Haramaya University

College of Business & Economics

Department of Management

Lecture on
Principles of Marketing
(Mgmt 2121)

By: Abdeta G.
 Chapter 1

An Overview of Marketing
&
Marketing Management

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Chapter Outline
1. Definition of Marketing
2. Philosophies of Marketing Management
3. Fundamental Marketing Concepts,
Trends/Shifts & Tasks
4. Marketing as Source of Economic Utilities

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1. Definition of Marketing

Several Definitions

Why?

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Definitions (Cont’d)
 Marketing deals with identifying and meeting
human and social needs.
 One of the shortest definitions of marketing is
"meeting needs profitably."
 AMA defines marketing as “an organizational
function and a set of processes for creating,
communicating and delivering value to customers
and for managing customer relationships in ways
that benefit the organization and its stake
holders.”
Principles of Marketing Abdeta G. (Lecturer) 1/13/2017 5
Cont’d
 Then, Marketing Management is the art and
science of choosing target markets and getting,
keeping and growing customers through creating,
delivering and communicating superior customer
value.
 Marketing definitions has got social and
managerial aspects:
 A social definition shows the role marketing
plays in society. In this context marketing's role
is to "deliver a higher standard of living."

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Cont’d
 From managerial point of view marketing can be
described as "the art of selling products.”
What is to be marketed?
 Marketing people are involved in
marketing 10 types of entities: goods,
services, experiences, events, persons,
places, properties, organizations,
information & ideas.

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Who Markets?
 Marketers and Prospects: A marketer is
someone who seeks a response (attention, a
purchase, a vote, a donation) from another
party, called the prospect.

 If two parties are seeking to sell something to

each other, we call them both marketers.

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What Do Marketers Do?
 Marketers are skilled in stimulating demand for
a company's products, but this is too limited view
of the tasks they perform.
 Just as production and logistics professionals are
responsible for supply management, marketers
are responsible for demand management.
 Marketing managers seek to influence the level,
timing and composition of demand to meet the
organization's objectives. Eight demand states
are possible:

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Cont’d
 Negative demand: Consumers dislike the
product and may even pay a price to avoid it.
 Nonexistent demand: Consumers may be
unaware or uninterested in the product.
 Latent demand: Consumers may share a
strong need that cannot be satisfied by an
existing product.
 Declining demand: Consumers begin to buy
the product less frequently or not at all.

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Cont’d
 Irregular demand: Consumer purchases vary
on a seasonal, monthly, weekly, daily, or even
hourly basis.
 Full demand: Consumers are adequately
buying all products put into the marketplace.
 Overfull demand: More consumers would like
to buy the product than can be satisfied.

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2. Philosophies of Marketing Management
Marketing activities should be carried out under
some philosophy.
There are five competing concepts or philosophies
under which organizations conduct their
marketing activity:
 Production Concept
 Product Concept
 Selling Concept
 Marketing Concept
 Holistic Marketing Concept
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A. The Production Concept
 The Production Concept is one of the oldest
concepts in business.
 It holds that consumers will favor products
that are available and highly affordable.
 Managers of Production oriented businesses
concentrate on achieving high production
efficiency, low cost and mass distribution.

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Cont’d

This concept is appropriate under two

types of situations:
 When demand is higher than supply; &
 When improved productivity is needed to
bring high costs down.

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B. The Product Concept

 The Product Concept holds that consumers will

favor products that offer the most quality,
performance & features.
 Managers in these organizations focus on
making superior products and improving them
over time.

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C. The Selling Concept

 The Selling Concept holds that consumers will

not buy enough of the organization's products
unless the organization undertakes a large
selling and promotion effort.
 The selling concept is practiced most
aggressively with unsought goods, goods that
buyers normally do not think of buying, such
as insurance

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D. The Marketing Concept
 The marketing concept emerged in the mid-
1950s.
 Instead of a product-centered, “make and
sell” philosophy, business shifted to a
customer-centered, “sense and respond”
philosophy.
 The job is not to find the right customers to
your products, but the right products for your
customers.
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Cont’d
 The Marketing Concept holds that achieving
organizational goals depends on determining the
needs and wants of target markets and
delivering the desired satisfactions more
effectively and efficiently than competitors.
 This concept focuses on the buyer rather than the
seller.
 The marketing concept is practiced more in
consumer goods companies than in industrial
goods companies and more in larger companies
than in smaller companies.
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E. The Holistic Marketing Concept
 The holistic marketing concept is based on the
development, design and implementation of
marketing programs, processes and activities
that recognizes their breadth and
interdependencies.
 Holistic marketing recognizes that “everything
matters” with marketing and that a broad,
integrated perspective is often necessary.
 Four components of holistic marketing are:

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Cont’d
1. Relationship Marketing
 Relationship marketing has the aim of building
mutually satisfying long-term relationship with
key parties – customers, suppliers, distributors,
and other marketing partners.
2. Integrated Marketing
 The aim of integrated marketing is integrating
the marketing mix elements so as to create,
communicate and deliver the needed value for
customers.
Principles of Marketing Abdeta G. (Lecturer) 1/13/2017 20
Cont’d
3. Internal Marketing
 Smart & successful companies understand that
there is as much activity inside the company as
outside. For it makes no sense to promise
excellent services before the company’s service
staff is ready to provide.
 This is the management task of hiring, training &
motivating the employees to serve the customers
well.

