CCM 105 PRINCIPLES OF MARKETING

1. Overview Of Marketing

a) Definition

The simplest definition of marketing: Marketing is managing profitable customer relationships.

Philip Kotler, the father of marketing says, Marketing can also be defined as a societal process by which individuals and groups obtain what they need and want through creating, offering, and, freely exchanging products and services of value with others. The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering value.

Peter Drucker, a leading management theorist, puts it this way:‘There will always, one can assume be need for some selling. But the main of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product/service available.

The American Marketing Association offers the following definition: Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals.

Marketing comprises all activities involved in the transfer of goods from the producer or seller to the consumer or buyer, including advertising, shipping, storing, and selling.

b) Evolution of marketing

The study of the history of marketing as an academic field emerged only recently. The publication in 1976 of the book The History of Marketing Thought, by Robert Bartels marks a turning-point in marketing thought. Since then, academics specializing in marketing decided to imitate economics, distinguishing theory and practice.

Two different fields of study emerged:

1. the history of marketing thought, giving theoretical accounts2. marketing history, focusing on the history of marketing practice

History of marketing thought

The history of marketing thought deals with the evolution of theories in the field of marketing, from the ancient world to contemporary days. Marketing historians agree that the discipline branched out of applied economics at the turn of the twentieth century, though some argue that scholars in the ancient and medieval ages had already studied marketing ideas.

Robert Bartels in The History of Marketing Thought categorized the development of marketing theory decade by decade from the beginning of the 20th century thus:

1900s: discovery of basic concepts and their exploration 1910s: conceptualization, classification and definition of terms 1920s: integration on the basis of principles

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1930s: development of specialization and variation in theory 1940s: reappraisal in the light of new demands and a more scientific approach 1950s: re-conceptualization in the light of managerialism, social development and quantitative

approaches 1960s: differentiation on bases such as managerialism, holism, environmentalism, systems, and

internationalism 1970s: socialization; the adaptation of marketing to social change

With the growth in importance of marketing departments and their associated marketing managers, the field has become ripe for the propagation of management fads which do not always lend themselves to Periodization.

Birth of marketing ideas

In pre-modern economies, the predominance of small enterprises (peddlers, stalls) and/or natural regional monopolies militated against the recognition of marketing as a separate field of expertise. Changes in the patterns and intensity of economic activity, as well as the rise of economics as a science, particularly in the 19th century, paved the way for studies of marketing.

The growth in size and scope of national and international economies in the course of the Industrial revolution led eventually to a transcendence of ad hoc retailing and advertising innovations and eventually to systematization. Marketing emerged as a separate technical field only in the late 19th century.

Traditional schools

Traditional authorities on marketing concentrated on products and on the sale and purchase of goods and services. They paid little attention to areas like after-sales service, and devoted even less attention to social responsibility or to social accountability.

Modern schools

Marketing historians like Eric Shaw and Barton A. Weitz point to the publication of Wroe Alderson's book, Marketing Behavior and Executive Action (1957), as a break-point in the history of marketing thought, moving from the macro functions-institutions-commodities approach to a micromarketing management paradigm; marketing began to incorporate other fields of knowledge besides economics, notably behavioral science, becoming a multidisciplinary field. For some scholars, Alderson's book marks the beginning of the Marketing Management Era.

Unlike economists, marketers have difficulty in organizing the different theories in their discipline into schools-of-thought. However, some marketing historians like Jagdish Sheth have tried to identify the main concepts behind the work of scholars in the field, grouping their ideas into "marketing schools" such as the following:

The Managerial school emerged during the late 1950s and became arguably the predominant and most influential school of thought in the field.

The Consumer/buyer behavior school, which dominated the academic field in the second half of the twentieth century (apart from the Managerial school), features theories emerging from behavioral science.

The Social exchange school, which focuses on exchange as the fundamental concept of marketing.

Marketing history

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Much of traditional marketing practice prior to the twentieth century remained hidebound by rules-of-thumb and lack of information.

Information technology, especially since the mid-twentieth century, has given the marketers new channels of communication as well as enhanced means of aggregating and analyzing marketing data.

Specializations have emerged (especially sales versus marketing and advertising versus retailing) and re-combined (business development) over the years.

Timeline of innovation

1450: Gutenberg's metal movable type, leading eventually to mass-production of flyers and brochures

1730s: emergence of magazines (a future vector of niche marketing) 1836: first paid advertising in a newspaper (in France) 1839: posters on private property banned in London 1864: earliest recorded use of the telegraph for mass unsolicited spam 1867: earliest recorded billboard rentals 1880s: early examples of trademarks as branding 1905: the University of Pennsylvania offered a course in "The Marketing of Products"[6]

1908: Harvard Business School opens 1922: radio advertising commences 1940s: electronic computers developed 1941: first recorded use of television advertising 1950s: systematization of telemarketing 1970s: E-commerce invented 1980s: development of database marketing as precursor to Customer Relationship Management

(CRM). 1980s: emergence of relationship marketing 1980s: emergence of computer-oriented spam 1984: introduction of guerrilla marketing 1985: desktop publishing democratizes the production of print-advertising

1991: Integrated marketing communications (IMC) gains academic status

1990s CRM and IMC (in various guises and names) gain dominance in promotions and marketing planning.

1995-2001: the Dot-com bubble temporarily re-defines the future of marketing 1996: identification of viral marketingMARKETING CONCEPTS

There are five core marketing concepts:a. Needs, wants and demands

NeedsThe basic concept underlying marketing is the human needs. Human needs are states of deprivation. They include:

Physical needs-food, clothing, warmth and safety. Social needs-for belonging and affection. Individual needs-for knowledge and self-expression.

These needs were not created by marketers; they are a basic part of the human DNA.Wants

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Wants are the form human needs take as they are shaped by culture and individual. For example a Kenyan Urbanite needs food but wants a burger from Galitos fast food outlet. Wants are shaped by one’s society and are described in terms of objects that will satisfy needs.DemandsDemands are wants that are backed by purchasing/buying power. People demand products with benefits that add up to the most value and satisfaction.Outstanding companies go to greater lengths to learn about and understand their customers’ needs, wants and demands. They conduct consumer research and analyze mountains of customer data.

b. Marketing Offers

This mans a combination of products, services, information or experiences offered to a market to satisfy a need or want. Marketing offers also include services, activities or benefits offered for sale that are essentially intangible and do not result in the ownership of anything.Marketing offers also include other entities-such persons, places, organizations, information and ideas. Smart marketers look beyond the attributes of the products (marketing myopia) and services they sell and they create brand meaning and brand experiences for consumers. For example Nike is more than just shoes; it’s what the shoes do for you and where they take you.

c. Value and satisfaction

Customer value and satisfaction are the key building blocks for developing and managing customer relationships. Consumers make choices based on their perceptions of the value and satisfaction that various products and services deliver. Customers form expectations about the value of various marketing offers and buy according .Satisfied customers buy again and tell others of their good experiences. Dissatisfied customers often switch to competitors and disparage the product to others.

d. Exchanges, transactions and relationships

An exchange is the act of obtaining a desired object from someone by offering something in return.Whereas exchange is the core concept of marketing, a transaction in turn is marketing’s unit of measurement.A transaction consists of a trade of values between two parties. For example you pay at Nakumatt sh.20000 and a get a Samsung flat-screen TV.Marketing consists of actions taken to build and maintain desirable relationships with target audiences involving a product, service, idea or other objects. Beyond simply attracting new customers and creating transactions, the goal is to retain customers and social relationship by consistently delivering superior value.

e. Markets

A market is a set of actual and potential buyers of a product .These buyers share a particular need or want that can be satisfied through an exchange relationship. The size of the market depends on the number of people who exhibit the need, have resources to engage in exchange and are willing to exchange these resources for what they want.

ROLE OF MARKETING IN SOCIETYa) Creating value for customers

The marketing department starts by researching consumer needs, wants and managing marketing information to gain a full understanding of the market place.

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Good marketing companies know they cannot serve all customers in every way and need to focus their resources on the customers they can serve best and most profitably.

b) Championing More Ethics and Social Responsibility

Marketers are reasoning their relationships with social values and responsibilities. With the worldwide consumerism and environmentalism movements, today’s markets are being called upon to take greater responsibility for social and environmental impact of their actions. More forward looking companies are readily accepting their responsibilities to the world around them .They take socially responsible actions as opportunities to do well by doing well.

c) Growth of not for-- Profit Marketing

In recent years, marketing has become a major part of the strategies of many not-for-profit organizations such as colleges, hospitals, museums and even churches. Churches facing competition and shrinking numbers, have increasingly borrowed marketing tools and tactics from companies selling worldlier goods. Many are tailoring their core product-religion-to needs of specific demographic groups. Similarly private colleges facing declining enrollment and rising costs are using marketing to compete for students and funds.

d) Creation of new Lifestyles in the New Digital Age

Using today’s vastly more powerful computers, marketers are able to create detailed database and use them to target customers with offer designed to meet in their specific needs and buying patterns. Technology together with marketing has brought a new communication and advertising tools-ranging from cell phones, CD ROMS and interactive TV to video kiosks at airports and shopping malls. Through e-commerce, customers can learn about, design, order and pay for products and services-without leaving home. This has brought about a culture of convenience, express delivery and home deliveries.

MARKETING ENVIRONMENTFormer McDonald’s CEO, Jim Cantalupo, summed the marketing environment up his way“Ray Kroc (52 years old salesman of milk-shake mixing machines bought in 1955 a string of 7 restaurants owned by Richard and Maurice McDonald-today (2006) –more than 31,000 restaurants worldwide serving 47 million customers per day, raking up sales of more than $50 B annually) used to say he didn’t know what we would be selling in the year 2000, but whatever it was, we would be selling the most of it. He recognized early on that the consumer needs change and we want to change with it.”Marketing environment are the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.As we move into the 21st Century, both consumers and marketers wonder what the future holds as the future holds as the environment continues to change rapidly.The marketing environment is made up of the microenvironment and macro environment.

A. MICRO-ENVIRONMENT

The microenvironment consists of actors close to the company that affects its ability to serve its customers-these include the company, suppliers, marketing intermediaries, customer markets, competitors and publics.Marketing management’s job is to build relationships with customers by crating customer value and satisfaction. For marketing Managers to succeed, they need to build relationships with other company departments, suppliers, marketing intermediaries, customer markets, competitors, and publics.

ACTORS IN THE MICRO-ENVIRONMENT

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a. THE COMPANY

In designing marketing plans, the marketing management takes into account groups such as top management ,finance, research and Development(R&D),purchasing&Logistics,operations and accounting. Top management sets the company’s mission, objectives, broad strategies and policies. Marketing managers make decisions within these strategies and plans. Marketing managers must work closely with other departments. Finance is concerned with finding and using funds to carry out marketing plan. The R&D department focuses on designing safe and attractive products. Purchasing worries about getting suppliers and materials whereas operations are responsible for producing and distributing the desired quality and quantity of products.Accounting has to measures revenues and costs to help marketing know how well it is achieving its objectives.Under the marketing concept all of these functions must ‘think Customer!’

b. SUPPLIERS

Suppliers form an important link in the company’s overall customer value delivery system .They provide the resources needed by the company to produce goods and services. Suppliers’ problems can seriously affect marketing. Marketing Managers must watch supply availability-supply shortages or delays, labor strikes and other events, can cost sales in the short-run and damage customer satisfaction in the long-run.Marketing Managers also monitor the price trends of their key inputs-rising trends of their increases that can harm the company’s sales volumes.Most marketers today treat their suppliers as partners in creating and delivering value.

c. MARKETING INTERMEDIARIES

These are firms that help the company to promote, sell and distribute its goods to final buyers; they include resellers/distributors, physical distribution firms, marketing service agents, brokers and financial intermediaries.Resellers are the distribution channel firms that help the company find customers or make sales to them. They include wholesalers and retailers who buy and resell merchandise.Physical distribution firms help a company to stock and move goods from their points of origin to their destination. Working with warehouse and transportation firms, a company must determine the most appropriate ways to store and ship goods, balancing factors such as cost, delivery, speed and safety.Marketing service agencies are the marketing research firms, advertising agencies, and media firms, marketing consultation firms that help the company target and promote its products to the right markets. When you decide to use on of these firms as a company, you must choose carefully because these firms vary in creativity, quality, service and price.Financial intermediaries include banks, credit companies, insurance companies and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.A firm must partner with their intermediaries as partners rather than channels through which they sell their products. These partnerships optimize the performance of the entire system.

d. CUSTOMERS

The company needs to put into account 5 types of customer markets:i. Consumer markets-Consists of individual and households that buy goods and services for personal

consumption.ii. Business markets buy goods and services for further processing or for use in their production

process.iii. Reseller markets buy goods and services to resell at a profit.iv. Government markets are made up of government agencies that buy goods and services or transfer

the goods and services to others who need them.v. International markets consist of those buyers in the other countries including consumers,

producers, resellers, governments.

Each market has special characteristics that call for careful study by the seller/marketer.

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e. COMPETITORS

Marketers do more than simply adapt to the needs of the target consumers. They also must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers.No competitive marketing strategy is best for all companies. Each firm should consider its size and industry position compared with those of its competitors. Large firms with dominant positions in an industry can use certain strategies that smaller firms cannot afford.There are however, strategies that small firms can develop that give them better rates of return than large firms enjoy(e.g. overall cost leadership ,differentiation strategies or focus strategy-focuses on a few market segments than going over the whole market).Other competitive positions include market leader, market challenger, market follower or market nicher strategies.

f. PUBLICS

Publics are any group that has an actual or potential interest or impact on an organization’s ability to achieve its objectives.There are 7 types of Publics:

i. Financial publics that influence the Company’s ability to obtain funds. Banks, investment houses and stockholders are the major financial publics.

ii. Media publics which carry the news, features and editorial opinion on the company. These include the newspapers, magazines, radios and TV stations.

iii. Government publics- Management must take government regulatory developments into account by consulting the company’s lawyers on such issues as laws and regulations on product safety, and truth in advertising.

iv. Citizen-action publics –A company’s marketing decisions may be questioned by consumer organizations, environmental groups, and minority groups and so on. Its public relations department can help it to stay in touch with consumer and citizen groups.

v. Local publics include neighborhood, residents and community organizations. Large companies usually appoint a community Relations Officer to deal with community, attend meetings, answer questions and contribute to worthwhile causes.

vi. General Publics. A Company needs to be concerned about the general public’s attitude towards its products and activities. The public’s image of the company affects its buying patterns and capacities.

vii. Internal publics. Include workers, managers, volunteers and the board of directors. Large companies use newsletters, websites and other means to inform and motivate their internal publics. When employees feel good about their company, this positive attitude spills over to the external publics.

