaction

A statement that a certain bank overcharges its customers implies a negative

affective response to that bank, which, in combination with feelings about other
attributes, will determine the overall reaction to this bank.

Behavioural (conative) component

This component represents the outcome of the cognitive and affective components
- to buy or not to buy. What a consumer does about knowledge of and feelings
towards a product is most important to a company. The consumer may have positive
information about a product and like it, but may not actually buy it for a variety of
reasons, for example, habit in respect of another brand may be strong, or there may
be other brands the customer likes better or it may be unaffordable.
The cognitive, affective and behavioural components of attitude tend to be
consistent. This means that a change in one attitude component tends to produce
related changes in the others.
Marketers are ultimately concerned with influencing behaviour. Consumers may
be influenced by listening to sales personnel, paying attention to advertisements
or examining packages. Marketers can, therefore, indirectly influence behaviour
by providing information that influences a belief about the product if the three
components are indeed consistent with one another.

5.2.q..2 Attitude change

By understanding the beliefs that underlie consumers' evaluation of a brand and
the importance of various attributes or consequences, the marketer is better able
to develop communication strategies to create, change or reinforce brand attitudes.

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 Chapter 5- Consumer behaviour

Ways in which the marketer can influence consumer attitudes are as follows:
111 Increasing or changing the strength or belief rating of a brand on an important
attribute. Marketers identify an attribute that is important and remind consumers
how well their brand performs with regard to this attribute.
111 Changing consumers' perceptions of the importance or value of an attribute. This
involves getting consumers to attach more importance to the attribute when
forming their attitude toward the brand. Marketers using this strategy want to
increase the importance of an attribute their particular brand has.
1!1 Adding a new attribute to the attitude formation process. Marketers often do this

by improving their products or emphasising additional benefits associated with

using the brand.
111 Changing perceptions of belief ratings for a competing brand. Marketers compare
their brands with those of their competitors on specific product attributes.

5.2.5 Personality

DEFINITION: Personality

The personality of a person is the result of individual traits. Personality distinguishes

one person from another. It also determines how and why a consumer behaves in a
particular way. A person's attitudes, values in life, and the influence exerted by the
people around him or her shape his or her personality. While growing up, a person's
personality is altered or modified by the surrounding people or events or due to
education. 6

You might say that one of your friends is 'fairly aggressive, very opinionated,
competitive, outgoing and witty: What you have described is your friend's
personality.
Personality can be defined as those inner characteristics that both determine
and reflect how a person responds to his or her environment. A person's personality
thus refers to his or her inner characteristics - those specific qualities, attributes,
traits and mannerisms that distinguish one individual from another. These deeply
ingrained characteristics, which we call personality, are likely to influence an
individual's product and store choices, as well as the way the consumer responds to
the marketer's promotional messages.

5.2.5.1. Characteristics of personality

Let us now look at some of the characteristics of personality.

Personality reflects individual differences

The characteristics that make up a person's personality are a unique combination of
factors; hence no two individuals are exactly alike. Many people can be described
 Essentials of Marketing

as very sociable, while others can be described as 'low' unsociable. Personality is a

useful concept as it enables us to categorise people into different groups on the basis
of a single trait or a few traits.

Personality is consistent and enduring

An individual's personality usually remains constant. 1hus, it is unreasonable
for marketers to attempt to change someone's personality to conform to certain
products. At best, they learn which personality characteristics influence particular
consumer responses, and attempt to appeal to the relevant personality traits inherent
in their target group of consumers. However, an individual's personality may change
because of a major event, such as the birth of a child, the death of a loved one or as a
result of a major career promotion.

5.2.5.2 The value of personality to marketers

Knowledge of personality and product image is indispensable for the marketer
because consumers tend to buy products that will reflect, enhance or even defend
their personalities. In this way a certain symbolic meaning is attached to some
products, resulting in what is referred to as the product image. Knowledge of
personality is also valuable in designing appropriate advertisements that will appeal
to groups of similar personalities.
In creating advertising appeal, marketers should note that highly dogmatic
consumers (ie those who approach the unfamiliar defensively and with considerable
discomfort and uncertainty) may be more willing to accept new products if they are
presented by an admired celebrity or a recognised expert. In contrast, less dogmatic
consumers (who will readily consider unfamiliar or opposing beliefs) seem to be
more receptive to messages that stress factual differences and product benefits;
hence it would be wise to emphasise in the advertisement the reasons why a new
product is technically as good as competing products.

5.2.6 Lifestyle

Lifestyle refers to the way in which individuals or families live.

Marketers use lifestyle to discover how people spend their time, what they find
interesting and important and how they view themselves and the world around them.
Lifestyle is related to one's values. Those who especially value fun such as skiing,
dancing and camping are often big alcohol consumers. A person's set of values plays
a very important role in consumption activities - many products are purchased
because people believe these products will help them to attain a value-related goal.

:1.24
 Chapter 5- Consumer behaviour

Red Bull
For starters, the carbonated energy drink is only one tiny little planet in the mass
universe of Red Bull. The brand goes way beyond the beverage and is overseen by a
greater entity, known as the Red Bull Media House (RBMH). Yes,they've established
their very own media hub that encompasses a video production company, a record
label, and an extreme sports magazine, The Red Bulletin. By tapping into the
interests of adrenaline-seekers and extreme-sport enthusiasts, RBMH gives the
people exactly what they're looking for- and more. Whether you love watching
a man jump from space or want to follow two surfers on their quest to ride the
world's most insanewaves, Red Bull truly seeks to 'give wings to people and ideas'
and be the fuel that gets people to do the things they love, or be content watching
others do it/

Our desired lifestyle influences our needs and desires and thus our purchasing and
using behaviour. The marketer can use lifestyle groups to depict particular lifestyles,
which the brand is attempting to target.
In the next section we will look at the group factors that influence consumer
behaviour.

5·3 Group factors influencing consumer behaviour

Most individuals tend to be involved with other people on a daily basis, whether they
are in the family, social class, cultural or reference groups or opinion leaders. For
example, a substantial amount of learning involves interaction with, or imitation of,
other individuals such as family and peers. These groups exert a great influence on
the individual and are reflected in Figure 5.1 on page 111. We will now look at each
of these groups.

5·3·1 Family
The family has a major influence on the consumer behaviour of its members. There
are two levels of family. The first is the nuclear family, comprising a husband, wife
and children. The second is the extended family, which includes grandparents or
other relatives who may or may not live under the same roof as the nuclear family.
A family whose members have lived in close contact with one another for years,
gradually develop fixed behaviour and consumption patterns. Most children acquire
their consumer behaviour norms through observation of their parents, who function
as role models.
Essentials of Marketing
--------------- ----------------------------------

5·3·1..1. Family roles

We distinguish five distinct roles in the family decision-making process. A look at
these roles provides further insight into how family members interact in their various
consumption-related roles:
• The initiator. This is the first person to suggest that a specific product should be
bought. ThiSis also the one who collects information about the product or service.
Teenagers often act as initiators.
• The influencer. This person influences the final decision either explicitly or
implicitly in the sense that his or her suggestions and wishes are reflected in the
family's decision.
• __Tfz.JLt;}&dsioit-:lll.fi.kery This person takes the actual decision and makes the final
choice between alternatives.
1!!1 The purchaser. This is the person who buys the products. Some purchasers are

·-f"Orc~dtocarry out the instructions of the decision-maker, whereas others have

the authority to choose for family members and thus assert their preferences.
• __If:!e
-........user.
.....,._ This is the person who actually uses the product.
Marketers are inclined to direct their marketing messages exclusively at women as
though they alone are responsible for the purchasing decision and dominate family
decision-making. However, there are indications that men play an increasingly
important role in family decision-making and that they even act as purchasers of
items previously regarded as exclusively in the female domain. Modern children are
very knowledgeable and it is generally accepted that they, too, have a role to play in
family decision-maldng.

Children under ~2 are most influential in purchases of breakfast cereals, snack

foods, sweets, soft drinks, games and toys, clothing, music and toothpaste.

5·3·1..2 Family types

Families are usually classified in terms of the dominant member. The following
family types are distinguished:
• In husband-dominant families, the husband decides what should be bought.
• In wife-dominant families, the wife is the dominant decision-maker.
• In syncratic families, decisions are usually made jointly by husband and wife.
With the changing role of women, this family type has become more prominent.
• In child-dominant families, the children have a strong influence on family
decisions, especially as initiators.
 Chapter 5- Consumer behaviour

5.3.2 Cultural group

Culture refers to the pattern of behaviour common to members of a societyi such

behaviour is learned and handed down from one generation to the next.

Cultural values, norms and symbols are created by people and are transmitted
frol%1 one generation to another to ensure survival and facilitate adaptation to the
circumstances of life. A consumer's culture further determines his or her overall
priorities in respect of different activities and products. Thus, a product that provides
benefits consistent with those desired by members of a culture has a much better
chance of being accepted in that market.
The bounds that culture sets for behaviour are called norms. Norms are simply
rules that specify or prohibit certain types of behaviour in certain situations and are
based on cultural values. Violation of cultural norms results in sanctions or penalties,
ranging from mild social disapproval to banishment from the group.

Culture provides standards and 'rules' about:

• when to eat, for example, 'not between meals'
• where to eat, for example, in a busy restaurant because the food is likely to be
good
11 what is appropriate to eat for breakfast, for example, juice and cereal
• what is appropriate to eat for lunch, for example, a sandwich
• what to serve guests at a dinner party, for example, a formal sit-down meal.

South African society is fragmented into many cultural groups and subgroups.
Therefore, marketing management should be careful not to use symbols in
advertisements that can be interpreted incorrectly or differently, and not to portray
unacceptable behaviour patterns. Effective communication can take place only if the
theme of the advertising message reflects the cultural norms, values and symbols of
the cultural group at which it is directed. 8 See example below.

EXAMPLE: Cultural differencesc

Some black and white cultural groups interpret advertisements differently. For
example, flowers have special significance to white people, but in many black
cultures, gifts in the form of flowers are frowned upon. ......

127
Essentials of Marketing

The well-known Five Roses adv~rtisement, which said 'And the fiftnros~ isfor you';
was not successful when used in media aimed at black consumers,
Cross-cultural mistakes are also made in other countries. For example, in Germany,
Pepsi,s advertisement'Come alive with Pepsi, was interpreted as 'Come alive out of
the grave with Pepsi,.

5·3·3 Social class

Social classes are groups who enjoy more or less the same prestige and status in
society.

A social class is a group of people in a country who are considered basically equal in
status or community esteem, who socialise on a regular basis formally and informally
and who share the same behaviour patterns. The behaviour of a social class is a
function of, for example, occupation, income and education. In South Africa, the
gap in income between the richest and poorest people, as measured by the Gini
coefficient (a recognised method of measuring inequality), is one of the largest in
the world.
A social class structure usually consists ofthe upper class, middle class and lower
class. During the past 10 years, more previously disadvantaged South Africans have
moved into the middle and upper social classes.
Social class strongly influences consumer lifestyles and is, in general, a good
indicator of the type of product that the consumer will be interested in. Furthermore,
consumers buy products to demonstrate their membership of a particular social
class and to advance their social standing in society. Marketers know that most
consumers aspire to membership of a higher social class. Their marketing messages
therefore imply that, by buying their product, the consumer may attain membership
of a higher class.
Some of the marketing implications of social class are the following behaviours:.
\
• Media usage. Educated individuals spend more time reading magazines and
books, listening to the radio and going to the cinema, and they spend less time
watching television than the less educated.
• Collection of information. The lower social groups appear to collect less
information than other groups. Those on the bottom of the rung have limited
access to information sources and limited training in processing purchase-related
information. They are also more likely to look for specials and use coupons.
• Store choice. Lower-class people tend to do their shopping downtown, especially
at discount stores.

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 Chapter 5- Consumer behaviour

Ill Leisure pursuits. High-status occupational groups prefer more active leisure
pursuits. Product usage is also often a symbol of one's social class, such as
belonging to a prestige country club or driving a certain make of car.

5·3·4 Reference groups

A reference group involves one or more people that a consume ruses as a basis
for comparison or 'point of reference' in forming responses and performing·
behaviours.

In all reference groups there are distinctive norms of behaviour and members are
expected to conform to these norms in order to avoid sanctions being applied against
them. We distinguish between the following types of reference groups that influence
consumer behaviour patterns:
JU Membership groups are groups to which the person has obtained membership,

for example, friends or a soc~al club.

Ill {J_utomatic groups are groups to which a person belongs as a result of age, gender

or occupation.
Ill Negative groups are groups with which a person does not wish to be associated.

A person intentionally avoids the norms of the negative group, for example,
drinkers.
• Associative groups are those groups to which a person aspires to belong, for
example, a group with higher status or level of acceptance among peers or a
celebrity. Typical members of associative reference groups are often used as
models in advertisements in order to show potential consumers the type of
person who buys the product and the way in which the product can be used. In
this way, consumers are persuaded to follow the example set by these models.

5·3·5 Opinion leaders

A reference group need not necessarily be a group of persons but can also be a
reference person: an individual to whom others will look when forming opinions
and taking consumer decisions. The reference person can therefore be regarded as
an opinion leader. The opinion leader need not be well known or enjoy high status,
but can be an ordinary person or even an imaginary person. Think of the well-known
advertisement in which the homemaker sings the praises of Ariel washing powder
in the store.
The group factors discussed above, as well as the individual factors influence the
consumer's decisions about what products to buy or which stores to patronise. We
shall now look at the decision-making process.
Essentials of Marketing

5·4 Consumer decision-making process

Consumers display distinctive behaviour patterns in the decision-making process.
Let us consider the different types of decisions.

5·4·1 Types of decision-making

There are three types of decision-making:
1. Real decision-making. This is a complex process and involves extensive problem-
solving, such as the decision to buy a new house or car.
2. Impulse decision-making. This refers to unplanned action on the spur of the
moment as opposed to conscious planning during real decision-maldng.
For example, a person waits in a queue at the check-out and decides to buy a
chocolate bar displayed at the till.
3. Habitual decision-making. This occurs when a consumer is brand loyal. For
example, Mary usually buys a large tin of Ricoffy coffee automatically and does
not even consider the coffee of competitors.
Let us now look at the phases involved in real decision-making.

5.4.2 Phases in consumer decision-making 9

There are five phases in consumer decision-maldng:
1. Need recognition. In this phase, the consumer becomes aware of a need. For
-exaffiPiZ~alises his car is getting too small for his growing family, so he
recognises a need for a bigger car.
2. ~for informati?._'!::_ In this phase, the consumer searches for information
about the product. For example, Johan may first use internal sources such as
memory and experience, then external sources such as the advice of family
members and friends or marketing sources such as Car Magazine.
3. Evaluation. Evaluation entails the appraisal by the consumer of the attributes and
benefits of the various alternatives. Johan may consider buying a Toyota Corolla,
Volkswagen Jetta or a Volvo. He now evaluates these three alternatives in terms of
certain criteria such as cost, performance, colour and quality.

----·-
4. Purchase decision. Once the best alternative has been identified, the consumer
-makes a decision. Johan also has to decide at which dealership he will buy the car
and whether he needs finance to pay for the car.
5. EQ§!::E.u:~!.f.bJJ.S.e.£.V£lluatiQ.:tJ.• In this phase, the consumer re-evaluates his decision.
If the product fulfils his expectations, this may lead to brand loyalty. If he is
dissatisfied, he may lodge a complaint or begin to wonder whether he has made
the right decision, even if there is nothing wrong with the product. This condition
is known as cognitive dissonance. The post-purchase phase can be regarded as the
beginning of a new decision-making process. Will Johan, for example, consider
repurchasing the same brand of car when the need arises?
In the next section, the adoption of new products by consumers is discussed.
 Chapter 5- Consumer behaviour

5·4·3 Adoption of new products

The adoption process focuses on the stages through which an individual consumer
passes in arriving at a decision to try or not to try, to continue using or to discontinue
using a new product. 10
When a product is new and unknown and there is a certain degree of risk attached
to its use, it is adopted only gradually as part of a learning process. The microwave,
as a new product, was adopted relatively slowly. The perceived risks attending the
adoption of a new product include financial risk (ie the money spent on the product
will be wasted if the product is unsatisfactory); functional risk (ie there is a danger
that the product may not perform as desired); social risk (ie consumers may feel that
others may look down on them ifthey purchase the product) and physical risk (ie the
potential for personal harm or health hazard).
Consumers usually move through the following five stages in arriving at a decision to
purchase or reject a new product:
1. Awareness. During this first stage, consumers are exposed to the product
innovation. They lmow about the new product but lack sufficient awareness about it.
2. Interest. The consumer becomes interested in the product and seeks more
information about it.
3. Evaluation. Based on the information they obtain, consumers draw conclusions
about the innovation or determine whether further information is necessary.
This stage represents a ldnd of 'mental trial' of the new product. If the evaluation
is satisfactory, the consumer will actually try the product; if the mental trial is
unsatisfactory, the product will be rejected.
4. Trial. At this stage, consumers use the product on a limited basis. Their experience
with the product provides them with the critical information that they need to
either adopt or reject the product.
5. Adoption or rejection. The adoption of some products may have minimal
consequences, while the adoption of other innovations may lead to major
behavioural and lifestyle changes, such as the major impact on society of products
such as the car and television.
The marketer of a new product must, therefore, do everything in his or her power to
allay the fears of the consumer. Sufficient information must be provided in marketing
messages to convince consumers that the product will satisfy their needs. Let us look
at the characteristics of people who adopt an innovation at different points in time:
• Innovators are venturesome, very eager to try new ideas, tend to be younger and
better educated and make extensive use of the media.
• Early adopters tend to be successful, well-educated and willing to take a calculated
risk on an innovation, but are concerned with failure.
• Early majority are consumers who are cautious and will adopt after the innovation
has proven successful with others.
 Essentials of Marketing

• Late majority are sceptical about innovations, tend to be older and have less
social status, and often adopt more in response to social pressure.
• Laggards are more traditional and are the last people to adopt an innovation, have
limited social interaction and are oriented towards the past, being suspicious of
anything new.
Marketers often attempt to identify the innovators who are more likely to adopt a
new product, hoping that the product will spread m6re easily in the market.

Packaging influericescoilsumer.behaviour

Some time ago, Werda products introduced a variety of salads to the market,
including a three-bean salad, curried beans, curried carrots and sweet-and-sour
beetroot. The difference with these salads was that they were packaged in boxes.
The salads do not require refrigeration until they are opened, and have a shelf life
of three months.
When Werda products were first introduced, the expectation was that customer
acceptance of this revolutionary new product would be immediate and high. The
main draw-card was thought to be the fact that the box could be kept for three
months, and would be especially useful in case of emergencies.
However, the actual product sales were extremely low. Somehow, customers could
not accept a fresh salad in a dry-goods box.
Questions:
1. Explain and illustrate how the principles of perception influenced the acceptance
of the salads.
2. How can Werda products attempt to change consumer attitudes to be rnore
positive towards their salads?
3· How should Werda products take into account the adoption of new products
and the different categories of adoption?

Summary
This chapter examined the individual and group factors influencing buying
behaviour. We also looked at different types of decisions, and the consumer decision-
making process. We further briefly discussed the adoption of new products.

References
l. Solomon, MR, Russell-Bennett, R & Previte, J, 2013. Consumer behaviour: Buying,
having, being. 3rd ed. Frenchs Forest, NSW: Pearson Australia, p 3.
2. Kurtz, DL. 2008. Principles of contemporary marketing. International student edition.
Mason, OH: Thompson South Western, p 158.

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 Chapter 5- Consumer behaviour
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3. Ibid.
4. Customer perception. nd. Available from: http:/ /www.mbaskool.com/business-concepts/
marketing-and -strategy-terms/1 0818-customer-perception.html (Accessed 13 May 2016).
5. Kurtz, op cit, p 163.
6. Consumer behaviour: Overview. nd. Available from: http:/ /www.icmrindia.org/
courseware/Consumer%20Behavior/Consumer%20Behavior.htm (Accessed 13 May
2016).
7. 3 awesome examples of lifestyle content marketing. 2013. Available from: http:/ I
www.scribewise.com/blog/bid/269588/3-Awesome-Examples-of-Lifestyle-Content-
Marketing (Accessed 13 May 2016).
8. Parumasur, SB & Roberts-Lombard, M. 2013. Customer behaviour: A South African
perspective. 2nd ed. Cape Town: Juta, p 62.
9. Cant, MC, Strydom, JW, Jooste, CJ & duPlessis, PJ. 2006. Marketing management. 5th ed.
Cape Town: Juta, pp 65-73.
10. Schiffman, LG, Bednall, D, Watson, J & Kanuk, LL. 1997. Consumer behaviour. Sydney:
Prentice Hall, p 513.

