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MARKETING

Refers to a process or system of researching into identifying customer needs and applying
suitable prices, product, place and promotion strategies in order to satisfy those needs
profitably. It is a business function which aims to link the business to the consumer and aims to
get the right product having the right price to the right place at the right time. Marketing is not
only advertising and selling of goods and services. Market research is done to find out what
customers want or might want and what price they are prepared to pay for a product. Marketing
will then involve making sure that the design and production teams produce what consumers
want at a cost that will enable a price to be set so that the business can make profit.

Marketing Objectives

Refers to the goals or targets a business has that are concerned with marketing methods or
issues. They specify the results expected from marketing efforts and should be consistent with
overall organisational/ corporate objectives. Basically, they are goals set for the marketing
department. Effective marketing needs to have a clear sense of direction.

Criteria for good marketing objectives

 Must express realistic expectations

 Must be expressed in clear, simple terms so that all marketing personnel understand
exactly what they want to achieve
 Must be measurable
 Must be time framed
Examples of marketing objectives

 Increasing sales revenue or sales turnover by 5% by December 2020

 To increase market share by 10% by end of 2019

 To increase promotional budget by 7% by end of 2019

Relationship between corporate objective and marketing objectives
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In Nestlé’s case, marketing objectives support the corporate objectives and all of them work
together

Importance of marketing objectives

 They provide sense of direction for the marketing department

 Progress can be monitored against these targets

 Assist in decision making

 Can be used in making marketing strategies ( long term plans established for
achieving marketing objectives
Demand and Supply

The primary goal for the marketing department is to meet customer wants profitably. Marketing
staff must be aware of how the free market works to determine the price. In a free market
economy, price is determined by the forces of demand and supply. Market is a place or system
that enables producers of a product or service to meet potential buyers and exchange these for
money.

Demand

Refers to the units of a product that consumers are willing and able to buy at a given price in a
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given time period. According to the law of demand, more units of a good are bought hen the
product’s own price decreases, ceteris paribus. Ceteris paribus means that ‘other things
remaining constant’ Consumers’ demand determines what producers should produce.

Demand curve: Refers to a graph which shows the relationship between quantity demanded
and prices. Demand curve is a graphical representation of demand schedule. It is the locus of
all the points showing various quantities of a commodity that a consumer is willing to buy at
various levels of price, during a given period of time, assuming no change in other factors

When price decreases from P0 to P1, consumers increase their purchase of the product from
Q0 to Q1. This is due to income effect and substitution effect of a price change

Income Effect: low prices increases real income and consumers can now buy more

Substitution Effect: low price makes the consumers to switch over from substitutes to this
product which is now cheaper

Shift in the demand curve

Usually demand curves are drawn based on the assumption that all other factors except price
remain the same. But there might be instances when demand may be affected by factors other
than price. This will result in the change in demand although the price will remain the same. This
change in demand may cause the demand curve to SHIFT inwards or outwards.

 Shift of demand curve OUTWARDS shows an increase in demand at the same price
level. It is known as INCREASE IN DEMAND.
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 Shift of demand curve INWARDS shows that less is demanded at the same price
level. It is known as a FALL IN DEMAND.

Factors Influencing Demand

i) Price of the product: price of the product is a key factor determining the
demand. If the price falls then demand will rise as the product becomes more
affordable to customers so they buy more of it. When products increase in
price people will buy less of them and demand falls
ii) Price of other Products: some products are substitutes and others are
complements. Substitutes include butter and margarine. When the price of
butter increases, people will buy more margarine and less butter. There is a
positive relationship between the price of one product and the demand for a
substitute good. When they are complements like tennis balls and tennis
rackets, a rise in the price of tennis balls will lead to a decrease in demand for
tennis rackets
iii) Advertising and promotion: a successful advertising campaign will create
new customers and remind existing customers to buy the product. The
demand for the product will increase due to promotional activities like by-one-
get-one-free.
iv) Income level: as people gain higher incomes they will demand more of most
products. People will buy more of normal goods when income increases e.g
meat. Demand for inferior goods decreases as income increases e.g second-
hand clothes.
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v) Change in the size and composition of population: a rise in the population

size will lead to an increase the demand for goods and services.
vi) Weather conditions: in a hot day people will buy more ice creams and less of
them on a cold day
vii) Change in fashion and taste: Commodities for which the fashion is out are less
in
demand as compared to commodities which are in fashion. In the same way,
change in taste of people affects the demand of a commodity.
viii) Changes in Income Tax: An increase in income tax will see a fall in demand
as people will have less money left in their pockets to spend whereas a
decrease in income tax will result in increase of demand for products and
services because people now have more disposable income.
What is Supply?

Supply refers to the amount of goods and services firms or producers are willing and able to
sell in the market at a possible price. The law of supply states that when the price of a
commodity rises, the supply for it also increases. The higher the price for the good or service
the more it will be supplied in the market. The reason behind it is that more and more suppliers
will be interested in supplying those good or service whose prices are rising.

Supply Curve

Represents the relationship between the quantity supplied and the price if the product in form
of a graph. A supply schedule represents this relationship in form of a table. Supply curve plots
the quantity of a product supplied against its price.
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Shifts in Supply Curve

When factors other than price affect the supply it results in the shift of supply curve. The
supply curve may move inward or outward.
A shift of supply curve outwards to the right will mean an increase in supply at the same
price level. When the supply curve moves inwards to the left it means that less is being
supplied at the same price level.
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Factors affecting Supply

Price of the commodity: A rise in price will result in more of the commodity being
supplied to the market and vice versa. A change in the price of the product will lead to a
movement along the same supply curve.

Other factors leading to shifts

Prices of other commodities: For example if it is more profitable to produce LCD TVs then
producers will produce more LCD TVs as compared to PLASMA TVs. Thus the supply curve
for PLASMA TVs will shift inwards (leftward shift) i.e. a fall in supply.

Change in cost of production: Increase in the cost of any factor of production may result in
the decrease in supply as reduced profits might see producers less willing to produce that
commodity. (Leftward shift)

Technological advancement: Improvement in technology results in lowering of cost of

production and more profits for the producer and thus more supply of that commodity.
(rightward shift)

Climate: Climate and weather conditions affect the supply of commodities especially
agricultural goods. Favourable weather will lead to an increase in supply (rightward shift).
Unfavourable weather will lead to a decrease in supply( leftward shift)

Number of firms: when the number of firms increases, the industry’s supply curve will shift to
the right (increase in supply). Conversely when the number of firms decreases the supply curve
will shift to the left( decrease in supply)

Government policy : Taxation can be regarded as an increase in the cost of production and
hence shifts the supply curve to the left. On the other hand, subsidies are seen as a reduction
of the cost of production thereby they shift the supply curve to the right.

Market Price-Equilibrium Price

Equilibrium refers to a situation of balance where, at least under the present circumstances,
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there is no tendency for change to occur. Demand will be equal to the supply. Thus the plans of
consumers ( as represented by the demand curve) match the plans of suppliers (as represented
by market supply curve). Consumers are willing and able to buy more when price decreases
and the producers are willing and able to supply more for sale when price increases. Thus the
consumers’ wishes and Sellers’s wishes are combined and that interaction of demand and
supply will force them to settle on a compromise price at a point where demand is equal to the
supply. Equilibrium price can be defined as the price at which the quantity demanded is equal to
the quantity supplied. Equilibrium price can be defined as the price which the demand is equal
to the supply. Prices are determined by supply and demand forces. Equilibrium quantity is
defined as the level of output where demand is equal to supply
In the graph below the point at which the demand curve meets the supply curve is the equilibrium.
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Disequilibrium: refers to a situation where demand and supply are not equal. Supply may be
greater than demand or the demand may be exceeding the supply. Shortage : This refers to a
situation where the demand is greater than the available supply. There will be an upward
pressure on prices. Price will continue to increase until demand is equal to supply. This
condition is also known as excess demand. Surplus: It occurs when the demand is less than
supply. There will be a down ward pressure in prices.
The sellers will find themselves with unsold stock. To avoid an unnecessary loss they reduce
the price to clear stock. This condition is also referred to as excess supply

Shifts and changes in the equilibrium

Equilibrium can only change if the conditions of either demand or supply change as
shown in the diagrams below.
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Progress Check: Using supply and demand curve diagrams, show how the price and quantity
demanded of soap made by ABC limited will change in the following circumstances. Make sure
you identify whether it is supply or demand that is changing:

i)The government carries out an extensive campaign to get people to wash their hands
more often ii)A new process is invented which reduces the cost of production of soap.
iii)XYZ limited, the main competitor reduces its
price iv)The government puts a new tax on soap

TYPES OF MARKETS

a) Consumer Market: a market whose customers are final users of the product such as
members of the public. They are ultimate/ final consumers who consume either by themselves
or for family use. They do not buy a product to make another product for resale.

b) Industrial Market: a market for which customers are other businesses and they buy
products as inputs to their own processes. It is also known as a business market. It consists of
individuals or groups who purchase a specific kind of product for any of the following purposes:

 Resale
 Direct use in producing other products
 General use in daily operation e.g lighting in schools, stationery for organisations’ offices
etc
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Product and Customer Orientation

Product Orientation: The business will supply products it thinks will be attractive to customes.
The business will be making unique products without keeping customer needs in mind. It is also
referred to as inward-looking approach where businesses just invent and develop products in
the hope that they will find customers who will buy their products. Much emphasis is placed on
the production of quality goods. They think that customers are always looking for high quality
goods. It is ideal when there is no or little competition. A good example is the iPhone, which
was designed by Apple and then sold worldwide on the strength of its design and technical
features.

Benefits of Product Orientation

 The approach saves market research costs

 The business is also using its strength
Limitations of Product

 More risk than customer orientation

 Resources will be wasted when customers are not buying the product
Customer Orientation: An approach used by businesses that researches what consumers
want and designs and supplies these to the market. It is also referred to as market orientation
or outward- looking approach. The business pays more attention to customers and their
satisfaction needs. The business will produce goods that are wanted by customers. This
approach requires the business to carryout market research and market analysis to indicate
present and future customer needs. It is ideal where there is stiff competition in the market.

Advantages of customer orientation

 The firm will be more confident of a successful launch of a new product as effective
market research has been undertaken to determine customer requirements
 Appropriate products that meet customer needs are likely to survive longer and give
higher profits that those built with a product-led approach.
 Firms can respond quickly to changes in the market information as constant feedback
from customers is given
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 Due to continuous market research, firms will be better able to anticipate changes and
will be in a strong position to meet the challenge of new competitors entering the market.
Recent Trends in Marketing

a) Asset-Led Marketing:- an approach to marketing that bases strategy on the firm’s existing
strengths and assets instead of concentrating on what the customers want. If a company try to
satisfy the needs of all customers in the market, the costs may increase leading to losses.

b) Societal / Green Marketing:- The concept was put forward by Kotler in 1972. This approach
considers not only the demands of customers but also the effects on all members of the public
(society) involved in some way when firms meet these demands. It’s a marketing approach that
focuses on the business and all its stakeholders. The business must therefore satisfy
customers profitably and at the same time minimise damage and costs to the society.

Features of the Market

a).Location: Firms should know who their customers are and where they are located. A firm
may operate locally, Nationally, regionally or internationally. Customers in all these
geographical areas may have different needs and wants depending on cultural, economic or
historical factors.

i).Local Markets: The firm will sell its products to customers in the area where the business is
located e.g hairdressers, motor-repair garages, restaurants. Local media is used to advertise
the products.

ii).National Markets: Firms will sell its products to consumers in the area where the business is
located and also outside its geographical location. National markets are larger and will require
more research. The business must be able to get what they offer known to potential buyers
across a country so mass media is often used for advertising. A firm may service national
markets to increase sales. Examples include Banking sector firms, large retail shops.

iii).Regional Markets: regional markets are larger again. A firm that sell its products to
customers located in different countries but in the same geographical region. They may cover a
wider economic grouping like the European Union, Southern African Development Commission
(SADC). Each region will have its own identifiable characteristic and customer needs.
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iv).International Markets: A firm that sell its products to customers located in different
countries in different continents. It is done to increase sales and also profitability. Companies
that operate in different countries are known as Multinational Companies (MNCs). International
markets are increasingly important as globilisation continues. Globalisation refers to the
growing integration and interdependence of economies and cultures involving increased trade,
movement of capital and people.

b) Market Size: is the measurement of all the sales of businesses that are supplying to the
market. Size of market can be estimated or calculated by the local market sales of all
businesses in the market. There are two methods that can be used to determine market size

 Value of goods sold:- the toal amount spend by customers buying products for all sellers
in the market (total revenue/ total sales)
 Volume of sales: refers to the total physical quantity of products which were sold by all
frims in the market i.e total number of units sold by all firms
Importance of Market size:-

 Firms can be able to calculate its own market share

 The firm can easily see if the market is growing or declining

 Marketing manager can assess whether a market is worth entering or not

c).Market Growth: It refers to the rate at which total sales in the market are rising each year or
falling (if growth is negative) It is also defined as th percentage increase in the size of the whole
market. Marketing managers will be more willing to venture into markets which are growing
rapidly.

