An Overview of Marketing

1.0 Introduction to Marketing

The goal of every organization is to create value for customers and in turn capture value
from them. Companies aim at building profitable relationships with customers.
Companies must develop and offer products and services that will be of value to the
customers and must convince them that they are gaining more from the products and
services they are buying than what they have foregone in terms of cash or other
alternatives. There is therefore need to understand consumer needs and wants, deciding
which target market an organisation can serve best, and developing a value proposition
by which an organisation can attract and retain target consumers.

Marketing Defined

In order to explain how the marketing of goods and services is done, we must first
describe what marketing is. There are several definitions of Marketing, but we present
two definitions of Marketing as defined by the Chartered Institute of Marketing (CIM) and
the American Marketing Association (AMA).

“The management process of anticipating, identifying and satisfying customer

requirements profitably” (CIM, 2001).

“Marketing is the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and
society at large” (AMA, 2007)

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Simple Marketing Exchange Process

2.0 The Marketing Process and Functions of Marketing

The marketing process is not a one-time operation. It is a four-step continuous process of
designing (the product/service/idea as per the customer requirements), developing,
delivering and determining. Baines et al have given the following four Ds comprising the
process of marketing.

a) Design – Represents the first step in the marketing process. It comprises

identification and anticipation of customer and consumer needs and design the
product/service/idea offering around their needs so as to create value for them.

b) Development - The next step would be to develop products, services, and ideas
which would meet the needs of the customer and consumers and deliver the value
as designed.

c) Deliver - After developing, products, services, and ideas as designed, the next
logical step is to deliver and make them accessible to customers and consumers
so that they may enjoy the value created.

d) Determine - It is concerned with making an assessment if the firm really designed,

developed, and delivered what the customers and consumers had wanted. If the
evaluation goes the other way then the firm will have to redesign and redevelop
the product, service, and idea to deliver the real value.

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The above four steps are used when marketing management is to be defined as Pride and
Ferrell define marketing management, “as the process of planning, organizing,
implementing, and controlling marketing activities to facilitate exchange effectively and
efficiently.”

2.1 Functions of Marketing

There are eight functions of marketing as indicated in the figure below. Each of these
functions of marketing is interlinked with stakeholder requirements. Marketers at
different levels within the organisation will undertake different components of these
functions at different levels. In general terms, the senior marketer or marketing director
will direct these functions, while the marketing manager will manage them, the
marketing executive will undertake the actions necessary to fulfil these functions and the
marketing assistant will support the marketing executive. Below is a presentation of the
eight functions of marketers.

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Functional Map For Marketing

1. Provide marketing intelligence and customer insight – Marketing intelligence

is about collecting information about the day to day happenings in the market such
as competitor prices, competitor activities e.t.c. The intelligence gathered can be
used by marketers for decision making. Customer insight on the other hand is
about collecting information on consumers’ buyer behaviour and interpretation
of trends in human behaviour in order to improve product development,
marketing communications development and customer support.
2. Provide strategic marketing direction for the organisation – The organisation
must be able to plan for the long term and avoid suffering from marketing myopia
(short-sightedness) because the business environment is both dynamic and
uncertain.
3. Develop the customer proposition – It is the functional of marketing to
understand the total benefits that customers seek from a product and develop the
customer proposition to deliver those benefits.

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4. Manage and provide marketing communications – This function of marketing
entails engaging with the target market to create awareness about the
organisation or its products as well as trying to influence the target market to
choose an organisation’s products using different marketing communications
tools. In addition, marketing communications should be managed by ensuring the
right message is communicated to the right people and the right channels are used
to communicate.
5. Use and develop marketing and customer information – This function of
marketing entails gathering information about the markets and customers that
can be used in decision making as well as in the company’s marketing strategy.
For example, an understanding of market and sales potential can help dictate the
allocation of resources. Further, information on customers can help in
understanding customers and devising of strategies to serve them better.
6. Lead marketing operations and programmes – It is the function of marketing to
take a lead in the implementation of marketing operations and programmes such
as market activations, sales promotions and market development.
7. Work with other business functions and third parties – In order to serve the
customers effectively, it is cardinal for the marketing function to work with other
departments such as finance, human resource and the supply chain departments.
Interfunctional co-ordination should be at the heart of marketing because if
marketing works in isolation, it will be impossible to serve the customers
satisfactorily. Apart from working with other business functions, marketing works
with third parties like advertising agencies, marketing activation agencies, media
houses and distributors to implement marketing programmes.
8. Manage and develop teams and individuals – Serving customers is done through
teams and individuals and it is the function of marketing to ensure that these
teams and individuals are managed in order to deliver. Further, the inculcation of
the right values (e.g. teamwork, empathy, responsiveness) and skills (customer
care skills, selling skills e.t.c) are paramount for both teams and individuals.
3.0 Introduction to the Marketing Mix Elements
The marketing mix is a mix of marketing policies and procedures to produce a profitable
enterprise and is commonly known as the 4Ps. The marketing mix elements which a
manufacturer must consider in developing policies and procedures include;

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 Product – Represents the offering and how it meets the customer’s need, it’s
packaging and labelling. Product comprises both goods and services.

 Place (distribution) – Represents distribution and concerns how to place the

optimum amount of goods and services before the maximum number of a target
market at the times and locations they want

 Price – Represents the cost to the customer, and cost plus profit to the seller. Price
is the only element in the marketing mix that generates revenue as the other
element represent cost.

 Promotion – Represents how the product’s benefits and features are conveyed to
the potential buyer. Promotion is the function of informing, persuading and
influencing the customer’s purchase decision. The function of all elements of the
promotional mix is to communicate. Examples of promotional tools include
advertising, personal selling, direct marketing, sales promotions and public
relations.

