MARKETING

MANAGEMENT

MARCIAL V. MOJICA

1 Marketing Management
Philippine Copyright © 2024

By

Marcial V. Mojica

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2 Marketing Management
3 Marketing Management
Chapter 1

Defining and understanding Marketing

Today’s successful businesses at all levels have one
PERFORMANCE thing in common. They are strongly dedicated into
STANDARD focusing more on the part of the consumers which lead
them to commit more on the idea of marketing. To be
The learners successful, an organization should motivate everyone in
shall be able to the organization to produce superior value for their
plot marketing customers, leading to high level of customer satisfaction.
goals and
approaches for What is marketing?
product or
service. Marketing is a social and managerial process by which
individuals and groups obtain what they need and want through creating and
exchanging products and value with each other.

Content Standard
The marketing principles, goals, and traditional
and contemporary approaches to marketing.

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There are different approaches to the study of marketing point to multi-
dimensional factors that affect marketing, making it difficult to give a complete
concept of marketing in one definition. Some of the known definitions are
stated below:

DEFINITIONS OF MARKETING

Acknowledged as the father of modern marketing and a foremost

expert on strategic marketing, Philip Kotler 1 defined marketing as “the
science and art of exploring, creating, and delivering value to satisfy the needs
of a target market at a profit. Marketing identifies unfulfilled needs and
desires. It defines measures and quantifies the size of the identified market and
the profit potential. It pinpoints which segments the company is capable of
serving best and it designs and promotes the appropriate products and
services.”

According to the American Marketing Association (AMA) Board of

Directors, “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.”

Another very simple definition of marketing is “that it is delivery of

customer satisfaction at a profit. Some marketing is critical to the success of
every organization. Marketing is a social and managerial process by which
individual and groups obtain what they want and need through creating and
exchanging products and value with others.”

Marketing is an ongoing communications exchange with customers in

a way that educates, informs and builds a relationship over time. The overtime
part is important because only over time can trust be created. With trust, a
community builds organically around products and services and those
customers become as excited about the products as you are — they become
advocates, loyal evangelists, repeat customers and often, friends. Marketing is
a really great way to identify what grabs people and gets them excited about
your brand and give it to them, involve them in the process, and yeah, the best

1
Philip T. Kotler and Gary Armstrong, Principles of Marketing, 15th
Edition. New York: Pearson, 2014.

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part, build great friendships in the process. ReneeBlodgett – Chief Executive
Officer/Founder, Magic Sauce Media

Marketing today is finally customer-focused. Social media made

that happen. Markets are once again conversations. Marketing is about
knowing the market, creating the right product, creating desire for that
product and letting the right people know you have it. The old adage that
says, “If you build a better mousetrap people will beat a path to your door”
doesn’t hold true without marketing. You might indeed have a better
mousetrap, but if people don’t know you have it, and they don’t know where
your door is, there will be no path beating and no conversation going
on. Sally Falkow – APR, PRESSfeed

Marketing is about focusing efforts to develop deep insights into

customer behavior and overall market conditions to drive sustainable
profitable growth for the company. Humphry Rollest

Core Marketing Concepts

Market

Exchange, transactions,
and relationships Needs, wants, and
demands

Products- goods,
Value, satisfaction, services,
and quality and experiences

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CORE MARKETING CONCEPTS

1) Needs, wants, and demands

• Human needs - It is a state of felt deprivation of some basic satisfaction.
• Wants - These are desires for specific satisfiers of these deeper needs
• Demands - These are wants for specific products that are backed by an
ability & willingness to buy them.
Marketers cannot create needs because needs pre-exists. But marketers
can influence wants and this is done in combination with societal
influencers.

2) Products- goods, service, and experiences

• Products - These are anything that can be offered to satisfy a need or a

want.
• Goods - An inherently useful and relatively scarce tangible item
produced from agricultural, construction, manufacturing, or mining
activities.
• Services - A service is an act of 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.
• Experience - Adding value for customers buying products and services
through customer participation and connection, by managing all
aspects of the encounter

3) Value, satisfaction, and quality

• Value – Products or services’ capacity to satisfy needs/ wants as per

consumer’s perception or estimation.
• Satisfaction - Person's feeling of pleasure or disappointment which
resulted from comparing a product's perceived performance or
outcome against his/ her expectations
• Quality – refers to the perception of the degree to which the product or
service meets the customer's expectations.

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4) Exchange, transactions, and relationships

• Exchange - The act/ process of obtaining a desired product from

someone by offering something in return.
• Transactions - These are basic unit of exchange. A transaction consists
of a trade of values between two parties.
• Relationships - A pattern of building long term satisfying relationship
with customers, suppliers, distributors in order to retain their long term
performances and business.

5) Market

• Market - It consists of all potential consumers sharing a particular need

or want who might be willing and able to engage in exchange to satisfy
that need or want.

In marketing terms: Sellers are called as “industry” while buyers are

called “Market”.

• Marketer - It means someone seeking a resource from someone else &

willing to offer something of value in exchange.
Marketer may be seller or buyer but most of time, marketer is seller.
DIFFERENCE OF MARKETING FROM SALES AND ADVERTISING
Many people think that marketing is personal selling. Others think
marketing means advertising. Still others believe marketing has to do with
making products available in stores, arranging displays, and maintaining
inventories of products for future sales. In fact, marketing includes all this
activities and more.
Advertising and selling are two marketing terms that are often used
interchangeably by marketers. But they are different and they both have
distinct definitions and uses. It is important to understand the role each plays
in reaching today's ever more elusive consumer.
In the given tables below, we can distinguish the difference of
marketing from sales and advertising:

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Marketing Concept vs. Selling Concept

Basis for
Marketing Concept Selling Concept
Comparison
Marketing concept is a Selling concept is a
business orientation business notion, which
which talks about states that if consumers
accomplishing and businesses remain
Meaning
organizational goals by unattended, then there will
becoming better than not be ample sale of
others in providing organization's product.
customer satisfaction.
Directing goods and Convincing consumer's
Associated with services towards mind towards goods and
consumer's mind. services.
Starting point Target Market Factory
Customer needs
Focuses on Product
Outside-in
Perspective Inside-out

Satisfaction of Transfer of title and

Essence
consumers possession

Business Planning Long term Short term

Product oriented
Orientation Customer-oriented
Heavy selling and
Means Integrated marketing
promotion
Market determined
Price Cost of Production

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Marketing Concept vs. Advertising Concept

Basis for
Marketing Concept Advertising Concept
Comparison
The activity of Advertising is a part of
understanding the market communication
market conditions in process which is done with
Meaning order to identify the the aim of seeking
customer needs and attention of the public
creating such a product towards a particular stuff.
that it sells itself.
Product, Price, Place,
Aspect People, Promotion, Promotion
Process.
Term Long term Short term
Market Research,
Radio, Television,
Promotion,
Newspaper, Magazines,
Advertisement,
Hoardings, Social Media,
Scope Distribution, Sales,
Sponsorships, Posters.
Public Relations,
Customer Satisfaction.

More and more sales

Importance Creates Awareness
Creating market for the
new or existing product
Grabbing the attention of
Focus on and building brand
the general public.
image.

MARKETING MIX

According to Philip Kotler - "Marketing Mix is the combination of four

elements, called the 4P's (product, Price, Promotion, and Place), that every
company has the option of adding, subtracting, or modifying in order to create
a desired marketing strategy"
According to Principles of Marketing by Kotler and Armstrong,
2012 - "The Marketing Mix is the set of tactical marketing tools - Product,
Price, Promotion, and Place - that the firm blends to produce the response it
wants in the target market.

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The controllable variables in this context refer to the 4 ‘P’s [product,
price, place (distribution) and promotion]. Each firm strives to build up such a
composition of 4‘P’s, which can create highest level of consumer satisfaction
and at the same time meet its organisational objectives. Thus, this mix is
assembled keeping in mind the needs of target customers, and it varies from
one organisation to another depending upon its available resources and
marketing objectives.

The 4P’s of Marketing

I. Product
Product refers to the goods and services offered by the
organization. A pair of shoes, a plate of dahi-vada, a lipstick, all are
products. All these are purchased because they satisfy one or more of
our needs. We are paying not for the tangible product but for the benefit
it will provide. So, in simple words, product can be described as a
bundle of benefits which a marketer offers to the consumer for a price.
While buying a pair of shoes, we are actually buying comfort for our
feet, while buying a lipstick we are actually paying for beauty because
lipstick is likely to make us look good. Product can also take the form
of a service like an air travel, telecommunication, etc. Thus, the term
product refers to goods and services offered by the organisation for
sale.

PRODUCT CLASSIFICATION

Let us have a brief idea about the various categories and their exact nature
under each head, noting at the same time that in marketing the terms ‘product’
and ‘goods’ are often used interchangeably.

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A. Based on use, the product can be classified as:
(1) Consumer Goods; and (2) Industrial Goods

1) Consumer Goods
Goods meant for personal consumption by the households or
ultimate consumers are called consumer goods. This includes items
like toiletries, groceries, clothes etc. Based on consumers’ buying
behaviour the consumer goods can be further classified as:
i. Convenience Goods;
ii. Shopping Goods; and
iii. Speciality Goods.

i) Convenience Goods
Do you remember, the last time when did you buy a
packet of butter or a soft drink or a grocery item? Perhaps you
don’t remember, or you will say last week or yesterday.
Reason is, these goods belong to the categories of convenience
goods which are bought frequently without much planning or
shopping effort and are also consumed quickly. Buying
decision in case of these goods does not involve much pre-
planning. Such goods are usually sold at convenient retail
outlets.

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ii) Shopping Goods
These are goods which are purchased less frequently
and are used very slowly like clothes, shoes, household
appliances. In case of these goods, consumers make choice of
a product considering its suitability, price, style, quality and
products of competitors and substitutes, if any. In other words,
the consumers usually spend a considerable amount of time
and effort to finalize their purchase decision as they lack
complete information prior to their shopping trip. It may be
noted that shopping goods involve much more expenses than
convenience goods.
iii) Speciality Goods
Because of some special characteristics of certain
categories of goods people generally put special efforts to buy
them. They are ready to buy these goods at prices at which they
are offered and also put in extra time to locate the seller to
make the purchase. The nearest car dealer may be ten
kilometres away but the buyer will go there to inspect and
purchase it. In fact, prior to making a trip to buy the product
he/she will collect complete information about the various
brands. Examples of speciality goods are cameras, TV sets,
new automobiles etc.

2) Industrial Goods
Goods meant for consumption or use as inputs in production
of other products or provisions of some service are termed as
‘industrial goods’. These are meant for non-personal and
commercial use and include
i) raw materials
ii) machinery,
iii) components, and
iv) operating supplies (such as lubricants, stationery etc.)
The buyers of industrial goods are supposed to be
knowledgeable, cost conscious and rational in their purchase and
therefore, the marketers follow different pricing, distribution and
promotional strategies for their sale. It may be noted that the same
product may be classified as consumer goods as well as industrial
goods depending upon its end use. Take for example the case of
coconut oil. When it is used as hair oil or cooking oil, it is treated
as consumer goods and when used for manufacturing bath soap it
is termed as industrial goods. However, the way these products are

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marketed to these two groups are very different because purchase
by industrial buyer is usually large in quantity and bought either
directly from the manufacturer or the local distributor.

(2) Based on Durability, the products can be

classified as :
1. Durable Goods; and
2. Non-durable Goods.
1) Durable Goods
Durable goods are products which are used for a long period
i.e., for months or years together. Examples of such goods are
refrigerator, car, washing machine etc. Such goods generally
require more of personal selling efforts and have high profit
margins. In case of these goods, seller’s reputation and presale and
after-sale service are important determinants of purchase decision.
2) Non-durable Goods
Non-durable goods are products that are normally consumed in
one go or last for a few uses. Examples of such products are soap,
salt, pickles, sauce etc. These items are consumed quickly and we
purchase these goods more often. Such items are generally made
available by the producer through large number of convenient retail
outlets. Profit margins on such items are usually kept low and heavy
advertising is done to attract people towards their trial and use.

(3) Based on tangibility, the products can be

classified as:
1. Tangible Goods; and
2. Intangible Goods.
1) Tangible Goods
Most goods, whether these are consumer goods or industrial
goods and whether these are durable or non-durable, fall in this
category as they have a physical form that can be touched and seen.
Thus, all items like groceries, cars, raw-materials, machinery etc.
fall in the category of tangible goods.

2) Intangible Goods
Intangible goods refer to services provided to the individual
consumers or to the organisational buyers (industrial, commercial,
institutional, government etc.). Services are essentially intangible
activities which provide want or need satisfaction. Medical

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treatment, postal, banking and insurance services etc., all fall in this
category

II. Price
Price is the amount charged for a product or service. It is the
second most important element in the marketing mix. Fixing the price
of the product is a tricky job. Many factors like demand for a product,
cost involved, consumer’s ability to pay, prices charged by competitors
for similar products, government restrictions etc. have to be kept in
mind while fixing the price. In fact, pricing is a very crucial decision
area as it has its effect on demand for the product and also on the
profitability of the firm.
The Product should always be seen as representing good value
for money. This does not necessarily mean it should be the cheapest
available; one of the main tenets of the marketing concept is that
customers are usually happy to pay a little more for something that
works really well for them.

PRICING AND FACTORS AFFECTING PRICING DECISIONS

A. Cost
No business can survive unless it covers its cost of
production and distribution. In large number of products, the
retail prices are determined by adding a reasonable profit
margin to the cost. Higher the cost, higher is likely to be the
price, lower the cost lower the price.

B. Demand
Demand also affects the price in a big way. When there
is limited supply of a product and the demand is high, people
buy even if high prices are charged by the producer. But how
high the price would be is dependent upon prospective buyers’
capacity and willingness to pay and their preference for the
product. In this context, price elasticity, i.e. responsiveness of
demand to changes in price should also be kept in view.
C. Competition
The price charged by the competitor for similar product
is an important determinant of price. A marketer would not like
to charge a price higher than the competitor for fear of losing
customers. Also, he may avoid charging a price lower than the
competitor. Because it may result in price war which we have

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recently seen in the case of soft drinks, washing powder, mobile
phone etc.

D. Marketing Objectives
A firm may have different marketing objectives such as
maximisation of profit, maximisation of sales, bigger market
share, survival in the market and so on. The prices have to be
determined accordingly. For example, if the objective is to
maximise sales or have a bigger market share, a low price will
be fixed. Recently one brand of washing powder slashed its
prices to half, to grab a bigger share of the market.

E. Government Regulation
Prices of some essential products are regulated by the
government under the Essential Commodities Act. For
example, prior to liberalisation of the economy, cement and
steel prices were decided by the government. Hence, it is
essential that the existing statutory limits, if any, are also kept
in view while determining the prices of products by the
producers.

METHODS OF PRICE FIXATION

1. Cost Based Pricing

Under this method, price of the product is fixed by
adding the amount of desired profit margin to the cost of the
product. If a particular soap costs the marketer Rs. 8 and he
desires a profit of 25%, the price of the soap is fixed at Rs 8 +
(8x25/100) =Rs. 10. While calculating the price in this way, all
costs (variable as well as fixed) incurred in manufacturing the
product are taken into consideration.

2. Competition Based Pricing

In case of products where market is highly competitive
and there is negligible difference in quality of competing
brands, price is usually fixed closer to the price of the
competing brands. It is called ‘young rate pricing’ and is a very
convenient method because the marketers do not have to worry
much about demand and cost and effect the change as per the
changes by the industry leaders.

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3. Demand Based Pricing
At times, prices are determined by the demand for the
product. Under this method, without paying much attention to
cost and competitor’s prices, the marketers try to ascertain the
demand for the product. If the demand is high they decide to
take advantage and fix a high price. If the demand is low, they
fix low prices for their product. At times they resort to
differential prices and charge different prices from different
groups of customers depending upon their perceived values and
capacity to pay. Take the case of cinema halls where the rates
of tickets differ for the different sets of rows in the hall.

4. Objective Based Pricing

This method is applicable to introduction of new
(innovative) products. If, at the introductory stage of the
products, the organisation wishes to penetrate the market i.e.,
to capture large parts of the market and discourage the
prospective competitors to enter into the fray, it fixes a low
price. Alternatively, the organisation may decide to skim the
market i.e., to earn high profit by taking advantage of a group
of customers who give more importance to their status or
distinction and are willing to pay even a higher price for it. In
such a situation they fix quite high price at the introductory
stage of their product and market it to only those customers who
can afford it.

III. Place
Goods are produced to be sold to the consumers. They must be
made available to the consumers at a place where they can conveniently
make purchase. Woollens are manufactured on a large scale in
Ludhiana and you purchase them at a store from the nearby market in
your town. So, it is necessary that the product is available at shops in
your town. This involves a chain of individuals and institutions like
distributors, wholesalers and retailers who constitute firm’s
distribution network (also called a channel of distribution). The
organisation has to decide whether to sell directly to the retailer or
through the distributors/wholesaler etc. It can even plan to sell it
directly to consumers.
The product should be available from where your target
consumer finds it easiest to shop. This may be High Street, Mail Order
or the more current option via e-commerce or an online shop.

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TYPES OF CHANNELS OF DISTRIBUTION

A. Zero stage channel of distribution

Zero stage distribution channels exists where there is

direct sale of goods by the producer to the consumer. This direct
contact with the consumer can be made through door-to-door
salesmen, own retail outlets or even through direct mail. Also
in case of perishable products and certain technical household
products, door-to-door sale is an easier way of convincing
consumer to make a purchase. Eureka Forbes, for example,
sells its water purifiers directly through their own sales staff.

B. One stage channel of distribution

In this case, there is one middleman i.e., the retailer. The

manufacturers sell their goods to retailers who in turn sell it to
the consumers. This type of distribution channel is preferred by
manufacturers of consumer durables like refrigerator, air
conditioner, washing machine, etc. where individual purchase
involves large amount. It is also used for distribution through
large scale retailers such as departmental stores (Big Bazaar,
Spensors) and super markets.

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C. Two stage channel of distribution

This is the most commonly used channel of distribution

for the sale of consumer goods. In this case, there are two
middlemen used, namely, wholesaler and retailer. This is
applicable to products where markets are spread over a large
area, value of individual purchase is small and the frequency of
purchase is high.

D. Three stage channel of distribution

When the number of wholesalers used is large and they

are scattered throughout the country, the manufacturers often
use the services of mercantile agents who act as a link between
the producer and the wholesaler. They are also known as
distributors.

FACTORS AFFECTING THE CHOICE OF DISTRIBUTION CHANNEL

1. Nature of Market

There are many aspects of market which determine the

choice of channel of distribution. Say for example, where the
number of buyers is limited, they are concentrated at few
locations and their individual purchases are large as is the case
with industrial buyers, direct sale may be the most preferred
choice. But in case where number of buyers is large with small
individual purchase and they are scattered, then need may arise
for use of middlemen.

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2. Nature of Product

Nature of the product considerably affects the choice of

channel of distribution. In case the product is of technical
nature involving a good amount of pre-sale and after sale
services, the sale is generally done through retailers without
involving the wholesalers. But in most of the consumer goods
having small value, bought frequently in small quantities, a
long channel involving agents, wholesalers and retailers is used
as the goods need to be stored at convenient locations. Items
like toiletries, groceries, etc. fall in this category. As against
this in case of items like industrial machinery, having large
value and involving specialised technical service and long
negotiation period, direct sale is preferred.

3. Nature of the Company

A firm having enough financial resources can afford to

its own a distribution force and retail outlet, both. But most
business firms prefer not to create their own distribution
channel and concentrate on manufacturing. The firms who wish
to control the distribution network prefer a shorter channel.

4. Middlemen Consideration

If right kind of middlemen having the necessary

experience, contacts, financial strength and integrity are
available, their use is preferred as they can ensure success of
newly introduced products. Cost factors also have to be kept in
view as all middlemen add their own margin of profit to the
price of the products. But from experience it is learnt that where
the volume of sales are adequate, the use of middlemen is often
found economical and less cumbersome as against direct sale.

IV. Promotion

If the product is manufactured keeping the consumer needs in

mind, is rightly priced and made available at outlets convenient to them

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but the consumer is not made aware about its price, features,
availability etc, its marketing effort may not be successful. Therefore
promotion is an important ingredient of marketing mix as it refers to a
process of informing, persuading and influencing a consumer to make
choice of the product to be bought. Promotion is done through means
of personal selling, advertising, publicity and sales promotion. It is
done mainly with a view to provide information to prospective
consumers about the availability, characteristics and uses of a product.
It arouses potential consumer’s interest in the product, compare it with
competitors’ product and make his choice. The proliferation of print
and electronic media has immensely helped the process of promotion.
Advertising, Public Relations, Sales Promotion, Personal
Selling and, in more recent times, Social Media are all key
communication tools for an organisation. These tools should be used
to put across the organisation’s message to the correct audiences in the
manner they would most like to hear, whether it be informative or
appealing to their emotions.

Four elements of a promotion mix.

Let us have a brief idea about these promotion tools.

A. Advertising
Advertising is the most commonly used tool for
informing the present and prospective consumers about the
product, its quality, features, availability, etc. It is a paid form
of non-personal communication through different media about
a product, idea, a service or an organisation by an identified
sponsor. It can be done through print media like newspaper,
magazines, billboards, electronic media like radio, television,
etc. It is a very flexible and comparatively low cost tool of
promotion.

B. Publicity
This is a non-paid process of generating wide range of
communication to contribute a favourable attitude towards the
product and the organisation. You may have seen articles in
newspapers about an organisation, its products and policies.
The other tools of publicity are press conference, publication
and news in the electronic media etc. It is published or
broadcasted without charging any money from the firm.

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Marketers often spend a lot of time and effort in getting news
items placed in the media for creation of a favourable image of
the company and its products.

C. Personal selling
You must have come across representatives of different
companies knocking at your door and persuading you to buy
their product. It is a direct presentation of the product to the
consumers or prospective buyers. It refers to the use of
salespersons to persuade the buyers to act favourably and buy
the product. It is most effective promotional tool in case of
industrial goods.

D. Sales promotion
This refers to short-term and temporary incentives to
purchase or induce trials of new goods. The tool includes
contests, games, gifts, trade shows, discounts, etc. Sales
promotional activities are often carried out at retail levels.
In the late 70’s it was widely acknowledged by Marketers that the Marketing
Mix should be updated. This led to the creation of the Extended Marketing Mix
in 1981 by Booms & Bitner which added 3 new elements to the 4 P’s Principle.
This now allowed the extended Marketing Mix to include products that are
services and not just physical things.

The extended 7 P’s:

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V. People – All companies are reliant on the people who run them from
front line Sales staff to the Managing Director. Having the right people
is essential because they are as much a part of your business offering
as the products/services you are offering.

VI. Processes –The delivery of your service is usually done with the
customer present so how the service is delivered is once again part of
what the consumer is paying for.

VII. Physical Evidence – Almost all services include some physical

elements even if the bulk of what the consumer is paying for is
intangible. For example a hair salon would provide their client with a
completed hairdo and an insurance company would give their
customers some form of printed material. Even if the material is not
physically printed (in the case of PDF’s) they are still receiving a
“physical product” by this definition.

Though in place since the 1980’s the 7 P’s are still widely taught due
to their fundamental logic being sound in the marketing environment and
marketers abilities to adapt the Marketing Mix to include changes in
communications such as social media, updates in the places which you can sell
a product/service or customers expectations in a constantly changing
commercial environment.

Is there an 8th P?
In some spheres of thinking, there are 8 P’s in the Marketing Mix. The final P
is Productivity and Quality. This came from the old Services Marketing Mix
and is folded in to the Extended Marketing Mix by some marketers so what
does it mean?

The 8th P of the Marketing Mix:

VIII. Productivity & Quality

This P asks “is what you’re offering your customer a good
deal?” This is less about you as a business improving your own
productivity for cost management, and more about how your company
passes this onto its customers.

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MARKETING MANAGEMENT
Marketing management is defined as the process of overseeing and
planning new product development, advertising, promotions and sales. An
example of marketing management is creating an advertising plan and
implementing that plan.

MARKETING MANAGEMENT ORIENTATIONS

Marketing management orientations are different marketing concepts
that focus on various techniques to create, produce and market products to
customers. The management usually focuses on designing strategies that will
build profitable relationships with target consumers.

The Five Marketing Concepts2 – Marketing Management Orientations

1. The Production Concept

This is one of the oldest concepts in business. The concept holds

the belief that consumers desire, favours and prefer products at low
prices which are affordable and available. The production management
needs to create products focusing on achieving high production
efficiency, low costs, and mass distribution as a marketing strategy.