Factors affecting market growth

 Economic growth: The rate at which GDP of a country is growing will also affect the
rate of market growth.
 Incomes of consumers: increases in income increases the consumers’ willingness abd
ability to pay for the product.
 Changes in consumer tastes and preferences: Consumer tastes can change in favour
or against the product.
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 Technological Advancement: inventions and innovations like on-line buying and selling
can lead to growth in the market
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Benefits of calculating Market Growth

 It enables the business to plan ahead by looking at the market growth trend
 Growing market indicates opportunities
d).Market Share: it is the proportion or percentage of sales of one firm as compared to the
whole market size. It is the percentage of the total market held by a business or product.Two
variables are used and these include firm’s sales and total market sales. Market share can be
by value or by volume. It is calculated using the following formulas.

Market Share by value = Firm’s sales x 100

Total sales of all firms

Market Share by Volume = Units sold by the firm x 100

Total units sold by all firms

Market share measures the relative success of one business’s marketing strategy against that
of its competitors. A product with the highest market share is known as a brand leader and a
business with the highest markets share is known as a market leader.

Benefits of high market share

 Higher market share usually translate into high profits

 Small scale shops will be willing to buy from the business since it will be offering best-
selling brands
 Customers are more willing to buy from a market leader ( a business with a higher market
share)
Limitations of market share

 Different results can be obtained if two methods are used which makes it difficult to
interpret the results
 Markets can change rapidly especially in services or technology-based industries,
making it difficult to track changes over time
 Data on sales or profits can be hard to obtain
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Numerical Example

There are four firms in the market and below are the sales figures for each firm. Use the data to
answer the questions that follow.

1990 1991
Firm $10 000 $50 000
W $40 000 $80 000
Firm $30 000 $50 000
X $20 000 $20 000
Firm
Y
Firm Z

Questions:
a)Calculate market size for the two years
b)Calculate market growth for the two-year
period
c) Calculate Firm Y’s market share in 1990 and
in 1991 d)Comment on the results obtained on
‘c’ above
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e).Competitors: are businesses that sell similar or identical goods or services in the market.
There are two main types of competition and these include price competition and non-price
competition. Price competition involves charging price different from the competitor’s price.
Non-price competition include offering quality goods, after-sale services, hire purchase facilities
etc. Competition can be direct or indirect.

 Direct competition: refers to competition from the business that provide the same or very
similar goods and services. Goods may be slightly differentiated. Goods can be
differentiated by size, colour, packaging etc
 Indirect Competition: competition is from businesses that are in a different market of
sector i.e a bus operator can experience indirect competition from rail transport
operators.
Niche and Mass Marketing

a).Niche Marketing: involves identifying and exploiting one segment of a larger market. This
segment can be one that has not been identified and filled by competitors. It is a very small
section of the market and that section has got specific requirements e.g the market for
professional divers’ watches or high status products. It is suitable for small firms and the goods
are produced in small quantities. This segment is also known as the target market. Target
market refers to a specific group of customers to which a business has decided to sell its
products or services. A target market can be defined according to age, gender, income, taste,
location etc. Allows businesses to develop products/services to meet the needs of this specific
group.

Benefits of Niche Marketing

 Enables small firms to avoid competition from larger firms

 By targeting niche markets, firms can focus on the needs of customers in these markets
 Direct marketing is possible
 There is little competition on those markets
Limitations of Niche Marketing

 Niche markets are small and can therefore only support a small business
 It is not suitable for a business selling many products
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 It is more risk than mass marketing

b).Mass Marketing: involves selling the same products to the whole market with no attempt to
target separate groups. Mass marketing produces a product that appeals to the whole market,
so that everyone becomes a customer, no matter what their age, job, income, wealth or gender.
Mass markets consists of a large number of customers for a standardised product such as
markets for food and grocery. Goods are produced in large quantities.

Benefits of Mass Marketing

 Enables a firm to operate in a large scale and enjoy economies of scale (economies of
scale refers to a decrease in the average costs experienced when a firm operate on a
large scale.)
 It is less risk than niche marketing since the business will be selling to a lot of consumers
 A strong brand image and customer loyalty is reinforced and these act as barriers to
entry making if difficult for competitors.
Limitations of Mass marketing

 The business can lose customers who will be looking for specialised products
 Direct marketing is not possible. Thus mass marketing is likely to require very high
advertising, promotion and distribution costs and failure to succeed will be very
expensive.
 There is a lot of competition as the needs and wants of the large market can be
seen by many businesses.
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Market Segmentation

Refers to the process of dividing the whole market into different sub-groups according to their
respective similar or homogeneous characteristics. It is the process of identifying particular
groups that have similar needs and wants in the market. Market segmentation is also known as
differentiated marketing. A sub-group of the whole market is referred to as a market segment. A
market segment consists of consumers who have similar characteristics. Segmenting a market
means that marketing activities are focused on people who are more likely to buy, meaning they
are more cost effective and less likely to be a waste of time.

Examples of market segments include:

 Age

 Cultural backgroundxqsq

 Educational attainment

 Ethnicity

 Family size

 Gender

 Geographic location

 Income

 Lifestyle

 Occupation (profession)

 Religion

 Social status
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Identification of Consumer Groups

The business should be able to determine the different consumer groups in the market. To have
a clear picture of the type of consumers in a given market, the business must come up with a
consumer profile. Consumer profile refers to a quantified picture of consumers for a firm’s
products. Thus the consumers can be grouped according to age, income levels, gender, social
class, religion and region.

Methods of Market Segmentation

a) Geographical Differences: refers to area wise market segmentation. Consumers in different

locations demand different types of goods and services. Thus it will be ideal to offer different
goods in these areas. Markets can be divided into districts, towns, provinces, rural etc. For
example Woollen and thick garments are not demanded in hot cities while the demand is very
high in Polar Regions.
b)Geographic segmentation splits consumers according to their different geographical locations.
Geographical factors include population density, climate (weather), and geographical locations. For
instance, customers in rural areas of a country may have slightly different needs and wants from those in
urban areas. In many countries, the climatic conditions vary in different parts of the country. Clothes
retailers such as GAP and H&M can therefore divide (segment) their markets based on climate or
cultural preferences of customers, for example. Another example is McDonald’s, which incorporates
local food preferences in their menus served at different locations. McDonald’s serves beer in Germany,
rice products in China, fish products in Portugal, banana pies in Brazil and McVeggie burgers (without
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beef) in India.
Geographic segmentation goes beyond domestic borders, so can include areas such as countries and
international regions. Geographic segmentation enables marketers to localize their products to better
suit customers in different areas or regions of the world. This helps marketing efforts to be more
focused to meet geographic differences in customer needs and wants. Geographic segmentation is
important in marketing, especially for multinational companies with global brands because a
successful marketing mix in one part of the world does not guarantee success in other regions of the
globe.
However, it should be noted that the needs and preferences of all customers of a particular geographic
area is unlikely to be exactly the same. Globalization, for example, has led to a convergence of tastes
across the world.

c) Demographic Differences: segmentation can be based on the vital characteristic of

population.
E.g gender, age, income distribution, religion, education etc.

Social class is usually determined by the levels of income earned by an individual. Basically
there are three categories of social classes and these are:

 Upper Class: skilled and experienced professional e.g C.E.Os Directors, Managers,
Lawyers, Doctors etc. They buy expensive goods for prestigious reasons
 Middle Class: Lower managerial workers e.g Teachers, Nurses etc. They want
quality goods at affordable prices
 Lower Class: unemployed, pensioners, part-time workers etc. The want inferior goods at
low prices
Age: Some products are purchased by particular age groups eg. Walking frames, coke zero

c).Psychographic Factors: refers to market segmentation according to mental status of the

people. It includes culture, personality attributes, motives, life style of the consumer. Life style
refer to the way in which one lives. Attitude refers to a settled way of thinking or feeling or a
position of the body indicating a particular mental state. Personality refers to the combination of
characteristic or qualities that form an individual’s distinctive character. Brands are generally
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segmented according to the psychograph. Segmentation is decided

according to the advertisements and content shown. A celebrity can be used for a BMW X5 car
to make the advert more appealing to the middle and upper classes.

Psychographic segmentation splits the market according to people’s lifestyle choices and
personal values:

 Lifestyle choices include people’s personal interests, such as their hobbies and other
pursuits. For example, publishers of consumer magazines use psychographic segmentation
to cater for a range of interests, such as sports, motoring, home improvement, fashion,
consumer electronics, health and beauty, cinema, and weddings.

 Personal values are the moral beliefs held by particular market segments. Examples include
vegans, vegetarians and environmental activists. It can also include people’s views or beliefs
regarding animal testing, fair trade, and sustainability (such as reducing, recycling and
reusing of products).

Some examples of family structures or characteristics and lifestyles acronyms used by

marketers in the real corporate world
 DINKY: Double Income, No Kids Yet

 DINKER: Double Income, No Kids, Early Retirement

 DITCHED: Double Income, Two CHildren, Extortionate Debts

 NILK: No Income, Lots of Kids

 OINKY: One Income, No Kids Yet

 ORCHID: One Recent Child, Hugely In Debt

 SITCOM: Single Income, Two Children, Outrageous Mortgage!

 WOOF: Well Off Older Folk.

d).Behavioural Segmentation: market segmentation according to the utilisation of the product.

Thus consumers are grouped according to the volume of usage, purchase occasions, brand
loyalty, price sensitivity etc.
e) Socio-economic segmentation splits the market according to consumer or household
income levels. This is often linked to their type of profession and/or their level of educational
attainment. Businesses then devise focused marketing mixes, targeted at each market segment
based on their income level of social status
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For example, segmentation by income level is used by many businesses. For instance, airline
carriers offer different ticket prices for their airline services, such as economy class, premium-
economy class, business class, and first class air travel.

Benefits of Market Segmentation

 Increased sales since products are produced for a specific group of consumers
 Enables the business to identify consumer needs and wants which are not currently
satisfied
 Enables small firms to avoid competition from big firms by targeting a specific group of
customers
 Enables the business to implement price discrimination to increase revenue and profits
 Money and time is not wasted in trying to sell products to the whole market
Disadvantages of Market Segmentation

 Firms may appeal to segments that are too small to be profitable

 Firms may not be able to use certain media due to small size of the segment
 Costly and extensive market research is needed
 Firms may misinterpret consumer similarities and differences
 Promotional costs might be high as different advertisements and promotions might be
needed for different segments
“Today, segmentation is no longer a simple or static marketing technique.
It is core to the way successful companies run their business.”- IBM’s Institute for Business Value

3.17 A Definition of Customer Relationship Marketing

Customer relationship marketing (CRM) is a technique based on client relationships and customer loyalty.
Using customer data and feedback, companies utilizing this marketing strategy develop long-term
relationships with customers and develop laser-focused brand awareness. Customer relationship marketing
varies greatly from the traditional transactional marketing approach that focuses on increasing individual sale
numbers.
Companies that prioritize customer relationships, on the other hand, strive to create strong customer
connections, which may be emotional, to their brand to promote customer loyalty and increase customer
lifetime value. They benefit from word-of-mouth promotion and develop brand ambassadors.
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Customer Relationship Marketing Strategies

Customer relationship marketing builds upon customer experience management and puts improving
customer interactions to foster brand loyalty at the core of marketing activities and efforts. There are several
ways that companies go about customer relationship marketing, including providing excellent customer
service at all times, getting to know individual customers to anticipate their needs, and offering loyalty
program perks and rewards for repeat customers.
Companies typically turn to the internet and social media to pursue customer relationship marketing
initiatives, which means that small businesses also can benefit from it by inviting customers to visit their
websites, read and comment on blog posts, and communicate via social media platforms like Twitter and
Instagram.
The goal of customer relationship marketing is to build trust with and engage customers to build brand loyalty
and reduce customer churn. One of the best strategies for building relationships with customers is focusing
on emotion. Brands who excel in CRM use nostalgia in their campaigns because it is one of the most
powerful connections consumers can have to a brand, according to BDA CEO Jay Deutsch. That’s why
branded merchandising is becoming part of some of the most successful marketing campaigns.