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 Chapter 6
' - __-,

Market segmentation,
targeting and posifioning

Learning objectives
After you have studied this chapter1 you should be able to:
• understand and explain the role of market segmentation
• discuss the advantages and disadvantages of segmentation
• practically apply the concept of segmentation in any industry
• explain the bases of segmentation of consumer markets
• explain the bases of segmentation of business markets
• understand why some companies fail at segmentation
• identify and discuss the strategies for target marketing
• understand the concept of positioning
• identify positioning bases
• identify common positioning errors.

6.1 Introduction
The term 'market' means different things to different people. Every day, we are
confronted with different types of markets, such as supermarkets, labour markets
and even stock markets, and all these markets share similar characteristics. They
consist of people or organisations (consumer or business markets), who have needs
and wants, who have the means to purchase the products that they seek to fulfil their
needs and who are willing to exchange their resources to acquire these products. 1
However, these markets are not all the same - they do not have the same needs.
Therefore, the process of market segmentation involves categorising customers into
groups and identifying the characteristics of each of these groups. Because companies
lmow that consumers have different needs and wants, they can design product features
and benefits that are attractive to particular market segments or groups of customers and
develop marketing material that is likely to resonate with them. 2

6.2 Segmentation, targeting and positioning defined

In order to survive in the long term, it is imperative that a company meets the needs
of the target market it has selected to serve. It is not good enough to keep repeating
 Chapter 6- Market segmentation, targeting and positioning

the same things all the time, because needs change and companies must adapt to
this. It is, therefore, essential that marketers constantly monitor the segments they
are serving for any changes or new demands that may arise. If they do not, their
competitors will. Although the satisfaction of customer needs is not a goal in itself,
it enables the enterprise to achieve its own goals. Therefore, the greater the need -
the greater the satisfaction customers can derive from an enterprise's products, the
easier it becomes for the enterprise to achieve its own goals.
To achieve maximum customer satisfaction, marketers divide the heterogeneous
market into fairly homogeneous subsets of customers. This process is referred to as
market segmentation. Each segment of the market, it is assumed, will have similar
needs, and will respond in a similar way to the market offering and strategy. The
market for clothing, for example, can be subdivided into the following sub-segments:
babies, girls, boys, teenagers, maternity, petite, women's, men's and outdoor clothes.
Each of these segments exhibits different characteristics and needs with regard to
occasion, usage, fashion and so forth. It follows that no single garment can cater for
all the unique needs of all these market segments.
The organisation must decide which market segments or market segments' needs
it can best satisfy. The business express train service (Gautrain) that runs between
Pretoria and Johannesburg has, for example, decided to cater primarily for the needs
of the business commuter, and has therefore developed its product offering around
this segment. The process of deciding which segment(s) to pursue is referred to as
market targeting. Once the target market segment has been selected, the company
must decide how to compete effectively in it.
A decision has to be made concerning the competitive advantage to be achieved;
this is known as positioning. A company can decide to compete on the basis of a
lower price (when compared to competitors), or on the basis of ambience and value,
which would be reflected in the quality of merchandise, store layout, store design,
prices charged and the availability of services required by customers. Alternatively,
it may decide to compete on the basis of a superior range of clothing items and
location. This chapter focuses on these three concepts.

6.3 The advantages of market segmentation

Segmenting markets requires a lot of thought and analysis and it is not a once-off
project, as companies need to continuously monitor any changes that take place
within the market segments on which they are focusing. By not monitoring changes
or not adjusting to them, the company can provide openings for new entrants into
the market, who can gain a competitive advantage as they may adapt better to the
changing needs of these segments. 3
The advantages that market segmentation offers to marketers include the following:
• Focusing the company. Segmentation is an effective method to ensure that an
organisation focuses on its market segments; having more focus means better

135
Essentials of Marketing

returns on its efforts. 4 In a segmented market, the organisation can better understand
and appreciate the differences in consumer needs and respond accordingly.
• Designing responsive products to meet the needs of the marketplace. By
understanding the needs of the market, a company can design better products
that can fulfil the needs of the customers more effectively.
• Maintaining effective relationship with customers. 5 Companies need to constantly
monitor the marketplace for changes that may be seen as presenting opportunities
or threats. It is through this that companies maintain relationships with customers
as they show them that their needs are acknowledged and perceived as important.
1!1 Retaining existing customers and attracting new ones. Through market seg-
6

mentation, companies can ensure that existing customers' needs are met and
new customers are attracted by means of constant monitoring and adaptation of
the offering to meet the needs of the broader market. It also makes it possible for
companies to identify formerly unexploited market segments.
• Reducing cost/expenses on various marketing activities and increasing market
share, resulting in higher profits. 7 The use of segmentation helps guide the effective
allocation of resources in an organisation. This can reduce the duplication of
costs, which can result in higher profits. The aim is to concentrate expenditure on
markets that will provide the highest return and therefore be the most profitable.
It also ensures that the marketing effort is not wasted on products and services
that cannot be offered effectively or competitively by the organisation. 8
• Better allocation offunds. By segmenting the market, the company may be able
to allocate more funds to a large or growing market segment, while a declining or
shrinking market may be scaled down or even abandoned.

6.4 The disadvantages of market segmentation

Market segmentation has the following disadvantages that must be considered by
the marketer:
• The development and marketing of separate models and market offerings is very
expensive. It is much cheaper to develop one product for one segment than to
develop multiple products for multiple segments and multiple strategies.
• Only limited market coverage is achieved. This is because marketing strategies are
directed at specific market segments only.
• Excessive differentiation of the basic product may eventually lead to a proliferation
of models and variations and finally cannibalisation. Cannibalisation occurs
when one product takes away market share from another developed by the same
enterprise.

6.5 Market segmentation and mass marketing

Mass marketing is when a company regards all buyers or consumers as the same
and offers the same products to all consumers. This method offers the advantage of
 Chapter 6- Market segmentation 1 targeting and positioning

economies of scale and reducing cost1 but it can also alienate customers who want
to be treated as individuals. 9 For this reason, it is difficult for marketers in today's
environment to try to mass customise their offerings.
Market segmentation allows companies to move away from mass marketing
and focus on the needs of the market. To take it even further, some companies are
experimenting with total customisation1 where the customer is seen as a market on
his or her own.

Nike has really done something truly unique to the customisation process. It has
not just allowed consumers to design their shoei it has given Nike fans a place to
express themselves and in doing so1 created a distinctive customisation experience.
By allowing customers to interact with the product and make it their own 1 Nike is
creating a relationship between not only the product and the consumer1 but the
brand and the consumer.

6.6 Using RFM segmentation to segment a market

One of the earliest segmentation techniques, called RFM (Recency, Frequency
and Monetary value) analysis1 has been in existence for many years and is based
on three simple customer attributes: recency of purchase, frequency of purchase
and monetary value of purchase. 11 This concept is based on the fact that a customer
who has recently purchased something from a certain company, who shops on
a regular basis and spends a lot of money1 is more likely to respond to marketing
communication campaigns than someone who has not shopped with the company
for a long time 1 who shops infrequently and spends a limited amount of money. 12
Table 6.1 provides the parameters within which RFM analysis can be performed.
Table 6.:1 Parameters within which RFM analysis can be performed
~ c

RFM CATEGORY APPLICABLE E-MAIL, CftM ORWEB-ANALYTICS METRIC

- ~-. ~·-~ - ~--· ..~ ~ '.- ;· ' - ~.~ ~~ ~--· . - . ~. ~ .:- ~ . ;, .

Recency • When the last purchase was made

• When the last e-mail was clicked on

• When the last lead was converted into a customer

Frequency • How many times every receiver purchased within a specific time
frame

• How many times every receiver clicked within a specific time

frame

• How many times leads converted into actual customers within a

specific time frame Ill. .

~37
 Essentials of Marketing

Monetary • How much was spent within a specific time frame

• The approximate value based on issues such as the cost of each
lead and the profits from each lead generated within a specific
time frame
• The collective engagement score formulated from various
metrics within a specific time frame
Source: Lyris, HQ. 2012. Target your best customers with RFM segmentation. Available from:
http:/ /www.eightleaves.com/2011/01/using-rfm-to-identify-your-best-customers (Accessed
21 June 2012).

Information regarding the past purchasing behaviour of consumers is particularly

useful in segmenting current customers and predicting which ones are most likely to
respond to a new offer. 13 From tracldng the responses to each offer and the behaviour
of each customer, direct-response marketers have leiuned that a customer who has
bought most recently, who buys frequently and who spent an above-average amount
over a designated period of time is most likely to respond to a new offer. 14
Recency of purchase is a measure of how much time has passed since the customer
has purchased from the company. It is assumed, for example, that customers who
have purchased from the company in the last 45 days are more likely to buy again
than those who have purchased months or years before. 15
Frequency is a measure of how often within a given period a customer has
purchased a brand or purchased from a particular organisation. 16 Frequency is
somewhat less valuable as an indicator than recency because new customers will
obviously not have had time to make repeated purchases. 17
Monetary value is a measure of the amount of money a customer has spent with
the company over a given period of time. 18 Direct marketers use these measures in
combination, called RFM, to analyse lists of past and potential customers. 19

6.7 Prerequisites for market segmentation

The main aims of segmentation are to enhance customer satisfaction and the
profitability of shareholders. To subdivide the market for small delivery vehicles into
Western Cape and KwaZulu-Natal farmers would make little marketing or business
sense. In this case, geographic location makes no difference, since the requirements
of the farmers remains the same regardless oflocation. On the other hand, geographic
location would be very effective as a means of segmenting the market for insecticides,
since farmers in the Western Cape have to deal with different insects than farmers in
KwaZulu-Natal. For market segmentation to be effective, it must meet the following
criteria:
• It must be measurable. If it is not possible to measure the size, purchasing power,
potential profit and profile of the segment, it will be extremely difficult to compare
such a segment with others, or to assess its attractiveness properly.
 Chapter 6- Market segmentation, targeting and positioning

11 It must be large enough. Pursuing a market segment that is too small is not
profitable. A segment must be the largest homogeneous group of people worth
exploiting with a tailored market offering and marketing strategy. Although South
Africa boasts a large variety of cultures, some may be so small that they do not
warrant special attention by marketers. The market must therefore be sustainable.
111 It must be accessible. Marketers must be able to reach the market segment with
their market offering and strategy. For example, it is difficult to reach rural people
who do not have access to newspapers or television. This segment is largely
inaccessible to the marketer.
• It must be actionable. It must be possible to develop separate market offerings for
different market segments. Small enterprises are often unable to develop different
market offerings or marketing strategies, even if they realise that there are distinct
differences between various segments.
11 It must be differentiable. Different market segments must exhibit heterogeneous
needs. In other words, people in different segments must have different needs,
demands and desires. People in the same segment, on the other hand, must
exhibit similar characteristics and needs. The marketer should also be able to
distinguish the segments from one another without too much difficulty.
Once marketing management is satisfied that a specific segment conforms to these
conditions, it can be considered as a possible target market.

6.8 Bases for segmenting consumer markets

The marketing manager can utilise different variables to segment a market. These
variables can generally be classified according to geographic, demographic,
psychographic and behaviouristic bases. Table 6.2 provides a detailed analysis
of these classification bases. The first column shows the bases for segmenting
consumer markets, while the different variables that can be used for each are shown
in the second column. In the following sections we offer a brief explanation of each
approach.
Table 6.2 Bases for segmenting consumer markets

..''··· ,c•:'c.'·'::• .:
. ···-·-· ..• ·.-
' -;_:_ ~ ·. • . <. : .. ·
I <:s~se.~ : ·. . POSSIBL~VARIA:SL~S ..
~"·

-::_ .:.<· .· .... _ .:>-·.;:.:••:-

Demographic
Age :15-18 years, 19-24 years, 25-34 years, etc.
Race White, coloured, black, Indian
Sexual category Male, female
Religious conviction Catholic, Muslim, Protestant, Hindu, Jewish, Christian
Family unit size Unmarried, unmarried and living together, mother and father
with 1 or more children, etc. , ...
139
 Essentials of Marketing

•·8~~~s'i
···;•.~~····i..
, ·.,,, ....<,(}''~.· •o?•••····'····c·,~~~i~~t~s:'~·e;·'';'•;F.'·''··x.:~/c{rt·r;\;••···"·-·:~~~·}~:._~:x·
I"'OS~IBlE ·.·-•· -:· ~ ·' ) · ; .·.····-·····..•-. '.> \ . ·.· < .:··

Yearly income Under R2o ooo

R2o oo1-R5o ooo
R5o oo1-R8o ooo
R8o oo1-R11o ooo
R11o oo1-R140 ooo
R140 001-R170 ooo
Over R170 ooo
Education Grade 10, Matric, diploma, certificate, degree, postgraduate
Family life cycle Married with children, single, in a relationship, etc.
Profession Type of work -lecturer, electrician, engineer, teacher, IT
specialist, etc.
Geographic

Weather Summer rainfall, winter rainfall, very hot and humid, very hot
and dry
Region Limpopo, George 1 Bloemfontein, Kimberly/ etc.
Volume Under 10 ooo, 10 ooo-20 ooo, 20 ooo-25 ooo, over 25 ooo
inhabitants
Mass Urban 1 suburban, rural
Behavioural

Allegiance status None 1 medium, strong, complete

Purchase occurrence Regular use 1 special occasion
Readiness stage lgnorant1 aware 1 informed 1 fascinated, eager
User status Non-user, ex-user, potential user1 regular user
Usage rate Serious user, medium user, regular user
Attitude towards Keen 1 encouraging, uninterested 1 pessimistic, aggressive
product
Psychographic

Social class Upper class, middle class, lower class

Standard of living Old-fashioned, moderate
Individuality Outgoing, demanding, spontaneous/ determined
Sources: Adapted from Kotler, P. 1997. Marketing management: Analysis, planning,
implementation and control. Englewood Cliffs, NJ: Prentice Hall; Marx, S & Deld<er, HJ. 1982.
Marketing management: Principles and decisions. Pretoria: Haum.
 Chapter 6- Market segmentation, targeting and positioning

The following three factors are important:

1. A mutual relationship may exist between some of these bases. It is possible, for
example, that there is a strong relationship between income, occupation and
education, on the one hand, and between family size and geographic region
on the other. In the tourism industry, for example, there is a strong relationship
between income, occupation and education, and the likelihood of travel,2°
2. Needs seldom relate to one segment base only. A specific marketing strategy is
unlikely to be directed only at people with an income of Rl5 000 to R20 000 per
year. A better description of a particular market segment often utilises more than
one segment base, for example, unmarried women between 21 and 30 years of
age with an income of more than R60 000 per year and living in the Gauteng area.
3. The market segmentation bases described in Table 6.2 are not complete. In
the tourism industry, for example, marketers also use distance travelled, trip
purpose, buyer needs and benefits sought as segmentation bases. The number of
possible segmentation bases is, to a great extent, determined by the creativity of
the marketing manager.

6.8.:1 Geographic segmentation

In segmenting a market geographically, the marketer divides the total market into
different geographical areas, such as countries or regions. Variations such as the
size of the city or town, or population density, may also be appropriate bases. The
enterprise can then decide to target only one or a limited number of geographical
areas. If customers in different areas exhibit diverse needs, these differences can
be addressed at local level. In a fairly small geographic area such as Johannesburg,
marketers realise there are diverse markets, such as the central, southern, northern,
western and eastern areas ofJohannesburg, which can be treated as separate market
segments with diverse needs. Many smaller entrepreneurs have decided to confine
their marketing and operations to only one or two of these segments.
There are two reasons why people who live in the same area may share similar
characteristics. First, some areas have more expensive properties than others and
so people with similar socio-economic characteristics may cluster together. Second,
they have similar transport and shopping options. It is easy to reach markets in
particular areas by using local newspapers, cinema, outdoor, and selective direct
mail, but mass media is less effective. Table 6.3 provides a few important definitions
of geographic variables.
_________ __. ____
Essentials of Marketing
,

Table 6.3 Definitions of geographic variables

Market density Market density refers to the Because Durban is located

number of possible consumers close to the coastline 1 the
inside a unit of land area. demand for surf boards and
surf-related products will be
higher in Durban than it is in
Johannesburg.
Geodemographic Geodemographic If there was a spate of
segmentation segmentation is a means of burglaries in a particular area,
market segmentation that such as a certain suburb of
groups individuals in smaller Pretoria 1 security companies
neighbourhood units based would identify a market
on their way of living and their segment that has a need for its
different demographics. services (security).
Micromarketing Geodemographic With the rising costs of living
segmentation 1 as explained and the fact that anything
above 1 permits marketers can go wrong at any moment1
to connect by means of healthcare companies use this
micromarketing. This involves method to communicate to the
focusing specific marketing market that it is imperative to
efforts on very undersized have a hospital plan.
geographic markets.
Source: Adapted from Hult, T, Pride, WM & Ferrell, OC. 2012. Marketing. Mason, OH: South-
Western Cengage Learning.

6.8.2 Demographic segmentation

Demographic segmentation is probably the most common base for segmenting consumer
markets. This may be because of the relative ease with which the approach can be
applied, or because consumer needs are often strongly associated with these variables. 21
Traditionally, companies in South Africa, with its diverse population groups
and cultures, used race heavily as a basis for market segmentation. The majority
of research reports or business plans published during the 1970s and 1980s
distinguished between the needs of black, white, coloured and Asian consumers.
Increasingly, however, companies are moving away from this approach, making
more use of other segmentation variables s'uch as income, education, lifestyle, living
standards, and so on.
In 1993, the South African Advertising Research Foundation (SAARF) published
its first Living Standards Measure (LSM) report, explaining how it arrived at eight
LSM categories, using 13 variables such as degree of urbanisation and ownership
of cars and major appliances instead of the outmoded categmy of race. 22 Since
 Chapter 6- Market segmentation, targeting and positioning

then, the SAARF LSM has become the most widely used marketing research tool in
South Africa. The most recent LSM classification divides the population into 10 LSM
groups: 10 (highest) to 1 (lowest). In Table 6.4, we provide a brief description of the
LSM groups. (The internet contains more information on the LSM.)
It should be noted that, even in the 1990s, culture and religion remained powerful
segmentation bases, primarily because the different cultures and religions have vastly
different traditions, beliefs, taboos and preferences, which must be accommodated.
Differences include the languages that people speak, the food they eat, the clothes
they wear, and the sport they watch or participate in, tci mention only a few.
Table 6.4 Description of LSM groups
.
·... _... ·:': ·:_· '::.· . ··:
BRIEF oestkiPTION ~f{~M1-;o
·. :··~
· ' ,~ c • . '·•. .. .
···.··... ·

'
LSM ~: 2,~% OF ADULT POPULATION LSM 2: s,7% OF ADULT POPULATION

Demographics Demographics

Males and females between the ages Females between the ages of ~s-24 and
of ~s-24 and so+. Completed primary so+. Some have completed high school
school and living in small urban or rural and live in rural areas, mostly in a house
traditional hut. Their average household or matchbox house, squatter hut/shack or
income is R~ 363 per month traditional hut. Their average household
income is R~ 929 per month

Media Media

Radio is a major channel of media Radio: commercial, mainly ALS- Ukhozi

communicationi mainly African Language FM, Umhlobo Wenene FM
Services (ALS)- Umhlobo Wenene FM,
Ukhozi FM and community radio

General General

Minimal access to services Communal access to water

Minimal ownership of durables, except Minimal ownership of durables, except
radio sets radio sets and stoves
Mzansi bank account Mzansi bank account
Activities: minimal participation in Activities: minimal participation in
activities, singing activities, singing

LSM 3: 6,s% OF ADULT POPULATION LSM 4: 13,1% OF ADULT POPULATION

Demographics Demographics

Females aged 1S-24 and so+. Schooling Males and females aged ~S-34 and so+.
up to some high school level and live in Schooling up to some high school level.
rural areas, mostly in a house or matchbox They mostly live in a house or matchbox
house, squatter hut/shack or traditional house, squatter hut/shack or traditional
hut. Their average household income is hut. Their average household income is
R2 2S8 per month R3 138 per month Ill . .