The Key Tasks for Marketing Communications

1. To differentiate – In many markets, there is little that separates brands (e.g

mineral water, soft drinks). In these cases, it is the images created by marketing
communications that help differentiate one brand from another and position them
so that consumers develop positive attitudes and make purchasing decisions.

2. To reinforce – Communications may be used to remind people of a need they

might have or of the benefits of past transactions with a view to convincing them
that they should enter into a similar exchange. In addition, it is possible to provide
reassurance or comfort either immediately prior to an exchange or post-purchase.
This is important as it helps to retain current customers and improve profitability.

3. To inform – Communications informs and makes potential customers aware of the

features and benefits of an organization’s offering. In addition, marketing
communications can be used to educate audiences on how to use a product or
what to do in particular situations.

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4. To persuade – Communication may attempt to persuade current and potential
customers of the desirability to enter into an exchange relationship.

The Promotion Mix

Promotion is the function of informing, persuading and influencing the consumer’s

purchasing decision. The role of promotion is to communicate with individuals, groups,
or organizations to directly or indirectly facilitate exchanges by informing and
persuading one or more of the audiences to accept an organisation’s products. In short it
is an element of the marketing mix by which firms communicate with their customers.
Promotional mix refers to promotional methods used by firms to communicate with
individuals, groups and organizations. These methods or rather components of
promotional mix include:

1. Advertising – is any paid form of non-personal communications about an

organization’s product, service, or idea by an identified sponsor. The paid aspect
of this definition reflects the fact that the space or time of an advertising message
must generally be bought. The non-personal aspect means that advertising
involves mass media (e.g. television, radio, magazines, and newspapers) that can
transmit a message to large groups of individuals, often at the same time.
Advertising is therefore a very important promotional tool for companies whose
products are targeted at mass market consumer markets such as packaged goods
and drug companies.

2. Direct marketing – involves an organization’s direct communication with target

customers to generate a response and/or a transaction. It involves a variety of
activities, including direct selling, telemarketing, and direct response ads through
direct mail etc. The rapid growth of the internet is a factor that is fuelling Direct
Marketing and a good example is how traders in second hand Japanese cars are
using this marketing tool to reach their Zambian market. Other activities include
the distribution of flyers, catalogues and this is very common among furniture
retailers in Zambia.

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3. Sales Promotion – are those marketing activities that provide extra value or
incentives to the sales force, distributors, or the ultimate consumer and can
stimulate immediate sales. Sales promotions are generally broken into two major
categories; Consumer Oriented and trade oriented sales promotions.

Consumer Oriented sales promotions are targeted to the ultimate user of a product
and includes couponing, sampling, premiums, sweepstakes and rebates.

Trade oriented sales promotions are targeted toward marketing intermediaries

such as wholesalers, distributors and wholesalers. Promotional and
merchandising allowances, price deals and trade shows are some of the
promotional tools used to encourage the trade to stock and promote a company’s
products.

4. Publicity – is non-personal communications regarding an organization, product,

service or idea that is not directly paid for or run under identified sponsorship. It
usually comes in the form of news story, editorial or announcement about an
organization and/or its products and services.

5. Public relations – is the management function which evaluates public attitudes,

identifies the policies and procedures of an individual or organization with the
public interest and executes a program of action to earn public understandings
and acceptance.

Public relations uses publicity and a variety of tools including special publications,
participation in community activities, fund raising, sponsors of special events, and
various public affairs activities , to manage an organisation’s image.

6. Personal selling – is a form of person to person communication in which a seller

attempts to assist and/or persuade prospective buyers to purchase the company’s
product or service or to act on an idea. It involves direct contact between the
buyer and seller either face-to-face or through some form of telecommunications
such as telephone sales. The interaction gives the marketer communication
flexibility; the seller can see or hear the potential buyer’s reaction and modify the
message accordingly.

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3.1 Extension from 4 to 7Ps
The traditional 4Ps marketing mix was developed at a time when goods marketing was
more prevalent and the role of services was insignificant. The growing importance of
services necessitated the revising of the 4Ps as it posed some limitations when it came to
marketing of services. For example, the intangibility aspect of services is normally
ignored and promotion fails to accommodate the inseparability issue between
production and consumption of services.

The shortcomings mentioned above led to the extension of the tradition marketing mix
to an extended marketing mix which comprises 7Ps. The additional 3Ps have been
included to address the unique characteristics of services and these include people,
physical evidence and processes. A detailed explanation of the services marketing mix
follows below;

 Physical evidence – to emphasise that the tangible components of services were

strategically important since customers used these to infer what the quality of
society might be (i.e. Airline loyalty cards, in-flight magazine, entertainment
service).

 Process – because service delivery is inseparable from the customer consumption

process, we include process because of the need to manage customer expectations
and satisfaction which becomes strategically important in this context. Where
processes are standardised, it is easier to manage customer expectations (i.e. self
service, online check in, travel class, increasing availability of alternative
locations).

 People – included to emphasise that services are delivered by customer service

personnel, sometimes experts and often professionals who interact with the
customer sometimes in an intimate manner (i.e. check-in staff, customer service
desk, cabin crew/pilot team).

3.2 The Nature/Characteristics of the Service Product

Services are said to have four key characteristics which impact on marketing
programmes. These are: Intangibility, Inseparability, Heterogeneity /Variability and
Perishability. It is helpful to consider each of these characteristics and their implications
briefly:

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a) Intangibility

Services are said to be intangible - they cannot be seen or tasted, for example. This can
cause lack of confidence on the part of the consumer. As was apparent earlier, in
considering pricing and services marketing, it is often difficult for the consumer to
measure service value and quality. To overcome this, consumers tend to look for evidence
of quality and other attributes, for example in the decor and surroundings of the beauty
salon, or from the qualifications and professional standing of the consultant.