A company can prepare marketing plans putting into account these major publics as well as for its customer markets

B. MACRO-ENVIRONMENT

Macro-Environment forces are forces that shape opportunities and pose threats to the company.These include demographic, economic, natural, technological, political and cultural forces.

1. DEMOGRAPHIC ENVIRONMENT

Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics.The demographic environment is of major interest to markets, because it involves people and people make up markets. Changes in the world demographic environment have major implications for business. For example, 25 years ago, the Chinese government passed a regulation limiting families to one child per

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family to curb the skyrocketing population. As a result. Today Chinese children (known as little emperors and empresses) are being showered with attention and luxuries under what is known as the “six-pocket syndrome” since as many as six adults-the two parents and the doting grandparents-may be indulging the whims of each child. On average a Beijing household now spends about 40% of their income on their cherished child. Among other things, this trend has created huge market opportunities for children’s educational products.In the US Market, the following are some of the demographic groups according to age/generations:

i. Millennial – (1-10 years)ii. Generation Y(11-28 years)-Born 1977-1989

Are a large teen and young adult market Comfortable using computer, digital and internet technology

iii. Generation X(29-40 years) Care about the environment and respond favorably to socially responsible companies. Less materialistic Cautious, romantics who want a better life. More interested in job-satisfaction than in sacrificing personal happiness and growth for

promotion. Skeptical bunch and cynical of frivolous marketing pitches.

iv. Baby Boomers(41-59 years) More educated More Wealthy Approach life with reasonableness and stability Anti-aging products and services consumers.

v. Aged (60 years and above)

Considerable purchasing

Healthier, wealthier, better educated power

Market potential not fully tapped

2. ECONOMIC ENVIRONMENT

This consists of the factors that affect consumer buying power and spending patterns.Nations and markets vary greatly in their levels and distribution of income. Some countries have subsistence economies (they consume most of their own agricultural and industrial output). These countries offer few marketing opportunities.At the other extreme end are industrial economies which constitute rich markets for many different market opportunities.Changes in IncomeDue to the global recession today, the financially squeezed consumers are spending more cautiously. Value marketing has become the catch phrase for many marketers. Rather than offering high quality at high prices or lesser quality at very low prices, marketers are looking for ways to offer today’s financially cautious clients greater value-just the right combination of product quality and good service at a fair price.Marketers need to pay attention to the income distribution as well as the average income .Income distribution is still much skewed. At the top are the upper class consumers whose spending patterns are not affected by current economic events and are a major market for luxury goods.There is the middle class, who are careful about their spending patterns but still can afford the good products and services in life the working class must stick to the basics of living such as food, clothing, and shelter and must try hard to save. Finally, the under class (bottom of the pyramid class) that include retirees, street families, slum dwellers, who must count their pennies and be extremely careful when even making the most basic products.

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Changing consumer spending patternsOn average food, housing and transportation use up most of the household income. However consumers at different income levels have different spending patterns. Ernst Engel studied how people shifted their spending patterns as their income rose.He found out that as family income rises the percentage spent on food declines, the percentage spent on housing remains constant(except for such utilities as gas, electricity and public services which decrease) and both the percentage spent on most other categories and that devoted to savings increase.Changes in major economic variables such as income, cost of living, interest rates and savings and borrowings patterns have a large impact on the market place.Busineses can be wiped by an economic downturn or caught unprepared in a boom.

3. NATURAL/ECOLOGICAL ENVIRONMENT

This involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities. Environmental concerns have grown steadily during the past three decades.

Marketers should be aware of the several trends on the natural environment. This involves:i. Shortage of raw materials

Air and water may seem to be infinite resources, but some groups see long –run dangers. Air pollution chokes many of the world’s large cities posing a great environmental hazar4d and water shortage is already a problem in many cities in the world.Renewable resources such as forests and food also need to be used wisely.Non-renewable resources such as oil, coal and various minerals pose a serious problem. Firms making products that require these scarce resources face large costs increases, even if the raw materials do remain available.

ii. Increased Pollution

Industry has continued to damage the quality of the natural environment .For example, the disposal of chemical and nuclear wastes, the dangerous mercury levels in the oceans, the quantity of chemical pollutants in our food and soil, the littering of the environment with biodegradable plastics and bottles.

iii. Increased government intervention in natural resource management

Many developed economies/countries vigorously pursue environmental quality whereas poorer nations do little about pollution, largely because they lack the needed funds or political will.The general hope is that companies around the world will accept more social responsibility to control and reduce pollution. Going into the future, firms doing business in Kenya and in the global arena expect strong controls from government and pressure groups.Instead of opposing regulations, marketers should help develop solutions to the material and energy problems facing the world. Concerns for the natural environment have spawned the so-called green Movement. Today enlightened companies are going beyond what government regulations demand. They are developing environmentally sustainable strategies and practices in an effort to create a world economy that the planet can support indefinitely.

4. POLITICAL ENVIRONMENT

It consists of laws, regulations, government agencies and pressure groups that influence or limit various organizations and individuals in a given society. Even the most liberal advocates of free-market economies agree that the commercial system works well with at least some regulations.Well-conceived regulations encourage competition and ensure fair markets for goods and services. Thus governments develop public policy to guide commerce (a policy is a set of laws and regulations that limit business for the good of the society as a whole).Many governments have laws covering such issues as competition, fair trade practices, environmental protection, product safety, truth in advertising, consumer privacy, packaging, labeling and pricing.

5. TECHNOLOGICAL ENVIRONMENT

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It is the most dynamic and dramatic force now shaping our destiny.Technol;ogy has released such wonders as the internet, laptop computers, mobile telephony as well as such horrors as nuclear missiles, chemical weapons and assault rifles.Example of how the technological environment is affecting business is the implanting of Little transmitters in all products in Supermarkets, which uses the RFID (Radio Frequency Identification or smart chip/Auto-ID), to allow tracking of these products from point of production through to point of use&disposal.Already this technology is being experimented on by Procter Gamble and Gillette Companies in collaboration with Walmart&Tesco Stores.New technologies create new markets and opportunities and replace the older technology. For example the automobile hurt the railroad, compact discs hurt the phonograph records, the mobile phone is coming after landline phones. When old industries/technologies fight or ignore new technologies, their business declines or completely dies out.Today’s research is usually carried out in research teams rather than by lone inventors such as Thomas Edison (man who discovered the bulb).Many companies are adding marketing people to R&D teams to try and obtain a stronger marketing orientation.Finally products and technology become more complex, the more the public needs assurance that these products are safe and of quality.

6. CULTURAL ENVVIRONMENT

Kenyan population is becoming a multicultural society and workforce and the trend is toward greater multiculturalism (When all major ethnic groups in an area--such as a city, county, or census tract--are roughly represented).

When designing global marketing strategies, companies must understand how culture affects consumer reactions in each of the world market. In turn they must also understand how their strategies affect local cultures.

Impact of Culture on Marketing The seller must examine the ways consumers indifferent countries think about and use certain products before planning a marketing program. There are often surprises. For example, the average Frenchman uses twice as many cosmetics and beauty aids as the wife. The Germans and the French eat more packaged, branded spaghetti than do Italians. Italian children like to eat chocolate bars between slices of bread as a snack. Women in some communities Tanzania will give them eggs for fear of making them bald.Business norms and behavior also vary from country to country. American business executives need to

be briefed on these factors before conducting business in another country. Here are some examples of different global behavior.

South Americans like to sit or stand very close to each other when they talk business-in fact, almost nose-to-nose. The American business executive tends to keep backing away as the South American moves closer. Both may end up being offended.

Fast and tough bargaining, which works well in other parts of the world, is often inappropriate in Japan and other Asian countries. Moreover, in face-to-face communications, Japanese executives rarely say so. Thus, Americans tend to become impatient with having to spend time in polite conversation about the weather or other such topics before getting down to business. And they become frustrated when they don’t know where they stand. However, when Americans come to point quickly, Japanese business executives may find this behavior offensive.

In France, wholesalers do not to promote a product. They ask their retailers what they want and deliver it. If an American company builds its strategy around the French’s wholesaler’s cooperation in promotions, it is likely to fail.

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When American executives exchange business cards, each usually gives the other’s card a cursory glance and stuff for future reference. In Japan, however, executives dutifully study each other’s card during a greeting, carefully noting company affiliation and rank. They a business card the same respect they show a person first.

By the same token, companies that understand cultural nuances can use them to advantage when positioning products internationally.

Thus understanding cultural traditions, preferences, and behaviors can help companies not only to avoid embarrassing mistakes but also to take advantage of cross-cultural opportunities.

MARKETING INFORMATION SYSTEM AND MARKETING RESEARCHMARKETING INFORMATION SYSTEMA marketing Information System (MIS) consists of people, equipment, and procedures to gather, sort, analyze, evaluate and distribute needed, timely and accurate information.MIS begins and ends with information users-marketing managers, internal and external partners and others who need marketing information.Marketing Information System

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Marketing Managers and Other Information UsersAnalysis Planning Implementation Organization Control

DEVELOING Needed INFORMATION

MARKETING ENVIRONMENTTarget Marketing Competitors Publics Macro-Environment ForcesMarkets Channels

Internal Data Bases

Information Analysis

Marketing Intelligence

Marketing Research

Distributing and Using Information

Assessing Information Needs

A. Assessing Marketing Information Needs

A marketing Information system (MIS) primarily serves the company marketing managers and other managers. However; it may also provide information to external partners such as suppliers, resellers, or marketing services agencies. For example Nakumatt might give Samsung Electronics Limited or BBK access to information on customer buying patterns and inventory levels.A good Marketing Information System balances the information users would like to have against what they really need and what is feasible to offer. The MIS must monitor the marketing environment in order to provide decision makers with information they should have to make key marketing decisions.At times the company cannot provide the needed information, either because it is not available or because of MIS Limitations. For example a brand Manager might want to know how competitors will change their advertising budgets next year and how these changes will affect the Industry market shares. This information on planned budgets may not be available and even if it is, the company’s MIS may not be advanced enough to forecast resulting changes in the market shares.Lastly the costs of obtaining, processing, storing and delivering information can mount quickly and the company must decide whether the benefits of having additional information are worth the costs of providing it, and both value and cost are hard to assess. Marketers should not assume that additional information will always be worth obtaining but should rather weigh carefully costs of getting more information against the benefits resulting from it.

B. Developing Needed Marketing Information

Marketers can obtain needed information from:a. Internal Data

Companies build extensive internal data bases. Internal databases are electronic collections of information obtained from data sources within the company. Marketing managers can readily access and work with information in the database to identify marketing opportunities and problems, programs and evaluate performance.Sources of information in the data base include:

i. Accounting department-who prepares financial statements and keeps detailed records of costs, sales and cash flow.

ii. Operation reports-production schedules, shipments and inventories.iii. Sales force reports – reseller reactions and competitor information.iv. Marketing department-gives information on customer demographics, psychographics and

buying behavior.v. Customer Service department-keeps records of customer satisfaction or service problems.

Challenges of Internal Data Because the information was collected for other purposes, it may be incomplete or in wrong

forma for making decisions. Data ages quickly-keeping data current requires a major effort both financial and manpower. A large company produces lots of information, and keeping track of all of it is difficult.

b. Marketing Intelligence

Marketing Intelligence is the systematic collection and analysis of publicly available information about competitors and developments in the marketplace. The goal of marketing intelligence is to improve strategic decision making, assess and track competitors’ and provide early warning of opportunities and threats. Techniques used by competitors range from:

i. Quizzing company’s own employeesii. Benchmarking competitors’ products

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iii. Researching the Internetiv. Industry trade showsv. Snooping on the rival’s garbage(P&G admitted dumpster diving at rival Unilever’s

HQs.Whereas Bob Ayling-ex-CEO of British Airways visited Easy Jet founder Stelios Haji-Ioannou,claiming that he was fascinated by the budget airline formula. One year later BA, launched GO-‘carbon copy’ of Easy Jet.

vi. Suppliers, resellers and key customers.vii. Observing competitors – buy and analyze their products and monitor their sales, parking

lots (empty lots could mean hard times, full lots could mean plenty of business).viii. Company annual reports, business publications, press releases, traders’ exhibits and

advertisements.Facing determined marketing Intelligence training efforts by competitors, most companies are now taking countermeasures. For example Unilever (US) does competitive intelligence training:

i. Staff is told to protect information as well as how to get it.ii. Keep their mouths shut when travelling.

iii. Take care with hired company cab drivers-as they might be spies.iv. Unilever normally do random undercover checks on internal security by planting

an ‘actor’ during a sales conference to see who spoke to him, how much they told him and how long it took for him to be found out.

c. Marketing Research It is a systematic design, collection, analysis and reporting of data relevant to a specific marketing situation facing an organization.Uses of marketing research data are:

a. Understand customer satisfaction and purchase behavior.b. Assess market potential and market shares.c. Measure effectiveness of pricing, product distribution and promotion

activities.Sources of market research data include:

a. Own research departmentsb. Hire outside research specialists on specific marketing problems.c. Purchase data collected by outside firms to aid in decision making.