2
Hitesh Bhasin, Concepts of Marketing, 2017. Retrieved from
https://www.marketing91.com › Marketing management articles

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2. The Product Concept

The product concept proposes that consumers favour products

offering the most quality performance, or innovative features.
Implementation of the product concept focuses on producing superior
products with innovative features that are normally improved over time
to meet the customer expectation.

3. The Selling Concept

The selling concept is based on the belief that consumers and

businesses will not purchase products from companies or won’t buy
enough of the organization’s products without aggressive selling and
promotional efforts. The purpose of this concept is focusing on selling
what the company creates rather than focusing on making what the
consumer wants (what the market wants) during implementation.
Managers usually focus on creating a comprehensive advertisement
campaign to coax consumers into purchasing their products.

4. The Marketing Concept

The marketing concept emerged in the mid-1950s as a

customer-centered, sense-and respond philosophy. The marketing
concept holds that the key to achieving organizational goals is being
more effective than competitors in creating, delivering, and
communicating superior customer value to the target markets. The job
is to find the right products for customers, thus the market strategy
focus on buyer’s needs and producing what a company can sell.

The implementation of marketing concept focus on three main

basic elements of marketing: customer orientation, company
commitment and goal orientation.

5. The Societal Marketing Concept

The societal marketing concept focuses on delivering value to

customers in way of maintaining or improving consumers and society
wellbeing. It looks on the interests and needs of the targeted consumer
market. So there are three considerations underlying this concept which
are Consumers satisfaction, society’s welfare and company’s profit.

25 Marketing Management
Importance of Marketing Management Orientations

• To meet customer needs more effectively.

• To avoid strategic mistakes.
• To uncover opportunities before competitors.
• To achieve higher customer satisfaction.
• To implement emerging technologies in the concept of marketing
orientation

26 Marketing Management
REVIEW EXERCISES

Name: ______________________________Date: __________________

I. TRUE or FALSE

Write True if the statement is Correct, If False, supply with the correct
answer.
__________1. Satisfaction is the person's feeling of pleasure or
disappointment which resulted from comparing a product's perceived
performance or outcome against his/ her expectations.
__________2. Sales promotion refers to short-term and temporary incentives
to purchase or induce trials of new goods..

__________3.In marketing terms: Sellers are called as “industry” while

buyers are called “Market”.
__________4.Three stage channel of distribution is the most commonly used
channel of distribution for the sale of consumer goods. In this case, there are
two middlemen used, namely, wholesaler and retailer.
__________5. “Marketing today is finally customer-focused.”
__________6. Marketers can influence wants and this is done in combination
with societal influencers but cannot create needs because needs pre-exists.
__________7. Marketing concept is associated with convincing consumer's
mind towards goods and services.
__________8.Publicity is a non-paid process of generating wide range of
communication to contribute a favourable attitude towards the product and the
organisation.
__________9.Marketer may be seller or buyer but most of time, marketer is
seller.
__________10. Demand also affects the price in a big way. When there is
limited supply of a product and the demand is high, people buy even if high
prices are charged by the producer.

27 Marketing Management
__________11. The Product Concept is one of the oldest concepts in business.
The concept holds the belief that consumers desire, favours and prefer products
at low prices which are affordable and available.
__________12. Convenience goods are goods which are purchased less
frequently and are used very slowly like clothes, shoes, household appliances.
__________13.Marketer may be seller or buyer but most of time, marketer is
buyer.
__________14. People, Processes, and Physical Evidence are considered as
the extension of 7P’s.
__________15. According to Philip Kotler, marketing is “the science and art
of exploring, creating, and delivering value to satisfy the needs of a target
market at a profit. Marketing identifies unfulfilled needs and desires. It
defines measures and quantifies the size of the identified market and the profit
potential. It pinpoints which segments the company is capable of serving best
and it designs and promotes the appropriate products and services.”

28 Marketing Management
LEARNING ACTIVITY

Visit a supermarket near your place and choose one consumer product
you like. What can you say on how the store utilizes the core concepts of
marketing in selling the product? Briefly discuss the importance of
marketing management orientations.
______________________________________________________________
______________________________________________________________
________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________

29 Marketing Management
Chapter 2
Customer Relationship: Customer
Service
Companies today face their toughest competition ever. This chapter
spells out in more detail how companies can go about outperforming
competitors in order to win and keep customers. To win in today’s marketplace,
companies must become adept not just in building products, but in building
customers. The answer lies in doing a better job than competitors do of
delivering customer value and satisfaction.

Once the customer trust is gained, the chances of

Performance switching to other company becomes relatively less, buys
Standard good in bulk, buys other supplementary goods and starts
Develop a neglecting average price variation. This maintains the unit
program for sales volume and increase in sales itself. The existing
customer
customers will be like a living advertisement. If the
service
customer is satisfied with the product, will recommend it
to friends and acquaintances.

Content Standard
The value of customer relations and customer
service.

30 Marketing Management
Customer Relation to make that happen the first thing to do is to
address several important questions relating customer relationship marketing.
What are the key building blocks for attracting, retaining and growing
profitable customers? What are the customer value and satisfaction? How is
customer satisfaction related to customer loyalty and retention? How can a
company grow its “share of customer”? Who in the organization is responsible
for building and maintaining customer relationship? What is the role of total
quality marketing? Next, is to examine competitive marketing strategies-how
companies analyze their competitors and develop successful, value-based
strategies for attracting, retaining and growing customers.

Customer Relationship

Traditional marketing theory and practice have focused in attracting

new customers rather than retaining existing ones. Today, however, although
attracting new customers remain an important marketing task, the emphasis
has shifted toward relationship marketing—creating and maintaining, and
enhancing strong relationship with customers and other stakeholders. Beyond
designing strategies to attract new customers and create transactions with
them, companies are all going out to retain current customers and build
profitable, long-term relationships with them. The new view is that marketing
is the science and art of finding, retaining, and growing profitable customers.

To fully understand here’s a definition from Philip Kotler, “Relationship

marketing is oriented more towards the long term. The goal is to deliver long-
term value to customers and the measure of success is long-term customer
satisfaction. It requires that all of the company’s departments work together
with marketing as a team to serve the customer. It involves building
relationships at many levels- economic, social, and technical and legal-
resulting in high customer loyalty.” In addition, relationship marketing is

31 Marketing Management
applicable where the customers have many options in the market for the same
product or service and the customer is entitled to make a selection decision. In
such a kind of market, businesses try to maintain their client by providing
comparatively better products and good service to meet their satisfaction.

Ripening Relationship: Customer Value and

Satisfaction

The key to building lasting relationships is the creation of superior customer

value and satisfaction. Satisfied customers are more likely to give a company
a larger share of their business.

More than 35 years ago, Peter Drucker observed that a company's first
task is: to create customers'. Today’s customers face a vast selection of product
and brand choices, prices and suppliers. The company must answer a key
question: How do customers make their choices? The answer is that customers
choose the marketing offer that gives them the most value. Customers are
value-maximizers, within the bounds of search costs and limited knowledge,
mobility and income. They form expectations of value and act upon them.
Then they compare the actual value they receive in consuming the product to
the value expected, and this affects their satisfaction and repurchase behaviour.

32 Marketing Management
Customer Value

Consumers buy from the firm that they believe offers the highest
customer delivered value- the difference between total customer value and
total customer cost. For example, suppose that a large construction firm wants
to buy a dump truck. It will buy the dump truck from either Caterpillar or to
its close competitor, Mitsubishi. The salespeople for the two companies
carefully describe their respective offers to the buyer. The construction firm
evaluates the two competing dump truck offers to assess which one delivers
the greatest value. It adds all the values from four sources—product, services,
personnel, and image. First, it judges that Caterpillar’s dump truck provides
higher reliability, durability, and performance. It also decides that Caterpillar
has better accompanying services—delivery, training, and maintenance. The
customer views Caterpillar personal as more knowledgeable and responsive.
Finally, it places higher value on Caterpillar’s reputation. Thus, the customer
decides that Caterpillar offers more total customer value than does Mitsubishi.

Value Chain

Michael Porter proposed the value chain as the main tool for identifying ways
to create more customer value. Every firm consists of a collection of activities
performed to design, produce, and market, deliver and support the firm's
products. The value chain breaks the firm into nine value-creating activities in
an effort to understand the behavior of costs in the specific business and the

33 Marketing Management
potential sources of competitive differentiation. The nine value-creating
activities include five primary activities and four support activities.

The primary activities involve the -sequence of bringing materials into

the business (inbound logistics), operating on them (operations), sending them
out (outbound logistics), marketing them (marketing and sales) and servicing
them (service). For a long time, firms have focused on the product as the
primary means of adding value, but customer satisfaction also depends upon
the other stages of the value chain. The support activities occur within each of
these primary activities. For example, procurement involves obtaining the
various inputs for each primary activity - only a fraction of procurement is
done by the purchasing department. Technology development and human
resource management also occur in all departments. The firm's infrastructure
covers the overhead of general management, planning, finance, accounting and
legal and government affairs borne by all the primary and support activities.

Under the value-chain concept, the firm should examine its costs and
performance in each value-creating activity to look for improvements. It
should also estimate its competitors' costs and performances as benchmarks.
To the extent that the firm can perform certain activities better than its
competitors, it can achieve a competitive advantage.

The firm's success depends not only on how well each department
performs its work, but also on how well the activities of various departments
are coordinated. Too often, individual departments maximize their own
interests rather than those of the whole company and the customer. For
example, a credit department might attempt to reduce bad debts by taking a
long time to check the credit of prospective customers: meanwhile, salespeople
get frustrated and customers wait. A distribution department might decide to
save money by shipping goods by rail; again the customer waits. In each case,
individual departments have erected walls that impede the delivery of quality
customer service.

To overcome this problem, companies should place more emphasis

on the smooth management of core business processes, most of which
involve inputs and co-operation from many functional departments. These
core business processes include the following;

34 Marketing Management
• Product development process. All the activities involved in identifying,
researching and developing new products with speed, high quality and
reasonable cost.

• Inventory management process. All the activities involved in developing

and managing the right inventory levels of raw materials, semi-finished
materials and finished goods, so that adequate supplies are available while
the costs of high overstocks are avoided.

• Order-to-payment process. All the activities involved in receiving orders,

approving them, shipping the goods on time and collecting payment.

• Customer service process. All the activities involved in making it easy for
customers to reach the right parties within the company to obtain service,
answers and resolutions of problems.

Figure 2.1. Core business Process

Customer Satisfaction

"Changes in companies’ customer satisfaction scores don’t happen overnight;

they have to work their way through complex value chains that ultimately affect
quarterly profits and stock prices (Harvard Business Review, 2007)."

Consumers form judgements about the value of marketing offers and

make their buying decisions based upon these judgements. Customer
satisfaction with a purchase depends upon the product's performance relative

35 Marketing Management
to a buyer's expectations. A customer might experience various degrees of
satisfaction. If the product's performance falls short of expectations, the
customer is dissatisfied. If performance matches expectations, the customer is
satisfied. If performance exceeds expectations, the customer is highly satisfied
or delighted. But how do buyers form their expectations?

Expectations are based on the customer's past buying experiences, the

opinions of friends and associates, and marketer and competitor information
and promises. Marketers must be careful to set the right level of expectations.
If they set expectations too low, they may satisfy those who buy, but fail to
attract enough buyers. In contrast, if they raise expectations too high, buyers
are likely to be disappointed.

Here are 7 Steps to Customers Satisfaction

Figure 2.2. Customers Satisfaction Steps

1. Encourage face-to-face dealings

2. Respond to messages promptly and keep your clients informed
3. Be friendly and approachable
4. Have a clearly-defined customer service policy
5. Attention to detail (also known as “the little niceties”)
6. Anticipate your client’s needs and go out of your way to help them out.
7. Honor your promises.

Customer Profitability

Marketing is the art of attracting and keeping profitable customers. Yet,

companies often discover that between 20 and 40 per cent of their customers
are unprofitable. Further, many companies report that their most profitable

36 Marketing Management
customers are not their largest customers, but their mid-size customers. The
largest customers demand greater service and receive the deepest discounts,
thereby reducing the company's profit level. The smallest customers pay full
price and receive less service, but the costs of transacting with small customers
reduce their profitability. In many cases, mid-size customers that pay close to
full price and receive good service are the most profitable. This helps to explain
why many large firms that once targeted only large customers are now
invading the middle market.

“A company should not try to pursue and satisfy every customer.”

What makes a customer profitable? We define a profitable customer as a

person, household or company whose revenues over time exceed, by an
acceptable amount, the company's costs of attracting, selling and servicing that
customer. Note that the definition emphasizes lifetime revenues and costs, not
profit from a single transaction. Here’s a dramatic illustrations of customer
lifetime value

Shelves in a supermarket crowded with different goods

Joselito Reyes, who operates a highly profitable single-store

supermarket, says that he sees P2, 500,000 flying out of his store every time
he sees a sulking customer. Why? Because his average customer spends about
P5, 000 a week, shops 50 weeks a year and remains in the area for about 10
years. If this customer has an unhappy experience and switches to another
supermarket, Joselito Reyes has lost P2, 500,000 in revenue. The loss can be
much greater if the disappointed customer shares the bad experience with other
customers and causes them to defect.

37 Marketing Management
Few companies actively measure individual customer value and
profitability, For example, banks claim that this is hard to do because
customers use different banking services and transactions are logged in
different departments. However, banks that have managed to link customer
transactions and measure customer profitability have been appalled by how
many unprofitable customers they find. Some banks report losing money on
over 45 per cent of their retail customers. It is not surprising that many banks
now charge fees for services that they once supplied free.

Strategies of Relationship Management

With a company-wide understanding of clients’ needs and values, the firm can
increase profitability, improve client satisfaction, and build loyalty. Just as
critical to long term success is maintaining positive communication with
business partners, vendors and employees.

1. Increase Efficiency and Organizational Intelligence

Consolidate knowledge of prospects, clients and partners in a single location

to drive revenue optimization initiatives across departments.

Organizational Intelligence is the capacity of an organization to create

knowledge and use it to strategically adapt to its environment or marketplace.

While organizations in the past have been viewed as compilation of

tasks, products, employees, profit centers and process, today they are
increasingly seen as intelligent systems designed to manage knowledge.
Scholars have shown the organizations engage in learning processes using tacit
forms of intuitive knowledge, hard data stored in computer networks and
information gathered from the environment, all of which are used to make
decisions. Because this complex process involves large numbers of people
interacting with diverse information systems, organizational Intelligence is

38 Marketing Management
more than the aggregate intelligence of organizational members; it is the
intelligence of the organization itself as a larger system.

2. Optimize individual Client Profitability

To thrive, manufacturers must identify and respond to local market needs by

designing, producing, marketing and selling the right producers at the optimal
price everywhere they operate. Unfortunately, many organizations have no
accurate information regarding the profitability of their customers, products
and sales channels nor do they know true costs of their processes, systems and
activities. Consequently, incorrect decisions are being made about production,
allocations, pricing, packaging of services, marketing, customer acquirement
and sales compensation plans.

Revealing true customer profitability and the customer contribution to our

shareholder value assumes a correct view on the ‘cost to serve’ of customer.

3. Improve Collaboration

Facilitate communication among clients, partners and employees to drive

profit, reduce recycle time, and manage issues. The primary goal of
collaborative CRM is to maximize profitability, profit and customer
satisfaction. The various technologies that support the business include gaining
the attention of customers, storage and analysis of customer information. The
most important part of collaborative CRM is combining software installation
with customer-oriented strategies. And while technology is a powerful tool to
support CRM initiatives, without the alliance to the customer, the tool is of
little benefit to the service or to company.

39 Marketing Management
An effective collaboration results to upgraded quality of customer service

The aim of Collaborative CRM is to get various departments within a business

to share useful information. This information gathered serves to collect
information that helps improve the quality of customer service. For
Collaborative CRM is a highly effective method of communication as it covers
direct interaction with customers including feedback and issue reporting.
Interaction can take place through web pages, email and Automated Voice
Response. Overall, the primary purpose of Collaborative CRM is to improve
the quality of customer service and to increase customer satisfaction.

4. Cultivate Successful Relationships

Re the most valuable clients and pursue prospects with similar attributes.

40 Marketing Management
Investing time with customers/clients creates trust in the relationship

Establishing and then cultivating successful relationships with CPAs

and other third party advisors can help build our own practice and credibility
among businesses owners and high-net-worth clients.

It is a strategy worth pursuing, but it is also one that takes time, patience,
persistence and constant communication. It is impossible to have an intimate
relationship with someone who is always busy doing their own thing. It is
equally hard to have a relationship with someone who is solely focus on work,
success or individual goals. The key to a successful marketing is building
relationships. Creating trust through honesty and transparency. Listening first
and being responsive. Making an effort to learn more and to find commonality
and working hard at meeting someone’s expectations. These are what build
relationships either in business or in life.

41 Marketing Management
When to Use Relationship Marketing

Marketing is not used to just boost the sales of a certain

business/company

Relationship marketing is not effective in all situations. Transaction

marketing, which focuses on one sales transaction at a time, is more
appropriate than relationship marketing for customers that have short time
horizons and can switch from one supplier to another with little effort or
investment. This situation often occurs in 'commodity' markets, such as steel,
where various suppliers offer largely undifferentiated products. A customer
buying steel can buy from any of severe steel suppliers and choose the one
offering the best terms on a purchase-by-purchase basis. The fact that one steel
supplier works at developing a longer-term relationship with a buyer does not
automatically earn it the next sale; its price and other terms still have to be
competitive.

In contrast, relationship marketing can pay off handsomely with

customers that have long time horizons and high switching costs, such as
buyers of office automation systems. Such major system buyers usually
research competing suppliers carefully and choose one from whom they can
expect state-of-the-art technology and good long-term service. Both the
customer and the supplier invest a lot of money and time in building the
relationship. The customer would find it costly and risky to switch to another

42 Marketing Management
supplier and the seller would find that losing this customer would be a
considerable loss. Thus each seeks to develop a solid long-terra working
relationship with the other. It is with such customers that relationship
marketing has the greatest pay-off.

Customer Service Strategies

Successful businesses don't just communicate with prospects and customers

for special sales. Here are seven relationship-building strategies that will help
you transform your company into a valuable resource:

1. Communicate frequently.

Communication is one factor that brings out the best work of the company

How often do you reach out to customers? Do the bulk of your

communications focus on product offers and sales? For best results, it's
important to communicate frequently and vary the types of messages you send.
Instead of a constant barrage of promotions, sprinkle in helpful newsletters or
softer-sell messages. It is critical to note that to maintain loyalty with your
customers is not something you do once but it is a chain of events involving
positive interactions with your customers; it should be handled in a manner
that they get used to expecting a great service quality from your enterprise
proving that you maintain the value you provide.

2. Offer customer rewards.

Customer loyalty or reward programs work well for many types of businesses,
from retail to cruise and travel. The most effective programs offer graduated
rewards, so the more customers spend, the more they earn. This rewards your

43 Marketing Management
best, most profitable clients or customers and cuts down on low-value price
switchers-customers who switch from program to program to get entry-level
rewards. Whenever possible, offer in-kind rewards that remind your customers
of your company and its products or services.

3. Hold special events.

Create any event that allows you and your staff to interact with your best
customers is a good bet, whether it's a public concert, a summertime pool
party or a school seminar. Just choose the venue most appropriate for your
unique customers and business. This also helps widen the horizon of
customers.

Doraemon Philippines Mall Tour last 2016

4. Build two-way communication.

When it comes to customer relations, "listening" can be every bit as important

as "telling." Use every tool and opportunity to create interaction, including
asking for feedback through your Web site and social media accounts, sending
customer surveys (online or offline) and providing online message boards or
blogs.

44 Marketing Management
What better way to make someone feel valued than by asking for his or her
opinion and advice? Business owners not only gain much insight from trusted
clients but also establish that they respect and value those clients.

By reaching out to customers, you give them a way to become involved and
make their voices heard. They will feel that they are a part of the company,
and you will get valuable feedback on what's working and what needs to be
changed in your company's marketing strategies and business plan. Customers
who know they're "heard" instantly feel a rapport and a relationship with your
company.

5. Enhance your customer service.

Do you have a dedicated staff or channel for resolving customer problems

quickly and effectively? How about online customer assistance? One of the
best ways to add value and stand out from the competition is to have superior
customer service. Customers often make choices between parity products and
services based on the perceived "customer experience." This is what they can
expect to receive in the way of support from your company after a sale is
closed. Top-flight customer service on all sales will help you build repeat
business, create positive word-of-mouth and increase sales from new
customers as a result.

6. Provide online customer support

Communicating to customer through social media is the nearest way to get

their heart
Marketing specialists are equipped to provide businesses the type of customer
support that also builds customer relationships. Via blog posts, newsletters,

45 Marketing Management
Facebook, Twitter, and an all-encompassing social media marketplace blitz,
marketers can provide information, insight, news, advice, and even technical
assistance to customers. Those acts establish the company's interest in its
customers, making them feel valued and needed by the company

7. Launch multicultural programs.

It may be time to add a multilingual component to your marketing program.

For example, you might offer a Spanish-language translation of your Web site
or use ethnic print and broadcast media to reach niche markets. Ethnic
audiences will appreciate marketing communications in their own languages.
Bilingual customer service will also go a long way toward helping your
company build relationships with minority groups.

8. Visit the trenches.

For many entrepreneurs, particularly those selling products and services to

other businesses, it's important to go beyond standard sales calls and off-the-
shelf marketing tools in order to build relationships with top customers or
clients.

Personal conversation with customers once in a while is a big thing

When was the last time you spent hours, or even a full day, with a customer-
not your sales staff, but you, the head of your company? There's no better way
to really understand the challenges your customers face and the ways you can
help meet them than to occasionally get out in the trenches. Try it. You'll find
it can be a real eye-opener and a great way to cement lasting relationships.

46 Marketing Management
REVIEW EXERCISES

Name: ___________________________ Date: _______________

1. How do you think can a marketer effectively influence customer

satisfaction?
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________

2. What is customer profitability? Discuss Briefly.

______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________

3. Briefly discuss the strategies of relationship management.

______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
_________________________________________

47 Marketing Management
4. When do you use relationship marketing? Discuss briefly.
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________

5. Give at least 5 importance of customer service strategies.

______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
____________________________________________

48 Marketing Management
Chapter 3

Market Opportunity Analysis and

Consumer Behaviour
A. STRATEGIC MARKETING PROCESS versus
TACTICAL MARKETING

Performance
STANDARD
Conduct marketing
We have to first define what strategy and tactics
research;
are for a better understanding of the Strategic Marketing
Interpret market Process and Tactical Marketing. A strategy is a plan for
buying behaviour on reaching a specific goal, while a tactic is the means you
product or service; use to reach the goal. In business, a strategy is a broad
and goal, such as increasing sales or market share of a firm.
Identify the product
It can also be creating a particular image for your
or service target
market.
products or business in order to attract more customers.3

Content Standard
The importance of information, the market characteristics
affecting consumer behavior, and the basis of market
segmentation.

3
Smallbusiness.chron.com/tacticalmarketing-vs-strategicmarketing-20704.html

49 Marketing Management
Tactics, on the other hand, are for creating an image or brand that might
include using price to establish your product as affordable (by pricing it lower
than competitor’s product) or high-end (by pricing it higher than your
competitor’s product). This is why when you are creating a marketing plan,
you should start with broad strategies and support them with specific tactics.

The Strategic Marketing Process

Strategic marketing is a planning process that seeks to establish a clear

direction and unified purpose for all marketing efforts of a business
organization. Strategic marketing is all about taking time to understand your
customer, what is important to the customer and why he purchases specific
items or a particular product. Strategic marketing allows companies to provide
a solution to what customers need. Strategic marketing consists of selling your
product in such a way that you achieve a goal. Goals can include increasing
sales, revenues, market share, segmenting the market or creating a new brand
or position in the marketplace. There are five steps in the strategic marketing
process. These are identifying a mission, analyzing the situation, setting
objectives, developing a marketing strategy, and planning for evaluation. 4
These are illustrated as follows:

Identifying Analyzing the Setting

the Mission situation Objectives

Strategy Developing
Evaluation A Marketing
and Control Strategy

Figure 3.1 The Five Steps in the Strategic Marketing Process

4
smallbusiness.chron.com/5step-strategic-marketing-process-15753.html

50 Marketing Management
Step 1: Identifying the Mission

The first step in strategic marketing is to formulate the mission

statement of the organization that articulates the reason why the organization
exists, its primary consumers, the products and services it can provide and how
it can benefit target consumers over the long term. The mission statement is
intended to anticipate the future and describe the present and on-going role for
the organization's products or services and expertise.