Implications of Intangibility:

• Services Cannot be inventoried

• Services Present difficulties in managing demand

• Services cannot be patented easily

• Services are copied by competitors easily

• Cannot be readily displayed or easily communicated

• difficulty for customers to assess quality

• Advertising and Pricing is difficult

b) Inseparability

Services are produced and consumed at the same time, unlike goods which may be
manufactured, then stored for later distribution. This means that the service provider
becomes an integral part of the service itself. The waitress in the restaurant, or the cashier
in the bank, is an inseparable part of the service offering. The client also participates to
some extent in the service, and can affect the outcome of the service. People can be part
of the service itself, and this can be an advantage for services marketers.

Implications of Inseparability

• Mass production is difficult.

• Real-time offering. Though this may be risky but it also provides opportunities for
customization.

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• Customers affect the outcome based on how they communicate about what they
want.

• Employees affect the service outcome based on their knowledge and training e.t.c.

c) Heterogeneity / Variability

Because a service is produced and consumed simultaneously, and because individual

people make up part of the service offering, it can be argued that a service is always
unique; it only exists once, and is never exactly repeated. This can give rise to concern
about service quality and uniformity issues. Personnel training and careful monitoring of
customer satisfaction and feedback can help to maintain high standards.

Implications of heterogeneity:

• Services cannot be easily monitored because the quality depends on customers,

employees, other customers and demand.
• Problems with consistency as it involves emotional labour
• There is no sure knowledge that the service delivered matches what was planned
and promoted.
d) Perishability

Services are perishable; they cannot be stored. Therefore, an empty seat on a plane,
for example, is a lost opportunity forever. Restaurants are now charging for reservations
which are not kept, charges may be made for missed appointments at the dental clinic.
Perishability does not pose too much of a problem when demand for a service is steady,
but in times of unusually high or low demand service organizations can have severe
difficulties.

Implications

• Inability to store the service for future use. It becomes difficult to forecast demand
or creatively plan for capacity.

• It is difficult to synchronize supply and demand with services

• Services cannot be returned or resold and there is therefore need for strong
recovery strategies in the event of service failure.

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In conclusion, it is important to mention that the marketing of services must be different
from the way physical goods are marketed because of the nature of the service product.
Marketers of services must be able to overcome the implications that arise as a result of
the unique characteristics that services possess such as intangibility, variability,
perishability and inseparability especially in this era where services as products have
taken prominence.

4.0 Marketing Management Philosophies

There are five (5) competing philosophies that strongly influence an organisation’s
marketing processes and these are; production philosophy, product philosophy, sales
philosophy, marketing philosophy and societal marketing philosophy.

4.1. Production Philosophy

The production concept or philosophy, is one of the oldest in business and it holds that
consumers prefer products that are widely available and inexpensive. This philosophy is
characterised by:

• Managers of production-oriented businesses concentrate on achieving high

production efficiency and low costs in order to make the product affordable.
• Intensive mass distribution of the product to ensure that the product is made
available and easily accessible.
This philosophy makes sense in developing countries, where consumers are more
interested in obtaining the product than in its features. It is also used when a company
wants to expand the market.

The weakness of the production orientation philosophy is that it does not take into
consideration the needs and wants of the market place when designing goods and
services. It uses an inside-outside perspective as it starts from the factory first before
going to the market.

4.2. The Product Concept or Philosophy

The Product concept or philosophy, holds that consumers favour those products that
offer the most quality, performance, or innovative features. Managers in these
organizations focus on making superior products and improving them over time,
assuming that buyers can appraise quality and performance.

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Product-oriented companies often design their products with little or no customer input,
trusting that their engineers can design exceptional products.

The weakness of the production orientation philosophy is that it does not take into
consideration the needs and wants of the market place when designing goods and
services. The product concept can lead to marketing myopia or short sightedness which
has killed postal services in Zambia.

4.3. Selling Concept or Sales Orientation Philosophy

A sales orientation is based on the ideas that people will buy more goods and services if
aggressive sales techniques are used and that high sales result in high profits. To sales
oriented firms, marketing means selling things and collecting money and they encourage
intermediaries to push manufacturer’s products more aggressively. This concept
assumes that consumers must be coaxed into buying, so the company has a battery of
selling and promotion tools to stimulate buying.

The selling concept is practiced most aggressively with unsought goods—goods that
buyers normally do not think of buying, such as insurance and funeral plots. The selling
concept is also practiced in the non-profit area by fund-raisers, college admissions offices,
and political parties.

The weakness of this philosophy is that there is a lack of understanding of the needs and
wants of the marketplace. Sales oriented companies often find that despite the quality of
their sale force, they cannot convince buyers to buy goods or services that are neither
wanted nor needed.

4.4. The Marketing Concept or Market Orientation Philosophy

The marketing concept holds that the key to achieving organizational goals consists of
the company being more effective than its competitors in creating, delivering, and
communicating customer value to its chosen target markets.

Companies that pursue the marketing concept are said to be marketing oriented. Market
Orientation refers to ‘the organisationwide generation of market intelligence pertaining
to current and future customer needs, disseminate of the intelligence across the
departments, and organisationwide responsiveness to it’ (Kohli and Jaworski, 1990).

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The market orientation is guided by the marketing concept which states that the social
and economic justification for an organisation’s existence is the satisfaction of customer
wants and needs while meeting the organisational objectives. The marketing concept
holds that what a business thinks it produces is not of primary importance but rather
what customers think they are buying and the perceived value they will get. The
marketing orientation includes;

• Focusing on customer wants and needs so that the organisation can distinguish its
products from competitors.