Other strategies in customer relationship marketing include:

 Show customers you value them with every interaction – Consider spontaneously recognizing
them and delighting them in unexpected ways
 Listen to customers and respond – Use social media monitoring tools to reply to comments and
complaints and address customers’ concerns
 Give customers free information – Identify topics and interests customers have and then create
content to address them and give customers free access to it, such as informational videos on
products they recently purchased or newsletters that highlight individual customers and share their
stories
 Expanded loyalty rewards – Any company can offer perks and rewards, but you need to expand
beyond the typical reward program and give people stuff they love or recognize them in unexpected
ways
 Communicate frequently – A relationship is nothing without communication, so make sure you
communicate with customers often via social media, email, messages, etc. (just be sure the
communication provides value to customers and does not become intrusive or too frequent). See how
Real Time Interaction Management (RTIM) can help you communicate with customers in a relevant
and timely way
Benefits of Customer Relationship Marketing
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When companies implement customer relationship marketing, they make good use of their customer data
and identify customers that will be of more value to the company itself. With customer relationship marketing
campaigns, companies save time and money by focusing on customers that will not be as costly in terms of
maintaining relationships with them; they also make better decisions about which customers have
underdeveloped potential.
Another advantage of utilizing customer relationship marketing is that it increases customer satisfaction and
communication levels. Customers who have strong relationships with companies interact with them more
frequently, which makes it easier to learn more.

about customers via customer data platforms. These

companies also save money by building relationships with existing customers rather than spending to attract
new customers.
Other benefits of using a customer relationship marketing strategy include:
 Delivering a consistent customer experience – By becoming customer-centric and focusing on
customer relationships, companies align their touchpoints and work across the organization to meet
customer needs, improve satisfaction, and deliver an exceptional experience
 Gathering customer feedback – Building strong relationships with customers requires
communication, and companies put more stock in gathering feedback and analyzing it to make better
business decisions to build stronger relationships
 Improving customer profitability – Customers that are loyal to brands spend more with them; in
fact, consumers are now putting customer experience ahead of cost when making purchasing
decisions
 Creating customer advocates – The happier your customers are, the better the chances they will
spread the word about you to others; when you build a strong relationship with them and deliver a
consistent experience, they have better reviews to share
See how our Intelligent Engagement Platform can give you the customer insight needed to build long-term
customer relationships.
 26

Market Research

Refers to the collection, collation and analysis of data relating to the marketing and
consumption of goods. It is the process of gathering information about markets, customers,
competitors and the effectiveness of marketing methods. It is every day information about
developments in the marketing environment that mangers use to prepare and adjust marketing
plans. The information is used to identify and define marketing opportunities and problems,
generate and evaluate marketing actions, monitor marketing performances and improve
understanding of marketing as a process.

Qualitative and Quantitative Information

Quantitative Information: information will be in the form of numerical data. Data can be
obtained by carrying observations and some experiments e.g test marketing or field
experiments. The results can be distorted if the person is aware that he/she is being observed.

Qualitative Information: information is non-numerical e.g attitudes, opinions, ideas etc The
researcher may want to find the reasons why consumers will or will not buy a particular product.
The data can obtained through personal interviews and in-depth discussions among groups e.g
focused groups and consumer panels

Reasons for conducting Market Research

a).To eliminate the risk associated with new products: the company needs to obtain
information about potential demand before launching a new product.

b).To predict future changes in demand: information should be gathered which will enable
the firm to predict all the likely changes in future demand.

c).To help in decision making: market research provides vital information which is needed for
decision making purposes
 27

d).To gain a competitive edge: to assess the most popular designs, styles, brands, promotions
and packages

e).To explain patterns in sales of existing products and market trends: market research is
required for both new and existing products. If the sales figures for an existing product are
declining then marketing managers must implement new measures to reverse the negative
trend.

Types of Market Research

Primary Research: it is also known as field research. It is the gathering of information for the
first time directly from sources in the market. Information which is collected by the researcher
and the information gathered is new. An example of primary research is asking people what is
their favorite chocolate.

Characteristics of Primary Research

 The data collected has never been published in any form

 The data will be directly related to a firm’s specific needs. Thus a consumer survey will
be designed to discover specific aspects of consumer needs relevant to the firm.
 Primary research is typically expensive to collect. This is because it requires significant
labour input and expertise of the results are to be trusted.
Primary Research Methods

a).Observation: market researcher can observe how people behave. Observations can take
the form of audit (stock checks) or using recording devices like security cameras and
Televisions. It can give you the answer of what is happening but not why as you just observe
and see through cameras. It involves seeing how much time they spend at a shelf and the type
of products they were looking at. Thus the results can be distorted if the customer knows that
he/she is being observed.
 28

b) Experimental Methods/ Test marketing: basically there are two types which includes:-

i).Laboratory Method:- occurs when people are invited to a particular artificial setting and ask
them to taste a product or try it at their own place.

ii).Field Experimentation:- the marketing manager will select a particular geographic area and
launch a product in that location to see the reaction of the people. This is cheaper as the loss is
less if the product is not successful.

c).Survey Method: It includes the telephone surveys, mall-intercepts, internet surveys, simple
questionnaire surveys and door-to-door surveys. Mall-intercepts occurs when people are
stopped in malls and

are then asked about a product. Questionnaire surveys are most common when people are
given out forms with questions that could be either open-ended or closed-ended. Quantitative
research include the use of closed questions e.g a yes or no question and or a multiple choice
question. Qualitative research include the use of open-ended questions where the responded is
allowed to give his or her point of view (space is provided for respondent to give his/her point of
view)

Questions to ask when using surveys

i).Who to ask: it involves population, sample size and sampling method. Population includes
current or potential customers.

ii)What to ask: the types of questions and the required information

iii).How to ask: the layout of the questionnaire, questionnaire techniques (i.e complex or simple)

iv)How accurate the result is: likely limitations of market research. Accuracy depends on the
intelligence and cleverness with which questions are being asked.
 29

Example of a questionnaire: Shopping for shoes

1. Do you ever buy shoes yourself?.............Yes… No……

2. If yes, where do you buy them? A) High street
B) Shopping mall
C) Departmental store
D) Internet site
E) Other
3. How do you often buy shoes? A) One week
B) Once a month
C) Once every three months
D) Once a year
4. How much do you usually spend on a pair of shoes? A) less than $10
B) $11-$20
C) $21-$40
D) Over $40
5. What is the most important thing you look for when buying a pair of
shoes?..................................................
…………………………………………………………………………………………………………………
…………
6. How important to you is the place you buy shoes
in?....................................................................................
…………………………………………………………………………………………………………………
……….
7. How much do you consider fashion when buying a pair of shoes?
………………………………………….

d).Sampling Method

What is a sample: is that part of the whole population whose characteristics are studied to give
insights into the characteristics of the population as a whole. Statistical theory can be used to
calculate the minimum size of the sample necessary to give the required degree of accuracy.
Sample size refers to the number of people selected from the population in which marketing
research is conducted. Generally speaking, the larger the sample size the more accurate can
 30

be the results. The sample must be more representative of the population, it should be
balanced in terms of age, sex, type of occupation, social class etc. A carefully chosen sample
should produce similar results to those that would be achieved by asking everyone in the
population.

However one needs to take into consideration time and cost factors. Bias will also exist
especially if the samples are poorly selected or too small, or if questionnaires have complex
interview questions.

Two types of Sampling Methods

 Probability Samples: a sample is selected randomly and the probability of each

member’s inclusion in the sample can be calculated and reliable conclusions about the
whole population can also be made. Probability sampling methods are more complex,
costly and also time consuming.
 Non-Probability Samples: it excludes estimating the probability of any particular item
being included. Reliable conclusions from these samples for the whole population are
not possible. However it saves time and money. It is also very easy.
Probability Sampling Methods

i) Random Sampling: every member of the population has an equal chance of being selected.
Names and addresses for respondents may be chosen at random from the electoral register
and then visited for an interview.

ii) Systematic Random Sampling: every nth member in the target population is selected. For

example, selecting every 10th name in the telephone directory until the required sample size
had been reached.

iii).Stratified Random Sampling: it divides the population into groups (strata) by age, sex,
occupation, social class etc. It provides a more representative cross-section of the whole
population. Each selected sub-group is then randomly sampled i.e people in each stratum
should be randomly chosen.

iv).Quota Sampling: when the population has been stratified and then the interviewer selects
an appropriate number of respondents from each stratum. It is commonly used for street
 31

interviews e.g a quota may be used to interview 25 males and 25 females for each selected age
group.

v).Cluster Sampling: cluster refers to a group of similar things positioned or occurring closely
together. A random group is selected from a particular area or region where they are
concentrated e.g choosing the CBD in a town. It is used to reduce costs of interviewing and
travelling.

Non-Probability Sampling Methods

i).Convenience Sampling: involves the gathering of information from whoever is available

when the survey takes place, regardless of their age, sex, background etc. It also involves
stopping by-passers, asking shoppers in just one location. It is less costly. However the results
are less reliable

ii).Snowball Sampling: it is a very specialised form of sampling in that, a first group of people
is selected as the first sample. The selected people are then asked for one more contact
(friend) who is then added into the sample. Sample size continue to increase hence snow ball
effect. Businesses in secretive markets use this and also those firms that produces highly
specialised and expensive products for a very limited range of customers. It is less costly.
However sampling in this way is not representative. Thus the results may be biased since a
person’s friend is likely to have a similar lifestyle.
 32

iii).Judgemental Sampling: the researcher chooses the respondents based on what they think
is appropriate for their study. This could be used by an experienced researcher who may be
short of time as they have been asked to produce a report quickly.

e).Focus Groups

It is a selected group of 15-20 people who are shown a product or allowed to taste it and then
asked about what they feel or think about it. These people must comment on its taste, design
and colour depending on what the product is. Once they are interviewed they won’t be asked
again. It is used to obtain feedback especially for new brands. During the interview, members
are allowed to discuss with each other. Information to be obtained is more reliable.

Limitations

 It can be time consuming

 The data collected can be difficult to analyse and present to senior managers
 The presence of the researcher may influence the discussions
f).Consumer Panels

It is to a great extent similar to focus group. The difference is that, after an interview, the focus
group is dismissed and another group is selected. In a consumer panel, the same group is
asked for opinions at a certain point in time after some changes have been introduced. It is
more accurate as asking the same people give a better idea of how consumer thoughts and
feelings are changed.
Advantages of Primary Research

 Targeted issues are addressed: thus the investigator collects data specific to the problem
under study
 Data is up-to-date: the data is current and as such it is specific to the place and situation
the researcher is targeting.
 The researcher enjoys privacy: collector of information is the owner of that information
and he need not share it with other companies and competitors. This gives an edge over
competitors relying on secondary data
 Data interpretation is better: the collected data can be examined and interpreted by the
 33

marketers depending on their needs rather than relying on the interpretation made by
collectors of secondary data.
 The researcher may get more information: if required, it may be possible to obtain
additional information during study.
Disadvantages of primary research

 High costs: collecting data using primary research is a costly proposition as the more
people are required to carry out surveys and collect data
 Time consuming: the time required to do the research accurately is very long as
compared to secondary data, which can be collected in much lesser time duration
 In accurate feedback: in case the research involves getting feedback from the targeted
audience, there are high chances that feedback given is not accurate. Feedback by its
basic nature is usually biased and given just for the sake of it.
 34

SECONDARY RESEARCH

It is also known as desk research. It involves the collection, analysis and evaluation of second-
hand information. Second-hand information refers to data that already exists. This information
was originally collected by another person or organisation for a different purpose. It is the
secondary research that should be initially done as it has lower costs, saves time and helps in
giving directions for primary research.

Sources of data for Secondary Research

Internal Sources

 Internal company records or annual reports

 Sales trends

 Stock movements

 Supplier and customer records

External Sources

 Newspapers e.g the business section

 Magazines

 Government publications (population census)

 Libraries (number of households in an area)

 Economic surveys (economic trends)

 Information from competitors

 Internet (feedback from customers)

 Prepared research report by other firms

Advantages of Secondary Research

 Secondary research materials are usually cheaper to obtain as costs of conducting the
research do not have to be borne by the organisation
 Data is obtained quickly since the data is already there. There are no hassles of data
collection
 35

 Data from several different sources can be compared and important competitor details
obtained
 Basic information like population structures can be obtained which then provide a
foundation for primary research. Thus secondary research makes primary research
easier.
Disadvantages of Secondary Research

 The data is often out-of-date:- in fast-moving consumer markets, data quickly become
out-dated as the external environment change.
 The data was collected for a different purpose:- Thus the data obtained may not suit
the objectives of the company as it may have been conducted for a different
purpose.
 If a company is starting to develop or has developed a new product then secondary
research data may not be available at all.
 Obtaining additional data or some additional clarification about something may not be
possible
 Lack of control over data quality. One can only hope that the data is of good quality.
 36

Factors affecting choice of the research method

1. Budget available: if the researcher has more money available for market research to be
conducted then primary research can be necessary. The organisation can afford expensive
primary research methods such stratified random sampling, quota sampling etc. If the
organisation is experiencing cash problems the secondary research can be the best option.