ACTIVITIES OF RESEARCHA. Defining the Problem and research objectives.

Marketing managers and researchers must work closely together to define the problem and agree on research objectives.After defining the problem, the marketing research project might use one of these of types of research:

a. Exploratory research-marketing research used to gather preliminary information that will help define problems and suggest hypotheses.

b. Descriptive Research- This is research used to describe things such as the market potential for a product, demographics and attitudes of consumers who buy the product.

c. Causal-Marketing research which is used to test the hypotheses about cause and effect relationships, for example. Could a 20% decrease in tuition at Kenya Institute of Management result into an enrollment increase sufficient to offset the reduced tuition.

Market Research vs Marketing Research

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Market Research -Researching the immediate competitive environment of the marketplace, including customers, competitors, suppliers, distributors and retailersMarketing Research Includes the entire above plus: - Companies and their strategies for products and markets - The wider environment within which the firm operates (for example political, social)

Types of Market Research1. By Source - Primary

- Secondary2. By Methodology

- Qualitative- Quantitative

3. By Objectives- Exploratory

Exploratory research is most commonly unstructured, “informal” research that is undertaken to gain background information about the general nature of the research problem.Exploratory research is usually conducted when the researcher does not know much about the problem and needs additional information or desires new or more recent information.

Exploratory research is used in a number of situations:i. To gain background information

ii. To define terms

iii. To clarify problems and hypotheses

iv. To establish research priorities

A variety of methods are available to conduct exploratory research:i. Secondary Data Analysis

ii. Experience Surveys

iii. Case Analysis

iv. Focus Groups

v. Projective Techniques

- Descriptive

Descriptive research is undertaken to provide answers to questions of who, what, where, when, and how – but not why. Two basic classifications:

• Cross-sectional studies

i. Cross-sectional studies measure units from a sample of the population at only one point in time. ii. Sample surveys are cross-sectional studies whose samples are drawn in such a way as to be

representative of a specific population. iii. On-line survey research is being used to collect data for cross-sectional surveys at a faster rate of

speed.

• Longitudinal studies

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i. Longitudinal studies repeatedly draw sample units of a population over time.

ii. One method is to draw different units from the same sampling frame.

iii. A second method is to use a “panel” where the same people are asked to respond periodically.

iv. On-line survey research firms recruit panel members to respond to online queries.

Two types of panels:• Continuous panels ask panel members the same questions on each panel measurement.

• Discontinuous (Omnibus) panels vary questions from one time to the next.

Longitudinal data used for:• Market tracking

• Brand-switching

• Attitude and image checks

- Causal (Or experimental)

Causality may be thought of as understanding a phenomenon in terms of conditional statements of the form “If x, then y.”Causal relationships are typically determined by the use of experiments, but other methods are also used.

An experiment is defined as manipulating (changing values/situations) one or more independent variables to see how the dependent variable(s) is/are affected, while also controlling the affects of additional extraneous variables.

a) Independent variables: those over which the researcher has control and wishes to manipulate that is package size, ad copy, and/or price.

b) Dependent variables: those over which the researcher has little to no direct control, but has a strong interest in testing for example sales, profit, market share.

c) Extraneous variables: those that may affect a dependent variable but are not independent variables.

Experimental DesignAn experimental design is a procedure for devising an experimental setting such that a change in the dependent variable may be solely attributed to a change in an independent variable.

Symbols of an experimental design:• O = measurement of a dependent variable• X = manipulation, or change, of an independent variable• R = random assignment of subjects to experimental and control groups• E = experimental effect•

How Valid Are Experiments?

An experiment is valid if:• the observed change in the dependent variable is, in fact, due to the independent variable

(internal validity)

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• if the results of the experiment apply to the “real world” outside the experimental setting (external validity)

Types of Experiments

Two broad classes:a. Laboratory experiments: those in which the independent variable is manipulated and

measures of the dependent variable are taken in a contrived, artificial setting for the purpose of controlling the many possible extraneous variables that may affect the dependent variable.

b. Field experiments: those in which the independent variables are manipulated and measurements of the dependent variable are made on test units in their natural setting.

B. Developing the research planThe research plan outlines:

Sources of data Spells out the specific research approaches. Contact methods-mail, questionnaires, telephone interviewing, personal interviewing

(individual vs. group interviewing), computer assisted telephone interviewing (CATI),online surveys and online focus groups.

Sampling plans- Instruments that researchers will use to gather new data-two main instruments are

normally used (questionnaire-open vs. closed) and mechanical devices (supermarket scanners & people meters).

C. Implementing the Research planThis involves collecting, processing and analyzing the information. Researchers should watch closely to make sure the plan is implemented correctly.

D. Interpreting and reporting the findingsThe researcher must not try to overwhelm managers with numbers and fancy statistical techniques. Rather, the researcher should present important findings that are useful in the major decisions faced by management. Thus managers and researchers must work together closely when interpreting research results and must share responsibility for the research and resulting decisions.

Limiting factors to conduct a successful Marketing research

1. Problems with research buyers vs suppliers

Buyer

a. Narrow concept of research• Many managers see M.R. as no more than fact-finding• They therefore spend little time defining the problem or explaining the context• The results are irrelevant• a vicious circle arises

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b. Research used token applications-used to confirm existing views rather than objective look at marketplace

c. Unrealistic view of timeframe-often results are expected very rapidly, hence research therefore commissioned too late AND research firms bow to time pressure and results are sub-optimal.

Supplier

i. Variable quality of market researchers- little uniformity of professionalism across the industry and also many small, poorly qualified companies

ii. Market researchers not sufficiently demanding-upfront time often insufficient and also little contact throughout process

iii. Technical problems for example problem ill-defined and questionnaires poorly constructed.

2. Frequent technical pitfalls

i. Poor definition of problemii. Designing the questionnaire

iii. Sample size smalliv. Data collection inadequate.

3. Problems with traditional market researcha. Market research has allowed prominent product failures, and wrong predictionsb. Markets are increasingly becoming micro-segmented (e.g. sports shoes aimed at affluent

fashion conscious women specifically for aerobics), so mass market research becomes correspondingly irrelevant

c. It is helpful for improvements, but less so for radical innovationsd. For more accurate targeting it may be advantageous to work with leading customers

within the target group

4. When and how not to do it

i. Lack of resourcesii. Research results not actionable

iii. Closed mindsetiv. Vague objectives

C. Analyzing Marketing InformationInformation gathered in internal databases, through marketing intelligence and marketing research usually requires more analysis. Marketing managers may use advanced statistical analysis models which go beyond means and standard deviations in the data. Such analysis will help them to answer questions about markets, marketing activities and outcomes.

CUSTOMER RELATIONSHIP MANAGEMENTSmart companies capture information at every possible customer touch point. These touch points include customer purchases, sales force contacts, service and support calls, websites visits, satisfaction surveys, credit and payment interactions, and market research studies.

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To sort out the problem with this information which is scattered widely across the organization and at times buried deep in the separate databases, plans and records of different company functions and departments, Customer Relationship Management (CRM) is used.Customer Relationship Management involves managing detailed information about individual customers and carefully managing customer ‘touch points’ in order to maximize customer loyalty.CRM consists of sophisticated software and analytical tools that integrate customer information from all sources, analyze in depth and apply the results to build stronger customer relationships. Companies gain the following benefits from CRM:

i. They can provide higher level of customer service.ii. Companies are able to develop deeper customer relationships.

iii. Companies are able to pinpoint high-value customers.iv. Companies are able to target & cross-sell the company’s products.v. The company is able to create offers tailored to specific customer

requirements.

D. Distributing and Using Marketing Information

Marketing information must make marketing decisions easier to make or dealing with customers more informed. The information made available to the managers help them to prepare periodic and intelligence reports. But managers also need non-routine information for special situations, for example, a sales manager having trouble with a large customer may want a summary of the account’s sales and profitability over the past year.Companies use intranet to provide information to employees and other stakeholders and extranets, which make information available to suppliers and customers. Thanks to modern technology today’s marketing managers can gain direct access to information system at anytime and from virtually any location.

Role of Research Information in Marketing

The company needs sound information in order to produce superior value and satisfaction. The marketing department also requires information on competitors, resellers and other actors in the marketplace.Increasingly marketers are viewing information as an important strategic asset and marketing tool.

Test Marketing

There are many problems and difficulties that must be overcome if research study is to provide valuable information for decision-making.

Test marketing is used largely to measure new product sales on a limited basis where competitive retaliation and other factors are used to operate freely. In this way, future sales potential can be estimated reasonably well.

Test marketing is the phrase commonly used to indicate an experiment, study, or test that is conducted in a field setting. Two broad classes:

• To test the sales potential for a new product or service• To test variations in the marketing mix for a product or service

Types of Test Marketing

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a. Standard test market: one in which the firm tests the product and/or marketing mix variables through the companies normal distribution channels

b. Controlled test markets: ones that are conducted by outside research firms that guarantee distribution of the product through prespecified types and numbers of distributors.

c. Electronic test markets: those in which a panel of consumers has agreed to carry identification cards that each consumer presents when buying goods and services

d. Simulated test markets: those in which a limited amount of data on consumer response to a new product is fed into a model containing certain assumptions regarding planned marketing programs, which generates likely sales volume

Criteria for Selecting Test Market towns

i. Representativeness: Do demographics match the total market?ii. Degree of isolation: Nyeri and Meru are isolated markets; Thika is not isolated.

iii. Ability to control distribution and promotion: Are there preexisting arrangements to distribute the new product in selected channels of distribution? Are local media designed to test variations in promotional messages?

Test Marketing Advantages:a. Allows most accurate method of forecasting future salesb. Allows firms the opportunity to pretest marketing mix variables

Disadvantages of Test Marketing:a. Does not yield infallible resultsb. Are expensivec. Exposes the new product or service to competitorsd. Takes time to conduct

There are a number of problems, however, that could invalidate test marketing results:1.Test markets are not representative of the market, in general terms of

population characteristics, competition, and distribution outlets.2.Sample size and design are incorrectly formulated because of budget

constraints.3.Pretest measurements of competitive brand sales are not made or are

inaccurate, limiting the meaningfulness of market share estimates.4.Test scores do not give complete support to the study such that

certain package sizes may not be carried or prices may not be held constant during the test period.

5.Test market products are advertised or promoted beyond a profitable level for the market in general.

6.The effects of factors that influence sales such as the sales force, season, weather conditions, competitive retaliation, and shelf space are ignored in the research.

7.The test-market period is too short to determine whether the product will be repurchased by customers.

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BUYER BEHAVIOUR AND MARKET SEGMENTATION

BUYER BEHAVIOUR

Types of Buying decision Behavior

Buying behavior differs greatly for tube of toothpaste, an iPod, financial services, and new car. More complex decisions involve more buying participants and more buyer deliberations as shown below in the figure:

Four types of buying behavior

High Involvement Low InvolvementSignificant differences Between brands

Few differencesBetween brands

1) Complex buying Behavior

This consumer behavior in found in situations characterized by high consumer involvement in a purchase and significant perceived differences among brands.

Consumers may be highly involved when the product is expensive, risky, purchased infrequently and highly self-expressive.

In fact the consumer has a lot to learn about the product category. For instance a Digital LCD TV buyer may not know what attributes to consider.The buyer will pass through a learning process, first developing beliefs (descriptive thoughts that a person has about something) about the product, then attitudes (a person’s relatively constitent evaluations, feelings, tendencies towards an object/idea), and then making a thoughtful purchase choice.Marketers of high involvement products must understand the information-gathering and evaluation behavior of high involvement consumers.They need to help buyers learn about product-class attributes and relative importance.They need to differentiate their brand features.They need to motivate store’s sales teams and buying acquaintances to influence the final brand choice.

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Complex buying behavior

Variety-seeking buying behavior

Dissonance-reducing buying behavior

Habitual buying behavior

2) Dissonance-reducing Buying Behavior

This occurs when consumers are highly involved with an expensive, infrequent, or risky purchase, but see little difference among brands.For example consumers buying tiling materials for a home may face a high-involvement decision because tiling a home is expensive and self-expressive. Yet the buyers may consider most Tile brands in a given price range to be the same.In this case, because perceived brand differences are not large, buyers may shop around to learn what is available, but buy relatively quickly. They may respond primarily to a good price or to purchase convenience.After the purchase, consumers may experience post purchase dissonance when they notice certain disadvantages of the purchased tile brand or era favorable things about brands not purchased.To counter that a marketers after-sale communications should provide evidence and support to help consumers feel good about their choices.

3) Habitual Buying Behavior

Habitual buying behavior occurs under conditions of low consumer involvement and little brand difference. For example, salt. Consumers have little involvement in this product category-they simply go to the store and reach for a brand. If they keep reaching for the same brand, it more out of habit rather than strong brand loyalty. Consumers appear to have low brand involvement with low-cost, frequently purchased items.Consumers do not search extensively for the brands, evaluate brand characteristics, and make weighty decisions about which brands to buy.

Because buyers are not highly committed to any brands, marketers of low-involvement products with few brand differences often use price and sales promotions to stimulate product trial. In advertisement of a low involvement product, and ad copy should stress only a few key points .Visual symbols and imagery are important because they can be remembered easily and associated with the brand.

TV is more effective than print media as it is a low-involvement medium suitable for passive learning.

Advertising planning should be based on classical conditioning theory, in which buyers learn to identify a certain product but a symbol repeatedly attached to it.

4) Variety –Seeking Buying Behavior

Consumers undertake variety –seeking buying behavior in situations characterized by low consumer involvement but significant perceived brand differences.In such cases consumers do a lot of brand switching .For example in buying cakes/yoghurt, a consumer may hold some beliefs, choose a cake/yoghurt brand without much evaluation, and then evaluate that brand during consumption. But nest time, the consumer might pick another brand out of boredom or simply to try something different.Brand switching occurs for the sake of variety rather than brand switching.

