HBC 2112 Principles of Marketing

JOMO KENYATTA UNIVERSITY
OF
AGRICULTURE & TECHNOLOGY
SCHOOL OF OPEN, DISTANCE AND

eLEARNING
IN COLLABORATION WITH
SCHOOL OF HUMAN RESOURCE
MANAGEMENT
DEPARTMENT OF COMMERCE
HBC 2112 PRINCIPLES OF MARKETING
P.O. Box 62000, 00200

Nairobi, Kenya
E-mail: elearning@jkuat.ac.ke
HBC 2112: PRINCIPLES OF MARKETING
Course description
Marketing overview; Marketing philosophies; Marketing information system; Mar-
keting environment; Consumer behavior; Types of buying situations, Consumer
buying roles. Marketing segmentation, positioning and targeting. Marketing mix
decisions; Product, Price Distribution and Promotion decisions. Service marketing;
Unique characteristics and strategies for management. Social Responsibility and
ethics in business. Marketing planning, implementation, evaluation and control of
the marketing activities.
Course aims
This course will enable the students to the essential concepts, skills and knowledge
in the field of marketing necessary for decision-making in organizations today.
Learning outcomes
At the end of the course students would be able to:
1. Enable students understand problems, opportunities and activities involved in

marketing practice.
2. Improve skills related to marketing decision making
3. Formulate marketing strategies for effective decision-making in organiza-

tions.
Instruction methodology
Lectures and tutorials, Case studies, class presentations, , group discussions and
assignments.
Course Text Books

1. Kotler , P. Armstrong, G. (2010). Principles of Marketing, 13th Ed., Pearson.
New York.
2. Kotler, P. (2009). Marketing Management, Analysis, Planning, Implementa-

tion and Control, 13th Ed. Prentice Hall, India.
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3. Perreault, W. D., Jr., Cannon, J. P., and Mc Carthy, E. J. (2008). Basic Market-
ing: A Marketing Strategy Planning Approach, 16th Ed. Richard D. Boston:
McGraw-Hill Irwin, Inc.
Course Journals
• Journal of Marketing
• Journal of Marketing Education
• Journal of Strategic Marketing
Assessment information
• Continuous Assessment Tests (CATS) 30%
• Examination (Semester Exam) 70%
• Total 100%
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Contents
1 Overview of Marketing 1
1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
• Marketing has twofold goals, namely; . . . . . . . 1
1.1.1 Definitions of Marketing . . . . . . . . . . . . . . . . . . . 2
1.1.2 With this definition, it would suffice to define the following
terms; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
• Needs . . . . . . . . . . . . . . . . . . . . . . . . 2
• Wants . . . . . . . . . . . . . . . . . . . . . . . 2
• Demand . . . . . . . . . . . . . . . . . . . . . . 3
• Product . . . . . . . . . . . . . . . . . . . . . . . 3
• Services . . . . . . . . . . . . . . . . . . . . . . 3
• Customer Value . . . . . . . . . . . . . . . . . . 3
• Customer Satisfaction . . . . . . . . . . . . . . . 4
• Quality . . . . . . . . . . . . . . . . . . . . . . . 4
• Relationship Marketing . . . . . . . . . . . . . . 4
1.2 Historical Development of Marketing . . . . . . . . . . . . . . . . 5
1.2.1 The Production Orientation Stage . . . . . . . . . . . . . . 5
• Sales Orientation Stage . . . . . . . . . . . . . . 5
• Marketing Orientation Stage . . . . . . . . . . . . 6
• Social Responsibility and Human Orientation Stage 6
1.3 Marketing Concepts (Philosophies) . . . . . . . . . . . . . . . . . . 6
1.3.1 The Production Concept . . . . . . . . . . . . . . . . . . . 7
1.3.2 The Product Concept . . . . . . . . . . . . . . . . . . . . . 7
1.3.3 The Selling Concept . . . . . . . . . . . . . . . . . . . . . 7
1.3.4 The Marketing Concept . . . . . . . . . . . . . . . . . . . . 8
1.3.5 The Societal Marketing Concept . . . . . . . . . . . . . . . 9
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CONTENTS CONTENTS
2 Marketing Environment 11
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Micro Environment . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2.1 Company Itself . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2.2 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2.3 Intermediaries . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2.4 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2.5 Competitors . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2.6 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2.7 Other publics . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Macro Environment . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3.1 Economic Factors . . . . . . . . . . . . . . . . . . . . . . . 13
2.3.2 Demographic Factors . . . . . . . . . . . . . . . . . . . . . 14
2.3.3 Political /Legal Factors . . . . . . . . . . . . . . . . . . . . 15
2.3.4 2.2.4 Social – Cultural Factors . . . . . . . . . . . . . . . . 16
2.3.5 Competitive Factors . . . . . . . . . . . . . . . . . . . . . . 18
2.3.6 Geographical Factors . . . . . . . . . . . . . . . . . . . . . 18
3 Marketing Research 20
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.2 Sources of information . . . . . . . . . . . . . . . . . . . . . . . . 20
3.2.1 Internal Sources . . . . . . . . . . . . . . . . . . . . . . . . 21
3.2.2 External Sources . . . . . . . . . . . . . . . . . . . . . . . 21
3.3 Steps in the Marketing Research . . . . . . . . . . . . . . . . . . . 21
3.3.1 Definition and identification of the research problem . . . . 21
3.3.2 Determination of the sources of information. . . . . . . . . 21
• Primary Source . . . . . . . . . . . . . . . . . . . 22
• Secondary Source . . . . . . . . . . . . . . . . . 22
3.3.3 Determination of Data Collection . . . . . . . . . . . . . . 23
3.3.4 Determination of the Sample Designs to be used . . . . . . . 23
3.3.5 Data Collection . . . . . . . . . . . . . . . . . . . . . . . . 23
3.3.6 Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.3.7 Report Results . . . . . . . . . . . . . . . . . . . . . . . . 24
3.3.8 Research Design . . . . . . . . . . . . . . . . . . . . . . . 24
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CONTENTS CONTENTS
• Basic Designs include; . . . . . . . . . . . . . . . 25

3.4 Marketing Information System (MIS) . . . . . . . . . . . . . . . . 26
3.4.1 Assessing Information Needs . . . . . . . . . . . . . . . . . 26
3.4.2 Developing Information . . . . . . . . . . . . . . . . . . . 26
3.4.3 Information Analysis . . . . . . . . . . . . . . . . . . . . . 27
3.4.4 Distributing the Information . . . . . . . . . . . . . . . . . 27
4 Consumer Behaviour 29
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.1.1 Reasons for studying Consumer Behaviour . . . . . . . . . 29
4.1.2 Factors Influencing Consumer Behaviour . . . . . . . . . . 30
• Cultural Factors . . . . . . . . . . . . . . . . . . 30
• Social Factors . . . . . . . . . . . . . . . . . . . 31
4.1.3 Personal Factors . . . . . . . . . . . . . . . . . . . . . . . . 32
4.1.4 Physiological Factors . . . . . . . . . . . . . . . . . . . . . 32
4.2 Consumers’ Buying Roles . . . . . . . . . . . . . . . . . . . . . . 33
4.3 Types of Buying Decision Behaviour . . . . . . . . . . . . . . . . . 33
4.3.1 High Involvement Buying Behaviour . . . . . . . . . . . . . 34
4.3.2 Low Involvement Buying Decisions . . . . . . . . . . . . . 34
4.3.3 The Buyer Decision Process . . . . . . . . . . . . . . . . . 35
• Problem Recognition . . . . . . . . . . . . . . . . 35
• Information Search . . . . . . . . . . . . . . . . . 36
• Evaluation of Alternatives . . . . . . . . . . . . . 36
• Purchase Decision . . . . . . . . . . . . . . . . . 36
• Post-Purchase Behaviour . . . . . . . . . . . . . . 36
4.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5 Market segmentation 39
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.1.1 Mass Marketing . . . . . . . . . . . . . . . . . . . . . . . . 39
5.1.2 Target Market . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.2 Levels of Market Segmentation . . . . . . . . . . . . . . . . . . . . 40
5.2.1 Mass Marketing . . . . . . . . . . . . . . . . . . . . . . . . 40
5.2.2 Segment Marketing . . . . . . . . . . . . . . . . . . . . . . 40
5.2.3 Niche Marketing . . . . . . . . . . . . . . . . . . . . . . . 40
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CONTENTS CONTENTS
5.2.4 Micro-Marketing . . . . . . . . . . . . . . . . . . . . . . . 41
• Local Marketing . . . . . . . . . . . . . . . . . . 41
• Individual Marketing . . . . . . . . . . . . . . . . 41
5.2.5 Basis for Segmenting Consumer Markets . . . . . . . . . . 41
• Geographic Segmentation . . . . . . . . . . . . . 41
• Demographic Segmentation . . . . . . . . . . . . 42
• Psychographic Segmentation . . . . . . . . . . . . 42
• Behaviouristic Segmentation . . . . . . . . . . . . 42
5.2.6 Basis of Segmenting Business Markets . . . . . . . . . . . . 42
5.2.7 Requirements for Effective Segmentation . . . . . . . . . . 44
5.2.8 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6 Marketing Mix 46
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.2 Product Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.2.1 Five Levels of A Product . . . . . . . . . . . . . . . . . . . 47
6.2.2 Product Classification . . . . . . . . . . . . . . . . . . . . . 48
• Consumer products . . . . . . . . . . . . . . . . . 48
• Industrial Products . . . . . . . . . . . . . . . . . 49
6.3 The Product Life Cycle (PLC) . . . . . . . . . . . . . . . . . . . . 49
6.3.1 Characteristics of each Stage . . . . . . . . . . . . . . . . . 49
• Introductory Stage . . . . . . . . . . . . . . . . . 49
• Growth Stage . . . . . . . . . . . . . . . . . . . . 50
• Maturity Stage . . . . . . . . . . . . . . . . . . . 50
• Decline Stage . . . . . . . . . . . . . . . . . . . . 50
6.3.2 Criticisms or Practical Problems . . . . . . . . . . . . . . . 50
6.3.3 New Product Development (NPD) Process . . . . . . . . . . 51
• Idea Generation . . . . . . . . . . . . . . . . . . 51
• Idea Screening . . . . . . . . . . . . . . . . . . . 51
• Business Analysis/Feasibility Stage . . . . . . . . 52
• Product Development . . . . . . . . . . . . . . . 52
• Test Marketing . . . . . . . . . . . . . . . . . . . 52
• Commercialization and Launching . . . . . . . . 53
6.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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CONTENTS CONTENTS
7 Pricing Decisions 55
7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.1.1 The Procedure in Price Setting Policy . . . . . . . . . . . . 55
7.1.2 Factors Affecting Pricing Decisions . . . . . . . . . . . . . 56
7.1.3 Importance of Pricing . . . . . . . . . . . . . . . . . . . . . 57
7.2 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8 Distribution Decisions 60
8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.1.1 Factors for Selecting Channel Members . . . . . . . . . . . 61
8.1.2 Functions of Channel Members . . . . . . . . . . . . . . . . 63
8.1.3 Determination of Intensity of Distribution . . . . . . . . . . 64
8.1.4 Importance of Channel Motivation . . . . . . . . . . . . . . 64
8.1.5 How to Motivate Channel Members . . . . . . . . . . . . . 65
8.1.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9 Promotion Decisions 67
9.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.2 The Promotion Mix Tools . . . . . . . . . . . . . . . . . . . . . . . 67
9.2.1 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . 67
• Advantages of Advertising . . . . . . . . . . . . . 68
• Disadvantages of Advertising . . . . . . . . . . . 68
9.2.2 Personal Selling . . . . . . . . . . . . . . . . . . . . . . . . 68
• Advantages . . . . . . . . . . . . . . . . . . . . . 69
• Disadvantages . . . . . . . . . . . . . . . . . . . 69
9.2.3 Sales Promotion . . . . . . . . . . . . . . . . . . . . . . . . 69
9.2.4 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.2.5 Public Relations . . . . . . . . . . . . . . . . . . . . . . . . 70
9.2.6 Direct Marketing . . . . . . . . . . . . . . . . . . . . . . . 70
• Direct marketing is; . . . . . . . . . . . . . . . . 70
9.3 Factors affecting the Promotional Mix . . . . . . . . . . . . . . . . 71
9.4 Effective Communication Program or Campaign . . . . . . . . . . . 71
9.4.1 Factors to consider when setting an Advertising Budget. . . 72
9.4.2 Methods of Setting the Advertising Budget . . . . . . . . . 73
9.5 Evaluating Communication Effectiveness . . . . . . . . . . . . . . 74
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CONTENTS CONTENTS
9.5.1 Promotion Mix Strategies . . . . . . . . . . . . . . . . . . . 74

9.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10 Service Marketing 76
10.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.2 Characteristics of Services . . . . . . . . . . . . . . . . . . . . . . 77
10.3 Marketing Mix for Services . . . . . . . . . . . . . . . . . . . . . . 79
10.3.1 Other Marketing Elements in Service Marketing . . . . . . . 80
10.3.2 Concept of Service Quality . . . . . . . . . . . . . . . . . 81
10.3.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Solutions to Exercises . . . . . . . . . . . . . . . . . . . . . . . . . 84
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HBC 2112 Principles of Marketing
LESSON 1
Overview of Marketing
Learning outcomes
Upon completing this topic, a student should be able to:
1. Describe the core concepts, principles, and theories of marketing.
2. Identify the various philosophies of marketing
3. Understand the role played by principles of marketing in management and

practice in the society.
1.1. Introduction
The term marketing is one that is widely used and misused at the same time. To
some, it has an image of glamorous and exciting careers; to others it concerns the
cynical exploitation of consumers using a variety of means of persuasion. Certain
marketing activities, such as, selling and advertising are highly visible and often
form the central component of many people’s understanding of marketing. In prac-
tice, though marketing as business activity is much broader than just these activities;
it is not always glamorous and rarely does it involve persuading to consumers to buy
what they don’t require or desire.
Therefore, marketing deals with understanding, creating, communicating and de-
livering customer value, and satisfaction is at the very heart of modern marketing
thinking and practice. It can be referred to as the “delivery of customer satisfaction
at a profit”(Kotler and Armstrong, 2002).
• Marketing has twofold goals, namely;

1. To attract new customers by promising them superior value
2. To keep current customers
Therefore, sound marketing is critical to the success of every organization (large

or small, profit or non-profit making, domestic or global firms). Current successful
companies have one thing in common. That is, they are strongly customer focused
and heavily committed to marketing. Today, marketing must be understood not
1
only from the old sense of making a sale ‘telling and selling’ but, in the new sense
of customer satisfaction. In contrast selling only occurs after a product has been
produced, but marketing starts long before a company produces a product. It is
therefore, a homework that marketers undertake to assess customer needs, measure
their extent and intensity and determine whether a profitable opportunity exists in
the market or not.
1.1.1. Definitions of Marketing