~43
 Essentials of Marketing

~CJ~~i.Ef:c '"'
..
···c::·~{· .•·i~:~h'N·~·~1~t'PNX~£;,~·~ii,:r1c··r·.';:t.•;;:'"i;,.'~{···F·.if.JP:;~'~}1';'··"·~~.~f··~~_.··g;~ ~ .·.;·2"'H
:·;., ··•·''·J"'""",''\":. .""~..·:;~J,')\'.;;•~~':C~':':' (''L;•'i;;·•~ci ~(···''•· ''.'·'{'''";;
Media Media

Radio: mainly ALS stations, Ukhozi FM, Radio: commercial mainly ALS, Gagasi,
Umhlobo Wenene FM Motsweding, Ukhozi, Umhlobo Wenene
TV: SABC ~ FM, community radio
TV: SABC~
General General

Electricity, water on plot or communal Electricity, water on plot or communal,

Minimal ownership of durables, except non-flush toilet
radio sets and stoves TV sets, electric hotplates
Mzansi bank account Mzansi bank account
Activities: singing Activities: attend gatherings, go to night
clubs
LSM 5: ~6,9% OF ADULT POPULATION LSM 6: 2~% OF ADULT POPULATION
Demographics Demographics

Males between the ages of ~5-49· Some Males between the ages of 25-49.
have completed high school and live in Completed up to matric and higher. They
small urban or rural areas. Their average live in large urban areas. Their average
household income is R4 165 per month household income is R6 322 per month
Media Media

Radio: commercial mainly ALS stations, Wide range of commercial and community
Lesedi FM, Motsweding FM, Ukhozi FM, radio
community radio TV: SABC ~, 2, 3, e.tv, Top TV, Community
TV: SABC ~, 2, 3, e. tv TV
Daily newspapers All print
Outdoor
General General

Electricity, water, flush toilet outside Electricity, water in home, flush toilet in
Communal TV sets, hi-fi/radio set, stove, home
fridge Ownership of a number of durables plus
Mzansi account cell phone
Activities: take-away in past 4 weeks, Savings and Mzansi accounts
bake for pleasure, go to night clubs, Activities: hire DVDs, go to night clubs,
attend gatherings, buy lottery tickets take-away in past 4 weeks, attend
gatherings, buy lottery tickets Ill . .

:144
 Chapter 6- Market segmentation, targeting and positioning

- - BRIEF.DESCRIPTION-_OFLSM--:i.._:Lo ... <, ~:-

•- _- . • •·· . ·-c---.- • ·c . -.: .•:•
_::_ ;,··_
·":'
-Fi\·-\/~;_r~ ,-,;~c -U c' ;-'~#!sc~;i
·<··-:.--:· -·-· •·>-•>>
..~~~;j~:.-.> •.
>• :·-:-" :'
LSM 7 LOW: 41 9% OF ADULT LSM 7 HIGH: 5,3% OF ADULT
POPULATION POPULATION

Demographics Demographics

Females between the ages of 25-49. Males between the ages of 25-49 years
Completed up to matric and higher. that have completed up to matric and
They live in urban areas. Their average higher. They live in urban areas. Their
household income is R9 320 per month average household income is R~~ 263 per
month

Media Media

Wide range of commercial and community Wide range of commercial and community
radio radio
TV: SABC ~, 2, 3, e.tv, DStv, Top TV, TV: SABC ~, 2,3, e.tv, M-Net, DStv, Top
Community TV TV, Community TV

All print All print

Accessed Internet past 7 days Accessed Internet past 7 days

Cinema and outdoor Cinema and outdoor

General General

Full access to services Full access to services, including cheque

Savings accounts and savings accounts

Increased ownership of durables plus DVD Increased ownership of durables plus DVD
and motor vehicle and motor vehicle

Participation in all activities Participation in all activities

LSM 8 LOW: 4,3% OF ADULT LSM 8 HIGH: 3,9% OF ADULT

POPULATION POPULATION

Demographics Demographics

Females 35+ years that have completed Males 35+ years that have completed up
up to matric and higher. They live in urban to matric and higher. They live in urban
areas. Their average household income is areas. Their average household income is
R~3 2~0 per month R~4 882 per month

Media Media

Wide range of commercial and community Wide range of commercial and community
radio radio
TV: SABC ~, 2, 3, e.tv, M-Net, DStv, Top TV: SABC 2, 3, e.tv, M-Net, DStv, Top TV,
TV, Community TV Community TV Ill. . .

~45
Essentials of Marketing

,,:'Wti~~~~~~~~t7{f~fl~~;~t:~~l1~~~~,~;!1"~Rl .
All print All print
Accessed Internet past 7 days Accessed Internet past 7 days
Cinema and outdoor Cinema and outdoor

General General

Full access to services and bank accounts Full access to services and bank accounts
Full ownership of durables1 incl. PC Full ownership of durables 1 incl. PC
Increased participation in activities Increased participation in activities

LSM 9 LOW: 41 6% OF ADULT LSM 9 HIGH: 41 6% OF ADULT

POPULATION POPULATION

Demographics Demographics

Females 35+. Completed matric and Males aged 35+. Completed matric and
higher. They live in urban areas and their higher; living in urban areas. Their average
average household income is R~7 g88 per household income is R2~ 328 per month
month

Media Media

Wide range of commercial and community Wide range of commercial radio

radio TV: SABC 2 1 31 e.tv1 M-Net1 DStv1 TopTV1
TV: SABC 2 1 31 e.tv1 M-Net1 DStv1 Top TV1 Community TV
Community TV Accessed Internet past 7 days
Accessed Internet past 7 days All print
All print Cinema and outdoor
Cinema and outdoor

General General

Full access to services and bank accounts Full access to services and bank accounts
Full ownership of durables Full ownership of durables
Increased participation in activities 1 Increased participation in activities 1
excluding stokvel meetings excluding stokvel meetings

LSM ~o LOW: 3t3% OF ADULT LSM ~o HIGH: 3t1% OF ADULT

POPULATION POPULATION

Demographics Demographics

Males aged 35+. Completed matric and Males aged 35+. Completed matric
higher; living in urban areas. Their average and higher; living in urban areas.
household income is R26 706 per month Their average household income is
R32 52~ per month
 Chapter 6- Market segmentation, targeting and positioning

Media Media

Wide range of commercial radio Wide range of commercial radio

TV: SABC 3, M-Net, DStv, Top TV, TV: M-Net, DStv, Community TV
Community TV All print
All print Accessed Internet past 7 days
Accessed Internet past 7 days Cinema and outdoor
Cinema and outdoor
General General

Full access to services and bank accounts Full access to services and bank accounts
Full ownership of durables Full ownership of durables
Increased participation in activities, Increased participation in activities,
excluding stokvel meetings excluding stokvel meetings
Source: SAARF. 2012. Living standards measure. Available from: http:/ /www.saarf.co.za/LSM/
lsms.asp (Accessed 27 June 2012).

The following will illustrate how certain demographic variables have been applied
creatively to market segmentation: 23
• Generation. Each generation is profoundly influenced by the times in which
it grows up: the music, movies, politics and defining events of that period.
Demographics call these groups cohorts. Members of a cohort share the same
major cultural, political and economic experiences. They also have similar
outlooks and values.
• Gender. Gender segmentation appears in many non-profit sectors, such as
universities, service and social clubs, prisons and military services. Men and
women tend to have different attitudinal and behavioural orientations based
partly on genetic make-up and partly on socialisation. For example, women
tend to be more community-minded and men tend to be more self-expressive
and goal-directed; women tend to take in more of the data in their immediate
environment; men tend to focus on the part of the environment that helps them
achieve a goal.
• Income. Income segmentation is another longstanding practice. The amount
of income and how it is earned - wage earner, self-employed, new money, old
money, etc. - suggests unique interests and needs for each group on which the
organisation may want to focus their offerings. By doing this, the organisation can
assist persons within each segment.

6.8.3 Psychographic segmentation

Psychographic segmentation involves the segmentation of the market by means
of categories such as social class, lifestyle or personality. To establish the different

~47
Essentials of Marketing

lifestyle categories, information concerning the respondents' attitudes, interests and

opinions (AIO), or values and lifestyles (VALS) is collected and then subjected to
factor analysis to identify separate subgroups.
Locally, the Nielsen Sociomonitor value groups survey is the most authoritative
psychographic profile of its ldnd in South Africa. In order to create the value groups,
respondents answer an extensive battery of psychographic statements. Their
answers are then grouped and scored, giving every respondent a different score and
position on the 'social map; depending on his or her answers. These scores are then
statistically analysed and the value groups - broad groups of consumers with similar
values, attitudes, and motivations (psychographies)- are established. The five value
groups embrace the full spectrum of values among South African adults. They help
marketers to understand what motivates their customers, and hence how best to
appeal to them. The data can also aid marketers in more effective media placement.
Five value groups have been identified from the 1997 all-adult database. These
are as follows:
l. Conformists (19,6% of all adults, or 5 042 million people).
2. Transitionals (20,5% of all adults, or 5 278 million people).
3. Progressives (18,8% of all adults, or 4 833 million people).
4. Non-conformists (17,0% of all adults, or 4 375 million people).
5. Today-ers (24,1% of all adults, or 6 193 million people).
Table 6.5 contains a condensed profile of the five value groups, according to the
1999/2000 Sociomonitor report available from Nielsen.
Table 6.5 Sociomonitor value groups

CONFORMISTS

These individuals conform to value systems such as cultural tradition, religion and the
family hierarchy. Because ofthis, they want to live harmoniously with other cultural
groups and genders in South Africa. They are tolerant and sympathetic of the emotions
of others because of their religious belief systems. They are uncomfortable with social
liberation matters and are more sheltered within group belief systems. Resulting from
their devotion to traditions and the well-known, they are characteristically not at
ease with new product offerings and technology, and most likely require persuading
to change from one brand to another. They are practical in their buying behaviour;
therefore, price and usefulness of products are considered key factors.

Transitionals embody customary principles and standards with some emphasis on

individual accomplishments. The traditional values that encompass their principles
are group based, for example: past orientation, ubuntu, familism, religion and cultural
traditions. These individuals are proud oftheir own accomplishments to a certain extent
and they consider it important that others see what they have accomplished. ,,,.
 Chapter 6- Market segmentation, targeting and positioning
·--------

Regardless oftheir standing and worldly orientation, price awareness and realism are
most influential in their decision-making process. They are very focused on their health
and their outward appearance. Although transitionals are group orientated, they are
not easily accepting of people from other cultural groups or accepting of individual
choices.
PROGRESSIVES
< ••• ·-- .- --·-::: .,-.·

Progressives are modern individuals who need self-growth accompanied by

synchronisation in getting meaning from their group and also giving back to the group.
They are boldly determined to improve themselves in all facets oftheir lifei therefore,
they thrive on taking care of, improving and portraying sophisticationi their health is
important as well as their family environment. They are constantly seeking to attain
new skills to inspire their minds. Excellence is essential and therefore portrayed in
their buying behaviour. They have tendencies to be money-orientated and boastful
about their accomplishments. They are at ease with the latest technologyi however,
uniqueness or sensations are not sought after for exhilaration. Perhaps because of their
search for meaning, they accept being part of a holistic picture and therefore embrace
traditional and religious norms. Nonetheless, not all customs are automatically
followed if they are not applicable to their current situation. These individuals are
empathetic to the feelings of others.
·. NON~CONFORMJStS

Non-conformists reject group-orientated, social and conventional principles and

standards in support of independence. They put up with other individuals despite their
gender or race and maintain their civil right to individual choice. Non-conformists
are easily accepting of new technological offerings. However, they are not money-
orientated and avoid possessing luxurious goods to impress people. The goods they buy
are chosen based on their relevance to their lives and technological improvement. They
do not share the common definition of success. They are confident individuals who do
not go out of their way to improve their outward appearance or alter their surroundings.
They are spontaneous in the manner in which they conduct their lives with a tendency
to be thrill-seeking rather than enjoying 'softer' self-development activities.
TODAY~ERS

Today-ers portray a stern exterior to the world. They purposefully refuse to be part
of anything similar to group standards. They are extrinsic and will purchase based on
brand and price. They are inclined to live their lives seeking action/thrill and thrive on
adrenaline. They use alcohol, drugs and sex for thrills and as a distraction. There is a
slight recognition or leniency towards the rights to individual sexual choice or gender
equality. As a result of their tough exterior, these individuals have little to look forward
to and have very little self-confidence as individuals, hence the need for reinforcement
from their peers. They take little interest in improving themselves or any area of their
lives. This is possibly due to the few opportunities that have come their way resulting
in feelings offailure. This means that they are commonly out of touch with the most
recent technological advancements and are inclined to focus on the past rather than
the future.
Source: Adapted from Nielsen Sociomonitor 1997, 1999.

~49
Essentials of Marketing

6.8.4 Behaviouristic segmentation

Companies can divide a market according to some feature of consumer behaviour
toward a product, commonly involving some aspects of product use. 24 Current trends
suggest that customer preferences tend to change rapidly, and that most businesses
are becoming more artdmore customer-oriented. Hence, applying the behaviouristic
segmentation approach is very much applicable to this industry change. 25 1his form
of segmentation may take the form of the following.

6.8.t,..:J. Purchase occasions

Some buyers may use a product very regularly, while others may use it only on
special occasions. Orange juice and champagne are two examples of products that
fall into this category. Orange juice is usually drunk mainly with breakfast, while
champagne is drunk mostly on special occasions such as graduation, engagements
and weddings. Consumption of these products can be increased by promoting the
use of them at other occasions, such as lunches and dinners in the case of orange
juice, or Valentine's Day in the case of champagne.

6.8.4.2 Benefits sought

Some market segments may be very specific in what benefits they seek when buying
a specific product. Some may seek economy in a motor vehicle, while others may
prefer speed or a good maintenance plan. When consumers are very specific with
regard to the benefits they seek, marketers can respond with products that address
these needs. In so doing, they satisfy their customers' needs.

6.8.4.3 User status

Consumers can be segmented into groups consisting of non-users, ex-users, potential
users or regular users. A balanced approach would require that an enterprise focus
on regular as well as potential users. While the regular users guarantee survival in the
short to medium term, potential users who can be enticed to become users represent
future growth.

6.8.t,..t,. Usage rate

Marketers can make provision for different market segments based on how frequently
buyers buy their products. Heavy users should receive special attention by marketers,
since they may represent the bulk of sales revenue. It is therefore common to see
hotels, casinos and airlines develop special clubs or frequent-flier programmes to
appeal to this important segment ofthe market.

6.8.t,..s Loyalty status

Consumers vary in the degree of loyalty they have towards the organisation or its
brand names. On the one extreme, one finds the switchers, or those consumers who
show no loyalty toward any brand. They can be attracted through frequent sales, but
 Chapter 6- Market segmentation, targeting and positioning

it may sometimes not be worthwhile attracting them. On the other hand, there are
very loyal buyers. Hard-core loyals would insist on a particular brand and would go
to great lengths to acquire it. Ideally, they should be retained, and where possible
they should be encouraged to become spokespeople for the organisation's products
and services, as suggested by the relationship marketing philosophy.
Typically, buyers are divided into the following four categories: 26
1. Platinum: consumers who always buy the brand
2. Gold: consumers who will buy the brand most of the time but occasionally choose
another
3. Iron: consumers who are indifferent to all brands in the category
4. Lead: consumers who have never demonstrated loyalty to the brand.
Marketers should concentrate their marketing efforts on promoting customers from
iron to gold and gold to platinum, and ensuring their platinum customers never
flee. Those who are in the lead category should be ignored because they will never
demonstrate loyalty to the brand, irrespective of the marketing mix.

6.8.4.6 Buyer readiness stage

Different marketing approaches have to be followed, depending on the consumer's
readiness to buy. Potential consumers who are unaware of the product must first be
made aware of it, while those who intend buying the product must be persuaded to
do so. When cell phones were introduced to the South African market, most people
were either unaware of the product, or aware but not informed. Initially, awareness
had to be established, and as it increased, more aggressive strategies were followed
in the marketing of cell phones.

6.8.4.7 Attitude towards the product

By segmenting consumers according to their attitude towards the product, an
enterprise can increase its marketing productivity. Market segments that are negative
or hostile towards a product can be avoided, saving valuable time and money.
Attempts can be made to persuade those who are indifferent, while those who are
enthusiastic or positive can merely be encouraged to support the product in future.
Kotler and Keller (2006) quote the political campaigner as an example in this regard.
Hostile and negative voters are avoided, while the enthusiastic and positive ones are
merely reminded to vote on election day. More time is spent with indifferent voters
in order to persuade them to support a specific party. 27

6.9 Bases for segmenting business markets 28

As is the case with consumer markets, business markets consist of businesses that
have similar needs and wants. Consequently, these markets are frequently segmented
using a number of variables. Marketers segment business markets according to
geographic location, type of organisation, customer size and product use.
Essentials of Marketing

6.g.1. Geographic location

Demand for business products can and will vary depending on geographic location.
It is common practice that industries are concentrated in specific geographic areas,
which makes it possible for companies to make use of geographic segmentation in
their market approach.

6.g.2 Type of organisation

Business markets can be segmented according to the type of organisation that is
found within that market. Different types of organisations often require different
product features, distribution systems, price structures and selling strategies to be
followed, which may result in a company concentrating either on a single segment
with one marketing mix (a concentration targeting strategy) or focusing on several
groups with multiple mixes (a differentiated targeting strategy).

6.9.3 Customer size

The size of an organisation will have a direct influence on the process it follows
in its purchases, as well as the volumes that are purchased. This implies that size
can be used as a variable to segment this market. Because the needs of large and
small buyers tend to be quite distinct, marketers frequently use different marketing
practices to reach various groups.

6.9.4 Product usage

Certain products, especially basic raw materials such as steel, petroleum, plastic and
lumber are used in numerous ways. How a company uses products affects the types
and amounts of products purchased, as well as the purchasing method.

6.1.0 Why segmentation fails 2 9

There are many reasons why segmentation fails. Some of these are discussed below.

6.10.:1 Business reasons

There is a lack of understanding of how segmentation can help the company meets
its specific goals, as often no tangible, measureable goals are set in the first place.
These items need to be thoroughly vetted before deciding to move forward with
segmentation.
There may be a lack of institutional alignment, support and discipline. Companies
need to ask themselves some questions, such as: How will it be done'? How will the
company implement it? Is there adequate communication, support and training to
integrate segmentation within the company'? Will the company show the necessary
discipline to adhere to the approach in the long term'?
 Chapter 6- Market segmentation, targeting and positioning

6.:1.0.2 Implementation issues

Segmentation is often not implemented correctly and marketers need to make sure
that the segmentation process is not too complex for people to implement, nor so
simple that no one sees value in it.

6.:1.0.3 Performance issues

11 The infamous 'cure all' perception problem. 'For various reasons, companies come
to see segmentation as the universal remedy for all ills (business problems).
Failure is almost certain when this happens. Segmentation will not tell you what
new products to develop; nor will it tell you why certain customers lapse; nor will
it tell you why some customers won't buy additional products: 30
Ell Segmentation gets you only halfway there. Within each segment, customers
can still be quite different. This often results in imprecise targeting for specific
tactics such as product offers, messaging and media channels. For example, three
neighbours are in the same demographic segment: high affluent and middle age.
One has a matric and owns four garages in town. One is an educated university
graduate and is quite prudent, saving money at every chance. The third is a third-
generation millionaire who inherited millions from his deceased parents and who
spends money liberally. They may seem the same in a demographic scheme, but
are quite different in every aspect. Therefore, marketing to these three customers
based on the segment profile will be less effective.

6.1:1 Targeting
After developing a comprehensive profile of the market segments based on the
criteria indicated above, the next step is to decide which segment/ s to target, or a few,
or even the whole market. This is referred to as market targeting. In this section, the
focus is firstly on the criteria to be used to evaluate market segments and secondly
on the approaches available to the enterprise.

6.11.:1 Criteria fo~ selecting potential target markets

I
Before a specific market segment is selected as a target market, it must first be
evaluated according to five important evaluation criteria.