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Cont’d
4. Social Responsibility Marketing
 Companies operate in a society and so do their
customers and hence they should never forget its
contribution to the company.
 It requires that marketers carefully consider the
role they are playing in terms of social welfare.
 Companies need to evaluate whether they are
truly practicing ethical & socially responsible
marketing.

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3. Fundamental Marketing Concepts, Shifts &
Tasks
Fundamental Concepts in Marketing:
Needs, Wants & Demands
Exchange & Transactions
Segmentation, Targeting & Positioning
Offerings & Brands
Value & Satisfaction
 Customer Value Triad (Quality, Service & Price)

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Cont’d (Fundamental Concepts)
Marketing Channels
 Distribution channels (wholesalers, retailers, etc.)
 Communication channels (TV, Radio,
Newspapers, Internet, etc.)
 Service channels (warehouses, banks, insurance
companies, etc.)
Supply Chain
 Raw Materials Final Users
 Supply chain represents a value delivery system.

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Cont’d (Fundamental Concepts)
Competition
 Includes all the actual and potential rival
offerings and substitutes that a buyer might
consider.
Marketing Environment
• Task environment (company, suppliers,
distributors, etc.)
• Broad environment (demography, economy,
politics, etc.)

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Cont’d (Fundamental Concepts)

Marketing Planning
• The marketing planning process consists of
analyzing marketing opportunities, selecting
target markets, designing marketing
strategies, developing marketing programs &
managing the marketing effort.

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Cont’d
Shifts/Current Trends in Marketing
Management
 Marketers are fundamentally rethinking their
philosophies, concepts and tools.
 Successful companies will be those who can
keep their marketing changing with the
changes in their marketplace.
 Here are 14 major shifts in marketing
management that smart companies have been
making in the 21st century.
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Cont’d (Major Shifts)
 From marketing does the marketing to
everyone does the marketing
 From organizing by product units to
organizing by customer segments
 From making everything to buying more
goods and services from outside
 From using many suppliers to working with
fewer suppliers in a partnership

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Cont’d
 From emphasizing tangible assets to
emphasizing intangible assets.
 From building brands through advertising to
building brands through performance and
integrated communications
 From attracting customers through stores and
salespeople to making products available online
 From selling to everyone to trying to be the best
firm serving well defined target markets

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Cont’d
 From relying on old market positions to
uncovering new ones
 From focusing on profitable transactions to
focusing on customer lifetime value
 From a focus on gaining market share to a
focus on building customer share
 From being local to being “global"-both
global and local

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Cont’d
 From focusing on the financial scorecard to
focusing on the marketing scorecard
 From focusing on shareholders to focusing on
stakeholders

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Cont’d
Marketing Management Tasks
The set of tasks necessary for successful
marketing management includes the
following:
 Developing marketing strategies & plans
 Capturing marketing insights
 Connecting the customers

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Cont’d (Tasks)
 Delivering value
 Communicating value
 Creating long-term growth
 Building strong brands
 Shaping the market offerings

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4. Marketing as Source of Economic
Utilities
 Economic utilities are created through the
interrelated processes of production and
marketing.
 Utility can be defined as the ability (power) of
a product to satisfy consumer's needs.
 The four basic types of utilities are the
following:

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Cont’d

 Form Utility
 Time Utility
 Place Utility
 Possession Utility

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 Chapter 2

Marketing Environment
&
Marketing Information

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Cont’d

What do you mean by Marketing

Environment & how does it affects the
work of marketing managers?

Class Discussion!

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1. The Marketing Environment
Environmental Scanning
 The marketing environment offers both
opportunities & threats and the marketing
firm must use its marketing research and
marketing intelligence systems to watch the
changing environment.
 The firm should watch the ever-changing
situation of the environment: it should
monitor the environment.

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Cont’d
Environmental scanning (environmental
monitoring) process includes:

1. Gathering information regarding the firm’s

external environment,
2. Analyzing it, &
3. Forecasting the impact of whatever trends
the analysis suggests.

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Cont’d
Environmental Forces
 Marketing environment can be classified into
two major categories:
1. External Environment
2. Internal Environment

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Cont’d
1. External Environment
 There are two levels of external forces:
A. The External Macro-environment
• Demographic forces
• Economic conditions
• Natural environment
• Technological environment
• Political & Legal forces
• Social & Cultural forces
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Cont’d
B. The External Micro-environment
• Market (customers)
• Suppliers
• Marketing Intermediaries
• Competitors.

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Cont’d
2. The Organization’s Internal Environment
• Company Management
• Employees
• Policy
• Production Activities
• Marketing Activities

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Cont’d
• Personnel Activities
• Finance Activities
• Purchasing Activities
• Research & Development

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Cont’d
 In addition to these, there are also other non-
marketing forces such as the firm’s location,
accounting system & the overall image the
firm projects to the public.
 To be successful, management must coordinate
the firm’s marketing and non-marketing
activities.

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Why Organizations Need
Environmental Analysis?

Class Discussion!

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2. The Marketing Information
 In carrying out marketing analysis, planning,
implementation and control, marketing
managers need information at almost every
turn.
 They need information about customers,
competitors, dealers and other forces in the
market place.
 One marketing executive put it this way; "To
manage a business well is to manage its
future; and to manage the future is to manage
information."
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 The Marketing Information System
 A marketing information system consists of
people, equipment and procedures to gather,
sort, analyze, evaluate and distribute needed,
timely, and accurate information to marketing
information decision makers.
 The marketing information system begins and
ends with marketing managers.
 First it interacts with these managers to
assess their information needs.