Jollibee Logo

For example, the mission statement of Jollibee Foods Corporation is

“To serve great tasting food, bringing the joy of eating to everyone.” 5 This is
a one-line mission statement that clearly states what the mission of Jollibee is
in the business world. Its mission statement gives the reason why it exists.

Cebu Pacific Logo

On the other hand the mission statement of Cebu Pacific says “"Why
everyone flies. Cebu Pacific brings people together through safe, affordable,
reliable, and fun-filled air travel. We are committed to innovation and
excellence in everything we do. We are an employer of choice providing
opportunities for professional and personal growth. We have a deep sense of
family values throughout our airline. We enhance the quality of life of the
communities we serve and are an active partner in our nation's progress. We
offer our shareholders a fair return on their investments.”6 This is a very long

5
https://aldenpre.wordpress.com/2011/07/18/jollibees-values-mission-vision
6
cebupacificaircorporate.com/Pages/mission-and-vision.aspx

51 Marketing Management
mission statement composed of even sentences. The reason behind this could
be the desire of Cebu Pacific to be very clear enough on why it exists.

Step 2: Analyzing the Situation

In this step, organizations conduct a situation analysis. It is also known

as a SWOT. This is in order to evaluate and prioritize the strengths,
weaknesses, opportunities and threats of an organization. This strategic
marketing process helps managers understand the resources they can build on
and the challenges they face. Some examples of strengths of a business could
include competitive advantages, quality, price, efficiency, the company’s
financial resources, location, or customer service. Some examples of a
business firm’s weaknesses could include limited financial resources, quality
concerns on its products, production inefficiencies, or poor brand image. Some
opportunities for a business could include new technology that could improve
production, changes in government policy or regulations that could benefit the
business, new markets due to changes in the lifestyles of people, improving
consumptions due to better economy and others. Examples of threats are entry
of more competition, changing lifestyles or tastes of consumers due to
improved incomes, entry of more substitute products and services, or new
taxes. Strengths and weaknesses are internal factors, while opportunities and
threats arise from the external environment.

Step 3: Setting Objectives

The third step in strategic marketing is to set marketing objectives.

These are clear, realistic and measurable goals that give decision makers a
basis for making choices and assessing progress. Objectives are usually
expressed in terms of one or more quantitative targets like revenue, profit, sales
or market share. It is important that each objective must be achievable within
a fixed period of time.

52 Marketing Management
Step 4: Developing a Marketing Strategy and Evaluation.
The fourth step in strategic marketing is strategy development. This is
selecting a target market, a distinct group of consumers who are highly likely
to buy the firm's product. Planners choose implementation tactics like effective
ways to use the marketing mix tools of product, promotion, price and
distribution to reach and influence prospective buyers.

Step 5: Strategy Evaluation and Control

The fifth step is strategy evaluation and control. Strategy evaluation

and control means specifying how, when and by whom these tactics are to be
monitored and assessed over time. This is to maximize the return on a
marketing plan, and the need for controls in place to monitor the plan's
progress. As a marketing plan moves along, the controls are constantly
analyzed to determine how the plan's actual performance compares to the
projections. Any changes that need to be made are done based on the analysis
of marketing controls. Understanding what the controls in a marketing plan are
will help the manager develop effective performance measurement indicators.

The tactical Marketing Process

The term “tactical marketing” refers to the actions a company takes in

order to market or sell a product. It is the process that complements strategic
marketing. It involves the tactics you will implement to make things happen as
per strategy. Once you have established business goals, including specific
strategies for achieving the goals, you should find out how you will implement
your strategies. If you want to increase your revenues or sales, for example,
one tactic might be to raise your prices in relation with rebranding a product
or service as upscale. If you want to increase market share among health-
conscious consumers, you might start sponsoring sporting events or
advertising in health and fitness magazines.

Tactical marketing is not a onetime process. As it is an on-going

process, you can always improve your tactics, depending on your results. But
it is essential for your business not to jump directly on the tactical part before
primarily considering and focusing on the strategies that will develop and
sustain your business. You need to have the background plan ready before you
start thinking on tactics to achieve the plan.

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Organizations or Firms adopt various tactical marketing processes
depending on their needs. But the tactical marketing process generally starts
with the development of your marketing strategies and can include the
following basic processes: planning/objectives, marketing activities, the time
line, activity budget, monitoring and control, and evaluation.

Marketing Planning/ Marketing

Strategies Objectives Activities

Monitoring and Activity Budget Timeline

Control

Evaluation

Figure 3.2An example of the Marketing Process

After formulating its marketing strategies, a business usually adopts a short

term or tactical marketing plan that will provide for the business a way to plan
and capture the key requirements of the activity you have planned to support
your chosen objectives. By creating a tactical marketing plan you will be
addressing several key areas of the performance your potential marketing
campaign.

But to be able to manage the marketing activity you need to know how
long it will take you to get your promotion to market and you will need to allow
for things like; extra stock being delivered on time, receiving marketing
promotional materials on time, take into account holidays and events, all of
these areas will start to help you think through how long it will take to manage
and launch the promotions.

Before you kick off your promotion and marketing activity you will
need to know how much budget you have and how much you will portion to
the different suppliers to make your event work. Then you also should have
targets included as a measure as to how many new customers or sales you will
need to make to break even and also forecast a potential uplift in sales so you

54 Marketing Management
have some idea as to how much increased revenue the activity may bring in
for your business.

You then have to monitor and control completion and implementation of

your tactical marketing plan. You will then have to measure your performance,
to know how successful the activity has been. You also need to review your
data and investigate how many incremental sales your business achieved or the
increase in revenue during the period. How or what you measure will be up to
your business but the only way to improve is to have some key performance
indicators that you can apply to this activity and future marketing promotions
so you can improve your marketing effectiveness.

B. THE MARKETING ENVIRONMENT

Marketing environment refers to external factors and forces that affect the
company's ability to develop and maintain successful transactions and
relationships with its target customers. It includes the internal factors
(employees, customers, shareholders, retailers and distributors, etc.) and the
External factors (political, legal, social, technological, economic) that
surround the business and influence its marketing operations. Some of these
factors are controllable while some are uncontrollable and require business
operations to change accordingly.
Business firms must be well aware of its marketing environment in which it is
operating in order to overcome the negative effect or impact the environment
factors are affecting or imposing on firm’s marketing activities. The marketing
environment is broadly classified into three parts: the, Micro Environment,
Internal Environment and Macro Environment.

MACRO ENVIRONMENT

Micro Environment

Internal Environment

Figure 3.3 An illustration of the Marketing Environment

that a business must take into account

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The Macro Environment

Macro Environment refers to all forces that are part of the larger
society and affect the micro-environment. These are the major external and
uncontrollable factors that influence an organization's decision making, and
affect its performance and strategies. These factors affecting organization in
Macro Environment are known as PESTEL, that is: Political, Economical,
Social, Technological, Environmental and Legal.

MACRO ENVIRONMENT

Political Legal Social Economic Technological

Figure 3.4 The major factors that influence decision making and
affect performance and strategies of an organization

The following are the detailed description of the Macro factors as

illustrated on Figure 3.4:

1. The Political and Legal Factors – There will be several changes are
seen in the market with the change in political parties. These can include
effects on trade and commerce, taxes and duties, codes and practices, market
regulations, and others. For the firm to succeed, it has to comply with all the
changes as any violation of which could mean penalties in its business
operations.

2. The Social Factors– Since a business operates in a society, it follows

that it has also some responsibility towards that society. So it is a must that it
follows the marketing practices that do not harm the sentiments of the people.
The companies are required to invest in the welfare of the people in general by
constructing public conveniences, parks, sponsoring education, and others as
part of its corporate social responsibility. Corporate social responsibility or
CSR is a corporation’s initiative to assess and take responsibility for the
company's effects on environmental and social wellbeing.

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3. The Economic Factors– The economy of a nation generally affects
every business that operates in that country. Businesses are affected by the
different phases it is undergoing. For example, in the case of recession, the
marketing practices of a business should be different as what are followed
during the inflation period. So business must adopt changes to conform to the
economic situation of a country.

4. The Technological Factors– Technology keeps on changing. It

advances day by day that business firms have to keep themselves updated so
that customers’ needs can be met with more precision. This is a must for
business to do so it does not get left behind

The Microenvironment

The Microenvironment includes all those factors that are closely

associated with the operations of the business and influences its functioning.
The microenvironment factors include customers, employees, suppliers,
retailers and distributors, shareholders, competitors, government and general
public. These factors are controllable to some extent.

A corporate meeting that includes top managers of the business should

thoroughly conduct an objective discussion of the various Micro
Environment factors of the organization.

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The micro environment factors are discussed in the
following.

1. Customers - Each marketing strategy is customer oriented.

This is because every business revolves around fulfilling the
customer’s needs and wants. A business focuses on understanding the
need of the customers and offering the best product that fulfils their
needs.

2. Employees – Employees are the main component of a

business who contributes significantly to its success. The quality of
employees depends on the training and motivation sessions given to
them. This is why Training and Development plays a crucial role to
impart and improve the marketing skills of its employees

3. Suppliers – Suppliers are the persons from whom the

material is purchased to make a finished good and hence are very
important for the organization. It is crucial for business to identify the
suppliers existing in the market and choose the best that fulfils the
firm’s requirement.

4. Retailers and Distributors – These are the channel partners

of business that play an important role in determining the success of
marketing operations of the firm. Being in direct touch with customers,
Retailers and Distributors can give suggestions about customer’s
desires regarding a product and its services.

5. Competitors – A business should keep a close watch on

competitors as this would enable a company to design its marketing
strategy according to the trend prevailing in the market.

6. Shareholders – Shareholders are the owners of the company,

and every firm has an objective of maximizing its shareholder’s wealth.
His is the reason why marketing activities should be undertaken
keeping in mind the returns to shareholders.

7. Government – Government departments make several

policies that could include pricing policy, credit policy, education
policy, housing policy, etc. These do have influences on the marketing
strategies of business. A company has to keep track on these policies

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and make the marketing programs accordingly, adopting changes,
where and when needed.

8. General public – The business has some social

responsibility towards the society in which it is operating. So all the
marketing activities should be designed to result in the increased
welfare of society as a whole.

The Internal Environment

The Internal Environment includes all the factors that are within the
organization and affects the overall business operations. These factors include
labor, inventory, company policy, logistics, budget, capital assets, etc. which
are a part of the organization and affects the marketing decision and its
relationship with the customers. These factors can be controlled by the firm.

C. MARKETING RESEARCH

Marketing Research is defined as the process or set of processes that

links the producers, customers, and end users to the marketer through
information used to identify and define marketing opportunities and problems;
generate, refine, and evaluate marketing actions; monitor marketing
performance; and improve understanding of marketing as a process. Marketing
research specifies the information required to address these issues, designs the
method for collecting information, manages and implements the data
collection process, analyzes the results, and communicates the findings and
their implications.

The Purpose and Importance of Marketing Research

Business market research is the process of collecting data to determine

whether a particular product/service will satisfy the needs of your customers.
With effective marketing research, your company can gain invaluable
information about your competitors, economic shifts, demographics, the
current market trends and the spending traits of your customers.

Marketing research can help to reveal key aspects of the competitors'

products, services, marketing strategies, and target audience. Using this

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information within your own campaigns can help to lead in the market over
your competition and add value to your business or brand.

For marketers, research is not only used for the purpose of learning, but
it is also a critical component needed to make good decisions. Marketing
research does this by giving marketers a picture of what is occurring (or likely
to occur) and, when done well, offers alternative choices that can be made by
the business. For example, a good research may suggest multiple options for
introducing new products or entering new markets. In most cases marketing
decisions prove less risky (though they are never risk free) when the marketer
can select from more than one option.

Stages of Marketing Research

The different stages of the marketing research process can help you
understand better what it is all about.

Stage 1: Formulating the Marketing Research Problem

Formulating a problem is the first step in the research process. Research

starts with a problem that management is facing. This problem needs to be
understood, the cause diagnosed, and solutions developed.

You should keep in mind, however, that most management problems

are not always easy to research. A management problem must first be
translated into a research problem. You then approach the problem from a
research angle for you to find a solution. For example, “sales are not growing”
is a management problem.

Translated into a research problem, we may examine the expectations and

experiences of several groups: potential customers, first-time buyers, and
repeat customers. You will determine if the lack of sales is due to:

• Poor expectations from the product that lead to a general lack of

desire to buy, or
• Poor performance experience and a lack of desire to repurchase or
buy again the product.

You must know the difference between a management problem and a

research problem. Management problems focus on an action. For example,
should you advertise more? Do you have to change your advertising message?

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Do you need to change an under-performing product feature? If so, how are
you going to do it?

Research problems, on the other hand, focus on providing the

information you need in order to solve the management problem.

Stage 2: Method of Inquiry

The scientific method is the standard pattern for investigation. It

provides an opportunity for you to use existing knowledge as a starting point
and proceed objectively.

The scientific method includes the following steps:

1. Formulate a problem
2. Develop a hypothesis
3. Make predictions based on the hypothesis
4. Devise a test for the hypothesis
5. Conduct the test
6. Analyze the results

The terminology is similar to the stages in the research process. There are
slight differences, however, in the way the steps are performed. For example,
the scientific method is objective while the research process can be subjective.

Objective-based research (quantitative research) relies on impartial

analysis. The facts are the priority in objective research. On the other hand,
subjective-based research (qualitative research) emphasizes personal judgment
as you collect and analyze data.

Stage 3: Research Method

In addition to selecting a method of inquiry (objective or subjective),

you must select a research method. There are two primary methodologies that
can be used to answer any research question: experimental research and non-
experimental research.

Experimental research gives you the advantage of controlling

extraneous variables or variables that you are not intentionally studying in
your experiment or test; and manipulating one or more variables that

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influences the process being implemented. Non-experimental research allows
observation but not intervention. You simply observe and report on your
findings.

Stage 4: Research Design

The research design is a plan or framework for conducting the study

and collecting data. It is defined as the specific methods and procedures you
use to acquire or get the information you need.

Stage 5: Data Collection Techniques

Your research design will develop as you select techniques to use.

There are many ways to collect data. Two important methods to consider are
interviews and observation. Interviews require you to ask questions and
receive responses.

The common modes of research communication include interviews

conducted face-to-face, by mail, by telephone, by email, or over the Internet.
This broad category of research techniques is known as survey research. These
techniques are used in both non-experimental research and experimental
research.

Another way to collect data is by observation. Observing a person’s or

company’s past or present behavior can predict future purchasing decisions.
Data collection techniques for past behavior can include analyzing company
records and reviewing studies published by external sources.

In order to analyze information from interview or observation

techniques, you must record your results. Because the recorded results are
vital, measurement and development are closely linked to which data
collection techniques you decide on. The way you record the data changes
depends on which method you use.

Stage 6: Sample Design

Your marketing research project will seldom examine an entire

population. It is more practical to use a sample—a smaller but accurate
representation of the greater population. In order to design your sample, you
must find answers to these questions:

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1. From which base population is the sample to be selected?
2. What is the method (process) for sample selection?
3. What is the size of the sample?

After you have established who the relevant population is (that you did and
completed in the problem formulation stage), you have a base for your sample.
This will allow you to make inferences about a larger population. There are
two methods of selecting a sample from a population: probability or non-
probability sampling.

The probability method relies on a random sampling of everyone within

the larger population. On- probability is based in part on the judgment of the
investigator, and often employs convenience samples, or by other sampling
methods that do not rely on probability.

The final stage of the sample design involves determining the appropriate
sample size. This important step involves cost and accuracy decisions. Larger
samples generally reduce sampling error and increase accuracy, but also
increase costs.

Stage 7: Data Collection

After you have established the first six stages, you can move on to data
collection. Depending on the mode of data collection, this part of the process
can require large amounts of personnel and a significant portion of your
budget. Personal (face-to-face) and telephone interviews may require you to
use a data collection agency or field service.

Internet surveys require fewer personnel, are lower cost, and can be
completed in days rather than weeks or months. Regardless of the mode of data
collection, however, the data collection process introduces another essential
element to your research project: the importance of clear and constant
communication.

Stage 8: Analysis and Interpretation

In order for data to be useful, you must analyze it. Analysis techniques
vary and their effectiveness depends on the types of information you are
collecting, and the type of measurements you are using. Because they are

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dependent on the data collection, analysis techniques should be decided before
this step.

Stage 9: The Marketing Research Report

The marketing research process culminates, or reaches a climax or

point of highest development, with the research report. This report will include
all of your information, including an accurate description of your research
process, the results, conclusions, and recommended courses of action. The
report should provide all the information the decision maker needs to
understand the project.

The report must be written in language that is easy to understand. It is

important to find a balance between completeness and conciseness. You do not
want to leave or exclude any information out, however, but you not let the
information get so technical that it overwhelms or make it hard to one who is
reading your report.

One approach to resolving this conflict is to prepare two reports: the

technical report and the summary report. The technical report discusses the
methods and the underlying assumptions. In this document, you discuss the
detailed findings of the research project.

The summary report summarizes the research process and presents the
findings and conclusions as simply as possible. Another way to keep your
findings clear is to prepare several different representations of your findings.
PowerPoint presentations, graphs, and face-to-face reports are all common
methods for presenting your information. Along with the written report for
reference, these alternative presentations will allow the decision maker to
understand all aspects of the project.

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Before you can start your Marketing Research project, you should get yourself organized
and prepare a budget and time schedule for the major activities in the study.

D. CONSUMER AND BUSINESS MARKETS

The consumer market pertains to buyers who purchase goods and

services for consumption rather than resale. But not all consumers are alike in
their tastes, preferences and buying habits due to different characteristics that
can distinguish certain consumers from others.

Consumer Markets and Buying Behaviours

Consumer buying behaviors can be best understood by studying

particular consumer characteristics. These particular consumer characteristics
include various demographic, psychographic, behaviorialistic and geographic
traits. Marketers usually define these consumer characteristics through market
segmentation, the process of separating and identifying key customer groups:

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1. Demographic Characteristics - Characteristics of consumer mar-kets
based on demographics include differences in gender, age, ethnic background,
income, occupation, education, household size, religion, generation,
nationality and even social class. Most of these demographic categories are
further defined by a certain range. For example, companies may identify the
age of their consumers in the 18 to 24, 25 to 34, 35 to 54, 55 to 65, and 65+
age groups. Companies often identify these demographic characteristics
through market research surveys used to discover which demographic groups
comprise the majority of their customer base.

2. Psychographic Characteristics – These psychographic

characteristics include interests, activities, opinions, values and attitudes.
Obviously, many magazines are geared toward a consumer's interest. For
example, prenatal magazines target expectant mothers who are interested in
learning more about caring for a baby. It can also include consumer activities
like participation in martial arts or basket weaving. Opinions and attitudes can
be both specific and general. A company may better understand consumer
opinions and attitudes after conducting a focus group, and can use that
information to tailor advertising or marketing campaigns. Consumer values
can refer to how a group of individuals feels about certain social issues, which
can be of interest to non-profit or charitable organizations.

3. Behavioralistic Characteristics - Behavioralistic characteristics can

also be gathered through marketing research. These include product usage
rates, brand loyalty, user status or how long they have been a customer, and
even benefits that consumers seek. Companies like to know how often their
consumers visit their restaurants, stores or use their products. Company
marketing departments usually try to distinguish between heavy, medium and
light users, whom they can then target with advertising. Marketers like to know
which customers are brand loyalists, as those consumers usually only buy the
company's brand.

4. Geographic Characteristics - Consumer markets also have different

geographic characteristics. These geographic characteristics are often based on
market size, region, population density and even climate. A small retailer may
find opportunities in a small market in which larger competitors have no
interest. Companies that sell beachwear will likely sell more products in

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warmer climates. Consumers in different regions of the country also have
different tastes in food and style.

The Consumer Buying Process

The actual purchase is just one step. In fact, there are six stages to the
consumer buying process and as a marketer; you should adopt the six stages of
the consumer buying process so you can market to them effectively. The six stages
of the consumer buying processes indicated in the diagram below

Problem Recognition Information Search Evaluation of

Alternatives

Post-Purchase Purchase Decision Purchase

Evaluation Decision

1. Problem Recognition - Before a purchase can ever take place, the

customer must have a reason to believe that what they want, where they want
to be or how they perceive themselves or a situation is different from where
they actually are. The desire is different from the reality and this could present
a problem for the customer. For the marketer, however, this creates an
opportunity. By taking the time to “create problem” for the customer, whether
they recognize that it exists already or not, you’re starting the buying process.

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2. Information Search - After a problem is recognized by the customer,
the customer search process begins. They know there is an issue and they are
looking for a solution. If it is a new micro wave oven, they look for micro wave
ovens to choose. If it is a new mobile phone with all the newest technology
thrown in, they start looking at the new mobile phones for sale. It is fairly
straight forward for the customers.

3. Evaluation of Alternatives - A customer will not readily buy your

product or service just because you stand out among the competition.
Customers today want to be sure they have done thorough research prior to
making a purchase. Because of this, even though they may be sure of what they
want, they will spend some time to evaluate alternative products or services
available to them. A good marketer must be prepared for this and make a plan
on how his product or service can truly stand out amidst the competition. The
adoption of an effective marketing strategy, complemented by the use of an
appropriate promotion mix can be of big help to the marketer.

4. Purchase Decision - The purchase decision falls near the middle of

the six stages of the consumer buying process. At this point, the customer has
explored multiple options, they understand pricing and payment options and
they are deciding whether to move forward with the purchase or not. At this
point they could still decide to walk away.

This means it is time to step up the game in the marketing process by

providing a sense of security while reminding customers of why they wanted
to make the purchase in the first time. At this stage, giving as much information
relating to the need that was created in step one along with why your brand, is
the best provider to fulfill this need is essential.

If a customer walks away from the purchase, this is the time to bring
them back. Retargeting or simple email reminders that speak to the need for
the product in question can enforce the purchase decision, even if the
opportunity seems lost. Step four is by far the most important one in the
consumer buying process. This is where profits are either made or lost.

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5. Purchase - A need has been created, research has been completed
and the customer has decided to make a purchase. All the stages that lead to a
conversion have been finished. However, this doesn’t mean it is a sure thing.
A consumer could still be lost. Marketing is just as important during this stage
as during the previous stages.

Marketing to this stage is straightforward: keep it simple. Test your

brand’s purchase process online. Is it complicated? Are there too many steps?
Is the load time too slow? Can a purchase be completed just as simply on a
mobile device as on a desktop computer? Ask these critical questions and make
adjustments. If the purchase process is too difficult, customers, and therefore
revenue, can be easily lost.

6. Post-Purchase Evaluation -Just because a purchase has been made,

the process has not ended. In fact, revenues and customer loyalty can be easily
lost. After a purchase is made, it is inevitable that the customer must decide
whether they are satisfied with the decision that was made or not. They
evaluate.

If a customer feels as though an incorrect decision was made, a return

could take place. This can be remedied by identifying the source of dissonance
or dissatisfaction of customer by offering an exchange that is simple and
straightforward. But even if the customer is satisfied with his or her decision
to make the purchase, whether a future purchase is made from your brand is
still in question. Because of this, sending follow-up surveys and emails that
thank the customer for making a purchase are critical.

Take the time to understand the six stages of the consumer buying
process. Doing this ensures that your marketing strategy addresses each stage
and leads to higher conversions and long-term customer loyalty.

Business Markets

Business markets refer to individuals or organizations (including

commercial businesses, governments and institutions). It allows them to sell
products or services to other companies or organizations that resell them, use
them in their products or services or use them to support their works. Business
marketing or B2B (business-to-business) marketing is marketing of products
to businesses or other organizations for use in production of goods, for use in

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general business operations (such as office supplies), or for resale to other
consumers, such as a wholesaler selling to a retailer.

Types of Business Markets

When you sell to other businesses, you are participating in the business-
to-business market or B2B. The B2B marketplace requires a greater emphasis
on customer education and proof of benefit than on desirability, status or other
emotional sales pitches. Business-to-business selling often consists of
garnering larger orders from fewer customers, with more personal interaction,
rather than advertising and promotions, necessary. Within the B2B market are
subsets of the marketplace focusing on the sale of industrial products,
consulting services and financial services.

1. Industrial - The industrial market consists largely of companies

transacting business in hard goods such as machinery, materials, chemicals,
vehicles and office furniture and supplies. The buyers are often manufacturers.

The sellers are known as suppliers. Suppliers must be experts in their

product or service and the market overall. They often use a consultative selling
approach to partner with customers, helping them solve problems or meet
specific business goals.