Marketing is the creation and delivery of a standard of living. It involves;
1. Finding out what the consumers want.
2. Then planning and developing a product or service that will satisfy those
wants
3. And then, determining the best way to price, promote and distribute that prod-
uct/ service.
Briefly, it can be stated that marketing is a total system of business activities de-
signed to plan, price, promote and distribute want satisfying goods and services
to both present and potential customers (by Stanton, W.J). Marketing is “a social
and managerial process by which individuals and groups obtain what they need
and want through creating, offering and sharing of value with others.” Therefore,
marketing means working with consumers to actualize their potential needs for the
purpose of satisfying them.
1.1.2. With this definition, it would suffice to define the following terms;
• Needs
A need is a state of deprivation. Needs may include basic physical needs, e.g. for
food, clothing, safety, social interaction, knowledge and self-expression, among
others. The human needs are unlimited yet the mean or resources to satisfy them
are limited.
• Wants
This is the society’s need that is shaped by culture and individual personality of
a customer. For example, an individual needs food, but wants a hamburger, irio,
2
ugali, matoke, French fries and many others. Consumer wants are shaped by the
society one comes from. This gives him/her the orientation to the consumption of a
particular product or service.
• Demand
These are human wants that are backed by the purchasing power of an individual.
Consumers view products as offering a bundle of benefits and choose products that
accord them the best bundle for their money. That is, for an ordinary car, the bene-
fits may include, basic means of transportation, affordable price and fuel economy
among others. Whereas, for a luxury products, (Mercedes Benz, Lexus, Land Rover
Discovery, e.t.c.), the benefits may include, luxury, comfort, speed, prestige and so
on.
• Product
Anything that is capable of satisfying a need or a want (the definition product is not
only limited to physical objects but also the intangible products – services).
• Services
These are the intangible products that are demanded by the consumers. They are
activities or benefits offered for sale that are essentially intangible and do not result
in ownership of anything, e.g. banking, airline, teaching, hotel, tax preparation,
home repair services, and many others. Therefore, products may include experi-
ence, persons, ideas, organizations, and information.
• Customer Value
This is the difference between the value the customer gains from owning and using a
product and the cost of obtaining the product. For example, in the transport industry,
customers of Akamba Bus, Coast Bus, Kenya Bus, e.t.c. gain benefits such as
quicker and faster services, reliable and comfortable services, whereas, for those
traveling by air, the benefits may include, reliability, comfort, speed and so on. The
customers rate these services in terms of costs, effort and time spent while using a
service.
In addition, they also compare the value of using certain services, i.e. the choice
to use one or the other (air, rail, road or water). The customers’ judgment about
the products is based on their perception. That is, they act on perceived value. The
3
main concern for the marketers is to change the customer perception in favour of
their products.
• Customer Satisfaction
This depends on the customers’ perceived performance in delivering value relative
to the buyer’s expectation. That is,
1. If the products performance falls short of customer’s expectation, the buyer

is dissatisfied,
2. If the product performance matches the customer’s expectation, the buyer is

satisfied, and
3. If the product performance exceeds the buyer’s expectation, the buyer is de-
lighted.
Therefore, outstanding marketing organizations go out of their way to achieve cus-

tomer satisfaction. This leads to repeat purchase and breeds customer loyalty. Mar-
keters must therefore, not only aim to satisfy their customers but to delight them.
This is the basis of company survival today in a competitive environment.
• Quality
Customer satisfaction is closely linked to quality of products and services. Many
marketers have now adopted Total Quality Management (TQM) programmes as-
signed to constantly improve the quality of their offers and marketing processes.
• Relationship Marketing
This is a process of creating, maintaining and enhancing strong value-laden rela-
tionships with customers and other stakeholders. That is, marketers must strive
to go beyond short-term transactions to build long-term relationships with valued
customers, distributors, dealers, and suppliers, among others. The marketers’ main
concern is to build strong economic and social connections by promising and con-
sistently delivering high quality products, services and fair prices. This enables the
organizations to build mutually beneficial relationships with their stakeholders. To-
day, most companies are striving to establish a strong marketing network in their
operations (have networks with other stakeholders with whom they have built mu-
tually profitable business relationships).
4
1.2. Historical Development of Marketing

The need for marketing arose and grew as the society moved from agriculture and
individual self-sufficiency to an economy built around division of labor, industrial-
ization and urbanization. In an agricultural setting, people are largely self-sufficient.
That is, they grow their own food, make their own clothes and build their own
houses. At this stage, there was no marketing because there was no exchange of
goods and services.
As time passed by, the concept of division of labor began to evolve. People began
to produce what they produced best. The result was that, they produced more than
they needed of some item and less than they need of another. Whenever people
produced more than they needed or less than they needed, the foundation was laid
for trade (exchange) and trade is now the corner - stone of marketing. Typically,
marketing has evolved through three significant stages with a fourth stage emerging
recently.
These are;
1. Production orientation stage
2. Sales orientation stage
3. Marketing orientation
4. Social responsibility and human orientation stage
1.2.1. The Production Orientation Stage

Here, the production process was a simple one with the main emphasis laid on
production, which was believed to be in short supply, and the economy was charac-
terized by shortages. Little or no attention was devoted to marketing and production
processes were very local, i.e. within neighboring areas. The function of a sales de-
partment in an organization was simply to sell the company’s output at a price (This
was a period of up-to 1930).
• Sales Orientation Stage

At this stage the small producers began to manufacture their goods in larger quanti-
ties in anticipation of future orders. Further division of labour occurred and a type of
business developed to help sell the increased output, i.e. intermediaries/middlemen.
5
To facilitate communication and buying and selling, the various interested parties
tended to settle near each other hence the formation of trading centers. The main
idea at this stage was to sell whatever was produced and this called for heavy/substantial
promotional effort to be expended. Unfortunately, this was the period that the con-
cepts of selling acquired its bad reputation (This was the age of hard selling i.e. the
period up-to 1950).
• Marketing Orientation Stage

Modern marketing was born with the Industrial Revolution where there was growth
of urban centers and declining rural population resulting in rural –urban migra-
tion. The emphasis here was on the growth of manufacturing enterprises because
the market demand exceeded the available supply (demand greater than supply)
but this has changed and supply has now exceeded demand shifting the emphasis
form production to marketing. The marketers must now embrace the concept of
integrated/coordinated marketing management, directed towards the twin goal of
customer- orientation and profitable sales volume. Emphasis here is on marketing
rather than selling. But, how well the companies have embraced the marketing
concept is still questionable.
• Social Responsibility and Human Orientation Stage

The conditions of the 1970’s led to this fourth stage, which was characterized by
the concern for the society. The emphasis here is on social responsibility on the
part of marketers for their survival in the industries. Marketers must therefore be
concerned with creating and delivering a better quality of life rather than only a
material standard of living. The rise in social responsibility as a concept for business
was highly influenced by the rise in consumerism movement.
1.3. Marketing Concepts (Philosophies)

The five alternative (competing) concepts under which organizations can conduct
their marketing activities include;
1. Production concept
2. Product concept
3. Selling concept
6
4. Marketing concept
5. Societal concept
1.3.1. The Production Concept

It’s a management philosophy that holds that consumers will favour products that
are available, as well as, affordable. The aim of the marketer is to focus on how
to improve production and distribution since the economy was characterized by
shortages (demand exceeded supply). Here, the marketers/producers are deeply
concerned with production since what they produce will quickly be sold. Product
quality at this stage is not an issue.
The production philosophy is useful in two situations;
• When the demand for the product exceeds supply - Marketers should look for
ways of increasing the production level
• When the product cost is too high - Marketers need to improve the productiv-
ity in order to bring the cost down.
1.3.2. The Product Concept

The marketers contend that consumers will buy products of high quality, perfor-
mance and innovative features and shun products of low quality. The emphasis
here was still on production since little marketing effort was needed to secure sat-
isfactory sales. The concept is again more prevalent in societies with shortages of
products. It is also assumed that people/consumers are aware of product quality and
will not be persuaded to make purchases. Therefore a marketer at this stage should
devote their energy to making continuous improvement and innovation. That is,
they should have a detailed version of the new idea stated in meaningful consumer
terms. The product concept can also lead to marketing myopia. For example,
the Kenya Railways once thought that users wanted trains rather than satisfying
the transportation need, and overlooked the growing challenges of airlines, buses,
trucks and automobiles.
1.3.3. The Selling Concept

This concept holds that consumers will not buy products until some large scale sell-
ing and promotional effort is expended despite, the fact that, they look for quality
7
products (the concept is typically practiced with unsought goods). At this stage,
marketing is still looked at from the producers/sellers point of view and works best
where there is over capacity. The aim is to sell what they have rather than what
the consumer requires. That is, they concentrate on sales transactions rather than
building long-term customer relationship hence, involves hard selling and ignores
relationship marketing. This kind of marketing carries high risks.
The Selling Concept makes two assumptions;
• That, customers who are coaxed into buying the product will eventually like
it
• If they do not like it, they will eventually forget their disappointment and buy
it again later.
1.3.4. The Marketing Concept

It is a philosophy that holds that the achievement of the organizational goals de-
pends on determining the needs and wants of the consumer or target markets and
delivering the desired satisfaction more effectively and efficiently than competitors
do. Decision-making at this stage starts with the customer, working backwards to
ensure that, the consumers’ needs are satisfied by developing a product that is tailor-
made to satisfy the need at a profit for the organization. The Marketing Concept has
been stated in colourful ways;
• “We make it happen for you,”
• “My Favourite”(British Airline),
• “ You are the Sovereign King” or “You are the Boss,”
• “We are not satisfied until you are”
• “We love you,”
• “Let us exceed your expectations” (General Electric)
• “The Pride of Africa” (Kenya Airways)
• “Great Value Always” (Uchumi Supermarket)
• “All Under One Roof” (Nakumatt Supermarket), e.t.c.
8
1.3.5. The Societal Marketing Concept

This is the newest of the five marketing philosophies. It holds that marketers are
not only concerned with satisfying the needs of consumer in the short-run but also,
concerned with the long-run welfare of the society. The societal marketing concept
questions whether the pure marketing concept is adequate in an age of environmen-
tal problems, resource shortages, rapid population growth, worldwide economic
problems and neglected social services. It contends that pure marketing concept
overlooks the possible conflicts between the consumer’s short-run wants and their
long-run welfare, e.g. beer drinking, cigarette smoking, and environmental degra-
dation through pollution among other social ills. A good example is, the case of
beer drinking, which leads to lung cancer, careless driving, family quarrels, and
many others problems, EABL should offer advice on how to drink moderately.
Another example is the, many people see the today’s giant fast-food industry (fish
and chips, the Steers, The Nandos, the wimpy, e.t.c) as offering tasty and conve-
nient food at reasonable prices yet many consumers and environmental groups have
voiced their concerns. Critics point out that hamburger, fried chicken, French fries
(chips) and most other foods sold by fast food restaurants are high in salt and fat.
This may harm the consumer in the long - run. To enhance this, the government has
also come up with laws controlling various sectors of the economy, particularly in
the areas of pollution, trade, licensing, drugs, e.t.c. Marketers should offer an after
sales service for most items to ensure their efficient use.
Revision Questions
E XERCISE 1. What is marketing?

E XERCISE 2. Why production orientation no longer is considered sufficient for
business success in an industry?
Example . Why should the marketers emphasize on consumer-focus?
Solution: Determining the needs and wants of the consumer or target markets and
delivering the desired satisfaction more effectively and efficiently than competitors
do. Decision-making at this stage starts with the customer; working backwards to
ensure that organizations develop a product that is tailor-made to satisfy the needs
of a market at a profit for the organization
9
References and Additional Reading Materials

1. Jobber, D. (2010). Principles of Marketing, 6th Ed. Mc Graw-Hill.
2. Kotler, P. (2011). Principles of Marketing, Prentice Hall, 14th Ed. New Delhi.
3. Kotler, P., Keller, K. L.and Lu, T. (2009). Marketing Management in China,

Pearson Eduction, Prentice hall, India.
4. Jain, R., Jain, S. and Dhar, U. (2007). “CUREL: A Scale for Measuring
Customer Relationship Management’s Effectiveness in the Service Sector,”
Journal of Services Research, Vol. 7. No.1.
5. Meldrum, M. (2000). A Market-Orientation. In Marketing Management: A

Relationship Perspective, Cranfiels School of Management, 3rd Ed. London,
Macmillan Business Press McCarthy, J. (1981).
6. Perrault, W. A. Cannon, J. and McCarthy, J.E. (2008). Basic Marketing, Mc

Graw- Hill.
10
LESSON 2
Marketing Environment
Learning outcomes
By the end of this topic a student should be able to;
• Describe the the environmental factors affecting a firm in the market place.
• Distinguish between macro and micro environments
2.1. Introduction
Businesses do not operate in a vacuum. They are affected in some way by the
environments in which they operate. This environment defines the opportunities for
developing new businesses, as well as, indicating areas in which the businesses are
threatened or weakened.
Marketing environment can be defined as the actors and forces within and outside
the marketing environment that may facilitate or hinder the management ability to
develop and maintain successful transactions with its target consumers. Therefore,
successful companies know the vital importance of constantly watching and adapt-
ing to the changing environment, which, keeps on changing to the extent that both
the marketers and the consumers wonder what the future may hold (the environment
is coupled with many uncertainties for most businesses).
The marketing environment of an organization falls into 2 categories;
1. Macro (external environment, i.e. uncontrollable)
2. Micro (internal environment, i.e. controllable)
The key component of developing a strategy in marketing is to analyze both the

micro and macro factors and try to match them with the capabilities of the organi-
zation.
2.2. Micro Environment

These are the forces close to the company that affect its ability to serve its customers
– the company itself, the suppliers, the distributors, competitors and the publics.
The Forces may include;
11
2.2.1. Company Itself

In designing the marketing plan, the management takes into account the various
groups. For example, finance, personnel and equipment, R& D, purchasing, and
manufacturing among others. That is, management must work closely with other
company departments. It includes the organization culture, values, beliefs and cor-
porate objectives and many others.
2.2.2. Customers
The marketers must be able to target each and every customer group and tailor-
make a product that suit their needs taking into consideration affordability of their
offers
2.2.3. Intermediaries
These are firms that help the companies to promote, sell and distribute their goods
to final buyers. They include resellers, physical distribution firms, marketing ser-
vice agencies and financial intermediaries. Today’s marketers must recognize the
importance of working with their intermediaries as partners rather than simply as
channels through which they sell their products.
2.2.4. Suppliers
These are an important link in the company’s overall customer value delivery sys-
tem. They are the providers of inputs for the organization to produce its goods and
services. Marketers must therefore watch supply availability - supply shortages or
delays, labour strikes and other factors that may affect the supply causing customer
inconveniences. Marketers must also monitor the cost of supplies since this may
harm the company’s sales volume.
2.2.5. Competitors
Due to the ever-increasing competition, marketers must provide greater customer
value and satisfaction than its competitors. Thus, they must simply adapt to the
needs of a target market and must strive to gain competitive advantage by position-
ing their offerings strongly against competitors’ offerings.
12
2.2.6. Employees
The employees always look for a better pay and better conditions of work.
2.2.7. Other publics

This is any group that has an actual or potential interest in or impact on organiza-
tion’s ability to achieve its objectives. The group may include, financial publics,
media publics, government bodies and trade union local community among others.
2.3. Macro Environment

The macro environment concerns the broad trends and patterns that take place
within a society, which affects all firms equally. These are factors beyond the con-
trol of the organization which, if analyzed can provide invaluable assistance in the
process of designing marketing strategies, identifying profitable products and the
best distribution channels to reach the consumer. On the other hand, a careful anal-
ysis of the environment can also enable an organization to identify developments,
which may be harmful to its operations and therefore, adopt a proactive stance in
the action it wishes to take.
Macro Environment of a firm can be broken down into the following variables;
1. Economic Environment
2. Demographic Environment
3. Socio-cultural Environment
4. Political legal Environment
5. Competitive Environment
6. Geographical Environment
7. Technological Environment
2.3.1. Economic Factors

This is the most important component of macro environment because it consists
of factors that affect consumer’s spending patterns. Marketers must focus their
13
attention on the developments within the economy, which is likely to have an impact
on their businesses directly or as a result of impact on the consumer spending.
Key aspects of Economic Environment are;
1. Inflation rates - Leads to an increase in prices, interest rates so reaching con-
sumer spending.
2. Demand for a particular product - If the demand for a product or service

increases, the supply also increases.
3. Total income and income distribution
4. Changing consumer’s spending patterns
5. Unemployment - If this increases, demand for products decreases
6. Economic depression or Boom time vii) Price controls
7. Natural environment
2.3.2. Demographic Factors