6.1.1.1..1. Segment size and growth possibilities

A target market does not necessarily have to be big. A small segment can often be
more profitable than one in which a large sales volume can be realised. Marketing
management must be convinced that there are further growth possibilities, thus
maldng the segment sustainable. The market for Rolex watches or Ferraris may be
small but the profit potential is huge. This makes it a very attractive segment.

153
Essentials of Marketing

6.1.:1.1..2 Attractiveness and potential profitability

The attractiveness of a target market lies not only in its size and growth possibilities,
but also in the promise of long-term profitability. Attractive segments attract
competitors, and intense competition can have a detrimental effect on future profits.
Serious threats to attractive segments are aggressive competitors that can launch
price wars or intensive advertising campaigns, or competitors who are able to
develop new substitute products. The growing power of buyers and suppliers also
threatens attractive target markets. If the threat is very serious, an enterprise that
has the necessary resources and skills may decide not to select a particular segment.
A target market is generally attractive if it has some degree of interrelationship
with other segments. Instead of serving a number of small segments, it would be
much better to combine interrelated segments. Interrelationships exist among
segments that use the same raw materials, similar production methods or joint
distribution channels.

6.1.1..:1.3 The resources and skills of the enterprise

Promising segment opportunities that do not fit in with the long-term objectives set
by management cannot be utilised. The same applies when resources and sldlls to
exploit the opportunity are lacldng. A segment can be chosen as a target market only
if marketing management is fully committed to serving this target market better than
any other competitor. This implies that the market offering must have an undoubted
differential advantage to target market members. If not, it would be advisable to
commit the cost and energy to an alternative option.

6.1.1..1..4 Compatibility with the enterprise's objectives

Apart from the resources and sldlls of the enterprise, the choice of a target market
must also take into consideration the compatibility with the objectives of the
enterprise. If it is found that the objectives of the enterprise cannot be enhanced by
the choice of a particular market segment, it should be disregarded.

6.1.1..1..5 Cost of reaching the target market

When a potential target market is inaccessible to an enterprise's marketing strategies,
or the cost to reach it is too high, it should not be considered. 31 In order to assess the
potential of each of the market segments identified during the segmentation process,
Walker et aP 2 propose five steps, as shown in Figure 6.1. These steps are highlighted
briefly in the following sections. The evaluation of potential market segments
starts with the selection of a set of criteria, which can be used to assess, firstly, the
attractiveness of the particular target market and secondly, the competitive position
of the enterprise with regard to a specific market segment. Because not all evaluation
criteria are of equal importance, these factors are then weighed to reflect the relative
importance of each.

154
 Chapter 6- Market segmentation, targeting and positioning

Step 3: Assess the current position of each potential target market on each of the factors .

- • • r < •• .-- •

S:tep 4: Project the anticipatedful:ure position of each marl<etbasedon expect~d cha~ges

implications of possible future changes for business

strategies and resource requirements

Figure 6.1 Steps in the evaluation of a potential market

Source: Adapted from Walker, OC, Boyd, HW & Larrecbe, JC. 1996. Marketing strategy:
Planning and implementation. Chicago: Irwin, p 162.

Competitive position

Medium Weak

High

Market
Medium
attractiveness

Low

Segment
'A'

Figure 6.2 Market attractiveness/business position matrix

Source: Adapted from Walker, OC, Boyd, HW & Lamkbe, JC in Cant, M (ed). 2010. Marketing:
An introduction. Cape Town: Juta, p 106.

155
Essentials of Marketing

The enterprise would then rate every market segment it considers. Scores that
reflect the market attractiveness and competitive position of the enterprise are then
posted on a market attractiveness/business position matrix. Such a matrix is shown
in Figure 6.2. Once this has been done, the marketing manager will consider likely
future changes that might manifest themselves. The arrow in Segment A in Figure 6.2
shows that this segment is expected to become less attractive in the future, while the
organisation also believes that its competitive position will deteriorate. It is critically
important to consider likely future changes, since the choice of a particular target
market commits the enterprise to this market. Should changes occur in the future,
the competitive position of the enterprise may be adversely affected.
Given these possible changes, the marketing manager should, lastly, evaluate
the implications of possible future changes with regard to their impact on company
strategies and resource requirements. Only once this has been completed will the
marketing manager finally choose a market segment or segments to target.

6.:1:1.2 Targeting market segments33

Because most markets will include customers with different characteristics, lifestyles,
backgrounds and income levels, it is unlikely that a single marketing mix will attract
all backgrounds and income levels. Thus, if a marketer wishes to appeal to more
than one segment of the market, he or she must develop different marketing mixes.
Strategies for selecting target markets are therefore discussed next.

6.:u.. 2.:z. Undifferentiated targeting

When using the undifferentiated strategy, the company essentially adopts a mass-
market philosophy. It views the market as one big market with no individual segment,
thus using one marketing mix for the entire market.

6.:1.:1..2.2 Concentrated targeting

With a concentrated strategy, an organisation selects a market niche (one segment
of a market) for targeting its marketing efforts. Because the organisation is appealing
to a single segment, it can concentrate on understanding the needs, motives and
satisfactions of that segment's members and on developing and maintaining a highly
specialised marketing mix. Some organisations find that concentrating resources
and meeting the needs of a narrowly defined market segment is more profitable than
spreading resources over several different segments. ,,_

6.1.:1..2.3 Multi-segment targeting

An organisation that chooses to serve two or more well-defined market segments and
develops a distinct marketing mix for each has a multi-segment targeting strategy.
The advantages of each strategy are summarised in the following lists:
 Chapter 6- Market segmentation, targeting and positioning

The advantages of the various types of strategies are listed below:

111 Undifferentiated targeting

o Savings on manufacturing and marketing costs

o The organisation may be vulnerable to competitors
11 Concentrated targeting
o Resources are spent on a single, defined market segment
o The needs of that single market can be better met
o Smaller organisations within the market can compete with those more
established in the market
o Organisations can establish a strong position within the market
11 Multi-segment targeting
o · Multi-segment targeting may result in increased profits
o Production and marketing outputs may increase.
The disadvantages ofthe various types of strategies are as follows:
11 Undifferentiated targeting
o Product offering may be unoriginal and derivative
• Concentrated targeting
o Market segments are narrow or may be constantly shifting
o Larger and more established organisations may be able to communicate to
the narrow market more successfully
• Multi-segment targeting
o Highly expensive strategy and resources are stretched across various market
segments
o Sales may cut into sales of existing products.

6.12 Product positioning

The ultimate aim of marketing actions is to position products or services in the minds
of customers in the way that marketers want their customers to perceive them, for
example, as a reliable supplier, a value-for-money product or a quality product.
Product positioning, therefore, refers to the way customers perceive a product in
terms of its characteristics, advantages and competitive positioning. Therefore, it
involves the creation, in the minds of the targeted buyers, of a distinctive position with
regard to the organisation's product relative to those of competing organisations. For
positioning to be effective, it is important that the marketer understands customer
buying criteria and recognises the performance of each competitor on each of the
evaluative criteria.
The concept 'product positioning' is relatively simple and applicable in both
industrial and consumer markets. The key aspects are as follows: 34
• Products and brands have both objective and subjective attributes.
I

I
I :!.57

\ .,
'
Essentials of Marketing

• Purchasers use such attributes when choosing between products or brands in a

particular segment.
• The customer has an individual idea about how competitive products or brands
rate on each attribute; ie 'positioning' takes place in the mind of the consumer.

6.:12.:1 Product positioning maps aid decision-making

Marketers often use positioning or perceptual maps to portray market positions
visually. A perceptual map is a multi -dimensional graphic image depicting consumer
perceptions. These maps assist marketers to develop focused marketing mixes or
strategies. They also help the manager to assess the advantage of an organisation's
marketing programme. 35
Figure 6.3 provides an illustration of a positioning map using hotels' quality and
price points from budget to luxury. Note the relationship between quality and price,
where luxurious hotels charge higher prices and budget hotels charge lower prices.
Normally, a unit must stay within its price/ quality product class, which is indicated
by the dotted lines on the map.

High quality Low quality

High price High price

A
'
''
''
'' ''
'' ''
' '
''
'' '
'' ''
"*······
''
''
'
''
'' ''
' '
'' '
''
''
B

Low price Low

High quality Low price

Figure 6.3 Hotel positioning or perceptual map

Source: Adapted from Bowie, D & Buttle, F. 2011. Hospitality marketing: Principles and practice.
2nd ed. Oxford: Butterworth-Heinemann.
 Chapter 6- Market segmentation, targeting and positioning

If a hotel is charging more than the price/quality norm, it could be accused of

'ripping-off' customers as indicated by '.N in Figure 6.3, unless there is another factm~
for example, a convenient location that compensates for the higher price. If a hotel
is offering genuinely higher quality at a lower price (five-star quality at three-star
prices), this strategy will not be sustainable in the long run (as indicated by 'B' in
Figure 6.3). 36
Many other variables or determinants can be used to compile similar positioning
maps; some are listed later in this chapter. However, marketing information and
sophisticated statistical testing are necessary for the development of positioning
maps.

6.:.1.2.2 The positioning process

A seven-step approach, as detailed in the points that follow, can be adopted when
positioning brands. (The term 'brands' is preferred here since it is the brands, not
products, of individual producers that compete against one another in a market.
Positioning maps can, however, also be developed for product categories.)

6.12.2.:1.. Identify a relevant set of competitive brands

The positioning process starts with the identification of a relevant set of competitive
brands to which a particular producer's brand will be compared. It is essential that
all relevant competing brands be identified in order to make the positioning effort
worthwhile. This enables marketers to identify the strengths and wealmesses of
their own brand against a competing one. It also helps them to decide whether to
reposition the brand in order to strengthen its position in the market. Repositioning
refers to changing a brand's (mostly undesirable) position in the market in the hope
that the new positioning will improve the brand's appeal among consumers.

6.:1..2.2.2 Identify relevant determinant or differentiation variables

In essence, product positioning has to do with competitive differentiation and the
effective communication of this to customers. Kotler and Keller 37 suggest that an
enterprise or market offering can be differentiated along four different dimensions:
I personnel, product, image or services. Table 6.6 summarises the main differentiation

I variables suggested. These are not the only variables that can be used, but the most
obvious ones have been discussed.
The marketer must decide which of the above (or other) differentiation variables
should be used in developing a positioning map. In this case, Walker et aP 8 refer to

I
determinant variables. They suggest that marketers must select those variables that
play a major role in helping customers to differentiate among alternative brands in
the market.

159
 Essentials of Marketing

Table 6.6 Differentiation variables

,:·~p;- '
5ER5rlcE:s
-_-,,,
:; ·. c ·.,··; ;

Receptiveness Trustworthiness Occasions Consulting service

Capability Repairability Icon Delivery
Consideration Product Marketing Equipment
Communication characteristics communication Customer guidance
Reliability Presentation Environment Restoration
quality
Dependability Various
Conformance
to the target
benchmark
Strength
Fashion
Design

Source: Adapted from Kotler, P. 1997. Marketing management: Analysis, planning,

implementation and control. Englewood Cliffs, NJ: Prentice Hall, p 283.

The following example serves to illustrate the importance of using determinant

variables. Although safety is a major concern for all airline passengers, it is not
regarded as a determinant variable as most customers use other features such as
price, convenient flying times, service or frequent-flier programmes to differentiate
between competing airlines. Appropriate marketing research can aid the marketer to
identify determinant variables.

6.1.2.2.3 Determine consumers' perceptions

The marketer must establish how consumers perceive the various brands in terms
of the determinant variables selected in the previous step. This step involves
the collection of primary data from a sample of consumers. Using a structured
questionnaire, consumers (named respondents) are questioned about their
perceptions of the various brands. The collected data is then analysed, using several
statistical techniques, including factor analysis, discriminant analysis and multi-
dimensional scaling.

6.1.2.2.4 Analyse the intensity of a brand's current position

When a consumer is unaware of a brand, the brand clearly does not occupy a
position in the mind of the consumer. In such instances, brand awareness must
first be established. However, when a consumer is aware of a brand, the intensity of
awareness may vary. In many markets, the awareness set for a particular product class
may be as little as three or fewer brands when there are more than 20 brands in that
product class. In such markets, the marketer of the lesser-known brand must attempt
to increase the intensity of awareness by developing a strong relationship between

:1.60
 Chapter 6- Market segmentation, targeting and positioning

the brand and a limited number of variables. Competing directly with dominant
brands is not advised. Instead, the marketer must identify a position within a market
segment that is not dominated by a leading brand. Alternatively, the marketer must
concentrate on a variable that is highly prized by a particular market segment.

6.1.2.2.5 Analyse the brand s current position

1

From the data collected from consumers about their perceptions of the various
brands in the market, the marketer can establish how strongly a particular brand
is associated with a variety of determinant variables. To do this, a positioning map,
similar to the one shown in Figure 6.3, is developed. Brands that are close to each
other on the map can be expected to be close rivals, while those that are far apart are
considered very different from each other. Competitive rivalry between the latter is
expected to be limited.

6.1.2.2.6 Determine consumers/ most preferred combination of

attributes
The discussion so far has focused on consumers' perceptions of existing brands and
has not given any insight into the positions that would appeal most to consumers.
This can be established by asldng survey respondents to think of the ideal product
or brand within a particular product category. Respondents would be asked to rate
their ideal product and existing products on a number of determinant variables.

6.:1.2.2.7 Select positioning strategies

Deciding where to position a new brand or where to reposition an existing one
depends on the target market analysis discussed earlier, as well as the market
positioning analysis. The position chosen must reflect customer preferences and
the positions of competitive brands. The decision must also reflect the expected
future attractiveness of the target market and the relative strengths and wealmesses
of competitors, as well as the organisation's own capabilities. Specific positioning
methods are discussed in the next section.

6.:12.3 Positioning methods39

Organisations can use a variety of bases for positioning, including:
II Attribute. A product is associated with an attribute, product feature or customer

benefit. For example, Benson & Hedges has chosen to position its cigarettes in
terms of lightness and taste.
• Price and quality. This positioning base may stress high prices as a signal of
quality or emphasise that lower-priced goods are an indication of lower value.
While Truworths is lmown for high-quality garments, similar garments are sold
at generic clothing stores that are lmown for unbeatable prices.
Essentials of Marketing
- - - - -----------------------·---------------------------··----------------

• Use or application. Stressing uses or application can be an effective means of

positioning a product with buyers.
• Product user. This positioning base focuses on a personality or type of user.
• Product class. The objective is to position the product as being associated with a
particular category of products, for example, positioning a margarine brand with
butter. Alternatively, products can be dissociated with a product category.
• Competitor. Positioning against competitors is part of any positioning strategy.
• Emotions. Positioning using emotions focuses on how the product makes
customers feel. For example, Lux body lotions are targeted at females and appeal .
to their emotions, inspiring women to revel in the pleasure of expressing their
beauty. 40

6.:1.2.4 Common positioning errors 41

Consumers are heavily influenced by their perceptions of other brands in the market.
The following are positioning errors that marketers should avoid at all costs:
• Under positioning. When customers have only a vague idea of a particular brand,
the brand suffers from under positioning. The brand is perceived as a 'me too'
brand and customers do not sense anything special about it.
• Over positioning. Buyers may have a very narrow image of a brand; in this case the
brand suffers from over positioning. The fact that the Blue Train is perceived as
being exorbitantly expensive and for overseas tourists only, means that it suffers
from over positioning. The result is that many consumers who do possess the
disposable income to take a trip on the train do not even consider it.
• Confused positioning. This occurs when the marketer changes the positioning of
the brand too frequently, or when too many claims are made about the brand.
Consumers are, therefore, not sure what to expect from the brand.
• Doubtful positioning. When the claims made about a brand are hard to believe or
too good to be true, the brand suffers from doubtful positioning. In such cases,
consumers will be very reluctant to buy the brand.

6.:1.3 Repositioning 42
Having developed a position for a brand, there is frequently the need to reposition
as the market develops, competitors enter or exit and customers' expectations and
needs change. However, when considering this option, marketers should consider
the following strategic options:
• Gradual repositioning. This involves a planned and continuous adaptation to the
changing market environment.
• Radical repositioning. This occurs when an increasing gap between what the
brand offers and what the market wants leads the management team to think
about a major strategic change.
 Chapter 6- Market segmentation, targeting and positioning

• Innovative repositioning. In this case, the planner finds a new strategic

position, which offers market opportunities that have not yet been identified by
competitors.
• Zero positioning. The organisation maintains an unchanged face to the market
over a long period of time and/ or it communicates very poorly with the target
market, with the result that potential customers have little idea of what the
organisation stands for.

Summary
For many years, marketers attempted to sell the same products to the same markets
in the same way. Not much effort is required when targeting such markets. Howeve1~
the concept of segmentation has since changed the way consumers are being
approached. In this chapter, we defined the main theoretical concepts associated with
segmentation and explained how to go about segmenting a market. Furthermore, we
discussed the manner in which marketers can target their specific market and how
they can place their products in the minds of consumers. 'The latter is referred to as
positioning. Ultimately, the success of marketing management will depend on its
ability to select profitable target markets, understand these markets and encourage
them to continue to support the organisation.

References
1. Lamb, CW, Hair, JF & McDaniel, C. 2012. Essentials of marketing. 7th ed. Mason, OH:
South-Western Cengage Learning. Available from: http:/ /books.google.co.za/books?
id= Qp CvQ fnPp NwC &p g=PT28 7 &dq =market +s e gm enta tion&hl= en&s a=X& ei=k
uLWT-HxKMiihQfY1Nm-Aw&ved=OCGcQ6AEwBw#v=onepage&q=market%20
segmentation&f=false (Accessed 30 May 2012).
2. Claw, KE & Baack, D. 2010. Marketing management: A customer-orientated approach.
London: Sage Publications, p 36.
3. Groucutt, J, Leadley, P & Forsyth, P. 2004. Essential principles, new realities. Derby: Saxon
Graphics, p 133.
4. Bhasin, H. 2011. Six advantages of segmentation. Available from: http://www.
marketing9l.com/6-advantages-segmentation/ (Accessed 30 May 2012).
I 5. Jain, R. nd. Market segmentation. Available from: http:/ /www.123 oye.com/job-articles/

II
I

business-corporates/market-segmentation.htm (Accessed 30 May 2012).

6. Ibid.

I 7.
8.
Ibid.
Groucutt eta!, op cit, p 133.
\ 9. Ibid, p 130.
I
10. SocialNet. 2009. Mass customization: Nike v. Puma. Available from: http:/ /socialnetw.
\ blogspot.com/2009/01/mass-customization-nike-v-puma.html (Accessed 27 June 2012).
11. Kohavi, R & Parekh, R. 2004. Visualizing RPM segmentation. Available from: http:/ I
1 www.siam.org/proceedings/ datamining/2004/ dm04_036kohavir.pdf (Accessed 21 June
I
lI 2012).

