Chapter Five
Marketing
1 Misgana B. (MBA & MA)
1. Introduction
The foundation of marketing is exchange.
o Marketing consists of all activities designed to generate or facilitate an exchange
intended to satisfy human needs.
A person at any given time has a need. This need arises out of physical or
psychological imbalances. Marketing starts with human needs and wants.
o Market is “The aggregate demand of the potential buyers for product or a product or
services” (AMA)
o Philip Kotler defines “A market as an area of potential exchanges”.
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Therefore, at the end of the chapter, you will be
able to:
o Define marketing concepts, analyze marketing
philosophies,
o Describe the role of marketing in achieving the goals of
a business enterprise,
o Assist in conducting marketing research, make
competitive analysis of the level, implement marketing
intelligence in their organization,
o Apply the various marketing mixes and strategies in
their businesses and
o Understand and implement selling and customer
service skills.
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2. Definitions of Marketing
Business firms and non-profit organization engaged in marketing.
Marketing is a social and managerial process by which an individual
or group obtain what they need and want through creating, offering
and exchanging of product of values with others (Philip Kotler,
2012).
Marketing management is the process of planning and executing,
the conception, pricing, promoting and distributing of ideas, goods
and services to create an exchange that satisfy individual or group
objectives (AMA, 2015).
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The above definitions of marketing reset on the
following core concepts:
Need: Human Need is a state of deprivation of some
basic satisfaction.
Wants: Wants are desires for specific satisfiers of
needs.
Demands: Demands are wants for specific products
that are backed by ability and willingness to buy
them.
Product: is anything that can be offered to satisfy a
need or want.
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Value: is the consumer’s estimate of the products overall
capacity to satisfy his or her needs.
Value is “the satisfaction of customer requirement at the lowest
cost of acquisition, ownership and use”.
Cost: is the amount of money that are going to be
expended or already incurred to acquire a product.
Exchange: is the act of obtaining a desired product
from someone by offering something in return.
Transaction: is the trade of values between two parties.
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Marketing answers the following questions:
1. Who are your customers? 3. How can I satisfy my
customers?
2. What are my customer’s
needs and wants?
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3. Importance of Marketing
A customer purchases a product because it provides satisfaction. That
something that makes a product capable of satisfying want is its utility.
Form Utility: is associated Place Utility: exists when a product is
primarily with production- the readily accessible to potential customers. So
physical or chemical changes physically moving the products to a store
that make a product more near the customers add to its value.
valuable.
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Time Utility: Time utility Information Utility: Information utility
means having a product is created by informing prospective buyers
available when you want it. that a product exists.
Possession Utility: Possession
utility is created when a customer
buys the product-that is, ownership is
transferred to the buyer.
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4. Marketing Philosophies
4.1. Production Concept
The production concept holds that consumers will favor products that are
widely available and low in cost.
Managers of production-oriented organization concentrate on achieving high
production efficiency and wide distribution.
The assumption that consumers are primarily interested in product availability
and low price holds in at least two situations
o DD for product is > that of SS of a product
o Where the product’s cost is high and has to decrease to expand the market.
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4.2. The Product Concept
The product concept holds that consumers will favor those products that
offer the most quality, performance or innovative features.
Under the concept, mangers assume that buyers admire well-made products
and can appraise product quality and performance.
In such situation, customers are ready to pay high prices for product extra
features.
Product-oriented companies often design their products with little or no
customer input.
o They trust that their engineers will know how to design or improve the product.
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4.3. The Selling Concept/Sales Concept
The selling concept holds that consumers will buy enough of the organization
product if they undertake an aggressive selling and promotion effort.
This concept assumes that consumers typically show buying inertia or resistance
and must be coaxed into buying.
The selling concept is practiced more aggressively with unsought goods,
those goods that buyers normally do not think of buying, such as
insurance, encyclopedia, and funeral plots.
Most firms practice the selling concept when they have over capacity. Their
aim is to sell what they make rather than make what the market
wants.
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4.4. The Marketing Concept
The marketing concept holds
:- that the key to achieving organizational goals consists of being more effective
than competitors in integrating marketing activities toward determining
and satisfying the needs and wants of target markets.
The marketing concept has been expressed in many colorful ways:
“Meeting needs profitably”
“Find wants and fills them”
“Love the customers, not the product etc.”
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Selling and Marketing Concept Contrasted;
Point of Difference Selling Marketing
Starting point Factory Market place
Focus Existing product Customer need
Means Selling & promotion Integrated marketing
End Profit through Volume Profit through
satisfaction
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4.5. The Societal Marketing Concept
The societal marketing concept holds
: - that the organization’s task is to determine the needs, want, and
interests of target markets and to deliver the desired satisfactions
more effectively and efficiently than competitors in a way that
preserves or enhances the consumers and the society’s wellbeing.
The societal marketing concept questions whether the pure marketing
concept is adequate in an age of environmental problems, resource
shortages, rapid population growth, worldwide economic problems, and
neglected social services.
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5. Marketing Information Systems
A marketing information system
:- consists of people, equipment and procedure to gather, sort, analyze,
evaluate and distribute needed timely and accurate information to
marketing decision makers.
The needed information is developed through
Internal company records,
Marketing intelligence activities,
Marketing research, and
Marketing decision support analysis.