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Cont’d
 Next it develops the needed information from
internal company records, marketing
intelligence activities & marketing research.
 Information analysis processes the
information to make it more useful.
 Finally, the marketing information system
distributes information to managers in the
right form & at the right time to help them in
marketing analysis, planning, implementation
& control.
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1. Assessing Information Needs
 A good marketing information system
balances the information managers would like
to have against what they really need and
what is feasible to offer.
 Too much information can be as harmful as
too little.
 Finally, the company must decide whether the
benefits of having an item of information are
worth the costs of providing it eventhough
both value and cost are often hard to assess.
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2. Developing Information
 The information needed by marketing
managers can be obtained from internal
company records, marketing intelligence &
marketing research.
 Internal Records: Most marketing managers
use internal records and reports regularly,
especially for making day to day planning,
implementation & control decisions.

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Cont’d
 Marketing Intelligence: it is everyday
information about developments in the
marketing environment that helps managers
prepare and adjust marketing plans.
 Marketing Research: this is the function that
links the consumer, customer & public to the
marketer through information

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Marketing Research Process
1. Defining the Problem & Research Objectives
2. Developing the Research Plan
3. Implementing the Research Plan
4. Interpreting & Reporting the Findings

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3. Distributing Information
 Marketing information has no value until
managers use it to make better marketing
decisions.
 The information gathered through marketing
intelligence and marketing research must be
distributed to the right marketing managers
at the right time.

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 Chapter 3
Analyzing Consumer
&
Business Markets

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I. Consumer Buying Behavior
Model of consumer behavior
 The central question to be answered by this
model can be stated as: "how do consumers
respond to various marketing stimuli the
company might use?"
 In the stimulus response model of buyer
behavior, marketing and other stimuli enter
the consumer's “black box" and produce
certain responses.

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 Cont’d (Model)

Marketing Other Buyer’s Black Box Buyer’s

Stimuli Stimuli Responses
Product Economic Buyer Buyer Product choice
Price Technology character decision Brand choice
Place Political istics process Dealer choice
Promotion Cultural Purchase timing
Purchase amount

Figure 3.1: Consumer Behavior Model

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 Personal Characteristics Affecting
Consumer Behavior
1. Cultural Factors:
 Culture
 Sub-culture
 Social class
2. Social Factors
 Reference Groups (aspirational group,
dissociative group, opinion leaders)
 Family
 Roles & Status
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Cont’d
3. Personal Factors
 Age & life-cycle stage
 Occupation
 Economic Situation
 Life Style
 Personality & self concept

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Cont’d

4. Psychological Factors
 Motivation
 Perception
 Learning
 Beliefs & Attitudes

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Consumer Buying Decision Processes
 A marketer needs to know which people are
involved in the buying decision and what roles
each person plays.
 People might play any of the following roles in
buying decision:
 Initiator
 Influencer
 Decider
 Buyer
 User
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Types of Buying Decision Behavior
1. Routine Response Behavior: the simplest type of
buying behavior occurs when consumers buy low
cost frequently purchased items
2. Limited Problem Solving: buying is more
complex when buyers confront an unfamiliar
brand in a familiar product class
3. Extensive Problem Solving: some times buyers
face complex buying decisions for more
expensive, less frequently purchased products in
a less familiar product class.
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Stages in the Buying Decision Process
1. Problem Recognition
2. Information search
3. Evaluation of Alternatives
4. Purchase Decision
5. Post Purchase Behavior
 Post Purchase Satisfaction
 Post Purchase Action (Private & Public Action)
 Post Purchase Use & Disposal

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II. Business Buying Behavior
 The business market consists of all business
users, organizations that buy goods and
services for one of the following purposes:
a. To make other goods and services
b. To resell to other business users or to
consumers &
c. To conduct the organizations operations

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Cont’d

 Business market contains manufacturers,

agriculture, resellers, government agencies,
service companies, non profit organizations,
etc.
 Among these, manufacturers constitute a
major portion of the business market.

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Business Market Vs Consumer Market
Business markets have the following major
characteristics that contrast sharply with
those of consumer markets:
• Fewer, larger buyers
• Close supplier-customer relationship
• Professional purchasing
• Several buying influences
• Multiple sales call

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Cont’d

• Derived demand
• Inelastic demand
• Fluctuating demand
• Geographically concentrated buyers
• Direct purchasing
• Reciprocity

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Business Buying Situations
 Straight re-buy: this is a routine, low involvement
purchase with seminal information needs and no
great considerations of alternatives
 Modified re-buy: this buying situation is
somewhere between the other two in terms of
time and people involved, information needed,
and alternative considered.
 New-task buy: this is the most difficult and
complex buying situation because it is a first-
time purchase of a major product
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Business Buying Decision Process
The steps involved in the buying decisions are as
follows:
1. Need/Problem Recognition
2. General Need Description & Product
Specification
3. Supplier Search
4. Proposal Solicitation
5. Supplier Selection
6. Order-Routine Specification
7. Performance Review
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Participants in the Business Buying :
Buying Center
 Initiators
 Users
 Influencers
 Deciders
 Approvers
 Gate keepers
 Buyers

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 Chapter 4
Target Marketing
(Segmentation, Targeting & Positioning)