2. Professional Services - Another subset of B2B is professional

services, which consists of providing consulting or delivery of business needs
such as marketing, information technology, human resources, benefits
planning, management consulting and payroll. Some commercial services,
especially those involving information technology systems, include the sale of
hard goods such as computers and software. Many solo entrepreneurs offer
professional services as consultants, while firms might group a variety of
services -- such as advertising, public relations, promotions and media buying
-- under one roof.

3. Financial Services – This is one area of the commercial services

market with its own moniker is the group of businesses selling financial
services. This can include banking, insurance, commercial credit and lending,
tax planning, investments and asset management and consulting publicly
traded companies. Financial services professionals are often highly trained,
certified, licensed or bonded. Financial services providers often must follow
specific government rules and regulations.

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4. Government - Working with the government provides a variety of
opportunities and challenges. A contract with a municipal, city, city or national
government agency means having a solid client that will honor its obligations
and pay you on time. Getting these contracts usually requires filling out
lengthy bids, showing proof of your corporate status and agreeing to follow
other business practices government agencies require. In all locales in the
Philippines, bidders for government contracts must meet requirements set by
Philippine procurement laws and as per Commission on Audit (COA) rules
and regulations. Even a landscaping or janitorial contract for a local city hall
or school can take months to secure due to the long and tedious procurement
law requirements in the Philippines. In spite of this, though, some businesses
do find government contracts lucrative or profitable to them.

Characteristics of Business Markets

In some ways, business markets are similar to consumer markets. Both
involve people who assume buying roles and make purchase decisions to
satisfy needs. However, business markets differ in many ways from consumer
markets. The main differences are in the market structure and demand, the
nature of the buying unit, and the types of decisions and the decision process
involved. Business markets also have their own characteristics. In some ways,
they are similar to consumer markets, but in other ways they are very different.
The main differences include

1. Market structure and demand -Business markets usually deal with

far fewer but far larger buyers. They are more geographically concentrated.
Business markets have derived demand, or business demand that ultimately
comes from or derives from the demand for consumer goods. Many business
markets have inelastic demand, that is, total demand for many business
products is not affected much by price changes, especially in the short run. A
drop in the price of leather will not cause shoe manufacturers to buy much
more leather unless it results in lower shoe prices that, in turn, will increase
consumer demand for shoes.

Finally, business markets have more fluctuating demand. The demand

for many business goods and services tends to change more--and more
quickly--than the demand for consumer goods and services does. A small
percentage increase in consumer demand can cause large increases in business
demand. Sometimes a rise of only 10 percent in consumer demand can cause
as much as a 200 percent rise in business demand during the next period

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2. Nature of the Buying Unit - Compared with consumer purchases,
a business purchase usually involves more decision participants and a more
professional purchasing effort. Often, business buying is done by trained
purchasing agents who spend their working lives learning how to make better
buying decisions. Buying committees made up of technical experts and top
management are common in the buying of major goods. Companies are putting
their best and brightest people on procurement patrol. Therefore, business
marketers must have well-trained salespeople to deal with well-trained buyers

3. Types of Decisions and the Decision Process -Business buyers

usually face more complex buying decisions than do consumer buyers.
Purchases often involve large sums of money, complex technical and
economic considerations, and interactions among many people at many levels
of the buyer's organization. Because the purchases are more complex, business
buyers may take longer to make their decisions. The business buying process
tends to be more formalized than the consumer buying process. Large business
purchases usually call for detailed product specifications, written purchase
orders, careful supplier searches, and formal approval. The buying firm might
even prepare policy manuals that detail the purchase process.

Finally, in the business buying process, buyer and seller are often much
more dependent on each other. Consumer marketers are often at a distance
from their customers. In contrast, business marketers may roll up their sleeves
and work closely with their customers during all stages of the buying process-
-from helping customers define problems, to finding solutions, to supporting
after-sale operation. They often customize their offerings to individual
customer needs. In the short run, sales go to suppliers who meet buyers'
immediate product and service needs.

Participants in the Business Buying Process

The decision-making unit of a buying organization is called its buying

center where all the individuals and units that participate in the business
decision-making process. The buying center includes all members of the
organization who play any of five roles in the purchase decision process.
1. Users – these are members of the organization who will use the
product or service. In many cases, users initiate the buying proposal and help
define product specifications.

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2. Influencers – they often help define specifications and also provide
information for evaluating alternatives. Technical personnel are particularly
important influencers.
3. Buyers – they have formal authority to select the supplier and
arrange terms of purchase. Buyers may help shape product specifications, but
their major role is in selecting vendors and negotiating. In more complex
purchases, buyers might include high-level officers participating in the
negotiations.
4. Deciders – they have formal or informal power to select or approve
the final suppliers. In routine buying, the buyers are often the deciders, or at
least the approvers.
5. Gatekeepers - they control the flow of information to others. For
example, purchasing agents often have authority to prevent salespersons from
seeing users or deciders. Other gatekeepers include technical personnel and
even personal secretaries.

The buying center is not a fixed and formally identified unit within the buying
organization. It is a set of buying roles assumed by different people for
different purchases. Within the organization, the size and makeup of the
buying center will vary for different products and for different buying
situations. Business marketers working in global markets may face even
greater levels of buying center influence. The buying center concept presents
a major marketing challenge. The business marketer must learn who
participates in the decision, each participant's relative influence, and what
evaluation criteria each participant uses. The buying center usually includes
some obvious participants who are involved for rally in the buying decision
process.

E. MARKETING SEGMENTATION, MARKET TARGETING,

AND MARKETING POSITIONING (STP)

Marketing Segmentation
Marketing Segmentation is the process of dividing potential market
into distinct subsets of consumers and selecting one or more segments as a
target market to be reached with a distinct marketing mix.

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Advantages and Benefits of Market Segmentation

The following are some of the benefits, as cited in leading marketing

books.
1. Customer needs - It is easier to understand the exact needs of the
customer and target the marketing strategy at a particular group. It is much
easier and more successful to create and promote specific and customised
products and services.

2. Profit Potential - Mass marketing is a strategy of the past. Target marketing

and positioning creates new potential customers and new ideas for new
products and services. Companies can create better products and hence
maximise their potential profit.

3. Growth - Segmenting the markets creates further opportunities for business

growth. Specific groups require specific products.

4. Retaining Customer - It is a great way to retain customers. Firms can

establish a life-long relationship with their consumers via formulating an
effective market segmenting strategy.

5. Right Target Market - The company’s resources are utilized for

producing the right product for the right customer.

6. Market Share - Segmenting business and consumer markets is

important to maintain existing market share and expand it. A successful
company needs to gain competitive advantage by looking closely at the
specific needs of customers and devising strategies to provide maximum
benefit and value.

The Value of Market Segmentation

The value of segmentation for both the company and the end user can
be broken down as such;

For the customer:

1. Provides greater choice of products/services, and

2. Products/services should more closely match the needs of
consumers.

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For the company:

1. Better marketing planning as reactions to marketing activities can be

predicted.

2. It helps organizations to identify prospects who are most likely to

buy.

3. Marketers will get to know their customers better so that they can
provide a better service.

4. Budgets can be more closely allocated on the basis of the investment

and return needed from different segments.

5. Smaller segments may be easier to dominate.

6. Marketing and sales activity will be closely focused, leading to more

sales, lower costs and higher profitability.

Market Segmentation Method for Consumer Markets

Multi-channel marketing can be personalized to each individual group’s

needs and behaviors. This increases repeat customers, conversions, and
referrals. With segmentation methods, customers can be sorted into groups
based on criteria such as:

(1) Geographic location

(2) Demographic characteristics
(3) Behaviors and interactions
(4) Lifestyle features

Market Segmentation Method for Business Markets

For B2C market segmentation, the common method used is ‘consumer

typology’. This is the process of segmenting consumers into 5 main categories
based on the following;

(1) Geographic
(2) Geodemographic

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(3) Demographic
(4) Behavior in the product field
(5) Motivation, psychographics and social value groups.

For B2B market segmentation, markets are typically segmented into the 5
following variable groups;

(1) Demographics
(2) Operating variables
(3) Purchasing approaches
(4) Situational factors
(5) Personal characteristics.

Market Targeting

Market Targeting refers to a consumer-oriented philosophy that

suggests that satisfaction of consumer needs provides the focus for product
development and marketing strategy to enable the firm to meets its own
organizational goals.
Targeting a specific market does not mean that you are excluding
people who do not fit your criteria. Rather, target marketing allows you to
focus your marketing dollars and brand message on a specific market that is
more likely to buy from you than other markets. This is a much more
affordable, efficient, and effective way to reach potential clients and generate
business.

Defining and Determining the Target Market

With a clearly defined target market, it is much easier for you to

determine where and how to market your company. Here are some tips to help
you define your target market.
1. Look at your current customer base - Who are your current
customers, and why do they buy from you? Look for common characteristics
and interests. Which ones bring in the most business? It is very likely that other
people like them could also benefit from your product/service.

2. Check out your competition - Who are your competitors targeting?

Who are their current customers? Don't go after the same market. You may
find a niche market that they are overlooking.

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3. Analyze your product/service - Write out a list of each feature of
your product or service. Next to each feature, list the benefits it provides (and
the benefits of those benefits). For example, a plaque and trophy producer
offers high-quality design services and quality finished products. The benefit
is a professional company image. A professional image will attract more
customers because they see the company as professional and trustworthy. So
ultimately, the benefit of high-quality design and quality product will make the
firm gain more customers and making more money.

4. Once you have your benefits listed, make a list of people who have
a need that your benefit fulfills. For example, a graphic designer could
choose to target businesses interested in increasing their client base. While this
is still too general, you now have a base to start from.

5. Choose specific demographics to target- Figure out not only who

has a need for your product or service, but also who is most likely to buy it.
Think about the following factors:

(a) Age
(b) Location
(c) Gender
(d) Income level
(e) Education level
(f) Marital or family status
(g) Occupation
(h) Ethnic background

6. Consider the psychographics of your target - Psychographics are the

more personal characteristics of a person, including:

(a) Personality
(b) Attitudes
(c) Values
(d) Interests/hobbies
(e) Lifestyles
(f) Behavior

Determine how your product or service will fit into your target's lifestyle.
How and when will your target use the product? What features are most

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appealing to your target? What media does your target turn to for information?
Does your target read the newspaper, search online, or attend particular events?

(g) Evaluate your decision – After you have decided on a target market,
be sure to consider these questions:
(a) Are there enough people who fit my criteria?
(b) Will my target really benefit from my product/service? Will they see a
need for it?
(c) Do I understand what drives my target to make decisions?
(d) Can they afford my product/service?
(e) Can I reach them with my message? Are they easily accessible?

But do not to break down your target too far! Remember, you can have
more than one niche market. Consider if your marketing message should be
different for each niche. If you can reach both niches effectively with the same
message, then maybe you have broken down your market too far. Also, if you
find there are only 50 people that fit all of your criteria, maybe you should re-
evaluate your target. The trick is to find that perfect balance.

Defining your target market is the hard part. Once you know who you are
targeting, it is much easier to figure out which media you can use to reach them
and what marketing messages will resonate with them. Instead of sending
direct mail to everyone in your ZIP code, you can send it only to those who fit
your criteria. Save money and get a better return on investment by defining
your target market.

Market Positioning

Market positioning is an effort to influence consumer perception of a

brand or product relative to the perception of competing brands or products.
Its objective is to occupy a clear, unique, and advantageous position in the
consumer's mind. It is the process of establishing and defending a valuable
position for products and services relative to the competition. Positioning can
encompass branding, advertising, promotion, pricing, product development,
sales, distribution and operations. The following are common types of market
positioning.

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Examples of Positioning Strategy in Marketing
1. Specific Demographic - If you try to be everything to everyone, you
may not appeal to any group. For example, Secret deodorant markets itself as
made specifically for women. This loses it sales among men; but it may
increase its overall market share by getting more women to buy this deodorant
than other brands, since they believe it is unique. Makers of athletic equipment
offer different models of the same equipment for beginners and advanced
players, making those products more attractive to specific consumers.

2. High-Price Strategy - Some companies price their products or

services higher than their competition to create a perceived value. Consumers
wonder why a particular company is able to sell its product for more or why
their fellow consumers are willing to pay more for the product. In the end, they
may believe that the higher-priced product or service is worth more. An
example of this strategy is a personal trainer who charges PHP300 per hour
more than the other trainers in his town.

3. Distribution - Where you sell your product says much about its
quality. Tennis and golf equipment manufacturers position certain models in
their line as higher quality by selling them only in pro shops or specialty stores.
Because these rackets and clubs are not available at Walmart or Target, the
public may believe these are the top-of-the-line models and desire them more.

4. Affinity - If you have a customer base with a common, personal

denominator, you can position your company to play on their loyalty to their
group. Examples of this type of positioning include marketers who advertise
their products as made locally or in the United States; Christian-owned
businesses; alignment with a charity; or sponsorship of a school sports program

5. Low-Price Strategy - Some companies position themselves as

affordable options for consumers by selling low-priced goods. This may
require a corresponding decrease in quality, such as a restaurant spending less
on interior design or a car manufacturer offering fewer standard options, such
as leather seats. An example of this low-price strategy is the 99-cent menus
offered by many fast-food chains. Consumers know they can get a sandwich,
side and drink for less than $5.00. This strategy works only if your potential
customer is looking for affordability.

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Differentiation Strategy: Market Positioning

A well-positioned company will beat the competition that has a

comparable offering. The company that clearly articulates what it does, why
it's relevant and how it's different helps customers make better and faster
buying decisions. Why are we suggesting you get our help? When we place a
Chief Outsider with your company, or consult with you on a strategic direction,

Creating a Market Positioning Strategy

While every company’s situation is unique, there are common criteria for
a company’s success in reaching and winning a market. You have to consider
the following dimensions in developing a market positioning strategy:
1. Brand Positioning Strategy: Brand Management or Rebranding?
Positioning a brand is serious business. There are several key questions which
have to be answered in brand positioning. You determine what dimensions are
critical to the positioning that has everything to do with the target customers.
Take into consideration the top two to five core criteria for decision making.
Then, you need to understand where the brand is currently positioned,
assuming you’re already in market. Often this sort of analysis is conducted to
determine what gaps are underserved, which presents a potential positioning
opportunity of where you would like to be positioned. You then need to
determine if the new positioning opportunity is purely a matter of messaging
(relating what you do, why it’s relevant, and how it’s different) or a matter of
bolstering your offerings.
2. Product Positioning Strategy: Market Fit and Differentiation. Good
product positioning strategy requires looking both internally and externally.
First, your business as a whole needs to be properly positioned, then your
product or services portfolio needs to be positioned. Some companies fail to
recognize that their own offerings need to “hang together” and make sense –
relative to one another and to your business overall. When a company has
diverging offerings or brands, they might best consider two different company
banners. Similarly, when companies try to extend the brand of a product in too
many directions they can dilute the value of the offering and confuse the
customer. With a product portfolio that makes sense, your business also needs
to successfully differentiate each product from its competition. Typically,
there are three key dimensions to positioning: functionality, relevance and
differentiation. When offerings are new (perhaps based on new technology)
and not well understood, the positioning is around what the offering does (e.g.,
now you can watch movies in high definition). When offerings are

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commodities, the positioning is around your differentiation strategy, and in
extreme cases, positioning around the emotional experience (like a beer might
claim to be the coldest, which is not actually a unique attribute of the product.
It may then go further by putting a temperature gauge on the can to prove it’s
cold.
3. Competitive Pricing Strategy: Pricing for Profit. Pricing strategy has
its roots in the very heart of competitive positioning. If your company boasts a
better product or service and also leads in market reputation (or brand) then
you have the opportunity to command premium (higher) pricing. You have to
consider, though, customers who are price-sensitive. In many cases, especially
in small or middle market companies, the unique value your offerings bring
may fully justify a premium price. On the other hand, if you lack a competitive
presence or are subject to a negative reputation, no amount of pricing discount
may equalize your handicap.
4. Competitive Positioning Strategy: Look at The Whole Picture.
Positioning strategy, by its very nature, involves your value relative to your
competition. You have to find out if what you do you do or offer is better (or
not as competitive) as others who offer similar products and services. When
these differences are identified, supported with proof your prospects will have
an accurate and compelling basis to compare your company to others.
However, there is always more to understanding your offerings than defining
them in light of competitive offers. Companies can easily make the mistake of
“over positioning” their products and services.
5. Leveraging Outside Experts for Compelling Market Positioning
Strategies. When developing strategies for market positioning, mid-market
CEOs (Chief Executive Officers) would do well to solicit executive
management consultants or top marketing consulting firms, rather than a
marketing agency or advertising firm. This is to ensure both effective and
efficient go-to-market planning and execution. An alternative to strategic
consulting firms is the use of fractional or part-time marketing executives.
Popular Styles of Brand Positioning

Style 1: Arm Wrestling

In this positioning style, you are trying to take on the market leader and
beat them at their own game. This type of strategy can be used when there is a

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well-established market category but no clear market leader that is way ahead
of everyone else in market.

A classic example can be seen in Coke versus Pepsi. These two

products are very similar and have to constantly compare themselves against
each other to try to gain market share. The advantage of this style is that your
audience already has a frame of reference, making it very easy for them to
understand your offering.

“Oh, I get it, this product is just like X.” However, the biggest hurdle
to attempting this strategy is that it takes a lot of money and time to make it
successful.

Style 2: Big Fish, Smaller Pond

The idea behind this style is to focus on a smaller sub-segment of an

existing market. In other words, it is about creating a niche within an
underserved market segment (the proverbial small pond). This strategy is
especially useful if there is an identifiable segment of the existing market
whose needs are not being met by the existing market leader.

Many marketing agencies, for instance, take this tactic and may
position themselves as a specialist in providing services to a specific industry.
The advantage to this, again, is your audience already has a frame of reference.

They understand you’re offering because it is similar to something that

already exists, but unlike “arm wrestling,” you don’t have to go head-to-head
with the market leader since you are targeting a very specific niche. The risky
part is the market leader could turn around and match your niche offering if
they see it working.

Style 3: Reframe the Market

This style of brand positioning reframes an existing market in new

terms. It makes the benefits highlighted by previous market leaders irrelevant,
or frankly, boring.

You would use this if your product or service features an innovation or

advancement that was previously unattainable, or if there has been a recent
shift or change in the market needs or expectations.

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Take the cases of Tesla and Apple, for instance.

Tesla, Inc. (formerly named Tesla Motors) is an American automaker,

energy Storage Company, and solar panel manufacturer based in Palo Alto,
California founded in 2003. The company specializes in electric cars, lithium-
ion battery energy storage, and, through their Solar City subsidiary, residential
solar panels.

Tesla electric cars produced in the U.S.A. adopts the style of brand
positioning reframes making previous market leaders irrelevant.

Before Tesla, the electric car market competed solely on battery life.
Tesla entered the market and said “battery life is a given, I’m not even going
to talk about it.” Instead, it highlighted the style and experience of its cars as
its differentiator.

Apple also approached the computer market in much the same way by
adopting this third style of brand positioning (reframe the market). Every good
computer is going to have an adequate amount of storage and decent level of
CPU speed, so Apple did not even bother talking about it. Instead the company
highlighted and competed on style and status.

The reason to pick this style would be to highlight your strengths as

differentiators, if they are so important to the audience, they can surpass those
of the market leader. You will want to make sure the market leader cannot
strike back by simply adding a feature similar to yours, however. Your strength
or differentiator must be bigger than a simple “feature.”

Both Tesla and Apple’s differentiators include a sense of exclusivity,

community, and a unique experience.

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Style 4: Change the Game

This style is reserved for when there is no market category for what
you do. You are the first of your kind and you get to invent your market. This
strategy should be used when your strengths don’t fit you into an existing
category or if a new need has emerged that is not served by any existing market
categories. It can be referred to as a new product market fit.

A simple example here is Grab. The rideshare app category didn’t exist
until Grab invented it. You will know you’re successful in changing the game
when people say things like “My company is the Grab of food delivery.”

The advantage to this strategy is you’ll be the default market leader

because you created the category. There are still, however, a few risks to be
wary of if you want to go this route. For example, you’ll want to be sure there
really is a need for your product or service. Sometimes if a market category
does not exist, it is because it does not need to. History is filled with products
flops or products that failed in the market, as these tried to fill a need that didn’t
exist.

Communicating Brand Position

Effective brand communications employ both creativity and strategy to

build and maintain the strong perceptions that attract your target audience and
grow your business.

Firstly, the most important consideration in communicating your brand

position is to have a clearly defined brand positioning strategy. To position
your brand note the importance of the following:

(a) Conduct market research to understand your customers’ needs and

how they perceive you and your team members;
(b) Understand the essential benefits of your business and defining how
you will provide value to your chosen market;
(c) Develop a strong vision statement that states what you want your
organization to achieve over time – this clear strategic focus guides and
inspires your team.

If you have undertaken the necessary preparation to define your brand

positioning strategy, you will have a strong foundation. From here, you can
develop and deliver a focused communications campaign.

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Three key principles to guide your approach to on-going brand
communications activities:

1. Use communications activities to reinforce your brand benefits.

Define what you will do to communicate with your audience. Your
communications activities may employ a select group of focused channels, or
they may be far-and wide-reaching. Common activities include events,
advertising, content marketing, newsletters, social media, promotions, direct
mail and media relations.

2. Communication materials should engage the attention of your

core audience. Consider your communication materials from your audience’s
viewpoint. They should serve to quickly attract attention, but also reflect your
brand in a positive and professional light. Your logo and headline must be
prominent and designed to drive maximum interest – but not at the expense of
engaging design and a well-considered tone.

Think about the overall look and feel you want to convey. Test your
end result by seeking feedback from people in your audience’s situation. Keep
in mind: if you aim to position your organisation as trustworthy and credible,
then your communication materials must reflect that. Your target audiences
will respond to materials that look professional and are based on fact.

Professional photography is a valuable tool in engaging with your

target audience. To create a unique image and demonstrate your authenticity,
invest in your own photo-shoot. But make sure you develop a clear brief so
that the photographer can tell your story and demonstrate who you are.

3. Consistently integrate the same key messages into your

communications. You can have the best creative in the world, but if you don’t
understand who you are communicating with and what their drivers are, then
your efforts will not translate into the action clients most commonly seek: sales
uplift.

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LEARNING ACTIVITY

Visit the Cleaners Section at a large Supermarket near your place,

where all-purpose, laundry detergent, dishwashing liquid/deter-gent are
usually displayed and sold. Observe and take note of the buying behaviors of
shoppers, their decision making process and choice of detergent and liquid
dishwashing purchases. Classify the buyers according to sex (female or male),
age (teenage, adult/middle-age or elderly), and the product/products they
purchased. Make a report and evaluation of your observation and what
influenced the consumer to buy a particular product or brand instead of the
other brands.

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REVIEW EXERCISES

Name: ______________________________ Date: __________

1. Nescafe has dominated the instant coffee market of the Philippines since it
was first introduced in the country in 1962. Blend 45 and Great Taste were
in far second and third places, respectively as Nescafe continued leading the
local market in the 1970s. Lately, Kopiko, from Indonesia, has put up a strong
challenge to Nescafe’s dominance of the instant coffee market in the country.
What do you think is the style of brand positioning adopted by Kopiko to
effectively compete in the market? List down at least three (3) instant coffee
products from each of the three leading competitors (Nescafe, Great Taste and
Kopiko).
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2. The Palmolive Company Philippines was established in 1926 with an office
in the Binondo district of Manila and since then Colgate Toothpaste has
been a great partner of Filipino homes for their oral hygiene needs. Other

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toothpaste brands have tried to challenge Colgate’s dominance of the local
market but they have failed. Why do you think Colgate continues to be the
favorite toothpaste of Filipinos?
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3. The latest study by the Nielsen Media Research revealed that shampoo
advertisers like Sunsilk, Palmolive, Head & Shoulders and Pantene are the
most advertised products in the Philippines. With the so many shampoo
brands and products in the market today Differentiation Strategy as a
Market Positioning is clearly the positioning of shampoo products and
brands in communicating to their target markets. Make a list of at least 10
shampoo products/brands sold in sari-sari stores in your neighborhood and

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write down the different features of each product to meet the need of a
particular consumer. You may include in your list different shampoo
products of the same brand.

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Chapter 4
Developing the Marketing Mix
(4 P’s)
Performance
The marketing mix consists of elements that a
Standard firm controls and uses to reach its target market. The
Design a new ingredients of the marketing mix are controllable
product or elements. A firm can vary each of them to suit its
service, decide
organizational goals, marketing goals, and target
types of pricing
approach, and markets. Marketing mix is defined as a combination of
choose product, price, place or distribution, and promotion
distribution developed to satisfy a particular target market.
methods and
promotion tools Product: The Element of Marketing Mix
that respond to
market trends.
The marketing mix begins with the product
offering. It is difficult to device a distribution system or
set a price without knowing the product to be marketed.
The heart of the marketing mix is a firm’s product
offerings.