• Integrating all the organisations activities including production to satisfy these

wants.

• Achieving long term goals for the organisation by satisfying customer wants and
needs legally and responsibly.

Achieving a market orientation therefore calls for an organisation to obtain information

about customers, competitors and markets, examining the information from a total
business perspective, determining how to deliver superior customer value and
implementing actions to provide value to customers. Narver and Slater (1994) suggested
that developing a market orientation means developing:

a) Customer orientation - with creating superior value by continuously developing and

redeveloping product and service offerings to meet customer needs. To do this, we
measure customer satisfaction on a continuous basis and train and develop front-line
service staff accordingly.

b) Competitor orientation - Requires an organisation to develop an understanding of

its competitors short-term strengths and weaknesses and it’s long term capabilities and
strategies.

c) Inter-functional coordination or Integrated Marketing - Requires all the functions

of an organisation to work together to achieve the above foci for long term profitability.

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The Three (3) Components of Market Orientation

In order to achieve market orientation so that an organisation is internally responsive to

changes in the market place, the following factors must be borne in mind;

• Senior management support

• Development of teams to gather the necessary market intelligence data
• Market sensing through environmental scanning
4.5. The societal Marketing Concept
The societal marketing orientation extends the marketing concept by acknowledging that
some products that customers want may not really be in their interests or the best
interest of society as a whole. This philosophy states that an organisation exists not only
to satisfy customer wants and needs and to meet organisational objectives but also to
preserve or enhance individual’s and society’s long term interests. This concept tries to
address society’s concerns such as climate change, the depleting ozone layer, fuel
shortages, pollution and health concerns. Addressing these concerns will ensure that
resources are conserved and reduce the damage to the environment.

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12 Market Segmentation
Market segmentation is the division of a market into different groups of customers with distinctly
similar needs and product requirements. Put in another way, market segmentation is the division
of a mass market into identifiable and distinct groups or segments, each of which have common
characteristics and needs and display similar responses to marketing actions. There are number
of reasons that make market segmentation an important undertaking in marketing and these
include;

✓ It forms an important foundation for successful formulation of marketing strategies and

activities.
✓ It ensures that the elements of the marketing mix are designed to meet particular needs
of different customer groups.
✓ It enables the effective use of scarce/finite organisational resources to provide offerings
for selected groups of people. Under normal circumstances, a company has limited
resources and it is not possible to produce all possible products, for all the people, all of
the time. Companies must therefore choose only the best opportunities to pursue.
The STP Process

The STP process refers to the three activities that are undertaken in the sub-division of whole
markets into market segments in a sequential manner.

The STP process is increasingly being used because of the realisation of the prevalence of mature
markets, greater diversity in customer needs and the ability to reach specialised, niche segments.
The three activities in the STP process are outlined below;

Segmentation Target Marketing Positioning

Identifying Similar Identify Group to Create a concept to

Groups of customers aim for appeal to target
market

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SEGMENTATION

SEGMENTING CONSUMER MARKETS/ BASES OF SEGMENTATION

A marketer has to try different segmentation variables, alone and in combination, to find the best
way to view the market structure. The major variables or bases that might be used in segmenting
markets include; geographic, demographic, psychographic, and behavioural variables.

a) Geographic Segmentation

This calls for dividing the market into different geographical units such as nations, regions, states,
counties, cities, or neighbourhoods. A company may decide to operate in one or a few
geographical areas, or to operate in all areas but pay attention to geographical differences in
needs and wants. It is common to localize products, advertising, promotions, and sales efforts to
fit the needs of geographical areas (regions, cities, and even neighbourhoods).

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b) Demographic Segmentation

Demographic segmentation divides the market into groups based on variables such as age,
gender, family size, family life cycle, income, occupation, education, religion, race, and nationality.
Demographic factors are the most popular bases for segmenting customer groups. One reason is
that consumer needs, wants, and usage rates often vary closely with demographic variables.
Another is that demographic variables are easier to measure than most other types of variables.
Even when market segments are first defined using other bases, such as benefits sought or
behaviour, their demographic characteristics must be known in order to assess the size of the
target market and to reach it efficiently.

I. Age and Life-Cycle Stage

Age and life cycle segmentation consists of offering different products or using different
marketing approaches for different age and life-cycle groups. Marketers must guard against
stereotypes when using this form of segmentation. While certain age and life cycle groups do
behave similarly, age is often a poor predictor of a person’s life cycle, health, work or family status,
needs, and buying power. For example, not all consumers aged between 25 and 30 have the same
weight that they can wear clothes of the same size. Consumer needs and wants change with age.
Some companies use age and life cycle segmentation, offering different products or using
different marketing approaches for different age and life-cycle groups.

II. Gender segmentation

This calls for dividing a market into different groups based on sex. This segmentation form has
long been used for clothing, cosmetics, toiletries, and magazines. New opportunities in this area
are emerging such as automobiles, deodorants, and financial services. There is an increased
emphasis on marketing and advertising to women. Specialized Web sites are becoming very
popular with this group.