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Buyer Decision Making Process

The Buying Process

Buying process/buying funnel-It is a description that involves all the steps in the purchasing process, and also goes by the names of buying cycle, buyer decision cycle, and sales cycle.Most marketers do not give a lot of thought to the buying processes of their customers. Giving attention to the buying process can have a positive effect on your sales.

What is the buying process? Where does your customer fall within it? How can you use it to help bring your customer to the point-of-purchase? The customer makes decisions before deciding to buy.

Each and every one of us goes through some sort of buying process when we make a purchase. At times the process is long and labored as when buying a new car. At other moments it happens almost without thought when buying a box of your favorite chocolate, for instance. But whatever the level of a buying decision a process does happen.

Generally speaking, the buying process consists of five steps. Those products/services that are new to the market, are new to your customer, or are very expensive will require a longer period of consideration in each phase. Products/services that are familiar, that have market longevity, or that cost very little will require a shorter (even instantaneous) process.

Step One - Need/Want or Problem Recognition

During this step, buyers realize they want or need something. They recognize that they have a problem or a desire, and they choose to find a solution. If this need or want is something along the lines of lunch, the buying decision can be made relatively quickly, without much thought of the actual buying process. Hunger is a quick problem to solve, most options are familiar to buyers, and the cost is usually low. If the need or want is a new car or a home, however, the actual buying decision can take weeks or months. There is a greater risk, new models and features come out all the time, the cost is high, and the possibility of making a "mistake" when buying is great.

Step Two - Information Search

Once the choice has been made to fill a need or want, your customer begins to search for information in order to make a quality decision that is in his/her best interest.Information sources include: Personal(family ,friends,neighbours,acquaintances),commercial9advertising,websites,sales persons,dealers,packaging,displays),Public(mass media, consumer-rating organizations) and Experiential(handling,examining,using the product)

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Car bazaar or web sites may be visited (in which case you should offer some way for the customer to remember you, such as printable versions of information, downloadable brochures and catalogs, a way to bookmark your site, etc.). Brochures may be gathered (be sure to offer your contact information). Phone calls might be placed (check to ensure you or your call staff has the information they need to answer questions). Free samples, test drives, and other means of "trial" work wonderfully to guide your customer through the information search stage and onto the evaluation and purchase stages.

Step Three Evaluation of Alternatives

After your customers have collected all the information they feel is necessary, they begin to evaluate their options and narrow their choices until they finally pick the one thing that they are comfortable with, and that they can afford. Some basic concepts will help us understand consumer evaluation processes; first-the consumer is trying to satisfy a need. Second-the consumer is looking for certain benefits from the product solution .Third-the consumer sees each product as a bundle of attributes with varying abilities for delivering the benefits sought to satisfy this need.E.G.THE SAROVA STANELY –location, cleanliness, atmosphere and price.This is the time to follow-up with your customers. Is there additional information they need in order to choose? Did they have problems with the free sample that can be corrected? Your "presence" during the evaluation stage is important, so do your best to retain customer contact information in order to "gently" offer any additional details the buyer might need. (Nobody likes a hard sell, or to be pushed into buying.)

Step Four Purchase Decision Once all the information has been evaluated, a purchase is made, and your customer walks away happy….right? Well, not always. In executing a purchase intention, the consumer may make up to five sub decisions; For instance buying a car, brand (VW Toureg), quantity (2200cc),timing(weekend) and payment mode(cash).Even if consumers form brand evaluations, two general factors can intervene between the purchase intention and the purchase decision. These are:

i. Attitude of others-this depends on two things-the intensity of the other person’s negative attitude toward our preferred alternative and our motivation to comply with the other person wishes. Related to the attitude of others is the Role played by infomediaries (chat rooms, log sites, music reviewers) who use various media channels to disseminate their evaluations e.g. published product testing reports in consumer magazines.

ii. Unanticipated situational factors-e.g. loss of job,storeperson being a turn-off, or other major purchase

A consumer’s decision to modify, postpone, or avoid a purchase decision is heavily influenced by perceived risk. Consumers may perceive many types of risk in buying and consuming a product;

i. Functional risk-The product does no perform up to expectations.ii. Physical risks-the product may pose a threat to physical well-being or

heath of the user or others.iii. Financial risk-the product is not worth the price paidiv. Social risk-The product results in embarrassment from others.v. Psychological risk-The product affects the mental wellbeing of the user.

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vi. Time risk-the failure of the product results in an opportunity cost of finding another satisfactory product.

Step Five - Cognitive Dissonance (Post Purchase Anxiety) While customers may have thought they chose the best solution when they purchased, many times customers later experience cognitive dissonance, otherwise known as ‘buyers’ regret. They second guess their decision and begin to feel uncomfortable about their decision. This is where trial periods, guarantees, and/or warranties come into play. Customers will have more confidence in their decision, even after it is made, if they know they are not stuck with their purchase. Having a guarantee to fall back on gives them the comfort to know that should something go wrong they will be left stranded? Generally speaking, a guarantee is a psychological support rather than a literal one. Most customers never take advantage of guarantees... they do not think they need to. However, if a guarantee was not offered, the anxiety of feeling "all alone" would overcome many buyers and persuade them into asking for a refund where possible. Understanding each step in the buying process can help you structure your selling process and your marketing materials to cater to the customer. Take the time to consider what your customer goes through when making the choice to buy, and alter your business accordingly. In doing so, you’ll increase your chances of making more sales, and landing more satisfied customers.

Marketing Segmentation

It is the process of dividing a market into groups of similar consumers and selecting appropriate groups for the firm to serve. It can also be defined as dividing a market into distinct groups with distinct needs, characteristics or behavior who might require separate products or marketing mixes.

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The group or market segment that a company selects to focus on is called a target market.Market segmentation can be broken into 6 steps as indicated in the diagram below:

A model of Market Segmentation Process

Segmentation is done along the two types of markets available:A. CONSUMER MARKETS

The major variables that might be used in segmentation of consumer markets are geographic, psychographic and behavioral variables.Segmentation Base includes:

i. Geographic

Continents Africa,Asia,Europe,North AmericaGlobal regions South East Asia,Mediterranean,Carribean IslandsCountries Kenya,China,Canad,FranceCountry regions West Africa,S.Africa,East AfricaCity, town/Province Under 5000 people,5000-19999,20,000 and overPopulation Density Urban,surburban,ruralClimate Tropical,temperate,cold

Geographic segmentation involves dividing the market into different geographic units such as nations, states, regions, counties, cities or neighborhoods. Many companies today are localizing their products, advertising, promotion and sales efforts to fit the needs of individual regions, cities and even neighborhoods.

ii. Demographic

Segmentation base ExampleAge Under 6 years old,6-12,13-19,20-29,30-39,40-49,50+Gender Male or FemaleFamily size 1-2 persons,3-4 persons, more than 4 personsFamily lifecycle Single,young,married with children, sole survivorIncome Under sh.49, 999 per year,sh.50,000-sh.100000/yr,..Education High school or less, high school graduate, college graduate, post

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Delineate firm’s current situation

Determine consumer needs and wants

Divide markets on relevant dimensions

Develop product positioning

Decide segmentation strategy

Design marketing mix strategy

graduate.Marital Status Single,married,divorced,widowed

iii. Social

Segmentation base ExampleCulture/subculture American,African,Asian,EuropeanReligion Christian,Jewish,Muslim,BuddhistRace European,Indian,BlackNationality Kenyan,Ugandan,Nigerian,French

iv. Psychographic

Segmentation base ExampleSocial class Upper class, middle class, working class, lower classLifestyle Achievers,strivers,strugglersPersonality Compulsive,gregarious,authoritarian and ambitious

v. Behavior

Segmentation base ExampleKnowledge Expert, noviceInvolvement High,medium,lowAttitude Positive,neutral,negativeBenefits sought Convenience,economy,prestigeInnovativeness Innovator, early adopter, early majority,laggards,non-adopterReadiness stage Unaware,aware,interested,desirous,plan to purchasePerceived risk High,moderate,lowMedia usage Newspaper,magazine,TV,internetPayment method Cash, Visa, Check, …Loyalty status None,some,totalUsage rate Light,medium,heavyUser status Non-user,ex-user, current user, potential userUsage Situation Work,home,vacation,commuting

B. BUSINESS/ORGANISATIONAL MARKETS

Segmentation base ExampleCompany size Small,medium,large relative to industryPurchase quantity Small,medium,large accountProduct application Production,maintainance,product componentOrganization type Manufacturer,retailer,government agency, hospitalLocation Mt.Kenya,Western,Nairobi,MombasaPurchase Status New Customer, occasional purchaser, frequent purchaser, non-purchaserAttribute Importance Price,service,reliability of supply

MARKETING SEGMENTATION

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Consumer marketsA) Demographic Segmentation

It is dividing the market into groups based on variables such as age, gender, family, size, family lifecycle, income, education, religion, race, generation and nationality. There are two reasons expended for demographic segmentation:

a. The consumer needs, wants and usage rate often vary with demographic variables.

b. It is easier to measure demographic variables as opposed to other types of variables

Demographic segmentation includes:i. Age and lifecycle stage

This involves dividing a market into different age and lifecycle groups. For example Keringet sells bottled water for kids featuring favorite cartoon characters and with funny colors plus easy to pull-push back and drink cap. For adults, it sells different water bottles. Companies marketing to mature consumers usually employ positive images and appeals, for example NIMEKAMUA PESA NA KCC TV ad for the mature adults market..

ii. Gender segmentation

This means diving your market into different groups based on gender. It has been used in clothing, cosmetics, toiletries and magazines. More recently ,other marketers noticed opportunities for targeting women. For example Standard Chartered Bank started the Diva Account for women. Research has shown that 90% of all home improvement decisions are today made by women,2/3 of all women are involved in materials installations and 80% of all household consumer purchases are influenced by women.

iii. Income

This implies dividing a market into different markets along income groups. This has been used by marketers of such products and services as automobiles, clothing, cosmetics, financial services and travel. Many companies targets affluent consumers with luxury goods and convenience services. Other companies target lower income groups .Tuskys Supermarket has traditionally located its branches near bus-terminus or in low/medium income residential areas to target the lower income group.

B) Geographic It involves dividing a market into different geographic units such as nations, states, regions, countries, cities, neighbourhoods.Many companies today are localizing their products, advertising, promotion and sales efforts to fit the needs of individual regions, cities and even neighbourhoods.For example many corporate companies I Kenya are advertising in regional radio stations. Other companies are seeking to cultivate yet untapped geographic territory. For example, large companies are fleeing the competitive cities and suburbs to set up factories in smaller rural towns since it costs less to operate in the latter environment, for example Bidco Oil Refineries plant in Thika town.

C) Psychographic

It entails dividing a market into different groups based on social class, lifestyle or personality characteristics. Marketers often segment their markets by consumer lifestyle.Virtually every human society’s exhibit social stratification. Stratification sometimes takes the form of a caste system where the members of different castes are reared for certain roles and cannot change their case membership.Social classes reflect not only income but other indicators such as occupation, education, area of residence. Social classes differ in dress, speech patterns, recreational preferences, and many other characteristics.Seven Major Social Classes

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1. Upper Uppers - the social elite on inherited wealth. They give large sums to charity, run the debutante balls/parties, maintain more than one home, and send their children to the finest schools. They are a market for jewelry, antiques, homes, and vacations. They often buy and dress conservatively .Although small as a group, they serve as a reference group to the extent that their consumption decisions are imitated by the other social classes.

2. Lower Uppers-Persons usually in the middle class, who have earned high income or wealth through exceptional ability in their profession or business-CEOs/COOs of blue chip companies and young successful entrepreneurs. They tend to active in social and civic affairs and to buy the symbols of status for themselves and their children. They include the nouveau riche, whose pattern of conspicuous consumption is designed to impress those below them.

3. Upper Middle – These possess neither family status nor unusual wealth and are primarily concerned with ‘career.’ They are professionals, independent businesspersons, and corporate managers who believe in education and want their children to develop professional or administrative skills. Members of this group are civic-minded and home-orinented.They are the quality market for good homes, clothes, furniture and appliances.

4. Middle Class – Average white and blue collar workers who live on the ‘right side of town.’ Often, they buy popular products to keep up with trends. A good number-almost ¼ owned imported cars and most are concerned with fashion. The middle class believes in spending more money on ‘worthwhile experiences’ for their children and steering them toward a college education.

5. Working class-Average pay blue-collar workers and those who lead a working-class lifestyle, whatever their income, school background, or job. The working class depends heavily on relatives for economic and emotional support, for tips on job opportunities, for advice, and assistance. A working-class vacation means staying in town and going down to the coast/nyalgunga/gichagi/Naivasha no more than two hours away. The working class tends to maintain sharp sex-role divisions and stereotyping.

6. Upper Lowers – Upper lowers are working although their living standards are just above poverty. They perform unskilled work and are very poorly paid. Often upper lowers are educationally deficient.

7. Lower Lowers – Lower lowers are visibly poverty-stricken, and usually out of work and on Welfare(in Western economies).Some are not interested in finding a permanent job ,and most are dependent on public aid or charity for income.

Conclusion

Social classes show distinct product and brand preferences in many areas including clothing, home furnishings, leisure activities and automobiles. Social classes differ in media preferences, with upper-class consumers preferring magazines and books and lower-class consumers prefer television.Even with a media category such as TV, upper class prefer news and drama, lower class consumers prefer soap operas and sports program.