Content Standard
The essence of new product development, pricing, placing
(distribution), and promoting a product or service.

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Product is defined as everything that one receives in an exchange, including
all tangible and intangible attributes, and expected benefits, it may be a good,
service, or idea. Product is anything that is capable of satisfying a want.
Another definition of product holds that it is a set of tangible attributes,
including packaging, color, price, quality, and brand, plus the services and
reputation of the seller.

The Product Life Cycle (PLC)

Products are like people. They are born, they live and they die. Product
progresses through a product life cycle, which is a series of stages in which its
sales revenue and profit increase, reach a peak, and then decline. A company
must be able to launch, modify, and delete products from its offering of
products in response to changes in product life cycles. Otherwise, the
company’s profit will disappear and the company will fail.

The Four Stages of Product Life Cycle

TIME

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1. Introductory Stage- the first page of the product life cycle which
represents the full-scale launch of a new product into the marketplace.
Marketing costs in the introductory stage are normally high and sales
normally increase slowly during this stage. But profits are usually
negative because of research and development costs, and high
introduction costs.

Promotional strategy in this stage focuses on developing product

awareness and informing consumers about the product category’s
potential benefits.

2. Growth Stage- If the new product survives the introductory stage, it

foes to the growth stage of the life cycle. In this stage, sales grow at an
increasing rate, many competitors enter the market, and profits are
healthy.

Distribution is a major key to success during this stage. Manufacturers

acquire dealers and distributors. Adequate distribution establishes a
strong market position.

Toward the end of the growth stage, prices begin falling and profits
peak.

3. Maturity Stage
A stage of the product life cycle in which sales begin to level off and
the market approaches saturation. As prices and profits continue to fall,
marginal competitors start dropping out of the market. Dealer margins
also shrink, resulting in less shelf space for mature items, lower dealer
inventories, and reluctance to promote the product.

Promotion to dealers often intensifies during this stage in order to

retain loyalty. Heavy consumer promotion is also required to maintain
market share.

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4. Decline Stage

In this stage, the sales drop and falling demand forces many
competitors are out of the market. The rate of decline is attributed by
the rapid change of consumer tastes or substitute products are adopted.

Extending Product Life Cycle

Marketing managers use several strategies to extend product life cycles:

• Promoting more frequent use of the product by current

customers:
Example- orange juice is advertised as a healthy, refreshing
beverage suitable for anytime of the day.
• Finding new target markets for the product:
Baking soda is promoted as a refrigerator freshener, jewelry
cleaner, and a toothpaste for white teeth. Sales would increase
when each new suggested use appeared in print and television ads.
• Pricing the product below the market:
This is done by introducing products of acceptable quality at low
prices.
• Developing new distribution channels
A product that is sold only in department stores, and then it was
introduced in supermarkets and grocery stores without any
changes in the product itself, the price or the promotional appeal.
• Adding new ingredients or deleting old ingredients
The laundry detergent industry has relied on this strategy to
extend the life cycles of brands, adding whiteners, bleaches,
scents, and various other ingredients and attributes.
• Making a dramatic new guarantee:
A product approaching declining stage may give new guarantee
that it remove stain from shirt, or it can whiten the skin in just
three (3) weeks.

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Branding

Abrand is a name, term, symbol, design or combination thereof that

identifies a seller’s products and differentiates them from competitors’
product.
A brand nameis the part of the brand that can be spoken including
letters (YMCA) words (Toyota) and number (7-Eleven). The elements of a
brand that cannot be spoken are called the brand marks – for example, the
brand marks of a well-known Mercedes Benz.

Purposes of branding

1. Identification
2. Repeat sales
3. New product sales
Trademarks
A trademark is a legal term indicating the owner’s exclusive right to use a
brand or part of a brand.
Parts of the brand that may qualify for trademark protection – for
example:

• Coca-Cola bottle
• Buildings like Shoe Mart (SM)
• Ornamental color or design, such as the decoration on Nike shoes,
Levi’s small tag on the left side of the rear pocket of its jeans,
• Budweiser’s “This Bud’s for you”
• Abbreviations, such as Bud or Coke.
Companies that fail to protect their trademarks face the problem of their
product names becoming generic. A generic product name identifies a
product by class or type and cannot be trademarked. Former brands that were
not sufficiently protected by their owners and became generic product names
include aspirin, cellophane, linoleum, thermos, kerosene.

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Packaging
Container used for protecting and promoting a product. Packages have
always served a practical function. They hold contents together or protect
goods as they move through distribution channel. Today, packaging is also
used for promoting the product.

Important Functions of Packaging

1. To contain and protect products

2. Promote products
3. Facilitate product storage, use, and convenience.
4. Facilitate recycling and reduce environmental damage.
Labelling
Labeling is an integral part of any package.

Two forms of label:

1. Persuasive labelling focuses on a promotional theme or logo rather

than consumer information. Standard promotional claims – such as
“new”, “improved”, and “super” have little impact on consumers’
product evaluations.

2. Informational labelling is designed to help consumers make a proper

product selection and lower their cognitive dissonance after the
purchase. Most companies put “label of confidence” tag on their
products for product information as durability, color, features,
cleanability, and care and construction standards. For food stuffs, the
terms like low fat, light, reduced cholesterol, low sodium, low calorie,
and fresh are affixed to the product packaging.
What is a new product?
Product new to the world, the market, the producer or seller, or same
combination of these. Developing new product sustains or increase profit.

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• The New Development Process

Nowadays, most companies follow a formal new product development

process, starting with a new product strategy. The funnel-shaped illustration
shows how each stage acts as a screen. The purpose is to filter out
unworkable ideas.

A new product strategy links the new product development process with the
objectives of the marketing department, the business unit, and the corporation.
This strategy provides guidelines for screening and evaluating new product
ideas in two ways.

1. The new product strategy specifies the roles that new products must
play
2. It describes the characteristics of products the organization wants to
offer and the markets it wants to serve.

• Idea Generation
New product ideas come from many sources, such as customers,
employees, distributors, competitors, research and development staff,

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and outside consultants. Brainstorming and focus group interviews
are the two techniques used for generating new product ideas.

• Screening
Stage is the product development process that eliminates ideas
inconsistent with the organizations new product strategy or
inappropriate for some other reason. The new product committee, the
new product department, or some other formally appointed group
perform the screening review.

• Business Analysis
Stage in the product development process where demand, cost, sales,
and profitability estimates are made. In here, costs and revenues are
estimated and compared. This process may be simple or complex,
depending on the nature of the product and the company.
The newness of the product, the size of the market, and the nature of
competition all affect the accuracy of revenue projections.

• Development
In the early stage of development, the research and development or
engineering department may develop a prototype of the product. The
firm start sketching out a marketing strategy. The marketing
department decides on the packaging, branding, labeling, and so forth,
it should also map out preliminary promotion, price, and distribution
strategies.

In this stage, the technical feasibility of manufacturing the product as

well its cost is thoroughly examined. This stage can last a long time
and thus be very expensive. For example, Crest toothpaste (used to be
popular in the Philippines) was in the development stage for ten (10)
years, fifteen (15) years to develop the Polaroid Camera, fifteen (15)
years to develop the Xerox copy machine, and fifty-five (55) years to
develop television.

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• Testing or Test Marketing

Process during which a product is introduced in a limited way to

determine the reactions of potential customers in a market situation.
New products that have been developed are usually tested in the
marketplace. When selecting test market cities, researcher should find
locations where the demographics and purchasing habits reflect the
overall market. The company should also have good distribution in test
cities.

• Commercialization
This is the final stage in the new product development
process. It is the decision to market the product. Several tasks are
considered in this stage, namely:
▪ ordering production materials and equipment
▪ starting production
▪ building inventories
▪ shipping the product to distribution points
▪ training the sales force
▪ announcing the new product to the trade
▪ and advertising the potential customers

THE SPREAD OF NEW PRODUCTS

The marketing managers are able to guide successfully the product through its
life cycle if they understand how consumer learns about and adopt products.
The product life cycle and the adoption process go hand in hand. A person who
buys a new product for the first time may ultimately become an adopter. An
adopter is a consumer who was happy enough with his or her trial experience
with a product to use it again.

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Stages in the Adoption Process

A model that describes the adoption process is called AIDA which

stands for attention, interest, desire and action. An expanded version of the
AIDA concept is the hierarchy of effects model. This model proposes that
consumers’ purchase decisions are the result of a six-stage process.

1. Awareness – the advertisers must first achieve awareness with the

target market. To do this, a new brand of product should be advertised
heavily on several ads on TV, Radio, and in consumer magazines.

2. Knowledge – the next step is to inform the target market about the
product’s characteristics, namely the ingredients of the product (food)
and its nutritional benefits.

3. Liking – after the target market learns about the product, the
advertiser must generate a favorable attitude. The marketer should
distribute samples establish liking for the new brand.

4. Preference – the marketer should create brand preference by

explaining why the product has a differential advantage over the
competition. He has to convince consumers that the new product has
a distinct advantage over other products.

5. Conviction – in order for the firm to develop conviction or an intention

to buy the new brand. For example, easy-to-open packaging, zip-lock
packaging for keeping the product fresh.

6. Purchase – some members of the target market may now be convinced

to buy the new product but have yet to make the purchase.

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Diffusion of Innovation

An innovation is a product perceived as a new by a potential adopter.

Diffusion is the process by which the adoption of an innovation spreads. The
diffusion process is the spread of a new idea from its source of invention or
creation to its ultimate users as adopters.

Five adopters in the diffusion process:

1) Innovators – they are eager to try new ideas and products, almost as
an obsession. They are well educated, with high income, and are
characterized as being venturesome.

2) Early adopters –they adopt early in the product’s life cycle. Respect
for others is a dominant characteristic of early adopters.

3) Early majority – group of consumers to adopt a new idea or product,

characterized by their deliberation. They are likely to collect more
information and evaluate more brands than early adopters. A dominant
characteristic of the early majority deliberateness.

4) Late majority – they adopt a new product or product, characterized

by their reliance on group norms. The dominant characteristic of the
late majority skepticism.

5) Laggards – group of consumers to adopt a new idea or product,

characterized by ties to tradition. Laggards have the longest adoption
time and the lowest socio-economic status. They are suspicious of the
new products. The dominant value of laggards is tradition. They are
ignored by markets because they do not seem to be motivated by
advertising or personal selling.
Product Management
Large organizations often use brand, product, or category managers to
direct specific marketing efforts.

A brand manager is responsible for a single brand.

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A product manager has responsibility for several brands within a
product line or product group.

A category manager has responsibility for multiple product lines within

a product category.

Categories of New Product

1. new-to-the-world products
2. new product lines
3. additions to existing product lines
4. improvements or revisions of existing products
5. repositioned products
6. lower-cost products

Price: An Element of Marketing Mix

Price means something to the consumer and something else to the
seller. To the seller price is revenue, the ultimate source of profits. Price
allocates resources in a free-market economy.

Price is the perceived value of a good or service. The perceived value

is commonly expressed in every nation’s money currency. Price is the money
exchange for a good or service.

Prices are the key to revenues, which all are in turn the key to profits
for an organization. Price changed to customers multiplied by the number of
units sold equals revenue for the firm. Revenue is what pays for every activity
of the company: production, finance, sales, distribution, and so on. What is left
over is profit, managers usually strive to charge a price that will earn a fair
profit. To achieve this goal, they must choose a price that is not too high or too
low. Moreover, the price must equal the perceived value to target consumers.

If a price is set too high in consumers’ minds, the perceived value will
be less than the cost, and sales opportunities will be lost, that will lead to lost
revenue. On the other hand, if a price is too low, it may not meet the company’s
profit goals.

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Pricing Objectives
To survive in today’s highly competitive marketplace, companies
need pricing objectives that are specific attainable and measurable.

1. Profit-Oriented Pricing Objectives

a. Profit maximization means setting the prices so total revenue
is as large as possible relative to total costs. Profit maximization
does not signify high prices. Price and profits depend on the
type of competitive environment the firm faces.
b. Satisfactory profits are a reasonable level of profits. Instead of
maximizing profits, organizations strive for profits that are
satisfactory to the stockholders and management. To maximize
profits, an ordinary store owner might have to keep his store
open seven days a week, but if the owner does not want to work
that hard and might be satisfied with less profit.
c. Target return on Investment (ROI) this is sometimes called
the firm’s return on total assets. ROI means the overall
effectiveness of management in generating profits with its
available assets,
ROI is calculated as follows:
𝑁𝐸𝑇 𝑃𝑅𝑂𝐹𝐼𝑇 𝐴𝐹𝑇𝐸𝑅 𝑇𝐴𝑋𝐸𝑆
Return on investment = 𝑇𝑂𝑇𝐴𝐿 𝐴𝑆𝑆𝐸𝑇𝑆

2. Sales-Oriented Pricing Objectives

This pricing objective is based on market share or on unit sales.
a) Market share is a company’s product sales as a percentage of
total sales for that industry.
b) Sales maximization ignores profits, competition, and the
marketing environment as long as sales are arising. Sales
maximization is a short-term objective, it can be effectively
used on a temporary basis to sell off excess inventory. Sales
maximization can also be used for year-end sales to clean out
old models before introducing the new ones.

3. Status Quo Pricing Objectives seeks to maintain the existing prices

or simply meet the competition. It meets competition by simply
following the price leader in the industry. These industries typically
have fewer price wars than those with direct price competition.

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Price Policies

Price policy is defined as the initial price for a product and the
intended direction for price movements over the product life cycle. Pricing
a new product and setting a price policy depends on the market conditions
and the other elements of marketing mix. For example, if a firm launches
a new item resembling several others already on the market, its pricing
freedom is restricted. To succeed, the company may have to charge a price
close to the average market price. In contrast, a firm that introduces a
totally new product with no close substitutes will have considerable pricing
freedom.

1. Price Skimming
It is sometimes called a “market-plus” approach to pricing,
because of its high price among the competing products. Price
skimming is a pricing policy whereby a firm changes a high
introductory price, often coupled with heavy promotion. This policy
is used when the new product is perceived by the target market as
having unique advantages. Its price, however, is lowered as the
product progresses through its life cycle to enable the firm to reach
larger market segments.

2. Penetration Pricing
This pricing policy is the opposite of price skimming.
Penetration pricing means charging relatively low price for a
product as a way to reach the mass market. The low price is designed
to capture a large share of the market, resulting in lower production
costs.

3. Value Marketing
It means offering the target market a high-quality product at a
fair price and with good service.

4. Discounts, Allowances, and Rebates

A base price can be lowered through the use if discounts, allowances,
and rebates.

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Forms of Discounts:

➢ Cash Discounts is a price reduction offered to a consumer, an

industrial user, or marketing intermediary in return for prompt
payment of a bill.
➢ Quantity Discounts is a price reduction offered to buyers
buying in multiple units or above a specified amount of
money.
➢ Cumulative Quantity Discounts is a deduction from list
price that applies to the buyer’s total purchases made during a
specified period, it is intended to encourage customer loyalty.
➢ Functional Discounts is a price discount to wholesalers and
retailers for performing channel functions.
➢ Seasonal Discounts is a price reduction offered to buyers
purchasing merchandise out of season.
➢ Promotional Allowances is a payment to a dealer form
promoting the manufacturer’s products.
➢ Rebates is a cash refund given for purchase of a product
during a specific period.

5. Geographic Pricing
Geographic pricing tactics used by several sellers:
➢ FOB Origin Pricing (Free on Board) is a price tactic that
requires the buyer to absorb the freight costs from the
shipping point.
➢ Uniform Delivered Pricing is a price tactic in which the
seller pays the actual charges and bills every purchaser are
identical, flat freight charge.
➢ Zone Pricing is a modification of uniform delivered pricing
into segments or zones and charges a flat freight rate to all
customers in a given zone.
➢ Freight Absorption Pricing is a price tactic in which the
seller pays all or part of the actual freight charges and does not
pass them on the buyer.
➢ Basing-Point Pricing is a price tactic that incorporates the
freight cost from a given point, regardless of the city from
which the goods are shipped.

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Special Price Tactics

➢ Single-Price Tactic is a policy of offering all goods and

services at the same price.
➢ Flexible Pricing (or variable pricing) is a price tactic in
which different customers pay different prices for essentially
the same merchandise bought in equal quantities.
➢ Professional Services Pricing is used by people with lengthy
experience, training, and often certification by a licensing
board – for example, lawyers, physicians, and counselors.
➢ Price Lining is the practice of offering the product line with
several items at specific price points.
➢ Leader Pricing (or loss-leader pricing) is a price tactic in
which a product is sold near or even below cost in the hope
that shoppers will buy other items once they are in the store.
➢ Bait Pricing is a price tactic that tries to get the consumer into
a store through false or misleading price advertising and then
uses high-pressure selling to persuade the consumer to buy
more expensive merchandise.
➢ Odd-Even Pricing (or psychological pricing) is a price
tactic that uses odd-numbered prices to denote bargains and
even-numbered prices to imply quality.
➢ Price Building is marketing two or more products in a single
package for a special price.

The Legality of Price Policies

1. Price Discrimination
It is the practice of charging different prices to different customers for the
same product.
2. Predatory Pricing
Practice of charging a very low price for a product with the intent of
driving competitors out of business or out of a market.
3. Price Fixing
It is an agreement between two or more firms on the price they will
charge for a product.
4. Unfair Trade Practices
It prohibits wholesalers and retailers from selling below cost.

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5. Price Discrimination
It is the practice of charging different prices to different customers for the
same product.
Promotion: An Element of Marketing Mix

The product offers benefit distribution, gives it place utility, price

points out the products value, promotion communicates these other factors to
potential buyers. Few goods or services, no matter how well developed, priced,
or distributed, can survive in the marketplace without effective promotion.

Promotion is communication by marketers that informs, persuades,

and reminds potential buyers of a product to influence an opinion or elicit a
response. Promotional strategy is a plan for the optional use of the elements
of promotion: advertising, personal selling, sales promotion, and public
relations.

Promotion strategy is related to the process of communication. As

humans give meanings to feelings, ideas, facts, attitudes, and emotions.

Communication is the process by which we exchange or share

meanings through a common set of symbols. When a firm creates a new
product, changes an existing one, or tries to increase sales of an existing good
or service, it must communicate its selling message to potential customers.
Marketers communicate information to the target market and various publics
about the firm and its product through its promotional programs.
Two Major Categories of Communication

1. Interpersonal Communication is direct, face-to-face communi-

cation between two or more people. A salesperson speaking directly to
with a client is an example of marketing communication that is
interpersonal.

2. Mass Communication refers to communicating to large audien-ces.

The marketing communication is directed to consumers as a whole,
usually through a mass medium, such as a television, radio, or a
newspaper.

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The Three Basic Tasks of Promotion

1. Informing
Informative promotion is more prevalent during the early
stages of the product life cycle.
o increasing new brand awareness
o informing the market of new product attributes
o suggesting new uses for a product
o correcting false impressions
o building a company image

2. Persuading
Persuasion is trying to motivate a consumer to buy a product.
Persuasive promotion is designed to stimulate a purchase or an
action. Persuasion is the main promotion goal when the product
enters the growth stage of its life cycle.
o building brand preference
o encouraging brand switching
o influencing customers to buy now
o changing customers’ perceptions of product attributes

3. Reminding
Reminder promotion is used to keep the product and brand
name in the public’s mind. This type of promotion prevails during
the maturity stage of a life cycle. It assumes that the target market
has already been persuaded of the goods or services merits. Its
purpose is simple to trigger a memory.

The Promotional Mix

Most promotional strategies use several ingredients which include advertising,

personal selling, sales promotion, and public relations – to reach the target
market. This combination in called promotional mix.

1. Advertising is impersonal, one-way mass communication paid for by

the sponsor. It can be transmitted by a different media, such as TV,
radio, newspapers, magazines, billboards, transit cards
(advertisements on buses and taxis, MRT, LRT). All the successful

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brands of consumer goods like Coca-Cola, Ivory Soap, and Colgate
were built by heavy advertising. Today, the millions of pesos used on
advertising are spent on maintaining brand awareness and market
share.
An advertising campaign usually have five phases:
▪ determining the advertising objectives
▪ setting the campaign budget
▪ determining the message to be transmitted to the target market
▪ selecting the message vehicle
▪ evaluating the campaign

2. Personal Selling is a planned, face-to-face presentation to one or more

prospective buyers for the purpose of making a sale. Personal selling
conducted over the phone is called telemarketing.
Advertising is prevalent in the promotional mix for consumer goods,
but personal selling is more prevalent for industrial products.

Advantages of Personal Selling

1. Personal selling can be used to provide a detailed explanation or

demonstration of the product. This is needed for complex or new
goods and services.
2. A sales person has the freedom to vary the message according to
the motivations and interests of each prospect. When objection
arises, he is there to provide explanation.
3. Personal selling can be directed only to qualified prospects. When
you offer product to customer it is expected that he is a prospective
buyer.
4. Advertising and sales promotion must often be purchased in fairly
large amount, but personal selling costs can be controlled by
adjusting the size of sales force (and resulting expenses) in one-
person increments.
5. More effective in closing the sale.

3. Sales promotion is an activity in which a short-term incentive is

offered to induce the purchase of a particular good or service.
Incentives include coupons, premiums, contests, and free samples.

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❖ Coupon is a certificate that entitles consumers to an
immediate price reduction when they buy the product.
❖ Premium is an extra item offered to the consumer usually in
exchange for some proof of purchase of the promotional
product. Examples: umbrellas, bags are given when you buy
cosmetics.
❖ Sampling allows the customer to try a product risk-free.
❖ A point-of-purchase display is a promotional display set up
at the retailers’ location to build traffic, advertise the product,
or induce impulse buying. Examples: ads on grocery carts and
bags, TV monitors at supermarket, shelf “talkers” (signs
attached to store shelves).

4. Public Relations is the marketing function that evaluates public

attitudes, identifies areas within the organization that the public may
be interested in, and executes a program of action to each public
understanding and acceptance. Like advertising and sales promotion,
a public relations is a vital link in a progressive company’s marketing
communications mix. Marketing managers plan strong public
relations campaigns that fit into the marketing plans and focuses on
targeted audiences. These campaigns strive to maintain a positive
image of the corporation in the eyes of the public.
PR tools used in communicating with the media
o Press relation: Placing net-worthy information in the
news media to attract attention to a person, good or
service.
o Product publicity: Publicizing specific products.
o Corporate communications: Creating internal and
external communications to promote understanding of the
firm or institution.
o Lobbying: Dealing with legislators and government
officials to promote or defeat legislation and regulations.
o Counselling: Advising management about public issues
and company positions and image.
Publicity is public information about a company, good, or
service appearing in the mass media as a news item. Public relations
and publicity prepare news releases and persuade media personnel to

109 Marketing Management

print or broadcast something about the firm’s production or
organization.

Place of Distribution: An Element of Marketing Mix

(Marketing Channel)

A marketing channel (channel of distribution) is a set of interdependent

organizations that east the transfer of ownership as products move from
producer to business user or consumer.

Different organizations participate in marketing channels. The intermediaries,

resellers, and middlemen are called channel members, while non-members
are advertising agencies and transportation firms. The channel members
negotiate, buy, sell, and facilitate the change of ownership between buyers
and sellers while non-members support the activities of the marketing
channel.

Wholesalers and retailers are intermediaries that take title to products

and resell them. It means they own the merchandise and control the terms of
sale – for example, the price and delivery date. Wholesalers are firms that sell
mainly to producers, sellers, governments, institutions, and retailers. On the
other hand, retailers are firms that sell mainly to consumers. Other
intermediaries such as brokers, manufacturers’ representatives, and agents do
not take title to the products and services they market but they facilitate the
exchange of ownership between sellers and buyers.

Basic Functions of Intermediaries

1. Transactional functions
▪ contacting buyers
▪ promoting products
▪ negotiating the sale
▪ taking on the risks associated with owning and keeping a
product inventory

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2. Logistical functions
▪ transporting and storing goods
▪ sorting out and accumulating, allocating, and assorting products
into homogenous or heterogeneous collections. For example,
grading agricultural products is a process of sorting out
▪ allocating is “breaking bulk”
▪ assorting function is performed by supermarkets or other
retailers

3. Facilitating functions
▪ research: gather information about other channel members
and consumers
▪ financing: extending credit and other financial services to
facilitate the flow of goods through the channel to the final
consumer

Factors Affecting Channel Choice

1. Market Factors

Among the most important market factors affecting the choice of

distribution channels are target customer considerations. Questions like
who are the potential customers? What do they buy? Where do they buy?
When do they buy? How do they buy? Imply that customers have
preferences regarding products, sellers, time, and credit that marketing
managers should be aware of. The choice of channel depends on whether
the producer is selling to consumers or to industrial customers.