III. Income segmentation

It consists of dividing a market into different income groups. Marketers for automobiles, boats,
clothing, cosmetics, financial services, and travel have long used this form of segmentation. Using
this form, marketers must remember that they do not always have to target the affluent. Other
income groups are also viable and profitable market segments.

c) Psychographics segmentation

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It calls for dividing a market into different groups based on social class, lifestyle, or personality
characteristics. The use of AIO (Activities, Interests and Opinions) dimensions are also used in
this segmentation method. The AIO dimensions are used to divide the market on how people
“Think and Act”. People in the same demographic class can exhibit very different psychographics
characteristics. As previously seen in, lifestyle also affects people’s interest in various goods, and
the goods they buy express those lifestyles. This method of segmentation is gaining in popularity.
Personality variables can also be used to segment markets. Marketers will give their products
personalities that correspond to consumer personalities.

d) Behavioural segmentation

It involves dividing a market into groups based on consumer knowledge, attitudes, uses, or
responses to a product. Many marketers believe that behaviour variables are the best starting
point for building market segments. Occasion segmentation consists of dividing the market into
groups according to occasions when buyers get the idea to buy, actually make their purchase, or
use the purchased item. Benefit segmentation involves dividing the market into groups
according to the different benefits the consumers seek from the product. Companies can use
benefit segmentation to clarify the benefit segment to which they are appealing, its
characteristics, and the major competing brands. They can also search for new benefits and
establish brands that deliver them. User status can also be used to divide the market. Segments
of nonusers, ex-users, potential users, first-time users, and regular users of a product are potential
ways to segment. Usage rates are another way that marketers segment markets. These
categories might be light, medium, and heavy user groups. Loyalty status can also be used to
segment markets. Consumers can be loyal to brands, stores, and companies. Consumers can be
completely loyal, somewhat loyal, or not loyal at all. An amazing amount of information can be
uncovered by studying loyalty patterns.

d) Multi-attribute segmentation

This involves using multiple segmentation bases in an effort to identify smaller, better-defined
target groups. Today there is a trend toward targeting multiple segments. Very often, companies
begin their marketing with one targeted segment, and then expand into other segments. This
often boosts a company’s competitive advantage and knowledge of the customer base. One of the
most promising developments in multivariable segmentation is “geodemographic” segmentation
based upon both geographic and demographic variables.

Target Marketing

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After evaluating the different segments, the company must decide which and how many segments
it will target. A target market consists of a set of buyers who share common needs or
characteristics that the company decides to serve. Note that market segmentation is simply the
dividing of the market where as target marketing is selecting or choosing the segment to go for
or serve. A company can decide to serve the segments in a number of ways discussed below.

Target Segment Evaluation Criteria

In order to target the most appropriate segment, a criterion is needed to guide the process and
below is an outline of the key aspects in the criteria

Distinct – Is each segment clearly different from other segments? If so, different marketing mixes
will be necessary.

Accessible – Can buyers be reached through appropriate promotional programmes and

distribution channels?

Measurable – Is the segment easy to identify and measure?

Profitability – Is the segment sufficiently large to identify and measure

OTHER CRITERIA TO EVALUATE MARKET SEGMENTS

Three factors must be considered when evaluating different market segments: segment size and
growth, segment structural attractiveness, and company objectives and resources.

Segment Size and Growth

The company must first collect and analyze data on current segment sales, growth rates, and
expected profitability for various segments. It will be interested in segments that have the right
size and growth characteristics. But "right size and growth" is a relative matter. The largest,
fastest-growing segments are not always the most attractive ones for every company. Smaller
companies may lack the skills and resources needed to serve the larger segments or may find
these segments too competitive. Such companies may select segments that are smaller and less
attractive, in an absolute sense, but that are potentially more profitable for them.

Segment Structural Attractiveness

The company also needs to examine major structural factors that affect long-run segment
attractiveness. For example, a segment is less attractive if it already contains many strong and
aggressive competitors. The existence of many actual or potential substitute products may limit
prices and the profits that can be earned in a segment. The relative power of buyers also affects

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segment attractiveness. Buyers with strong bargaining power relative to sellers will try to force
prices down, demand more services, and set competitors against one another—all at the expense
of seller profitability. Finally, a segment may be less attractive if it contains powerful suppliers
who can control prices or reduce the quality or quantity of ordered goods and services.

Company Objectives and Resources.

Even if a segment has the right size and growth and is structurally attractive, the company must
consider its own objectives and resources in relation to that segment. Some attractive segments
could be dismissed quickly because they do not mesh with the company's long-run objectives.
Even if a segment fits the company's objectives, the company must consider whether it possesses
the skills and resources it needs to succeed in that segment. If the company lacks the strengths
needed to compete successfully in a segment and cannot readily obtain them, it should not enter
the segment. Even if the company possesses the required strengths, it needs to employ skills and
resources superior to those of the competition in order to really win in a market segment. The
company should enter only segments in which it can offer superior value and gain advantages
over competitors.

Target Marketing Approaches

There are several approaches that marketers can use to determine the number of segments to
enter and these are explained below;

a) Undifferentiated (Mass) Marketing

This is a market coverage strategy in which a firm ignores market segment differences and goes
after the whole market with one offering. For instance, Coca-cola once had only one type of coke
packaged in the same bottle design everywhere. This strategy focuses on what is common in the
needs of the consumers rather than on what is different. The company designs a product and a
marketing program that will appeal to the largest number of buyers. It relies on mass distribution
and mass advertising, and it aims to give the product a superior image in people's minds.
However, most modern marketers have strong doubts about this strategy. Difficulties arise in
developing a product or brand that will satisfy all consumers. Moreover, mass marketers often
have trouble competing with more focused firms that do a better job of satisfying the needs of
specific segments and niches.

b) Differentiated (Segmented) Marketing

Using a differentiated marketing strategy, a firm decides to target several market segments or
niches and designs separate offers for each. Toyota tries to produce a car for every "purse,