II
Essentials of Marketing

12. Ibid.
13. Duncan, T. 2002. IMC: Using advertising and promotion to build brands. New York:
McGraw-Hill, p 245.
14. Ibid.
15. Ibid.
16. Ibid.
17. Ibid.
18. Ibid.
19. Ibid.
20. Goeldner, CR, Ritchie, JRB & Mcintosh, RW. 2000. Tourism: Principles, practices,
philosophies. 8th ed. New York: John Wiley & Sons.
21. Kotler, P. 1997. Marketing management: Analysis, planning, implementation and control.
Englewood Cliffs, NJ: Prentice Hall; Marx, S & Dekker, HJ. 1982. Marketing management:
Principles and decisions. Pretoria: Haum.
22. South African Advertising Research Foundation (SAARF). 2008. The South African
Advertising Research Foundation's living standards measure (LSM). November.
23. Wrenn, B, Kotler, P & Shawchuck, N. 2010. Building strong congregations. American
Bible Society. Available from: http://books.google.co.za/books?id=Z5SmjiXS3jEC&pg
=PA25l&dq=market+segmentation+kotler&hl=en&sa=X&ei=9IP6T8bhKZSihQfYqYjYB
g&redir_esc=y#v=onepage&q&f=false (Accessed 9 July 2012).
24. Hult, T, Pride, WM & Ferrell, OC. 2012. Marketing. Mason, OH: South-Western Cengage
Learning, p 136.
25. Cebuecommerce. 2012. Evaluation of Pfizer's market segmentation approach.
Available from: http:// cebuecommerce.info/ evaluation-of-pfizer%E2%80%99s-market-
segmentation-approach/ (Accessed 30 June 2012).
26. Moore, K & Pareek, N. 2006. Marketing: The basics. 2nd ed. London: Routledge. Available
from: http://books.google.co.za/books?id=rHBKk7M_GPoC&pg=PA38&source=gbs_
toc_r&cad=4#v=onepage&q&f=false (Accessed 30 June 2012).
27. Kotler, P & Armstrong, Gin Cant et al. 2010. Marketing management: A South African
Perspective. Cape Town: Juta, p 88.
28. Hult et al, op cit, pp 138-139.
29. Thompson, T. 2012. When and why segmentation fails. Available from: http://academy.
brighttalk.com/storage/MMG_Segmentation.pdf (Accessed 30 June 2012).
30. Ibid.
31. Kotler, P & Keller, KL. 2006. Marketing management. 12th ed. Upper Saddle River, NJ:
Pearson Prentice Hall.
32. Walker, OC, Boyd, HW &Larreche, JC, in Cant, M (ed). 2010. Marketing: An introduction.
Cape Town: Juta, p 106.
33. Lamb, CW, Hair, JF & McDaniel, C. 2012. Essentials of marketing. 7th ed. Mason, OH:
South-Western Cengage Learning, pp 274-275.
34. Lancaste1~ G & Massingham, L. 2011. Essentials of marketing management. New York:
Routledge. Available from: http://books.google.co.za/books?id=sULdOOaYYxEC&pg=PA
69&source=gbs_toc_r&cad=4#v=onepage&q&f=false (Accessed 9 July 2012).
35. Walker et al in Cant. 2010, op cit, p 108.
36. Bowie, D & Buttle, F. 2011. Hospitality marketing: Principles and practice. Oxford:
Butterworth-Heinemann.
 Chapter 6- Market segmentation, targeting and positioning
---··-----------

37. Kotler, P & Keller, KL in Cant et al. 2013, op cit, p 111.

38. Walker eta! in Cant. 2010, op cit, p 111.
39. Lamb et al, op cit, p 280.
40. Unilever. 2012. Lux. Available from: http:/ /www.unilever.com/brands/personal
care brands/ lux/ (Accessed 9 July 2012).
41. Cant, MC &Van Heerden, CH. 2010. Marketing management: A South African perspective.
Cape Town: Juta, p 109.
42. Gilligan, C & Wilson, RMS. 2009. Strategic marketing planning. Burlington, VT: Elsevier.
Available from: http:/ /books.google.co.za/books?id=T7BUimN4tmAC&pg=PA377&dq=
repositioning+strategies&hl=en&sa=X&ei=yt_7T6zDC8fBOQX2kYmBBw&ved=OCEQQu
wUwAjgK#v=onepage&q=repositioning%20strategies&f=false (Accessed 10 July 2012).
 lnte~rated mark~~ing

Learning objectives
After you have studied this chapter1 you should be able to:
• explain how the marketing concept relates to critical marketing decisions
• explain how marketing information can be obtained through a marketing
information system (MIS)
• explain the effect ofthe environment on the design ofthe marketing mix
• discuss how the determinants of consumer behaviour influence marketing
decision-making
• explain how choice of target market determines the design of the market
offering
• explain how integrated marketing communication relates to integrated
marketing.

7.3. Introduction
In the previous chapters, the core analysis and information sources that need to be
identified, researched and discussed before maldng a marketing decision have been
established. A marketing offering requires a thorough analysis to be performed and
marketing decisions should be based on a strong information core in order to be
effective. The mistake that many businesses make is that they do not ask the right
questions, and therefore the true nature of the marketing problems being faced is
unlmown.
In this chapter, we will establish how each of the elements in the prior chapters
affects the marketer's decisions when offering a product or a service. We will attempt
to link the core information areas and the market decisions that are to be made on
the basis of this information. We will also investigate the process of integrating the
marketing effort to be able to compete effectively. For example, imagine trying to
launch another cellular service brand in South Africa, with two giant entrenched
competitors (Vodacom and MTN) to face. This was the situation facing Cell C when
it launched its brand - and it managed to gain about 14% of the market and turn a
profit after seven years. The company achieved this by marketing innovative products
 Chapter 7 -Integrated marketing

and promotions to the mass market, weaving the elements of simplicity, choice and
value into the make-up of the Cell C brand. It has integrated its communication
and promotion efforts to establish a sustainable position in a very tough business
environment.

7.2 The marketing process

There are certain decisions that the marketing department needs to make and
which are considered to be major fundamental areas of marketing strategy. This
combination is called the marketing mix, and is made up of four significant areas of
decision -making. Before these key decisions can be made, the target market on which
the organisation wishes to focus must be chosen. The first decision is made when the
marketer decides on the combination of goods and services the organisation wishes
to offer to the chosen target market; this is the product decision. The second decision
concerns the activities that make the product available to customers wishing to
purchase the product. The third decision relates to the communication methods and
media used to inform, persuade and remind customers of the benefits of the product
and encourage them to purchase. The last decision relates to the price, which is the
amount of money customers must pay to obtain the product. 1 The four variables
of product, price, place and promotion are known as the four Ps and make up the
marketing mix.
Figure 7.1 illustrates how the core analysis and topics discussed in the previous
chapters interact during the marketing process in order to facilitate the achievement
of the organisation's goals and objectives. After the target market has been chosen,
based on the research conducted to understand customers and markets, the
marketing mix can then be developed. If the marketing mix is developed effectively,
the marketer can contribute to the fundamental objectives ofthe organisation and to
the maximisation oflong-term profitabilitY.
Some marketers have questioned whether the traditional marketing mix (the four
Ps) is adequate for marketing services in current marketing environments. It has been
proposed that an expanded, more comprehensive version of the mix ought to be
used. There are three additional elements in the expanded version of the marketing
mix, which need to be considered by companies that market a combination of
product and service, or those that offer mostly service. These additional elements
include the following:
1. Customer service. This can assist marketing management to build closer relationships
with customers and retain customers, and possibly to differentiate the business.
2. People. The staff members, especially those who interact with customers on a
daily basis, form an integral part of the product.
3. Processes. The creation and delivery of the product or service are influenced by
the policies and procedures of the business.
The concepts and ideas discussed previously and their relation to the marketing mix
will now be examined.
Essentials of Marketing

