CHAPTER 5 1

M A R K E T I N G
 2
DISCUSSION TOPICS

5.1 INTRODUCTION
5.2 Meaning and Definitions of Marketing
5.3 Core Concepts of Marketing
5.4 Importance of Marketing
5.5 Marketing Philosophies
5.6 Marketing Information Systems
5.7 The Marketing Mix Strategy
5.8 The concept of Customer Service and Customer
3
4
 5.1 INTRODUCTION 5

 Business
firms and non-profit organizations
engage in marketing.
 Products marketed include:
 goods as well as services,
 ideas,
 people, &
places.
 6

 The foundation of marketing is

exchange.
 In which one party provides to
another party something of value
in return for something else of
value.
 In a broad sense, marketing
consists of all activities designed
to generate or facilitate an
exchange intended to satisfy
human needs.
5.2 Meaning and Definitions of 7

Marketing

 Marketing has been defined in various

ways.
 The definitions that serve our purpose best
are as follows:
Meaning and Definitions of Marketing (cont.…) 8

1. Marketing is a social and managerial process by which

an individual or group obtain what they need and
want through creating, offering and exchanging of
product of values with others (Philip Kotler,2012).
2. Marketing is the total business activity designed to plan,
price, promote and distribute want satisfying products
to target market to achieve organizational goal
(William J.Stanton, 1984).
3. Marketing is the creation and delivery of standard of
living to society (Paul. Mazor, 2005).
 Meaning and Definitions of Marketing (Cont…) 9

4. Marketing management is the process of planning and executing,

the conception, pricing, promoting and distributing of ideas, goods
and services to create an exchange that satisfy individual or group
objectives (American marketing Association, 2015).
5. Marketing is the effort to identify and satisfy customers’ needs and
wants.
▪ It involves finding out who your customers are, what they need and
want, the prices, the level of competition.
▪ It involves the knowledge and all the processes you undertake to sell
your product.
 10
The above definitions of marketing reset on the
following core concepts:
 needs, wants and demands;
 products (Goods, Services and Idea), value, cost and
satisfaction:
 exchange and transaction;
 Relationship and Networks;
 market; and
 marketers and prospects.
 11

 Marketing answers the following questions:

▪ Who are my customers?
▪ What are my customer’s needs and wants?
▪ How can I satisfy my customers’?
▪ How do I make a profit as I satisfy my customers?
 Who are your customers? 12

 Yourcustomers are the people or other

businesses that want your products/ services
and are willing to pay for them. They include;
▪ People who are buying from you now.
▪ People you hope will buy from you in the future.
▪ People who stopped buying from you but you
hope to get them back.
What are my customer’s needs and wants? 13

 An
important point to note is that customers
want to look at different products so that they
can choose what they like best.
 Some customers want a different design and
others want high quality and are willing to pay
extra for that.
How can I satisfy my customers’? 14

 You need to do everything to find out who your

customers are and what they need and want in order to
satisfy them improve your sales and make a profit.
 You need to find out;
▪ Products/services your customers want.
▪ Price your customers are willing to pay.
▪ Location of your business in-order to reach your customers (Place).
▪ Promotion to use to inform your customers and attract them to buy
your products or services.
 5.3 Core Concepts of Marketing 15

 5.3.1 Needs, Wants and Demand

✓ A person at any given time has a need.

✓ This need arises out of physical or psychological imbalances.
Marketing starts with human needs and wants.
✓ People need food, air, water, clothing and shelter to survive.
✓ Beyond this, people have a strong desire for recreation, education
and other services.
 Need, Wants & Demands 16
 Need: - Human Need is a state of deprivation of some basic satisfaction.
People require food, clothing, shelter, safety and belonging and esteem.
 Wants: - Wants are desires for specific satisfiers of needs. Human wants are
continually shaped and reshaped by social forces and institutions including
churches, schools, families and business cooperation.