This refers to the study of human population in terms of size, density, location,
occupation and other characteristics. It includes component like;
1. Total population - The higher the population, the higher the demand for the
products
2. Population distribution - in areas that are densely populated, the demand for
products is assumed to be high.
3. Changing age structure of the population - Marketers have a challenge of

creating products that suit every age group
4. Population Growth - growth rate exerts pressure on the available resources as

well as having marketing implications in terms of production of goods and
services.
5. Dependency ratio - in Kenya there are fewer wage earners with a very high
dependency level. This is coupled with unemployment and older parents nor-
mally depend on working children. This reduces the amount of disposed
income per wage earner.
14
6. Geographic shifts in population -moving to towns creates congestion, pres-

sure on the available social amenities, which reduces the standards of living.
It also includes migration from one country to another.
7. Level of education - dictates the behaviour of the consumer. The more afflu-
ent a society is, the higher the status, lifestyle, consumption pattern among
others.
8. The working woman concept - More women are now found in working places,
which creates additional income to the family, increased demand for products
required by these women.
9. The Changing Family Structure. The household patterns have since changed,
from the traditional married couples to singles, divorcees and separated fam-
ilies.
2.3.3. Political /Legal Factors

This is concerned with government policies and regulations governing certain areas
of the economy. When a government makes a policy statement, it becomes law and
the concern of the marketer is to scan the environment and make use of laws that
are favourable to him/her and may sometimes lobby to make the government act
in his/her favour. The political environment consists of laws, government agencies
and pressure groups that influence and limit various organizations and individuals
in a society.
1. Laws Regulating Business - Well-conceived legislation encourages compe-

tition and ensures free markets for goods and services. Therefore, the gov-
ernment develops public policy to guide commerce. That is, every marketing
activity is subject to laws and regulations
2. Increasing Legislation - Legislation affecting business activity has increased

over the years. They include areas like, competition, fair trade practices,
environmental protection, product safety, truth in advertising, packaging and
labeling, pricing, and other important areas.
3. Changing Government Agency Enforcement - Marketers operating across the

borders will encounter numerous agencies put up to enforce trade policies and
15
regulations. Foe example, the international Standards Organization, Food and

Poison’s Act, Workman’s Compensation Policy, Employment Act, Consumer
product safety Act, Children’s Act, Environmental protection Act, Export
Compensation Act among other laws.
4. Increased Emphasis on Ethics and Socially Responsible Actions - Business

organizations are governed by social codes and rules of professional ethics.
Companies go beyond the regulatory framework and ‘does the right thing.’
These socially responsible companies actively seek out ways to protect the
long-run interests of their consumers and the environment.
2.3.4. 2.2.4 Social – Cultural Factors

These are institutions and other forces that affect the society’s basic values, per-
ceptions, preferences, and behavoiur. The market’s behavoiur and consumption
patterns are shaped by the society’s values and beliefs. The major cultural values
of a society are expressed in people’s views of themselves, and others, as well as,
in their views organizations, society, nature, and universe It can also be defined as
the specific influence on society and cultural structures, for example, social groups,
habits, religion, languages and many other differences. The implication is that, ev-
ery society has its own norms, attitudes and perceptions that may affect marketing
efforts uniquely.
In many societies there are defined roles for men and women, while in the U.S.,
the unisex roles are dominant. Some societies may be classified into low, medium
and high classes. This is a challenge to marketers because they have to appeal to
each group differently in terms of income, lifestyle, perception, attitude, likes and
dislikes and other areas of uniqueness. The social cultural aspect of a society has
led to the development of social institutions - e.g. Consumer Movement, Green Belt
Movement and Select Committees among others. It helps to check the standards of
goods and services and even fairness of policies. That is, these bodies advocate for
fairness, which may be contained by the following;
1. Cultural values - what the society believes in quality, image fairness and oth-
ers
2. Moral values - what is acceptable to the society
16
(a) Attitudes/beliefs /perceptions - these factors are subjective and hard to

Quantify.
The following Cultural values can affect marketing activity;
1. Persistence of Cultural Values - People in a given society hold specific beliefs

and values, which have high degree of persistence. For example, the British
and the Americans believe in working hard, donating to charity, being honest
and other behaviour patterns. These beliefs and values shape the people’s be-
haviour in a much more specific way. Core beliefs and values are passed on
from parents to children and are reinforced by schools, churches and the en-
vironment at large. Marketers must therefore understand the target market’s
beliefs and values.
2. Shifts in Values and Beliefs - Despite the fact that, core values are fairly per-
sistent, cultural swings or changes do occur. Marketers must therefore learn
to predict the cultural shifts within a society in order to spot new opportunities
or threats.
2.2.5 Technological Environment

Technology is a dramatic force now shaping the destiny of most organizations. That
is, it changes rapidly. It has released such wonders as the mobile phones, comput-
ers, organ transplants, human cloning, automobiles, T.V.s, aeroplanes and many
others and has created such horrors as, chemical weapons, nuclear missiles, assault
rifles among others. Technological advances focus on the way the technology (both
the level and rate of change) will affect the way an organization undertakes its busi-
ness. It’s of great implication to marketers in the area of new product development,
customer satisfaction and also its role in controlling and standardizing quality of
products and services. New technologies also create new markets and opportunities
Technology has come with computerization for many businesses and marketers are
striving to computerize their operations. Some are trying to enlist their services in
the internet. Internet marketing is increasingly becoming an important aspect of the
economy today. The age of technology has also enabled consumers to get better
products and services (e.g. ATMs). It has facilitated faster production of goods and
services and enabled businesses to earn economies of scale arising from large-scale
17
production. The marketers must know the level and rate of change in technology in
every target market.
2.3.5. Competitive Factors

With globalization, liberalization and computerization, stiff competition has set in,
in various sectors of the economy. Many economies have opened up their doors for
free trade increasing the number of competitors in every sector. Customers have
also become knowledgeable due to high education and increased awareness hence,
demand high quality products. Therefore, the marketers must know who their com-
petitors are, their products, objectives, strategies, strengths and weaknesses among
other factors. This will enable them to react to competition appropriately.
Marketers must also know the following;
1. Strength of competitors
2. Threats of new entrants
3. Availability of substitutes, i.e. products
4. Bargaining power of suppliers/distributors
5. Bargaining power of buyers
2.3.6. Geographical Factors

The concern of the marketers is to design strategies that suit the need of each ge-
ographical region, for example, location, district, neighbourhoods, countries, and
continents. Consumers are found in different regions of the world and have dif-
ferent tastes and preferences. Therefore, marketers must be able to target them
with different strategies, for example, customer characteristics (i. e. income, size,
growth potential, e.t.c), climatic conditions, behavoiur patterns and many others.
Revision Questions
E XERCISE 3. Briefly distinguish between the micro and macro environmental

factors
E XERCISE 4. How do organizations in Kenya react to technological advances?
18
Example . Briefly discuss the impact of political legal environment of Kenyan

firms
Solution: Adoption of rules and regulations. Adherence to rules in the market.
Response to the changing legislation
1. Adcock, D. Al, H. and Ross, C. (2001). Marketing: Principles and Practice,

4th Ed., London.
3. Kotler, P. (2011). Principles of Marketing, Prentice Hall, 14th Ed. New Delhi.
4. Kotler, P. and Armstrong, G. (2002). Principles of Marketing, Pearson Edu-

cation, Asia, 9th Ed..

6. Lehmann, D.R., Winer, R.S., Lehmann, D. and Winer, R. (2001). Product

Management. Prentice Hall.
19
LESSON 3
Marketing Research
Learning outcomes
Upon completing this topic, the student should be able to:
1. Describe the marketing steps in marketing research process
2. Identify sources of research information
3. Identify the research designs and the marketing information systems
3.1. Introduction
Marketing research can be defined as the systematic gathering, recording, analyz-
ing and reporting of data about problems relating to the marketing of goods and
services.
1. The types of marketing decisions which marketing research can help include:
2. Size of the market
3. Customers and their buying motives
4. The changing trends in the market
5. Evaluating marketing efforts like advertising – is it effective?
6. Customer satisfaction with company products
7. Least and most attractive features of company products
8. How well the company is performing in the market, i.e. the market share viii)
Help organization learn about its competitor’ strategies
3.2. Sources of information

Marketing research has two sources of information.
• Internal sources
• External sources
20
3.2.1. Internal Sources

This is a source of information that already exists in the organization. The informa-
tion had been collected for other uses but, can also be used for the current research.
It’s important to ensure that the organization understands how the information was
originally collected and has to be assessed whether or not the information is valid
to be used for the current research.
Sources of information include;
• Internal record system -records kept in the organization, for example, sales
figures, profit figures, payables, receivables and others records.
• Information collected from the employees, management, and shareholders.
• Company magazines, e.t.c.
3.2.2. External Sources

• These are sources outside the organization e.g.
• Trade sources e.g. marketing society of Kenya (MSK)
• Government sources or statistics, e.g. Population Census, Economic growth

etc.
• Media, e.g. TV statistics, Press, Magazines Publishers etc.
3.3. Steps in the Marketing Research

3.3.1. Definition and identification of the research problem
The problem of research must be identified clearly and it must be precise and not
ambiguous. As Churchill puts it, “ a problem well-defined is a problem half -
solved.”
3.3.2. Determination of the sources of information.

Two sources;
21
• Primary Source
This is a fresh field study to address the specific question that’s failing the organi-
zation. It is carried out to address a particular purpose, e.g.
1. Customer research /marketing research
2. Advertising research
3. Product research, product life cycle,
4. Competitor research
5. Pricing, packaging e.t.c.
Methods of Collecting Primary Data.

The most common methods include:-
1. Interviews - Personal interviews, Mail interviews, Telephone interviews.
2. Observation
3. Experimentation
4. Questionnaire method -“drop and pick”
5. Altitude scale tests
6. Consumer panels
• Secondary Source
This is an already available data not collected for the specific problem in question.
Sources of Secondary Data:-
1. Government Press
2. Official Publications
3. Magazines or journals from Professional bodies.
22
3.3.3. Determination of Data Collection

This will depend on the source of data to be collected. For secondary data, the
researcher will use desk research. That is, perusing through all the available data
relevant to the problem in question. Whereas, for primary data, the researcher will
have to institute fresh research or field study.
3.3.4. Determination of the Sample Designs to be used

This refers to the group of people or objects that the researcher is about to make
generalizations on the findings. The main concern of the researcher is to;
1. Define the population of interest - All those people likely to be interested in

buying the company’s particular product.
2. Specify the sampling frame - This is a list of all those in the population of in-
terest. If population of interest is women, then for hairdressers- the sampling
frame will be a list of all women who make their hair.
3. Specify the sampling units - This is the type of people to be interviewed that
is it has to be very specific, for example, housewives, businessmen and others.
4. Selection of sampling method - Which is the sampling method being used?

- How are the sampling units going to be selected for example, every 10th,
20th or 100th name in the sampling frame is mentioned.
5. Determine the sample size - The sample size must be representational of the
total population. This factor is determined much by the cost of interviews and
the budget allocated. Too large a sample, may be time wasting and costly.
3.3.5. Data Collection

Data collection involves conducting desk research, fieldwork or experiment. The
researcher should ensure that, proper data collection instruments are put in place,
especially the interview guides (the questionnaire), observation methods and others.
The process of data collection should be administered carefully to ensure that the
research design is properly followed. A lot of care is also required needed to ensure
that, factors that can bias or distort information are avoided as much as possible.
23
3.3.6. Data Analysis

The purpose of data analysis and interpretation is to obtain meaning from the re-
search carried out.
The preliminary analytical steps include;
1. Editing - data clean - up to ensure that the questionnaires are complete, accu-
rate and consistent
2. Coding - giving value to responses for ease of analysis
3. Tabulating - representing the information in a tabular form.
4. Cross-tabulation - That is, relating two or more variables, especially e.g. find-
ing out the relationship between the variables like, age, income, and gender
among others.
3.3.7. Report Results

Regardless of how well research has been carried out, the project is a failure if
the research report fails in its mission – which is to communicate with the read-
ers/audience. That is, the report is the yardstick for evaluating the research project.
A Good Report should therefore satisfy the following criteria:
1. Completeness - Should not leave out input details or procedures or research
2. Accuracy - Reporting exactly the findings of the project without exaggeration
3. Clarity - Must be clear in terms of sentences, expressions and explanations.

There should be no use of jargon.
4. Conciseness - Must be brief - Should not elaborate on unnecessary detail and

should be non-repetitive (This is when we talk about quality of the research
report).
3.3.8. Research Design

A research design or type of research refers to the research method to be used.
Types of marketing research may be classified according to the purpose of data
collection (Basic Research Designs) while classification according to method of
data collection is referred to as secondary designs to be covered later.
24
• Basic Designs include;

Exploratory Research - It can be defined as research to gather preliminary in-
formation that will help define problems and suggest hypotheses. It is most
appropriate where there is little or nothing known about a phenomenon and
hence the need to explore and gain insights and ideas about a particular prob-
lem. Explanatory research in this case, may help to generate explanations,
which may be used as starting points into further research or main research.
For example, customer survey to know the market’s tastes and wants. That is,
researchers first and foremost, must look at the general tastes and preferences
that customers exhibit, then on the basis of this, carry out a main research.
Descriptive Research - This is marketing research to better describe marketing

problems, situations or markets, such as the market potential for a product or
the demographics and attitudes of consumers in a target market. It is most
appropriate where the researcher is fairly knowledgeable about a key aspect
or subject of the study but, has little knowledge if any, regarding their char-
acteristics, nature or details. Hence, a descriptive study aims to generate
knowledge that may be used to describe or develop a profile of what is being
studied.
Causal Research - This is a marketing research to test hypotheses about cause and
effect relationship.
Under this method the researcher can do the following;
• Manipulate one or more variables in order to determine their effect
• Control extraneous variably and other variables so that they do not affect the
results of the study. For example, one can confine the respondents in product
testing, to the extent that the researcher only asks questions to those who have
just tried out the product without any external influence.
Secondary Research designs include;
1. Surveys
2. Case studies
3. Experiments
25
3.4. Marketing Information System (MIS)

MIS consists of people, equipment and procedures to gather, sort, analyze, evalu-
ate and distribute; needed, timely and accurate information to marketing decision
makers. The marketing information system interacts with managers to;
• Assess information needs
• Develop needed information
• Information Analysis
• Distribute information to managers
3.4.1. Assessing Information Needs

A good MIS should balance the information the managers require against what they
really need and what is feasible to offer given the organizations resources. This can
be ascertained through interviews with managers. Care should be taken on too
much information, as well as, too little information –both can be dangerous. The
company also looks at the cost of obtaining the information from elsewhere in terms
of affordability.
3.4.2. Developing Information

The information the marketing managers require may be obtained from:-
• Internal record System (I.R.S) - This consists of information gathered from

operations within the company, to evaluate marketing performance and to
identify marketing problems and opportunities. Many companies now build
extensive databases, computerized collections of information obtained from
data sources within the company. It includes sales figures, receivables, payables,
costs and cash flows and other sources. This information is vital for day-to-
day planning, implementation and control of decisions and can be used to
evaluate company performance, detect problems and create new marketing
opportunities.
• Marketing Intelligence System (MIS) - This is the systematic collection

and analysis of publicly available information about competitors and devel-
opments in the marketing environment. That is, it is the every day infor-
26
mation about developments in the environment. It determines what intelli-

gence is needed, gathers, analyzes and distributes the information about the
company’s competitive, technological, customer, economic, social and polit-
ical and regulatory environments and delivers it to the marketing managers
for decision-making. The main goal of marketing intelligence is to improve
strategic decision-making process in organizations, assess and track competi-
tors’ actions, and provide an early warning of opportunities and threats. Much
intelligence can be collected from company’s personnel, suppliers, distrib-
utors, competitors, annual reports, share – holders or even subscribing for
on-line databases. Some staff also can also scan the available publications,
summarize important news and send the bulletins to the marketing managers.
This improves the quality of information within an organization.
• Marketing Research - This is the function that links the consumer or cus-
tomer and the public to the marketer through information used to identify and
define marketing opportunities and problems: to generate, refine and evalu-
ate marketing actions; to monitor marketing performance; and to improve
understanding of the marketing process.
3.4.3. Information Analysis

Information gathered from the marketing intelligence and the company research
systems requires more analysis in order for managers to apply the information to
their marketing problems and decisions. This might involve more advanced statis-
tical tools to find out the relationship between variables, as well as, mathematical
tools to enable them come up with quality information vital for effective decision
making.
3.4.4. Distributing the Information

Marketing information has no value until the managers use it to make better deci-
sions. The information gathered from all these processes must be distributed to the
marketing managers at the right time. With the recent developments in informa-
tion technology, most companies are decentralizing their marketing operations and
most of the times, the managers have direct access to information network through
personal computers and outside sources.
27
Revision questions
Example . Distinguish between market and marketing research

Solution: Market research is research about a specific market. Marketing research
is research conducting to solve general problems affecting the market
E XERCISE 5. Why do organizations find it necessary to carry out marketing

research in their firms?