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purpose, and personality." Nike offers athletic shoes for a dozen or more different sports, from
running, fencing, and aerobics to bicycling and baseball. By offering product and marketing
variations, these companies hope for higher sales and a stronger position within each market
segment. Developing a stronger position within several segments creates more total sales than
undifferentiated marketing across all segments. Procter and Gamble gets more total market share
with eight brands of laundry detergent than it could with only one. But differentiated marketing
also increases the costs of doing business. A firm usually finds it more expensive to develop and
produce, say, 10 units of 10 different products than 100 units of one product. Developing separate
marketing plans for the separate segments requires extra marketing research, forecasting, sales
analysis, promotion planning, and channel management. Thus, the company must weigh
increased sales against increased costs when deciding on a differentiated marketing strategy.

c) Concentrated (Niche) Marketing

This market-coverage strategy, concentrated marketing, is especially appealing when company

resources are limited. Instead of going after a small share of a large market, the firm goes after a
large share of one or a few segments or niches. Concentrated marketing provides an excellent
way for small new businesses to get a foothold against larger, more resourceful competitors.
Through concentrated marketing, firms achieve strong market positions in the segments or
niches they serve because of their greater knowledge of the segments' needs and the special
reputations they acquire. They also enjoy many operating economies because of specialization in
production, distribution, and promotion. If the segment is well chosen, firms can earn a high rate
of return on their investments. At the same time, concentrated marketing involves higher-than-
normal risks. The particular market segment can turn sour. Or larger competitors may decide to
enter the same segment.

d) Micromarketing (Local Marketing)

This is the practice of tailoring products and marketing programs to suit the needs and wants of
specific individuals and local customer groups. It includes; Local Marketing which is tailoring
brands and promotions to needs and wants of local customer groups e.g cities, neighborhoods
etc. This strategy can be effective in the face of pronounced regional and local differences in
demographics and lifestyles. The drawback of this strategy is that it can drive up manufacturing
and marketing costs by reducing economies of scale. It can also create logistics problems as
companies try to meet the varied requirements of different regional and local markets. The
overall brand image may also be diluted especially if the product and message vary too much in
different localities.

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e) Individual marketing (one-to-one or customized marketing) which involves tailoring
products and marketing programs to needs and preferences of individual customers. Although
this is effective for relationship building with customers, this strategy can be costly.

Positioning

Positioning is the unique place for our product/service relative to the competition in the mind of
our customer. Positioning is the means by which goods and services can be differentiated and so
give consumers a reason to buy. There are two major fundamental elements that encompass
positioning. The first element concerns the physical or intangible attributes, the functionality and
the capability that a brand offers. The second positioning element concerns the way in which a
brand is communicated and how consumers perceive the brand relative to other competing
brands in the marketplace. The attributes and design of the product alone are not enough for
successful positioning just as communication of the product alone is not enough. For example,
claims through communication that a detergent paste is powerful and will remove all dirty from
clothing will be rejected if the product fails to deliver. Positioning, therefore, is about how
customers judge a product’s value relative to competitors, its ability to deliver against the
promises made and the potential customers have to derive value from the offering.

Positioning Strategies

A number of positioning strategies that firms can use are explained below;

i. Positioning by Product Attributes and Benefits – This a common positioning approach

and entails setting the brand apart from the competition on the basis of the specific
characteristics or benefits offered. Marketers attempt to identify the salient features
(those that are important to customers) and use them. They can use one or more features.
ii. Positioning by Price/Quality – Marketers often use price/quality characteristics to
position their brands. This is common for premium brands to justify a premium price.
Another way this method is used is when the focus is on the quality and value offered by
a product at a very competitive price.
iii. Positioning by Use or Application – This is where you position the brand by associating
it with a specific use.
iv. Positioning by Product Class – This positioning strategy entails positioning your
product category against another product category as competition often comes from a
product that comes from outside the class.
v. Positioning by Product user – This strategy entails positioning a product by associating
it with a particular user or group of users.

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vi. Positioning by Competitor – This approach entails positioning yourself against the
competition. For example Euro Buses has taken up a positioning strategy of not having
‘ghost passengers’ each time their buses are loading in contrast to some of its
competitors.
vii. Positioning by Cultural Symbol – This is a positioning strategy that entails using a
meaningful cultural symbol to differentiate brands. For example, mothers pride used by
National Milling depicts this positioning strategy.

PRODUCT DECISIONS

WHAT IS A PRODUCT?

As the first of the four marketing mix variables, it is often where strategic planning begins
and ends. A marketing manager cannot determine a price, design a promotional strategy
or create a distribution channel unless the firm has a product to sell. Product strategy
calls for making coordinated decisions on individual products, product lines, and the
product mix.

A product is anything that can be offered to a market for attention, acquisition, use, or
consumption and that might satisfy a want or need. It includes physical objects, services,
persons, places, organizations, and ideas.’ Pure' Services are distinguished from 'physical'
products on the basis of intangibility, inseparability, variability and perish ability.
Services are a form of product that consist of activities, benefits, or satisfactions offered
for sale that are essentially intangible and do not result in the ownership of anything.

Types of Products

Products can either be classified as either business (industrial) or consumer products,

depending on the buyer’s intentions. The key distinction between the two is their
intended use as explained below;

✓ A business product is used to manufacture other goods or services or to facilitate

an organisation’s operations or to resell to other customers.
✓ A consumer product is bought to satisfy an individual’s personal use. In certain
instances, the same product can either be a business or consumer product
depending on the use.