Eg. A person needs food but wants spaghetti

 Demands: -
 Demands are wants for specific products that are backed by ability and
willingness to buy them.
 Wants become demand when supported by purchasing power.
 Companies must therefore measure not only how many people want their
product but, more importantly how many would actually be willing and able to
buy it.
Product: - 17

Product is anything that

can be offered to satisfy a
need or want.
Products broadly classify as
tangibility and intangibility
features.
 Value & Cost 18

Value: -
 is the consumer’s estimate of the products overall capacity
to satisfy his or her needs.
 According to DeRose, value is “the satisfaction of customer
requirement at the lowest cost of acquisition, ownership and
use”.
Cost: -
 is the amount of money that are going to be expended or
already incurred to acquire a product.
 19
Exchange, Transaction
& Market
Exchange: -
✓ is the act of obtaining a desired product from someone by
offering something in return.
Transaction: -
✓ is the trade of values between two parties.
Market: -
✓ consists of all the potential customers sharing a particular
need or want who might be willing and able to engage in
exchange to satisfy their need or want.
5.4 Importance of Marketing 20

❖ On the average, about 50 cents of each dollar we spend as

consumers goes to cover marketing costs.
❖ The money pays for:
❖ designing the products to meet our needs
❖ making products readily available when and where we want
them, and
❖ informing us about producers.
❖ These activities add want satisfying ability or what is called
utility, to products.
Importance of Marketing (Cont.….) 21

 A customer purchases a product because it provides

satisfaction.
 That something that makes a product capable of
satisfying want is its utility.
 And it is through marketing that much of a products
utility is created.
 Then potential buyers must be informed about the
products existence and the benefits it offers through
various forms of promotion.
 The kinds of utility that marketing 22
provides in the process are as follows:

1. Form Utility

2. Place Utility

3. Time Utility

4. Information Utility

5. Possession Utility
1. Form Utility
23
 Form utility is associated primarily with
production- the physical or chemical
changes that make a product more
valuable.
 When timber is made into furniture, form
utility is created.
 This is production, not marketing.
 However, marketing research may aid in
decision making regarding:
▪ product design
▪ Color
▪ quantities produced, or
▪ some other aspect of a product.
 All of these things contribute to
the product’s form utility.
2. Place Utility 24

 Place utility exists when a product

is readily accessible to potential
customers.

 So physically moving the products

to a store near the customers add
to its value.
 3. Time Utility 25

 Time utility means having a product available when you

want it.
 Having a product available when we want it is very
convenient but it means that the retailer must anticipate
our desires and maintain an inventory.
 Thus, there are costs involved in providing time utility.
 4. Information Utility 26

 Information utility is created by informing prospective buyers that a

product exists.
 Unless you know a product exists and where you can get it, the
product has no value.
 Advertising that describes a sales person answering a customer
questions about the durability of a product creates information
utility.
 Image utility is a special type of information utility. It is the emotional
or psychological values that a person attaches to a product or
brand because of its reputation or social standing.
 5. Possession Utility: 27

 Possession utility is created when a customer buys the

product-that is, ownership is transferred to the buyer.
 Thus, for a person to consume and enjoy the product,
a transaction must take place.
 This occurs when you exchange your money for a
product.
 Think of a recent purchase you
made. How did the company 28
provide you with the following
utilities?
▪ Form:
_______________________________
________________________________
Time:
________________________________
________________________________
▪ Place:
________________________________
________________________________
▪ Ownership:
________________________________
________________________________
5.5 Marketing Philosophies 29

 There are Six competing concepts under

which organizations can choose to
conduct their marketing activities:
namely:
1. the production concepts
2. the product concept
3. the selling/sales concept
4. the marketing concept
5. the societal marketing concept and
6. the Relationship Marketing Concept. Relationship
Marketing
1. The Production Concept 30

 The production concept is one of the oldest concepts in

business.
 The production concept holds that consumers will favor
products that are widely available and low in cost.
 Managers of production-oriented organization concentrate
on achieving high production efficiency and wide
distribution.
2. The Product Concept 31

 The product concept holds that consumers will favor those

products that offer the most quality, performance or
innovative features.