1. Churchill, G.A. Jr., Iacobucci, D. (2009). Research Methodological Founda-
tions, Cengage Learning.
2. Hunter, G K. and Perrault, W. D. Jr. (2007). “Making Sales Technology

Effective,” Journal of Marketing, Vol. 71, No. 1.
4. Kotler, P. (2011). Principles of Marketing, Prentice Hall, 14th Ed.New Delhi.
5. Kotler, P. and Armstrong, G. (2012). Principles of Marketing, Flat World

Knowledge, 14th Ed


8. Solomon, M. R. (2012). Consumer Behaviour, 10th Ed.
28
LESSON 4
Consumer Behaviour
Learning outcomes
1. Assess the importance of customers
2. Describe the influences on customer behaviour
3. Describe the types of consumer buying roles
4. Assess the consumer buying process
5. Describe the reasons why consumers behave the way they do
4.1. Introduction
The definition of marketing introduced in chapter one, stresses the importance of
understanding and responding to consumer needs. To do this effectively, it is im-
portant to develop an understanding of buyer behaviour. This means understanding
how consumers make decisions about purchases, what motivates them and what
their expectations are for various products. It can be defined as the behaviour ex-
hibited by individuals or organizations in planning, purchasing, and using economic
goods and services. The ultimate concern for the marketer is what causes the act of
purchase or non-purchase.
4.1.1. Reasons for studying Consumer Behaviour

The way a buyer behaves dictates the company’s marketing, production and other
strategies. This has a great impact to its success or failure, for example, every
consumer with his/her individual demand constitutes a vital element of the total
demand figure for the organization.
1. The consumer behaviour is a major component of the marketing concept.

That is, a firm should create a marketing mix that satisfies consumer needs
and wants given the changes in their behaviour. To be able to do this, a
marketer has to consider the reasons for consumer behaviour (i.e. why, when,
where, how and who).
29
2. By gaining better understanding of the factors that affect consumer behaviour,

a marketer is better placed to predict how consumer will respond to the firm’s
total marketing strategy.
3. Exposure to stimulus has been known to activate desired response and mar-
keters accomplish this through advertising.
4. Increases company sales through satisfied consumers in terms of repeat pur-

chases, word-of-mouth and consumer loyalty. That is, it enables companies
to be profitable in business.
5. Understanding consumer behaviour decreases the level of risk especially in

purchasing or launching of new products.
6. Helps in implementing effective marketing activities, e.g. planning, hence,

proactive strategies. It also encourages flexibility in designing the marketing
program.
7. As consumers, we benefit from one’s own consumption patterns. We would

be able to understand why we buy, when, what, where, e.t.c. This helps us to
be better customers.
8. As scholars, it helps us to understand why consumers act in a certain con-

sumption way or related pattern.
4.1.2. Factors Influencing Consumer Behaviour

• Cultural Factors
These exert the broadest and deepest influence on consumer behaviour. Here, we
talk about roles played by the consumers’ culture, sub-culture and social class.
• Culture: This is the most basic cause of a person’s want and behavior. Hu-
man behaviour is greatly learned especially from the society. For exam-
ple, one acquires values, perceptions involvement in activities, efficiency and
practicality, progress, individualism and many other behaviour patterns. Ev-
ery group in a society has a culture, and cultural influences on buying be-
haviour vary greatly from one country to the other. Failure by marketers to
adjust to these differences can result in ineffective marketing programmes or
embarrassing mistakes
30
• Sub-Culture: This consists of smaller sub-cultures or groups of people with

shared value systems based on common life’s experiences and situations that
provide more specific identification and socialization for its members. This
includes nationality, racial groups, religion, and geographic region which
make-up important market segments. For example, one may be from a cul-
ture that places more importance on education, business/wealth, e.t.c. Hence,
acquires such orientation.
• Social class: These are relatively permanent and ordered divisions in a soci-
ety whose members share similar values, interests and behaviours. They are
various social stratifications in any society, for example, the various caste-
system is known for certain roles and cannot change their caste membership.
Members of a social class share similar values, interests, behaviour, educa-
tion, places of residence, among others. Social classes differ in their dress,
speech, pattern of consumer behaviour, educational preferences, among many.
Marketers must therefore, identify the various social classes in every soci-
ety and tailor-make the products and services to meet customers’ wants and
needs.
• Social Factors
• Reference Groups - These have direct influence or one’s attitude and be-
haviour. They include family members, friend and neighbours. It exposes an
individual to certain behaviour and lifestyles and creates pressures for confor-
mity. Marketers concern is to identify the reference group and targets them
with program tailored towards meeting the needs and wants of that group.
• Family - This is the most influential social group. Through this, one ac-
quires an orientation towards religion, politics, buying behaviour, education,
love and Self -worth among others. Marketers are interested in the buying
roles and relative influence of husbands, wives, children and their buying
behaviour. Buying patterns that are male dominated are taking insurance
policies, buying cars, acquiring property and many others. Marketers selling
households goods should target the wives and for entertainment, marketers
should target youngsters.
• Roles and Statuses - A person belongs to many groups, for example, the
31
family, clubs, organizations, among others. That is, the person’s position in
each group can be defined in terms of both role and status. Each role carries
a status reflecting the general esteem given to by the society, i.e. people often
buy products that communicate their role and status in the society.
4.1.3. Personal Factors

Buying behaviour is influenced by personal characteristics. That is, age, sex, econ-
omy, occupation, personality, lifestyle, self-concept, and many others.
• Age - People of various ages buy different products
• Occupation - Blue-collar workers will buy more rugged work clothes, whereas,
white-collar workers will buy more business suits. Marketers’ concern is to
identify the various groups and develop marketing strategies for each of them.
• Economic situation - This depends on income, savings and assets. For ex-
ample, attitudes towards spending will influence how much one spends on
what. Marketers of sensitive products pay attention to changes on personal
income, savings, among others.
• Lifestyle - This is a person’s pattern of living as expressed in his/her psycho-

graphics. It involves measuring a person’s activities, interests and opinions,
which portray the whole person. Since people depict various lifestyles, mar-
keters must be cautious about which lifestyle is exhibited.
• Personality - This is a person’s distinguishing psychological characteristics

that lead to relatively consistent and lasting responses to his or her own en-
vironment. Personality is usually described in terms of traits such as, self-
confidence, dominance, defensiveness, sociability, autonomy, aggressiveness,
adaptability, and many other characteristics.
4.1.4. Physiological Factors

A person’s buying choices are influenced by innate factor such as:-
• Motivation - This is an inner drive or the urge that is sufficiently pressing to

direct the person to seek satisfaction of the need. Customers are motivated by
different factors, for example, Maslow’s Hierarchy of Needs.
32
• Perception - A motivated person is ready to act.
• Attitudes - It describes a person’s relatively consistent evaluations, feelings

and tendencies towards an object or an idea. Attitudes put people into the
frame of mind that of, liking or disliking things, of moving towards or away
from them. For example, attitudes like, “ Buy the Best,” or “Creativity and
Self-expression are among the most important things in life,” (Japanese Slo-
gan).
4.2. Consumers’ Buying Roles

There are 5 major roles or decision.
1. The initiator - This is the first person who suggests the idea of buying.
2. The influencer - This is the person whose view or advise, influences the deci-
sion.
3. The decider - One who decides the buying of the product, i.e. what to buy
and how.
4. The buyer - One who makes the actual purchase
5. The user - One who consumes / uses a product or service.
4.3. Types of Buying Decision Behaviour

Buying decision varies from what is to be purchased. Complex and expensive pur-
chases are likely to involve more buyer participation deliberation. Four major con-
sumer buying decision behaviour based on the degree of buyer involvement and the
degree of differences among brands have been identified.
They fall into 2 major categories;
• High involvement
• Low involvement
33
4.3.1. High Involvement Buying Behaviour

• Complex Buying Behaviour - This is a consumer buying behaviour in situ-
ations characterized by high consumer involvement in a purchase and sig-
nificant brand differences. That is, consumers are highly involved in a pur-
chase decision and are aware of significant differences among brands, es-
pecially when the product is expensive but infrequently bought, risky and
highly self- expressive, like the personal computers, the consumer does not
know much about the product and have to learn about it. The buyer devel-
ops beliefs and perceptions about the product and lastly makes a thoughtful
purchase choice. Therefore, the concern of the marketer is to understand
the information-gathering and evaluation behaviour of high involvement con-
sumers, avail the information to enable the consumers learn more about the
product, its attributes and their relative importance. That is, the marketers
must understand the complex buying behaviour of various customers, differ-
entiate their brand features and motivate the store sale force and the buyer’s
acquaintances to influence the final brand choice.
• Dissonance-Reducing Buyer Behaviour - This is a consumer buying behaviour

in situations characterized by high involvement but, few perceived differ-
ences among brands. The consumer sees little difference in the brands. It’s
a high involvement decision because the product is expensive, infrequently
bought and the consumer will take his/her time shopping around and pur-
chasing quickly, responding primarily to a good price. After the purchase,
the consumer may experience post-purchase dissonance (after-sale discom-
fort or anxiety) when they notice certain disadvantages or hear something
about other products not purchased and will always be alert for information
that justifies his/her decision about the purchase. To counter this bad feeling
by the consumers, the marketers’ after-sale communications should provide
evidence and support to help consumers feel good about their brand choices.
4.3.2. Low Involvement Buying Decisions

• Habitual buying behaviour - Here, the products are bought under conditions
of low involvement and few significant perceived brand differences, for ex-
ample, salt, sugar, bread, and others. The consumers go to the supermarket
34
and reach out for the brand as a habit and not out of strong loyalty. This
shows that, buyers have low involvement with low-cost products, frequently
purchased. Consumers do not search for information about the brands but
get the information as they watch T.V advertisements. Repetitive advertising
creates brand familiarity rather than loyalty. They do not form strong attitude
towards a product. That is, the purchase of a product is by familiarity. A mar-
keter of low involvement products with few brand differences finds it effective
to use price and sales promotions to stimulate product trial since consumers
are not committed to any brand. Adverts should only stress a few key point,
use symbols and imagery that can be remembered and marketers can link the
product to a high involvement purchase brands. The adverts should encour-
age high repetition of short-duration messages. This is in order to raise the
consumer involvement to a moderate level.
• Variety- seeking buying behaviour - The purchase decision is characterized

by low consumer involvement but significant perceived brand differences.
Hence, a lot of brand switching, especially cookies, sweets, chocolates, among
others. That is a consumer picks a product without much evaluation but eval-
uates the product during consumption, and next time the same consumer may
reach out for another brand. Therefore, brand switching occurs out of variety
rather than satisfaction. The market leaders have to encourage habitual buy-
ing behaviour by dominating the shelf space in the supermarkets, avoiding
out of stock conditions and sponsoring numerous reminder advertising. The
challengers will encourage variety - seeking by offering lower prices, special
deals, free samples and advertising that presents reason for trying something
new.
4.3.3. The Buyer Decision Process

There are 5 main stages:-
• Problem Recognition
The buying process starts when a buyer recognizes need/problem which can be trig-
gered by internal/ external stimuli, for example, thirst, hunger, security and others.
The marketers need to know the circumstances that trigger a need then develop a
marketing strategy to trigger a purchase.
35
• Information Search
The customer will search for information about a product or service while paying
attention to adverts, friends, colleagues and other sources in the office or within
their surrounding. Information search depends much on the customers’ drive, the
value placed on additional information and the satisfaction to be received from the
search. Therefore, companies or marketers must strategize to get their brands into
awareness set, consideration set, and choice set so that the company can plan for a
competitive appeal.
• Evaluation of Alternatives
A consumer has a need to satisfy, looks for certain benefits from the product and
sees each product as a bundle of attributes with varying abilities of delivering ben-
efits. He/she develops brand beliefs and brand image. This depends on selective
perception, selective distortion and selective retention. Then arrives at attitudes
about the product through an attribute evaluation. The consumer has a set of al-
ternative products, and based on attributes he/she will make a purchase decision by
comparing his/her preferences about each product. The marketers therefore, need to
find out how they actually evaluate brand alternatives in order to be able to influence
the buyers’ decisions.
• Purchase Decision
This is the stage of the buyer decision process where the consumer actually buys the
brand on the basis of preference. The stage takes into consideration the customer’s
attitude towards the brand and also situational factors (e.g. loss of job).
Sometimes, the consumer’s decision to modify, post-pone or, avoid a purchase de-
cision may be heavily influenced by the perceived risk. This varies with the amount
of money at stake, attribute uncertainty, attitude of others and the amount of con-
sumer self-confidence.
• Post-Purchase Behaviour
The stage of the buyer decision process in which consumers take further action af-
ter purchase based on their satisfaction or dissatisfaction. That is, after purchasing
the product, a consumer experiences some level of satisfaction, or dissatisfaction.
A satisfied consumer is likely to make a repeat purchase and also tell others about
36
the brand (good-mouthing). A dissatisfied consumer will suffer consumer disso-

nance/consumer anxiety. He/she will likely not have a repeat purchase and will
discourage other potential buyers from buying the product (bad-mouthing). There-
fore, marketers have a duty to match the performance of the product to the perceived
idea of it by the consumer.
• If performance falls short of expectation - Dissatisfied
• If performance matches expectation - Satisfied
• If performance exceeds expectation - Delighted
4.4. Summary
Solid understanding of customer behaviour is of utmost concern to the firms be-
cause the customers are the main reason for any business’ existence, since without
the customers to sell to, the business cannot operate. That is, consumer behaviour
will influence success or failure of a marketing strategy since a firm must create
a marketing mix that satisfies consumers. Therefore, organizations must strive to
meet the customers need better than competitors do. Every customer that deals with
an organization should be left with a feeling of satisfaction. This outcome leads to
repeat purchase, and customer loyalty.
37
Revision questions
Example . What is the importance of consumer satisfaction?

Solution: Increases probability for the firm. Increases customer loyalty and patron-
age. Increases customer base. Encourages repeat purchase

E XERCISE 6. What are the five key stages in the consumer buying process?

1. Hunter, G K. and Perrault, W. D. Jr. (2007). “Making Sales Technology
Effective,” Journal of Marketing,
2. Hawkins, D. and Mothersbaugh, D. (2012). Consumer Behaviour, 12th Ed.
5. Kotler, P. and Armstrong, G. (2012). Principles of Marketing, Flat World

Knowledge, 14th Ed
6. Kotler, P. and Armstrong, (2002). Principles of Marketing, Pearson Educa-

tion, Asia, 9th Ed..