Geographic location and size of the market are also important to channel
selection. In a concentrated market, direct selling through a direct sales
force is appropriate. A very large market requires more intermediaries. For
instance, Unilever has to reach millions of consumers with its many brands
of household goods. Wholesalers and retailers are needed for the
distribution of products.

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Competition is another criterion for choosing a channel. Entering a
channel where competition is fierce is difficult. Thousands of new products
are introduced into the marketplace, as a result, channels become crowded
and difficult to enter.

2. Product Factors

Products that are more complex and customized and have a high unit cost
tend to use shorter and more direct marketing channels. These types of
products sell better through a direct sales force. Examples, computers,
pharmaceuticals products, scientific instruments.

Products life cycle is also an important factor in choosing a marketing

channel. The choice of any channel may change over the life of the product.

Another factor is the perishability of the product. Perishable products

like meat, vegetable, fruits and milk have a relatively short life span.
Fragile products require a minimum amount of handling. Therefore, both
require fairly short marketing channels.

3. Producer Factors
Producers with large financial, managerial, and marketing resources are
better able to use channels that require fewer intermediaries. Compared to
producers with only one or two product lines, producers that sell several
products in a related area are able to choose channels that are more direct.

Types of Wholesaling Intermediaries

1. Merchant Wholesalers
A merchant wholesaler is an institution that buys goods from
manufacturers and resells them to business, government agencies, and
other wholesalers or retailers. As mentioned, all merchant wholesalers
take title to goods they sell. Most of them operate warehouses in
which they receive goods, store them, and later reship them.

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Categories of merchant wholesalers

➢ Full service merchant wholesalers assemble an assortment

of products, provide credit for clients, offer promotional help
and technical advice, maintain a sales force to contact
customers, and deliver merchandise and may offer research,
planning, installation and repair. They also offer fast delivery
in emergencies.

➢ General merchandise wholesalers stock a full assortment of

products within a product line. For example, a hardware
wholesaler will stock a full array of tools, paints, ropes,
chains. These wholesalers are common in the drug, grocery,
and clothing markets.

➢ Specialty merchandise wholesalers offer part of a product

line to target customers but in greater depth than general
merchandise wholesalers offer. These wholesalers have
excellent product knowledge in their specialized line of
merchandise.

➢ Industrial distributors are full-service merchant wholesalers

that sell to manufacturers rather than to retailers. They stock
products, such as: hardware products, office supplies,
equipment used in the operation of the business, machinery
used in making raw materials and semi-finished goods into
finished products (grinders, dryers)

➢ Rack jobbers perform the merchant wholesalers’ functions

and some usually carried out by the retailer, namely stocking
non-food merchandise on racks or shelves. They serve drug,
grocery, and general merchandise retailers. Rack jobbers
typically sell on consignment.

➢ Truck jobbers perform the functions of salesperson and

delivery person. They carry limited line of semi-perishable
merchandise, such as milk, bread, snack foods, beer, and
candy. Truck jobbers sell for cash. Their customers are

113 Marketing Management

supermarkets, restaurants, hotels.

➢ Mail-order wholesalers sell goods by catalog to businesses,

institutions, government and other organization.

Channels for Consumer Products

This illustration shows the four ways manufacturers can route products to
consumers.

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Channels for Industrial Products

2. Agents and Brokers

The function of a broker is to bring buyers and sellers together.

Brokers represent the buyer or seller in finding another party to
complete the transaction. A broker locates a potential buyer or seller
and then lets the two parties resolve matters of price, quantity, delivery
date, and specifications. In turn, the broker receives a fee from either
seller or buyer engaging their services.

Categories of Agents and Brokers

➢ Manufacturers’ agent represents one manufacturer or several

manufacturers of complementary lines and follows the terms
set by the manufacturer. Agents are paid on commission.
➢ Selling agent is an intermediary that uses mostly by small
firms on a commission basis and contracted to sell the
manufacturer’s entire output. They also work on commission.

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3. Manufacturers’ Branches and Offices

Large manufacturers owned and controlled wholesale

institution that carries inventory. The distinction between
manufacturers’ sales offices and sales branches is that branches carry
inventory and offices do not.

Market Segmentation

There are several products being marketed but few of them can satisfy
all customers. The goal of marketing concept is to put the buyer at the center
of marketing effort, thereby different products must be offered to be able to
satisfy different groups of buyer.

Marketers use the technique of segmentation – the identification of

different groups of potential buyers that share similar, definable needs and
behaviors. Potential buyers can be segmented on the basis of geographic
variables, demographic variables, psychographic variables or other criteria that
benefit sought and usage rate.

Marketers are aware that different customers went different benefits

from the goods and services that they buy, so they create different brands,
adjust their services, and vary their promotional messages to appeal to target
groups. Furthermore, marketers intentionally position their products for
comparison with those of competitors. So every time consumer picks up her
favorite product, for example, astringent, she would choose her brand over
others on the shelf because of its price and supposed success in exfoliating the
skin.

What is market segmentation?

The word market means different things to different people. Everybody

is familiar with terms like supermarket, stock market, labor market, flea
market. All these types of markets share several characteristics, like they are
composed of people (consumer market), or organizations (business markets),
they have several wants, and they have the ability to buy the products they
seek, and they are willing to spend to get the devised products.

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Within a market, a market segment is subgroups of people or
organizations sharing one or more characteristics that cause them to have
similar product needs. Every person or organization is unique, making each a
market segment. The entire consumer market is one large market segment and
the business market is another large segment.

Market segmentation is a process of dividing a market into meaningful,

relatively similar, and identifiable segments or groups. The purpose of market
segmentation is to enable the marketer to tailor marketing mixes to meet the
needs of one or more specific segments. For instance, marketers of Extraderm
astringent have segmented the total market into segments, such as age groups
(teenagers and over 30 years old), groups with need for different levels of skin
exfoliation (extra melapeal with tretinoin and melawhite, extradermlite for
mild exfoliation with phytoplenolin, extraderm plus with tretinoin and
hydroquinone-depigmenting agents).

Market segmentation is a response to changing market needs. Through

this process, markets are able to sense, analyze, and respond quickly to the
changing tastes if people within a target market. When Filipinos became more
health-conscious, companies of beverages quickly come up with new diet
colas, natural fruit juices, and low fat milk products.

Bases for Segmenting Consumer Market

1. Geographic segmentation refers to segmenting markets be region of

the country or world, market size, market density or climate.
a) Climate is used for geographic segmentation because of its
impact on residents’ needs and purchasing behavior. Snow
blowers, fur coats, air-conditioning and heating systems are
products with varying appeal, depending on climate.
b) Market density means the number of people within a unit of
land.

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c) Region
• finding new ways to generate sales
• assessing which brands sell best in that region
• introducing new regional brands intended to appeal
to local preferences.

2. Demographic segmentation is a method of dividing markets based

on demographic variables such as age, gender, income, family cycle.
a) Age segmentation
Different age groups influence spending on various products,
such as food, beverages, toys, clothing, housing,
transportation, entertainment, education, personal insurance,
and pensions and health care.
b) Gender segmentation
Products like clothing, cosmetics, personal care items,
magazines, jewelry, and footwear commonly segment markets
by gender.
c) Income segmentation
Income level influences consumers’ wants and determines
their buying power. Many markets are segmented by income,
including housing, clothing, automobiles and alcoholic
beverages.
d) Family life cycle segmentation
It is a series of stages determined by a combination of age,
marital status, with or without children. The consumption
patterns of these groups depend on families’ needs, incomes,
and resources.

3. Psychographic segmentation
It is a market segmentation by personality, motives, lifestyle, and
geodemographies.
a) Personality
Personality characteristics reflect a person’s traits, attitudes,
and habits. For example, beers for “machomen”, softdrink for
“cool” young people.

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b) Motives
Marketers of baby products and life insurance appeal to
consumers’ emotional motives – namely, to care for their
loved ones. Using appeals like economy, reliability, and
dependability on product advertisements target customers with
rational motives.

c) Lifestyles
This segmentation divides people into groups according to the
way they spend their time, the importance of the things around
them, their beliefs, and socio-economic characteristics like
income, and education. For example, a marketer may conduct
a research on the “eating lifestyles” of the firm’s market
segment with different socio-economic characteristics.

d) Geodemographics
It is a method of dividing markets based on neighborhood
lifestyle categories. It combines geographic, demographic, and
lifestyle segmentation. Geodemographic segmentation helps
marketers practice micro marketing. Micromarketing is
developing marketing programs tailored to prospective buyers
who live in small geographic regions and who have very
specific lifestyle and demographic characteristics.

4. Benefit segmentation
Benefit segmentation is the process of grouping customers into
market segments based on the benefits they seek from the product.
Benefit segment groups potential customers on the basis of their
needs or wants rather than some other characteristic such as age or
gender. For example, the snack food market can be grouped into six
(6) benefit segment, namely: nutritional snacks, weight watchers,
guilty snackers, party snackers, indiscriminate snackers, and
economical snackers.

5. Usage rate segmentation

Usage rate segmentation divides a market by the amount of product
bought or consumed. The market segments are non-users, former

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users, potential users, first-time users, and heavy users. Segmenting
by usage rate enables marketers to focus their efforts on heavy users
or to develop multiple marketing mixes aimed at different segments.

Bases for Segmenting Consumer Market

1. Macro segmentation
Macro segmentation is a method of dividing business markets based
on such general characteristics as geographic location, type of
organization, customer size, and product use.
2. Micro segmentation
Micro segmentation is the process of dividing business markets into
segments based on the characteristic of decision-making units within
a macrosegment.

Criteria for Successful Segmentation

Marketers segment markets for three important reasons: first, it enables

them to identify groups of customers with similar needs and analyze the
characteristics and buying behavior of these groups. Second, it provides them
with information to help them design marketing mixes that matched with the
characteristics and desires of one or more segments. Third, segmentation is
consistent with the marketing concept: satisfying customer needs and wants
while meeting the organization’s objectives.

Basic criteria of segmentation scheme:

1. Substantiality – is a segment, must be large enough to warrant

developing and maintaining a special marketing mix.
2. Identifiability and measurability – segments must be identifiable and
their size measurable. Segments that provide concrete measures of
segment size are: population within geographic boundaries, the number
of people in various age categories, and other social and demographic
characteristics.
3. Accessibility – the marketer must be able to reach members of targeted
segments with customized marketing mixes. For example, the senior

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citizens are hard to reach because of hearing disabilities, or some are
illiterate. People who own piggery business will be reachable by
marketers of Purina if they watch the same television shows, read the
same newspapers, and shop in supermarkets. The main point here is
that marketers should have a satisfactory means of reaching any
desirable market segment to enable them to identify, describe, and
measure the segment.
4. Responsiveness – a market is a valid segment if it responds to the same
marketing mix. If buyers in a segment respond differently to a
marketing mix, there is a need to change the segmentation for Colgate
toothpaste features children and parents who want good and healthy
teeth for them, Close up commercials promise sex appeal. Obviously,
these two market segments of toothpaste respond in different watts.

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REVIEW EXERCISES

Name: ______________________________ Date: __________

Supply the answers/Fill in the blanks in the following:

__________1.A stage of the product life cycle which represents the full-scale
of a new product into the marketplace.
__________2. It is a name, term, symbol, design, or combination thereof that
identifies a seller’s products and differentiate them from competitors’
products.
__________3. Containers used for protecting and promoting a product.
__________4.A stage in the product development process that eliminates
ideas in consistent with the organization’s new product strategy or
inappropriate for some other reason.
__________5. It is a process by which the adoption of an innovation spreads.
__________6.Group of consumers to adopt a new idea or product,
characterized by ties or tradition.
__________7.A form of label which focuses on a promotional theme or logo
rather than on consumer information
__________8. It is anything that is capable of satisfying a want.
__________9. A stage of the product life cycle in which sales begin to level
off and the market approaches saturation.
__________10. It is a legal term indicating the owner’s exclusive right to use
a brand or part of a brand.
__________11. It is defined as the initial price for a product and the intended
direction for price movements over the product life cycle.
__________12.Pricing strategy which means charging a relatively low price
for a product as a way to reach the mass market.
__________13. It is a price reduction offered to a consumer, an industrial
user, in return for prompt payment of a bill.
__________14. A price tactic in which a product is sold below or near cost in
the hope that buyers will buy other items once they are in the store.
__________15. It is a practice of charging different prices to different
customer for the same product.
__________16. It is a form of discount where a cash refund is given for

122 Marketing Management

purchase of a product during a specific period.
__________17. It is the money exchange for a good or service.
__________18. In pricing, it is also called “market-plus” approach.
__________19. It is a price tactic that incorporates the freight cost from a
given point, regardless of the city from which the goods are shipped.
__________20. It is marketing two or more products in a single package for
a special price.

__________21. It is a promotional display set up at the retailer’s location to

build traffic, advertise the product or induce impulse buying.
__________22. It is a certificate that entitles consumers to an immediate
price reduction when they buy the product.
__________23. It is an activity in which a short-term incentive is offered to
induce the purchase of a particular good or service.
__________24. It is a task of promotion which is designed to stimulate a
purchase or an action.
__________25. It is a communication that informs, persuades, and reminds
potential buyers of a product to influence an opinion or elicit a response.
__________26. Process by which we exchange or share meanings through a
common set of symbols.
__________27. It is a direct, face-to-face communication between two or
more people.
__________28. It is impersonal, one-way mass communication paid for by
the sponsor.
__________29. It is a planned face-to-face presentation to one or more
prospective buyers for the purpose of making a sale.
__________30. It is a form of personal selling conducted over the phone.

__________31. It is an intermediary used mostly by small firms on a

commission basis and contacted to sell manufacturer’s entire output.
__________32. Place orders for its customers with the manufacturer but does
not physically handle the products it sells.
__________33. They are full-service merchant wholesalers that sell to
manufacturers rather than to retailers.
__________34. It is an institution that buys goods from manufacturers and
resells them to business, government agencies, and other wholesalers or

123 Marketing Management

retailers.
__________35. It is a set of interdependent organizations that ease the
transfer of ownership as products move from producer to business user or
consumer.
_________ 36.Firms that sell mainly to consumer.
__________37.A merchant wholesaler that performs the functions of
wholesalers and retailers, such as stocking non-food merchandise on racks or
shelves.
__________38. They are firms that sell mainly to producers, resellers,
governments, institutions, and retailers.
__________39.Represents the buyer or seller in finding another party to
complete the transaction.
__________40. .A wholesaling intermediary that have expertise in their
specialized line of merchandise.

__________41. It refers to segmenting markets by region of the country or

world, market size, market density, or climate.
__________42. It is a subgroup of people or organizations sharing one or
more characteristics that case them to have similar product needs.
__________43. It is a process of grouping customers into market segment
based on benefits they seek from the product.
__________44. It is a method of dividing markets based on neighborhood
lifestyle categories.
__________45. It is a process of dividing markets into meaningful, relatively
similar, and identifiable segments or groups.
__________46. It is a method of dividing markets based on demographic
variables such as age, gender, income, family cycle.

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Chapter 5

Managing the Marketing Effort

(The Marketing Process)
THE MARKETING PROCESS

Performance
Standard The marketing process is defined as a process of
doing so it can be modelled in a sequence of steps: the
Create a new
product or situation is analyzed to identify opportunities, the strategy
service design is formulated for a value proposition, tactical decisions are
and pricing, and made, the plan is implemented and the results are
promotion and monitored.7
distribution
strategies. Content Standard
The necessity of a marketing plan in business.

7
Ahmed,Gulzar. (2014). Marketing Process Definition & Steps.
Retrieved September 23, 2017, from http://www.studylecturenotes.com/mba-
marketing/marketing-process-definition-steps

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Four Basic Steps in Marketing Process

1. Analyzing marketing opportunities

2. Selecting target markets
3. Developing marketing Mix
4. Managing the marketing effort

MANAGING THE MARKETING EFFORT (THE MARKETING PROCESS)

a. Market Analysis – SWOT Analysis

b. Marketing Planning
c. Marketing Implementation
d. Marketing Control
The marketing process involves the analysis of the marketing
opportunities, target market, developing marketing mix, and managing the
marketing effort.

Analyzing marketing Selecting target

opportunities Markets

Managing the Developing

Marketing effort Marketing Mix

Figure 5.1 An illustration of the four steps in the marketing process

Analyzing Marketing Opportunities

A marketing opportunity analysis takes into consideration the financial
capabilities, available technology and your competitive readiness to take
action. Its conclusions allow you to identify new target markets, discover
unmet customer needs, and realize your competitive advantages.

A marketing opportunity analysis takes into consideration the financial

capabilities, available technology and your competitive readiness to take
action. Its conclusions allow you to identify new target markets, discover
unmet customer needs, and realize your competitive advantages.

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Instead of guessing what it is your customers are after, it’s essential you do
your analysis properly. All good businesses meet their customers’ needs,
which is especially in today’s environment where the level of competition is
through the roof.

Market Opportunity8 Analysis Steps

In its simplest form, to properly perform a market opportunity analysis, there

are five steps to consider. These five steps can be of great help to you when
you do your market opportunity analysis:

1. Identify what’s currently happening in the business environment. In

this you need to look at the economic conditions (growth, stable or decline) as
well as any trends or social changes that could have an impact on the business.
Delve into both the legal and regulatory situations, as these can often change
and you need to be prepared for any future expected changes as well. Research
the latest technology and state of the art developments, and take into account
the natural environment, for you to know of any vulnerabilities or limitations
on resources that could hinder your growth.

2. Define the industry and determine the outlook. In here you need to
state exactly the industry that you are operating within, and make forecasts on
the size of the market. Look back over the last 5 years, and project how you
believe it will grow over the next 12 months, 3 years and 5 years. Look to your
competition and discover the marketing practices that are being utilized, and
see if you can see any major trends or shifts within your industry. There could
be major implications for potential opportunities, as you need to ensure you’re
moving in the same direction as the market.

3. Dive into the details of your competitors. You need to know what
businesses you are competing with, and know their products inside and out.
Go through their product mix, and compare this with the products you are

8Bennett, Travis. (2014). Market Opportunity Analysis: Find What Customers

Really Want. Retrieved September 23, 2017, from
https://blog.udemy.com › Students › Business

127 Marketing Management

offering. Make sure you’re objective in your approach, and also identify the
relative strengths and weaknesses of the products from your customers point
of view. Look at how your competition is reaching the market, the channels
they’re using to both distribute and market their products, and the level of
service that’s being offered. If you have details on the market share of other
businesses include it here, and sum it all up in a couple of short sentences that
outline the implications of this section regarding the opportunities in the
market.

4. Describe your target market. You need to build a profile of your ideal
customer, so that you can adequately focus your sales and marketing efforts
and reach your customers. You simply need to look at the needs of your
customers

5. Create your projections. Use a variety of techniques that build on all

of the information in your business plan to set a forecast of your sales. This
includes best and worst case scenario analysis, any intuition or “gut-feelings”
you have about new markets, and compare any results you have seen to date.
The final recommendation in a market opportunity analysis is a simple answer
to this question. Is the project a go? Or a no go?

Selecting the Target Market

Target marketing contrasts with mass marketing, which offers a single product
to the entire market. The target market is the actual customer group, or
audience, in which your business will attempt to sell its products and services.
Although it is impossible to capture every customer within your target market,
gearing your services toward the identified market will make sales much easier

Two important factors to consider when selecting a target market segment are
the attractiveness of the segment and the fit between the segment and the firm's
objectives, resources, and capabilities.

To succeed in today's competitive marketplace, companies must be customer

centered. They must win customers from competitors and keep them by
delivering greater value. Sound marketing requires a careful and deliberate
analysis of consumers.

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Since companies cannot satisfy all consumers in a given market, they must
divide up the total market (market segmentation), choose the best segments
(market targeting), and design strategies for profitably serving chosen
segments better than the competition (market positioning).

Defining your target market

Identify your target market. And here are some tips to help you define your
target market.

1. Look at your current customer base.

2. Check out your competition.
3. Analyze your product/service.
4. Choose specific demographics to target.
5. Consider the psychographics of your target.
6. Evaluate your decision.
7. Additional resources.

Selecting Your Target Market

You can also try some invaluable guides on how to select your target market.
These are as follow:

(1) Consider the personal characteristics of your potential customers

and determine how the customers lifestyle affects a need for your products.
Think about the customers interests, values and personality traits. Consider
how and when your customer will use your services, as well as the features
that appeal to the customer.

(2) Look at your competitions target market. Analyze the needs that
your competition fills for their target market. Identify the areas of the market
that have been overlooked by the competition. Seek to fill the void within the
market, rather than targeting the same market as your competition.

(3) Take a look at your current customer base, if your business is

already operating. Identify the products or services that interest your current
customers and determine what benefits these customers get from those
services.

(4) Compile all of your research findings. Use your findings to

determine which types of customers have the most need for your services.

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Keep the market well-balanced so that your target market is not too big or too
small.

Since companies cannot satisfy all consumers in a given market,

marketers adopt Target Marketing. Yjodis one of the most important
considerations in conducting Market Opportunity Analysis

B. MARKETING PLANNING
Marketing Planning is the process of developing marketing plan incorporating
overall marketing objectives, strategies, and programs of actions designed to
achieve these objectives." Marketing Planning involves setting objectives and
targets, and communicating these targets to people responsible to achieve
them. It analyzes one or more potentially interesting marketplaces in order to
determine how a business can optimally compete in them. The market planning
process typically results in a marketing strategy that can be used to enhance
sales for the business producing it.

Stages of Marketing Planning

The 10 stages of marketing planning generally used by leading companies

worldwide are discussed in detail in this section for your greater understanding
of marketing planning that you can adopt when you are also in business
yourself or working with some business firms in the future.

(1) Mission Statement. All businesses should be able to say concisely

what their main reason for existing is, to define their purpose. This should be
accessible to all of the company's stakeholders (that is people who have an

130 Marketing Management

interest in the organization), indeed today many companies display a mission
statement in their Head Office.

(2) Corporate objectives. The marketing department is a part of the

company and so must 'fit in' with what the overall company is doing. As such
it needs to appreciate what the corporate objectives are and ensure its own
actions and decisions support the overall objectives.

Mission statements and corporate objectives occur at an organizational

level (such as the Board of Directors will usually determine them). The rest of
the marketing planning process occurs within the marketing department. All
of the actions the marketing department makes must be justified by referring
to the companies' stated mission and corporate objectives.

(3) Marketing Audit. To audit something is in effect to take stock. If

for example you ran retail shop and audited it you would count the different
types of products you buy, sell and still have left on the shelves. So a marketing
audit is a way of checking all aspects of the business directly related to the
marketing department. It allows you to answer the question 'Where are we
now?'

(4) SWOT. This for: Strengths, Weaknesses, Opportunities, and

Threats It is a way of organizing the material and issues gathered in the
marketing audit under four separate specific categories. To carry out a
marketing audit well the findings need to be carefully considered by
determining whether they are a current strength, weakness or potential
opportunity, threat.

Strengths and Weaknesses relate to things inside the company (internal),

things that can be directly controlled by the organisation. For example a leisure
centre might consider its large swimming pool to be a strength whilst a zoo
might think its lack of exotic animals is a weakness.

Opportunities and Threats relate to things outside the company (external),

things the company does not control directly. For example a Pub might
consider the soccer world cup to be an opportunity as they can show the games
on a big screen and so attract customers.

(5) Marketing Objectives and strategy. For marketing departments the

objectives and strategies relate to the companies products/services and brands

131 Marketing Management

and to the markets you currently/ propose to operate in. By markets we mean
the groups of consumers you intend to sell to and attract as your customers. So
objectives are about deciding what you are offering (selling) and to whom.
Strategies are about how you are going to achieve these things.

(6) Marketing Mix plan. To ensure the marketing planning process is

carried out properly it is important that decisions about the mix are made only
after the earlier stages in the process have been carried out. It is easy to fall
into the trap of starting with the mix because it is very familiar to marketing
staff. The danger in starting your planning at this point is that you will not
consider the broader, bigger issues and are likely to lack innovative ideas
because you focus too much on what you are already doing.

(7) Budget. Setting objectives and choosing a strategy means you are going
to develop a plan of action. This will involve using resources. Marketing
activities can be very expensive, advertising costs, for example, go up far faster
than inflation each year.