 Managers in product oriented organization focus their

energy on making superior products and improving them
over time.
3. The Selling Concept/Sales Concept 32

 The selling concept (or sales concept) is another common

approach.
 The selling concept holds that consumers, if left alone, will
ordinarily not buy enough of the organization product.
 The organization must therefore undertake an aggressive
selling and promotion effort.
 This concept assumes that consumers typically show buying
inertia or resistance and must be coaxed into buying.
 The selling concept (cont.….) 33

 The selling concept is practiced more aggressively with unsought

goods, those goods that buyers normally do not think of buying,
such as insurance, encyclopedia, and funeral plots.
 Most firms practice the selling concept when they have over
capacity.
 Their aim is to sell what they make rather than make what the
market wants.

important
Therefore, people are surprised what they are told that the most
part of marketing is not selling; selling is only the tip of
marketing iceberg.
4. The Marketing Concept 34

 The marketing concept is a business philosophy that challenges the

three concepts we just discussed.
 Its central tents crystallized in the mid-1950s.
 The marketing concept holds that the key to achieving organizational
goals consists of being more effective than competitors in integrating
marketing activities toward determining and satisfying the needs and
wants of target markets.
 The marketing concept has been expressed in many colorful ways:
“Meeting needs profitably”
“Find wants and fills them”
“Love the customers, not the product etc.”
 35
 Table 5.1 Selling and Marketing Concept Contrasted
5. The Societal Marketing Concept 36

 The
societal marketing concept holds that the
organization should determine:
▪ the needs,
▪ wants and
▪ interests of target markets.
It should then deliver the desired satisfactions more
effectively and efficiently than competitors in a way
that maintains or improves the consumers and the
society’s well-being.
The Societal Marketing Concept (cont.…) 37

 The societal marketing concept questions whether the pure marketing

concept is adequate in an age of:
✓ environmental problems,
✓ resource shortages,
✓ rapid population growth,
✓ worldwide economic problems, and
✓ neglected social services.
 It asks if the firm that senses, serves and satisfies individual wants is always
doing what’s best for consumers and society in the long run.
 According to the societal marketing concept, the pure marketing concept
overlooks possible conflicts between short-run consumer wants and long run
consumer welfare.
 6. Relationship Marketing 38

 Relationship marketing is the practice of building long term

satisfying relations with key parties :
• customers
• suppliers
• distributors
In order to retain their long term preferences and business.
 The ultimate outcome of relationship marketing is the building of a
unique company asset called a marketing network.
 In this case, customer experience rather than customer satisfaction
is the most critical component in relationship marketing.
 Table 5.2: Summary of the Evolution of Marketing 39

Production • Consumers favor products that are available and highly affordable
• Improve production and distribution
• ‘Availability and affordability is what the customer wants’

Product • Consumers favor products that offer the most quality, performance and
innovative features
• ‘A good product will sell itself’
Sales • Consumers will buy products only if the company promotes/ sells these products
• ‘Creative advertising and selling will overcome consumers’ resistance
and convince them to buy’

Marketing • Focuses on needs/ wants of target markets and delivering satisfaction better than
competitors
• ‘The consumer is king! Find a need and fill it’

Relationship • Focuses on needs/ wants of target markets and delivering superior value
marketing • ‘Long-term relationships with customers and other partners lead to
success’
 Activity 5.2
40
Make a statement to describe each of the stages in the evolution of marketing. You may consider
the given examples before coming up with your own statements.
1. Production era
a. ‘Cut costs. Profits will take care of themselves’
2. Product era
a. ‘A good product will sell itself’
3. Sales era
a. ‘Selling is laying the bait for the customer’
4. Marketing era
a. ‘The customer is King!’
5. Relationship marketing era
a. ‘Relationship with customers determine our firm’s future’
6. Customer Relationship marketing
a. Create networking with customers and develop the relationship to the highest level.
 5.6 Marketing Information 41