D) Behavioral

This dividing the market into groups based on consumer knowledge, attitude, use or response to a product.i. Occasion

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It can help the firm to build up product usage .For example Tuzo milk has been promoted as an after-exercise drink of choice or Weetabix as a breakfast cereal. Many marketers prepare special offers ad ads for holiday occasions, for example Christmas or Valentine offers.

ii. Benefits segmentation

It means dividing the market into groups according to the different benefits that consumers seek from the product. This requires finding the major benefits people look for in a product class, the kinds of people who look for each benefit for example, Reckitt Benkiser has Jik Ordinary Bleach for ordinary clothes and Jik Colors for colored clothes.

iii. User Status

Markets can be segmented into groups of non-users, ex-users, ex-users, potential, first-time users and regular users of a product. A company’s market position also influences its focus. Market share leaders focus on attracting potential users, whereas smaller firms focus on attracting current users away from the market leader.

iv. Usage rate

Markets can be segmented into light, medium and heavy users. Heavy users are often a small percentage of the total consumption. Marketers usually prefer to attract one heavy user to their product/service rather than several light users. On average in the fast-0food industry, heavy users make up 20% of patrons and eat up to 60% of the food served. But marketing dollars are often spent trying to convince light users that want a burger in the first place.

v. Loyalty Status

A market can be segmented by consumer loyalty. Consumers can be loyal to brands (Omo), Stores (Mr. Price/Nakumatt), and companies (Microsoft).Buyers can be divided into groups according to their degree of loyalty-completely loyal (they buy one brand all the time), somewhat loyal (loyal to 2or3 brands of a given product/favor one brand while sometimes buying others).In conclusion, marketers rarely limit their segmentation analysis to only one/few variables but use multiple segmentation bases in an effort to identify small, better-defined target groups. Thus a bank may not only identify a group of wealthy retired adults but also within that group distinguish several segments based on their current income, asset, savings and risk preferences and lifestyles.

Business Markets (Segmentation)Business buyers can be segmented geographically, demographically (industry, company size or by benefits sought, user status, usage rate and loyalty status).Additional variables that help in segmentation are: customer operating characteristics, purchasing approaches, situational factors and personal characteristics. Within the chosen industry, a company can further segment by customer size or geographic location.Within a given target industry and customer size, the company can segment by purchase approaches and criteria. As consumer segmentation many marketers believe that buying behavior and benefit provide the best basis for segmenting business markets.REQUIREMENTS OF EFFECTIVE SEGMENTATIONTo be useful, market segments must be:

a. Measurable

This means that the size, purchasing power and profiles of the segments must be measured, for example there is no data on the demographics of lefties segment and hence very few products are targeted to this group.

b. Accessible

The market segments can be effectively reached and served. For example, a cosmetics company finds that heavy users of its brands are single working men and women who stay out late and socialize a lot. It is there very difficult to reach them through conventional media,

c. Substantial

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The market segments are large and profitable enough to serve. It would not pay for example, for an automobile manufacturer to develop cars especially for people whose height is less than 3 ft tall.

d. Differentiable

The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If gay and non-gay men respond similarly to a sale of a deodorant, they do not constitute separate segments.

e. Actionable

Effective programs can be designed for attracting and serving the segments. For example one small milk-processing company identified 5 market segments, however its staff was too small to develop and implement separate marketing programs for each segment.

MARKETING MIX

A. PRODUCT

Product meaning Product is anything that is offered to a market for attention, acquisition, use, or consumption that might satisfy a want or a need. Products include more than just tangible goods. Broadly defined, products include physical objects, services, events, persons, places, organizations, ideas or mixes of these entities. That is an Apple iPod, a Toyota Lexus, and a Caffe Latte at Kengeles are products. But so are Zanzibar/Malaysian vacation, Old Mutual investment services and the advice from your doctor.Product is a key element in the overall market offering .This offering becomes the basis upon which the company builds profitable relationships with customers.Today, as products and services become more commoditized, many companies are moving to a new level in creating value for their customers. To differentiate their offers, beyond simply making products and delivering services, they are creating and managing customer experiences with their products or company.Levels of Products (services)Product planners need to think about products and services on there levels. Each level adds customer value. The most basic level is the core benefit-which addresses the question What is the buyer really buying? A woman buying lipstick buys more than the lip color. Charles Revson of Revlon saw this early, ‘In the factory, we make cosmetics; in the store, we sell hope.” And people who buy a Black Berry are buying more than a wireless mobile phone, e-mail and web-browsing device, or personal organizer. They are buying freedom and on-going connectivity to people and resources.At the second level product planners must turn the core benefit into an actual product. They need to develop product and service features, design and quality level, a brand name, and the packaging. For example, the Black Berry is an actual product. Its name styling, features, packaging and other attributes have all been combined to deliver the core benefit of staying connected.

Three Levels of Product

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Finally, product planners must build an augmented product around the core benefit and actual product by offering additional consumer services and benefits. Black Berry must offer just more than a communication device. It must provide consumers with a complete solution to mobile connectivity problems. Thus when consumers buy Black Berry, the company and the dealers also might give the consumers/buyers a warranty on parts and workmanship, instructions on how to use the device, quick repair services when needed, and a toll-free telephone number and website to use if they have problems or questions.Marketers make product and service decisions at three levels: individual product decisions, product line decisions and the product mix decisions.Product and Service ClassificationsAlthough broadly defined products also include marketable entities such as experiences, organizations, persons, places and ideas, Products and services fall into two main classifications:

1. Consumer products – these are products and services bought by the final consumers for personal consumption. Marketers further classify these products and services based on how consumers go about buying them.

i. Convenience products. These are consumer products and services that the customer usually buys frequently, low-priced, immediately and with minimum of comparison and buying efforts. Examples include soap, newspapers, candy and fast-food. Their promotion is through mass promotion by the producer.

ii. Shopping products .These are less frequently purchased consumer products and services that customers compare carefully on suitability, quality, price and style. Example is furniture, clothing and used cars, hotel and airline services. Shopping products’ marketers usually distribute their products through fewer outlets but provide deeper sales support to help customers in their comparison effoerts.Promotion is through advertising and personal selling by the producer and the reseller/agent.

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Augmented Product

Actual Product Features Delivery After-salesAnd Brand name Credit Quality Packaging Installations Warranty

Credit

Quality Design Packaging

Installation Warranty

Core Product

iii. Specialty products. These are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Examples include specific brands and types of cars, high-priced photographic equipment, designer clothes and the services of the medical or legal specialists. A Hummer is a specialty product, for example, because buyers are usually willing to travel great distances to buy one. Buyers normally do not compare specialty products. Promotion is more carefully targeted by both the producer and the reseller.

iv. Unsought products. These are consumer products that the consumer either does not know about or knows about but does not normally think of buying. Classic examples of known but unsought products and services are life insurance, preplanned funeral services, burial/cemetery plots and blood donations to the Red Cross. Also major innovations are unsought until the consumers are aware of them through advertising. Most of these products require lot of advertising, personal selling and other marketing effort.

2. Industrial Products-.These are those purchases for further processing or for use in conducting a business. If a consumer buys a WAHL electric Shaver for use for home use, the shaver is a consumer product. If the same consumer the WAHL electric for a kinyozi business, the WAHL shaver is an industrial product. The three groups of industrial products and services:

i. Materials and parts –.They include raw materials and manufactured materials and parts. Raw materials include farm products (-wheat, cotton, livestock) and natural products (fish, crude petroleum).Manufactured materials and parts consists component materials (iron, yarn, cement) and component parts (small motors, castings).Most manufactured materials and parts are sold directly to the industrial users. Price and service are the major marketing factors. Branding and advertising tend to be less important.

ii. Capital items-.These is industrial products that aid the buyer’s production or operations including installations (major purchases such as buildings-offices as well as factories and fixed equipment, namely generators, lifts, elevators) and accessory equipment which include portable factory equipments and tools (hard tools, forklift trucks) and office equipment (computers, fax machines, desks).

iii. Supplies and services. Supplies include operating supplies (lubricants, coal, paper, pencils) and repair and maintenance items (paint, nails, brooms).Supplies are the convenience products of the industrial field as they are purchased with minimum of effort or comparison. Business services include maintenance and repair services(window cleaning, computer

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repair) and business advisory services(legal,managem,ent consultancy, advertising)

3. Organizations , Persons, Place and ideas

Organizations-often carry out activities to ‘sell’ the organization itself. Organization marketing consists of activities undertaken to create, maintain or change the attitudes and behavior of target consumers toward an organizations. Business firms sponsor public relations or corporate image advertising campaigns to polish their images and market themselves to various publics. Person marketing consists of activities undertaken to create, maintain, or change attitudes or behavior toward particular people. People ranging from presidents, entainers, and sports figures to professionals such as doctors, lawyers and architects use person marketing to build their reputation. The skilful use of person marketing can turn a person’s name into a powerhouse brand. The brand power of Oprah Winfrey’s name has made her billionaire: Oprah-branded products include her television show, TV and feature movies, O, The Opray Magazine, Oprah’s Angel Network, Oprah’s Boutiques online shop, and Oprah’s Book Club.Place Marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places. Cities, states, regions and even nations compete to attract tourists, new residents, conventions and company offices and factories. Kenya advertises under the Kenya Tourist Board abroad about our lush green ice capped Mt.Kenya, the inviting coastal beaches and the seductive Maasai Mara.Ideas can be also marketed. We will narrow our focus to the marketing of social ideas. Social marketing defined by the Social Marketing Institute as the use of commercial marketing concepts and tools in programs designed to influence individuals’ behavior to improve their well-being and that of society.Social Marketing programs include public health campaigns to reduce smoking, alcoholism, drug abuse and overeating. Still others address issues such as family planning, human rights, and racial equality.Product MixProduct Mix (product assortment) is the set of all product lines and items that a particular seller offers for sale.A company’s product mix has four important dimensions: width, length, depth, and consistency.

i. Product Mix Width

It refers to the number of different product lines the company carries. For example Procter & Gamble carries and sells a wide product mix consisting of 250 brands organized into such product lines as fabrics and homecare; baby feminine and family care; beauty care; health care; and food and beverage products.

ii. Product Mix length

It refers to the total number of items the company carries within its product lines. For example East African Breweries Limited (EABL) typically carries many brands namely over half dozen beer products, over 10 spirits, over 8 wines and so on.

iii. Product Mix depth

It refers to the number of versions offered of each product in the line .Dettol soaps comes in around six varieties-fresh,cool,medicated,herbal, normal and so on

iv. Consistency

Consistency of the product mix implies how closely related the various product lines are in end use, production requirements, distribution channels or some other way.EABL’s product lines are consistent in so far as they are consumer products that go through the same distribution channels. The lines are less consistent in so far as they perform different functions for buyers.Nb: A company can increase its business in 4 ways:

a. It can add new product lines.b. Widening the product mix, that’s new lines, built on the company’s reputation in its other lines.c. Lengthen its existing product lines to become a more full-line company.d. Add more versions of each product and therefore deepen its product mix.

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PRODUCT LIFECYCLEIt means the course a product’s sales and profits over its lifetime. It involves five distinct stages:

a. Product development

It begins when the company finds and develops a new-product idea. At this stage, sales are zero and the company’s investment are increasing by the day.

b. Introduction stage

The product lifecycle stage in which the new product is first distributed and made available for purchase. Profits are low or negative because of low sales and high distribution and promotion expenses(in order to attract distributors and build their inventories).Promotion spending is relatively high to inform consumers on the new product and get them to try it.

c. Growth

It is the lifecycle stage in which a product’s sales start climbing quickly. The early adopters will continue to buy and the late buyers will start following their lead, especially if they hear favorable word of mouth. New competitors will enter the market, attracted by opportunities for profits.The increase in competitors leads to an increase in the number of distribution outlets and sales jump just to build reseller inventories. Prices remain the same or fall slightly as companies keep their promotion spending at the same or a slightly high level. Profits increase as promotion costs are spread over a large volume and as unit manufacturing costs fall.

d. Maturity

This is the stage in the product lifecycle in which sales growth slows or levels off. The slowdown in sales results in many producers with many products to sell. In turn this overcapacity leads to greater competition. Competitors begin marking down their prices, increasing their advertising and sales promotions and increasing their R&D budgets to find better versions of the product. These steps lead to a drop in profit. Some of the weaker competitors start dropping out and the industry contains only well-established competitors.

Offensive strategies used to defend mature markets:1. Modify the market.

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2. Modify the product.

3. Modify the marketing mix elements.

e. Decline

This is the product lifecycle stage in which a product’s sales decline. Sales may decline because of a number of reasons, namely, technological advances, shifts in consumer tastes, and increase in competition.Management may decide to maintain its brand without change in the hope that competitors will leave the industry, reposition/reformulate the brand in the hopes of moving it back to the growth stage of the lifecycle, or harvest the product.

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NEW PRODUCT DEVELOPMENTThis means the development of original products, product improvements, product modification and new brands through the firm’s own research and development efforts. Give the rapid changes in consumer tastes, technology and competition; companies develop a steady stream of new products and services. A company can obtain new products in two ways: 1) Acquisition-to buy a whole company, a patent or a licensee to produce someone else’s product.2) New Product development through the company’s research and development department.

Why new products can fail?

a) The market size may be overwhelmed even if the idea is good.

b) The actual product was not designed as well as it should have been.

c) It is incorrectly positioned in the market, priced too high or advertised poorly.

d) A high-level executive might push a favorite idea despite poor marketing research findings.

e) Costs of development are higher than expected.

f) The competitors might at times fight back harder than expected.

The new product development process involves major steps:

1. Idea generation

Idea generation means the systematic search of new product ideas. A well known management consultant said,” For every 1000 ideas, only 100 ideas will have enough commercial promise to merit a small-scale experiment, only 10 of these will warrant substantial financial commitment, and of these, only a couple will turn out to be qualified success.”Major sources of new product ideas are:

I. Internal sources

It can find new ideas through research and development. It can pick the brains of its executives, scientists, engineers, manufacturing staff and salespeople. Some companies have developed successful ‘intrapreneurial’ programs that encourage employees to think up and develop new-product ideas. A company like 3M fosters creativity and gives employees the freedom to take risks and try new ideas. The successful Post-it notes evolved out of this program (employees are allowed to spend 15% of their time working on projects of personal interest).