8. Solomon, M. R. (2012). Consumer Behaviour, 10th Ed. Vol. 71, No. 1.
38
LESSON 5
Market segmentation
Learning outcomes
1. Describe is market segmentation?
2. Understand the reasons for market segmentation
3. Assess the requirement for effective market segmentation
5.1. Introduction
In the earlier discussion, it is obvious that not all consumers are identical. That is,
thy do not have the same motivations, needs or patterns of behaviour. Due to this, it
is common for organizations to attempt to divide their markets into groups, which
may have particular attitudes or characteristics in common. Provided that these
characteristics are related to their buying behaviour, it is then possible to develop
specific products and /services and marketing campaigns which are tailored to the
needs of these different market segments. Therefore, marketers today realize the
fact that they cannot appeal to all customers in the market place with one marketing
programme. Buyers are now too numerous, too widely scattered, and too varied in
their needs and wants or buying patterns. On the other hand, companies themselves
vary widely in their abilities to serve different segments of the market. Therefore,
each company has to identify which segments of the market it can best serve.
Market segmentation can be understood by distinguishing between mass and
target marketing;
5.1.1. Mass Marketing

This is using the same marketing program to target the whole population (“Shot-
gun” approach or undifferentiated marketing). However, in mass marketing, the
seller engages in mass production, distribution and promotion for one product for
all the buyers. The main argument for mass marketing is that it creates the largest
potential market, which leads to the lowest costs, which in tern translate into either
39
lower prices or higher margins. However, many factors have now made mass mar-
keting difficult due to changing preferences and tastes, technological, consumption
patterns and advertising appeals among others. Therefore, most companies are now
moving away from mass marketing to market segmentation and target marketing
5.1.2. Target Market

Here, the seller distinguishes major market segments, targets one or more and de-
velops products and programmes tailored towards each segment. That is, firms are
focusing on the buyers who have greater interest in the values they create best (“Ri-
fle” approach or differentiated marketing).
5.2. Levels of Market Segmentation

There are 4 levels:-
5.2.1. Mass Marketing

Up to 1990s, many companies practiced mass marketing and not target marketing.
Most consumer products companies practiced mass marketing (“one-size-fits-all”
marketing). That is, mass production, mass distribution, and mass promotion of the
products. For example, Henry Ford widely used this strategy when he offered the
model T Ford to all buyers. Similarly, Coca-Cola at one time produced only one
drink for the whole market, hoping it would appeal to everyone.
5.2.2. Segment Marketing

The marketer isolates broad segments that make up a market and adapting the mar-
keting strategy to match the needs of one or more segments. Therefore, segment
marketing consists of a large identifiable group within a market.A company that
practices this type of marketing recognizes that, buyers differ in their wants, buying
attitudes, purchasing power and many other characteristics.
5.2.3. Niche Marketing

A marketer focuses on sub-segments or niches with distinctive traits that may seek
a special combination of benefits. Therefore, a niche is a more narrowly defined
group, typically a small market whose needs have not been well served. Niche
40
marketing, can be carried out by dividing segments into sub-segments, or defin-

ing a group with a distinctive set of wants, who may seek special attributes of a
product, for example, heavy smokers segment consisting of heavy smokers, who
are overweight. Niches are normally small markets, which attract one or a few
competitors. Most of the time, they attract smaller companies, and niche marketers
understand their niches so well that their customers are always willing to pay a
higher price (premium).Niching offers smaller companies an opportunity to com-
pete by focusing their limited resources on serving niches that may be unimportant
to or overlooked by larger competitors. In many markets niching is the norm.
5.2.4. Micro-Marketing
This is tailoring products and marketing programs to suit the tastes of specific indi-
viduals and locations.
It includes;
• Local Marketing
This is tailoring brands and promotions to the needs and wants of local customer
groups (i.e. cities, neighbourhoods, specific stores, e.t.c.). Target marketing is in-
creasingly taking on the character of regional and local marketing programmes. For
example, the retailers (Uchumi and Nakumatt) may customize their merchandise
and promotions to match their specific clientele.
• Individual Marketing
This is the ultimate level of marketing segmentation and the micro - marketing
becomes individual marketing where, the companies tailor-make products and mar-
keting programs to suit the needs and preferences of individual customers. It has
been labeled one-to-one marketing, customized marketing and markets-of-one mar-
keting
5.2.5. Basis for Segmenting Consumer Markets

• Geographic Segmentation
This calls for dividing the market into different geographical units, particularly, the
nations, areas, regions, neighborhoods, and others. The company can decide to
41
operate in one or more segments but adapt to local variations in terms of tastes and
preferences.
• Demographic Segmentation
The market is divided on the basis of demographic variables (e.g. age, family size,
gender, income, religion, race, generation, nationality and social class).
• Psychographic Segmentation
Buyers are divided into groups on the basis of lifestyles and or personality (i.e.
opinions, attitudes among others).
• Behaviouristic Segmentation
Buyers are divided into groups on the basis of knowledge of, attitude towards, use
of or response to a particular product. Many marketers believe that, behavioural
variables like occasions, loyalty status, buyer readiness, benefit, usage rate and at-
titude are the best starting points for segmenting markets, i.e.
• Occasions - regular or special occasions.
• Benefits - quality, services, speed, e.t.c.
• User status - users, potential, regulars and first timers etc.
• Usage rate - non-users, medium and strong users, etc.
• Buyer readiness - unawareness, aware, informed, desirous, intending to buy,

e.t.c.
• Attitude towards - enthusiastic, positive, negative, indifferent, hostile, e.t.c.
5.2.6. Basis of Segmenting Business Markets

1. Demographic Factors
(a) Industry - which industries should we serve?

(b) Company size - which size of the company should we target/serve?
(c) Location - which geographical or regional areas should we target?
2. Operating Variables
42
(a) Technology - what kind of technology are consumers interested in?

(b) User or non-users status,
(c) Customer capabilities - what is the customer capable of?
3. Purchasing approaches
(a) Purchasing function organization - structure, i..e. whether centralized

or decentralized.
(b) Power structure - marketer should identify the key people in the or-
ganization and find out how much power they have. They can easily
influence a purchase decision.
(c) Nature of existing relationship - strong relationship or most desirable
companies
(d) General purchase policies - companies that prefer leasing contracts or
sealed biding or tendering.
4. Situational Factors
(a) Agency - some customers will require quick and sudden delivery sys-
tem.
(b) Specific application - we have certain specific products being applied
for separately or an application for all products.
(c) Size of order - in small or large quantities.
5. Personal Characteristics
(a) Buyer-seller similarity - Organizations find it easy to access customers

with similar values, e.t.c.
(b) Attitudes towards risks - whether the decision makers are risk-takers,
avoiders, neutral or averse.
(c) Loyalty status - look at a company that shows high loyalty to you as a
supplier or marketer.
43
5.2.7. Requirements for Effective Segmentation

1. Measurable, - in terms of size, purchasing power and characteristics of the
segments.
2. Sustainable, i.e. larger and profitable enough to serve or be served, i.e. the
largest possible homogenous group worth going after with a tailored market-
ing program.
3. Accessible - the market should be accessible and served effective.
4. Differentiable, i.e. distinguishable and respond differently to different mar-

keting mix elements.
5. Actionable - worth a strategy/programme.
5.2.8. Summary
• Today market segmentation is becoming an important and an essential ap-
proach to be adopted by firms across the board Its prime function is to identify
and group customers with similar characteristics and similar needs as far as
the goods and services are concerned. The identification of market segments
and the categorization of consumers across those segments provides the basis
not only for the development of the products and services which are better tai-
lored to the needs of consumer; it also provides valuable information which
can be used in developing efficient and effective promotional campaign.
44
Example . Explain some of the benefits that can accrue to a company due to the
use of market segmentation strategy
Solution: Efficient use of resources. Increased profitability. Specialization in cus-
tomer needs and wants. Encourages flexibility. Leads to product development.

Revision questions
E XERCISE 7. What is the difference between market segmentation and mass

marketing?
References and Additional Reading Material

4th Ed., London.
3. Kotler, P. and Armstrong, (2002) Principles of Marketing, Pearson Education,

Asia, 9th Ed..


6. Solomon, M. R. (2012). Consumer Behaviour, 10th Ed.Baker, M.J. (1992).

Marketing Strategy and Management, 2nd Ed., Mac Millan Press, London.
Gronroos, C. (2000). Service Managemnt and Marketing: A Consumer Re-
lationship, 2nd Ed., Chichester, Jon Wiley and Sons Ltd.
7. McDonald, M. and Dunbar, I. (2012). How to Do it and How Profit from it.
John Wley and Sons, 4th Ed.
45
LESSON 6
Marketing Mix
Learning outcomes
1. Describe the key elements of the marketing mix
2. Describe the product levels and classifications
3. Assess the product life cycle stages and new product development
4. Describe the adopter categories and the adoption process
6.1. Introduction
Marketing mix is set of marketing tools that a firm uses to sell its products or, it can
be referred to as a configuration of strategies that focus on a particular market in re-
lation to the product, price, distribution and promotion. It presumes a target market
and that the marketer has knowledge of the consuming public and environmental
conditions. It generally dictates the survival of the products and to a larger extent
the survival of the firm.
There are dozens of marketing tools, which, have been classified into 4 P’s,
namely:-
• The Product
• The Price
• The Place
• Promotion
6.2. Product Decisions

A product can be defined as anything that can be offered to the market for attention,
acquisition, rental, use or consumption that might satisfy a need or a want.
46
6.2.1. Five Levels of A Product

1. Core Product - This is the most basic level of a product, i.e. the core prob-
lem solving benefits that consumers look for in a product. That is, it addresses
what the customer is really buying, for example, hotel - “rest & sleep,” or in
factory, the manufacturers make cosmetics, but they sell hope. Therefore, the
core product stands at the center of the total product. Marketer’s main con-
cern is to identify the core benefits the product will provide to the consumers
and understand the total consumer experience that surrounds the purchase
and use of the product
2. Actual Product - Marketers must turn benefits into an actual product around
the core product, for example, hotel room includes, bed, bathroom, towel,
desk, and so on, or for Coke, its name, features, packaging convenience,
portability, quality and other attributes have all been combined to deliver the
core benefits.
3. Expected Product - This is a set of attributes and conditions that buyers

normally expect and agree to when they purchase the product, for example, a
clean room, clean towel, working bulbs and relative degree of silence.
4. Augmented Product. - This meets the customer’s desires beyond their ex-
pectations, for example, the hotel manager may augment his/her product by
including a remote control T.V set, fresh flower, rapid check-ins, fine dining,
e.t.c. It describes what’s included in the product today. The product planner
builds an augmented product around the core and actual products by offering
additional consumer services and benefits. For example, when a consumer
buys Sony camcorder, the equipment must provide a complete solution to
the consumers’ picture taking problems. That is, the manufactures must pro-
vide warranty on parts, instructions on how to use the product, quick repair
services among others.
5. Potential Product - Encompasses all the augmentations and transformations

that the product might ultimately undergo in the future – its possible evalu-
ation. Companies search aggressively for new ways to satisfy the customer,
for example, en-suite hotel rooms. They not only add benefits that satisfy
their customers but, also surprise and delight them.
47
6.2.2. Product Classification

This falls into two major categories
• Consumer products
These are products bought by consumers for final consumption. They are classified
according to the way consumers go about buying them. The examples include;
1. Convenience Goods - These are products that are bought frequently, imme-
diately and with less comparison and minimum buying effort, for example,
cigarettes, soap, salt, bread, chocolates, newspaper, fast-food, e.t.c. They are
usually low-priced and the marketer distributes them through many outlets
making them readily available and avoiding out of stock conditions (inten-
sive distribution). Convenience goods can be classified further into;
(a) Staple goods - purchased on a regular basis

(b) Impulse goods - purchased without any planning
(c) Emergency goods - purchased when a need is urgent.
2. Shopping Goods - Usually expensive products and infrequently bought by

the consumers. Consumers compare them on the basis of suitability, quality,
price, and style. The consumers spend a lot of time and effort in gathering
information and making comparisons on the suitable brands. Examples in-
clude, furniture, cars, major electric appliances and many others.
3. Shopping goods - are usually distributed through fewer outlets but they pro-
vide deeper sales support to help customers in their comparison efforts (se-
lective distribution).
4. Specialty Goods - These are consumer products and services with unique
characteristics or brand identification for which a significant group of buyers
are willing to make a special purchase effort. Examples include luxury cars,
designer clothes, specialized services like medical, legal, marketing, accoun-
tancy, e.t.c. The consumers normally do not compare specialty products in
terms of prices or quality.
48
5. Unsought Goods - These are consumer products that the consumer either
does not know or knows about them, but does not normally think of buying.
Examples include, new innovations or new products and processes. Good ex-
amples of known but unsought products include insurance policies and blood
donations. Marketers must therefore create awareness through advertising,
personal selling and other marketing efforts so as to enlighten the market
about them.
• Industrial Products
These are products purchased by individuals or organizations for further processing
or for use in conducting a business. Examples include materials and parts, capital
items, and supplies and services among others.
6.3. The Product Life Cycle (PLC)

Products have life cycles that can be divided into four stages, namely;
1. Introductory
2. Growth
3. Maturity
4. Decline
6.3.1. Characteristics of each Stage

• Introductory Stage
The introductory stage starts where commercialization of a product stops, i.e. at
the end of the new product development stage. At this stage, profits are negative
because of low sales and heavy distribution and promotion expenses. The firms
with products at this stage experience high costs of production, net losses, and
limited distribution and coverage for the products. It is a very risky and an expensive
stage. Competition is low because of few competitors who sell same versions of the
product. Attention is focused on consumers who are most ready to buy, usually,
the high income, innovators. Prices tend to be high due to cost of production,
technological problems and need for higher margins to support future production.
Marketers have to concentrate on scheming and penetration strategies.
49
• Growth Stage
This stage is marked by rapid increase in sales and profits. The implication is that,
the majority of consumers have not adopted the product and production costs are
still higher. Since, this stage is the most attractive of all the PLC stages, competitors
are attracted into the market. The increased competition leads to wider distribution,
and factory costs of operation may rise.
Prices may fall or remain stable depending on the industry’s cost structure. Pro-
motion expenditure may be lowered or raised to meet the level of competition.
Marketers, therefore, concentrate on strategies like improvement of quality, modi-
fication and addition of more attributes to the product.
• Maturity Stage
This is a stage where the market gets to a mature stage. That is, the market/consumers
are well aware of the product being sold in the market. The rate of growth in sales
will slow down as production matures. That is, the level of sales and profits will
increase but, at a declining rate. Profits may level out.
Due to this, the level of competition may decrease in the industry because sales
are not growing and firms are no longer attracted into the market. The maturity
stage lasts longer than any of the stages in the life history of a product. Therefore,
marketers may concentrate on product improvement, modification and addition of
more attributes.
• Decline Stage
This is the last stage in the PLC. Sales decline due to over-capacity, technological
advances, differing tastes and preferences, e.t.c. The result of this is, profit erosion
and firms may close down. Firms that may remain may limit their production ca-
pacity because the market has shrunk. Marketers should therefore, use strategies
like holding, increasing investment and divesting from the business or shrinking the
level of business.
6.3.2. Criticisms or Practical Problems

The PLC faces the following problems, namely;
1. Time period - It’s not easy to predict the life span of a product because some
may go out of the market so soon while others last forever.
50
2. Shape of the curve - The PLC curve can take the following shapes and not
the conventional one
3. Sales decline continuously Sales have humps Sales rise and drop fast
4. Product Definition - the concept of the P.L.C. It does not define what it is that
is being referred to in marketing.
The term Product may refer to any of the following;
• Product Item - Specific designation of a product, e.g. Lux, Colgate, Datsun,

etc.
• Product Line - A whole range or line of products, e.g. detergents, cooking

fat, e.t.c.
• Product Mix - all products produced by a company.
6.3.3. New Product Development (NPD) Process

A new product is a good or service or idea that is perceived by both existing and
potential consumers as new. It may include a new product per se or new modifica-
tions or new inventions of a product. This is because in each case the consumer is
experiencing the product for the first time.
The Process involves six stages;
• Idea Generation
This is where all ideas concerning a product are generated. The ideas may be nu-
merous, but, at any given time, an organization can only develop one idea at a time,
given the scarcity of resources. Ideas generated could come from both existing and
potential customers, competitors, scientists, sales representatives, top management,
employees, distributors or suppliers among others.
• Idea Screening
All the ideas from stage 1 are screened and evaluated realistically. The company’s
aim is to identify ideas that are worth developing in terms of their feasibility given
the resources available within the organization. The management, therefore, must
determine the ideas that warrant further study.
51
• Business Analysis/Feasibility Stage

Through forecasting the management reviews future sales, costs, profit estimates to
determine how they comply with the company’s objectives. An idea that survives
up to this stage is expanded into a concrete business proposal.
Management should;
• Identify the production features for the product
• Estimate the market demand and the product’s profitability. iii) Establish a
program to develop the product. iv) Assign responsibilities for further study
for the product’s feasibility.
Several techniques can be used to determine whether they comply with the
company’s objectives.
• Break-even analysis.
• Pay-back period
• Rate of return on investment (ROI)
• Product Development
Following the successful feasibility study, marketers must develop a full product
concept. That is, ideas on paper converted into a physical product or developed
into a concept that appeals to the customers. For example, pilot models or small
quantities may be manufactured or samples of the product distributed to encourage
trial ability of the consumers. A corresponding target market is used to test the
concept. The management can then come up with other evaluations to determine
the production feasibility of the product.
• Test Marketing
Here, the idea is tested with the target market to see their behaviour and attitude
towards the new product. Market tests and other commercial experiments are con-
ducted to ascertain the feasibility of a full-scale marketing program in limited ge-
ographic areas. At this stage, design and production variables may have to be ad-
justed as a result of test findings. The management must make a final decision
regarding whether or not to launch and market the product commercially.
52
• Commercialization and Launching

After the market has been tested, marketers must decide to go into full-scale pro-
duction to launch and market the product. Before a product is launched into the
market, there are certain considerations that must be made. These include;
• Timing - which must be at the right time
• Geographical strategy - where or location?
• Target market prospects - growth potentials of the market
• How to enter the market - penetration or, skimming strategy?
6.4. Summary
A product is the focal point in the success of an organization. That is, if the product
is not consistent with what the consumers require then, there is very little that the
other marketing mix elements can achieve in the market. Once the core products
have been developed additional attributes or features must be added so as to dif-
ferentiate the product from competition. To do this successfully requires a regular
monitoring and understanding of both the internal and the external environment to
ensure the development of a product, which is consistent with organizational strat-
egy and internal capabilities as well as meeting the particular requirements of the
markets being served. New product development is an important component of the
product strategy for all organizations, since in effect, it is only through this that
products and services can be developed with sets of features that correspond to the
consumer requirements.
53
Example . What is a product?