Systems
 Every firm must organize the flow of information to its marketing managers.
 A marketing information system consists of:
 people,
 equipment and
 procedure
To:
 gather
 Sort
 Analyze
 evaluate and
 distribute
needed timely and accurate information to marketing decision makers.
5.6.1 Marketing Research 42

 Marketing research is the systematic and objective identification,

collection, analysis, and dissemination of information for the purpose
of assisting management in decision making related to the
identification and solution of problems and opportunities in
marketing.
 Thus, systematic planning is required at all the stages of the marketing
research process. The procedures followed at each stage are
methodologically sound, well documented, and, as much as
possible, planned in advance.
 It uses the scientific method in that data are collected and analyzed
to test prior thinking or hypotheses.
 5.6.1.1 The Role (Significance) Of Marketing 43
Research In Decision Making

 Thereare three Functional Roles of Marketing Research.

These are:
▪ Descriptive Function:
▪ the gathering and presentation of statements of fact.
▪ Diagnostic (analytical) Function:
▪ The explanation of data.
▪ Predictive Function:
▪ Specification of how to use the descriptive and diagnostic research
to predict the result of a planned marketing decision.
 5.6.1.2 Marketing Research Components 44
 Marketing researchers deal with many aspects of a market including the following:
 Market size: this deals with the number or value of units sold to a market in a given
period.
 Market Share: this one is about a specific corporation’s share of the market size
out of the whole market of a product or products of the same purpose.
 Market penetration: this is a marketing strategy which is used to know when a
company enters/penetrates a market with current products to get better market
share by lowering the price of a product.
 Brand equity research: this research is conducted to know how favorably
consumers view the brand.
 Buyer decision processes research: this part of marketing research activity is used
to determine what motivates people to buy and what decision-making process
they use.
5.6.1.3 Customer Satisfaction Research 45
 In this type of research there are different types of research that are
used to assess about customers.
 Distribution channel audits - to assess distributors’ and retailers’ attitudes toward
a product, brand, or company.
 Marketing effectiveness and analytics - Building models and measuring results
to determine the effectiveness of individual marketing activities.
 Mystery Consumer or Mystery shopping – here the researcher acts as a
shopper. This is often used for quality control or for researching competitors'
products.
 Positioning research – this research is mostly conducted to answer questions
like:
 How does the target market see the brand relative to competitors?
 What does the brand stand for?
 46

 Price elasticity testing – here the objective of the research is to

determine how sensitive customers are to price changes
 Sales forecasting - to determine the expected level of sales given
the level of demand with respect to other factors like advertising
expenditure, sales promotion etc.
 Segmentation research – this type of research helps to determine
the demographic, psychographic, and behavioral characteristics
of potential buyers.
 Test marketing – this is a small-scale product launch used to
determine the likely acceptance of the product when it is
introduced into a wider market.
5.6.1.4 Marketing Research Process 47

 Since research is a process which consists of a

number of steps to be accomplished in a logical
and systematic manner marketing research
consists of the following related phases:
Step 1: Define the research purpose or objectives 48

The following questions help to establish objectives:

✓Where potential customers buy the product?
✓Why they purchase there?
✓ What is the size of the market? How much of it can your
business capture?
✓How does your business compare with competitors?
✓The impact of promotion on customers.
✓What types of products are desired by potential customers?
 Step 2: Research Design Formulation 49

 The research design is a blueprint for conducting the marketing research.

 More formally, formulating the research design involves the following steps:
▪ Study period and place determination.
▪ Qualitative data collection methods.
▪ Methods of collecting quantitative data (survey, observation, and experimentation).
▪ Definition of the information needed.
▪ Questionnaire design.
▪ Measurement and scaling procedures.
▪ Sampling process and sample size.
▪ Plan of data analysis.
Step 3: Gather at this stage secondary data, 50

A data which is originally collected by others for

their own purpose, but such data can be used by
the researcher when it is relevant to the current
study. Secondary data:
▪ Is less expensive.
▪ Can be acquired within or outside the venture.
▪ But, may be outdated and less valid.
Step 4.Gather Primary Data 51

 Primary data collection techniques can be categorized as;