II. External Sources

CustomersIdeas can come from watching and listening to customers. The company can analyze customer questions and complaints to find new products that solve consumer problems. The company can conduct surveys or focus groups to learn about consumer needs and wants. At times, consumers create new products and uses on their own and companies can benefit by finding the products and putting them into the market. For example Chloride Exide developed solar batteries as rural consumers were already buying normal acid batteries to light and run electronic appliances (such as radios and Television sets).Other companies even give customers the tools and resources to design their own products for example General Electric(GE)

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Plastics gives customers access to company data sheets, engineering expertise, simulation software and other web-based tools for designing better plastic products to make product development faster and less expensive.CompetitorsCompanies watch competitors’ ads and other communications to get due about their own products. They buy competing new products, take them apart top see how they work, analyze their sales and decide whether they should bring out a new product.Distributors and Suppliers.Resellers/agents are close to the market and pass along information about consumer problems and new product possibilities. Suppliers can tell the company about new concepts, techniques and materials that can be used to develop new products.NB: Trade magazines, shows, seminars, government agencies, new product consultants, advertising agencies, marketing research firms, university and commercial laboratories can also be other external sources.To avoid new ideas generation/development being haphazard or going unrecognized, management needs to install an idea management system either through I). appointing a respected senior manager to be the company’s idea manager or ii).create a cross-functional idea management committee,iii).set a toll-free number of website for anyone who wants to send an idea to the idea manager,iv).encourage all company shareholders-to contribute,v).set up a recognition programs to reward those who contribute the best ideas.

2. Idea screening

This entails screening new-product ideas in order to spot good ideas and drop poor ones. Many companies require their executives to write up new product ideas on a standard form that can be reviewed by a new-product committee-the form describes the Product, the target market and the competition, estimate of market size, product price, development time and costs, manufacturing costs and rate of return.

3. Concept development and testing

An attractive idea needs to be converted into a product concept .A product concept is an idea for a possible product that the company can see itself offering to the market. A product concept is the detailed version of the idea stated in a meaningful consumer terms. A product image is the way consumers perceive an actual or potential product.Concept testingThis calls for testing new product concepts with groups of target customers. The concepts may be presented to consumers symbolically or physically. Concept testing may be done through a word/picture description but other times a more concrete and physical presentation of the concept will increase the reliability of the concept test, for example hairdressers have used virtual reality for years to show consumers how they might look with a new style.

4. Marketing Strategy Development

It involves designing an initial marketing strategy for a new product based on the product concept.It consists of three parts:

a. Description of the target market; the planned product positioning; Sales, market share and profit goals for the first few years.

b. Product planned price, distribution and marketing budget for the first year.

c. Planned long-term sales, profit goals and marketing mix strategy.

5. Business Analysis

It involves a review of the sales, costs and profit projections of a new product to find out whether these factors satisfy the company’s objectives. If they do, the product can move to the product development

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stage’s estimate sales the company might look at sales history of similar products and conduct surveys of market opinion.

6. Product Development

This involves developing the product concept into physical product in order to ensure that the product can be turned into a workable product. The R&D or engineering develops the product concept into a physical product. The R&D will develop and test one or more physical versions of the product concept. Developing a successful prototype can take days, weeks, months or even years. On any given day at Procter & Gamble(US),subjects meet in focus groups, sell their dirty lau7ndry to researchers, put prototype diapers on their babies bottoms and rub mysterious creams on their faces(It has also paid students in the past an parents to wear new sneakers that they hand in every month for six months. Half of them returned the shoes cleaned but no one knows what P&G is testing and the company will not say .A new product must have the required functional features and also convey the intended psychological characters.

7. Test Marketing

This is the stage of the new product development in which the product and marketing program are tested in more realistic market settings. It lets the company test the product and its entire marketing program-positioning strategy, advertising, distribution, pricing, branding, packaging and budget levels.When management is already confident about the new product, the company may do little or no test marketing. But when introducing a new product requires a big investment or when management is not sure of the product or marketing program, a company may do a lot of test marketing.Although test marketing costs can be high, they are often small compared to the costs of making a major mistake. For example, McDonald’s made a costly mistake when it introduced low-fat burger called McLean Deluxe, nationally in the US Market without the chain’s normal and lengthy testing process. It failed after a big investment but lean results. However, be aware that test marketing does not guarantee results.

8. Commercialization

This entails introducing a new product into the market. The company launching a new product must first decide on the introduction timing. Next the company must decide where to launch the new product-in a single location, a region, the national market or the international market. Many companies due to the shortage in capital, capacity and confidence, will develop a planned market roll-out.Companies with international distribution systems may introduce new products through global rollout, for example Microsoft may follow a lead-country strategy by launching its products in some markets first.NB: There are two approaches to new product development process, namely:

a. Sequential Product development approach-one company department works individually top complete its stage of the process before passing the new product along to the next department and stage.

b. Simultaneous product development (or team-based/collaborative product development) where the company departments work closely together through a cross-functional team, overlapping the steps in the product development process to save time and increase effectiveness.

B. PRICING

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MeaningThe amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.

Factors affecting priceA company’s pricing decisions are affected by both internal company factors and external environmental factors.

a. Internal FactorsInternal factors affecting pricing include the company’s marketing objectives, marketing mix strategy, costs and organizational considerations.

i. Marketing Objectives Pricing strategy is largely determined by decisions on market positioning. Business/companies that provide economical products/services for budget-minded clients charge a low price whereas companies that target higher-income segments charge a high price.

ii. Marketing Mix Strategy Price is one of the marketing mix tools that a company uses to achieve its marketing objectives. Price decisions must be coordinated with product design, distribution, and promotion decisions to form a consistent and effective marketing pro9hgram.Companies often position their products on price and the tailor other marketing mix decisions to the prices they want to charge. This price positioning strategy is supported by target costing-pricing that starts with an ideal selling price then targets costs that will ensure that the price is met. Other companies such as Sony deemphasize price and use other marketing mix tools to create non-price positions. Sony uses higher quality and customers are willing to pay more to get it.

iii. Costs Companies with lower costs can set lower prices that result in greater sales and profits. A company’s costs take 2 forms’) Fixed costs, which are costs that do not vary with production/sales level (for instance rent, interest and executive salaries).ii) Variable costs, are costs that vary directly with the level of production (plastics, supplies, services)Management wants to charge a price that will at least cover the total production costs at a given level of production.

iv. Organizational Considerations On average in many organizations, top management sets the pricing objectives and policies and it often approves the prices proposed by lower management or salespeople. In small companies prices are often set by top management whereas in large companies, pricing is left to division or product line managers.

b. External FactorsThese factors include the nature of the market and demand, competition and the other environmental elements.

i. The Market and Demand Costs set the lower limit of prices, but the market and demand set the upper limit. Pricing varies in different types of markets for example:

I. Pure competition markets, where the market consists of many buyers and sellers, no single buyer or seller has much effect on the going market price, for example wheat, copper or financial services. Sellers in these markets do not spend too much time on marketing strategy.

II. Monopolistic competition, where the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.

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Sellers try to develop differentiated offers for different customer segments and in addition to price, freely use branding, advertising and personal selling to set their offers apart.

III. Oligopolistic Competition, where the market consists of a few sellers who are highly sensitive to each other’s pricing and marketing strategies. The product can be uniform such as steel, cement or non-uniform such as cars. Each seller is alert to competitors’ strategies and moves. If one seller slashes prices or increase prices by 10% the other sellers have to quickly follow suit. In the end ,the consumer will decide whether a product’s prices is right. Pricing decisions, like other marketing mix decisions must be buyer-minded. Each price the company charges will lead to a different level of demand, which is in a demand curve. Thus the higher the price, the lower the demand. However in prestige goods, consumers think higher prices mean more quality. When demand is inelastic ,a small change in price hardly charges demand, but if demand changes greatly, with a slight change in price, then it is said to be elastic.

ii. Competitors’ Costs, Prices and Offers A consumer who is considering the purchase of a Samsung hifi system will evaluate Samsun’s price and value against the prices and values of comparable products made by Sony, Panasonic, LG and others. In addition, a company’s pricing strategy may affect ct the nature of the competition it faces. If Samsung follows a high-price high-margin strategy, it may attract competition, but a low-price, low-margin strategy however may stop competitors or drive them out of the market.

iii. Other External Factors Economic conditions can have strong impact on the firm’s pricing strategy. Economic factors such as boom/recession, inflation and interest rates affect pricing decisions because they affect both the costs of producing a product and consumer perceptions of the product’s price and value. The Government is another important external influence on pricing decisions. Social concerns may have to be taken into account when setting prices.Resellers and their reactions to various prices is a factor to be considered.

PRICING OBJECTIVES AND POLICIESTwo price policies putting into consideration that prices were set by negotiation between buyers and sellers include:

a. Fixed pricing policies, where a company is involved in setting one price for all the buyers. It is a relative modern idea that has been brought up with the development of large-scale retailing.

b. Dynamic pricing policy, where different prices are charged depending on individual customers and situations. This is due to the internal corporate networks that are wireless connecting sellers and buyers as never before thorough the internet.

PRICING METHODSThere are different pricing methods depending on the approaches used, namely:

a. General Pricing These include:

I. Cost based i. Cost-plus, which is the simplest pricing method which involves adding a standard

mark-up to the cost of the product. A weakness of this pricing method is the fact that it ignores demand and competitors prices.

ii. Break-even pricing/target pricing, which entails setting price to break even on the costs of making and marketing a product, setting price to make a target profit. It

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fails to consider the impact of price on sales volume needed to realize target profits and the likelihood that the needed volume will be achieved at each possible price.

II. Buyer based approach(value-based pricing) It involves setting prices based on buyer’s perceptions of the value rather than on the seller’s cost.

i. Value pricing, which entails offering the right combinations of quality and god service at a fair price. In many cases, this has involved introducing less expensive versions of established brand name products or in other cases at the retail level, it is the everyday low pricing adopted by a number of supermarket chains.

ii. Value-added marketing, which normally happens especially in business-to-business marketing, where companies rather than cut prices to match competitors ,attach value-added services to differentiate their offers and thus support higher margins. Caterpillar charges premium prices for its heavy construction and mining equipment by convincing customers that its products and services justify every additional coin.

III. Competition-based approach It entails setting prices based on the prices that the competitors charge for similar products. It takes two forms:

i. Going-rate pricing, in which the firm bases its price largely on competitors prices with less attention paid on its own costs or to demand ,for example,steel,gasoline companies.

ii. Sealed-bid pricing, Where the firms bid for jobs/tenders and bases their prices on how they think competitors will price rather than on its own costs or on the demand.

b. New Product pricingThese are methods/strategies that usually change as the product passes through its lifecycle. They are two broad strategies:

i. Market-skimming pricing It means setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay a high price; the company makes fewer but more profitable sales. Marketing skimming makes sense only under these conditions:

I. The product’s quality and image must support its higher price and enough buyers must buy the product at that price.

II. The costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more.

III. Competitors should not be able to enter the market easily and undercut the high price.ii. Market-penetration pricing(MPP)

MPP means setting a low price for a new product in order to attract a large number of buyers and a large market share. The high sales volumes results in falling costs, allowing the company to cut prices even further. Several conditions must be met for this strategy to work:

I. The market must be highly price-sensitive so that a low price produces more market growth.II. Production and distribution costs must fall as sales volume increases.

III. The low price must help keep out the competition and the penetration pricer must maintain its low-price position.

c. Product Mix pricing

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The firm looks for a set of prices that maximizes the profits on the total product mix. There are 5 product mix pricing situations:

i. Product line pricing Companies usually develop product lines rather than single products. For example Sony offers not just one type of television but several lines of televisions, each containing many models-it offers everything from Watchman portable Color TV starting from approximately sh.1,000 to flat screen Trinitrons ranging from sh.30,000 to sh.150000 to its top-of-the-line plasma WEGA flat panel sets running from sh.600,000 to sh.800,000.Product-line pricing entails the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors. The sellers’ task is to establish perceived quality differences that support the price differences.

ii. Optional-Product pricing A situation where many companies offer to sell optional or accessory products along with the main product. For example, a car consumer/buyer may choose to order power windows and a CD changer.GM normal pricing strategy was to advertise a stripped down model at a base price(to attract people into their showrooms) and then devote most of the showroom space to showing option-loaded cars at higher prices. The economy model was stopped of so many comforts and conveniences that most buyers rejected.

iii. Captive-product pricing(CPP) CPP means setting a price for products that must be used along with a main product such as blades for a Gillette razor, films for a camera, Video games and printer catridges.Producers of the main products(razors,cameras,video game consoles and printers) often price them low and set high mark-ups on the supplies, for example HP makes very low margins on its printer but very high margins on the printer catridges.Similarly Sony loses money on its play station game console but makes money on the games themselves.In service, this strategy is known as two-part pricing. The price of the service is broken into a fixed fee plus a variable usage. The fixed amount should be low enough to induce use of the service; profit can be made on the variable fees (Safaricom).

iv. By-product pricing(BPP) BPP means setting a price for by-products in order to make the main product’s price more competitive. The firm will seek a market for these products and should accept any price that covers more than the cost of storing and delivering them. Such industries as meat processing, petroleum products, quarrying channels have often by-products for example-Nairobi National Park (KWS) can generate income from their occupants, manure and even brand the manure. It can even be bought on-line as, “the easiest way to buy our Crap!”.East African Breweries Limited Machicha Business or Equity Bank starting of stock-brokerage services.

v. Product bundle pricing It will involve combining several products and offering the bundle aat a reduced price. Price bundling can promote the sales of product consumers might not otherwise buy, but the combined price must be low enough to get them to buy the bundle. For example hotels sell specially priced weekend or holiday packages that include room, meals and entertainment.

d. Price-adjustment strategies(PAS)PAS depicts situation where companies usually adjust their basic prices to account for various customer differences and changing differences. There are six price adjustment strategies:

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i. Discount and allowance pricing-DAR DAR will happen when companies adjust their prices to reward customers for certain responses such as early payment of bills, volume purchase and off-season buying. These discounts and allowances can take various forms namely:

I. Discounts, which are straight deductions in price on purchase during a stated period. There are cash discounts (price reduction to buyer who pay their bills promptly), Quantity discounts (price reduction to buyers who large volumes and given to customers to buy more from one given seller rather than from many different sources.),functional discounts-trade discount(which is offered by the seller to trade channel members who perform certain functions as selling, storing and record keeping),seasonal discounts(is a price reduction to buyers who buy merchandise or services out of season and allows the seller/producer to keep production/business steady during an entire year, for example low tourist season offers on Tourist Hotels at the coast).