The budget is the process of documenting the expected costs of the

proposed marketing plan. In an ideal situation a budget would be developed
from a blank piece of paper, in other words you decide what needs to be done
and then cost each part (this is called a zero-base approach). In reality budgets
are often incremental, that is, they are based on what was spent in the previous
year. Other ways of setting a budget include; percentage of sales, comparative
(such as to competitors), all you can afford and task method.

(8) Implementation.9This is the point that a marketing team is ready to

actually start putting their plans into action. This may involve spending money
on advertising, launching new products, interacting with potential new
customers, opening new retail outlets etc.

Most authors writing about marketing suggest it is important to ensure the

people responsible for carrying out the plans are also involved in the earlier
stages of the marketing planning process. This way they understand why things
are to be done in certain ways and the logic of decisions made. Early

9
Click, Laura. (2015). 8 Important Steps to Successfully Implement Your Marketing Plan.
Retrieved September 25, 2017, from https://flybluekite.com/how-to-implement-your-
marketing-plan/

132 Marketing Management

involvement in this process might take the form of asking for their suggestions
and opinions and holding regular update meetings with them to keep them
informed.

The best marketing plans should also have some flexibility built into them
(Blythe 2001). If they are to rigid, or to strict they will not allow those carrying
them out to respond to unexpected events and changes in the external
environment in which the organization operates.

For example the marketing plan might say we will launch a new product range
in October but you might hear in June that a major competitor intends to launch
something very similar to your planned new product in September. What do
you do? Your plan should certainly allow for the possibility of a change in that
plan.

(9) Evaluation. Marketers should be careful not to believe the evaluation

part of the process takes place only at the end of the activities in question. If
its left that late to check how things went, you risk missing lots of opportunities
to modify and adapt the plan and so increase your chances of success.

(10) Contingency. If we could be absolutely sure about what the future

holds and what the consequences of our decisions and actions were we would
not need to be prepared for the unexpected and unintended consequences. But
in reality much of what marketing deals with is full of uncertainty and risk.
The best plans include contingencies and so mean the organization is, for
example, at least prepared if there is an emergency.

Marketing Planning involves setting objectives and targets, and

communicating these targets to people responsible to achieve them. The
internet or online communication plays a vital and major role in reaching

133 Marketing Management

more potential customers almost all products and services today in the
Philippines.

MARKETING IMPLEMENTATION

Marketing implementation is the process of executing the marketing strategy

by creating specific actions that will ensure that the marketing objectives are
achieved.

How to Implement Your Marketing Plan

1. Set the right expectation.

2. Build the team and secure resources.
4. Communicate the plan.
5. Build out timeline and tasks.
6. Set up a dashboard for tracking success.
7. Monitor and check in regularly.
8. Be willing to adapt.
9. Communicate results and celebrate success!

Marketing implementation requires that marketers follow the

marketing plan developed by the company.

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MARKETING CONTROL

Marketing control10 is the process of monitoring the proposed plans as they

proceed and adjusting where necessary. Controlling may be also defined as the
process of analyzing actual operations and seeing that actual performance is
guided towards expected performance. It involves comparing operating results
with plans and taking corrective action when results deviate from plans. It is a
mechanism by which someone or something is guided to follow the
predetermined course. As a plan is put into operation, it becomes necessary to
check results to find out whether the work is proceeding along the right lines.
In case of any deviations, necessary corrective action is taken to ensure that in
future the work proceeds in the desired manner.

Meaning of Control
On the basis of types of criteria – sales, profits, efficiency, and strategic
considerations – used for measuring and comparing results, there are four types
or tools of marketing control. In every type of control, the same procedure is
applied, i.e., setting standards, and measuring actual performance.11

The marketing manager will then compare actual progress against the
standards. Corrective action (if any) is then taken. If corrective action is taken,
an investigation will also need to be undertaken to establish precisely why the
difference occurred.

10
Ghose, Shreyasi. (n.d.).Marketing Control: Meaning, Nature, Significance and Other
Details.Retrieved September 25, 2017, from
http://www.yourarticlelibrary.com/marketing/marketing-control-meaning-nature-
significance-and-other-details/50971

11
Jaideep, S. (n.d.).Marketing Control: Top 4 Methods of Marketing Control. Retrieved
September 25, 2017, from http://www.yourarticlelibrary.com/marketing/marketing-
control-top-4-methods-of-marketing-control/48751

135 Marketing Management

Control involves measurement, evaluation, and monitoring. Resources
are scarce and costly so it is important to control marketing plans.
Control involves setting standards and evaluation of results as shown on
the figure above.

1. Annual Plan Control. In this method, annul plans are prepared for
various activities. Each plan includes setting objectives (expected
results or standards), allocating resources, defining time limit, and
formulating rules, policies and procedures. Annual plan control relates
to sales. Periodically (mostly annually) the actual results are measured
and compared with standards to judge whether annual plans are being
(or have been) achieved.
Measures or Tools of
Efficiency Control

1. Sales Force 2. Advertising

Efficiency Control Efficiency Control
Control

3. Sales Promotion 4. Distribution

Efficiency Control Efficiency Control

5. Marketing Research
Efficiency Control

Figure 5.3 Four Types of Marketing Control according to Philip Kotler

136 Marketing Management

Measures (Evaluation Tools) of Annual Plan Control. The following five
measures are used in annual plan control:

(1) Analysis of Different Sales: Analysis of different sales contains

measuring and evaluating different sales (total sales, territory- wise sales,
distribution channel-wise, product-wise sales, customer-wise sales, etc.) with
annual sales goals. Targets are set for different types of sales and actual sales
of different categories are compared to find out how far company can achieve
its sales goals.

(2) Analysis of Market Share: Here, market share is used as base for
measuring, comparing, and correcting results. Market share is a proportion of
company’s sales in the total sales of the industry. It helps to know how well
the company is performing relative to its close competitors. Thus, the
performance is assessed against expected market share and competitors’
market share.

(3) Analysis of Market Expenses-to-Sales: This type of control

checks marketing expenses. It ensures that the firm is the overspending to
achieve its annual sales goals. Different marketing expenses are watched in
relations to sales.

(4)Financial Analysis: Financial control consists of evaluating sales

and sales-to-expense ratios in relation to overall financial framework. It means
net profits, net sales, assets, and expenses are studied to find out rate return on
total assets, and rate of return on net worth. Financial analysis determines
firm’s capacity of earnings, profits, or income.

(5)Analysis of Customer and Stakeholder Attitudes: The measures

of annual plan control discussed in former part are financial and quantitative
in nature. Qualitative measures are more critical because they give early
warning about what is going to happen on sales as well as profits.

(6) Measuring Customers’ Attitudes: Here, a firm tries to measure

attitudes of customers by using various methods like, complaints and
suggestions, customer panels, customer survey, etc. It provides details about
new customers created, existing customers lost, dissatisfied customers, relative
product quality, relative service quality, target market awareness, target market
preference, and other valuable information.

137 Marketing Management

(7) Measuring Stakeholders’ Attitudes: It consists of measuring or
recording stakeholders’ attitudes. It shows the pattern of stakeholders’
preference, attitudes, and overall response toward company and its offers.
Stakeholders include suppliers, dealers, employees, stockholders, service
providers, etc. They have critical interest and impact on company’s
performance. Without their cooperation and contribution, a company cannot
realize its goals.

2. Profitability Control. In this method, the base of exercising control over

marketing activities is the profitability. Certain profitability (and expenses)
related standards are set and compared with actual profitability results to find
out how far company is achieving profits. Profitability control calls for
measuring profitability of various products, channels, territories, customer
groups, order size, etc. It provides necessary information to management to
determine whether products, channels, or territories should be expanded,
reduced, or eliminated.

Process of Marketing Profitability Analysis: It is a systematic and logical

process is used for analysis of profitability. It involves:

(1) Identifying Functional Expenses: It consists of determining

expenses to be incurred for the marketing activities like salaries,
rents, advertising, selling and distribution, packing and delivery,
billing and collection, etc.
(2) Assigning Function Expenses to Marketing Entities: Simply,
expenses of particular head (for example, salary or advertising) are
associated with different entities like products, channels,
territories or customers groups.

(3) Preparing Profits and Loss Statement: A profit and loss

statement is prepared for each type of products, channels, territories, etc., to
evaluate their relative performance. Based on relative performance in form of
profitability, management can decide on products, channels or territories to be
expanded, reduced or eliminated.

(4) Taking Action: On the basis of the profit and loss statement,
necessary actions can be directed.Actions include one or more of the
following: Expanding product(s); Reducing product(s); Eliminating; pro-
duct(s); Reducing any of the expenses; and Increasing sales, etc.

138 Marketing Management

3. Efficiency Control. This control, particularly, concerns with measuring
spending efficiency. While profitability control reveals the relative (in relation
to different entities like products, territories, channels, etc.) profits a company
is earning, the efficiency control shows the ways to improve efficiency of
various marketing entities like sales force, advertising, distribution, sales
promotion, and so forth.

Efficiency control can improve efficiency of marketing department in two

ways – one is, improving ability of various marketing activities to contribute
more in reaching the goals, and the second is, reducing expenses or wastage.

Types of Efficiency Control

Main types of efficiency control involve controlling sales force efficiency,

advertising efficiency, sales promotion efficiency, distribution efficiency, and
marketing research efficiency.

a) Sales Force Efficiency Control: To measure efficiency of sale force

(salesmen), certain key indicators/criteria are developed. A manager
has to make a lot of calculations and paperwork.
b) Advertising Efficiency Control: Advertising is the most expensive
among all the promotional tools. Major part of promotion budget is
consumed by advertising alone. So, it is extremely necessary to find
out efficiency level of advertising efforts. A company sets advertising
goals (standards) and compared actual contribution of advertising to
decide how far advertising has been capable to fulfill firm’s
expectations. Advertising efficiency control mainly involves
measuring cost efficiency or contribution efficiency.
c) Sales Promotion Efficiency Control: This control is exercised by sale
manager. Sometimes, sales promotion manager is also appointed to
deal with the issue. Sales promotion efficiency measures the impact of
sales promotion efforts on sales, profits, competitiveness, and
consumer satisfaction.
d) Distribution Efficiency control: In an average, distribution costs
account for 20 to 30 per cent of selling price. By a suitable distribution
network, company can improve its profitability on one end and
consumer satisfaction on the other end. It is necessary to review or
assess the entire distribution system periodically. Distribution
efficiency control measures how far company’s distribution system is
efficient to achieve marketing goals.

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e) e) Marketing Research Efficiency Control: Marketing research is
process of gathering, analyzing, and interpreting data relating to any
marketing problem. Due to dynamic nature of marketing environment,
a company needs data on various relevant variables time to time.
Marketing research is an expensive option. It is imperative for a firm
to know how far marketing research efforts and costs are instrumental
in achieving marketing goals. It provides necessary details to improve
research policies and practices.

4. Strategic control. Strategic Control implies a critical review of overall

marketing effectiveness in relation to broad and long-term objectives and
firm’s response to marketing environment. It deals with assessing firm’s ability
to define and achieve marketing goals, and response pattern to environment.
Normally, strategic control verifies company’s long-term performance with
reference to the close competitors. The entire marketing system is reviewed to
judge firm’s overall strengths and weaknesses. It answers the question: How
far is the firm capable to exploit emerging marketing opportunities and face
challenges and threats?

Methods or Tools of Strategic Control

As shown in Figure 5.3, four tools are used for strategic control – the marketing
effectiveness review, the marketing audit, the marketing excellence review,
and the ethical and social responsibility review. Let’s discuss each of them.
1. Marketing
Effectiveness
Review

3. Marketing Tools of 2. The

Excellence Strategic Marketing
Review Control Audit

4. The Ethical
and Social
Responsibility
Review
Figure 5.4 Tools of Strategic Control

140 Marketing Management

1. The Marketing Effectiveness Review: It involves a review of
overall marketing performance. It helps finding effectiveness of several
business plans in term of sales growth, market share, and profitability.
Attempts are made to detect causes for good-performing marketing department
and poor-performing department.

Common criteria: Some criteria are used to review marketing effectiveness.

They include:

(a) Company’s Customer Philosophy: It shows company’s app-roach

toward customers.
(b) Integrated Marketing Efforts: It shows the way company integrates
efforts of all divisions and departments for achieving marketing goals.
(c) Marketing Information: It studies company’s policies and practices
to collect, use, and disseminate critical information on a regular basis.
(d) Company’s Strategic Orientation: It shows company’s broad and
long-term plans for survival and growth. It also indicates firm’s long-
term plans for profits, sales, and expansion.
(e) Operational Efficiency: It shows how efficiently a company
managing its current operations.
(f) Public Relations Practices: It shows company’s policies and
practices to establish, maintain, and improve relations with various
publics, which have direct interest in the company’s operations, and
whose cooperation seems critical in achieving marketing goals. Here,
we have considered only six criteria. As per need, more criteria can
be developed and used for the purpose.

2. The Marketing Audit: Another alternative tool for critical review of

overall marketing performance is the marketing audit. Audit means to
examine systematically. It is systematic examination/investigation of
all critical aspects of marketing department.

Philip Kotler12 defines it as “A marketing audit is a comprehensive, syste-

matic, independent, and periodical examination of a company’s marketing
environment, objectives, strategies, and activities with a view to determine

12Kotler, Philip T. and Armstrong, Gary.(2014). Principles of Marketing, 15th Edition. New York: Peon. ars

141 Marketing Management

problem areas and opportunities, and recommending a plan of action to
improve the company’s marketing performance.”

Components of Marketing Audit: The marketing audit examines six major

components of company’s marketing operations, such as:

a. Marketing Environment Audit: It examines impacts of micro and

macro factors of marketing environment. Macro marketing environ-ment
consists of demographic, economic, environmental (ecological),
technological, political and cultural factors. Micro marketing environment
includes market segments, customers, competitors, dealers, suppliers,
facilitators, and general publics.

b. Marketing Strategy Audit: It examines company’s business

mission, marketing goals and objectives, resources capacity, and mar-keting
strategies.

c. Marketing Organization Audit: It examines suitability of

marketing organization (structures) to implement marketing operations
effectively. It includes level, relations, authority-responsibility, commu-
nication, facilities, organization manual, etc.

d. Marketing System Audit: It examines major systems like

marketing information and research system, marketing planning system,
marketing control system, new product development system, etc.

e. Marketing Productivity Audit: It examines company’s

profitability for different products, territories, and channels. It also examines
cost-effectiveness for various operations.

f. Marketing Function Audit: It examines marketing mix elements

such as product, price, promotion (advertising, sales promotion, personal
selling-sales force, publicity, and public relations), and distribu-tion. For each
of the components, appropriate auditing questions are designed to examine
how effectively the company is performing. All relevant respondents like
customers, suppliers, managers, dealers, etc., are interviewed using these
questions.

Finally, the auditor prepares marketing audit report. The audit report contains
individual and joint evaluation of main audit components (marketing areas). It

142 Marketing Management

detects strengths and weakness, and recommends actions for improving
marketing performance.

3. The Marketing Excellence Review: This is more or less similar to

market effectiveness review. But, here, some excellently performing business
units are taken as the base for evaluating firm’s performance. Here,
performance is reviewed relatively.

The marketing excellence review is used to judge how excellently the company
is performing with reference to high performing business units. A special
instrument with adequate number of criteria and appropriate scaling can be
developed to judge poor, good or excellent performance.

4. The Ethical and Social Responsibility Review: This review/

verification decides whether firm’s marketing policies and practices are
ethically and socially true. Ethics are moral principles, norms, or standards of
right or wrong. Every business unit has social responsibilities toward a number
of stakeholders. Marketing practices should be ethical with reference to moral
norms, standards, and values. Company’s products, policies, and practices
should not have adverse impact on customers, other stakeholders, and larger
interest of society. Thus, here company tries to assess its ethical and social
responsibility. As per need, necessary actions are taken.

143 Marketing Management

EXERCISE CASELET

Ultra Smart Products, Inc.

The main purpose of the mobile phone is to be able to make and receive
telephone calls. In addition, text messaging is a basic function, officially called
SMS (Short Message Service) that is very popular among Filipinos.

For many people they won't leave their home without a Mobile Phone.
For some, it's often among the top three items they carry with them. A phone
is such a personal device that you take it almost everywhere with you. You use
it as a calculator, watch, personal TV and even as a torch as you navigate dark
alleys.

The multipurpose device can cater to many needs, but it's often used
more for one thing than the other. For most, they use a mobile phone for
making or answering calls, taking pictures, instant messaging, social media,
for work-related activities, watching videos (movies or TV) gaming and other
many uses.

One of the most dangerous elements to a Smartphone is water. People

have lost their phones to the water in pools, pails of water and other watery
locations.

In response to this problem, a very enterprising group of young Filipino

investors formed the Ultra Smart Products, Inc. that produces Waterproof
Phone Cases and Liquid Phone Cases.

The Waterproof Phone Case to protect your Smartphone There are

such cases for various types of phones. The case allows you to interact with
your phone normally while giving it 100% protection from water. It is a
trending product.

Another one of the most important accessories for Smartphone is a

phone case. It protects your phone from shocks and grazes. It also protects your
phone screen from cracking or breaking. Today, there are liquid phone cases.
They are simply regular phone cases with a twist. The back of the case is filled
with a gel-like fluid encased in an interesting ornament design. The fluid

144 Marketing Management

moves around in the ornament design when you tilt the phone. It is a hit product
and is trending.

Ultra Smart Products, Inc. is 100% owned by Filipinos. In view of the

presence of many Computer Engineer and designers, these young but very
enterprising Filipinos came up with their own mobile Phone Case products.

They were also encouraged by the news of the Association of Southeast

Asian Nations (ASEAN) integration with the official launch of the ASEAN
Economic Community (AEC) on 31 December 2015. The ten ASEAN member
countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand, and Vietnam - now form a single market and
production base. Collectively, the region is the 7th largest economy in the
world and, with more than 600 million people, the 3rd largest market. 100%
of originating goods can now be traded customs-free within the ASEAN-6
(Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand), the
most developed economies of the association. However, special provisions still
apply for Cambodia, Laos, Myanmar and Vietnam.

145 Marketing Management

REVIEW EXERCISES

Name: __________________________ Date:

________________

1. What do you think are the Strengths and Weaknesses Ultra Smart
Products, Inc.? Do a SWOT Analysis. Fill up the columns below. Give at least
3 or more strengths and weaknesses you know.

Strengths Weaknesses

2. What are the opportunities that Ultra Smart Products, Inc. can take
advantage of?

Opportunities

3. What are the possible threats that Ultra Smart Products, Inc. be aware
and guard of?

146 Marketing Management

Threats

4. What Measures or Tools of Efficiency Control can you suggest to

Ultra Smart Products, Inc.? Briefly explain your answer.

Suggested Measures or Tools of Efficiency Control

147 Marketing Management

Chapter 6

Workshop and Preparation of

Marketing Plan
Performance
Standard
This chapter combines and integrates your
Prepare a
marketing plan knowledge on what you have learned on the basic
and present it to
a group of principles of marketing. You would now need to
marketing demonstrate what you have learned from this book by
professionals.
preparing a mini Marketing Plan.

Content Standard
Proper implementation of marketing
strategies through workshop and
presentation.

148 Marketing Management

Outline of a Marketing Plan

The first step that you would have to do when preparing a marketing plan is to
make an outline. An example of an outline 13 of a marketing plan is shown
below.

1.0 Executive Summary

1.1 Brief Description of Business
1.2 Market
1.3 Products/Services
1.4 Management
1.5 Financing needs

2.0 Situation Analysis .

2.1 Market Summary
Target Markets
2.1.1 Market Demographics
Geographics
Demographics
Behavior Factors
2.1.2 Market Needs
2.1.3 Market Trends
2.1.4 Market Growth
2.2 SWOT Analysis
2.2.1 Strengths
2.2.2 Weaknesses
2.2.3 Opportunities
2.2.4 Threats
2.3 Competition
2.4 Product Offering
2.5 Keys to Success
2.6 Critical Issues
3.0 Marketing Strategy
3.1 Mission
3.2 Marketing Objectives
3.3 Financial Objectives

13Philip Kotler and Kevin Lane Keller (2012).Marketing Management. Upper

Saddle River, New Jersey: Prentice Hall.

149 Marketing Management

3.4 Target Markets
3.5 Positioning
3.6 Strategies
3.7 Marketing Mix
3.8 Marketing Research
4.0 Financials
4.1 Break-even Analysis
4.2 Sales Forecast
4.3 Expense Forecast
5.0 Controls
5.1 Implementation’
5.2 Marketing Organization
5.3 Contingency Planning
Difficulties and Risks

Every business needs a marketing plan. It provides a step-by-step guide

on the best ways to address customer needs and measure how you are meeting

150 Marketing Management

defined expectations. Your marketing plan is the roadmap for achieving your
business goals.14

It is not easy writing a business or marketing plan because it is a time-

consuming process. This is why small business owners do not bother to do this
and just focus on the daily challenges of running their companies. But a
business without a well thought-out marketing plan is like a ship without a
rudder—it just drifts and you can only hope it gets you to your destination.

1.0 Executive Summary

The first part of the marketing plan and presents a brief overview of the
plan. This appears first in the plan but is actually prepared or written last. It
presents relevant background data on current external and internal
environments.15

It summarizes in brief a description of the company, the market that the

business intends to enter, the products or services offered by the business, the
persons responsible in managing the operation and marketing program of the
business, and the financial needs or budget needed for carrying out or in the
implementation of the marketing program of the company.

2.0 Situation Analysis

In order to profitably satisfy customer needs, the firm first must
understand its external and internal situation, including the customer, the
market environment, and the firm's own capabilities. Furthermore, it needs to
forecast trends in the dynamic environment in which it operates.
2.1 Market Summary
This would include your target markets, market demographics, market
needs, market trends, market growth

14Kenneth E.Clow and DonaldBaack (2007). Advertising, Promotion,, and Marketing

Communications (Upper Saddle River, New Jersey: Pearson Education, Inc. (2007), pp.
439-440.

15RanjanKushagra,
(n.d.). Philip Kotler Marketing Management Summary. Retrieved
November 11, 2017 from http://www.academia.edu/5189766/

151 Marketing Management

Target Markets - A target market is the market a company wants to sell
its products and services to, and it includes a targeted set of customers for
whom it directs its marketing efforts. Identifying the target market is an
essential step in the development of a marketing plan.

2.1.1 Market Demographics

Geographic – Geographic market is the area or place you
would want to sell your product or service. Geographic
segmentation is when a business divides its market on the basis
of geography. You can geographically segment a market by
area, such as cities, towns, provinces, regions, countries, and
international regions. You can also break a market down into
rural, suburban and urban areas.
Demographics - Demographic segmentation is market
segmentation according to age, race, religion, gender, family
size, ethnicity, income, and education. Demographics can be
segmented into several markets to help an organization target
its consumers more accurately.

Behavior Factors - To fully understand how consumer behavior

affects marketing, it's vital to understand the three factors that
affect consumer behavior: psychological, personal, and social.
In daily life, consumers are being affected by many issues that
are unique to their thought process. Internal or psychological
factors: The buying behavior of consumers is influenced by a
number of internal or psychological factors. This includes:
social factors as man is a social animal; cultural factors;
economic factors; and personal factor.

2.1.2 Market Needs 16 - Before a company thinks of creating a

business or marketing plan for its product or service, a clear
assessment of market needs should be performed. This ranges
from studying the need for a customer's product in the
marketplace, studying the need for a customer's product in the

16 InfoAnalytica.(n.d.).Market
Needs Analysis and Market Needs Assessment.
Retrieved November 28, 2017 from http://infoanalytica.com/market-needs-analysis-
research.php

152 Marketing Management

marketplace, studying competitors, performing a quick sizing
of the proposed market, an analysis of market trends, and some
primary research into propensity to purchase a product that
fulfills those needs.

An analysis of market needs analysis help business to identify

the best-fit market for the idea, gain early and sustainable
competitive advantage prior to concept deve-lopment and
product build-out and to estimate the market size and ascertain
the earnings potential of the product.

You then determine whether the product concept possesses

strong competitive, sphere of influence OR brand advantages
over existing solutions to meet a market need. This is where a
marketer should ideally calculate the potential market share that
the business could capture. Doing this can further define
strategies for eventual product research and development, and
the budgets involved for funding build-out and go-to-market
strategies.