2. Accuracy required: primary research provides more accurate results than secondary
research . Secondary research provides misleading results since the research was done for a
different purpose and is often out-dated.

3. How quickly the information is required: secondary information is ideal when the
marketing data is required quickly since the data is readily available. Primary research
method can be employed when the data is not required quickly.

4. Accessibility to the old sample: if the researcher doesn’t have access to the sampled
population then primary research won’t be possible. The researcher will then depend on the
data provided by other organisations.

Cost effectiveness of market research

The business should not just spend large sums of money on market research for the sake of it.
The marketing managers should ask themselves questions such as: Is it worth it? Is it cost
effective? These questions implies that money should not be wasted. A well designed and
focused market research pays for itself in form of higher sales and increased profits. If very little
amounts are spent on market research then the validity and reliability o the results will be
compromised. By spending more on market research the more the data can be obtained
leading to better results. Nowadays the internet and mobile phones have made it easy to
contact a wide range of potential customers within a short period of time as compared to home
surveys. The key way to maximise the likelihood of cost-effectiveness is to plan thoroughly.
According to the Marketing Association: an existing business must set a marketing budget not
exceeding 1% of its gross sales and 10% for a new product or business.

Factors to consider when deciding how much to spend on market research

a) likely returns :The marketing manager should consider the potential increase in sales or profits

b) Method to be used :More money is required if they are planning to use a primary research
method.
 37

c) Budget available: resources available can be a constraint to the amount of money a

business can spend on market research.

d) Emergence with which the data is required: If the data is required quickly then more is
required so that more data collectors can be hired.

Reliability of data collection

-different factors should be considered before concluding on whether the data is reliable or not.

Market research data may be unreliable due to the following reasons:

 Questionnaires used may have had misleading or leading questions

 Interviews or focus group leaders may guide responders or may not fully under stood
the question they are asking.
 Interviewers or focus group leaders may complete the forms themselves
 Respondents to questionnaires, interviews and discussions may deliberately not give
their real views in order to get the process finished quickly or just for fun.
 People in focus groups may say what they think other people in the group would like to
hear
 The sample size may be too small and so not represent the whole population
 Different statistical methods of treating data will often result in different conclusions

Analysis and Interpretation of the results of market research

Most market research reports will be presented in writing, though there may be meetings
where the findings are orally presented. The writing may be supported by graphs, charts,
tables and diagrams. The information must be presented clearly and in an organised way.
There may be recommendations, though these may be left to those who the report was
produced for.

Methods of presenting market research results

a) Tables: a table shows the rows and columns which show any connection between the
two variables. It is important to choose appropriate headings for the rows and columns. It is
an effective way of organising large quantities of data.
 38

Product Sales revenue for the four product in a supermarket over time
1990 1991 1992
Biscuits $100 $110 $123
Bread $90 $88 $84
Cooking oil $55 $55 $56
Buckets $60 $65 $70

Problems

 Not attractive in most cases

 The reader may take more time to interpret the data

Pie Chart

They are visually attractive and present the data in an easy-to-see way. The data is broken
down into categories. The area of each circle/sector occupied by each category is in proportion
to the percentage that category is of the total.

Problem: A pie chart is used to show only one variable

Bar Graph

Show data in the form of vertical or horizontal bars. A bar graph displays data in separate
columns. They may show absolute values or percentages. They are also visually attractive.
Use the data in the table below to draw a bar graph
 39

Month Jan Feb Mar April May Jun July

Pairs of shoe 30 35 20 0 25 20 30
sold
 40

Pictograph

A pictograph uses icons or pictures to present the information. It is visually appealing and it is
easy to see variables. A key is required for the reader to easily understand value of an icon.
Use the following data to draw a pictograph.

Month Jan Feb Mar April May Jun July

Pairs of shoe 30 35 20 0 25 20 30
sold

Draw a pictograph on the space provided

 41

Line Graph

A line graph is used for showing the way a variable changes over time. A line graph plots data
as points and joints the points with a line. It is simple and clear and more than one line can be
shown on the same axis to enable a comparison. Use the data below to draw a line graph.

Month Jan Feb Mar April May Jun July

Pairs of shoe 30 35 20 0 25 20 30
sold
 42

Measures of the middle or the average

Use the data in the table below to calculate the mean; median and the mode. The table
shows the number of hours the respondents listened to a certain radio station

Year Number of hours

2010 7;3;2;0;10;3;2;4;8;6;7;5;7;10;7;11
2011 6;12;3;9;11;6;9;10;5;9;9;4;10;4

First step: Arrange the data in ascending order

Year Number of hours

2010 0;2;2;3;3;4;5;6;7;7;7;7;8;10;10;11
2011 2;3;4;4;5;6;6;9;9;9;9;9;10;10;11;12

Mean = add all the values and divide by the total number
of values Mean (2010)= 92/16 = 5.8

Mean (2011) = 118/16= 7.4

Comment : the data show an improvement since people are listening to the radio programs for
 43

longer periods.

Mode: refers to the number which appears

most Mode (2010) is 7 (appears 4 times)

Mode (2011) is 9 ( appears 5 times)

Median refers to the middle term in the range of ordered data. The median divides the data
into 2 equal parts

Median when there are odd number of values :- = (Number of values +1) th value
2

Median when there are even number of values = add the two middle numbers and
divide by 2 Median (2010) = (6+7)/2 = 6,5
Median (2011) = (9+9)/2 = 9

Advantages of using a mean

 It includes all of the data in its calculation

 It is widely used and easily understood

Disadvantages of using the mean

 It is affected by one or two extreme results

 It is commonly not a whole number.

Advantages of using the mode

 It is easily observed and no calculation is necessary

 The result is easily understood since it is a whole number

Disadvantages of using a mode

 The mode does not consider all of the data

 There can be more than one modal result which could cause confusion

Advantages of using the median

 It is less influenced by extreme results than the mean

 44

Disadvantages of using the median

 It cannot be used for further statistical analysis

 When there is an even number of items in the results, its value is approximated
 45

MARKETING MIX

Marketing Mix is defined as a combination of elements that influence a customer’s decision

whether or not to buy a product. It is also defined as the combination of product, price,
promotion and place that is used to make sure that the customer’s requirements are met. It is a
marketing tool that combines a number of components in order to strengthen and solidify a
product’s brand and to help sell the product or service. The marketing mix is often simplified and
is commonly described as the 4 P’s. This approach identifies four elements in the mix (all
beginning with the letter P)

P - Product : Include the many different aspects of a product such as design, quality, reliability
as well as its features and functions. A product is an item that is built or produced to satisfy the
needs of a certain group of people. The product can be intangible or tangible as it can be in the
form of services or goods.

P – Price: Refers to how much the customers are charged for the product and other terms of
payment involved. This is what a business is asking consumers to pay for a product or service.
The price can be related to the cost of production or sometimes related to the prices charged by
competitors

P – Promotion: This is the way a firm communicates information about the product to the
customer. It may use advertising or a sales force to highlight its strength. The promotion of a
product will affect the image that customer have of it and their awareness and understanding
of the benefits of the product. Promotion includes advertising, special offers, sponsorship and
public relations activities

P – Place: Refers to the way the product is distributed. Is the product sold directly to the
customer or through retail outlets? Can you buy online or do you have to travel some
distance to get to a shop where it is sold. Place refers to the points of sale such as store or
websites as well as Lorries that distribute products.
Packaging is also part of promotion. Packaging refers to the technology of enclosing or protecting
product for distribution, storage, sale and use.
 46

The role of the consumer (The 4 C’s’)

Another way of analysing the marketing mix is to consider it from the perspective of the
consumer. The 4Cs (Customer/consumer value, Cost, Convenience, and Communication)
enables you to think in terms of your customers’ interests more than your own. From being business-
oriented, you’ll become customer-centric. This is known as the 4 C’s approach
 47

4 C’s Explanations
Customer solution  What benefits does it offer? How does the product meet a
customer need to solve a customer’s problem? A company
should only sell a product that addresses consumer demand.
So,
marketers and business researchers should carefully study the
consumer wants and needs.
Convenience to  How easy it is to buy the product. The product should be
customers readily available to the consumers. Marketers should
strategically place the products in several visible distribution
points.
Communication with  What do we know about the product. Marketers should aim to
the customers create an open dialogue with potential clients based on their
needs and wants
Cost to the customer  How much does the product cost to the customer

Relationship between 4 C’s and 4 P’s

The 4 P’s take the point of view of the seller and not the one of the buyer. From the buyer’s
point of view, the 4 P’s are transformed into the 4 C’s

Relationship between 4 P’s and 4 C’s

4 P’s Product Price Place Promotion

4 C’s Customer solution Cost to the Convenience of Communication
customer the with customers
customer

Customer Solution and Product

 Buyers don’t see a product as a selling item but rather as a solution for their problem
 The business must find out what people want and then ‘build it’ for them, their way
 Study customer needs and wants and then attract them one by one
 48

Cost to the customer

 Price indicates a return to the sellers and on the other hand, price is a cost to the
customers
 Buyers see how much they would have spent to benefit from the product

Convenience to the customer

 Sellers try to choose the right place for their products in order to make them convenient for
buyers
 You have to know how each sub-set of the market prefers to buy e.g on the internet,
from a catalogue, on the phone, using credit cards etc
 49

Communication with the customers

 Communication requires a give and take between the buyer and seller
 As a marketing manager, you must listen to your customers whenever they give you
feedback

Product Differentiation: refers to the degree to which customers perceive a product or brand
to be different. The main focus for most of the businesses is to make customers see that the
brand or product is the only one that meets their wants. The differentiation may be through an
actual advantage in design, performance, or price, or an imaginary but real process in which the
customer is convinced that the product or brand has something over and above its physical
characteristics.

Ways to achieve product differentiation:

 Advertising and marketing campaigns to make the product stand out e.g Nike
 Branding and packaging e.g Coca Cola
 After sale services and guarantees
 New designs

Unique Selling Point / Unique Selling Proposition

A unique selling proposition (USP, also seen as unique selling point) is a factor that
differentiates a product from its competitors, such as the lowest cost, the highest quality or the
first-ever product of its kind. A USP could be thought of as “what you have that competitors
don’t.” A successful USP promises a clearly articulated benefit to consumers, offers them
something that competitive products can’t or don’t offer, and is compelling enough to attract
new customers. The USP may be something unique to the product, the distribution
arrangements or the marketing methods.

Here are a few famous examples of USPs:

 Domino’s Pizza deliveries“ it arrives in 30 minutes or it’s free” promise.
 FedEx’s “When it absolutely, positively has to be there
overnight.” Southwest’s claim to be the lowest-priced
airline
 50

Benefits of Unique Selling Point (USP)

 The business is able to charge high prices

 Positive publicity from customers
 Increase in market share
 Leads to Brand loyalty. Brand refers to an identifying symbol, name or trade mark
that distinguishes a product from its competitors

Ethics in Marketing Research.

Ethics are the moral principles and values held by society. When it comes to the ethics of
market research, this refers to all aspects of how the research is designed to how the results are
shared and presented. Ethics need to be considered in order to minimise or prevent researcher
bias and to gain public trust. In the worst-case scenario, unethical practices can lead to criminal
action being taken against the organization. Instead, an ethical approach to market research
helps to generate objectivity and findings that are more representative.

Ethical considerations of market research include the following:

1. Purpose of use
Participants need to be told what information is being collected and what it is to be used for.
Participants should be informed that they are part of a market research activity, and have the
legal right to opt out if they so wish. For example, telephone calls are often recorded, so
research participants must be informed that these are for “monitoring and training purposes”.
Many websites use 'cookies' to track the user’s browsing history. Users should be informed
about this when visiting websites for the first time.

2. Confidentiality
Research participants should be reassured about the confidentiality of their personal data and
responses. This not only provides needed reassurance, but can encourage research
respondents to answer more openly and honestly. Information should only be obtained for its
stated purpose. Firms must not sell their research data to third parties without receiving prior
consent. For example, researchers should not sell data about household income to retailers and
other businesses. Breaching trust and confidentiality are clearly unethical practices.
 51

3. Selection of research subjects

Market researchers need to be sensitive to using vulnerable groups of research participants,
such as children and the elderly. In the case of children, researchers probably need to gain
written consent from the parent before undertaking the research. Again, the purpose must be
clearly communicated. Similarly, it would be rather unethical (and biased or pointless) asking a
group of drivers only for their views on petrol prices or the cost of motor insurance premiums.