II. Allowances, which means promotional money paid by manufactures to retailers in return for agreement to feature the manufacturer’s products in some way. For example promotional allowances (price or payment reductions to reward dealers for participating in advertising and sales support programs) to supermarkets and dealers, trade allowances to motor vehicle dealers(entailing a price-reduction given for turning in an old car when buying a new one).

ii. Segmented pricing-SP Sp means selling a product or service at two or more prices, where the difference in prices is not based on difference in costs. It takes several forms:

a. Customer segment pricing, where different customers pay different prices for the same product, for example national parks’ entry fees for residents or non-residents.

b. Product-form pricing where different versions of the product are priced differently but according to differences in their costs, for example, Philips Iron box is price differently from Philips steam iron box.

c. Location pricing, where a company charges different prices for different locations even though the cost of offering each location is the same. For example theatre seats.

d. Time pricing, a form of pricing where the firm varies its price by the season, the month, the day and even the hour. For example Terrible Tuesday price-down on burgers, Resorts gives weekend and seasonal discounts.

iii. Psychological pricing-PP

A pricing approach that considers the psychology of prices and not simply the economics; the price is used to say something about the product. For example consumers perceive higher-priced products as having higher quality.Another aspect of PP is reference prices. This means prices that buyers carry in their minds and refer to when they look at a given product.PP can be formed by noting current prices, remembering past prices, or assessing the buying situation. Some psychologists argue that each digit has symbolic and visual qualities that should be considered in pricing. Thus 8 is round and even and creates a soothing effect whereas 7 is angular and creates a jarring effect. Furthermore sh.3000 vs. sh.2999.95-the former looks expensive whereas the latter looks cheap).

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iv. Promotional pricing0-PPg PPg means temporarily pricing products below the lit price and sometimes even below cost to increase short-run sales. This is supposed to create buying excitement and urgency. Supermarkets and departmental stores will price a few products as loss leaders to attract customers to the stores in the hope that they will buy other times at normal mark-ups.Sellers will also use special events prices to draw customer traffic in certain seasons, for example Christmas and Back-to-School shoppers.Manufacturers sometimes offer cash rebates to customers who will buy the product from dealers within a specified time, the manufacturer sends the rebate directly to the customer(common to auto industry as well as consumer packaged goods).Other manufacturers offer low-interest financing ,longer warranties or fee maintenance to reduce the customer’s process. This is a favorite for auto industry.PPg has adverse effects by creation of ‘deal-prone’ customers, who only wait until brands go on promotional prices before placing an Order; it hurts the brand’s image in the eyes of users and can also lead to industry price wars.

C. PROMOTION MIX

This is also known as a communication mix-also called a promotion mix and consists of the specific blend of the advertising, sales promotion, public relations, personal selling and direct marketing tools that a company uses to pursue its advertising and marketing objectives.Importance of Promotion Mix

One of the importance of the Promotion mix is to build closer relationships with customers in more narrowly defined micro markets as the mass markets fragment.At the same time today’s information technology helps marketers to keep closer track of customer needs and these newer technologies also provide new communication avenues for reaching smaller customer segments with tailored messages.All too often companies failed to integrate their various communications channels resulting in consumer confusion, for instance, mass media advertisements say one thing, a price promotion sends a different signal, a [product label creates still another message, a company sales literature says something altogether and the company’s website seems out of sync with everything else!Hence IMC (Integrated Marketing Communication),a concept under which a company carefully integrates and coordinates its many communications channels to deliver a clear, consistent and compelling messages about the organization and its products. Integrated promotion mix(communication) produces better communications consistency and greater sales impact.

a. Advertising

It is any paid form of impersonal presentation and promotion of ideas, goods or services by an identified sponsor.Advantages

i. It can reach masses of geographically dispersed buyers at a low cost per exposure and it enables the seller to repeat a message many times.

ii. Large-scale advertising also says something positive about the seller’s size, popularity and success. They look more legitimate.

iii. Advertising is very expensive and it allows the company to dramatize its products through the artful use of visuals, print, sound and color.

iv. It can trigger quick sales.

v. It can build long-term image of the company.

Disadvantages

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i. It is impersonal and cannot be as directly persuasive as salesmanship.

ii. It can carry only one-way communication with consumers/audience.

iii. Audience has no obligation to pay attention or respond.

iv. Though radio advertising may be cheaper, but TV advertisement can be expensive.

Marketing management must make four important decisions when developing an advertising program:i. Setting the advertising objectives

This means a specific task to be accomplished with a specific target audience during a specific period of time. Advertising objectives can be classified by the primary purpose:

1. To inform, this also means informative advertising. It is used heavily when introducing a new product category.

2. Persuade, this also means Persuasive advertising, here the company’s objective is to build selective demand, and becomes more important as competition increases. This goes along with comparative advertising (comparing two brands).

3. Reminder advertising (to remind).It is important for mature products and keeps the consumers thinking about the product. Expensive Coca Cola television ads primarily remind people about the brand rather than informing or persuading them.

ii. Setting the advertising budget

There are four common methods of setting advertisement budgets:1. Affordable Method, which implies setting the promotion budget at the level

management, thinks the company can afford. It tends to place advertising last among spending priorities, even in situations in which advertising is critical to firm’s success.

Some of the demerits of this method include: It ignores the effect of promotion on sales, it tends to place advertising last among spending priorities, and it leads to uncertain annual promotion budget which makes long-range market planning difficult.

2. Percentage-of-sales Method; It involves setting their promotion budget at a certain %age of current or forecasted sales or as a %age of unit sales.

Some advantages include that it is simple to use and helps management think about the relationship between promotion spending, setting price and profit/unit. However disadvantages include: it wrongly view sales as the cause of promotion rather than result as the method is based on the availability of funds rather than on opportunities: Budget varies from year to year and hence long-term planning is hard: It does not promise any specific percentage except what has been done in the past or what competitors

3. Competitor-parity method

This involves setting the promotion budget to match competitors’ outlays. You monitor competitor’s advertising or get industry spend estimates from trade publications. Some advantages include that it represents collective wisdom of the industry, spending what the competitors spend helps prevent promotion wars.

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Disadvantages include, there is no evidence for believing that the competitor has better idea, Companies differ greatly and each has its own special promotion needs, and there is no evidence that budgets on that the method prevents promotion wars.

4. Objective and Task Method

This means developing the promotion budget by: a) defining specific objectives) determining the tasks that must be performed to achieve these objectives, c) estimating the costs of performing these tasks.The disadvantages are that it is a difficult method, as it is hard to figure out which specific tasks will achieve specific objectives.In conclusion, no matter what method is used deciding how much to spend on advertising is one of the hardest marketing decisions a company faces measuring the results of advertising results of advertising spending and’ advertising return on investment’ remains an inexact science.

iii. Developing advertising strategy(message decisions and media decisions)

iv. Evaluating advertising campaigns.

b. Personal Selling

It is the most effective tool especially in the building up buyer’s preferences, convictions and actions. It involves interaction between two or more specific people, so each person can observe the other’s needs and characteristics and make quick adjustments. The effectivePersonal selling means the personal presentation by the firm’s sales force for the purpose of making sales and building customer relationship.There effective salesperson keeps the customers’ interests at heart in order to build a long-term relationship. The buyer usually to feel a great need to listen and respond even if a polite “no, thanks you”A salesperson is an individual acting for a company by performing one/more of the following activities----prospecting, communicating, servicing and information gathering. Sale Force management means the analysis planning, implementation and control of sales force activities. It includes setting and designing sales force strategy and structure, and recruiting, selecting, training, supervising, compensating and evaluating the firm’s salespeople.Designing Sales Force Strategy and StructureThere are several ways to structure a sales force:

i. Territory Sales Force-TSF

A sales organization that assigns each salesperson to an exclusive geographic territory which the salesperson sells the company’s the company’s full line of products/services. Travel expenses are relatively low as salespersons travel were limited area. The Salesperson’s work is clearly defined by the organization and fixes accountability.TSF increases the salesperson’s desire to build local business relationship.

ii. Product Sales Force Structure

A Sales force organization under which salespeople specialize in selling only a portion of the company’s products/lines. It leads into problems when a major client (hospital) has several salespeople from same company calling on them on the same day. The benefits are that the salesperson gains better product knowledge and attention to individual products.

iii. Customer Sales Force Structure

A sales force organization under which salespeople specialize in selling only to certain customers or industries.The Merits of this structure are that Organization becomes more customer-focused and build closer relationship with key customers.

iv. Complex Sales Force

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Where a company sells a wide variety of products or services to many types of customers over a broad geographic area it combines several types of sales force structures. Salespeople can be specialized by customer and territory, by product and customer, or by product and territory, product or customer.Other Personal Selling activities and issues include recruiting, training, compensating, supervising and evaluating salespeople

Sales Force Size;Once the company has set up its structure, it is ready to consider sales force size. Sales forces may range in size from only a few salespeople to many tens of thousands.The sales force constitutes one of the company’s most productive – and most expensive-assets. Therefore increasing their number will increase both sales and costs.One of the method used s the Workload Approach which entails several steps:

1. Using the method a company groups accounts into different classes according to size, amount status, or other factors related in the amount of effort required to maintain them.

2. Determine the number of salespeople needed to call on each class of accounts, the desired number of times.

3. For example, the company might think as follows:

Suppose w had 200 Type A accounts and 400 Type B accounts.Type A requires 36 calls a yearType B requires 12 calls a yearIn this case, the sales force’s workload-the number of calls it must make per year-is9600(36*200)+(400*12)=7200+2400=9600Suppose our average salesperson can make 1000 calls a year.Thus the company needs 10 salespeople=9600/1000=9.6

Sales promotionThey are short-term incentives to encourage the purchase or sale of a product or service. It is targeted toward final buyers (consumer promotion),retailers and wholesalers(trade promotions),business customers(business promotions) and members of the sales force(sales force promotions).Sales Promotion objectives vary with target groups:

i. With Consumers, which is supposed to increase short-term sales or help build market share.

ii. Trade, the aim is to get retailers to carry new items and more inventory, getting them to advertise the product and give it more shelf space and getting them to buy ahead.

iii. Sales Force, it is used in order to get more sales support for current or new products/getting salespeople to sign up new accounts.

Consumer Promotion ToolsThis include samples, cash refunds, price Packs, premuims,advertising speciallities,patronage rewards, point-of-purchase displays and demonstrations and contests, sweepstakes and games.Samples are offers of a trial amount of a product. Some samples are free, whereas for others a company charges a small amount to offset its costs.Coupons are certificates that give buyers a saving when they purchase specified products. Most consumers love coupons. Coupons can stimulate sales of a mature brand or promote trial of a new brand. Marketers are also cultivating new markets for distributing coupons such as supermarkets shelf dispensers, electronic point-of-sale coupon printers or ‘paperless coupon systems’Cash refund offers (rebates), are like coupons except the price reduction occurs after the purchase rather than at the retail outlets. The consumer sends a ‘proof of purchase’ to the manufacturer, who then refunds part of the purchase price by mail.

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Price packs (cents-off deals), which the offer the consumers savings off the regular price of the product. They are very effective in stimulating short-term sales. The reduced prices marked by the producer directly on the label or package.Premiums are gods offered either free or at low cost as incentive to buy a product. A premium may come inside the pack (in-pack), outside the pack (on-pack) or through the mail.Advertising specialties/promotion products. These are useful articles, imprinted with an advertiser’s name, logo, message that are given as gifts, to consumers. They include T-shirts, apparel, pens, coffee, mugs, calendars, key rings mouse pads, matches, goofballs and caps.Patronage rewards are cash or other awards offered for the regular use of a certain company’ products/services. For example airlines offer frequent flier plans awarding points for miles traveled that can be turned into free airline trips or the Nakumatt loyalty card.Point of Purchase promotions (POP) promotions include displays and demonstrations that take place at the point of sale. They include aisle displays, signs, posters and so on received from the manufacturer’s every year.Contests, sweepstakes and games give consumers the chance to win something such as cash, trips or gods by luck or through extra effort.Trade Promotion ToolsThese are sales promotion tools used to persuade resellers to carry a brand, give it shelf space, promote it in advertising and push it to customers. Shelf space is s scarce these days that manufacturers often have to offer price-offs,allowances,buy-back guarantees of free goods to retailers and wholesalers to get products on the shelf and once there to keep them on it.Many of the tools used for consumer promotions such as contest, premiums and displays can be used as trade promotions:

1) Manufacturer’s may also offer straight discount off the list price, on each case purchased during a stated period of time (also called a price-off).

2) Manufacturers can offer allowance-usually so much money off a case in return to the retailer’s agreement to feature the manufacturer’s product in a certain way.

3) Free goods. Manufacturers’ may offer free goods which are extra cases of merchandise, to resellers who buy a certain quantity or who feature a certain flavor or size.

4) Push money. These are cash/gifts top dealers or their sales to “push” the manufacturer’s goods.

5) Specialty advertising items: These are given to the retailers by the manufacturers and carry the company’s calendars, pens, pencils, paperweights, memo pads and so on.