., . ~J:. ~ '·- . f .;: ;-.-

~a;ketre~earch feedback

! The target market ·The marketing communication

mix-
~~~~,~,
The target market is the . Integrate the various
group of customers at ! marketing communication
which the organisation elements to provide added
has decided to aim value to the customer
its marketing efforts and increase positive
relationships

Soti'fy I M"imi'<

.
Customer
needs \ I Profitability
I

Atmosphere
.!
Figure 7.1 The marketing process
Source: Adapted from Cant, MC & Van Heerden, CH. 2010. Marketing management: A South
African perspective. Cape Town: Juta, p 18.

7·3 Marketing orientation

Marketing orientation is, in essence, the marketing activities that an organisation
adopts in order to meet customers' wants and needs and provide superior value to
customers. 2 A market-orientated business has three characteristics: 3
1. Customer orientation. The business has to understand the customers' wants and
needs in order to provide superior value to the customer. Telkom's Heita (8ta) has
focused on the mass market, and as Africa's largest integrated communications
company, Telkom has tried to increase internet access in South Africa, provide
new landline offers and become active in the cell phone market.
2. Competitor orientation. The business has to understand the strengths, weak-
nesses, capabilities and strategies of current and potential competitors. Heita
offers 3G services; therefore, Telkom has entered a market in which there are
strong competitors with well-developed 3G systems in place.

168
 Chapter 7 -Integrated marketing

3. Inter-junctional or team coordination. This is the use of the business's resources,

particularly human resources, to create superior value for targeted customers.
Southwest Airlines, an airline in the United States of America, embodies this, as
even pilots assist in loading the luggage in order to have faster turnaround times.
These three characteristics strengthen the effort to satisfy the customer and provide
superior value. This should be measured, and if the customers' needs are satisfied,
the profits the business accrues can be enhanced through better customer retention
and increased loyalty. This is illustrated in the benefits that a business gains through
retaining the correct customers over an extended period of time. These benefits are
increased purchases, reduced operating costs, referrals to other potential customers
and the ability to justify a price premium to differentiate the product from price
competitors. The profitability of a business is reinforced when the market orientation
is combined with effectiveness in the marketplace. This relationship is illustrated in
Figure 7.2.

. I
·---c----··--~·

Business profitability ·
·~~···--·· l"~~~-- ~·------·-·~-~
. . . . . .1
I M~a.;_rk_e_t.;_o_ri~en_t_at_io_n~.--'
L I_ _
Competitive
~--"-~
advantage i
_ _.:__c__.,_ __,

Figure 7.2 Drivers of business profitability

Source: Adapted from Best, RJ. 1997. Market-based management. Upper Saddle River, NJ:
Prentice Hall, p 8.

The ultimate goal of market orientation is to develop and implement strategies

that attract, satisfy and retain target market customers. This goal is accomplished
through the use of a marketing strategy, which includes the decisions made by the
organisation about the target market and the marketing mix. 4 This is illustrated in
Figure 7.3.

CMarketing knowledge The target market

and the marketing
I Marketing orientation . ·· mixwhith is.
I included in the
[--.- ..-.· Marketing eXperience -I I marketing strategy
IL - ' - ' . - - - - - - - - - ' _·•·_ _ )

I
Figure 7·3 Marketing orientation shapes marketing decisions
Source: Adapted from Best, RJ. 1997. Market-based management. Upper Saddle River, NJ:
Prentice Hall, p 25.
I
7·4 The marketing environment
The marketing environment is made up of several sub-environments. These sub-

I
environments are dynamic in nature and have a number of interacting influences.

~69
 Essentials of Marketing

In certain sub-environments there are uncontrollable variables, such as the

economic, legal, social and technological variables in the macro environment. 5 On
the other hand, variables such as the marketing mix are controllable by marketing
management.
It is necessary to stress that the controllable variables are indirectly affected
by these uncontrollable elements in the environment. The marketer must ensure
that the variables that can be controlled reflect the realities of the uncontrollable
variables in the marketing environment. This is illustrated in Figure 7.4.
1
Company .. • · . · I ;-:M-ar-keti-ng_e_n-vi;-on_n1_e-nt-.-,~.
Marketingactivities and plans ,.
1 (cont.ro. llables)
Major direction
of influence
! Uncontrollable variables in the
! macro-environment 1
I! •• Product
Price
~+---------:1 •
l Ia
Economic
Social
II

•. •. Communication ,il IIIII Technological !

I• I
J_

1• Distribution Political
'----·----.-·-·-~·~·~---·----' L_, ________, ___,_______ _j
Figure 7·4 Environmental influence

The effectiveness of marketing will be determined by how well it can match the
business's offerings to the requirements from the marketplace. The ability to adopt an
outside-in orientation is seen in the business's response to changes in the environment.
This is the strategic role of the marketing function in the organisation. The ability
to constantly respond to the environment is a difficult task, as businesses become
preoccupied with daily operations and lose track of occurrences in the environment.
A mistake many businesses make is to ignore or discount small changes in the

.·J·
environment; in reality, these small changes often indicate big changes to come.

J Externala~alysis . ·.. I Changes based

SC:ariningt···· on internal and
Monitoring .... external analysis
Forec.asting···· ·. • ·. ·.. Sales
Assessing Changes in sales
Profit ·
Change in_profit

I
Determination Degree of
Market share of potential
Internal analysis adaptation of:
Vision Opportuf]ities .Product··
Mission. Threats · Pricing.·..
!
Strengths Promotiol)s.
Weaknesses Di~tr\bution

Figure 7·5 Environmental adaptation and monitoring

Sources: Adapted from Busch, PS & Houston, MJ. 1985. Marketing: Strategic foundations.
Homewood: Irwin, p 82; Theodosiou, M & Leonidou, LC. Standardization versus adaption
of international marketing strategy: An integrative assessment of the empirical research.
International Business Review, 12: 141-171, 143; Morrison, JL. 2005. Environmental scanning.
Available from: http:/ /horizon.unc.edu/courses/papers/enviroscan/ (Accessed 2 August 2012).

170
 Chapter 7- Integrated marketing

In order to identify the short-term changes and long-term trends, environmental

monitoring has to be conducted. This is the constant monitoring of the business
environment. Figure 7.5 provides a framework for environmental monitoring and
adaptation. The changes and trends can be translated into opportunities, threats or
inconsequential events. If there is a need to adapt the current position on certain
aspects, this should be reflected in the marketing mix of the business. In other words,
the business must change something to respond to the change.

111 McDonald's has responded to the growing concern for fast-food restaurants to
offer healthier options on their menus. This is evident in the addition of options
such as salads and wraps, as well as healthier options for children.
• Honda has responded to the environmentally· aware consumer by creating
vehicles that are environmentally friendly, such as the Civic Natural Gas, various
hybrid models, as well as the fuel-cell vehicle. Toyota has had great success with
the Prius, which is a response to the same trend.

7·5 Obtaining and using marketing information

It is imperative that a marketing organisation has an efficient marketing information
system (MIS), as discussed in Chapter 4. This is a tool to manage information
effectively, and consists of a system made up of interactive and independent
subsystems that function as a whole. This system assists the integration of the
different types of marketing information and makes it accessible to the decision-
makers, in a timely and useful form. 6 This concept is illustrated in Figure 7.6.

I Quality marketing decisions

I
Figure 7.6 Sources of information

The purpose of an MIS is to gather and analyse data continuously 'to provide
marketing managers with the information they need in order to make decisions: 7 This

I
system stands between the market environment and the decisions that marketers
make, and provides an interface between the two. This information is, however,
not only made available to the marketing function, but also to the other functions

I
Essentials of Marketing

within the organisation such as finance, production, operations, and research and
development.
The MIS system assists the organisation in identifying trends, opportunities and
threats that occur within the market environment. This scanning of the environment
will help empower the organisation to react to changes in the environment in a
timely fashion. Some companies have formal MIS structures in place, especially the
bigger companies. Many small companies, on the other hand, make use of informal
channels to be aware of the happenings in the market environment. These informal
channels prove to be effective for small companies. 8 Figure 7.7 illustrates the link
between the information that is received from the MIS structure and the decisions
made based on this structure. The activities that the organisation performs are
shown as the gathering of data and information. As soon as this information has been
analysed and evaluated, a response must be made by marketing management in the
form of some key marketing decision related to the change. The value of information
is in its use. Decisions on a response have to be made based on information about
the changes in the environment.
The response is not the end of the process, as the response then has to be monitored
and evaluated to determine the success of attempting to align the organisation in
response to environmental trends and the market.

Scanning the external Acquiring marketing intelligence

Performing marketing research J

j All these elements produce
1. information which 'is anqlysed and
! evaluated.lt: is then used in making
i dedsions regarding:
i• Objectives
• Target markets

i.
Feedback • Positionfng Feedback
• Product
• Price
Marketing communication
I• DistribUtion' ·

Figure 7·7 MIS and marketing decision-making

Source: Adapted from Jobber, D. 2007. Principles and practice of marketing. London: McGraw-
Hill, p 231.

172
 Chapter 7- Integrated marketing

For example, Procter & Gamble videotapes the day-to-day behaviour ofits consumers.
By doing this with a sample of families in some European countries, they found
that information and knowledge about caring for their babies was as important to
new mothers as the nappy itself. It responded by launching Pampers.com, which is
an online community where mothers can obtain information on areas of concern
to them.

7·5·1 Perspectives on consumer behaviour

Marketing's essence lies in the organisation understanding the customers they serve
or intend to serve. This includes understanding customers' buying behaviours, habits
and needs. Once this understanding is gained, the marketer is better able to assist
the customer to achieve their objectives by designing and developing an effective
offering for them. 9
Questions such as who the organisation's customers are and why they buy should
be answered by the marketer. These answers are important for the marketing function
as they are the link between the customer and the organisation.
Various factors influence the relationship between the environment, the marketer
and the customer and impact on the decision-maldng process. These factors are
summarised below:
1111 Internal factors such as age, gender, income, education, lifestyle, values and
personality
• External factors such as social, cultural, family, opinion leaders and reference
group influences
• Buyer decisions include questions such as 'Buy or not to buy?; 'What, where or
when to buy?; 'How much to buy?; 'Buy again?'
• Stimuli in the environment include economic, technological, political and cultural
influences
• Marketing stimuli relate to price, promotion, product and quality questions.
Both the uncontrollable environmental variables and the controllable marketing
mix have an influence on the customer. These two factors are external stimuli to
the customer. The decisions made by the customer are also affected by the internal
characteristics of the customer. These internal stimuli, such as the customers'
characteristics, perceptions and expectations, which are all different for each
customer, can affect customers' decisions.
The different individual and group influences, the manner in which customers
proceed through the decision-making process, as well as their habits, will influence
customers' decision-maldng.
Another factor that could influence· customers' decisions is their involvement
with the product. This will serve as an indication of the seriousness and systematic
manner in which customers proceed through the steps of the decision-making

173
Essentials of Marketing

process. Customers or buyers have a number of stages to go through to make their

decisions. This is where marketers come into play as they persuade customers, with
the use of the marketing mix, to buy the organisation's product. Marketers also
have to persuade customers after the purchase that their need satisfaction has been
achieved and that they will remain loyal to the organisation.
We have mentioned that the marketing environment is constantly changing;
therefore, the monitoring of the environment should be a continuous process in order
for the organisation to make appropriate responses. As the organisation is affected
by changes in the environment, so are customers, and their needs may change.
In addition, in order for any business to be successful, it has to be aware of the
changing nature of customers' characteristics and needs. These changes may have
a significant effect on the organisation and the organisation should be prepared to
respond to these changes with their marketing activities.
In the late 1990s, Wilson and Gilligan identified a number of characteristics that
are associated with what they term the 'new' consumer. 10 Many of these are still valid
and they include:
• the development of new value systems
• greater emphasis on value for money
• higher levels of price awareness and price sensitivity
• an increased demand for and a willingness to accept more and exciting new
products
• less fear of technology
• lower levels of brand and supplier loyalty
• a greater willingness to experiment with new products, ideas and delivery systems
• a greater cynicism
• higher levels of environmental awareness
• greater scepticism about politicians, big business and traditional institutions
• the changing roles of men and women.
There is a connection between the characteristics mentioned above and the design
of the marketing mix. How many of them do you think apply to the South African
consumer?
Commitment to understanding customers' needs and problems is at the core
of any marketing strategy. The process of understanding customers is known as
customer analysis and is illustrated in Figure 7.8.
Figure 7.8 shows that changing customer needs and product usage have to be
continuously monitored by the business. These two factors affect the benefits that the
customer is seeking and desires. The business responds to these factors by changing
the controllable variables such as the marketing mix.

174
 Chapter 7 -Integrated marketing

~~·-_··.___·_·_c_u~s~to_m_e~r__n_e_e_d_s__~~ I

. Customer use situation

r I. Des.ired...benefits · ~
I I
~'-'"---'
f.'--'--'·

Figure 7.8 Customer analysis and the marketing mix

Source: Adapted from Walters, D & Lancaster, G. 2000. Implementing value strategy through
the value chain. Management Decision, 38(3): 160-178.

If customer needs are successfully met and the desired benefits are delivered, the
business will satisfy the customer needs and increase the likelihood of success. Note that
the value perceived by customers is determined by the benefits they perceive to have
received in relation to the cost of the product or service. This emphasises the important
role that marketing management plays in ensuring that customers perceive they are
receiving value for money relative to what they would receive from competitors.
In a previous example we discussed Procter & Gamble's research findings that
new mothers were equally concerned about information and nappies. In this case,
the company responded to their concerns in order to retain customers and add value
in areas of importance to them.

7.6 Target market selection and positioning

The concept of market fragmentation helps one to understand the importance of
target market selection and positioning.U Fragmentation occurs when the market
splinters into different groups according to aspects such as income bracket, lifestyle,
race or experience. This leads to markets becoming smaller and an increase in the
number of product ranges required to cater for the various segments.
There are various groups within a target market and marketers have to understand
this. Market research on the different groups in a market assists the marketer in
optimising the market segmentation process.
The potential for each segment must be established after each of the different
segments has been identified. This is part of the market research that has to be
conducted to assist in the selection of appropriate segments.
After the target market has been decided on, the marketer will have to decide how
to position the product. This is often accomplished by further market research that
focuses on competitor positioning and customer need satisfaction. The marketing
mix must be tailored to meet the customers' needs, but this can be done only once
the positioning strategy has been established.

175
Essentials of Marketing

The positioning of the product was discussed in Chapter 6. If correctly designed, the
marketing mix is the method the marketer uses to meet the needs of the customer
so that the customer's perception of the product matches the positioning strategy
selected by the marketer.
There are continuous changes in the market, so the market must be continuously
monitored. This is particularly important in order for the marketer to determine
whether the product needs to be repositioned or not. The overall process of
segmentation, targeting, positioning and designing the appropriate marketing mix
is illustrated in Figure 7.9.

Positioning
Segmenting
Target market • Understanding Designing a

i
the market by -? ~ consumers ~ marketing mix for
selection
choosing variables II Position products each target
in consumer minds

Figure 7·9 Progression for choosing your market

Source: Adapted from Groucutt, J, Leadley, P & Forsyth, P. 2004. Marketing: Essential principles,
new realities. London: Kogan Page, p 129.

7·7 Integrated marketing communication (IMC)

In order to effectively deliver the message that the business would like its target
market to receive, there needs to be an effective marketing communication campaign.
This is usually achieved by means of an integrated marketing communication (IMC)
campaign. This is an effective mass-media communication technique that supports
strategies the business and marketer make use of in order to persuade the customer
to purchase the product offering. The methods used to create an IMC campaign will
be discussed in the sections below. 12

7·7·l. The need for integrated marketing communication

Consumers see countless advertisements every day, which all add to the blur of
marketing messages from businesses. When a single business delivers messages
through more than one medium, the consumer will view the messages as part of a
single message. In order to avoid confusing the target audience, the business has to
ensure that its messages are compiled in such a way that they are not contradictory
or ambiguous.
When messages are not in line, consumers may become confused and this may
jeopardise the company image, brand position and customer relationships. The
messages that the business delivers should be aligned as this helps to make the
message delivery more effective. Problems arise when messages are created by
different people inside and outside the business. In some cases, the advertising
campaign will be created by an agency that is outsourced to do the job, the personal

:q6
 Chapter 7- Integrated marketing

selling message is created by sales management and the marketing department

creates sales promotion events.
The various messages are delivered using different media channels, such as the
internet, social networking sites, television and radio. 13 This is where IMC can avoid
the many mistakes businesses make when they deliver messages across different
mediums. IMC is a concept that 'carefully integrates the communication channels to
deliver a clem~ consistent and compelling message: 14
Customer touch points are the situations in which the consumer will encounter
the brand or business. IMC recognises that the business has to ensure that each
touch point will deliver a consistent message to the consumer.
The goal ofiMC is to ensure that the company provides a consistent message every
time the consumer comes into contact with the business in any shape or form. 15 This
is especially true when IMC is able to tie all the company's messages and images
together. This is accomplished by maldng sure that all the communication channels
the business wishes to use have a similar 'feel' and overall message.

7·7·2 Elements of integrated marketing communication

IMC is a method of communicating with the consumer that is customer centred and
is driven by the need to provide specific messages to the customer. This method is the
management of all types of communication methods such as advertising, personal
selling, sales promotion, public relations and direct marketing. 16 This is a difficult
task as the specific combination of the marketing communication elements has to fit
with the intended message, the target audience and the objectivesY The elements of
IMC are the following: 18
11 Advertising. This is any paid form of personal presentation and promotion of
ideas, goods and services by an identified sponsor.
• Sales promotion. This is the encouragement of sales through short-term incentives.
• Public relations. This involves building good relations with the various target
audiences by obtaining favourable publicity, creating a good corporate image
and controlling unfavourable rumours or the potential for unfavourable rumours.
• Direct marketing. This involves making direct connections with the target
audience to obtain an immediate response and to cultivate a lasting customer
relationship.
These elements of IMC are used to communicate the value and benefits that the
customer can receive when purchasing the product or maldng use of the service.

7.8 The new marketing communications model

A number of factors that influence the marketing communications model have
evolved. These changes have occurred in communications technology and marketing
strategies. Customers now have access to information and communication

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Essentials of Marketing

technology that give them the ability to gather more information and be more
empowered to make informed decisions. 19
The changing nature of communications technology has enabled customers
and companies to communicate differently from how they did a decade ago. This
has created a platform for many information and communication tools, such as
smartphones, satellite TV and the internet. Even the manner in which companies
may decide to deliver the message has changed in terms of specialisation. 2° For
example, a company may decide to target consumers through blogs and e-mails
rather than broadcasting via the traditional communications channels.

7·9 Steps in developing effective marketing communications

There are certain steps that marketers should follow in order to create an effective
IMC and promotion programme. These steps are: identifying the target audience,
determining the communication objectives, designing a message, choosing media
and collecting feedback. These steps are discussed below.

7·9·:1. Identifying the target audience

In order for marketing communications to be effective, there needs to be a clear
idea of who the business should be targeting and the possible audiences in that
target market. This could be anybody from the person who uses the product to the
purchasers or even a group of individuals. The target audience will influence the
message that is to be delivered in every way, that is, the content of the message, the
manner in which it is said, the time and place of delivery, as well as who delivers the
message. 21

7.9.2 Determining the communication objectives

It is all very well to have a beautiful communications campaign, but what does
the company want to achieve with the campaign? If the company does not have a
clear idea of what it would like to achieve, it will be impossible to determine if the
communications campaign was a success or not. The company has to establish a set
of communication objectives.
For example, one of the objectives of the campaign could be the desired response
from the target audience. In order for communication objectives to be established,
there has to be an understanding of what the audiences' perceptions of the business
are and what can be done to adapt these to the desired perception the business
wishes to create.
There are six stages that the target audience can occupy in terms of the purchase
decision-maldng process. These are known as the buyer-readiness stages, which
include: awareness, knowledge, liking, preferences, conviction and purchase.
Basing the communication campaign on the consumer's buyer-readiness stage can
influence the manner in which the campaign will be set out. 22

:q8
 Chapter 7 -Integrated marketing

7·9·3 Designing a message

Designing a message that is effective has to include a number of actions or behaviours
that are sought, such as getting the attention of the audience, holding that interest,
arousing desire and obtaining action. These elements are reflected in the attention,
interest, desire and action (AIDA) model. The essence of message design includes the
message content, message structure and the message format. These elements are
discussed further. 23

7·9·3·1. Message content

The message has to appeal to the audience in order to produce the desired response.
The appeals that the business can make use of are the rational, emotional and moral
appeals.
11 Rational appeal is the self-interest that the audience experiences. These are the
qualities such as value, economy and performance that the product provides.
• Emotional appeal relates to the emotions that might be evoked when purchasing
a product, be they positive or negative. For example, this could be the love
experienced when exchanging jewellery between partners, the fear of driving a
car without an automatic braldng system or the joy of a child who receives a toy
as a gift.
• Moral appeal is created in the attempt to capitalise on the audience's morals,
ie the customers' views of what is considered to be right and wrong. Often this
appeal is used in support of social causes, such as the political situation in Tibet or
healthcare campaigns. An example of a moral appeal is the Earth Hour campaign
that takes place annually, when people are urged to switch off their lights for an
hour at a specific time, on a specific day to raise awareness about the need to do
something about climate change.
Alongside these appeals is the common use of humour that attempts to get the
audience to pay attention, create a joyful mood or to make the brand seem to have a
personality.

7·9·3·2 Message structure

Usually an advertisement has structure, which includes a beginning, a middle and
an end that follow a chronological or logical chain of events. Sometimes, however,
marketers may decide not to give the audience an end or resolution. This creates
questions in the mind of the audience, and leaves them wanting more.
Another aspect to consider is where to place the strongest point? Should the
marketer place the strongest arguments for the use of the product or service at the
beginning or end of the advertisement? Having the argument in the beginning of the
advertisement may lead to an early climax and therefore an anti-climactic ending
that loses the audience's attention.

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Essentials of Marketing

The final aspect to take into consideration in terms of the message structure is the
nature of the argument. Should the marketer present an argument that displays only
the strong points of the product while neglecting to display the possible shortcomings,
or should the marketer discuss both the strengths and shortcomings?

1·9·3·3 Messagejormat
The format of the message includes the placement of the headline or copy as well as
the illustration and use of colour. If the message has to be delivered over the radio, the
chosen words to convey the message, the sounds that are included in the message,
as well as the voices have to be appropriate for the product being advertised. If the
message is delivered on television, the visuals used, the props, the sounds and the
body language of the model have to all be appropriate in relation to the product.
There are many details that the marketer has to consider when looldng at the way in
which the message is being conveyed. The small details of the advertisement have to
create the overall intended effect when delivering an effective message.

7·9·4 Choosing media

There are two channels of communication from which the marketer will have to
choose. These channels are personal and non-personal. These communication
channels are discussed below.

1·9·4·1. Personal communication channel

In this channel, two or more people communicate directly with each other. This
communication may take place face-to-face, over the telephone, via e-mails or
through internet chatting. This is an effective form of communication because the
individuals involved are able to address each other personally and there is room for
feedback.
Some ofthese communication channels are controlled by the company, whereas
others are controlled by outside bodies, such as agencies the company hires for this
specific purpose. 24
Two effective personal communication channels are word-of-mouth influence
and buzz marketing. Word-of-mouth influence is an example of viral marketing,
whereby customers themselves give opinions on the product or service through
different media channels, which in turn can affect sales. Buzz marketing is the
channel that makes use of an opinion leader who spreads information about a
product or service in the circles in which these opinion leaders operate.

1·9·4·2 Non-personal communication