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 I. Market Segmentation
 Philip Kotler defined market segmentation as “sub-
dividing of market into homogenous sub-sections of
customers, where any subsection may conceivably be
selected as a market target to be reached with
distinct marketing mix.”
 W.J.Stanton put is as "Market segmentation consists
of taking the total heterogeneous market for a
product and dividing it in to several sub markets or
segments, each of which tends to be homogenous in
all significant aspects."
Importance of Market Segmentation
 The importance of market segmentation lies in a
better understanding of the consumer needs and
behavior so that marketer can plan accordingly in
brief.
The major importances include:
a. Understand potential customers,
b. pay proper attention to particular areas,
c. Formulate marketing programs,
Cont’d

d. Select channels of distribution,

e. Understand competition,
f. Use marketing resources efficiently,
g. Advertise the products & launch sales promotion
programs
h. Design marketing mixes: product, price, place &
promotion.
Market Segmentation Procedures
1. Survey Stage: Conducts exploratory interviews &
focus groups discussion to gain insight into
customers’ motivation, attitude & behavior.
2. Analysis Stage: Appraise factor analysis and
cluster analysis to remove highly related
variables & to create specified number of
maximally different segment, respectively.
3. Profiling Stage: The task of building up a fuller
picture of the target segments.
 Levels of Market Segmentation
1. Segment Marketing: A market segment consists
of a large identifiable group within a market.
2. Niche Marketing: A Niche is a more narrowly
identified group than market segments, typically
a small market whose needs are not being well
served (by dividing a segment into sub
segment).
 Cont’d
3. Local Marketing: Target marketing is
increasingly taking on the character of
regional/local marketing, with programs being
tailored to the needs and wants of local
customer groups.
4. Individual Marketing: The ultimate level of
segmentation leads to the “segments of one”,
“customerized marketing” or “one-to-one
marketing”.
Patterns of Market Segmentation
 Homogeneous Preferences: a market when all
the consumers have roughly the same
preference.
 Diffused Preferences: consumer preferences
may be scattered throughout the market.
 Clustered Preferences: the market might
reveal distinct preference clusters, called
natural market segments.
Basis for Market Segmentation
There are 5 major bases to segment a
consumer market:
1. Geographic Segmentation
2. Demographic Segmentation
3. Socio Economic Segmentation
4. Psychographics Segmentation
5. Buyer Behavior Segmentation (Occasions,
Benefit Sought, User status, Usage Rate &
Loyalty status)
Requirements for Effective Segmentation
To be useful, market segments must have the
following characteristics:
 Measurability
 Accessibility
 Substantiality
 Differentiability
 Action ability

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II. Market Targeting
 Market targeting is the process of evaluating
each segment’s attractiveness and selecting
one or more of the target market segment to
enter.
 In evaluating different market segments, a
firm must look at 3 factors: segment size &
growth, segment structural attractiveness and
company objectives & resources.

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Cont’d
1. Segment Size & Growth
 The Company must first collect and analyze
data on current dollar sales projected sales,
growth rates and expected profit margins for
the various segments.
 It wants to select segments that have the right
size and growth characteristics, but “right size
and growth” is a relative matter.

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Cont’d
2. Segment Structural Attractiveness
 The company must examine several major
structural factors that affect long-run segment
attractiveness.
 From this point of view Michael Porter
identified five competitive forces that should
be considered in evaluating the structural
attractiveness of a segment.

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Cont’d

1. Impact of current competitors

2. Impact of potential competitors or entry
3. Impact of substitute products
4. Power of suppliers
5. Power of buyers

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Cont’d
3. Company Objectives & Resources
 Even if a segment has positive size & growth
and is structurally attractive, the company
must consider its own objectives and resources
in relation to that segment.
 If a segment fits the company’s objectives, the
company must then decide whether it
possesses the skills and resources needed to
succeed in that segment.

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Selecting Market Segments
 After evaluating different segments, a
company hopes to find one or more market
segments worth entering.
 It must then decide which and how many
segments to serve.
 The firm can adopt one of the following five
market coverage strategies/patterns of target
market:

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Cont’d
 Single-segment concentration
 Selective specialization
 Product specialization
 Market specialization
 Full market coverage (undifferentiated &
differentiated marketing)

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Differentiated Marketing Costs
 Differentiated marketing typically creates
more total sales than undifferentiated
marketing.
 However, it also increases the costs of doing
business.
 The following costs are likely to be higher:

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Cont’d

 Product modification costs

 Manufacturing costs
 Administrative costs
 Inventory costs
 Promotion costs

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Choosing a Market Coverage Strategy
 Many factors must be considered when
choosing a market coverage strategy.
Which strategy is best depends on:
 Company resources
 Product variability
 The products life cycle stage
 Market variability &
 Competitors marketing strategies

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III. Market Positioning
 Market positioning is the process of setting the
competitive positioning for the product and a
detailed marketing mix.
 A products position is the complex set of
perceptions, impressions and feelings that
consumers hold for the product compared with
competing products.
 Marketers plan positions that will give their
products the greatest advantage in selected target
markets and they design marketing mixes to
create the planned positions.
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Choosing &Implementing Positioning
Strategy
The positioning task consists of three major
steps:
1. Identifying possible competitive advantages
2. Selecting the right competitive advantage/s
3. Communicating & delivering the chosen
strategy

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Cont’d
1. Identifying Possible Competitive Advantages
 This about in what specific ways can a
company differentiate its offer from those of
competitors.
 A company or market offer can be
differentiated along lines of product, service,
personnel or image.
 So, the major differentiation areas are:

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Cont’d

I. Product Differentiation
II. Service Differentiation
III. Personnel Differentiation
IV. Image Differentiation

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Cont’d
2. Selecting the Right Competitive Advantage/s
 Suppose a company is fortunate enough to
discover several potential competitive
advantages, it must now choose the ones upon
which it will build its positioning strategy.
 It must decide how many differences to
promote & which ones.