Solution: anything that can be offered to the market for attention, acquisition, rental,
use or consumption that might satisfy a need or a want
Revision questions
E XERCISE 8. Exercise 2. Giving examples, distinguish among convenience,

shopping and specialty goods
E XERCISE 9. Exercise 3. “Products come and go.” Discuss this statement with
reference to life cycle stagesbeginsolutionAll product go through a life cycle stages
just as human beings. They are introduced, grow, mature and decline. Different
products have different product life cycles. Some die out almost immediately while
other last along period of timeendsolution

4th Ed., London.
2. Gremler, D., Bitner, M. J. and Zeithaml, V. A. (2012). Service Marketing,

6th Ed..

Asia, 9th Ed..

54
LESSON 7
Pricing Decisions
Learning outcomes
1. Describe the pricing objectives
2. Assess factors influencing on pricing decisions
3. Describe the approaches to pricing and outline the benefits of pricing
7.1. Introduction
Price can be defined as a measure of value exchanged by the buyer for the value
offered by the seller. As such, it may be expected that the price should reflect the
costs to the seller of producing the product and the benefit to the buyer of consuming
it. It can be the value placed on a good or a service by customers at one point in
time, a measure of what must be exchanged in order to obtain a particular good, or
what consumers pay for a product.
7.1.1. The Procedure in Price Setting Policy

1. Selecting a price objective - what a company wants to accomplish with its
products offer other goals i.e.
(a) Profit objectives - maximize its profits, target return;

(b) Sales objectives - growth in sales, growth in market share, maintain
share of the market;
(c) Competitive objectives - meet the level of competition; Price leadership
especially for large firms who are leaders in the various industries
2. Estimate the demand curve - probable quantities a product will sell at given
prices.
3. Estimate the cost curve, which varies at different levels of accumulated pro-
duction, experience, and for differentiated marketing offers.
55
4. Examine the competitors, costs, prices and even offers
5. Select one of the following strategies - Psychology of a customer, influence

of other marketing mix elements on price, company’s pricing policy, impact
of price on other parties
7.1.2. Factors Affecting Pricing Decisions

1. Internal and external Factors - Marketing objectives, type of market and its
characteristics, product’s demand in the market, low or high, consumers’ per-
ception of price and value (psychological), competitors’ costs, prices and of-
fers and other macro-environmental factors - e.g. economic, technological,
political, social-cultural, e.t.c.
2. Pricing Policies or Approaches - This deals with the issues of whether to offer
a product at a single or many different prices, how to price a new product,
psychological pricing and promotional pricing, e.t.c.
3. Cost - Plus Pricing - All the costs incurred during production are totaled up
and a reasonable margin is added. That is, all costs will be covered and
a desired profit level will be achieved. For example, cost-plus pricing by
intermediaries, or construction companies, i.e. they add a mark-up in order
to make profits thereby increasing prices to the final consumer.
4. Value - Based Pricing - This is setting a price based on the buyers’ perception
and not the sellers’ perception. A company using value-based pricing may
find out what value buyers assign to different competitive offers. This kind of
pricing is difficult to arrive at due to the varying consumer perceptions. Some
consumers, a high price may signify quality or prestige while, a lower price
may be viewed as a bargain or even an inferior quality. Psychological pricing
is designed to encourage purchases that are based on emotional rather than
rational responses. For example odd pricing, e.g. 199/= is viewed as lower
than 200/=. The law of attractive numbers may also be used by consumers to
make a choice on a product. For example, Ksh. 88 may be viewed as more at-
tractive than Ksh.99 or Ksh.77. Thus, more and more marketers have adopted
value-pricing strategies – offering just the right combinations of quality and
good service at a fair price.
56
5. Demand - Oriented Pricing - Pricing based on the demand level prevailing in

the market. That is, marketers set a higher price when demand is higher and
vice versa.
6. Competition-Oriented Pricing - This is setting a price based on what the com-

petitors charge for similar products, for example, the going-rate pricing. Mar-
keters must decide to keep their prices higher or lower than competitors de-
pending on their objectives.
7. Professional Pricing - Used by professional people with great skill, qualifica-

tion or experience. Some professionals charge specialized fees, e.g. doctors,
lawyers and other professionals.
8. Promotional Pricing - This is a strategy where by the marketers temporarily

price products below the list price and sometimes even below the cost price to
increase the short-run sales. This is a pricing system that attracts customers
to buy.
9. Geographical Pricing - An organization must decide how to price its prod-

ucts in different locations (regional pricing). Marketers that use this strategy
appreciate the fact that, customers in various regions have different charac-
teristics, particularly, demand and level of income.
10. Others include - Single and variable pricing, pricing of new products - skim-
ming or penetration, Product mix pricing - product line, captive - pricing
(products that must be used together), optional pricing (pricing of accessory
products along with the main product), and by-product pricing in order to
make the main product’s price competitive), e.t.c.
7.1.3. Importance of Pricing

1. Means of regulating the economic activities. It keeps the economy in balance.
2. Has considerable impact on the consumers. For example, the marketer may
raise it and emphasize or quality on lower it and emphasize on a bargain.
3. One of the 4 Ps that can be changed quickly to respond to changes in the

environment, e.g. competition.
57
4. Determines the entire marketing strategy of the company.
7.2. Summary
Pricing strategy is very important for the success of organization because it is the
only P that generates revenue. All others are costs to the firms. Effective pricing
therefore requires a thorough evaluation of costs of the relevant products or services.
58
Example . What is pricing?

Solution: A measure of value exchanged by the buyer for the value offered by the
seller that which reflects the costs to the seller of producing the product and the
benefit to the buyer of consuming it. May also be referred to as value placed on
a good or a service by customers at one point in time, a measure of what must be
exchanged in order to obtain a particular good, or what consumers pay for a product.
this is the answer to the first question
Revision questions or guidelines
E XERCISE 10. Justify why organizations need to adopt a cost-plus pricing pol-
icy
E XERCISE 11. Differentiate between skimming and market penetration strate-
gies


Asia, 9th Ed..

Pearson Eduction, Prentice Hall, India.
4. Monroe, K. (2003). Pricing: Making Profitable Decisions, McGraw-Hill.
5. Smith, K. (2011). Pricing Strategy: Setting Price Levels, Managing Price

Discounts and Establishing Price Structures, South-Western Cengage Learn-
ing.
59
LESSON 8
Distribution Decisions
Learning outcomes
1. Describe the types of distribution channels and members
2. Assess the selection of channel members
3. Describe the functions of channel members
8.1. Introduction
This is the component of the marketing mix concerned with the processes by which
the product is made available to the consumer/market. Other commonly used terms
for ‘place’ include distribution, delivery systems and marketing channels. It is of
concern to the marketers because the other marketing efforts would be wasted if
the product is not actually in the right place at the right time to enable a purchase
to be made. Furthermore, it is crucial to every organization to give a thorough
consideration to the place component of the marketing mix since effective and effi-
cient distribution can be an important source of competitive advantage. Therefore,
a channel of distribution is the route through which products move from the point
of production to the point of consumption. It involves a set of interdependent orga-
nizations involved in the process of making a product or service available for use
or consumption by the consumer or business user. It overcomes the time, place and
possession gaps that separate goods and services from those who would use them.
Examples of channel of distribution include;
1. Producer - Consumer: Zero channel
2. Producer - Retailer - Consumer: One level channel
3. Producer - Wholesaler - Retailer - Consumer: Two level channel
4. Producer - Agent - Retailer - Consumer: Two level channel
5. Producer - Wholesaler - Agent - Retailer - Consumer: Three level channel
60
8.1.1. Factors for Selecting Channel Members

• Customer characteristics
• Product characteristics
• Company characteristics
• Middleman characteristics
• Competitive characteristics
• Environmental characteristics
1. Customer Characteristics - The important customer characteristics that the

marketer must evaluate include, the size of market, type of customer, geo-
graphic dispersion of the buyers, customer buying habits in terms of amount
or quantity purchased per period, the outlets that they purchase from and the
composition of the market among others. That is, each of the mentioned
factors will directly or indirectly affect channel choice. Taking into consid-
eration the composition of the market, there are industrial, government and
household consumers and, under normal circumstances, the first two buy di-
rectly from the manufacturers/producers while the later buys from the channel
members. The concern of a marketer here is to undertake channel analysis
of the final consumer and work backwards to the distributor/channel member
since this decision is determined by customer characteristics.
2. Product Characteristics - The important factors here include the perishabil-

ity of products and product category, and whether the product is for household
or industrial use (product usage). Highly perishable products are distributed
using shorter channels so as to reach the final consumers as soon as possible,
e.g. vegetables, fruits, flowers, green beans and pineapples among others.
Whereas durable products are distributed using the longest channels espe-
cially if they are purchased frequently. But, for the custom-made/industrial
products, e.g. custom-made suits and prestige vehicles among others can be
distributed directly to the buyers.
3. Company Characteristics - Besides evaluating customer and product char-

acteristics, marketers must consider company characteristics. The relevant
61
characteristics here include, company objectives, financial status, product

mix, past channel experience and the desired degree of channel control. That
is to sell directly to the consumers; marketers need to open up their own retail
outlets, although the cost of this strategy will be prohibitive. There may be
cases when the marketer/producer may want to retain a high degree of control
over the price the customer pays for his/her product as well as how the prod-
uct is presented to the market. Should this be the case, the producer will sell
directly or use the shortest channel to distribute his/her product, i.e. use only
one channel member. In cases where the producer has a wide and divergent
product mix, longer channels will be appropriate. For example, Unilever uses
a long channel to distribute its range of products.
4. Middleman Characteristics - This is a major factor that has to be considered

in the combination of market intermediaries to be used in effectively and effi-
ciently distributing the products to their final consumption points/markets/destinations.
Of great concern to marketers include factors such as, the markets served by
the middlemen, their financial standing, the services they offer, storage ca-
pacity and their availability. The financial standing of a channel member
is of utmost interest to the marketers because some of them may be finan-
cially weak and may not be able to offer credit to their customers for buy-
ing merchandise. Again, a producer like Unilever may feel that distributing
its products through a chain of retailers such as Nakumatt, Tuskys, Uchumi
and Ukwala supermarkets among others may be more profitable than selling
through independent retailers.
5. Competitive Characteristics - It is believed that marketers should use chan-

nel member that are used by competitors since they are regarded as repre-
senting the collective wisdom of the industry, i.e. through retail shops like,
Uchumi, Nakummatt, Tuskys and Ukwala supermarkets among others. As a
result of this, a producer who decides not to use channel members used by
other competitors in the industry has to show reasons why his/her product or
brand demands a different channel. It is also believed that a producer should
meet the level of competition head on for fair competition to thrive in the
industry. Therefore, marketers must avail their products where competitors’
products are in order to encourage fair competition.
62
6. Environmental Characteristics - Choice of channel selection is also influ-

enced by the environmental factors such as, economic, political, legal, so-
cial - cultural factor, e.t.c. It is often argued that, where economic con-
ditions are depressed, marketers should move their products via the route
that is least expensive to the ultimate customers. Channel decisions are also
affected by political-legal environment. For example, sometime in Kenya,
sugar was distributed through Kenya National Trading Company (KNTC),
Cereals distributed through National Cereals and Produce Board (NCPB),
Coffee through Coffee Board of Kenya among others. That is, where a certain
law prevails, a marketer has no choice, but to distribute through the already
existing channels.
8.1.2. Functions of Channel Members

1. Contacting function - Finding and communicating with the prospective buy-
ers, i.e. in contact with most customers
2. Market information or feedback - The channels gather and distribute mar-

keting research and intelligence information about actor and forces in the
environment needed for planning and aiding exchange.
3. Bulk - breaking into smaller units or matching - They fit and shape the offer to
the buyer’s needs including activities such as, grading, packaging, branding,
e.t.c.
4. Physical distribution of products, i.e. transportation of products to the desired

destinations, i.e. increases the market coverage for the products and services
5. Demand stimulation - Developing and spreading persuasive communications

about an offer, e.g. through personal selling, advertising, sales promotion,
e.t.c.
6. Advance credit to their clients, taking this burden away from the manufactur-
ers
7. Storage capacity - Must have a warehouse for the purposes of storing excess
capacity
63
8. Negotiation - Channels of distribution reach an agreement on price and other

terms of the offer so that ownership or possession can be transferred
9. Risk-taking - They assume the risk of carrying out the channel work, i.e. risk
of loss, breakage, spoilage, e.t.c.
8.1.3. Determination of Intensity of Distribution

After making a choice on the channel member to use, a marketer has to decide on
the intensity of the distribution of the product. That is, determine the number of in-
termediaries he/she will use at each level. A marketer/producer has 3 considerations
as regards the level of intensity.
1. Intensive Distribution - Products are carried by as many outlets as possible,

for example, anyone willing to distribute the product especially the conve-
nience products, e.g. cigarettes, soft drink, milk, bread among others.
2. Selective Distribution - A marketer here selects only a few distributors to dis-

tribute his/her products. Selective channel is used by the manufacturers of
specialty goods and shopping goods. Hence, the products are only found in
just a few selected outlets with certain qualities. For example, products like
refrigerators, dish washers, driers, cookers are found only selected distribu-
tion outlets.
3. Exclusive Distribution - Getting into an agreement with a particular middle-

man whereby the manufacturer gives exclusive rights to one distributor to
market the product in a given market. For example, D.T. Dobbie (K) Ltd
is the exclusive distributor for Mercedes Benz, whereas, Marshalls Ltd has
the right to distribute Peugeot vehicles in Kenya. The rationale behind this
is that, specialization in one line may greatly increase sales and profits for a
firm, particularly if a premium price is obtained through exclusive distribu-
tion.
8.1.4. Importance of Channel Motivation

1. Increases sales for the producers
2. Maintains the market feedback between customers and producers
64
3. Increases the market coverage
4. Increases the distribution of products, e.t.c.
8.1.5. How to Motivate Channel Members

1. Higher margins, incentives, special deals, cooperative advertising allowances,
display allowances and sales contest (negative incentives may include, threat-
ening to reduce margins, to slow down delivery, or to end the relationship
altogether
2. Boosting their morale, i.e. visits by producers, establishing long-term part-

nerships in order to create a marketing system that that meets the needs of
both the manufacturer and the distributor.
3. Setting attainable targets for their distributors, e.t.c.
8.1.6. Summary
The development of effective and efficient distribution networks is a central issue
the future development and success of organizations. This has been accelerated
level of technology, increased competition and heightened consumer awareness.
This has had a considerable impact on the delivery of goods and services.
Example . Identify the factors that may influence the choice of a channel mem-
ber
Solution: Customer characteristics, company characteristics, middleman character-
istics, product characteristics, environmental factors, regulations governing busi-
ness transactions

Revision questions
E XERCISE 12. Give reasons why consumer goods may be distributed using the
longest channels of distribution
E XERCISE 13. How does the function of physical distribution contribute to cor-
porate competitiveness?
65

2. Kotler, P. (2008) Marketing Management: Analysis, Planning and Control,

Prentice-Hall, New Delhi.