These channels are considered non-personal as they are meant for mass media,
which leave no room for personal contact or feedback. These channels include major
media, atmospheres and events. Major media includes online media, print media,

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 Chapter 7 -Integrated marketing
------------·----------------·-

broadcast media and display media. Atmospheres are designed environments that
reinforce the consumer's inclination to purchase a product or service. This is the
type of channel that lawyers make use of, in terms of their offices being stylishly and
elegantly furnished. Events are the media channel that makes use of staged events to
inform the consumers about the company or about a specific message.
Often non-personal communication is followed up by personal communication.
There has also been a trend to include the personal communications that have
taken place between the company and the customers in the non-personal
communications. 25

7·9·5 Collecting feedback

This is the response of the target market or the audience to the message that has
been sent out. This is an important step as the company can establish whether the
message and its objectives have been successful. This is imperative as the company
has to know if the message has to be adjusted in order to achieve the intended results.
Certain aspects of feedback are important in order for the company to make the
necessary changes. These aspects are: whether customers remember the message and
the frequency of viewing the message; which points they can recall; and their attitude
towards the product and company before and after the message has been seen. 26

7.10 The marketing mix

The care and attention to detail that has to be exercised by marketers will assist in
the key decision-maldng areas of marketing, such as choice of target market and the
appropriate marketing mix for that target market.
The choice of a target market and positioning of the product offering in the market
were dealt with in Chapter 6 and briefly in Section 7 .6.
The second key decision-making area is the marketing mix. Although it is not the
aim of this book to discuss the marketing mix in detail, we do need to introduce the
topic and briefly discuss the impact of these building blocks on the components of
the marketing mix.
The marketing mix is a set of marketing tools that the business makes use of to
implement its marketing strategy. 27 These tools are used by the business to produce
the response it desires from the target market, which is almost always for the customer
to purchase its products and/ or services. These marketing tools are also known as the
four Ps, which are product, price, place and promotion. Product refers to the goods-
and-services combination that the company offers to the customers it has decided
to target. Price is the amount of money that the customer has to exchange for the
product. This is the value of the product, in monetary terms, which the customer
will be willing to pay. Place includes the activities that need to take place in order for
the product to be made available to customers. Promotion is the activities that the
business uses to communicate to the target market the benefits of the product, as

1.81
 Essentials of Marketing

well as to persuade them to purchase the product. It is accomplished through the use
of advertising, personal selling, sales promotion and publicity. 28 1hese four tools are
combined to assist the business in achieving its objectives, as shown in Figure 7.10
and discussed below.

Figure 7.:1.0 The four Ps of marketing

Source: Adapted from Lafnez, JM, Reklaitis, GV & Puigjaner, L. 2010. Linking marketing
and supply chain models for improved business strategic decision support. Computers and
Chemical Engineering, 34(12): 2108.

7.1.0.:1 Product decisions

The product decision is imperative as this represents the key component in the
marketing offering. This concerns the construction of the offering that is of value to
the customers that the business targets. This is the basis on which the business builds
the customer relationship that is profitable for the business. 29
The marketer needs to make decisions regarding the range of products and/or
services that the business wishes to offer. This is called product mix. The marketer has
to establish specific product strategies. The marketer could either decide to extend
the product mix through product diversification or to reduce the product mix through
specialisation. The product range can also be standardised or differentiated. In the
product strategy, the marketer has to decide on development and commercialisation
of the products that must be developed. Decisions for the product and package
design are imperative as these are related to the product decisions.
Other product-related issues that have to be considered are the branding
decisions and how to raise awareness about the product or brand within the selected
target market. The development and design of the product offering and the package
depend on the results of the environmental analysis and the customer analysis.
These are essential steps that have to be completed before making decisions about
the marketing mix because the marketer cannot design a product offering to meet
the customers' needs if these two areas have not been researched.
For example, changing economic conditions may make it necessary to develop a
lower-priced product. Toyota SA developed the Tazz range of cars as a response to
economic changes in the marketplace that generated more attention on entry-level
cars. (The Tazz was eventually replaced by the Etios and Yaris ranges.)
Evolving use of products may necessitate design changes. Both of these could
lead to new product opportunities and/or brand extensions.

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 Chapter 7 -Integrated marketing

7.:1.0.2 Pricing decisions

Price is important as it is the only element of the marketing mix that makes revenue
possible. The marketer's role in generating revenue for the business is to establish the
price sensitivity of the target customers, which will contribute to establishing the basic
price that can be set for the product offering. This price can be calculated by taldng into
consideration the basis of costs, demand for the product and the competitive pricing
structures, all of which are able to influence the setting of a price.
The use of adjustments can assist in establishing flexibility in the pricing structure.
This can be done through instruments such as discounts, as well as the geographic
location of the target customers.
The environment has an effect on pricing as the different economic conditions
of a specific location can mean that lower-priced alternatives may be preferred.
Environmental scanning has to be conducted in order to analyse whether environmental
factors have an effect on pricing. Material or process developments could have an impact
on the bottom line as they will have an effect on costs, which in turn will have an effect
on pricing and profit margins. Technology is another factor that could have an effect
on pricing as this is an ever-changing factor that may have positive or negative effects
on the business. Developments such as 'just-in-time' materials management systems
and e-commerce have had a significant impact on the profit margins of motor vehicle
manufacturers, as it is now possible to buy and sell vehicles online. Other products that
are sold online include clothing and groceries.
Marketers must also carefully research and monitor the target market's sensitivity
to its pricing strategy. In India, shampoo manufacturers discovered that many lower-
income consumers could not afford their shampoo offerings because the price was
too high for the quantity offered. They responded by developing single-occasion
sachets that allowed the consumer one shampoo, and priced it accordingly. This
resulted in a significant increase in the volume of shampoo sold and improved
profitability.

7.:1.0.3 Distribution (place) decisions

In order for the product offering to reach the customer, there has to be an effective
distribution channel to meet the market's needs and expectations. The marketer's
task in distribution is to determine what intensity of distribution is needed to meet
the market's needs and wants and to then establish the necessary channel. The
different types of distribution intensities are intensive, selective or exclusive.
Along with this distribution intensity decision, the marketer decides on the type
of distribution channel that will be most effective in delivering the product or service
to the target market. There are a number of channels from which the marketer can
choose, such as direct channels, or those that make use of intermediaries, such as
retailers, wholesalers and agents. The environment also has an effect on this element
of the marketing mix, such as the added advantage of being able to order products
Essentials of Marketing

over the internet, or deliver digital products over the internet. The internet has had
a revolutionary effect on the way in which some businesses, such as Amazon, reach
their target markets.
Dell overtook Compaq as the leading personal computer seller in the US, and
one aspect that may have helped is that Dell had a completely different distribution
strategy from Compaq. While Compaq distributed through traditional computer
retailer channels, Dell used a direct channel by selling to customers by means of the
internet. This innovation led to significant reductions in distribution costs and also
had a direct effect on its pricing policy.
Marketers must monitor changes in the environment as well as the customers'
expectations of where they want to purchase products. In so doing, they will always
be able to meet customers' needs by providing the right product at the right time and
in the right place.

7.10.4 Promotion decisions

The promotion variable of the marketing mix revolves around the business informing
current and potential customers about its products and services as well as marketing
activities. This can be communicated by means of marketing communication tools
such as advertising, sales promotion, personal selling and publicity.
Not only does the marketer have to decide which channel to use, but he or she
also has to decide on what message to deliver, what media to use, what size budget
is required and which promotional support activities will have to be implemented.
The marketer also has to take into consideration communicating these decisions
to employees so that they are aware of what the market's expectations are and the
message the business is intending to deliver to the target market. These decisions
have to be coordinated, applied and evaluated.
The selection of the media is imperative and therefore the marketer has to
pay special attention to the media choices available. The internet provides an
increasing number of growing media channels. The marketer's role is to choose the
appropriate media channel that is suitable for the target audience and the message
being delivered, as well as the product offering. Effectiveness of the message being
delivered has to be taken into consideration as this is dependent on the type of media
chosen. 11lis requires systematic research of the customer base to monitor trends
in terms of media, as well as advertising-campaign impact. Nando's, for example,
has been particularly effective in designing campaigns that are related to current
events in South Africa. Its success is the result of monitoring the environment for
opportunities.
A good example of the process of setting a marketing mix is the actions Samsung
took when trying to establish its brand as a global consumer brand. It had been
a manufacturer of computer chips and decided to reposition itself as a global
consumer-goods brand. Its target market changed from mostly business customers
 Chapter 7 -Integrated marketing

to global consumers, and it wanted its brand name to be positioned as a well-loved,

high-quality consumer brand. It broadened its product mix into consumer goods,
such as white goods and consumer electronics, and embarked on a global marketing
campaign to get its brand known and associated with high quality. It chose to deal
with big retailers and wholesalers who were active in consumer markets. It priced
its products in line with its desire to be seen as high quality, but still provided highly
attractive price points in order to reach value-seeldng segments. It used mass media
to get its name better known as a player in consumer products for consumer lifestyles.
The success of the Samsung brand over the last 20 years was not based on luck, but on
a carefully thought-out, well-executed, integrated marketing campaign, with all the
elements of the marketing mix worldng in unison to achieve its marketing objectives.

TaylorMade is a well-known manufacturer and marketer of golf clubs and footwear,

and its products are used by millions of golfers around the world. The leadership.·
of TaylorMade, in terms of database marketing, has given them a significank
advantage over their competitors in a very competitive industry. Their database
consists of over 1.,4 million names and addresses. This enables the company to
contact and enhance relations with the users of its products. If individuals on the
list have internet access, for example, they receive a weekly online magazine with
information on golfing destinations and playing tips from golf professionals. In,
:-each mailing of the magazine, readers are asked information about products they .
prefer, prices, and so on. This is then used to input into product designs andpricing ,
decisions. It can also merge its list with that of subscribers to golf magazines 9nd ''
t', th('!n)ailor e-mail ads to each category of subscriber. . ..

Cause-related marketing is any business-related activity by which business,

charities and/or causes form a partnership with each other in orderto market
images, products and/or services for the benefit of both. A lot of organisations are
forming agreements with charities and/or causes with the aim in mind that each
party will benefit. It is important to realise that this type of relationship is much
more than just 'we give X rand for each amount spent'. This relationship means a
collaboration between the parties, where the business can help deliver physical
benefits to a particular cause or charity over a specified time.
Source: Adapted from Barrett, D. 2002. The rise of cause-related marketing. Harvard
Business School, Harvard College, p 2.

1.85
 Essentials of Marketing

Harley-Davidson provides a good example of how a company used the traditional

four Ps of marketing to position its motorcycles_ in a new customer segment1
the baby poomer generation in the US.The product was changed by introducing
a new engine 1 but the heavy-metal look was retained. The promotional strategy
was changed by shifting the advertising to promote a softer image. It featured
celebrities on a Harley-Davidson 1 the objective being to attract the high-income
segment. It changed its distribution strategy by cleaning up the dealerships so that
they did not look so dark and so that they were more customer friendly. Harley-
Davidson does not sell only motorcycles now - it also sells motorcycle fashion
accessories 1 which are displayed in a clean 1 bright atmosphere. The motorcycles
are priced to reflect the value that the high-income earners place on living out their
fantasies on a Harley-Davidson motorcycle. The upper end of the motorcycle range
often runs into the $20 ooo price range. All these components demonstrate a well-
coordinated marketing mix targeted at a specific segment of the market.

Summary
In this chapter, we have established how the topics covered in the previous chapters
help to shape the decisions made by marketers in terms of the marketing mix. In fact,
a number of analyses were needed in order to accomplish this. Firstly, the marketing
orientation of the business had to be analysed to ensure that the company culture
is correct and proactive. Secondly, the marketing environment and its effect on all
the decision-making areas of marketing were highlighted. Thirdly, we emphasised
the importance of marketing research in order to align the market offering with the
marketing environment and to meet customer needs. This all entails a thorough
understanding of the customer and the characteristics that affect the decisions made
in terms of purchasing. Lastly, target market selection and positioning is critical,
as all the decisions made by marketing are as a result of selection and positioning,
which are the main considerations for all marketing decisions. Figure 7.11 places the
philosophy and approach discussed in this book into context.

1.86
 Chapter 7 -Integrated marketing

· Dev~loprnent of niarketingmix

T"got mrot "lectioo >od prHooiog [ jl

Customer needs !I :! segmentation

Market II
. I
Competitor •.·
analysis . I
1

~---!._____~~--[--~I 1-cJ
Market orientation and culture

Figure 7.:1.1 Core analyses for marketing decisions

References
1. Kotler, P & Armstrong, G. 2012. Principles of marketing. 14th ed. Harlow: Pearson
Education, p 76.
2. Farrell, MA, Oczkowski, E & Kharabheh, R. 2008. Market orientation, learning orientation
and organisational performance in international joint ventures. Asian Pacific Journal of
Marketing and Logistics, 20(3): 292.
3. Narver, JC & Slater, SF. 1990. The effect of a market orientation on business profitability.
Journal of Marketing, 54(4): 21.
4. Ibid, pp 21-22.
5. Jooste, CJ, Strydom, JW, Berndt, A & DuPlessis, PJ. 2012. Applied strategic marketing.
4th ed. Cape Town: Pearson Education, pp 29-31.
6. Cant, MC. 2010. Marketing: An introduction. Cape Town: Juta, p 59.
7. Ibid.
8. Ibid.
9. Parumasur, SB & Roberts-Lombard, M. 2012. Consumer behaviour. Cape Town: Juta, p 2.
10. Wilson, RMS & Gilligan, C. 1997. Strategic marketing management. Oxford: Butterworth-
Heinemann, p 158.
11. Jobber, D. 2008. Principles and practice of marketing. 5th ed. London: McGraw-Hill,
p 547.
12. Kotler & Armstrong, op cit, p 433.
13. Ibid, p 434.
14. Ibid, p 436.
15. Ibid.
16. Doorley, J & Garcia, HF. 2008. Reputation management: The key to successful public
relations and corporate communications. New York: Routledge, p 269.
17. Du Plessis, PJ & Rousseau, GG. 2007. Buyer behaviour: Understanding consumer
psychology and marketing. Cape Town: Oxford University Press Southern Africa, p 111.
18. Kotler & Armstrong, op cit, p 432.
19. Ibid, p 433.
Essentials of Marketing

20. Kotler & Armstrong, op cit, p 434.

21. Ibid, p 440.
22. Ibid.
23. Ibid, p 441.
24. Ibid, p 442.
25. Ibid, pp 443-444.
26. Ibid, p 444.
27. Ibid, p 36.
28. Ibid, p 37.
29. Ibid, p 248.

188
 Chapter 8

Strategic marketing

Learning objectives
After you have studied this chapter, you should be able to:
11 understand and explain what strategic marketing is
• discuss strategic versus tactical planning
• examine the importance of implementation
• describe the nature of control
• identify and explain the steps in the evaluation and control process.

8.1 Introduction
Throughout this textbook, a number of important issues have been discussed, all
of which marketing managers should focus on. When discussing the integration of
the marketing components, the elements of a marketing strategy were mentioned.
To make a success of any strategy, it is essential that the total marketing process is
managed with care. This leaves managers with the responsibility of implementing,
monitoring and controlling plans and taldng corrective action if necessary.
Marketing management is responsible for planning, implementation and control,
which should be conducted on a continuous basis. Doing these activities once a year
or once a quarter is not sufficient. When planning a marketing strategy, marketers
must follow up by implementing and controlling efficiently, because it is senseless
to spend vast sums of money on the planning stage if the plans are not implemented
properly.

8.2 Strategic marketing management

8.2.1 The meaning of strategic marketing management
The strategic marketing management process consists of three steps, namely
planning, implementation and control. These steps and the relationships that exist
between them are illustrated in Figure 8.1.
 Essentials of Marketing
--------·----·-------------------- ·---·---------

ic
I ccimpo~ents ofstrategic marketing

i· lmplemE!ntation _
a
•
Developing Organisational structure • Measure results
strategic i• Leadership
Ia
Evaluate results
I
L;--J
;
1
plans I• Organisational culture Ta~e corrective
[• Planning ~ • ~-anagerial proce:ses

-----1--
models

r·---·-----------l
[_______ Fee~c:_c:~_____ __j

Figure 8.:1 The relationship between planning, implementation and control

Source: Adapted from Kotler, P & Armstrong, G. 1993. Marketing: An introduction. 2nd ed.
Englewood Cliffs, NJ: Prentice Hall, p 52.

Strategic marketing occurs in a strategic context, suggesting that the organisation

has a long-term vision of achieving its organisational goals, while incorporating
marketing objectives with the overall organisational objectives. Therefore, it can be
concluded that strategic marketing management requires the marketing department
to base decisions on long-term growth with the aim of survival in a competitive
environment.
In this chapter, the management tasks of planning, organising, leading and
controlling will be discussed. 1

8.2.2 Strategic versus tactical planning

Planning can be categorised according to its scope or breadth, for example, a broad
plan focuses on far-reaching organisational objectives that could play a major role in
the organisation for over five years. More specific plans focus on individual business
units and are applicable for shorter time periods. Planning can also be categorised
as strategic or tactical, as described below.
Strategic planning occurs when an organisation's primary objectives are
determined and certain courses of action are adopted to achieve these objectives.
An organisation's future can be influenced drasti~ally by strategic planning, as this
provides the organisation with a long-term direction on which all decisions should
be based.
~--I~~-!i.E~~.E~~::~~::£..~-~T.E!"~-~-~£!~.§.!!~!~.s!s.PJ~nl1!ngJ:lY g~J9Jngthe.im.pl~,p e~ ta~~
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near future. These activities should be completed in order to implement the larger
strategies. Tactical planning may require swift decision-making and responses. 2
 Chapter 8- Strategic marketing

BMW's far- reaching strategic planning generally enables BMW to maintain its status
as a top-quality vehicle manufacturer. Unfortunately, its excellent strategic planning
could not prevent the organisation from having its reputation damaged because of a
recall of 1,3 million vehicles globally. After discovering a potentially dangerous issue,
the organisation's officials were forced to formulate and implement a new tactical
plan as quicldy as possible in order to keep the damage to BMW's reputation minimal.
They developed a solution to the issue and contacted all the owners of the specific
model. The owners of these vehicles were requested to visit a BMW dealership for
repairs, free of charge, which were completed in 30 minutes. Quick response and a
practical, simple solution allowed BMW to regain the trust of its loyal customers and
restore its reputation. 3

8.3 Planning
8.3.:1 The nature of planning
Planning is one of the most central marketing activities and it always begins with
information gathering. Information can be sourced from internal and external
environments and should be interpreted and continuously monitored. A decision
can be reliable only if it is based on reliable information; this highlights the
importance of extensive marketing research and forecasting before decisions are
made. This usually requires a detailed SWOT analysis to be conducted by marketing
management in order to identify the organisation's capabilities, limitations and
possible lucrative opportunities.
Planning holds many advantages for any organisation, including:
• encouraging systematic thinldng about the organisation's future
• leading to improved communication between different departments and levels
of management
• establishing performance standards for measuring results
111 providing a logical basis for decision-making
• improving the organisation's ability to cope with change
• enabling the organisation to succeed in a rapidly changing business environment
• enhancing the organisation's ability to identify marketing opportunities. 4
Various factors can cause an organisation to fail in a competitive market
environment, for example, the market segment size, customer preferences and the
actions of competitors all interact to affect the outcome of any strategic marketing
plan. The large number of influential factors and the uncertainty these cause, leave
organisations with no choice but to analyse them systematically in order to determine
their impact. Strategic marketing plans can then be designed to meet current and
future challenges in the environment. These tasks are accomplished through the
marketing planning process.
Essentials of Marketing

Strategic and marketing plans are then turned into actions aimed at achieving
objectives through implementation. People from inside and outside the business
should work together to implement the strategic and marketing plans. The results
of the plans should be measured and controlled in order to determine whether or
not they were implemented successfully. Should the results be unsuccessful and the
objectives unmet, corrective action should be taken. Marketing analysis provides
an organisation with information and controls that are needed for all the other
marketing activities.
While it makes sense to conduct planning before starting with implementation
and control, bear in mind that planning (like implementation and control) is
dependent on the results of preceding analysis. It does not always have to be first
in the process, and it does not necessarily end before marketers start with the other
activities. 5

8.3.2 The marketing planning process

A marketing plan is a written document containing guidelines for an organisation's
marketing programmes and allocations over a certain period of time. The use of
marketing plans includes the following benefits:
• Consistency. Marketing action plans will be consistent with the overall corporate
plan as well as with the other functional plans.
• Responsibility. Those people responsible for implementing the individual parts of
the marketing plan will know their responsibilities and their performance can be
monitored accordingly.
• Communication. Those involved in implementing the plans will be aware of what
the overall objectives are, as well as the assumptions that lie behind them.
• Commitment. If all involved agree to the plans, their agreement should stimulate
a group commitment.
Marketing planning is an activity directed towards the future. An organisation will
need wide-ranging and reliable information about all the environments applicable to
them before being able to make a knowledgeable estimate of what their future could
hold. While some decisions are implemented immediately, many decisions that are
made today may be implemented only in the distant future. This demonstrates that
marketing planning can occur in the short, medium and long term. It is relatively
easy to make accurate forecasts in the short term (usually about one year). It becomes
more difficult in the medium term (three to five years), and it is increasingly risky and
difficult to make long term forecasts (over five years), when the accuracy of forecasts
may become uncertain. Nevertheless, it is crucial to conduct planning over all three
phases to ensure long-term survival and growth.
An important step in planning is environmental scanning. In most cases, a
marketing audit will serve as the foundation of such an environmental scan. The
 Chapter 8- Strategic marketing

process may be complex, but the aim is straightforward: to identify the existing
factors - external and internal - that could significantly impact the future of the
organisation.
A particularly practical and widely used technique for analysing the material
gathered in the environmental scan is the SWOT analysis. A SWOT analysis is a
summary of the major findings of the organisation's current situation under the
headings strengths, weaknesses, opportunities and threats, as illustrated in Table
8.1. This makes it easier for an organisation to identify which areas to focus on. The
SWOT analysis groups information into two main categories, namely internal factors
and external factors.
1. Internal factors. The strengths and weaknesses identified during the SWOT
analysis can be seen as internal factors, suggesting that the organisation has a
certain level of control over these factors.
2. External factors. The opportunities and threats identified during the SWOT
analysis can be seen as external factors, suggesting that the organisation cannot
control these situations.
All information regarding internal and external factors is systemised and kept up
to date in a marketing information system. This allows convenient access to the
information for planning purposes and market forecasting. 6
Table 8.:1. The components of a SWOT analysis

Activities that an organisation should

improve on to keep competitors from
gaining advantage
THREATS·······

Situations in the marketing environment Situations in the marketing environment

from which the organisation can benefit if that the organisation cannot use to its
it takes advantage of them advantage, but instead pose a threat to
the organisation's profitability
Source: Adapted from Cant, MC. 2013. Marketing: An introduction. 2nd ed. Cape Town: Juta,
p 233.

8.4 Implementation
The next step in the strategic marketing management process is implementation.
Planning is useless to any organisation without having an implementation strategy
in place. Strategy implementation as outlined in Figure 8.2 will now be discussed.

193
Essentials of Marketing

.·.·I
_._I
i

• Delegating
authority I• Resource
allocation
I. Reward
•
•
Coordination
Communication I systems
• Motivation
L~~~-

Barriers to implementation

Figure 8.2 Important factors of strategy implementation

Source: Adapted from Cant, MC, Strydorn, JW, Jooste, CJ & DuPlessis, PJ. 2006. Marketing
management. 5th ed. Cape Town: Juta, p 566.

8.4.1 The importance of implementation

Implementation refers to the process of putting marketing strategies into action.
Even though marketers often neglect the implementation process, focusing instead
on strategic planning, the implementation process can determine the success or
failure of a marketing strategy. Marketers should therefore realise the importance of
implementation.
Another important factor to remember is that marketing strategies seldom
turn out as planned. Organisations usually deal with two ldnds of strategy, namely
the intended strategy and the realised strategy. The intended strategy is what was