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Cont’d
A difference is worth establishing to the
extent that it satisfies the following criteria:
 Important
 Distinctive
 Superior
 Communicable
 Preemptive
 Affordable
 Profitable
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Cont’d
3. Communicating & delivering the chosen
strategy
 Once it has chosen a position, the company
must take strong steps to communicate and
deliver the desired position to target
consumers.
 All the companies marketing mix efforts must
support the positioning strategy.

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 Chapter 5
Product Management

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Definition of Product

 What is Product?

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Cont’d (Definition)

 According to Philip Kotler a product is

anything that can be offered to a market for
attention, acquisition, use, or consumption
that might satisfy a want or need.

 It includes physical objects, services, persons,

places, organizations & ideas.

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Levels of a Product

There are three levels of a product:

 Core product
 Actual product &
 Augmented product

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 Cont’d
Core
After Sale Product
Service

Feature

Core Benefit or Service

Augmented Actual/Tangible
Product Product
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Product Classifications
Based on Durability & Tangibility:

 Non-durable goods
 Durable goods
 Services

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Cont’d
Based on Type of Users:
Consumer Goods: Industrial Goods:
 Convenience goods  Materials & parts
 Shopping goods  Capital items
 Specialty goods  Supplies & business
 Unsought goods services

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Product Line & Product Mix
 A broad group of products, intended for
essentially similar uses and having similar
physical characteristics, constitutes a product
line.
 A product mix (also called product assortment)
is the set of all product lines and items that a
particular seller offers for sale to buyers.

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Cont’d
A company’s product mix has four important
dimensions:

 Width: width refers to the number of different

product lines the company carries.
 Length: length refers to the total number of
items the company carries within its product
line.

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Cont’d

 Depth: depth refers to the number of versions

offered of each product in the line
 Consistency: consistency of the product mix
refers to how closely related the various
product lines are in end use, production
requirement, distribution channels, or some
other way.

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New product Development
A company can obtain new products in
two ways:
 One is through acquisition, by buying a whole
company, a patent, or a license to produce
someone else's product.
 The other is through new product development
in the company's own research and
development department.

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Cont’d

 "New Products" means original products,

product improvements, product modifications
and new brands that the firm develops
through its own research and development
efforts.

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Cont’d
Major stages in new product development are:
1. Idea generation
2. Idea Screening
3. Concept Development & Testing
4. Marketing Strategy
5. Business Analysis
6. Product Development
7. Test Marketing
8. Commercialization

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Product Life Cycle (PLC)
 The life cycle is nothing more than the pattern
of demand for the product over time.
A basic product life cycle consists of 4 stages:
1. Introduction
2. Growth
3. Maturity &
4. Decline

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 Graph of PLC
Total Sales
Volume
Sales & Profit

Maturity
Growth
Profit

Introduction

Time (Years)
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112
Assumptions of PLC
 According to Philip Kotler, the assumption
behind the product life cycle concepts are as
follows:
 Products have a limited life
 Product sales pass through distinct stages,
each posing different challenges to the
seller

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Cont’d
 Profits rise and fall at different stages of
product life cycle.
 Products require different marketing,
human resource, finance, production
strategies in each stage of their life cycle.

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 1. Introduction Stage
 Starts when the new product is first launched
 Sales is slow
 Profit is negative or low because of low sales and
high distribution and promotion expense
 Promotion expense is relatively high because:
 to inform consumers about the new product &
 to secure distribution in retail stores

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Marketing Strategy at Introduction Stage
launch the new product with high price & low
promotion spending when:
 The market is limited in size
 The market is aware of the product
 Buyers are ready to pay higher price
 Potential competition is low

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Cont’d
Introduce new product with a low price &
heavy promotion spending when:
 The market is large
 The market is unaware of the product
 Buyers are sensitive for price
 Potential competition is high
 The companies unit manufacturing costs fall
with the scale of production and accumulated
manufacturing experience

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2. Growth Stage
If the new product satisfies the market it will
enter a growth stage, in which:
• Sales will start climbing quickly
• Early adapters will continue to buy and later
buyers will start to buy
• New competitors enter to the market

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Cont’d
• Price remain same or slightly reduced
• Companies keep their promotion spending at
the same or slightly higher level
• Profits increase as promotion costs are spread
over a large volume and unit manufacturing
costs fall.

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Marketing Strategy at Growth Stage
 Improves product quality and adds new
product features and models.
 Enter into new segment and new distribution
channels.
 Transfers from product awareness
advertisement to product performance
advertisement.

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Cont’d
 Lower prices to attract more buyers.
 By spending a lot of money on product
improvement, promotion and distribution, the
firm can capture a dominant position.

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3. Maturity Stage
 At some point, a product’s sales growth will
slow down and a product will enter a maturity
stage.
This stage is characterized as follows:
• This maturity stage normally lasts longer than
the previous stages.
• It poses strong challenge to marketing
management.
• Here some of the weak competitors start
dropping out & the industry eventually contains
only well established competitors.
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Marketing Strategy at Maturity Stage
 Market Modification
 Product Modification (Quality, Feature &
Style)
 Marketing Mix Modification (Product, Price,
Promotion & Distribution)

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4. Decline Stage

At this stage, sales decline for many

reasons, including:
 Technological advances,
 Shifts in consumer tastes &
 Increased competition

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Cont’d

As sales & profits decline:

 Some firms withdraw from the market
 Some may reduce the number of products
they offer.
 Some may reduce price.