4. Researcher bias
Biased market research can also be caused by the researcher asking (mis)leading questions.
Deliberately, asking people leading questions can quite easily influence how they respond,
thereby adding bias to a survey or interview. By contrast, ethical considerations would mean
questions are free from deliberate researcher bias (such as stereotyping and prejudices).
Importantly, the market researcher should not make any direct attempt to influence the opinions
or attitudes of the research participants.

5. Presentation of findings
Similarly, market researchers should not manipulate data and information in order to change the
results. Deliberately ‘cheating’ (changing or influencing) the outcome of a research activity is
unethical, especially if the research data is used for personal gain.

What is the product life cycle?

The product life cycle is an important concept in marketing. It describes the stages a
product goes through from when it was first thought of until it finally is removed from the
market. Not all products reach this final stage. Some continue to grow and others rise and
fall. This can be illustrated by looking at the sales during the time period of the product
 52

What are the main stages of the product life cycle?

Development stage - objectives

At this stage, you should not worry about sales or introducing the product. Your focus
should be on working with a team of designers, manufacturers or product development
experts on:

-producing prototypes
-testing prototyped product
-sourcing and pricing materials
-intellectual property issues

To further develop your product, you should:

 consult team members on development plans
 speak to suppliers and other business associates
 communicate with customers about your plans
 consider the environmental impacts of your product
 ask a group of potential customers to test your product and give feedback - you can use this to
develop the product
 When developing your product or service you need to establish the level of quality you are
aiming for, and how many different versions you want to develop to generate interest at
launch. You should also take steps to protect all your intellectual property rights - eg patents
and trademarks - before you launch the product or service. Doing this protects you from other
competitors copying the idea and hurrying through an alternative. See how to protect your
intellectual property.

Introduction stage of a product life cycle

The introduction stage of a product's life cycle is when you can build an awareness of your
product or service in certain markets.

Introduction stage - objectives

You should concentrate on building a base for your product at this stage, and focus on the
following marketing factors: - pricing
-distribution
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-promotion

Price your product or service

You should initially start pricing at the highest point you believe it is possible to achieve. You
can also consider a skimming price strategy: charging a relatively high price for a short time
when a new, innovative, or much- improved product is launched onto a market. The aim with
skimming is to skim off customers who are willing to pay more to be one of the first to have a
new product. You can lower the prices later when demand from the early adopters falls.

A penetration pricing strategy may work best for businesses entering a new market or building
on a relatively small market share. It involves the setting of lower, rather than higher prices to
achieve a large, if not dominant market share. See how to price your product or service.
Distribution
Your distribution should be selective and limited to a specific type of consumer, until your
product is accepted. Also, you should consider different distribution models during different
periods of the product life cycle, eg new products for different seasons in a clothes shop.

Promotion
You should try to build brand awareness at an early stage. It is worth working with a
brand design or communications agency as you develop a product to establish a
strong brand.
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You can use samples or trial incentives to capture early adopters of the product or service.
Introductory promotions can also help convince potential resellers to carry your lines. See more
on branding: the basics.

Profitability during the introduction stage of product life cycle

It is likely that, at the introduction stage, your sales will be low until customers become aware of
your product or your service's benefits. Due to the high cost of advertising and low initial sales,
it is possible that you won't make immediate profits or you may even find that the product is
producing negative profits. However, you should make up for this with increasing revenue
generated at the growth and maturity stage of a product life cycle

Growth and maturity stage of a product life cycle

At this point in your product's life cycle, you should be putting your efforts into:

-increasing your product's market share

-creating a brand preference for your customers
Product growth stage
This should be a period of rapid growth in both sales and profits for your product or service.
Your profits should rise through an increase in output and more competitive pricing.

You should also consider:

-maintaining product quality and adding features or support services for the product
-maintaining pricing to increase demand for the product
-increasing distribution channels to cope with demand
-aiming promotion at a wider audience
If your profits are still low, consider reducing the price of the product or service to increase the
volume of sales.

Product maturity stage

If your product or service makes it to the maturity stage, this should be the longest part of its
product life cycle. Sales are near their highest, but the rate of growth is slowing down, e.g.
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new competitors in market or saturation

At this stage, you will probably notice that:

 you may need to enhance product features to make it more appealing than competitors'
 you may need to lower your pricing due to increased competition
 distribution is becoming more intensive and you may need to offer incentives
 you may need to focus your promotion on the difference between existing products
At this point, the market has often reached saturation as a result of competitors releasing their
own version of your product. Your product or service may experience a decreasing rate of sales,
which should eventually stabilise.

During this stage, you should aim to differentiate your product or service from others that your
competitors offer. You can do this by focusing and highlighting any branding, trademarks, or
customer testimonials that may give you an advantage. Read about designing a successful
brand.

Decline Stage

The last of the product life cycle stages is the Decline stage, which as you might expect is often
the beginning of the end for a product. When you look at the classic product life cycle curve, the
Decline stage is very clearly demonstrated by the fall in both sales and profits. Despite the
obvious challenges of
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this decline, there may still be opportunities for manufacturers to continue making a profit from
their product. The product/service either comes to its natural end or is re-developed

Extending the Product Life Cycle

What can businesses do to extend the product life cycle?

 Extension strategies extend the life of the product before it goes into decline. Again
businesses use marketing techniques to improve sales. Examples of the techniques
are:
 Advertising – try to gain a new audience or remind the current audience
 Price reduction – more attractive to customers
 Adding value – add new features to the current product, e.g. improving
the specifications on a smartphone
 Explore new markets – selling the product into new geographical areas or creating a
version targeted at different segments

Challenges of the Decline Stage

 Market in Decline: During this final phase of the product life cycle, the market for a product
will start to decline. Consumers will typically stop buying this product in favour of something
newer and better, and there’s generally not much a manufacturer will be able to do to
prevent this.
 Falling Sales and Profits: As a result of the declining market, sales will start to fall, and the
overall profit that is available to the manufacturers in the market will start to decrease. One
way for companies to slow this fall in sales and profits is to try and increase their market
share which, while challenging enough during the Maturity stage of the cycle, can be even
harder when a market is in decline.
 Product Withdrawal: Ultimately, for a lot of manufacturers it could get to a point where
they are no longer making a profit from their product. As there may be no way to reverse
this decline, the only option many business will have is to withdraw their product before it
starts to lose them money.

Summary : Stages of the PLC and the marketing Mix

Introduction growth MATURITY Decline

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Product -first model -modified model -new models -drop poor

-wide range -modify selling models
existing
models to
extent
their life cycle
Price -Could be high -could be lower -Could be -heavily
(skimming to attract lowered further discounte
pricing) Could customers to attract d
be low - could be higher customers -reduce price
(penetration if the brand is - competitors are to clear stock
pricing) successful. also entering
the market
Promotion -Significant -more -persuasive -could be
advertising ( advertising and adverting to much lower to
informative promotion to stress on the save costs
advertising) and create brand positive - advertising is
promotion to loyalty difference with only used to
raise competitors’ inform the public
awareness. products about lower
prices
Place -Could be -increased levels -the highest -eliminate
focused on the for wider number of unprofitabl
key areas ( coverage outlets e
restricted outlets) outlets
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Uses of the PCL

 The position of a product in the PLC gives some indications to a business about
how the elements of the marketing mix might be used
 It is also used to check progress against the marketing objectives of the business
 It is used to identify how cash flow might depend on the cycle
 To decide on whether to withdraw or to re-launch a product

Limitations of the PLC

 It is based on past or current data as such it cannot be used to predict the future
 Some products can come back after the decline stage
 Sales of some products continue to grow.
New Product Development

An ability to develop new products [or services] can help to breathe new life into a business.
The primary advantage of product development is that it can help a brand and business stay
relevant with its consumer base. By continually striving to solve new problems that consumers
face, an organization is continually creating the chance to create revenues.

New Product Development: the creation of products with mew or different characteristics that
offer new or additional benefits to the customer. Product development may involve modification
of an existing product or its presentation, or formation of an entirely new product that satisfies a
newly defined customer want or niche market.

Benefits of new product development

 Increase in market share

 The business is able to respond to changing needs of customers

 The business can benefit from positive word-of-mouth marketing, which can lead to
higher revenues.

Limitations

1. It can be easy to set unrealistic expectations for a product.

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Without quality benchmarks in place, the product development process can create unrealistic
future expectations for a brand and business. Just because a prototype works as intended does
not mean that it can provide an expected value. There must be
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a consistent performance in meeting consumer value expectations and accurate

benchmarks must be set to make this happen.

2. Products can fail unexpectedly.

Even with thousands of hours of testing, it is possible for a product to fail unexpectedly. The
Samsung Galaxy Note 7 battery issues and subsequent recall are example of this. If a product
doesn’t perform as expected in the general market, then
the anticipated profits can become large unanticipated expenses in a very short period of time.

3. External sources can change procedures, which can alter your product
development.
There are a number of external sources which are involved in the product development process,
but fall outside of the direct sphere of influence for a brand and business.
Shipping vendors may change delivery dates. Off-shore manufacturers might change
procedures. Manufacturing materials may decline in quality. These all can affect the final
product under development.

4. Product testing can result in a failed idea.

A brand and business can put a lot of time and effort into the product development process,
only to see an idea fail when tested within a market. There will always be a risk with product
development because the costs of a failed idea must be absorbed. If the hopes for new
revenues rely on one product in development, then this puts the organization at risk for failure
instead of experiencing a product failure.

5. The primary disadvantage of product development is that changing consumer

preferences can cause a valuable product to actually be seen as worthless.

NB: The pros and cons of product development show that this process can be risky, but it
also provides a brand and business with the opportunity to experience greater success.
When approached in a methodical way, the innovative outcomes are often worth the risk of
future failure.
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Product Portfolio Analysis

Refers to analysing products of a business to help allocate resources effectively between

them. Considers the range of product a business offers, using market sales, market share,
position of the product life cycle and segmentation in order to plan the most appropriate
product mix to meet objectives. It focuses on how to achieve the optimum (best) product mix,
that means getting a range of products that are going to achieve long-lasting sales. It helps the
business to pinpoint exactly what marketing activities need to be employed for each product in
the mix

Benefits of product portfolio analysis

 Allows businesses to ensure that it always has a product ready to replace

products that might be losing market share or sales
 It enables a business to have a range of products so that if one fails the others can
provide revenue to cover
 It allows planning to take place over time so that the business will always be in a position
to maintain revenue.

Marketing Mix – Promotion (Promotional Strategy)

Promotion is the marketing activity that communicates to customers in order to change their
attitudes or buying behaviour. It is an attempt to draw attention of the customer to the
product. Promotion is the part of marketing where you advertise and market your product,
also known as a promotional strategy. Through it, you let potential customers know what
you are selling.

 In order to convince them to buy your product, you need to explain what it is, how to use it,
and why they should buy. The trick in promoting is letting consumers feel that their needs
can be satisfied by what you are selling.