Business ToolsSales Promotion tools used to generate business leads, stimulate purchases, reward customers and motivate salespeople. Business tools includes many of the same tools used for consumer/trade p[promotions.However in addition, there are 2 more:Conventions and trade shows. This provides that many vendors receive many benefits such as opportunities to find new sales leads, contact customers, introduce new products, meet new customers, sell more to present customers and educate customers with publications and audiovisual materials.Sales Contests: It is a contest for salespeople/dealers to motivate them to increase their performance over a given period.Sales contests have several benefits: motivate and recognize good company performers-who receive trips, cash prizes, and also award points for performance which the receiver can turn in for any of a variety and work best when tied to measurable and achievable sales objectives.(such finding new accounts ,receiving old accounts or increasing account profitability).

c. Public Relations

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It means building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image and handling or heading off unfavorable rumors, stories and events.The Public Relations may perform any or all of the following functions or more:

a. Press relations or press agency: creating and placing newsworthy information in the news media to attract attention to a person, product, or service.

b. Product publicity: publishing specific products.

c. Public affairs: building and maintaining national or local relations.

d. Lobbying: building and maintaining relations with legislators and government officials to influence legislation and regulation.

e. Investor relations: maintaining relationships with shareholders and others in the financial community.

f. Development: Public relations with donors or members of nonprofit organizations to gain financial or volunteer.

Public relations are used to promote products, people, places, ideas, activities, organizations and even unions.

Role and Impact of Public Relations

Public Relations (PR) can have a strong impact on public awareness at a much lower cost than advertising can. The company does not pay for the space or time in the media. If a company develops an interesting story, it could be picked by several different media, having the same effects as advertising that would cost millions of dollars. And it would have credibility than advertising.PR has potential strengths, but it has always been viewed as marketing stepchild because of its limited and scattered use.PR consultants assert that advertising does not build brands but PR does.

Major Public Relations Tools

They include:a. News.PR professionals find or create favorable news about the company and its products or

people. Sometimes news stories occur naturally and sometimes the PR person can suggest events or activities that would create news.

b. Speeches can also create product and company publicity. Increasingly company executives must field questions from the media or give talks at trade associations or sales meetings, and these events can either build or hurt the company’s image.

c. Special events, ranging from new conferences, press tours, grand openings, and fireworks displays to laser shows, hot air balloon release, multimedia presentations and star-studded spectaculars or educational programs designed to reach and interest target publics.

d. Mobile marketing, travelling promotional tours that bring the brand to consumers that has emerged as an effective way to build one-to-one relationships with targeted consumers.

e. Written materials. These are intended to reach and influence their target markets. These materials include annual reports, brochures, articles and company newsletters band magazines.

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f. Audiovisual materials, such as films, slide and sound programs, video and audio cassettes, are being used increasingly as communication tools.

g. Corporate identity materials can also help create a corporate identity that the public immediately recognizes. These include logos, stationery, brochures, designs, business forms, business cards, buildings, uniforms and company cars and trucks.

h. Public Service activities. Companies can improve public goodwill by contributing money and time.

i. Company website can also be a good public relations vehicle. Consumers and members of other publics can visit the site for information and entertainment.

g. Direct Marketing

The direct connection with carefully targeted individual consumers to both obtain immediate response and cultivate lasting customer relationships-the use of telephone,mail,fax,email;,the internet and other tools to communicate directly with specific consumers.The Early direct marketers used catalogs, direct mail, telemarketing models but today, direct marketing has been transformed into a new transformation that is on-online marketing. Online marketing constitutes a new complete model of doing business.Benefits/Importance of Direct MarketingDirect marketing continues to become more web-oriented and internet marketing is claiming a first growing share of direct marketing spending.Importance to Buyers

i. It is convenient, easy and private. Direct marketers never close their doors, customers do not need to be traffic, find parking spaces and trudge through the stores to find products.

ii. It gives buyers a wealth of products can offer almost unlimited selection to consumers almost anywhere in the world.

iii. Direct marketing channels give buyers access to a wealth of comparative information about products, companies and competitors. Good ca6tatalogues/websites often provide more information in more useful forms than even the most helpful retail salesperson.

iv. It is interactive and immediate. Buyers can interact with sellers by phone or on the seller’s web site create exactly the configuration of information, products or services they desire and then order them on the spot.

v. DM gives consumers greater measures of control. Consumers decide which catalogs they will browse and which websites they will visit.

Importance/Benefits to Sellersi. A powerful tool building customer relationships .Because of the one-to-one nature of Direct

marketing (DM), companies can interact with customers by phone or online, learn more about their needs and tailor products/services to specific customer tastes. Customers can also ask questions and volunteer feedback.

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ii. DM offers sellers a low-cost efficient, speedy alternative for reaching their markets. Personal selling is a higher-cost-per-contact media as compared to DM media such as telemarketing direct mail and company websites. It also results in lower costs and speedier handling of such functions as order processing, inventory building and delivery.

iii. DM can offer greater flexibility. It allows marketers to make ongoing adjustments to its prices and programs, or to make immediate and timely announcements and offers.

iv. DM gives sellers access to buyers that they could not reach through other channels. Smaller firms can mail catalogs to customers outside their local markets. Internet marketing is truly a global medium that allows buyers and sellers to click from one country to another in seconds.

Direct Marketing and Customer Databases

Customer databases; an organized collection of comprehensive data about individual customers or prospects, including geographic, psychographic and behavioral data. Effective direct marketing begins with a good customer database.In consumer marketing, a customer database contains a customer’s demographics (age, income, family members, birthdays), psychographics (activities, interest and opinions) and buying behavior (buying preferences and the recency, frequency and monetary value-RFM-of past purchases).In B-2-B marketing, the customer profile might contain, the products and services the customer has bought, past volumes and prices; key contacts(and their ages,birthdays,hobbies,and favorite foods);competing suppliers; status of current contracts; estimated customer spending for the next few years and assessment; of competitive strengths and weaknesses in selling and servicing the account.Some databases are huge .Yahoo!(Internet portal) records every click made by every visitor, adding some 400 billion bytes of data per day to its database-the equivalent of 800000 books.Companies can use data for the following:

a) Locate good potential customers.

b) Generate sales leads

c) Mine data base to learn about customers in detail and tailor their market offerings and communication

Components of Direct MarketingThese include:

a) Personal selling-refer to Personal selling notes.

b) direct-mail marketing

This is the most predominant selling method and includes everything from a simple black-and-white postcard to an impressive multicolor professional package. Catalogs, letters, brochures, pamphlets, flyers as well as computer disks (CDS), videotapes and other promotional materials are mailed directly to customers.Direct mail is well-suited to direct one-to-one communication. It allows high target selectivity, can be personalized, flexible and allows easy measurement of results. Direct mail has proved successful in promoting all kinds of products, from books, magazine subscriptions, and insurance to gift items, clothing, and industrial products.

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The direct-mail industry constantly seeks new methods and approaches. For example used with the internet, CDs offer an affordable way to drive traffic to web pages personalized for a specific market segment or a specific promotion. They can also be used to demonstrate computer-related products.Three forms of mail delivery have become popular including fax mail (which marketers now routinely send fax mail announcing special offers, sales and other events to prospects and customers with fax machines),E-mail(marketers are now sending sales announcements,offers,product information and other messages to e-mail addresses-sometimes to a few individuals, sometimes to large groups. The new breed of email ad uses glitzy features such as animation, interactive links, streaming video, and personalized audio messages to reach out and grab attention, voice mail (marketers have set up automated programs that exclusively target voice mailboxes and answering machines with prerecorded messages-they target homes between 10am-4pm and businesses between 7-9pm,to thwart hang-ups by annoyed potential customers. If the automated dialer hears a live voice, it disconnects).

c) catalog marketing

This means direct marketing through print, video or electronic catalogs that are mailed to select customers, made available in stores, or presented online. Most print catalogers have added web-based catalogs to their marketing mixes, and a variety of new Web-only catalogers have emerged. Although the internet has provided the new avenue for catalogs sales, printed catalogs remain the primary medium (over 87% of catalogs sales come from this medium).

Consumers can buy just about anything from a catalog.-from jet propelled surfboards, Masaai Mara travel and Mr. Price Clothing Company features everything they sell in catalogs.Along with benefits, however, web-based catalogs also present challenges. Whereas a print catalog is intrusive and creates its own attention, web catalogs are passive and must be marketed. Attracting new customers is much more difficult for a web catalog than for a print catalog.

d) Telephone marketing

This means the using the telephone to sell directly to customers. Marketers use outbound telephone marketing to sell directly to consumers and businesses. In bound numbers are used to receive orders, sometimes toll-free numbers are provided.

Targeted telemarketing provides benefits such as purchasing convenience, and increased product and service information. However the recent explosion in unsolicited telephone marketing has annoyed many consumers, who object to almost daily, ‘junk phone calls’ that pulls them away from their usual work or fill the answering machine.

It also actually means a very broad term that applies to a multiplicity of both inbound and outbound telephone marketing.

However the recent explosion in unsolicited telephone marketing has annoyed many consumers, who object to almost daily, ‘junk phone calls’ that pulls them away from their usual work or fill the answering machine.

The most common functions of telemarketing include:1. Improving marketing data: at a basic level this may include gathering the contact details of decision makers and their usage of products and services relevant to your market, but further probing can deliver more in-depth information - perhaps on distribution channels for example.

2. Lead generation: using a team of dedicated telemarketers to do this tough, up-front work can make more cost-effective use of your often highly paid field sales or telesales executives by allowing them to focus on closing sales rather than chasing prospects.

3. Event planning: if you're investing money in marketing events - perhaps a seminar to introduce your company to likely sales prospects in your target market, or presenting a new product or service to

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potential customers - telemarketing is an effective way to ensure the right people turn up in the right numbers. This method is often used as a follow up to a targeted mailing.

4. Direct mails follow up: telephone follow up to mailings is proven to increase returns, by between three and seven times as much in some cases.

5. Point of sale promotion: for those distributing products through multiple channels, regular contact with distributors or resellers has numerous benefits. It can ensure that they are familiar with your products and have the right marketing materials to sell them successfully, but can also achieve the difficult goal of keeping your product/service at the forefront of their minds.

6. Company profiling: this offers the opportunity to go beyond the type of superficial prospect data held by most businesses and gain a full understanding of how potential customers operate. Information on aspects such as their decision making processes and who they currently purchase from enables much better tailoring of sales and marketing approaches.

7. Customer contact: while all of the above functions are relevant to existing and potential customers, there is scope for more creative uses of telemarketing that have particular relevance to previous/existing customers. For one has set up a new website - so call customers to introduce them to this new way of doing business with them. Or if you change location or company name - as well as writing to your customers, call them - and perhaps take the opportunity to pass on new product information and/or a special offer.

Getting a good return from your telemarketing investment will require:

a) Planning: you need to consider your budget, your objectives for the volume/quality of data you want, and your in-house resources, in terms of manpower, skills and equipment, compared to the cost of using an outside agency. Telemarketing rarely stands on its own; you need to establish how it integrates with your other sales and marketing activities.b) Accurate data: as with all direct marketing methods, accurate data is the essential foundation for success. Naturally, successful targeting rests on speaking to the right decision makers - getting data that includes this information may cost more but the outcomes are consistently more profitable.c) A good script: an effective telemarketing script is actually not a script at all but a guide for the discussion that steers the listener in the direction you want him/her to go. It must be tailored to the target audience, must grab the attention of the listener within a few seconds of the conversation, and must be highly interactive; long presentations of information can be frustrating for the listener who is then less likely to focus on the issue being presented. The guide/script should be refined in the early stages of a campaign according to quality of responses received.d) Skilled telemarketers: no matter how well targeted the call is, nor how well thought out the script, a wooden and inflexible caller will not deliver the goods. To achieve the desired outcomes the telemarketer must have a good knowledge of the company and product/service they represent, be able to talk intelligently around the structure of the script without getting side tracked, absorb all the negative responses, and talk persuasively to people at all levels.

Outsourcing Telemarketing

Increasingly larger companies are recognising the value of developing in-house telemarketing teams. However, most businesses lack the resources to conduct a reasonably sized project in a practical time scale, for example say, contacting a thousand companies on their purchasing intentions for a particular CAD software within two weeks. All too often telemarketing is carried out with stretched and sometimes inappropriate resources, such as using highly paid sales staff to gather leads, or a harassed secretary to cram in as many calls as possible in between other duties.

If you are considering bringing in an external agency to conduct the work, here are three points to bear in mind:a. Find a company with experience of working in your industry and who shows an understanding of your target market as well your products and services. You'll have to be satisfied that they have staff with

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the right skills and knowledge and accurate data to ensure the credibility of your company is not undermined.b. Make sure you clarify the objectives of the campaign with them and that these are included in their full proposal of how they will conduct the work.c. Don't commit yourself to a full project to gather a specified number of leads or contact a certain number of companies; even for an agency that knows your market well it's very hard to predict a percentage of successful outcomes. Agree a pilot period to evaluate the project and refine - or shelve it - as necessary.

e) Direct-response television marketing

This means direct marketing via television, including direct-response television advertising (infomercials) and home shopping channels.Direct marketers air television spots, often 60 or 120 seconds long that persuasively describe a product and give customers a toll-free number for ordering. Television viewers often encounter 30 minute advertising programs or infomercials foe a single product. Direct- response TV commercial are usually cheaper to make and the media purchase is less costly. Moreover results are easily measured. Unlike branding campaigns, direct-response ads always include a toll free number or web address, making it easier for marketers to gauge whether consumers are paying attention to their pitches. Home shopping channels, another form of direct-response television marketing, are television programs or entire channels dedicated to selling goods and services.

f) Kiosk marketing

Some companies place information and ordering machines-called kiosks (in contrast to vending machines, which dispense actual products)-in stores, airports and other locations. Kiosks are used to help customers create and purchase personalized greeting cards, listening kiosks that customers listen to the music before purchasing.Business markets also use kiosks that collect sales leads and provide information on their products. Like everything else these days, kiosks are going online, as many companies merge the powers of the real and virtual worlds. For example Levi Strauss stores, you can plug your measurements into a web kiosk and have custom-made jeans delivered to your home in 2 weeks.

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