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Marketing Strategy at Decline Stage

 Identify those products in the declining stage

by regularly reviewing the sales, market
shares, cost and profit trends.

 For each declining product, management must

decide whether to maintain, harvest or drop.

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Product Identification
1. Branding
 Perhaps the most distinctive skill of
professional marketers is their ability to
create, maintain, protect and enhance brands.
 Marketers say that “Branding is the art and
cornerstone of marketing."

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Cont’d
 A brand is a name, term, sign, symbol or
design or a combination of them, intended to
identify the goods or services of one seller or
group of sellers and to differentiate them
from those of competitors. It contains:
 Brand name
 Brand Mark
 Trade Mark

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Cont’d
A manufacturer has certain brand
ownership options:

 Manufacturer's brand: the product may be

launched as a manufacturer's brand (or
national brand), as when the manufacturer
sells its output under its own brand names.

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Cont’d
 Private brand: the manufacturer may sell to
resellers who give it a private brand (also
called a store brand or distributor brand).

 Licensed brand: the manufacturer may

produce some output under its own name and
some under distributor’s labels.

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Branding Strategy
 The Major Strategies are:
 Line Extensions
 Brand Extensions
 Multi brands
 New Brands
 Co-brands

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Desirable Qualities of Brand Name
 It should suggest something about the
products benefits and qualities.
 It should be easy to pronounce, recognize, and
remember.
 The brand name should be distinctive.
 The name should be translated easily into
foreign languages (It should not have
negative meaning in other countries and
languages).
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Brand Equity
 The most successful brands within their product
category develop brand equity.
 Brand equity is the added value a brand brings
to a product beyond the item's functional value.
 Companies develop equity for their brands by
consistently delivering high quality, building
strong associations between a brand and a set of
benefits and developing a consistent image
through the use of logos, trademarks, trade
characters or spokespeople.

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Cont’d
 Brand equity increases profits and market
share.
 It also enhances both customer and distributor
loyalty to a brand.
 When firms apply brands with strong equity
to new products or new lines of products,
consumers are more appropriate to try them.

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2. Packaging
 Packaging is the activities of designing and
producing the container or wrapper for a
product.
 The container or wrapper is called the
package.
 The package may include up to three levels of
material:
 Primary Package: the product's immediate
container.
Principles of Marketing Abdeta G. (Lecturer) 1/13/2017 135
Cont’d

 Secondary Package: the material that

protects the primary package and that is
thrown away when the product is about to
be used.
 Shipping Package: the packaging necessary
to store, identify & ship the product.

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Cont’d
When packing, the following points
should be considered:
 Product description
 Product image
 Product value
 Shelf display

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Benefits of Packaging
The Major Benefits are:
 Communication benefits
 Functional benefits
 Perceptual benefits

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Criticism of Packaging

The Major Ones are:

 Packaging depletes natural resources
 Packaging is too expensive
 Packaging is deceptive

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3. Labeling
 A label is a part of a product that carries
information about the product and the seller.

 A label may be part of the package or it may

be a tag attached to the product.

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Cont’d
Labels fall into three primary kinds:
 A brand label is simply the brand alone applied
to the product or package.
 A descriptive label gives objective information
about the product's use, construction, care,
performance, and/or other pertinent features.
 A grade label identifies the product's judged
quality with a letter, number, or word as for
example, A, B or C.

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 Chapter 6
Pricing Decisions

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Definition of Price
 Among the different components of the
marketing-mix, price plays an important role
to bring about product-market integration.
 Price is the only element in the marketing-mix
that produces revenue.
 In the narrowest sense, price is the amount of
money charges for a product or service.

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Cont’d
 More broadly, price is the sum of all the
values that customer exchange for the benefits
of having or using the product or service.
 Price may be defined as the value of product
attributes expressed in monetary terms which
a customer pays or is expected to pay in
exchange and anticipation of the expected or
offered utility.

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Factors Influencing Pricing
 Price is influenced by both internal and
external factors.
Internal Factors:
 Corporate and marketing objectives of the
firm.
 The image sought by the firm through pricing.
 The desirable market positioning of the firm.
 The characteristics of the product.
 Price elasticity of demand of the product.
Principles of Marketing Abdeta G. (Lecturer) 1/13/2017 145
Cont’d (Internal Factors)
 The stage of the product on the product life
cycle.
 Costs of manufacturing and marketing.
 Product differentiation practiced by the firm.
 Other elements of marketing mix of the firm
and their interaction with pricing.
 Consumption of the product line of the firm.

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External Factors
 Market characteristics
 Buyers behaviors in respect to the given
product.
 Bargaining power of the customer.
 Bargaining power of the major suppliers.
 Competitor’s pricing policy.

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Cont’d (External Factors)
 Government controls/ regulation on pricing.
 Other relevant legal aspects
 Social considerations.
 Understanding, if any, reached with price
cartels.