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Classification of Products

Consumer Products Classification

Knowledge about the different product classes is important because business and
consumer products are marketed differently. They are marketed to different target
markets and require a unique marketing mix strategy. The different classifications of
consumer products are explained below;

✓ Convenience Products – Convenience products are relatively inexpensive and

non-durable products that consumers by without much effort and on a frequent
basis. Examples of convenience products are grocery items that we purchase on a
regular basis such as bread, soap, petrol e.tc. Consumer products usually require
wide distribution in order to sell sufficient quantities to meet profit goals as well
as provide accessibility to consumers.
✓ Shopping Products – Shopping products are usually more expensive than
convenience products and are not bought as frequently as convenience products.
Examples include products like electronics, clothes, furniture e.t.c. Consumers
attach more effort and planning to make these purchases because the level of risk
is more substantial than convenience products. Shopping products do not require
mass distribution strategies as compared to convenience products but a selective
distribution strategy as consumers often want specialist advise offered by experts.
✓ Speciality Products – Represent high risk and very expensive products that are
bought very infrequently. Consumers search extensively for these products as
they are reluctant to accept substitutes. Custom made cars, watches or rare
paintings and artworks.
✓ Unsought Products – Unsought products refer to products that people do not
normally anticipate buying and are only motivated to seek knowledge about them
when a need arises. Examples include a coffin, burial plots e.t.c.
Business products

Business products are bought to meet organisational goals and below are the different
classes of business products;

✓ Capital Equipment – Include all capital goods that are considered large and
expensive such as factory equipment, buildings. These require substantial
investment, lengthy planning processes and are usually once off purchases
designed to be used for a considerable amount of time. A number of different
people and groups are involved in the purchase process.
✓ Accessory Equipment – Represent those goods that support key operational
processes and activities of the organisation. Examples include furniture,
photocopiers and computers.
✓ Raw Materials – Represent the basic unprocessed materials that are used in
order to produce finished. They are usually bought in large quantities and buyers

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often negotiate heavily on price. Other factors that influence the buying decisions
include length of relationship, service quality and credit facilities.
✓ Component Parts – Are finished and complete parts that are bought from other
organisations in order to be included in the completion of another product. For
example, Boeing buys seats from another company to be fitted on their planes. The
availability of component parts is key for Original Equipment Manufacturers.
✓ Processed Materials – Are products used directly in manufacturing other
products and have undergone some processing. For example, manufactures of
pots will need sheets of steel as a processed material. Processed materials are
bought according to customer specifications.
✓ Supplies – These are consumable items that do not become part of the final
product such as lubricants, stationery, detergents e.t.c. These are routine
purchases and are inexpensive. Supplies fall into a category that is known as
maintenance, repair and operations (MRO).
✓ Business Services – Are intangible services used to enhance the operational
aspect of the organisation. Examples of business services include management
consultancy, auditing services, marketing research e.t.c.

LEVELS OF PRODUCT S

As shown in the figure below, each product item offered to customers can be viewed on
three levels. Therefore product planners need to think about products and services on
three levels shown below;

Levels of Product Figure

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1). The core product is the core, problem solving benefits that consumers are really
buying when they obtain a product or service. It answers the question what is the buyer
really buying?

2). The actual product may have as many as five characteristics that combine to
deliver core product benefits. They are:
a) Quality level
b) Features
c) Design
d) Brand name
e) Packaging

3) The augmented product

This includes any additional consumer services and benefits built around the core and
actual products. Therefore, a product is more than a simple set of tangible features.
Consumers tend to see products as complex bundles of benefits that satisfy their needs.
When developing products, marketers must:

1). Identify the core consumer needs that the product will satisfy.

2). Design the actual product and finally

3). Find ways to augment the product in order to create the bundle of benefits that will
best satisfy consumer’s desires for an experience.

The product life cycle concept

Every product is expected to have a life cycle just like a human being is conceived, born,
grows, matures and finally dies. Product Life Cycle (PLC) is the course of a product’s sales
and profits over its lifetime. The sales of many products appear to follow a typical pattern,
showing a gradually increasing growth to maturity, a levelling out as saturation point is
reached and then a decline. The Product Life Cycle concept can be applied as a useful
framework for describing how products and markets work, and when used carefully, it
may help in developing good marketing strategies for different stages of the PLC.

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The product Life Cycle Figure

The different stages are explained below.

(a) Product development

This begins when the company finds and develops a new product idea. Prior to the
introduction of a product to the market, there is a development stage during which there
tends to be greater and greater investment. This investment cost must be either charged
against future earnings or written off, and it is not unnatural to find that a company which
has invested large sums in a particular development project will be reluctant to abandon
the research. During this stage, sales are zero and the company’s investment costs
mount.The product life cycle concept is useful in determining the time and cost of
development projects in relation to the ultimate pay off. Frequently, large-scale
development projects take much longer than originally expected, and it is important at
regular periods to review progress made, against life-cycle expectations.

(b) Introduction

In the introductory stage, costs of production and marketing will be high, but if there is a
genuine product differential (an advantage not enjoyed or easily copied by other
companies), a company may benefit in various ways, such as high initial pricing or rapid
market penetration. It’s a period of slow sales growth as the product is introduced in the
market. Profits are negative or low due to low sales and heavy expenses of product

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introduction e.g distribution, advertising, promotion etc. An organisation must choose a
launch strategy that is consistent with the intended product positioning.

(C) Growth

A period of rapid market acceptance and increasing sales growth and profits. During the
growth stage, the initial marketing efforts should lead to the greatest rate of sales
expansion, but according to the rate or technical change, the rate of market acceptance
and the ease with which competitors can imitate and enter the market, buying resistance
will build up. New competitors enter the market attracted by the opportunities of profits.
They’ll produce new product features and market will expand. Management must
therefore be ready to phase in new products and adjust marketing tactics in line with the
anticipated cycle.Prices must remain where they are or fall slightly.