❖ Observational techniques-do not involve contact with
respondents.
❖ Focus groups.
❖ Experimentation-investigates cause and effect relationships.
❖ Surveytechniques- generate data by asking people questions
and recording their responses.
Examples of survey techniques. 52

A. Mail questionnaires: The researcher may send the

questionnaires to research Participants.
B. Telephone interviews: Using the telephone numbers from
telephone directory, the researcher may ask research
participant via the telephone.
C. Personal interviews. The researcher may go to the research
participants’ address and may drop and pick the questionnaire
or may interview the research participants.
Step 5: Data Processing and Analysis 53

 Data processing includes the:

 editing
 Coding
 transcription, and
 verification of data.

 And data analysis, guided by the plan of data analysis, gives meaning to the data
that have been collected.
 Research results should be evaluated and interpreted in response to the research
objectives.
Step 6: Report Preparations and Presentation 54

 At the end the research results will be written in a report form and
presented to the concerned parties. The report includes:
▪ The specific research questions identified,
▪ Describes the research approach,
▪ The research design,
▪ The data collection methods, and sampling procedures,
▪ The data processing and analysis procedures,
▪ The major findings and suggestions for actions.
▪ In addition, an oral presentation should be made to management
using tables, figures, and graphs to enhance clarity and impact.
5.6.2 Marketing Intelligence 55

 Market intelligence is the systematic process

of:
▪ gathering
▪ Analyzing
▪ supplying and
▪ applying information (both qualitative and
quantitative)
about the external market environment.
5.6.2.1 The Importance of Marketing Intelligence 56

✓ Marketing intelligence provides the following benefits;

▪ Market and customer orientation – promote external
focus.
▪ Identification of new opportunities.
▪ Smart segmentation.
▪ Early warning of competitor moves.
▪ Minimizing investment risks.
▪ Quicker, more efficient and cost-effective information.
 5.6.2.2 Ways to Undertake Marketing Intelligence 57
i. Unfocused scanning: Any information that may be useful is gathered
without any specific purpose in mind.
ii. Semi-focused scanning: no specific purpose. The manager is not in
search of particular pieces of information that he/she is actively searching but
does narrow the range of media that is scanned. For instance, the manager
may focus more on economic and business publications, broadcasts etc. and
pay less attention to political, scientific or technological media.
iii. Informal search: - limited and unstructured attempt to obtain information
for a specific purpose. For example, entering the business of importing frozen
fish from a neighbouring country may make informal inquiries as to prices and
demand levels of frozen and fresh fish.
iv. Formal search: - this is a purposeful search for information in some
systematic way. Marketing intelligence is carried out by the manager
him/herself rather than a professional researcher. Scope of the search in this
case is likely to be narrow and far less intensive (less rigorous) than marketing
research.
5.6.3 Competitive Analysis 58

 Competitive analysis refers to determining

the strengths and weaknesses of competitors
and designing ways to take opportunities or
tackle threats posed by competitors.
 5.6.3.3 Steps of Competitive 59

Analysis
 Every business owner should have a complete
understanding of the competitive landscape in the
market.
 Competition is defined as any business that provides a
similar service or product in the same market, region or
industry.
 A strategic business owner not only knows who its
competitor is but also understands the best way to
position ahead of its competitor.
 Steps of Competitive Analysis (cont…) 60

 The following provides a step-by-step process in creating your

competitive analysis.

1)Identify your competitors:

2) Gather information about competitors:
3) Gathering Information on Competitors
4) Analyzing the Competition
5) Develop a pricing:
1) Identify your competitors: 61

 Determine both local and international

competitors.
 Be sure to define the competitive landscape
broadly.
 Yourcompetitor includes anything that could
draw customers away from your business.
 2) Gather information about 62

competitors:

 At this stage you need to know;

 what markets or market segments your competitors serve;
 what benefits your competitors offer;
 why customers buy from them; and
 as much as possible about their products and/or services,
pricing, and promotion strategies.
 63
3) Gathering Information on Competitors