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Pricing Procedures
1. Development of Information Base
2. Estimating Sales & Profits
3. Anticipation of Competitive Reaction
4. Scanning the Internal Environment
5. Consideration of Marketing-mix Components
6. Selections of Price Policies & Strategies
7. Price Determination

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General Pricing Approaches
 Companies set prices by selecting a general
pricing approach that includes one or more of
the following three approaches:
1. The Cost-based Approach
• Cost-Plus Pricing
• Break-Even Analysis & Target-Profit Pricing
2. The Buyer-based Approach
• Perceived Value Pricing

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Cont’d

3. The Competition-based Approach

• Going-rate Pricing
• Sealed-bid Pricing

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Pricing Objectives
The Major Objectives are:

 Pricing for a target return

 Pricing for market penetration
 Pricing for market skimming
 Discriminatory pricing
 Stabilizing pricing

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New Product Pricing Strategies
The two major strategies are:

1. High Initial Price (Skimming Price)

2. Low Initial Price (Penetration Price)

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Cont’d
Skimming Price is appropriate when:
 Demand is likely to be less price elastic in the
early stages than later
 If the life of the product promises to be a
short one, a high initial price helps in getting
as much of it and as fast as possible.
 Such a policy can provide the basis for
dividing the market into segments to differing
elasticities

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Cont’d
 A high initial price may be useful if a high
degree of production skill is needed to make
the product so that it is difficult and time
consuming for competitors to enter on an
economical basis.

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Cont’d
Price Penetration is appropriate when:
 There is high short-run price elasticity;
 There are substantial cost savings from
volume production;
 The product is acceptable to the mass of
consumers;
 There is no strong patent protection; and
 There is a threat of potential competition so
that a big share of the market must be
captured quickly.
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Product-mix Pricing Strategies
The Major Strategies are:

 Product Line Pricing

 Optional-Product Pricing
 Captive-Product Pricing
 By-Product Pricing
 Product-Bundle Pricing

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Price Adjustment Strategies
The Major Strategies are:
 Discount & Allowance Pricing
 Segment Pricing
 Psychological Pricing
 Promotional Pricing
 Value Pricing
 Geographical Pricing
 International Pricing

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 Chapter 7
Promotion

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Definition of Promotion
 Promotion is the element in an organization's
marketing mix that serves to inform,
persuade and remind the market of a product
and/or the organization selling it, in hopes of
influencing the recipient's feelings, beliefs, or
behavior.

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Promotion Mix Elements
To communicate to consumers, a company
can use one or more of four promotional
alternatives:
1. Advertising
2. Sales Promotion
3. Publicity &
4. Personal Selling

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Cont’d
 Three of these elements: advertising, sales
promotion and publicity are often said to use
mass selling, because they are used with
groups of prospective buyers.
 In contrast, personal selling uses
interpersonal selling because the seller
usually talks person-to-person with the
individual who is a prospective buyer.

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Factors Influencing the Promotional Mix
The following factors should be taken into
account when determining the promotional
mix:
1. The Target Market (readiness to buy,
geographic scope of the market, type of
customers & concentration of the market).
2. The Nature of the Product (unit value, degree
of customization, presale & post sale
service).

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Cont’d
3. The Stages of the PLC
4. The Amount of Money/Funds Available:
Regardless of what may be the most
desirable promotional mix, the amount of
money available for promotion is the
ultimate determinant of the mix.

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1.Advertising
 Advertising is any paid form of non-personal
presentation and promotion of ideas, goods,
or services by an identified sponsor.
 Advertising dollars go into many media;
magazines & newspapers, radio & television,
outdoor, direct mail & others.

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Major Decisions in Advertising
Marketing management must make five
important decisions in developing an
advertising program:
1. Setting Objectives (Informative advertising,
Persuasive advertising & Reminder
advertising)
2. Budget Decisions
 The following major factors should be
considered when deciding on the advertising
budget:
Principles of Marketing Abdeta G. (Lecturer) 1/13/2017 166
Cont’d
 Stage in the product life cycle
 Market Share
 Competition & clutter
 Advertising frequency
 Product differentiation

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Cont’d
3. Message Decisions:
 Advertisers go through three steps to develop
a creative strategy: message generation,
message evaluation & selection and message
execution.
4. Media Decision:
 Deciding on reach, frequency & Impact.
 Selecting the media
 Deciding on media timing
Principles of Marketing Abdeta G. (Lecturer) 1/13/2017 168
Cont’d
5. Advertising Evaluation:
 The advertising program should regularly
evaluate the communication & sales effects of
advertising.

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2. Sales Promotion
 Sales promotion can be defined as demand
stimulating devices designed to supplement
advertising and facilitate personal selling.
 In other words “Sales promotion consists of a
diverse collection of incentive tools mostly
short term designed to stimulate quicker
and/or greater purchase of particular
products by consumer or the trade.”

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Cont’d
 Examples: coupons, premiums, trade shows,
samples, in-store demonstration, & contests.

There are two categories of sales promotion:

1. Consumer Promotions: aimed at consumers.
2. Trade Promotions: directed to the members
of the distribution channel.

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Major Decisions in Sales Promotion
1. Determining Objectives of Sales Promotion
The objectives of a sales promotion include
the following:
 Stimulating business user or household
demand for a product
 Improving the marketing performance of
middlemen and sales people
 Supplementing advertising and facilitating
personal selling.
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Cont’d
2. Determining Budgets
 The sales promotion budget should be
established as a specific part of the budget
for the total promotional mix.
 Setting a separate budget for sales
promotion forces a company to recognize and
manage it.