Asia, 9th Ed..


6. Solomon, M. R. (2012). Consumer Behaviour, 10th Ed.Baker, M.J. (1992).

Marketing Strategy and Management, 2nd Ed., Macmillan Press, London.
66
LESSON 9
Promotion Decisions
Learning outcomes
1. Describe factors influencing the promotional mix
2. Design an effective communication campaign
3. Identify factors influencing the communication budget
4. Identify methods of setting an advertising budget and the promotional mix

strategies
9.1. Introduction
Promotion in general and advertising in particular are the activities most commonly
associated with the term ‘marketing’ although marketing orientation goes far be-
yond these functions. The term promotion as a component of any marketing mix
refers to the processes used by an organization in order to communicate with its cus-
tomers, both actual and potential It involves the specific mix of advertising, sales
promotion, personal selling, public relations, publicity and direct marketing
9.2. The Promotion Mix Tools

9.2.1. Advertising
This is any paid form of non-personal presentation and promotion of ideas, goods
or services by an identified sponsor through the media. Advertising offers a reason
to buy. It includes print and electronic media. Advertising is widely used in order
to reach masses of geographically dispersed buyers at a low cost per exposure and
it allows the marketer to repeat the message many times. Beyond the widespread
coverage, advertising says something positive about the sellers’ size, popularity and
success. Due to its public nature, consumers tend to view advertised products and
services as more legitimate.
67
• Advantages of Advertising
1. It is very expressive. That is, it allows the company to dramatize its products
through the artful use of visuals, print, sound, and colour.
2. It can be used to build up long-term image for a product (such as Coca-Cola,

Omo, Tusker, Blue-Band ads, e.t.c.).
3. It triggers off quick sales
4. It can be used to influence, persuade, and remind customers about the exis-
tence of the brands.
5. Wider coverage of the market
• Disadvantages of Advertising
1. Advertising is impersonal and cannot be as directly persuasive as the com-
pany sales force
2. Advertising can only in most instances involve a one-way communication

with the audience, and the audience may not feel that it has to pay attention
or respond, i.e. no immediate response.
3. It can be very costly, i.e. T.V. advertising
9.2.2. Personal Selling

This is face-to-face or door-to-door selling of products/services. It is the personal
presentation by the firm’s sales force for the purpose of making sales and build-
ing customer relationships. It includes sales presentations, demonstrations, trade
shows, e.t.c.
This is the most effective tool at certain stages of the buying process, particularly in
building up buyers’ preferences, convictions and actions. Personal selling involves
personal interaction between two or more people, so each person can observe the
other person’s needs and characteristics and make a quick adjustment. It allows all
manner of relationships to spring up, ranging from a matter of selling to personal
friendship. This enables the sales people to establish long-term relationships.
68
• Advantages
1. The consumers usually feel greater need to listen and respond, even if the
response is a polite “no thank you.”
2. Encourages flexibility in operations
3. Product are tailor-made for the right customer group
4. The sale person can read the reactions of the customer through face-to-face
presentation or demonstration
5. Encourages efficiency in dealing with the target market
6. Enhances relationship selling, increased profitability and increased customer

loyalty.
• Disadvantages
1. It involves high costs of employing, training, remunerating and even devel-
opment of the sales force.
2. It is limited by company’s inability to get the right sales force to carry out
the job (Due to this many retailers have abandoned the use of sales force and
shifted to the self-service stores).
9.2.3. Sales Promotion

This consists of a diverse collection of incentive - tools, mostly short-term designed
to stimulate quick and greater purchase of particular products/services. It offers an
incentive to buy. It includes samples, coupons, prices-off, prizes, patronage reward,
and point-of-purchase displays among others. This includes a wide assortment of
tools, e.g. coupons, contests, cent-off deals, premiums and other incentives. The
incentives attract consumer attention, offer strong incentives to purchase and can
be used to dramatize product offers and to boost sagging sales. Sales promotions
invite and reward quick response - whereas advertising says “Buy our product”
while sales promotion says “Buy it now.” Sales promotions are often short lived.
69
9.2.4. Publicity
This is a non-personal form of demand stimulation and is not paid for by the person
or organization benefiting from it. It takes the form of favourable news presentation
or some form of public address.
9.2.5. Public Relations

A public is a group that has an actual or potential interest in or impact on a com-
pany’s ability to achieve its objectives. Public relations (PR) include a variety of
programs designed to produce or protect a company’s image or its individual prod-
ucts. Main tools in Public Relation are publications, events, news, speeches, or ser-
vice activities among others. It involves building good relations with the company’s
various publics by obtaining favourable publicity, building up a good corporate im-
age and handling or heading off unfavourable rumours, stories and events. Public
relation is very believable and includes tools like, news stories, features and events.
PR can reach many prospects who may avoid sales people and advertisements. That
is, the message gets to the people as news rather than as a sales-directed commu-
nication. It is still not a popular method of creating awareness for many marketers
since they use it only as an afterthought. Yet, a well-thought-out public relations
campaign used with other promotion mix can be very effective and economical.
9.2.6. Direct Marketing

This is direct communication with carefully targeted individual consumers to ob-
tain an immediate response and create a lasting - customer relationships. It includes
telemarketing, catalogs, faxes, e.t.c. Forms of direct marketing include telemarket-
ing, direct mail, electronic marketing and on-line marketing among others.
• Direct marketing is;

1. Non-public - The message is normally addressed to a specific person
2. Immediate - Messages can be prepared very quickly
3. Customized - Messages can be tailored to appeal to a specific group of cus-

tomers
4. Interactive - It allows a dialogue between the marketer and the customer and
the message can be altered depending on the consumer’s response
70
9.3. Factors affecting the Promotional Mix

The markets must decide what combinations of advertising, personal selling and
other promotional tools will make the most effective promotional program form the
country.
The following factors should be taken into consideration when deciding the promo-
tional mix:
1. Funds available - Capital resources,
2. Nature of the market - consumer or organizational market.
3. Geographical scope - Small or local markets can be reached through personal

selling whereas for a larger market, the marketers will put more emphasis on
advertising.
4. Type of customers - Whether the company aims at industrial users, consumers

or middlemen. What is the target market?
5. The Nature of the Product - Consumer products Vs industrial products require

different advertising strategies.
6. Stage of the Product Life Cycle
Promotional strategies are influenced by life cycle stages of a product
1. Introductory stage - To educate and inform the customers about the product.
2. Growth stage - To stimulate demand since competition has set in
3. Maturity stage - Persuade the customers to buy, provide information, maintain

the market share of product and to undertake reminder advertising.
4. Decline - Sales decline and new products come up. The marketers may reduce
the advertising expenditure, e.t.c.
9.4. Effective Communication Program or Campaign

This involves 5 steps in developing an effective campaign
71
1. Identifying the Target Audience - Marketing communication starts with the

identification of the specific group in mind. The audience determines what
will be said, how it will be said, when it will be said, where it will be said and
who will say it.
2. Setting the Communication Objectives - These can be classified whether their

aim is to inform, persuade or remind the customers about the product. There-
fore, the marketer has to find out the stage of communication where the au-
dience is in, in terms of buyer-readiness stage like, awareness, knowledge,
liking, preference, conviction and purchase. For example, if the objective of
communication was to create awareness about a new product, the TV and
radio advertising would be appropriate.
3. Choosing the Communication Message - The message to be designed by the

communicator should get Attention, hold Interest arouse Desire and obtain
Action (the AIDA model - suggests the qualities of a good message). In
putting the message together, the communicator has to know what to say and
how to say it.
4. Deciding the Communication Media - The communicator must decide on

which channels to use, i.e. the media (personal or impersonal) that reaches the
audience most effectively, for example, press, T.V, radio, magazines, news-
papers, internet, cinema among others. Advertisers must check the media
cost-effectiveness and decide on the media timing, i.e. when to put up an
advert (which season?).
5. Deciding the Communication Budget - The main concern for the company
is to decide on how much to spend on communicating its offers to the target
audience. This is done after setting the objectives. It will enable an organiza-
tion to achieve the set sales goals. It is argued that promotion, for example,
advertising increases cost of products and the final price to the consumer goes
up.
9.4.1. Factors to consider when setting an Advertising Budget.

Type of media to be used – Personal or non-personal
72
1. Stage in the product life cycle - New products receive larger advertising ex-
penditures to build awareness and gain consumer trial.
2. Market share and consumer base - Higher market share brand usually require
lower advertising budgets.
3. Competition - Larger number of competitors, higher budget on advertising in

order to be heard above the noise in the market.
4. Communication frequency - The number of times the advert has to be re-

peated.
5. Product sustainability - Brands in a commodity class, e.g. cigarettes, beer,

soft drink require heavy advertising to sustain them in the market.
9.4.2. Methods of Setting the Advertising Budget

1. Affordable Method - Setting the promotion budget according to what the
management thinks is affordable by the organization. Smaller companies
are notorious at using this arguing that their companies cannot spend more
than they have. This method of setting budgets completely ignores the effects
of promotion on sales, and tends to place advertising last among spending
priorities even when it is critical to the success of the firm. This leads to an
uncertain annual budget, which makes long-range planning difficult.
2. Percentage-of-Sales Method - This is a method that sets the promotional bud-

get at a certain percentage of the current or forecasted sales. It is simple to
use and helps management think about the relationships between promotion
spending, selling price and profit per unit. But, this method wrongly views
sales as the cause of promotion rather than as the result. The method does not
provide any basis for choosing a specific percentage, except what has been
done in the past or what competitors are doing currently.
3. Competitive - Parity Method - This is setting a promotion budget that matches

what the competitors are spending. That is, the marketers monitor the com-
petitors’ advertising budget or get the industry promotion spending estimates
from publications or trade associations, and then set their budget on the in-
dustry average.
73
4. Objective-and-Task Method - This is the most logical way of setting an ad-

vertising budget. That is, the company sets its promotion budget based on
what it wants to accomplish with promotion.This budgeting method entails;
9.5. Evaluating Communication Effectiveness

Measure the communication effect of the promotional mix elements (advertising).
That is, how effective is the communication strategy;
• Are the audience reached and with what results?
• What is its potential effect on awareness, knowledge and preference?
9.5.1. Promotion Mix Strategies

There are two basic Promotional Mix Strategies
• Push strategy
• Pull strategy
1. Push Strategy - This is a promotion strategy that calls for using the sales
force and trade promotion to push the product or service through the distri-
bution channels to the final consumers. That is, the marketers or producers
direct their marketing effort (primarily personal selling and trade promotions)
towards channel members to induce them to carry the product and to promote
it to the final consumers
2. Pull Strategy - This is a promotion strategy that calls for spending a lot on
advertising and consumer promotions to build consumer demand, which pulls
the product or service through the channels. That is, the marketers direct their
marketing efforts (primarily advertising and consumer promotions) towards
the final consumers to induce them to buy the product.
9.6. Summary
The combination of the promotional mix to be used will vary according to the na-
ture of the markets, the characteristics of the target audience and the features of
the product. That is, there may be no standard promotional mix ideal for every
74
situation. The promotional mixes are complimentary and not competitive and there
are considerable gains from developing a coherent and well-balanced promotional
mix.
Example . What are the advantages and disadvantages of advertising?
Solution: Advantages - Encourages flexibility in operations. Product are tailor-
made for the right customer group. Encourages efficiency in dealing with the target
market. Enhances relationship marketing. Increased profitability and increased
customer loyalty. Disadvantages - Involves high costs of employing, training, re-
munerating and even development of the sales force. It is limited by company’s
inability to get the right sales force to carry out the job
Review and Discussion Questions
E XERCISE 14. Why is personal selling particularly appropriate to corporate cus-

tomers?

1. Fletcher, W. (2010). Advertising: A Very Short Introduction, Oxford Univer-
sity Press, New York.

Asia, 9th Ed..
3. Engel, J.F., Warsaw, M. R. and Kinnear, T. C. (1994). Promotion Strategy:

Managing the Marketing Communications Process, 8th Ed., Boston, MA,
Richard, D. Irwin Inc.
4. Tyagi, C. L. and Kumar, A. (2004). Advertising Management, Mehra Offset

Press, New Delhi.
75
LESSON 10
Service Marketing
Learning outcomes
1. Describe the characteristics that that distinguish service magnetizing from

physical product marketing
2. Distinguish the strategies in service marketing
3. Understand the service quality
10.1. Introduction
Kotler (2002) defines service marketing as separately identifiable, intangible activ-
ities which provide want-satisfaction when marketed to household consumers and
industrial users, which are not necessarily tied to the sale of a product or service.
It includes those services sold by persons, business organizations and professional
firms to make a profit, i.e. domestic services like cleaning, banking, insurance,
teaching, hair cutting, e.t.c. The definition, however, excludes all services which
are incidental to the sale of physical goods.
Zeithmal and Bitner (2003) simply define services as deeds, processes and perfor-
mance which are of value or benefit to customers. Further Koter and Keller (2006)
define a service as any act or performance that one party can offer to another which
is essentially intangible and does not result in the ownership of anything. According
to Kibera and Waruingi, (2007), the demand for services is a function of people’s
income, amount of time available for leisure and a general rise in the living stan-
dards for the market. The authors further suggested that, for country like Kenya,
where disposable personal incomes are low, the quantity purchased of any services
such as beauty care is less than that purchased in the United States of America
where incomes are relatively high.
In service marketing, the emphasis is laid on the services marketed by businesses
or professionals with a profit motive like, commercial services. The service sector
has increasingly grown in importance due to the fact that businesses have become
more complex, specialized and competitive. As a consequence, marketers have
76
been forced to call in experts to provide services in research, taxation, advertising,

labour relations and many others.
Today, service marketing has been enhanced by an increase in disposable incomes
as well as the increasing lifestyles, hence, an increase in the service sector. To
capitalize on the emerging service economy, many marketing managers are diver-
sifying their operations into various service sectors. The special nature of service
marketing stems from distinctive characteristics that create special marketing chal-
lenges and opportunities. They result in coordinated marketing programmes that
are substantially different from those of the physical product marketing.
10.2. Characteristics of Services