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5.1. Marketing Research
Marketing research is the Marketing researchers deal with
systematic and objective many aspects of a market including the
identification, collection, following:
analysis, and dissemination of Market size;
information for the purpose of Market Share;
assisting management in decision Market penetration;
making related to the identification Brand equity research;
and solution of problems and Buyer decision processes research
opportunities in marketing.
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Customer Satisfaction Research
Distribution channel audits
Marketing effectiveness and analytics
Mystery Consumer / Mystery shopping
Positioning research
Price elasticity testing
Sales forecasting
Segmentation research
Test marketing
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5.2. Marketing Intelligence
Market intelligence is the systematic process of gathering, analyzing,
supplying and applying information about the external market environment.
Marketing intelligence is used to determine: Current and future market
needs, Changes in the business environment and nature of the market in the future.
Marketing intelligence provides the following benefits;
Identification of new opportunities.
Early warning of competitor moves.
Quicker, more efficient and
Cost-effective information.
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5.3. Competitive Analysis
Competitive analysis refers to determining the strengths and weaknesses of
competitors and designing ways to take opportunities or tackle threats posed by
competitors.
Competitive analysis is important for businesses since it has the advantages
stated as follow:
It provides an informed basis to develop strategies to achieve competitive
advantage in the future
It generates understanding of competitors’ past, present (and most importantly)
future strategies.
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6. The Marketing Mix and Marketing Strategies
The 4 P’s of Marketing/The Marketing Mix
1. Product:- is anything that can be offered to a market to satisfy a
want or need.
Products include physical goods, services, experiences, events, persons,
places, properties, organizations, information, and ideas.
It includes physical objects or services being sold, together with:
packaging, image, brand name and warranty and, physical attributes
that influence consumer’s perceptions such as: colors, shapes, sizes and
materials.
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2. Pricing:- refers to the process of setting a price for a
product/service.
is the monetary unit required for a purchase, and from an
entrepreneur’s view point, it is the unit of income
it is the only element in the marketing mix that produces revenue
Your prices must be low enough to attract customers to buy and
high enough to earn your business a profit. To set your price you
need to:
Know your costs.
Know how much customers are willing to pay.
Know your competitor’s price.
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Pricing Strategy
Price is the value placed on what is exchanged. There are different pricing
strategies like
Price Skimming: this is a type of marketing strategy that firms use by charging the
highest possible price that buyers who most desire the product will pay.
Penetration Pricing: In this strategy, prices of products are reduced compared to
competitors’ price for the same product to penetrate into markets and to increase sales.
Or setting lower price at the time of commercialization.
Competition Oriented Pricing: Considers competitors prices primarily; but
the market type matters.
Odd-even pricing: This is Psychological pricing method based on the belief that
certain prices or price ranges are more appealing to buyers. E.g. 4999.95 birr.
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3. Place: means the different ways of getting your products or services
to your customers.
It is also referred to as distribution.
Distribution can mean the physical channels or transporting products from
manufacturers to end user.
It includes agents, wholesalers, retailers and etc.…
If your business is not located near your customers, you must find ways to get
your products/services to where it is easy for customers to buy.
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Distribution Strategies
Direct channels: In this type of
channel, producers and end users
directly interact.
Indirect channels: In this type of
channel intermediaries are inserted
between seller and buyer.
Intermediaries include Merchant,
Wholesalers, retailers, dealers,
agents, brokers; and manufacturer’s
branches and offices.
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4. Promotion: Refers informing your customers of your products and
services and attracting them to buy them.
Promotion is the act of communication that provides consumers with
information about a company’s products, its services or the venture itself.
Promotion includes advertising, sales promotion, public relation and
personal selling.
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The main promotional mix strategies
Advertising: It is any paid form of non-personal, one-way, mass
communication about an organization, good, service, or idea by an
identified sponsor.
Personal selling: This is the two-way flow of communication between a
buyer and seller, often in a face-to-face encounter, designed to influence a
person’s or group’s purchase decision.
Public relations: Public relation is a form of communication that seeks to
change the perceptions of customers, shareholders, suppliers, employees
and other publics about a company and its products.
Sales promotion: This promotion type involves short term incentives of
value such as discounts, free samples, and prizes to be offered to arouse
interest of customers in buying the good/service.
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31 Melaku B. (MBA)
7. Selling of Customer Service
Service; refers to any activity undertaken to fulfil customer’s needs.
It is any act or performance that one party can offer to another
that is essentially intangible and does not result in the
ownership of anything.
Distinctive features of services include intangibility,
inseparability, variability, and perishability as opposed to
goods.
Customer is a person or organization that buys a product or
service either for use or for resale.
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Organizations should make the effort
Customer Handling and Satisfaction
to retain every single customer.
Customer handling and satisfaction Considering Customers as an
is a key for successful organizations. Invaluable Asset.
Poor service/defective service is the Reducing Customer Complaints
causes of loss and bankruptcy for
many organizations. Place Yourself in The Customer’s
Shoes
Also take into account that the
major reasons to lose customers are:
Poor service, Poor quality and Rude
behaviours.
We need to Retaining existing
customers, and strive to increase the
number of customers.
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Quiz (5%)
1. What does it mean marketing (2 pt.)
2. Discuss the marketing philosophies (3 pt.)/ Or
3. Discuss the Marketing Mix Elements and Marketing
Strategies (3 pt.)
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