(d) Maturity
The maturity and saturation stages, for example, may be the time for changes in pricing,
in advertising and promotion, or in design or quality range. Sales growth slows down.
Slow sales lead to inventory build-up causing greater competition i.e competitors start
marking down prices, raising advertising and sales promotions and raising their R&D
budgets to develop better product version. Profits level off or decline because of
increased marketing outlays to defend product against competition. Weaker competitors
start dropping out and eventually only the well-established ones remain in the industry.
Product managers should ensure that the product evolves to meet changing consumer
needs i.e they should consider modifying the market, product and marketing mix

(e) Decline

A period when sales fall off considerably and profits drop. Causes include technological
advances, shifts in consumer tastes, increased competition etc. In this stage, some firms
withdraw from the market. The remaining firms may prune their product offerings i.e
drop smaller market segments or cut promotion budget and reduce prices further.
Management should therefore weigh the benefits of keeping a weak product against the
costs associated with it.

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Usefulness of the PLC Concept

The PLC is a well known and popular concept as it tries to explain the broad path a
product or brand takes. It also clearly explains that no product, service or brand lasts
forever. The PLC allows marketing managers to adapt marketing strategies and tactics to
meet the evolving conditions and product circumstances.

In conclusion, it is important to note that not all products follow this product life cycle.
Some products are introduced and die quickly; others stay in the mature stage for a long,
long time. Some enter the decline stage and are then cycled back into the growth stage
through strong promotion or repositioning.

Developing and Managing Products

Developing new products is an important undertaking as it tries to sustain growth,

increases revenues and profits and replaces obsolete products. Research the Boston
Research Group has indicated that the World’s 25 most innovative companies have
higher revenue growth and include companies such as Apple, Microsoft, Proctor and
Gamble, Boeing e.t.c. This section will focus on new products, processes for developing
new products and how new products are spread among consumers or business users,
locally, nationally and globally.

Benefits of New products

Being first on the market offers new products benefits that are termed as ‘first mover
advantages’. The different advantages that are presented by new products are outlined
below;

i. Increased sales through longer sales life – The earlier the product reaches the
market, relative to the competition, the longer its life can be.
ii. Increased Sales Margins – The more innovative the product (i.e the longer it
remains unchallenged on the), the longer consumers will accept a premium
purchase price.
iii. Increased Product loyalty – Early adopters are likely to upgrade, customize or
purchase companion products.

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iv. Greater market responsiveness – The faster that companies can bring products to
market that satisfy new or changing customer needs, the greater the opportunity
to capitalize on those products for margin lift and to increase brand recognition.
v. A sustained leadership position – Being first in the market is a market position
that is very difficult for competitors to take away. Furthermore, being first
repeatedly establishes companies as innovators and leaders in the market.
vi. More resale opportunities – Being first can ensure that you record sales in other
channels.

NEW PRODUCT DEVELOPMENT (NPD) Process

New product development is the development of original products, product

improvements, product modifications, and new brands through a company’s own R&D
efforts. This becomes necessary considering changes in consumer tastes, technology and
competition. Improving and updating product lines is crucial for the success for any
organisation. Failure for an organisation to change could result in a decline in sales and
with competitors racing ahead. The process of NPD is crucial within an organisation.
Products go through the stages of their lifecycle and will eventually have to be replaced.
There are eight stages of new product development. These stages will be discussed briefly
below:

Stage 1: Idea generation

New product ideas have to come from somewhere. But where do organizations get their
ideas for NPD? Some sources include:

• Within the company i.e. employees through brainstorming and observing the
marketing environment. E.g sales people, R & D personnel e.t.c
• Competitors – No firm rely solely on internally generated ideas for new products. The
marketing intelligence system should monitor the performance of competitors
products.
• Customers - According to the marketing concept, customers should be the
springboard for developing new products through means such as complaints,
suggestions and market research.
• Distributors, Supplies and others.

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A company needs to generate many ideas in order to find a few good ones

Stage 2: Idea Screening

This involves screening new product ideas generated in stage 1 above in order to spot
good ideas and drop poor ones as soon as possible. This stage acts as a filter to disqualify
ideas that are not consistent with the organization’s new product strategy or are
inappropriate. A company should select ideas which are feasible and workable to
develop. Pursing non-feasible ideas can clearly be costly to the company.

Stage 3: Concept Development and Testing

The organisation may have come across what they believe to be a feasible idea; however,
the idea needs to be taken to the target audience. What do they think about the idea? Will
it be practical and feasible? Will it offer the benefit that the organisation hopes it will? Or
have they overlooked certain issues? Note the idea and concept is taken to the target
audience not as a working prototype at this stage but only as a description and visual
representation of a product.

Stage 4: Marketing Strategy and Development

This stage entails designing a marketing strategy to use to introduce the product into the
market. How will the product/service idea be launched within the market? A proposed
marketing strategy will be developed laying out the marketing mix strategy of the
product, the segmentation, targeting and positioning strategy sales and profits that are
expected.

Stage 5: Business Analysis

The ideas that pass the concept testing stage move to the business analysis stage where
preliminary figures for demand, costs, sales and profitability are calculated. Important
information that is considered at this stage include the size, shape and dynamics of the
market. The business analysis stage looks more deeply into the cashflow the product
could generate, what the cost will be, how much market shares the product may achieve
and the expected life of the product.

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Stage 6: Product Development

Finally, it is at this stage that a prototype is finally produced. The prototype will clearly
run through all the desired tests, and be presented to the target audience to see if changes
need to be made.

Stage 7: Test Marketing

Test marketing means testing the product within a specific area. The product will be
launched within a particular region so the marketing mix strategy can be monitored and
if needed, be modified before national launch.

Stage 8: Commercialization

If the test marketing stage has been successful then the product will go for national
launch. There are certain factors that need to be taken into consideration before a product
is launched nationally. These are timing, how the product will be launched, where the
product will be launched, will there be a national roll out or will it be region by region?

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