 An effective promotional effort contains a clear message that is targeted to a certain

audience and is done through appropriate channels. The target customers are people who
will use, as well as influence or decide the purchase of the product. Identifying these people
is an important part of your market research. The marketing image that you’re trying to
project must match the advertisement’s message. It should catch your target customers’
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attention and either convince them to buy or at least state their opinion about the product.
The promotional method you choose in
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order to convey your message to the target customers may probably involve more than one
marketing channels

Objectives of Promotion

 To increase customer awareness

 To reach targeted clients which might be geographically dispersed

 To remind customers about the existing product and its quality

 To show the superiority of a product over its competitors

 To increase sales

 To give information about the product and the company

Types of Promotion

a) Above the line promotion: it occurs through an independent media such as

advertising using television, magazine, newspaper, radio, internet. Thus it involves
using mass media space that is paid for, often through an advertising agency. The main
aim is to inform, raise awareness and build brand positioning.
Communication is targeted to the whole market not to specific individuals

b) Below the line promotion: marketing methods that communicate with the
customer without paying for the media. These are promotional activities that pushes
customers into buying e,g buy one get one free (BOGOF). These are promotional
activities where the business has direct control over the target or intended audience. It
is designed and produced by a business in-house. It is more of one-on-one approach.
It is designed to achieve short term sales increases and repeat purchases.
Elements of Below the lime promotion include:

-Sales promotion

-Personal selling

-Public relations

-Exhibitions and Trade fairs

Promotional Mix

Refers to all the elements of promotion that a business can pursue which include
advertising, public relations and sales promotions. In other words, it is defined as the
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combination of promotional techniques that a firm uses to sell a product. Elements of

Promotional Mix
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a)Advertising: it is a controlled impersonal conveyance of a message regarding a

need-satisfactory product or service by a business to a specific audience with the
objective of informing, reminding or persuading them to take a specific action.
Four Types of Advertising

i) Informative Advertising: it is done to inform the public about the existence of a product.
Provides precise details of goods to the public on new products, prices, where to buy
and how to buy the product.
ii) Persuasive Advertising: it is undertaken by an individual company to promote its own
products using brand names at the expense of other manufacturers. iii)Competitive
Advertising: advertising only gives the good points about the product and they use
attractive devices or techniques
iv)Collective or Generic Advertising (Collaborative):producers in the same

industry will jointly advertise a product in general. They don’t use brand names e,g
‘Take a lot of milk for good health’.
Types advertising Media

a)Print Media: newspapers; magazines; pamphlets

b).Electronic Media: Radio; internet; television
c)Outdoor Media: Billboards; posters

Factors influencing choice of Media

i) Size of targeted audience: national coverage requires Television; national

newspapers. Local level requires posters and Billboards
ii) Cost involved: television is more expensive nut more expensive iii)Urgency of
message: if speed is required to spread the information then radio and television is
the best
iv)Expected profit or revenue: revenue to be collected should be able to cover
all the advertising expenses

Benefits of advertising
 Enables consumers to make informed decisions
 Increase in sales and profitability
 Fights competition
 Improves image of the business
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 Informs customers about promotions and sales taking place

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Problems of advertising
 Leads to higher prices
 Encourages impulse buying
 Adverts interrupt TV and radio programmes
Elements of Below-the-line promotion

 Sales promotion

 Personal selling

 Public relations

 Exhibitions and trade fairs

Sales Promotions
This promotional strategy is done through special offers with a plan to attract people to buy the
product. Sales promotions can include coupons, free samples, incentives, contests, prizes, loyalty
programs, and rebates. You might also want to educate potential and current customers by holding
trainings and seminars, or reach them via trade shows. Some of the target audience may be more
receptive to a certain promotional method than another. You can also do sales promotions by
setting up product displays during a public event or through social networking at business and civic
gatherings.

Sales promotion is divided into two:-

Trade Promotions: These are aimed at distributors like wholesalers and retailers. It includes special
discounts and bonuses such as free extra product per case.
Consumer promotions: is used to create interest and tempt potential customers to make a
purchase. It includes free gifts, coupons, special offers, free samples, competitions, buy- one-get-
one (BOGOF).

Public Relations or PR
Public relations is usually focused on building a favorable image of your business. You can do this
by doing something good for the neighborhood and the community like holding an open house or
being involved in community activities. It also involves sponsorship.
Sponsorship refers to a financial contribution to an event in return for publicity. You can engage the
local media and hold press conferences as part of your promotional strategy. In this case the
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business is not going to pay for the message to be run on the media. Thus PR is the cheapest
method of promotion

Personal Selling
You can employ salespersons to promote and sell your products as part of the business
communication plans. These salespersons play an important part in building customer relationships
through tailored communication. Personal selling can be a bit costly, though, because you will need
to hire professional sales people to do the promotion for you. But done right, the profit gained could.
It is an action oriented approach and it is often used by insurance companies.
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Exhibitions and Trade fairs

Some businesses attend trade fares and exhibitions to promote their products. The business setup a
stall and promote their products face-to-face.

Factors to consider when choosing a method of promotion

a) Cost: many businesses are forced to use cheaper promotions because advertising is too
expensive

b) Stage in the product life cycle: promotional methods change as a product gets older e.g PR is
used during the introduction stages aggressive advertising on maturity and decline stage.

c) Competitors’ promotion: it is common for business to copy the method of promotion used by a
rival firm. Once one business come up with a successful promotional method, others will quickly take
advantage of it and modify a little bit.

d) Legal factors: in the E.U, tobacco product cannot be advertised on T.V.

Promotional Elasticity of Demand

The responsiveness of quantity demanded due to a change in promotional expenditure

,ceteris paribus.

Promotional Elasticity of demand = % change in quantity demanded

%change in promotional expenditure

Illustration: From the data below find the promotional elasticity of demand when the promotional
budget was increased from $2000 to $3000.

Year Quantity demanded in units Promotional budget ($)

2010 100 000 200

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2011 200 000 300

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Marketing Mix – Price (Pricing Strategy)

Price is the amount of money that your customers have to pay in exchange for your product or
service. Determining the right price for your product can be a bit tricky.

A common strategy for beginning small businesses is creating a bargain pricing impression by
pricing their product lower than their competitors. Although this may boost initial sales, low price
usually equates to low quality and this may not be what customers to see in your product.

Pricing Objectives
-They include the following:
1. Profitability -prices should increase overall profitability of the firm
2. Rate of return –a specified return on capital employed (ROCE)
3. Growth –the price should provide a steady profit over a period of years to enable the firm
to survive and grow.
4. Competition –should be competitive and attractive to customers
5. Market share –a price must be set which enables a firm to at least maintain its market share.
6. Utilization of capacity –it should cover fixed costs and enable the firm to fully utilize
capacity, thus spreading unit costs over a larger output.

Pricing Policies/Strategies

1. Price Skimming –It uses high prices to obtain high profit margins and a quick recovery
of development costs. It is useful for products with a short life cycle and fashion items e.g.
computers, videos, toys, CDs etc It is ideal for technological goods and where there is less
competition

Advantages
 High prices give appearance of quality and a must have ‘factor’
 Some customers pay high prices for a new unique product
 High prices covers development and marketing costs
 More profits to the business
Disadvantages
 High prices may discourage buyers
 Early buyers at high prices may be discouraged when price falls and they will not buy again
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 Buyers may wait as they know price will fall

 Attract new competitors

2. Penetration Pricing –The main objective is to capture a large share of the market as
quickly as possible. It depends on the expected product life. It is mainly used for products with
a longer life. Low prices are set in the initial stages of the product and gradually increased as it
gains market share. Consumer products are often introduced this way. It is suitable where
there is stiff competition. Advantages
 High sales volumes and low prices stop entry of competitors
 High sales volume reduces average costs ( economies of scale)
 Increase in brand awareness
 High market share
Disadvantages
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 Consumer resistance when prices are increased in the future

 May result in brand seen as low quality
 Low profit margins

3. Differentiated/Discrimination Pricing –It involves the use of different prices for the same
product when it is sold in different locations or market segments e.g. wholesalers may receive
trade discounts while small buyers in remote areas may be charged a higher price due to
additional distribution costs.
Can be used where:
 Supply of the product is controlled only by one firm
 Markets are geographically separated
 Reselling of the product is not possible e,g when the business is selling a service

4. Promotional Pricing –Involves the use of a lower and normal price either to launch a
new product or to periodically boost sales of existing products.

5. Negotiable Pricing –It is common in industrial markets and building trade. The price
is individually calculated to take account of costs, demand and any specific customer
requirements.

6. Market Pricing –Prices are quoted ‘at market’. They are determined by forces of supply
and demand. Common for commodity markets e.g. gold, silver, stock exchange
etc

7. Premium Pricing –Involves charging a higher price than competitors to strengthen the
image perceived by consumers of a certain brand.

8. Cost-based pricing: firms will assess the cost of producing each unit of the product and
add a certain amount on top of the calculated cost. It also includes mark-up pricing which
involves adding a fixed mark-up for profit to the unit price of a product. It takes into account all
the relevant costs. But the problem is that it can lead to higher prices.

9. Predatory Pricing: charging a low price to drive competitors out of the market. When the
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rival firms had closed down the business will then increase price.

10. Psychological Pricing: setting a price at just below a whole number e.g $99,99,
making customers feel they are paying much less than $2.00, so they more likely to buy
than if the price were
$2.00

11. Bait and hook pricing: selling a product at a low price but charging a high price for
associated products, for example selling a printer cheaply but the cartridges are expensive.
It can only work if the products are complementary goods.

12. Loss leader pricing: products are sold below cost at a loss to attract customers who
might then buy other products. When customers enter into a shop, full price products will also
be bought. Customers have a tendency of buying more than what they planned for. The loss
on the loss leader will
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be more than made up for by extra spending on the full-price items. It is used in most
cases by supermarkets.

13.Competitor based pricing: involves researching the price competitors charge and then
setting a price based on this. The price can be similar, slightly higher or lower than that which
is charged by competitors. It is suitable where there is large number of competitors. If the firm
is selling a differentiated product, they can charge a higher price. Differentiated product is that
where customers see as being different from any other similar products. If they are selling the
same type of product, they can charge the same price and then offer after sale services to
attract more customers.

Factors to consider when setting prices

 cost : fixed and variable costs

 price charged by the competitors
 stage of the product in the product life cycle
 Objectives of the business
 Customer perceptions
 Government policy
 Price elasticity of demand

Price elasticity of demand (PED)

Refers to the responsiveness of quantity demanded for a product due to a change in

its price. It measures the extent to which units demanded respond to a decrease or
increase in price

% change in quantity
Price Elasticity of demand
demanded
(PED)=
% Change in price
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If the answer is between 0 and 1 (ignore negative sign)

PED is inelastic: increase the price to maximise profits. A given increase in price will lead
to a less than proportionate decrease in quantity demanded. The product has very few
substitutes

If the answer is equal to 1(ignore negative sign)

PED is said to be unitary elastic: maintain the price

If the answer is greater than 1(ignore negative sign)

PED is said to be elastic: reduce the price to maximise sales. A given decrease in price
will lead to a more than proportionate increase in quantity demanded. The product will be
having a lot of substitutes.

Illustration: Use the data in the table below to answer questions that follow
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Current units demanded proposed increase in price

and the corresponding and its effect on quantity
price demanded
Quantity demanded 100 units 200 units

Price $10 $8

a)Calculate the Price elasticity of demand (PED) [3]

b)Use your answer in ‘a’ above to decide on whether it is elastic or inelastic [1]
c).What will be the best strategy for the business to maximise sale in this case [3]
Factors that affect Price elasticity of demand:

 The number of substitutes: goods that have a lot of substitutes have elastic
demand e.g margarine. Those with very few substitute have inelastic demand e.g
pills to a patient
 The period of time : in the short run the demand for goods is generally inelastic
while it becomes elastic in the long run
 The proportion of income spent on the commodity: products which take up a
small proportion of an individual’s income have inelastic demand e.g sweets. On the
other hand products which take up a larger fraction of a person’s income have elastic
demand e.g wardrobes
 The necessity of the product: products that are basic necessities have inelastic
demand while luxury products have elastic demand.

DISTRIBUTION
-It is concerned with getting the product from the producer to the customer at the right
quantity, to the right place, at the right time and in the right condition.

Channel of distribution
Refers to the chain of intermediaries a product passes through from producers to the final
consumer. It involves the links between the manufacturer and the consumer. A Channel of
Distribution for a product is the route taken by the product as it moves from the producer to
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ultimate consumer
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The 3 types intermediaries are :

1. Agents
-An agent works on behalf of another firm to perform certain specified services. They are
usually used in importing and exporting and also in domestic trade.

2. Wholesalers
-A wholesaler buys goods for resale to someone other than the eventual customer. They
usually supply goods to retailers who in turn sell to the public or to the manufacturers who
use the goods in the production process.
Functions of Wholesalers
a) they break down bulk purchases and repack them into smaller lots to retailers
b) they offer warehousing for products for the manufacturer
c) they provide financial service to manufacturer (pay cash) and extend credit to the retailer
d) they handle publicity and promotion on behalf of the manufacturer

3. Retailers
-Retailing refers to all activities that are related directly to the sale of goods/services to the
ultimate consumer.

Types of Distribution Channels

1. Zero –level Channel/ Direct selling

The product is passed directly from manufacturer to the final consumer e.g dentist.

Advantages of zero-level channel / direct selling

 Quicker than other channels
 Producer has complete control over the marketing mix i.e how the product is sold
 Direct contact with customers offers the business with useful information
 Products will be cheaper to consumers

Disadvantages of direct selling

 All storage costs are paid for by the producer
 It may not be convenient for consumers
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 It can be expensive to deliver each item to the consumer

 Consumers may not be able to see and try the product before they buy

One-level Channel
There is only one intermediary. The retailers buy the product from the manufacturer and sell it
to the final consumers

Advantages of One-level channel

 Producers can focus on production and selling is done by retailers
 Retailers are often in locations that are near to customers
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 When goods are bought by retailers, the risk is reduced on the part of the manufacturer
 Storage costs are reduced

Disadvantages of One-level channel

 Profit mark-up imposed by retailers could make the product more expensive
 Producers lose some control over the marketing mix
 Retailers may sell products from other competitors too i.e there is no exclusive outlet

Other channels of distribution

Factors Affecting Choice of Distribution Channel

 The desired degree of control wanted by the manufacturer: More is gained on a

zero-channel of distribution
 The number of potential customers: If they are too many then a 2-level or 3-level
channel can be used
 Type of products: some goods are perishable hence they require a zero-level
channel of distribution.
 Storage costs: if storage costs are very high then the goods must be quickly sold to
wholesalers or retailers
 Availability of intermediaries like the agent; wholesalers or retailers. If they are not
there , the manufacturer will have to sell the goods directly
The role of Branding in Promotion

Branding:-Brand is a name/term/design or symbol or a combination of these which is

intended to identify the goods/services of one business from others, usually offering
similar products.
 Brand Image is a perception a person has of a particular brand.
 Brand Extension is a strategy by which an established brand name is applied to new
products from the same manufacturer.
 Brand Loyalty is a consumer’s decision to consistently repurchase a brand
continually because he/she perceives that the brand has the right product features or
quality at the right price.
-With brand loyalty, consumers can reduce purchasing time, thought and risk therefore
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developing brand loyalty as the long-term objective of all marketing organizations and the
major reason for their continued study of consumer behaviour.