 To
gather information about your competitor
you can go either to your competitors’
company site or to the company's Web site (if any) using
which you can learn about;
promotion strategies by visiting their business site; prices;
your competitors’ customers;
vendors or suppliers, and their employees;
 trade shows; and
publicly available information - from Newspapers,
magazines, press releases and online publications.
4) Analyzing the Competition 64

 After studying the information you have gathered

about each of your competitors, ask yourself these
primary questions:
How are you going to compete with that company?
Is there a particular segment of the market that your
competitor has overlooked?
Is there a service that customers or clients want that
your competitors do not supply?
5) Develop a pricing: 65

 There are many factors that go into designing the appropriate

pricing structure so you will need to do some research and
evaluate:
 what price levels your market will bear
 your cost basis for the development of your product
 how much you need to cover overhead and marketing costs and
 lastly how much profit you think is appropriate for what you are offering.

 Do not immediately think you have to price your products below your
competition, people appreciate the value in your product and set your price
accordingly.
 66

The goal of your competitive analysis is to

identify and expand upon your competitive
advantage.

To make your competitive analysis effective,

transfer the weaknesses of your competitors into
potential strengths for your business.
 67
5.7 The Marketing Mix Strategy

 5.7.1 The 4 P’s Of Marketing/The Marketing Mix

 These are marketing variables that the
marketing manager can manipulate as
controllable variables. They include:
1. product
2. Pricing
3. place (channel) and
4. promotion
1. Product: 68

 Refers to goods/services produced for sale, the product

/service should relate to the needs and wants of the
customers.
 Some important questions you need to ask yourself
include:
a. What products/services do I sell?
b. Why did I decide to sell these products?
c. Do I have the products customers want?
d. Do any of my products not sell well?
e. Do I stock products that do not sell well?
 69

Always listen to what your customers like and don’t like.

When their needs change, change your products and
services to satisfy the new needs.
Do more market research in order to provide those
products or services and increase your sales.
If your product is not selling well, think of new ideas like
finding new customers.
2. Pricing: 70

✓ Refers to the process of setting a price for a product/service.

Your prices must be low enough to attract customers to buy
and high enough to earn your business a profit.
✓ To set your price you need to:
▪ Know your costs.
▪ Know how much customers are willing to pay.
▪ Know your competitors price.
▪ Know how to make your prices more attractive
 3. Place: 71
 Means the different ways of getting your products or
services to your customers.
 It is also referred to as distribution.
 If your business is not located near your customers, you must
find ways to get your products/services to where it is easy for
customers to buy.
 You can distribute your products to your customers through:
Selling directly to the consumers of the products.
 Retail distribution and wholesale distribution.
4. Promotion: 72
 Refers informing your customers of your
products and services and attracting them to
buy them.
 Promotion includes:
 advertising,
 sales promotion,
 publicity (non-paid promotion) and
 personal selling.
 Use advertising to make customers more
interested in buying your products or services.
Some useful ways of advertising 73
include:
 Signs
 Boards
 Posters
 Handouts
 Business cards
 Pricelists
 Photos
and
 Newspapers.
 74

❖ You can use sales promotion (short term incentives) to

make customers buy more when they come to your
business, you could also:
❖ Ensure you maintain attractive displays.
❖ Let customers try new products.
❖ Have competitions.
❖ Give demonstrations.
❖ Sell complementary products (products that go together)
5.7.2 What Is Marketing Strategy? 75

 A marketing strategy is a process that can allow an

organization to concentrate its limited resources on the
greatest opportunities to increase sales and achieve a
sustainable competitive advantage.
 Marketing strategy is a method of focusing an organization's
energies and resources on a course of action which can
lead to increased sales and dominance of a targeted
market.
 76

 A marketing strategy:
 combines product development, promotion, distribution,
pricing, relationship management and other elements;
 identifiesthe firm's marketing goals, and explains how they will
be achieved, ideally within a stated timeframe.
 determines the choice of target market segments, positioning,
marketing mix, and allocation of resources.
 is effective when it is an integral component of the overall firm
strategy, defining how the organization will successfully engage
customers, prospects, and competitors in the market arena.
1. Pricing Strategy 77

 Price is the value placed on what is exchanged.