2.1.3 Market Trends - A trend analysis is an aspect of technical

analysis that tries to predict the future movement of a product,
service or stock based on past data. Trend analysis is based on
the idea that what has happened in the past gives traders an idea
of what will happen in the future. A market trend is a perceived
tendency of brands or financial markets to move in a particular
direction over time. These trends are classified as secular for
long time frames, primary for medium time frames, and
secondary for short time frames.
2.1.4 Market Growth17- The business environment today poses so
many challenges in sustaining growth and profitability.
Technological and scientific advances shorten life cycles of

17 Andres Chehtman.(June 23, 2017). , 8 Ways to Identify Market

Opportunities for Business Growth. Retrieved on November 28,2017from
https://blog.euromonitor.com/2017/06/8-ways-identify-market-opportunities-
business-growth.html

153 Marketing Management

products and services, business models change and new
competitors appear from outside the industry. There is this
constant instability that makes it necessary to seek new business
opportunities. With this, business needs to define a framework
to help search for opportunities. To do this, it is necessary to
understand your company’s business direction and to have
knowledge of the resources, strengths and capabilities of your
company. With a good understanding of company goals and
areas of expertise, the next step is to analyze the market,
assessing consumer needs and how they are being met by
companies today. In order to identify market opportunities, the
business model as a whole must be evaluated by identifying
consumers and companies and other factors such as brand value
propositions, direct and indirect competitors, supply chains,
existing regulations and the general environment.

2.2 SWOT Analysis

SWOT Analysis is an effective process for companies to use in
assessing themselves and their competitors and formulate their strategies.
This is where the SWOT analysis is helpful. It stands for: S = Strengths
(internal), W = Weaknesses, O = Opportunities, and T – Threats.

2.2.1 Strengths - A firm's strengths are its resources and

capabilities that can be used as a basis for developing a
competitive advantage. Examples of such strengths
include: patents, strong brand names, good repu-tation
among customers, cost advantages from proprietary
know-how, exclusive access to high grade natural
resources, and favorable access to distribution
networks
2.2.2 Weaknesses - The absence of certain strengths may be
viewed as a weakness. For example, the following may
be considered weaknesses: lack of patent protection, a
weak brand name, poor reputation among customers,
high cost structure, lack of access to the best natural
resources, and lack of access to key distribution
channels

In some cases, a weakness may be the flip side of

strength. Take the case in which a firm has a large amount of
manufacturing capacity. While this capacity may be considered

154 Marketing Management

a strength that competitors do not share, it also may be a
considered a weakness if the large investment in manufacturing
capacity prevents the firm from reacting quickly to changes in
the strategic environment.

2.2.3 Opportunities -The external environmental analysis may

reveal certain new opportunities for profit and growth.
Some examples of such opportunities include: an
unfulfilled customer need, arrival of new technologies,
loosening of regulations, and removal of international
trade barriers
2.2.4 Threats - Changes in the external environmental also
may present threats to the firm. Some examples of such
threats include: shifts in consumer tastes away from the
firm's products, emergence of substitute products, new
regulations, and increased trade barriers.

2.3 Competition

A business should Know who its competitors are, and what they
are offering. This can help you to make your products, services and
marketing stand out. You can use this knowledge to create marketing
strategies that take advantage of your competitors' weaknesses, and
improve your own business performance. A competitive analysis
covers five key topics: company's competitors, competitor product
summaries, competitor strengths and weaknesses, strategies used by
each competitor to achieve their objectives, and the market outlook.

2.4 Product Offering -

`A product is the item offered for sale. A product can be a service or an
item. It can be physical or in virtual or cyber form. Every product is
made at a cost and each is sold at a price. The price that can be charged
depends on the market, the quality, the marketing and the segment that
is targeted. In marketing, a product is anything that can be offered to a
market that might satisfy a want or need. In retailing, products are
called merchandise. In manufacturing, products are bought as raw
materials and sold as finished goods. A service is another common
product type. An offering in marketing is the total offer to your

155 Marketing Management

customers. An offering is more than the product itself and includes
elements that represent additional value to your customers, such as
availability, convenient delivery, technical support or quality of
service.

2.5 Keys to Success –

Key success factors are defined as the basic planning, design,
and implementation of the way in which products and services will be
presented for consumers to result in successful sales. ... They become
part of the overall sales style of each business as it best relates to their
public offering.

2.6 Critical Issues18

As a business offers a new service or takes a new product to
market, it needs to create a marketing plan for introducing consumers
to the service or product. The development of a marketing plan takes
time and the marketing team must address a number of critical issues
along the way. These other critical issues may include: market segment
selection, specificity, measurability, and achievability.

Selecting the appropriate market segment to focus marketing

efforts on presents one of the most critical issues in marketing plan
development. It makes no sense to actively market baby products to
senior citizens or to market retirement villages to college students. In
cases where the product can potentially serve multiple market
segments, the business needs to engage in market research to pick out
the market segment or segments that provide sufficient size and
sufficiently low barriers to entry, such as competition, to make the
marketing effort worthwhile.

Marketing plans can suffer from the inclusion of generalities or

fluff that only bears a tangential relationship to a business strategy. This

18 EricDontigney. (n.d.), Critical Issues in Marketing Plans. Retrieved on

November 22,2017from https://yourbusiness.azcentral.com/critical-issues-marketing-
plans-14904.html

156 Marketing Management

requires specificity. For example, a general marketing goal might read,
“capture more of the youth market.” The youth market represents so
much socio-economic diversity that the objective allows for no clear
path to plotting steps to make it happen. A specific goal, such as
“increase sales 15% to white, middle-class males between 25 and 30
years of age,” allows the marketing team to focus on the needs, wants
and desires of a particular group and develop steps to attract those
buyers.

A key issue facing marketing as an industry and in terms of

marketing plans is measurability. Some marketing goals, such as raise
brand awareness, yield poor measurability. Surveys can help to indicate
whether key features of brand awareness appear to improve over time,
but the outcomes often do not manifest clearly on a quarterly or yearly
schedule. Some elements of marketing lend themselves to
measurement.

Realism about achievability must temper the development of a

marketing plan. The amount of money a business owner puts into a
marketing budget will define the scope of a marketing plan, as well as
the number of marketing pieces and communication channels
employed to distribute those marketing pieces. Environmental factors,
state of the economy, competition impact the overall effectiveness of
marketing efforts and influence the achievability of a marketing plan.

3.0 Marketing Strategy 19

Your marketing strategy is an explanation of the goals you need to achieve
with your marketing efforts. Your marketing strategy is shaped by your
business goals. Your business goals and your marketing strategy should go
hand-in-hand.
3.1 Mission
A mission statement describes the organization’s basic function
in society, in terms of the products and services it produces for its

19Leon G. Schiffman and Leslie LazarKanuck,. (2010). ConsumerBehavior Global

Edition, Tenth Edition. Upper Saddle River, New Jersey: Pearson Education, Inc.

157 Marketing Management

customers. A strategic marketing plan starts with a clearly defined
business mission.

3.2 Marketing Objectives

Marketing objectives are goals set by a business when promoting its
products or services to potential consumers that should be achieved within a
given time frame. In other words, marketing objectives are the marketing
strategy set in order to achieve the overall organizational objectives.

Typically, clients marketing objectives include some or all of the

following: Increase sales, Build brand awareness, Grow market share, Launch
new products or services, Target new customers, Enter new markets
internationally or locally, and Improve stakeholder relations.

3.3 Financial Objectives

An objective set by a company in which the target state is measured in
monetary terms, such as a certain amount of profits, or a certain percentage
increase in profits over a period of time. Setting financial objectives makes the
final plan a more accurate and useful management tool. These include: Use
Financial Resources Wisely; Increase Revenue Growth Rate; Build Accurate
Financial Models; Set Numerical Productivity Targets; Include All Marketing
Costs; and Create Realistic Financial Projections.

3.4 Target Markets

A target market is the market a company wants to sell its products and
services to, and it includes a targeted set of customers for whom it directs its
marketing efforts. Identifying the target market is an essential step in the
development of a marketing plan.
Some tips to help you define your target market: Look at your current
customer base; Check out your competition; Analyze your product/service;
Choose specific demographics to target; Consider the psychographics of your
target; Evaluate your decision; and Additional resources.

3.5 Positioning
Positioning is a marketing concept that outlines what a business should
do to market its product or service to its customers. In positioning, the
marketing department creates an image for the product based on its intended
audience. This is created through the use of promotion, price, place and
product. An effective positioning strategy considers the strengths and

158 Marketing Management

weaknesses of the organization, the needs of the customers and market and the
position of competitors. The purpose of a positioning strategy is that it allows
a company to spotlight specific areas where they can outshine and beat their
competition.

3.6 Strategies
`Marketing Strategy - Your marketing strategy is an explanation of the
goals you need to achieve with your marketing efforts. Your marketing
strategy is shaped by your business goals. Your business goals and your
marketing strategy should go hand-in-hand.
Develop a marketing strategy. Effective marketing starts with a
considered, well-informed marketing strategy. A good marketing strategy
helps you define your vision, mission and business goals, and outlines the steps
you need to take to achieve these goals. ... describes your business and its
products and services

3.7 Marketing Mix20

The marketing mix in marketing strategy: Product, price, place and
promotion. The marketing mix is the set of controllable, tactical marketing
tools that a company uses to produce a desired response from its target market.
It consists of everything that a company can do to influence demand for its
product.

3.8 Marketing Research

A market research plan should provide a thorough examination of how
your product or service will fare in a defined area. It should include: An
examination of the current marketplace and an analysis of the need for your
product or service. It should provide an assessment of competition and data
about customers.
Use market research and marketing analysis to gain valuable insights
about your customers, the market conditions and the competitive landscape.
Use this knowledge to build a more effective marketing plan. Explore our
collection of market research articles written by the experts.

4.0 Financials
Your business must have a strong, well-thought-out marketing plan. It is
essential to keep the financial information current because lenders may review
it to evaluate you for funding. Make this section as complete and strong as

20Clow&Baack (2007) andSchiffman&Kanuck (2010), Ibid. .

159 Marketing Management

possible so you and your lender can trust your financial viability. You have to
determine sales projections, break-even analysis, foxed costs, cash flow
statement, income statement, balance sheet, loan activity, and product
viability.
4.1 Break-even Analysis

Your marketing plan must include a break-even analysis in the

financial section. Estimate how much you will have to sell to pay back the
initial investment. Predict when you will achieve this mark. This analysis is
vital to getting funding, because lenders want to know when they can expect
repayment.

4.2 Sales Forecast

A market forecast is a core component of a market analysis. It projects
the future numbers, characteristics, and trends in your target market. A
standard analysis shows the projected number of potential customers divided
into segments. The AMT computer store has a simple market forecast.

Your sales forecast in a business plan should show sales by month for
the next 12 months--at least--and then by year for the following two to five
years. Three years, total, is generally enough for most business plans.

If you have more than one line of sales, show each line of sales
separately and add them up. If you have more than 10 or so lines of sales,
summarize them and consolidate. Remember, this is business planning, not
accounting, so it has to be reasonable, but it doesn't need too much detail.
Some tips in sales forecasting are as follow:

1. Develop a unit sales projection. Where you can, start by forecasting

unit sales per month. Not all businesses sell by units, but most do, and
it's easier to forecast by breaking things down into their component
parts. Product-oriented businesses obviously sell in units, but so do a
lot of service businesses. For example, accountants and attorneys sell
hours, taxis sell rides, and restaurants sell meals.
2. Use past data if you have it. Whenever you have past sales data,
your best forecasting aid is the most recent past. There are some
statistical analysis techniques that take past data and project it
forward into the future. You can get just about the same results by

160 Marketing Management

projecting your two most recent years of sales by month on a line
chart and then visually tracking it forward along the same line.
3. Use factors for a new product. Having a new product is no excuse
for not having a sales forecast. Nobody who plans a new product
knows the future--you simply make educated guesses. So break it
down by finding important decision factors or components of sales. If
you have a completely new product with no history, find an existing
product to use as a guide
4. Break the purchase down into factors. For example, you can
forecast sales in a restaurant by looking at a reasonable number of
tables occupied at different hours of the day and then multiplying the
percent of tables occupied by the average estimated revenue per table.
Some people project sales in certain kinds of retail businesses by
investigating the average sales per square foot in similar businesses.
5. Be sure to project prices. The next step is prices. You've projected
unit sales monthly for 12 months and then annually, so you must also
project your prices. Think of this as a simple spreadsheet that adds the
units of different sales items in one section, and then sets the
estimated prices in a second section. A third section then multiplies
units times price to calculate sales. The math is simple--the hard part
is making that estimated guess of unit sales.

4.3 Expense Forecast

When preparing financial projections, a business needs to forecast all

of its expenses and include them in the income statement. When forecasting
expenses, we could simply enter a fixed amount for each expense, however,
this takes no account of the fact that some of the expenses do not remain fixed
and vary with the scale of the business activity. In addition, entering fixed
amounts for every expense would make the financial projections time
consuming and difficult to adjust as the scale of the business

To simplify the process of expense forecasting there are various

techniques which can be employed to link each type of expense to other
variables (cost drivers), such as revenue or headcount, which have already
been forecast in the financial projections. Of course there will always be
expenses which are fixed in nature, which cannot be linked to other variables
and need to be estimated in absolute monetary terms. Expense forecasting
using the revenue forecast simply involves establishing a percentage
relationship between the revenue and the expense, and applying that

161 Marketing Management

percentage to the forecast revenue used in the financial projections to estimate
the expense.

5.0 Controls
Marketing control is the process of monitoring the proposed plans as they
proceed and adjusting where necessary. If an objective states where you want
to be and the plan sets out a road map to your destination, then control tells
you if you are on the right route or if you have arrived at your destination.

There is no planning without control. Marketing control is the process of

monitoring the proposed plans as they proceed and adjusting where necessary.
If an objective states where you want to be and the plan sets out a road map to
your destination, then control tells you if you are on the right route or if you
have arrived at your destination.

Control involves measurement, evaluation, and monitoring. Resources are

scarce and costly so it is important to control marketing plans. Control involves
setting standards. The marketing manager will than compare actual progress
against the standards. Corrective action (if any) is then taken. If corrective
action is taken, an investigation will also need to be undertaken to establish
precisely why the difference occurred.

5.1 Implementation
This is - the organizing and putting into action the marketing programs.
The most important purpose of strategic control is to help top achieve
organizational goals through monitoring and evaluating the strategic
management process. A Tactical Implementation Plan is derived from a
common understanding of the business need to change or improve, and is the
common tool that is used to make it clear to all, the actions required to achieve
the business goals and targets.

5.2 Marketing Organization

Marketing organization is a group of marketing persons brought

together to make decisions on marketing areas like product, price, place, and
promotion. Marketing organization is the foundation of effective sales
planning for systematic execution of plans and policies.
The heart of your business success lies in its marketing. Most aspects
of your business depend on successful marketing. The overall marketing
umbrella covers advertising, public relations, promotions and sales. Marketing

162 Marketing Management

is a process by which a product or service is introduced and promoted to
potential customers.
Marketing plays an important role in establishing relationships
between customers and the organizations offering to the market. ... The
marketing function is also tasked with branding of the organization,
participation in publicity activities, advertising and customer interaction
through feedback collection.

5.3 Contingency Planning

Since business plans can never foresee all eventualities, good planning
provides for contingencies to address unexpected events. In marketing plans,
projections for sales, revenue and market reaction to initiatives depend on
factors outside the control of the company making the plans. As a result, plans
have to include provisions for action when the projected results don't
materialize. Planning for contingencies includes an evaluation of possible
variations in basic assumptions and the effects on the marketing plan.
Contingency planning has.

For contingency planning, a company has to combine risk assessment

with an impact analysis. A particular risk may be high, but its impact on the
company's marketing may be small and manageable. In that case, the company
can accept the risk and take no special action. A typical impact analysis assigns
a value between 1 and 10 to the risk and another value between 1 and 10 to the
impact, with 10 being high risk and high impact. The events that have a high
combined score of risk and impact threaten to endanger marketing targets and
require contingency planning.

Difficulties and Risk

To manage risk, a company tries to identify sources of uncertainty. It lists risks

and analyzes the likelihood that an event will take place. For marketing plans,
internal risks include the loss of key employees, physical damage to production
facilities and technical or quality failures. External risks come from the
competitive environment, regulatory actions or legal challenges. Marketing
risk assessment looks for events that could influence company marketing
performance and assigns a probability of the event occurring.

163 Marketing Management

LEARNING ACTIVITY

Mini-Marketing Plan for Presentation

Prepare a 15 to 20 minute PowerPoint Presentation of a mini-plan

with the following parts:2.1 Market Summary

Target Markets
2.1.1 Market Demographics
Geographics
Demographics
Behavior Factors
2.1.2 Market Needs
2.1.3 Market Trends
2.1.4 Market Growth
2.2 SWOT Analysis
2.2.1 Strengths
2.2.2 Weaknesses
2.2.3 Opportunities
2.2.4 Threats
2.3 Competition
2.4 Product Offering
2.5 Keys to Success
2.6 Critical Issues
3.0 Marketing Strategy
3.1 Mission
3.2 Marketing Objectives
3.3 Financial Objectives
3.4 Target Markets
3.5 Positioning
3.6 Strategies
3.7 Marketing Mix
3.8 Marketing Research
4.0 Financials
4.1 Break-even Analysis
4.2 Sales Forecast
4.3 Expense Forecast
5.0 Controls
5.1 Implementation’
5.2 Marketing Organization
5.3 Contingency Planning

164 Marketing Management

Mini-Marketing Plan Oral Defense

Prepare for an Oral Defense of your Mini-Marketing Plan before

selected academicians or marketing professionals selected by your teacher for
the purposes.

165 Marketing Management

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171 Marketing Management

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172 Marketing Management

Glossary

Behavioralistic Characteristics. The aggregate of all the responses

made by an organism in any situation.
Business market. It is a marketing practice of individuals or
organizations (including commercial businesses, governments and
institutions). It allows them to sell products or services to other companies or
organizations that resell them, use them in their products or services or use
them to support their works.
Buying Behaviors. The sum total of a consumer's attitudes,
preferences, intentions, and decisions regarding the consumer's behavior in the
marketplace when purchasing a product or service.
Communication. It is the process by which we exchange or share
meanings through a common set of symbols.
Consumer Behavior, It is the study of how individual customers,
groups or organizations select, buy, use, and dispose ideas, goods, and services
to satisfy their needs and wants. It refers to the actions of the consumers in the
marketplace and the underlying motives for those actions
Consumer markets. It pertains to buyers who purchase goods and
services for consumption rather than resale.
Data Collection. It is the process of gathering and measuring
information on targeted variables in an established systematic fashion, which
then enables one to answer relevant questions and evaluate outcomes.
Demographic Characteristics. Statistical data about the
characteristics of a population, such as the age, gender and income of the
people within the population. When the census assembles data about people's
ages and genders, this is an example of assembling information about
demographics.
Differentiation Strategy. It refers to the process of dividing the market
of consumers into groups based on one or more shared internal or external
characteristics.
Diffusion. It is the process by which the adoption of an innovation
spreads.

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Innovation. It is a product perceived as a new by a potential adopter.
Internal Environment. It is composed of the elements within the
organization, including current employees, management, and especially
corporate culture, which defines employee behavior.
Macro Environment. It refers to all forces that are part of the larger
society and affect the micro-environment

Marketing control. It is the process of monitoring the proposed plans

as they proceed and adjusting where necessary.

Marketing Environment. It refers to external factors and forces that

affect the company's ability to develop and maintain successful transactions
and relationships with its target customers.

Market Opportunity. A potentially favorable condition in which a

business can capitalize on a changing trend or an increasing demand for a
product by a demographic group that has yet to be recognized by its
competitors.

Market Positioning. It is an effort to influence consumer perception

of a brand or product relative to the perception of competing brands or
products.

Market segmentation. It is a process of dividing a market into

meaningful, relatively similar, and identifiable segments or groups.

Marketing Planning. It is the process of developing marketing plan

incorporating overall marketing objectives, strategies, and programs of
actions designed to achieve these objectives

Marketing process. It is defined as a process of doing so it can be

modelled in a sequence of steps: the situation is analyzed to identify
opportunities, the strategy is formulated for a value proposition, tactical
decisions are made, the plan is implemented and the results are monitored.

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Marketing Research. It is defined as the process or set of processes
that links the producers, customers, and end users to the marketer through
information used to identify and define marketing opportunities and problems;
generate, refine, and evaluate marketing actions; monitor marketing
performance; and improve understanding of marketing as a process.

Marketing segmentation. It is the process of dividing an entire market

up into different customer segments. Targeting or target marketing then entails
deciding which potential customer segments the company will focus on.

Market targeting. It refers to a consumer-oriented philosophy that

suggests that satisfaction of consumer needs provides the focus for product
development and marketing strategy to enable the firm to meets its own
organizational goals.
Microenvironment. It includes all those factors that are closely
associated with the operations of the business and influences its functioning.
The microenvironment factors include customers, employees, suppliers,
retailers and distributors, shareholders, Competitors, Government and General
Public

Mission Statement. A written declaration of an organization's core

purpose and focus that normally remains unchanged over time.

Product. It is defined as everything that one receives in an exchange,

including all tangible and intangible attributes, and expected benefits, it may
be a good, service, or idea.

Promotion. It is communication by marketers that informs, persuades,

and reminds potential buyers of a product to influence an opinion or elicit a
response.

Psychographic Characteristics. A quantitative methodology used to

describe consumers on psychological attributes.

Strategy.A plan of action or policy designed to achieve a major or

overall aim, "time to develop a coherent marketing strategy"

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Strategic Marketing Process. It is a planning process that seeks to
establish a clear direction and unified purpose for all marketing efforts.

Tactic. An action or strategy carefully planned to achieve a specific

end

Tactical Marketing. It is determining how you will implement your

strategies, once you have goals, including specific strategies for achieving your
goals,

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Index

A
Advertising, 18
Agents and Brokers, 112
B
Branding, 91
Buying Behavior, s
Participants in the Business Buying Process
Participants, 70
C
Cebu Pacific, 48
Categories of Agents and Brokers, 112
Channels of Distribution (types), 15
Channels for Consumer Products, 111
Channels for Industrial Products, 112
Characteristics of Business Markets, 68
Communication, 103
Communicating brand position, 82
Competition, 13
Competitors, 55
Consumer and business markets, 62
Consumer Buying Process, 64
Consumer markets and buying behaviours, 62
Core Marketing Concepts, 4
Cost, 12
Customers, 55
Customer Profitability, 33
Customer Relationship, 26
Customer Satisfaction, 32
Customer service strategies, 40
Customer Value, 39

D
Defining and Determining The Target Market, 74
Demand, 12
Difference of Marketing from Sales and Advertising, 6
Diffusion, 97

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E
Element of Marketing Mix, 88
Employees, 55
Extended 7 P’s, 19
Extending Product Life Cycle, 91

F
4P’s of Marketing, 9
G
General public, 56
Government, 55
Government Regulation, 17
I
Innovation, 97
Internal Environment, 56
J
Jollibee, 48
L
Labelling, 93
Legality of Price Policies, 102
M
Macro Environment, 53
Market, 5
Market segmentation, 113
Market research, 56
Purpose and importance of market research, 56
Stages of marketing research, 57
Marketing, 1
Definitions, 2
Difference from sales and advertising, 5
4P’s, 8
Marketing Concept, 22
Societal, 22

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Marketing Concept vs. Advertising Concept, 7
Marketing Concept vs. Selling Concept, 6
Marketing Management, 20
Marketing Management Organization, 20
Marketing Management Orientations (Importance), 22
Marketing Mix, 7
Marketing Objective, 13
Marketing process, 122
Market positioning, 76
Marketing control, 132
Marketing implementation, 131
Marketing environment, 52
Marketing segmentation, 71
Advantages and Benefits, 71
Method for Business Markets, 73
Method for Consumer Markets, 72
Market targeting, 73
Michael Porter, 28
Microenvironment, 54
Middlemen Consideration, 18
Mission Statement, 48

N
Nature of Market, 17
Nature of Product, 17
New Product, 93

P
Packaging, 92
Place of distribution, 107
Product, 88
Participants in the Business Buying Process, 70
Personal selling, 19
Place, 14
Popular Styles of Brand Positioning, 79
Price, 12, 98
Price fixation, methods, 13
Pricing, 12
Factors Affecting Pricing Decisions,12
Product, 8

179 Marketing Management

Product Classification, 9
Product Life Cycle, 89
Product Positioning Strategy
Promotion, 18, 103
Promotion Mix (4 elements), 18
Promotional Mix, 104
Publicity, 19
R
Retailers and Distributors, 55
S
Sales promotion, 19
Shareholders, 55
Stages of Marketing Planning, 127
Stages of marketing research, 57
Strategic Marketing Process, 47
Strategies of Relationship Management, 35
Suppliers, 55

T
Tactical Marketing Process, 50
Types of Business Markets, 67
Types of Efficiency Control, 137
Types of wholesaling intermediaries, 109
V
Value Chain, 30
Value of Market Segmentation
W
When to use relationship marketing, 39

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