Types of Brands
1. Family Brands
-the brand name is used to cover all the products of a business, even if they are widely
different and in different markets e.g. Willard, Heinz, Kellogg, and Unilever

2. Retail Brands
-the retailer, not the manufacturer is the one guaranteeing quality and consistency e.g.
Barbour’s, Greatermans, Truworths

3. Corporate Brands
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-the name of the business is incorporated into the brand name of the product e.g. Jewel Bank-
CBZ

4. Individual Brand
-each product is given its own brand name

Factors to consider when selecting a brand

1. easy to spell, say or recall
2. should allude to the product uses, benefits or special characteristics
3. should be distinctive and recognizable
4. should be sufficiently versatile to be applicable to new products
5. should be capable of being registered and legally protected under The Trade Marks Act
6. should be adaptable to packaging and labelling requirements

Benefits of Branding
-protects quantity
-it aids in shelf selection (case of identity)
-it differentiates similar goods
-for prestige
-it facilitates product diversification
-it hampers price comparisons
-it facilitates promotional effort

Reasons for Not Branding

-to avoid the high initial costs of promoting a brand
-the physical nature of some goods may prevent branding e.g. vegetables
-to maintain a consistent quality of output
-it may be difficult to differentiate products of one firm from another e.g.
safety pins, coal, wheat etc
The role of packaging in promotion
Packaging is what the consumers see as they consider buying a product. Packaging act as
protection and security, enables grouping of several items, convenience and is used for
transmitting information and marketing communications
-Packaging is used to develop brand image by making it distinct and easily recognizable.
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-It is termed the ‘silent salesman’ in marketing.

-It is often an integral part of a product designed to add to its appeal through the use of
colour, shape, size, logos etc, all of which can have a significant effect on sales.
-Packaging is useful in successful advertising and promotion as it can encourage impulse buying.

*A package should have:

1. brand (product) name
2. quantity
3. expiry date
4. ingredients/nutritional information
5. guarantee
6. directions for use
7. address and contact number of manufacturer
8. health information e.g. ‘do not litter’
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Internet Marketing (Online Marketing)

Refers to the advertising and marketing activities that use the internet, email and mobile
communication to encourage direct sales via electronic commerce

E-commerce: refers to the buying and selling of goods and services by business to
consumers through electronic medium. It involves the trading of products or services using
computer networks, particularly the internet and mobile phones.

Benefits of Internet Marketing

 It is relatively cheap
 World coverage
 Accurate data can be kept about the number of visitors
 Convenient for consumers since they can shop in the comfort of their homes

Problems of internet marketing

 Internet connectivity problems

 Consumers can not touch, smell, fell or try the goods before buying it
 It is more risk.ie dealing with someone whom you doesn’t know
 Problem of hackers especially for telegraphic funds transfer.

Viral Marketing

Refers to the use of social media sites or text messages to increase brand awareness or sell
products. It is type of marketing in which users of social networks act as advertisers for
products by spreading knowledge of them to other users of the network. It describes any
strategy that encourages individuals to pass on a marketing message to others, creating the
potential for exponential growth in the number of people getting the message. A viral message
must be created and then passed to the influences. The influences will then pass on the
message about the products they like and the people who are going to receive that message
will also spread the message to their friends.
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Short Answer questions

1.What is meant by the term marketing mix? [2]
2.a)What is meant by the term price elasticity of demand [2]
b)Explain the meaning a value of price elasticity of demand of -3 [3]
3.a)Explain any two stages of the product life cycle [2]
b)Explain one way in which the marketing mix might change at different stages of the product
life cycle
[3]
4.a)What is meant by an extension strategy [2]
b)Explain one extension strategy with an example [3]
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5.a)What is meant by the term ‘price skimming’ [2]

b)Explain one condition necessary for price skimming to be effective [3]
6.a) What is meant by the term ‘price description’ [2]
b)Explain one benefit of price discrimination to the business [3]
7.a)What is meant by the term ‘primary market research’ [2]
b)Explain one advantage of primary market research [3]
8.What is meant by the term ‘secondary market research’ [2]
b)Explain one disadvantage of secondary market research [3]
9.a)What is meant by the term ‘market research’ [2]
b).Explain one reason why spending more on market research may not lead to higher
sales [3]
10a) What is the difference between a random sample and a quota sample [2]
b).Explain one limitation of sampling [3]
11.a)Define the term ‘qualitative research’ [2]
b).Briefly explain the term ‘consumer profile’ [3]
12.a)Explain why sample size influences the reliability of research results [3]
b).Explain why it is important to consider the type of market that a new product is aimed at
before starting primary research [3]
13.a)List two factors that could lead to an overall decline in the size of a market [2]
b).Explain two benefits to a business of using mass marketing [3]
14a).Outline two possible examples of marketing objectives that a retail business might set
[2]
b)Outline three ways a manufacturer of jeans could use to try to increase market share [3]

15. Use the data in the table below to answer questions that follow
2013 2014
Value Volume Value Volume
($) (Units) ($) (Units)
Company A 200 150 600 300
Company B 300 200 400 200
Company C 500 450 800 500

a).Define the term ‘market share’ [2]

b) Calculate market share (by volume) for company B in 2013 [3]
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c) Find market growth by value for the two year period [3]
16.a)Explain the term ‘Unique selling point’ [2]
b).Explain the term ‘product portfolio’ [2]
17 (a) Define ‘product differentiation’. [2]
(b) Briefly explain two marketing benefits of product differentiation. [3]

(b) Briefly explain two advantages of using ‘focus groups’ as a method of market research. [3]

18 (a) Defi ne the term ‘cost-based pricing’. [2]

(b) Briefl y explain when a business might use penetration pricing. [3]

Essays
719(a) Analyse how a business might use price elasticity of demand for pricing decisions. [8]
(b) Discuss the best ways a car manufacturer could use the marketing mix to increase
its share of the market. [12]

20 (a) Analyse, using examples, why packaging could be important in the marketing mix. [8]
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(b) Discuss factors that could determine the success of a business that has decided to
set up an online shop to sell beauty products. [12]

21 (a) Explain the differences between niche marketing and mass marketing. [8]
(b) Discuss the view that marketing is only about the advertising and selling of products and
services. [12]
22(a) Explain, with examples, the difference between ‘above the line’ and ‘below the line’
methods of promotion. [8]
(b) Discuss the importance of branding for effective product promotion. [12]
23 (a) Explain the importance of primary market research to a new business. [8]
(b) Discuss how a business could make sure that its market research expenditure is cost effective.
[12]

Marketing Advanced Level

MARKET PLANNING
Is the systematic approach to developing marketing objectives and setting out specific activities
that will implement the marketing strategy designed to achieve the objectives. It will result in a
marketing plan setting out these activities. Marketing plan sets out the marketing objectives,
strategy, budget and the activities necessary to achieve the objectives. Marketing plan provides
a detailed, fully researched written report on marketing objectives and the marketing strategy to
be used to achieve them

Important questions when making a marketing plan

 Where are we now? Carry out an Audit. An audit is an investigation to determine exactly
what position in the marketplace a business is. Market audit can be achieved through
PEST and SWOT analysis
 Where do we want to go? It involves setting marketing objectives
 How are we going to get there? It involves deciding on the appropriate marketing mix
 How do we make sure we get there? Monitoring using performance standards and
benchmarks
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Elements of a Marketing Plan

 Purpose and Mission: it must provide important information about the business to
potential investors. The plan must highlight on the purpose of the marketing plan
and mission of the business. The marketing plan should provide background
information about the business.
 Situational Analysis: It must clearly indicate the position where the business is currently
at. Carry out things like PEST or SWOT analysis. The plan will look at current product
analysis. The plan will also look at competitor analysis to identify the main competitors.
Target market analysis is also done to identify the important features of consumers in
the market
 Marketing objectives: the plan must clearly spell out where the business is aiming to get
to. Marketing objectives should be SMART. An example of objectives for a car
manufacture could be: ‘To take advantage of the expanding customer demand for fuel-
efficient cars and to obtain 5% of small-car market by 2018’
 Marketing Mix: it must describe how the business is planning to get there. Marketing
plan can now focus on the 4 Ps.(product, place, price and promotion)
 Budget : a budget must be prepared to ensure the success of these marketing
objectives. Most businesses are affected by the problem of limited resources. The
budget will look at how much is required to put the marketing strategy and tactics into
effect. The budget must also consider the
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expected sales performance of the plan, to allow a comparison between marketing

expenditure and expected sales
 Executive Summary: refers to a short summary of the plan and the time scale over
which it will be introduced. The plan will also look at how the business is going to
ensure they get there. Monitoring using performance standards and benchmarks
should be highlighted.

Benefits of a marketing Plan

 Ensure that the marketing activities are aimed at achieving corporate objectives
 Encourage a rational integrated approach to marketing
 Improve efficiency of the business in relation to using its resources by providing a frame
work for marketing activities
 Better prepare the business for change as there is ongoing monitoring and evaluation
 It is an essential part of the overall business plan. It is used to convince potential
investors that their business proposal is both sound and potentially profitable

Limitations of marketing plan

 It is costly and many small business doesn’t have the money to finance the
production of a professional marketing plan
 It is time consuming
 Since the market is ever changing, it means the marketing plan can become out of date
before it is published

Demand
-this is the total amount of a particular product which consumers wish to buy at a given price or
period of time. -generally, demand increases if price falls and vice-versa -a change in price has
an income effect (low price, real income increase) and substitution effect (high price, consumer
switch on to substitute goods or other cheaper products from competitors)
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The Demand Curve

Factors Influencing Changes in Demand

Change in people’s income: More the people earn the more they will spend and thus the
demand will rise. A fall in income will see a fall in demand.

Changes in population: An increase in population will result in a rise in demand and vice versa.

Change in fashion and taste: Commodities or which the fashion is out are less in demand
as compared to commodities which are in fashion. In the same way, change in taste of people
affects the demand of a commodity.

Changes in Income Tax: An increase in income tax will see a fall in demand as people will
have less money left in their pockets to spend whereas a decrease in income tax will result in
increase of demand for products and services because people now have more disposable
income.
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Change in prices of Substitute goods: Substitute goods or services are those which can
replace the want of another good or service. For example margarine is a substitute for butter.
Thus a rise in butter prices will see a rise in demand for margarine and vice versa.

Change in price of Complementary goods: Complementary goods or services are

demanded along with other goods and services or jointly demanded with other goods or
services. Demand for cars is affected by the change in price of petrol. Same way, demand for
DVD players will rise if the prices of DVDs’ fall.
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Advertising: A successful advertising campaign may affect the demand for a product or
service. The demand will increase since advertise creates new customers and remind old
customers to buy the product.

Climate: Changes in climate affects the demand for certain goods and services. In winter the
demand for warm clothing increases and in summer demand will decrease.

Interest rates: A fall in Interest rate will see a rise in demand for goods and services.
People can save when interest rate is low, they rather use the money to buy goods for
current consumption.

Elasticity of Demand
Elasticity is the degree of responsiveness of demand to changes in demand conditions (price,
income).

1. Price Elasticity of Demand (PED) -it measures the responsiveness of demand to

changes in price of the product.
PED = % change in quantity demanded
% change in price

-If PED > 1, a small change in price causes a large change in quantity demanded therefore it
is elastic. A reduction in price causes revenue to increase.
-If PED < 1, a small change in price causes a relatively small change in quantity demanded,
therefore it is inelastic. A reduction in price causes total revenue to fall and vice-versa.
-Unitary Elasticity is when total revenue stays the same at all prices.