decided on during the planning phase. The realised strategy is the one that actually
takes place. The way in which the plan is implemented will result in a difference
between the intended and realised strategy. The realised strategy could turn out to
be either better or worse than the intended strategy, but it usually does not live up to
the expectations of the planners. 7
The course of implementation strategies through the organisation can be
compared to a cascade; goals and decisions flow down an organisational hierarchy
much like water flows from pool to pool in a Japanese garden. Strategic plans are
developed at the first level in an organisation; they are then communicated to the
level below, where they are interpreted and translated into actions, which aim to
achieve the broader strategy. Therefore, an organisation's design and management
are critical factors in the successful implementation of a strategy.
Marketers do not have one specific, agreed-upon framework that can be used for
strategy implementation; this is one of the main reasons for failure during the imple-
mentation process. A practical yet theoretically sound model that guides executives,
managers and supervisors through the implementation process can prevent failure.

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 Chapter 8- Strategic marketing

Research on various implementation strategies suggests that there are important

similarities among the different strategies. Most strategies consist of similar
factors, including strategy formulation, organisational structure, culture, people,
communication, control and outcome. This means that when marketers develop an
implementation strategy, they should consider multiple factors simultaneously. 8

8.5 Control
8.5.1. The nature of control
The control phase - also known as the evaluation phase - is an absolute necessity
for today's marketing managers. Control enables managers to assess mistakes
made before or during a project in order to ensure more effective planning and
implementation in the future. The term 'control' is closely linked to 'monitoring;
but differs in the following way: 'control' is concerned with the periodic process of
assessment for the purpose of learning, while 'monitoring' is an ongoing process of
data capture and analysis for the purpose of control. The number of stakeholders
who want proof of the results of their project investments is increasing, making the
control phase all the more important.
The purpose of control and monitoring includes:
• ensuring project performance through informed management decision-making
and control
• demonstrating accountability through transparency and accountability
• promoting organisational learning through testing development hypotheses and
capturing lessons learned.
Evaluation is a necessary adjunct of control, as actions must first be evaluated to
determine whether or not they are on target before they can be controlled. Control
is seen as the ongoing process of measurement and the monitoring of the results of
marketing strategies and plans. Afterwards, corrective action is taken, ensuring the
achievement of marketing objectives and success over competitors. Thus, it is the
directing and redirecting of an organisation's actions with the aim of ensuring that
objectives are achieved.
In terms of marketing, control has two dimensions: a corporate or strategic
business unit (SBU) dimension, and a product dimension. Control in the corporate
or SBU dimension refers to keeping the components of the strategic marketing plan
on target and redirecting them when needed. In the product dimension, it refers to
product-marketing control or keeping the marketing plan on target. 9

8.5.2 Steps in the evaluation and control process

It is essential for an organisation to have a systematic basis on which each marketing
effort can be evaluated and controlled at corporate and product levels. Figure 8.3
represents a model of marketing evaluation and control.

~95
 Essentials of Marketing

Step 3: Develop a marketing organisation

Step 4: Develop the marketing plan

Steps: Control marketing performance

Step 6: Take corrective action

Figure 8.3 A model of marketing evaluation and control

Each step in the model is discussed below. 10

Step 1: Establish performance criteria

There is a strong link betwt?en planning and controlling, as the performance criteria
that are set during the planning phase have to be measured during the control phase.
These performance criteria could include, for example, the business and marketing
objectives. The control phase can be made much easier if performance criteria are set
in such a way that they are measurable, ordered according to priority and achievable.
Control will be difficult and sometimes impossible if performance criteria are vague,
generalised and unrealistic.
Standards can be determined for various marketing activities. They are especially
useful with routine activities, for example, determining the weekly number of visits or
demonstrations that are expected of sales representatives. Standards can also be set for
once-off marketing projects, like the activities regarding a specific advertising campaign.
Performance criteria can be set in quantitative and qualitative terms, depending
on the marketing activities.

Step 2: Develop performance projections

After establishing performance criteria, the organisation must develop performance
projections for products and business units. This is done in the form of a profit-and-
loss statement. A profit-and-loss statement is developed by establishing a budget for
a product or business unit, including cost and revenue estimates.
 Chapter 8- Strategic marketing

Many organisations today are using zero-based budgeting for this, a variation of an
objective-task approach, in which past sales or competitive expenditures are not
considered. The organisation decides on a budget at the beginning of each year and
estimates the necessary expenditures by considering the actions that are required
to meet its profitability goals. Zero-based budgeting provides an objective basis for
controlling marketing performance, making it a popular approach. It simplifies the
control phase as expenditures are evaluated from a zero starting point.
Other organisations prefer to assess marketing expenditures by comparing the
numbers to those of previous years. An organisation would, for example, argue that
it increased the advertising budget by 5% compared to the previous year and control
advertising results on this basis. The fallacy is that notwithstanding the increase, the
budget from the previous year might have been too high or too low to begin with.
This problem is overcome by using zero-based budgeting. No matter what the budget
is, the only basis for assessing the expenditure value is by considering the profit it
produces, with no reference to previous expenditure.

Step 3: Develop a marketing organisation

During this step, the organisation must establish a marketing organisation capable
of implementing and controlling marketing strategies. The different marketing
organisation structures have been discussed previously.

Step 4: Develop the marketing plan

The development and implementation of a marketing plan have also been discussed
previously. Bear in mind that people are involved in the implementation of plans and
that it is natural for conflict and resistance to occur. A corporate culture conducive to
harmony in the organisation is therefore a critical requirement.
Steps: Control marketing performance
Control takes place when the actual results are compared to the previously
formulated performance criteria. This means that managers need to systematically
analyse whether or not the activities that have taken place are in line with the
performance criteria identified during the planning phase. Strategic control points
are established beforehand and overseen by individuals with the necessary authority
to exercise control. The product manager, advertising manager and sales manager
are responsible for measuring and noting actual performance against the previously
identified performance criteria.
As mentioned before, control can take place before, during and after the actual
activity takes place. Even though it might not always be possible, it is ideal to control
the implementation of activities before or at least during the process, in order to
identify deviations from the plan in time to be able to make the necessary changes.
Time and money can be saved this way. If this is not possible, marketing control will
have to take place after the event has occurred and becomes a matter of recovery

197
Essentials of Marketing

management. Recovery management aims to establish a basis that can be used in

future planning and to prevent a repetition of a deviation in the future, known as
preventive management. It may be difficult to exercise effective control, especially in
large organisations. To solve this issue, strategic control points can be delegated to
lower-level employees, while top management is informed only in cases where there
are exceptional differences and deviations from the preset performance standards.
This process is known as control by exception. Should deviations occur, the
responsible parties should first determine the nature and extent as well as reasons
for the deviations before taldng corrective action.

Step 6: Take corrective action

In many cases, actual performance will be below the preset performance criteria
and steps must be taken to improve performance. For example, if sales during the
first quarter of the year are lower than the norm set in the sales budget, corrective
measures can be taken in the form of an intensive marketing campaign. Corrective
action can be taken in three possible areas: territory decisions, product decisions
and customer and order-size decisions. For example, if the relative profitability of
each product or group of products is known, informed decisions can be taken. As
in the case of unprofitable models, sizes or colours can be eliminated; salespeople's
compensation plans may be altered to encourage the sale of high-margin items; or
channels of distribution may be changed.
While there are specific actions that can be taken in each area, the following three
broad guidelines can be followed. When the discrepancies between actual and set
performance are significant, a decision must be made on whether the deviations
warrant correction.
These deviations can be dealt with in various ways:
1. take corrective action that eliminates the cause of the deviation
2. change performance standards if it becomes clear that the standards set in the
marketing plan are no longer realistic
3. keep the same goals and allow the deviation from the plan to continue.
In cases where the deviation from the preset plan is caused by uncontrollable
environmental factors, standards have to be lowered iftheywere set too high to begin
with. It is also possible that actual performance can exceed the preset standards in
more favourable circumstances. Standards will also have to be adjusted in this case.
For example, if actual sales in the first quarter exceed the norm set in the budget, an
adjustment will avoid possible stock problems in the second quarter.
The information on past deviations, the reasons for those deviations and the
nature of corrective action can be used in future periods during the forecasting
process in order to set more accurate standards and minimise deviations.
 Chapter 8- Strategic marketing

Summary
Planning, implementation and control, known as the components of strategic
marketing, direct the marketing task in the organisation. Marketing management
plans market-driven marketing and market strategies while considering internal
strengths and weaknesses, as well as external opportunities and threats. It considers
consumer needs, demands and preferences as well as the competitive position of the
organisation. The main objective of all organisations is the maximisation of profits.
This can be realised only through aggressive marketing efforts, the creation of an
effective organisational structure, the judicious application of resources and the
establishment of a control system through which performance standards are set and
activities controlled.

References
1. Cant, MC, Van Hem·den, CH & Ngambi, H. 2013. Marketing management: A South
African perspective. 2nd ed. Cape Town: Juta, p 506.
2. Doone, LE & Kurtz, DL. 2012. Contemporary marketing. 15th cd. Mason, OH:
South-Western Cengage Learning, p 39. Available from: http:/ /books.google.co.za/
bo oks?hl=en&lr=&id=- e0Yt7AxEVOC&oi=fnd&p g=PR4&dq=Kurtz. +2008. +Principles+ of
+contemporary+marketing&ots=ct28AEn_IO&sig=GAo5S762cUywP6LEAYRre8CePuA#
v=onepage&q&f=false (Accessed 21 June 2012}.
3. Dean, G. 2012. BMW recalls previous-generation 5 and 6 Series. Carmag. Available
from: http:/ /www,carmag.co.za/article/bmw-recalls-previous-generation-5-and-6-
series-2012-03-27 (Accessed 21 June 2012}.
4. Cant, MC. 2013. Marketing: An introduction. 2nd ed. Cape Town: Juta, p 233.
5. Cant eta!, op cit, p 471.
6. Ferrell, OC & Hartline, MD. 2011. Marketing strategy. 5th ed. Mason, OH: South-Western
Cengage Learning, p 31.
7. Pride, WM & Ferrell, OC. 2012. Marketing. 16th ed. Mason, OH: South-Western Cengage
Learning, p 44.
8. Okumus, F. 2003. A framework to implement strategies in organisations. Management
Decision, 41(9}. Available from: http:/ /www.scribd.com/doc/76190343/A-Framework
(Accessed 28 June 2012}.
9. Pride & Ferrell, op cit, p 36.
10. Cant et al, op cit, p 505.

~99
 Index

Note: Page numbers in italics refer to tables and figures.

A behaviour of consumers see consumer

behaviour
ad hoc research studies 73
benefits sought, by consumers 150
adoption of new products 131-132
bias
advertising 177
of interviewers 98
affective component, of attitudes 122
of respondents 98
AIDA (attention, interest, desire and
action) model 179 biasing questions 89
American Marketing Association 3, 18 BMW 115,191
AMPS Peoplemeter II 85 brand positioning see product
positioning
applied research 68
breakdown methods, to estimate
artificial observation 85, 88
market and sales potential 102-103
associative groups 129
broadband technology 22-23
atmospheres (designed
budgets 197
environments) 180-181
build-up methods, to estimate market
attention, in perception process 118
and sales potential 103
attention, interest, desire and action
business cycles 41
(AIDA) model 179
business position matrices see market
attitudes
attractiveness/business position
ofconsumers 121-123, 148, 151 matrices
of workers 32 business-to-business (B2B)
automatic groups 129 markets 15, 36, 151-152
auxiliary enterprises 4 business-to-consumer (B2C)
available markets 101 markets 15
buyer readiness stages 151, 178
B buying 6
B2B (business-to-business) buzz marketing 180
markets 15,36,151-152
B2C (business-to-consumer) c
markets 15 C2C (consumer-to-consumer)
basic research 68 marketing 15
behavioural (conative) component, of causal research 81
attitudes 122 cause-related marketing 185
behavioural targeting 108 Cell C 166-167
behaviouristic segmentation 140, censuses 94, 103
150-151
 Index

CGM (consumer-generated consumer-generated media

media) 107 (CGM) 107
change 26 consumer importance in marketing
child-dominant families 126 environment 35-36
closed questions 89 consumerincome 41,52,147
cluster sampling 95-96 consumer markets 36
Coca-Cola 59, 100-101, 120-121 consumer orientation 9, 33, 168
coding of data 98 consumer-to-consumer (C2C)
cognitive component, of marketing 15
attitudes 121-122 consumption and production, gaps
cognitive dissonance 130 between 3-4
communication strategy see marketing contingency planning 19
communication contingent reward leadership style 20
Compaq 184 control 19,21,195-198,196
competitors 36-37, 37, 162, 168 by exception 198
complaints of customers 11-12 of interviewers 97
completeness, of information 68 of marketing performance 67
conative component, of attitudes see convenience sampling 96
behavioural (conative) component, corrective action 198
of attitudes cost-benefit analysis 65
concentrated targeting 156, 157 CRM (customer relationship
conformists 148, 148 marketing) 105
consumer behaviour 110-111, 132 cultural factors, in international
attitudes 121-123 marketing environment 49-51,
cultural groups 127-128 49-50
decision-maldng process of cultural groups 127-128
consumers 130-132 cultural values 42
definition of 111-112, 111 customer analysis 174-175, 175
families 125-126 customer behaviour see consumer
group factors influencing 112, behaviour
125-129 customer complaints 11-12
individual factors influencing customer-orientated businesses 9, 28,
112-125 33, 168
integrated marketing 173-175, 175 customer relationship marketing
learning ability 111, 119-121 (CRM) 105
lifestyle 124-125 customer satisfaction 64
motivation 112-116, 114 cyber focus groups see internet, focus
opinion leaders 129 groups
perception 116-119 cyber surveys see internet, surveys
personality 123-124 cycles
reference groups 129 business 41
social classes 128-129 sales forecasting 105

201
Essentials of Marketing

D electronic equipment for

observation 85, 88
data
e-mail surveys 90
analysis of 98-99
emotional appeals 179
information vs 69
emotional motives, of consumers
needs for marketing research
115-116
81-84,82
emotional value, of products 16
primary 82, 82
emotions, positioning using 162
processing of 98-99
employee performance and
quality of 68
attitudes 32
relevance of 68
environmental influence 170
routine 69-70
environment see international
secondary 82-83, 82, 103 marketing environment; marketing
decision-makers environment
in families 126 environmental scanning 43-44, 170,
in organisations 99 183, 192-193
decision-making esteem needs 115
of consumers 130-132 evaluation see control
MIS and 172, 172 events, as media channel 181
Dell 184 exchange function, of marketing 6,
demographics 13-14,14
international marketing exchange rates 38, 41
environment 54-55 experimentation 85-86
segmentation 139-140, 142-143, expertsurveys 104-105
143-147, 147 exploratory research 80
socio-cultural environment 41 exporting 59
dependent variables in causal exposure, in perception process 117
research 81 extended families 125
descriptive research 80, 81 external environment see macro-
dichotomous questions 89 environment
direct marketing 177 external sources of information 83
distribution (place) decisions 183-184 extranets 106
domestic (local) marketing 48
F
E
face-to-face interviews 91
early adopters 131 factual surveys 88
early majority 131 families 125-126
economic environment 40-41, 52 feedback 181
economic motives, of consumers fieldwork 97-98
115-116
financial function, in organisational
efficiency motive 33 structure 17

202
 Index

financial resources, of IMC see integrated marketing

organisations 32 communication
financing, for customers 5 implementation 19-20, 19, 20,
Five Roses 128 193-195,194
focus groups 86-87 impulse decision-making 130
forecasting see sales forecasting income of consumers 41, 52, 147
four Ps see marketing mix independent variables in causal
franchising 59 research 81
India 54, 58, 183
G industrial markets see business-to-
business (B2B) markets
gaps between production and
industrial structure of countries 52
consumption 3-4
inflation 40
gender segmentation 147
influencers 126
general management function, in
information function, in organisational
organisational structure 17
structure 17
generation segmentation 147
information gap 4
geographic segmentation 140, 141,
information management see
142, 152
marketing information system
globalisation see international
information vs data 69
marketing environment
initiators 126
global marketing 47-48
'gold' consumers 151 innovation 32
innovative repositioning 163
government markets 36
innovators 131
grading 5
integrated marketing 166-187, 187
gradual repositioning 162
communication 176-177
green marketing 10
marketing communication 177-181
marketing environment 169-171,
H
170
habitual decision-making 130 marketing information system
Harley-Davidson 186 171-175,171,172,175
Honda 51, 171 marketing mix 167, 174-175,175,
human resources function, in 181-186,182
organisational structure 17 marketing orientation 168-169, 169
humour 58, 179 marketing process 167, 168
husband-dominant families 126 organisational integration 9
hypotheses 78-79 positioning 175-176
target markets 175-176, 176
integrated marketing communication
IBIS see International Business (IMC) 176-177
Information Systems intended strategy 194
IKEA 51 interactive marketing 22

203
Essentials of Marketing

interactive promotions 22 interviewers

interest rates 40, 52 bias of 98
inter-functional coordination 169 selecting, training and control of
internal environment see micro- 96-97
environment interviews see surveys
internal reporting subsystem, of intranets 106
MIS 71 IPTV (internet protocol television) 22
internal sources of information 83 'iron' consumers 151
International Business Information
Systems (IBIS) 72 J
international marketing
joint venturing 59
environment 38-39,46-47,59-60
judgement sampling 96
decision-making process 55-59, 58
definition of international
marketing 4 7-48 L
external factors influencing 48-55, laggards 132
48, 49-50 laissez-faire leadership style 20
international markets 36 late majority 132
marketing mistakes in 51 'lead' consumers 151
marketing research for 106 leadership 20
see also marketing environment leading questions 89
internet learning ability ll9-121
broadband technology 22-23 legal environment 38, 53-54
competitive market structures 36 licensing 59
distribution (place) decisions 184 lifestyles 41-42, 124-125, 148
focus groups 87 Living Standards Measure (LSM)
interactive marketing 22 142-143, 143-147
interactive promotions 22 local (domestic) marketing 48
IPTV 22 loyalty status, of consumers 150-151
marketing research and 106-108 LSM see Living Standards Measure
marketing research companies
on 74 M
research reports on 99 macro-environment 27, 27, 33, 37-42,
secondary data on 83-84 66-67
statistics on 99 mail surveys 90
surveys 91 major media 180-181
wireless technology 23 management-by-exception leadership
. see also technology style 20
interpretation, in perception management tasks 18-21, 19, 20,
process ll8 189-191,190

204
 Index

market attractiveness/business marketing orientations 1-2, 6-10,

position matrices 155, 156 168-169, 169
market environment 27-28, 27, 34-37, marketing research 62-63, 108
37 analysis of 105-106
market forecasting 103-104 companies that provide 74
marketing definition of 63-64
core aspects of 12-16, 12, 14 importance in decision-making
definition of 2-4 63-68
functions of 5-6 international 106
importance of 1-2 internet's impact on 106-108
in organisational structure 16-18, marketing information system
17 68-74, 70
process of 2, 13, 68, 167, 168 market potential 99-105
marketing communication 22, sales forecasting 99-105
176-181, 184-185 steps in 74-99, 75
marketing environment 26-27, 44, step 1: identify problem/
169-171,170 opportunity 76-78
components of 27-28, 27 step 2: formulate hypotheses
environmental scanning 43-44 78-79
macro-environment 27-28, 27, step 3: determine research
37-42 objectives 79-81, 80
market environment 27, 27, 34-37 step 4: determine data needs
micro-environment 27-34, 27, 81-84,82
28-29, 30-31 step 5: select method of collecting
SWOT analysis 42-43 information 84-88
see also international marketing step 6: design form for collecting
environment information 88-91, 92-93
marketing function, in organisational step 7: determine extent of formal
structure 17 investigation 94-96
marketing information system step 8: select, train and control
(MIS) 6, 68-74, 70, 105-106, interviewers 96-97
171-175,171, 172,175 step 9: fieldwork 97-98
marketing instruments see marketing step 10: data processing 98-99
mix step 11: communicate findings to
marketing intelligence subsystem, of decision-makers 99
MIS 71-72 surveys 88-91,92-93,103,104,107
marketing mix 14-15, 14 use of 105-106
integrated marketing 167, 174-175, market offering 10-11
175, 181-186,182 market orientation (pure marketing
international marketing concept) 2, 8-9
environment 57-58, 58 market potential 99-105
marketing environment 33-34
marketing research and 65-66

205
Essentials of Marketing

markets, definition of 134 mistakes in international markets,

market segmentation 134-163 examples 51
advantages of 135-136 monetary policy of governments 41
bases for business markets 151-152 monitoring 195
bases for consumer markets see also control
139-151 monopolies 37, 37
behaviouristic segmentation 140, monopolistic competition 37, 37
150-151 moral appeals 179
business markets 151-152 motivation 112-116, 114
definition of 134-135 motivational surveys 88
demographic segmentation multi-segment targeting 156-157
139-140, 142-143, 143-140 147
disadvantages of 136 N
geographic segmentation 140, 141,
Nando's 184
142
natural resources 39, 55
mass marketing and 136-137
needs 12-13, 111, 113-115, 130
micro-segmentation l l
negative groups 129
prerequisites for 138-139
Nielsen Sociornonitor 148
psychographic segmentation 140,
147-148, 148-149 Nike 137
reasons for failure of 152-153 non-conformists 148, 149
RFM segmentation 137-138, non-personal communication
137-138 180-181
market standing, of businesses 32 non-probability sampling 95, 96
market targeting see target markets non-profit sector 15
Mars chocolate bars 86 non-random sampling 95, 96
Maslow's hierarchical classification of non-response error 97-98
needs 114-115,114 norms 127
mass marketing 136-137 , nuclear families 125
McDonald's 57-58, 59, 171
mechanical equipment for 0
observation 85, 88 objectives ofbusinesses 31-33
media channels 184-185 observational research 84-85
membership groups 129 oligopolies 37, 37
memory (recall) 119 online technology see internet
micro-environment 27-34,27,28-29, open-ended questions 89
30-31 operations function, in organisational
micro-segmentation 11 structure 17
middlemen 4 opinion leaders 129, 180
MIS see marketing information system opinion surveys 88
mission statements 29-30 organisational integration 9

206
 Index

organisational structures 17, 17, 18 production -orientated

orientation of organisations see organisations 1-2, 6-7, 10
marketing orientations productivity 32
ownership gap 4 product orientation 7, 10
product positioning 134-135, 157-163,
p 158,160,175-176
packaging 132 profitability 32, 33, 169, 169
partnerships 59 profit-and-loss statements 196-197
penetrated markets 101 profit orientation 9
progressives 148, 149
Pepsi 128
perceptions 116-119, 160 promotion decisions 184-185
perfect competition 37, 37 see also marketing communication
performance psychographic segmentation 140,
147-148,148-149
criteria for 196
public relations 177
of managers 32
public relations function, in
projections for 196-197, 196
organisational structure 17
of workers 32
purchasers, in families 126
performance value of products 16
purchasing function, in organisational
personal communication channel 180 structure 17
personality, of consumers 123-124
personal surveys 91 Q
physical environment 39
quality
physical resources 32
of data 68
physiological needs 114, 115
importance of 64
place (distribution) decisions 183-184
positioning methods 161
planning 19, 19, 190-193, 197
questionnaires 88-91, 92-93
'platinum' consumers 151
political environment 38, 53-54
population, in marketing research 94 R
positioning see product positioning radical repositioning 162
predictive research 81 random factors, in forecasting 105
preventive management 198 random (probability) sampling 95
price value 16 random sampling errors 95
pricing decisions 161, 183 rational appeals 179
primary data 82, 82 real decision-making 130
probability (random) sampling 95 realised strategies 194
Procter & Gamble 173, 175 recall (memory) 119
product decisions 162, 182 Recency, Frequency and Monetary
product image 124 value see RPM segmentation
production and consumption, gaps recovery management 198
between 3-4 Red Bull 125

207
Essentials of Marketing

reference groups 129 secondary data 82-83, 82, 103

reinforcement, in learning 120 segmentation see market segmentation
relational value 16 selective attention 118
relationship marketing 10-12 selective exposure 117
relevance, of data 68 selective interpretation 118
reliability, of questionnaires 90 self-actualisation 115
repetition, in learning 120-121 selling 6, 7-8
reports, research 99 sense of belonging 115
repositioning 159, 162-163 Sharwoods 51
research see marketing research simple random sampling 95
reseller markets 36 skills, of organisations 33
resources social classes 128-129
financial 32 social factors, in international
natural 39, 55 marketing environment 49-51,
of organisations 33 49-50
physical 32 social media 107
respondent bias 98 social needs 115
response, in learning 120 social responsibility 32
return on investment (ROI) 33 societal orientated organisations 2,
RFM segmentation 137-138, 137-138 9-10
risk taking 5-6 socio-cultural environment 41-42
ROI see return on investment South African Advertising Research
Foundation (SAARF) 142-143
routine data 69-70
space gap 4
special purpose data 69-70
5
standards 5, 198
SAARF see South African Advertising statistical subsystem, of MIS 72-73
Research Foundation
statistical techniques 99
safety needs 115
stimulus, in learning 119-120
sales-force surveys 104
storing 5
sales forecasting 99-105
strategic marketing 189, 190, 199
sales intermediaries 4
control 195-198, 196
sales-orientated organisations 2, 7-8,
implementation 193-195, 194
10
management 189-191,190
sales potential 102-103
planning 190-193, 193
sales promotion 177
stratified random sampling 95, 96
sample frame 94
strengths, weaknesses, opportunities
sample size 94-95
and threats see SWOT analysis
sampling 94-96
sub-cultural influences 42
Samsung 184-185
suppliers 35
satisfaction of customers 64
surveys 88-91,92-93,103,104,107
seasonality 105

208
 Index

SWOT analysis 42-43, 191, 193, 193 u

syncratic families 126 Umbra 51
undifferentiated targeting 156, 157
T unemployment 40
tactical planning vs strategic universal functions of marketing 5
planning 190-191 universe, in marketing research 94
target audiences 178 users, in families 126, 150
target markets
definition of 101 v
integrated marketing 175-176, 176
validity, of questionnaires 90
targeting 30, 30-31, 134-135,
value
153-157,155,163
of customers 16
taxation 41, 52
gap 4
TaylorMade 185
ofproducts 15-16
team coordination 169
values 148
technology
variables, in marketing
environment 39-40
environment 170
impact of 21-23
international marketing
environment and 53
w
observation 85, 88 wants 12-13
pricing decisions and 183 websites see internet
see also internet Werda 132
telephone surveys 91 wife-dominant families 126
time gap 4 wireless technology 23
timeliness, of information 68 word-of-mouth influence 180
time-series analysis 105 worker performance and attitudes 32
today-ers 148, 149
total market 101 z
Toyota 171, 182 zero-based budgeting 197
transformational leadership style 20 zero positioning 163
transitionals 148, 148-149
transport 5
trends 105

209
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