 Something of value is exchanged for satisfaction and utility, includes
tangible (functional) and intangible (prestige) factors. It can even be
barter.
 Price is often the only element the marketer can change quickly in response
to demand shifts.
 It relates directly to total revenue TR = Price * Quantity Profit = TR – TC
Where, TR=Total Revenue, TC=Total Cost
 Pricing strategies are subject to incredibly complex environmental and
competitive forces.
 78

The following are some of pricing

strategies mostly applicable in the
real world scenario.
i. Price Skimming: 79

 This is a type of marketing strategy that firms use

by charging the highest possible price that
buyers who most desire the product will pay.
 It attracts a market segment that is more
interested in quality, status, uniqueness etc.
 In this case, consumers’ demand must be
inelastic.
 ii. Penetration Pricing: 80

 In this strategy, prices of products are reduced compared to

competitors’ price for the same product to penetrate into
markets and to increase sales.
 However, the quality of the product should not be lower as
compared to other competitors’ product.
 It should be again noted that the cost of production should
be lower to the extent that can enable the firm to get the
desired profit.
 This is appropriate when the demand is elastic.
 81

iii) Cost-plus pricing:

✓ Any amount that is above unit cost may be considered.

Iv. Mark-up pricing:

A certain percentage of the selling price is added to unit cost.

v) Competition Oriented Pricing:

✓ Considers competitors prices primarily; but the market type matters.

vi. Odd-even pricing 82

 This is Psychological pricing method based on the belief

that certain prices or price ranges are more appealing to
buyers.
 This method involves setting a price in odd numbers (just
under round even numbers) such as $49.95 instead of
$50.00.
 Although not supported by any research findings, its
proponents claim that the consumers see a $49.95 price as
'just in the price range of $40’rather than in the $50.
 2. Promotion Strategies 83

 Promotion is the communication of the company and its products to

customers.
 Promotional strategy is choosing a target market and formulating the
most appropriate promotion mix to influence it.
 An organization’s promotional strategy can consist:
i) Advertising: It is any paid form of non-personal, one-way, mass
communication about an organization, good, service, or idea by an
identified sponsor.
ii) Personal selling: This is the two-way flow of communication between
a buyer and seller, often in a face to face encounter, designed to
influence a person’s or group’s purchase decision.
 84

 iii) Public relations: Public relation is a form of communication that seeks to

change the perceptions of customers, shareholders, suppliers, employees and
other publics about a company and its products.
iv) Sales promotion: This promotion type involves short term incentives of value
such as discounts, free samples, and prizes to be offered to arouse interest of
customers in buying the good/service. Businesses may use one of the above
promotional mix elements to arouse the interest of customers and make them
take action by informing, persuading and reminding about the goods and
services that they provide to the market.
3. Distribution Strategies 85

 A successful product or service means nothing unless the benefit of

such a service can be communicated clearly to the target market.
 For product-focused companies, establishing the most appropriate
distribution strategies is a major key to success, defined as
maximizing sales and profits.
 Unfortunately, many of these companies often fail to establish or
maintain the most effective distribution strategies. Problems that
researchers identified include:
 86

 Unwillingness to establish different distribution channels for

different products,
 Fear of utilizing multiple channels, especially including direct
or semi-direct sales, due to concerns about erosion of
distributor loyalty or inter-channel cannibalization
 Failure to periodically re-visit and update distribution
strategies
 Lack of creativity, and
 Resistance to change.
 5.8 The concept of Customer 87
Service and Customer
5.8.1 The Concept of Service
 Many employees have unclear understanding of what customer service
really is.
 There are indications everywhere that there are customer service problems
that demand solutions.
 Customer service is what happens between the customer determining
his/her needs and receiving the desired benefits. However, most service
providers do not appropriately understand what service delivery really
means.
 For this reason, many organizations fail to improve the level of their customer
service delivery.
The Concept of Service (cont….) 88

 Service refers to any activity undertaken to fulfil customer’s needs.