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Cont’d
3. Selecting the Appropriate Techniques
 Common sales promotion techniques used by
a company based on the target audience are
as follows:
A. For Business users or households
 Coupons  Point of purchase displays
 Cash rebates  Product demonstrations
 Premium (gifts)  Trade show & exhibitions
 Free Samples  Advertising specialties, etc
 Contests
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Cont’d
B. For Middlemen
 Trade shows and  contests for sales
exhibition people
 Point of purchase  Training middlemen's
displays sales forces
 Free goods  Product
 Advertising demonstration
allowances  Advertising
specialties
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Cont’d
C. Producers' Sales Force
 Sales contests are probably the most
commonly used tools for this.
 The most common incentive is cash, used in
over half of all contests.
 Sales promotion tools for sales people also
includes packet of promotional materials,
visual sales aids (flipcharts, slides), and
brochures to reinforce sales presentation.

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Cont’d
4. Evaluating Sales Promotion
 Evaluating the effectiveness of sales
promotion is much easier and the results are
more accurate than evaluating the
effectiveness of advertising.
 For example, to a premium offers or a coupon
with a specified closing date can be counted
and compared to a similar period where there
were no premiums or coupons offered.

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3.Publicity
 Publicity is any communication about an
organization and its products, including
publicities through the media that is not paid
for by the organization.
 It can be used to announce new products,
publicize new policies, recognize employees,
describe research breakthroughs or report
financial performance.
 The credibility of publicity typically is much
higher than advertising.
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Major Benefits of Publicity Over Advertising
 Lower cost than advertising or personal
selling
 Increased leadership, publishing is presented
as editorial material or news, so it gets
greater leadership
 More information
 Timeliness
 Higher credibility than advertising

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4.Personal Selling

 Personal selling can be defined as the

personal communication of information to
persuade somebody to buy something, or oral
presentation in a conversation with one or
more prospective purchasers for the purpose
of making sales.

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Merits of Personal Selling
 Personal selling is more flexible than these
other tools
 Personal selling usually can be focused or
pinpointed on prospective customers, thus
minimizing wasted effort.
 The goal of personal selling is to actually
make a sale.

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Demerits of Personal Selling
 The major limitation of personal selling is its
high cost
 A company often is unable to attract the
quality of people needed to do the job

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The personal Selling Process
The personal selling process is generally
divided into four steps:
1. Prospecting
2. Pre-approach & Approach to Individual
Prospects
3. Presenting the Sales Message
4. Post Sale Service

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Cont’d (Personal Selling Process)
Prospecting Pre-approach Post Sale
Presentation
& Approach Service

Identifying: AIDA:
• Profiles • Attention
• Records • Information
• Interest • Reduce Dissonance
Qualifying: • Habits
• Desire • Building Goodwill
• Capacity • Preferences
• Action
• Willingness

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 Chapter 8
Distribution Channel

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What is Distribution Channel?

 Philip Kotler defines a distribution channel as

“the set of firms and individuals, that take title,
or assist in transferring title, to the particular
goods or services as it moves from the producer
to the consumers.”

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Distribution Channel Functions
 The primary purpose of a distribution channel
is to bridge the gap between producers and
users by removing differences between supply
and demand.
 For this, certain essential functions need to be
performed.

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Cont’d

The Major functions are:

 Information  Financing
 Promotion  Risk taking
 Contact  Negotiation
 Matching  Physical distribution

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Major Channels of Distributions
Distribution works can be majorly
categorized in to two:

1. Distribution of Consumer Goods

2. Distribution of Industrial Goods

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Consumer Goods Distribution Channels
Producer Consumer
Producer Retailer Consumer
Producer Wholesaler Retailer Consumer
Producer Agent Wholesaler Retailer Consumer

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Industrial Goods Distribution Channels

Producer Industrial User

Producer Industrial distributor User
Producer Agent User
Producer Agent Industrial distributor User

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Factors Affecting the Channels of Distribution
 Distribution Policy
 Product Characteristics
 Supply Characteristics
 Customer Characteristics
 Middlemen Characteristics
 Company Characteristics
 Environmental Characteristics
 Cost of Channel

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Channel Management
 Ideally, because the success of individual
channel members depends on overall channel
success, all channel firms should work
together smoothly.
 They should understand and accept their roles,
coordinate their goals and activities and
cooperate to attain overall channels goals.
 By cooperating, they can more effectively
sense, serve and satisfy the target market.

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Cont’d
 However, individual channel members rarely
take such a broad view.
 They are usually more concerned with their
own short-run goals.
 They often disagree on the roles each should
play – on who should do what and for what
rewards.
 Such disagreements over goals and roles
generate channel conflict.

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Cont’d
Channel conflict can be categorized into
two:
 Horizontal conflict: occurs among firms at the
same level of the channel.

 Vertical conflict: is more common and refers to

conflicts between different levels of the same
channel.

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Channel Conflict Management Strategies
1. Vertical Marketing Systems

 A Vertical Marketing System (VMS) consists of

producers, wholesalers and retailers acting as
a unified system.
 There are three types of VMS: corporate VMS,
contractual VMS & administrated VMS.

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Cont’d
2. Horizontal Marketing System

 In this case, two or more companies at one

level join together to follow a new marketing
opportunity.
 By working together, companies can combine
their capital, production capabilities or
marketing resources to accomplish more than
any one company could working alone.

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Cont’d
3. Hybrid Marketing System

 Today, with the proliferation of customer

segments and channel possibilities, more and
more companies have adopted multichannel
distribution systems – often called hybrid
marketing channels. For Example: IBM

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 THE END!!

THANK YOU SO MUCH!!

ANY QUESTION?

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