Service marketers encounter many challenges in their attempts to sell their offers to
the market. This is because services possess many distinctive attributes or charac-
teristics which have serious marketing implications on their efforts. For this reason,
marketing managers must design programmes that are quite different from those of
physical products marketing, which include;
1. Intangibility - Services are intangible, i.e. they cannot be touched, seen,
tasted or heard. One cannot know the results of a purchase until after the pur-
chase has been executed, e.g. hair-cut, medical treatment, teaching, banking
and many others. This implies that they do not have tangible or features that
can be touched or compared that will appeal to the customers’ sense of sight
and smell or taste. Hence, it is more difficult to demonstrate in an exhibi-
tion or to display in shops. Hence, service marketing requires imaginative
personal selling. Another consequence of service marketing is that the con-
sumers are not able to judge the quality of a service before buying it and
therefore the reputation of the producer or seller influences the market sub-
stantially. In order to reduce this level of uncertainty, the consumers would
look for signs or evidence of service quality in terms of place, people, price,
e.t.c. Therefore, the service marketers are forced to “manage the evidence”
that the customers look for in services. That is, “tangibilize the intangibility.”
The marketers can achieve this by emphasizing on the service benefits, e.g.
faster services, convenience, durability, e.t.c. For example, an insurance com-
pany should emphasize on the benefits like, payment of school/college fees
to the clients’ children, retirement benefits, e.t.c. Whereas, the banks could
77
emphasize on the benefits like, faster services, lower interest rates, reliability
of services, insurance packages to the clients, variety of accounts from which
the client can make a choice among others.
2. Inseparability - Services are difficult to market because they are inseparable

from the service providers and the presence of the client is of utmost impor-
tance. That is, services are produced and consumed at the point of production.
Provider-client interaction is therefore, a special feature of service marketing
and marketers must strive to “get the services right the first time”. For exam-
ple, a dentist may create and dispense all his/her services at the same time.
This implies that, direct marketing is the only possible channel of distribu-
tion used by marketers, because, services are only sold in limited geographic
markets. This characteristic limits the scale of operation in many firms. One
exception inseparability has is that it can be sold by a representative of the
firm, for example, tour or travel agents, insurance agents or brokers, rental
agents, e.t.c.
3. Variability/Heterogeneity - Services are highly variable or heterogeneous

rather than homogeneous. Due to this, there is difficulty in standardizing the
services provided by the service firms. That is, the provision of a service will
depend on who provides it, when provided and where provided, for example,
teaching and airlines services among others. This means that unlike manu-
factured products, it is difficult if not impossible to standardize the output of
different sellers of more or less the same service. Heterogeneity is further
compounded by the fact that quite often it is difficult to judge the quality of a
service and even worse to forecast it into the future since it is highly variable,
i.e. it changes from time to person to person, time to time and occasion to
occasion. The question asked here is, whether the service is worth the price.
To ensure standardization and standardization of services, marketers must; i)
Invest in good human resource, selection and training ii) Prepare the service
blue - prints that depict the service events in the organization iii) Monitor
customer satisfaction through suggestions and complaints systems iv) Pay at-
tention to the product planning stage of their marketing programmes to ensure
consistency and to maintain high levels of quality control.
4. Perishability - Services are highly perishable and cannot be stored for later
78
use. For example, professionals charge for missed appointments, vacant seats
in a cinema hall, unoccupied seats in a Kenya Bus, unoccupied seats in a lec-
ture theatre and idle mechanics in a garage among others. These represent
businesses that are lost forever. In addition, the demand for services keeps
on fluctuating considerably depending on seasons, e.g. the use of a city bus
fluctuates between peak and off-peak seasons, unused golf field during win-
ter, e.t.c. Therefore, the marketers should have an appropriate strategy for
each season. It should also be clear that this feature of high perishability of a
service uniquely distinguishes it from physical products which can be stored
for a longer period of time. Perishability may have a notable exception, i.e.
the “holding capacity” (in life assurance, the service is purchased by a client
but, held by the company until such a time the service would be required by
the client/beneficiary. This constitutes a type of “storage” which is “not very
perishable,” e.g. different maturity period for various services. The combina-
tion of perishability and fluctuating demand, offers product planning, pricing,
distribution and promotion challenges to the marketers. In some companies,
marketers monitor the idle capacity. For example, Kenya Bus manages the
off-peak seasons by reducing prices or fares or giving the consumers an at-
tractive deal. That is, inducing the customers to travel off-peak. Another
example is the mobile phone companies that also offer lower rates at night to
encourage more people to make more calls.
5. Ownership - This is lack of exclusive ownership to a purchase decision, i.e.

it denies exclusive rights to individuals, which go with the privilege of own-
ership. A person does not own the service purchased. That is, services do
not result in the transfer of property or title. This is as opposed to buying of
physical product where there is a permanent transfer of title and control of
the purchased product. Therefore, purchase of services gives the customers
the rights to possess services but not the right to own it.
10.3. Marketing Mix for Services

1. Product Decisions - Everything that applies to tangible product do apply to
services particularly in the area of product policy, product planning and devel-
opment processes. It is also noted that the demand for services is positively
79
related to income or a nation’s economic development. The strategies to be

used service marketing can include a combination of market segmentation
and product differentiation. For example, Kenya Airways offers differenti-
ated products to various categories of clients (first, or economy classes). Pro-
fessional people, i.e. doctors will design different packages for their clients.
For a cinema hall, differentiation is in the form of distance from the screen
and whether a customer is viewing it from upstairs or from the stalls, and for
the a football match, the seat quality would be the factor to use for differenti-
ation.
2. Price Decisions - Due to the discretionary nature of service marketing, price

determination is very crucial. Based on this, price reductions may mot in-
crease demand in many cases. For example, if there are empty seats in a
cinema hall, it is not possible to postpone the viewing and offer it at a lower
price later. It therefore appears that the intensity of demand should be the
main factor to be considered in pricing of services. Thus, higher prices should
be charged when demand for the specific services is high and vs versa. The
concern of the service marketers here is in terms of not only considering the
intensity of demand, but to be more prudent when considering pricing for ser-
vices and to monitor the prevailing degree of competition within the market.
3. Place Decisions - The only major issue here is the transfer of ownership
from the producer to the buyer. It is therefore appropriate to conclude that the
distribution of services differs considerably from that of physical products
since it basically involves direct marketing through the sales force or agents.
4. Promotion Decisions - This entails the use of advertising, personal selling,

sales promotion, publicity and public relations. Due to the nature of services,
the desire to use or build relationships increases the importance of personal
selling. Hence, it is the backbone of service marketing.
10.3.1. Other Marketing Elements in Service Marketing

Gronroos (2000) suggest that the traditional marketing mix (the 4Ps) approach used
in the marketing of goods and services is insufficient to market and manage services
effectively due to the services’ unique characteristics. This call for an extension of
80
the 4P’s by 3 more P’s (But, the 4Ps are still critical to service marketing), namely
people, process and physical evidence/ambiance.
1. People - This implies all those who play a part in service delivery, i.e. firm’s
employee, firm’s customers and other customers in the service environment.
That is, employee’s behavior, attitude and expertise level among other factors
affect a firm’s competitiveness. It is therefore important for firms to ensure
that they hire only competent staff and to closely monitor their performance to
ensure delivery of the service quality and to also engage in internal marketing
efforts in order to build a more market-oriented organization. To this extent,
service firms must focus attention and resources on attracting, developing,
motivating and retaining qualified employees.
2. Process - This involves actual procedures, mechanisms, flow of activities by

which service is delivered. It includes ways of achieving marketing tasks like
procedures, policies, information, capacity levels, speed, and timing among
others. The concern here is achieve efficiency of the delivery process which
may be a significant source of competitive advantage.
3. Physical Evidence - This refers to the environment in which the service is

delivered - where customers and the firm interact. It includes tangible compo-
nents that facilitate performance or communication of the service. Therefore,
service providers should ensure that their service provision setups reflect their
desired positioning standards. Thus, they should tangibilize the intangibility.
10.3.2. Concept of Service Quality

This is very crucial in service marketing. It can be defined as the customers’ percep-
tion of how well a service meets or exceeds their expectation. It is the conformance
to customer requirements. Quality is basically defined by the customer and occurs
when an organization provides services to specification that satisfies customers,
whose expectations serve as standards against which service expectations are com-
pared. Thus, failure to meet customers’ needs and desires results I dissatisfaction
with the service.
Today many marketers have now adopted Total Quality Management (TQM) pro-
grammes assigned to constantly improve the quality of their offers and marketing
processes. TQM can be defined narrowly as, “Freedom from defects” But, the
81
customer focused organizations define it as the, “the totality of features and charac-
teristics of a product or service that bear on its ability to satisfy customer expecta-
tions” or “quality is doing something for the customer.” These definitions suggest
that companies can only achieve TQM if their products or services meet and ex-
ceed customer expectations. Thus, quality begins with customer needs and ends
with customer satisfaction.
10.3.3. Summary
Services are intangible products whose marketing is much more complex than phys-
ical product marketing. The features are present in varying degrees. A key aspect
of service marketing is to confront these issues and attempt to resolve them. A
common strategy is usually to develop a tangible representation of a product.
82
Example . Identify the main features in service marketing

Solution: Intangibility, inseparability, variability, perishability, lack of ownership

Review Questions
E XERCISE 15. Outline the difference between product and service marketing
E XERCISE 16. Explain why these differences are important to marketers

1. Gilmore, A. (2003). Service Marketing, Sage Publications.
2. Gremler, D., Bitner, M. J. and Zeithaml, V. A. (2012). Service Marketing,

6th Ed..

Asia, 9th Ed..
4. Lovelock, C. H. and Wright, L. (1999). Principles of Services, Marketing and

Management, Upper Saddle River, New Jersey, Prentice Hall.
5. Kibera, F.N. and Waruingi, B.C. (2007). Fundamentals of marketing, An

African Perspective, Kenya Literature Bureau, Nairobi.
83
Solutions to Exercises
Exercise 1. Managing markets to bring about exchanges and relationships for the
purpose of creating value and satisfying customer needs and wants. This can be
achieved through proper marketing management practices Exercise 1
Exercise 2. The focus production orientation on how to improve production and
distribution since the economy was characterized by shortages (demand exceeded
supply). It is mainly concerned with production since what they produced was
quickly sold. Product quality at this stage was not an issue. This is contrary to
marketing concept being used today since the main focus is on the satisfaction of
customer needs and quality is of essence Exercise 2
Exercise 3. Micro environment are factors within the reach of an organization.
They are controllable factors. On the other hand, macro environment are factors
from the external environment outside the firm’s control. They are uncontrollables
Exercise 3
Exercise 4. Adoption of new technologies, modernization of production processes.
Quality improvement. New product development Exercise 4
Exercise 5. To know about the target market. Understand characteristics of the
market. To find out the level of competition. Identify the strength of competitors,
their strategies among others Exercise 5
Exercise 6. Problem recognition. Information search. Evaluation of alternatives.
Purchase decision. Post purchase decision Exercise 6
Exercise 7. Market segmentation - seller distinguishes major market segments,
targets one or more and develops products and programmes tailored towards each
segment. Mass marketing - using the same marketing program to target the whole
population (undifferentiated marketing). The seller engages in mass production,
distribution and promotion for one product for all the buyers. Assumption is that
the need is the same. Exercise 7
Exercise 8. Convenience products - Those that are bought frequently, immediately
and with less comparison and minimum buying effort and mostly easily available.
For example, cigarettes, soap, salt, bread, chocolates, newspaper, fast-food, e.t.c.
Shopping goods - Usually expensive products and infrequently bought by the con-
sumers. Consumers compare them on the basis of suitability, quality, price, and
84
style. The consumers spend a lot of time and effort in gathering information and
making comparisons on the suitable brands. Examples include furniture, cars, ma-
jor electric appliances and many others. Shopping goods are usually distributed
through fewer outlets but they provide deeper sales support to help customers in
their comparison efforts (selective distribution) Specialty goods - consumer prod-
ucts and services with unique characteristics or brand identification for which a
significant group of buyers are willing to make a special purchase effort. Exam-
ples include luxury cars, designer clothes, specialized services like medical, legal,
marketing, accountancy, e.t.c. The consumers normally do not compare specialty
products in terms of prices or quality Exercise 8
Exercise 10. Determines the entire marketing strategy. Shows the level of prof-
itability. Has a great impact on consumers emotions. Can be adjusted quickly to
respond to changes in the environment, e.g. competition Exercise 10
Exercise 11. Market skimming - This strategy involves using a relatively higher
price to introduce new products in the market in order to take advantage of buyers
who are ready to pay more particularly the innovators and early adopters (skimming
the cream of the market). That is, marketing managers skim the maximum revenues
layer by layer from the segments. Customers here are pace-setters in the market,
high risk takers and less-price sensitive. This strategy is appropriate at the intro-
ductory level since it enables the marketers to cover their high costs of production;
Market penetration - Marketers set relatively lower prices to introduce the products
into the market to stimulate growth. This group of the market is highly price sen-
sitive. This strategy is appropriate to the marketers since they are able to cover a
larger market share, achieve economies of scale and with the low price, discourage
new competitors who may wish to enter the industry Exercise 11
Exercise 12. They are convenience goods demanded by all consumers. Product
availability is is of utmost importance to avoid out of stock conditions. There is
no customer loyalty for these products. Thus, consumers will buy only what is
available Exercise 12
Exercise 13. A firm that is able to use this strategy brings products closer to the
customers. Increases availability of products. Increases consumer choice. Leads to
increased profitability Exercise 13
85
Exercise 14. Involves face to face interaction. Provides an opportunity for ques-
tioning. Leads to more understanding. Leads to customer satisfaction. Leads to
repeat purchase and customer patronage Exercise 14
Exercise 15. Product marketing - Involves marketing of physical goods to cus-
tomers, while service marketing involves marketing of intangibles or services which
can not be touched, moved or tested Exercise 15
Exercise 16. Since service marketing involves dealing with products that are in-
tangible, marketers must know how to present the evidence for the same, i.e. the
evidence of quality, better service, customer satisfaction, e.t.c. They must also em-
phasize on the unique features of services to convince the customers of quality they
may believe in Exercise 16
86

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JOMO KENYATTA UNIVERSITY

SCHOOL OF OPEN, DISTANCE AND

HBC 2112 PRINCIPLES OF MARKETING

P.O. Box 62000, 00200

1. Enable students understand problems, opportunities and activities involved in

2. Improve skills related to marketing decision making

3. Formulate marketing strategies for effective decision-making in organiza-

Course Text Books

2. Kotler, P. (2009). Marketing Management, Analysis, Planning, Implementa-

• Journal of Marketing Education

• Journal of Strategic Marketing

• Examination (Semester Exam) 70%

• Basic Designs include; . . . . . . . . . . . . . . . 25

9.5.1 Promotion Mix Strategies . . . . . . . . . . . . . . . . . . . 74

1. Describe the core concepts, principles, and theories of marketing.

2. Identify the various philosophies of marketing

3. Understand the role played by principles of marketing in management and

• Marketing has twofold goals, namely;

2. To keep current customers

Therefore, sound marketing is critical to the success of every organization (large

1.1.1. Definitions of Marketing

1. Finding out what the consumers want.

1. If the products performance falls short of customer’s expectation, the buyer

2. If the product performance matches the customer’s expectation, the buyer is

Therefore, outstanding marketing organizations go out of their way to achieve cus-

1.2. Historical Development of Marketing

1. Production orientation stage

2. Sales orientation stage

4. Social responsibility and human orientation stage

1.2.1. The Production Orientation Stage

• Sales Orientation Stage

• Marketing Orientation Stage

• Social Responsibility and Human Orientation Stage

1.3. Marketing Concepts (Philosophies)

1.3.1. The Production Concept

1.3.2. The Product Concept

1.3.3. The Selling Concept

1.3.4. The Marketing Concept

• “We make it happen for you,”

• “My Favourite”(British Airline),

• “ You are the Sovereign King” or “You are the Boss,”

• “We are not satisfied until you are”

• “We love you,”

• “Let us exceed your expectations” (General Electric)

• “The Pride of Africa” (Kenya Airways)

• “Great Value Always” (Uchumi Supermarket)

• “All Under One Roof” (Nakumatt Supermarket), e.t.c.

1.3.5. The Societal Marketing Concept

E XERCISE 1.  What is marketing?

References and Additional Reading Materials

3. Kotler, P., Keller, K. L.and Lu, T. (2009). Marketing Management in China,

5. Meldrum, M. (2000). A Market-Orientation. In Marketing Management: A

6. Perrault, W. A. Cannon, J. and McCarthy, J.E. (2008). Basic Marketing, Mc

• Distinguish between macro and micro environments

1. Macro (external environment, i.e. uncontrollable)

2. Micro (internal environment, i.e. controllable)

The key component of developing a strategy in marketing is to analyze both the

2.2. Micro Environment

2.2.1. Company Itself

2.2.7. Other publics

2.3. Macro Environment

4. Political legal Environment

2.3.1. Economic Factors

2. Demand for a particular product - If the demand for a product or service

E XERCISE 1. What is marketing?

E XERCISE 3. Briefly distinguish between the micro and macro environmental

Example . Briefly discuss the impact of political legal environment of Kenyan