 It is any act or performance that one party can offer to another that
is essentially intangible and does not result in the ownership of
anything.
 Its production may or may not be tied to a physical product.
 Distinctive features of services include intangibility, inseparability,
variability, and perishability as opposed to goods.
The Concept of Service (cont….) 89

 Service is situational in the sense that what is good for one customer one
day may be perceived differently by the same customer another day.
 There is also difficulty associated in measurement of service.
 This is because the higher one sets expectation by delivering service, the
more the customers expect the next time they deal with the service
provider.
 Service is also subjective in the sense that an acceptable service for one
customer may not be equally or totally acceptable by another customer.
 Finally, service is influenced by the service provider. If the service provider
sets expectations effectively, the customer will probably be satisfied.
 90
5.8.2 The Concept of Customer
 Customer is a person or organization that buys a product
or service either for use or for resale.
 Customers can be internal (e.g. member of the
organization) or external (customers coming from
outside).
 A thorough understanding of the concept of customer
service enables organizations to provide quality service
by using proper service management approaches.
 5.8.4 Customer Handling 91

and Satisfaction

 Customer handling and satisfaction is a key for successful

organizations.
 Managers and employees should work hand-in-hand to
improve their service delivery programs.
 Existing customers must be satisfied with the existing service.
 Existing customers are also means of potential customers.
 What is expected from successful service providers in this
regard are the following.
 92

 Poor service/defective service is the causes of loss and bankruptcy for

many organizations.
 Many organizations, especially business organizations worried about the
reduction of sales or profitability due to lost customers/ or gradual
reduction of customers.
 Organizations invest huge cost to increase market share by using
advertisement or different sales promotion techniques.
 But the first most important principle here is not losing a single customer.
 93

 Attracting new customers is directly related to keeping existing customers satisfied.

 The consequence of poor customer handling, therefore, is losing existing customers.
 Again, organizations invest huge resources to acquire new customers, who are later
lost, resulting in a total loss of investment.
 There is unnecessarily spending money on advertising and marketing to get
customers.
 Customer retention and satisfaction comes not from words, but from putting time,
effort, and money to satisfy customers.
 Establish an information system to track lost customers and record your day-to-day
progress.
 Also take into account that the major reasons to lose customers are:
 Poor service,
 Poor quality and
 Rude behavior.
 94

NB:
For a company success
 Considering Customers as an Invaluable Asset
 Reducing Customer Complaints
 Place Yourself in The Customer’s Shoes
 5.8.4.2 Reducing Customer 95

Complaints

 Every
single complaint should be treated as
an opportunity to improve the quality of your
products and services.
A complaining customer is a very fair person.
 Turn customer discontent to your advantage.
 Research Findings About 96
Customer Satisfaction

91% of customers who have major complaints decide they

will never come back. But if the complaint is resolved quickly,
82% of them will return.
 Quick complaint resolution drops customer defection rate
from 91% to 18%.
It is better to have a complaining customer than no
customer at all. It pays to resolve complaints quickly.
 Research findings about customer 97
satisfaction (cont…)

There is no investment like investment in customer

satisfaction.
Treat the cost of satisfying a customer as an investment
rather than as an expense. You will get unmatched returns
through referrals, repeat purchases decreased operational
costs and increased profits.
In the customer’s benefit lies our benefit.
 98

 Therefore, organizations should start tracking the cost of

customer dissatisfaction to convince employees and
management about the importance of keeping customers
satisfied.
 Your competitive advantage will lie in retaining the customer
longer than your competition.
 Because of a few disloyal customers, you cannot lose your
faith in all your customers.
 5.8.4.3 Place Yourself in 99

The Customer’s Shoes

 You have the right to choose your customers but not the
luxury to compromise on your level of service.
 Get rid of the unwanted customer but do it with tact.
 Part with the unwanted customer with a smile and a
handshake. Place yourself in the customer’s shoes. ‘Do
onto your customer as you would have done onto you’.
100