Factors determining the degree of Elasticity

1. Availability of Substitutes e.g. glass has no perfect replacement therefore it is very inelastic
2. The proportion of income spent on a product –e.g. matches, salt are very inelastic – they
cost a tiny proportion of a person’s income.
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3. Necessities –e.g. bread, mealie-meal, clothing are inelastic. Luxuries e.g.

computers, holidays, satellite, television are elastic.
4. Habit forming goods –e.g. tobacco and alcohol have a relatively inelastic demand because
they make substitution more difficult for consumers to accept.

Importance of PED

Elastic demand: firms must reduce price of goods to maximise revenue. Revenue refers to
the total amount of money that the seller will get which is found by multiplying price with the
number of units sold.

Inelastic demand: firms must increase the price in order to maximise revenue. The product
has no substitutes so the customers cannot easily switch to other products.
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2. Income Elasticity of Demand (YED) -it measure the responsiveness of demand to change
in levels of income

-If income increases, the demand for necessities will probably not change but the demand for
luxuries is likely to increase.
-If income produces a fall in demand, YED is negative because people switch from ‘inferior’ to
‘better’ products.

3. Cross Elasticity of Demand (XED) -it measures the responsiveness of demand to changes

in price of other products.

-Substitute goods have a positive XED e.g. coffee, beer, butter and margarine. -
Complementary goods have negative XED e.g. cars and petrol, VCR and video tapes.
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Promotional Elasticity of Demand

Show the sensitivity of demand due to a change in promotional expenditure or the
responsiveness of quantity demanded due to a change in promotional budget.
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PRED = % change in quantity demanded

% change in the promotional expenditure

When Positive
It shows that when the business spend more on promotion, quantity demanded will increase

When Negative
It shows that when promotional expenditure is increased, quantity demanded will decrease

NB: PROMOTION -The basic sum of promotion is to communicate information to

customers and potential users about the product/services on offer and to eventually
persuade them to buy.
-It focuses on the distinctive features of a product called the ‘Unique Selling Points’ (USPs).
-Promotion comprises advertising, public relations (PR) and sales promotion

-The objectives of promotion are;

1. to increase awareness of the
2. to target particular segments
3. to position the product in relation to its main competitors
4. to build an image for the organization

-The promotional mix depends on;

1. the nature of the product
2. the nature of the market and its customers
3. the product life cycle
4. the relative costs and the availability of funds

New Product development

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Refers to the creation of products with new or different characteristics that offer new or
additional benefits to the customers. Product development may involve modification of an
existing product or its presentation, or formulation of an entirely new product. It is important for
businesses to consider developing new products all the times as existing products reach the
decline phase of their life cycle, as new technologies appear, as market gaps are identified, as
a way of expanding into different markets and as a way to maintain their competitive
advantage over rivals

Reasons for Product Development

1. it stimulates sales enabling existing markets to be developed
2. to enter new markets or market segments
3. to counter competition more effectively
4. to increase market share and profitability
5. to spread risks
6. to maintain market positions as innovator
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Stages in the Product development process

Developing a new product is a process. It require planning, it does not just happen.
Developing a new product starts with an idea and moves on through stages in the planning
process as described below.

Generating ideas: it involves assessing current range, threats and opportunities in relation to
objectives. Business may be doing this as part of review and market research. Ideas for new
product can come from a variety of sources which include: company’s own research and
development (R&D), from the adaptation of competitor’s idea, market research such as focus
groups, employees, sales people and brainstorming in groups.

Idea Screening: it involves eliminating those ideas that seem to be unprofitable. It can be very
expensive to develop and market new products that have very few chances of success. Those
doing the screening process should ask themselves questions such as: How will the customers
in our target markets benefits from this product?, is it technically feasible to manufacture this
product?, will the product be profitable enough at the price we are likely to be able to charge
the customers for it?
Developing new product
The people involved should consider things like the features that should be included, method
of production which is cost-effective and possibly how consumers are likely to react. The firm
will the then produce prototypes and should carry out initial market research.

Product Testing: this is concerned with the technical performance of the product and whether
it is likely to meet consumer’s expectations. Product testing include testing the product in
typical use conditions e.g a car will be tested in hot and cold industries to test performance
under different conditions, using focus groups to gather opinions about the product and
adapting the product as required after testing considering focus group feedback.

Test Marketing: refers to the launch of the product on a small market to test consumer’s
reactions to it. Test marketing has certain benefits over a full-scale launch to the entire
market.
These benefits include:
 Getting and recording actual consumer behaviour
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 Feedback from customers can be used to improve the product before the full-scale launch
 Risks associated with a product failing after a full-scale launch are reduced.
 Any weakness in the product are identified and addresses in the final version of the product

Limitations of test marketing

 It can be very expensive
 Competitors have access to the firm’s intentions and possibly come up with an exact
copy of the product before the full-scale launch of the product

Full-Scale Launch:
It corresponds to the introduction stage of the product life cycle. Consumer reaction
monitored through product life cycle and marketing mix altered in response. It is also referred
to as commercialisation.
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Research and Development (R&D)

Refers to the scientific research and technical development of new products and processes. It is
a function within a business set up to investigate new ideas/ products/ services and then to
develop the best of these into marketable products / services.

Benefits of R&B programmes

 Generate new product possibilities
 Increase in profitability
 Reduces risk of failure
 Business will gain competitive advantage in rapidly changing environment
 Quality goods are produced
 Good name for the business

Factors influencing the level of R&D expenditure in a business

 The nature of the business. i.e rapidly changing industries requires substantial amounts
 The R&D spending plans of competitors
 Business expectations
 The risk profile and culture of the business: attitude of the management to risk and
whether shareholders are prepared to invest for the future.
 Government policy: tax exemptions for business that invest in R&D programmes can
promote research and development.
Reasons why new products fail
Product failure is attributed either to failure in the marketing process
or to an unanticipated change in the external environment.
-inadequate market research
-misleading market research findings
-defects in the product
-activities of competitors
-insufficient or inappropriate marketing efforts
-distribution problems
-unexpectedly high costs
-inadequate sales force

Sales Forecasting
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Is defined as the predicting of future sales levels and sales trends. Marketing data is a
valuable tool for a business.

Importance of sales forecasting

 The production department would know how many units to produce and how many
materials to order
 The marketing department would be aware of how many products to distribute
 The human resource department will know how many employees to add
 Finance department could plan cash flows with much greater accuracy
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Methods of forecasting sales

a).Trend Analysis/ Time series Analysis

Trend refers to an average change (increase/decrease) for each time period. It shows the
overall pattern of movement in the data. Trend analysis takes data over a period of time and
assumes that whatever patterns or trends had occurred in the past will continue into the future.
For instance, if sales have been increasing by 5% per year, trend analysis assumes the future
see sales continue to rise by 5% per year. To forecast sales in the near future, extrapolation is
used.

The dotted line shows projected sales for the next year (2009).

b) Moving Average Forecasting

Refers to a method of forecasting into the future that takes account of regular variations. E.g
seasonal changes in sales. It involves averaging sales figure over a set time period and doing
this successively, moving the average through time. Moving average method enables the data
 105

to be smoothened out to give a trend line that removes the effect of regular changes

Calculating moving average for a four quarter moving average

It is used to forecast sales where they are varying in regular quarterly way
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Data

Year 1st quarter 2nd quarter 3rd quarter 4th quarter

Sales ($) Sales ($) Sales ($) Sales ($)
2005 100 130 140 120
2006 130 160 190 150
2007 140 190 240 180
2008 170 240 280 190

Calculation

Column 1 column 2 column 3 column 4 column 5 column 6 column 7 column 8

Year Quarter Sales four Eight Eight Seasona Averag
quarte quarte quarte l e
r r r total/ variation season
sales sales 8 = (Col3- al
Col6) variatio
n
per
quarter
2005 1 100
2 130
3 140 126.25 13.75 31.25
4 120 490 133.75 -13.75 -16.1
2006 1 130 520 1010 143.75 -13.75 -30
2 160 550 1070 153.75 6.25 11.25
3 190 600 1150 158.75 31.25 31.25
4 150 630 1230 163.75 -13.25 -16.1
2007 1 140 640 1270 173.75 -33.75 -30
2 190 670 1310 183.75 6.25 11.25
3 240 720 1390 191.25 48.75 31.25
4 180 750 1470 201.25 -21.25 -16.1
2008 1 170 780 1530 212.50 -42.25 -30
2 240 830 1610 218.75 21.25 11.25
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3 280 870 1700

4 190 880 1750

NB: Quarterly moving average (trend) is found on column 6. The data for the quarterly moving
average is used to forecast sales.
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Evaluation

 Give forecasts which takes account of seasonal variation hence the estimates are more
accurate
 It identifies the average seasonal variation for each time period and this can assist in
planning for each quarter in future
 More realistic than projecting forward a trend line without considering seasonal variation
Limitations

 Future growth in sales may not follow past trend due to changes in the future external
environment
 Change in customer’s tastes and entry of new competitors may not be reflected in the trend
analysis
 It is more complicated to use.
Co-ordinated marketing Mix

A successful marketing mix is one that achieves specific objectives. These objectives must be
clearly set out and relate to achieving the overall objectives of the organisation. Product, price ,
place and promotion must all be integrated together to give the same message to consumers
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and support and reinforce each other.

 A high quality, high –specification product is likely to be sold to a small target market at a
high price where technical expertise and personal selling is available to the consumer.
Promotions of such a product are likely to be in appropriate media publications and will
focus on the performance and characteristic of the product, or the level of service
available to a buyer.
 A low-quality and low-price product aimed at a mass market is likely to be promoted in
mass media with a focus on the price and be available in a wide range of outlets.
Contrast the marketing of a luxury cruise liner with that of discount clothing. If one of the
mix elements does not match and support the others, the consumers are less likely to
be interested
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A co-ordinated marketing mix must take account of the position of the product in its life cycle, the
economic environment, market conditions and the actions of competitors

Globalisation and international marketing

Globalisation: refers to the growing trend towards worldwide markets in products, capital and
labour, unrestricted by barriers. Globalisation is now being accelerated by the rapid growth of
Multinational Companies and the expansion of free international trade with fewer tariffs and
quotas on imports Tariff is a tax charged on imported goods. It is also known as a customs
duty. Quota refer to a physical limit on the quantities of imports from other countries. In other
words, Globalisation means moving towards a borderless world.

Characteristics of Globalisation:

 A rapid expansion of international trade in products and services

 A large increase in finance moving between countries, both money and
foreign direct investments and inward direct investments by multinational
companies
 Increased international travel and instant global communications
 Increasing similarity between cultures and societies
 Free movement of workers.
 Signing of trade agreements. Globalisation involves the signing of the World Trade
Organisation and its free trade agreements. It also involves the growth of regional free
trade areas that allow no trade barriers between member states, such as the Northern
American Free Trade Area(NAFTA) and the European Union (EU).
 Increase in the Global brands for example, Apple, Toyota, Coca Cola are found
in most countries
Effects of increasing Economic collaboration/ or forming trading Blocs

 member countries will maximise the gains from trade

 removal of the barriers to trade leads to variety of goods
 member state are able to sell their products and services more easily in other markets
 countries can easily achieve a faster economic growth and a rising income.
Standards of living will improve when GDP is increasing
 competition between local and foreign firms leads to quality goods
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NB: Trading Bloc: refers to an agreement between states, regions or countries, to increase
trade between the participating regions by removing barriers to trade. It is a grouping of
countries with formal agreements on trade. They make it easier for member countries to access
the market and very difficult or expensive for non-members to sells their goods on the market.

Examples of trading blocs:

 ASEAN:- Association of South East Asian Nations

 APEC:- Asia Pacific Economic Co-operation

 NAFTA:- North American Free Trade Agreement

 EU:-European Union
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BRICS Countries

It’s an acronym for Brazil, Russia, India, China and South Africa. These are major economic
power that are not yet fully developed but are developing at a faster rate. Their income (GDP)
is growing rapidly. They account for over 40% of the world population, 25% of the world income
and production, and have large trade surpluses and foreign reserves. As their economies
continue to grow and attract greater trade, their markets will become increasingly important for
the world economy and as key market opportunities for foreign businesses

Benefits of Globalisation to the businesses

 Greater opportunity for selling goods in other countries

 Increased competition gives firms the incentives to become more internationally
competitive
 There is a wider choice of locations
 Greater freedom to arrange mergers and takeovers with firms from other nations as
restrictions on foreign acquisition are reduced
 Global brand can be created and this saves on the cost of ‘different markets –different
products’ This is also known as Pan Global marketing. Thus adopting a standardised
product across the globe as if the entire world were a single market. It involves selling
the same goods in the same way.
Limitations of Globalisation to the businesses

 Businesses from other countries have freer access to the domestic market, so the
will be increased competition
 Inefficient domestic firms will shutdown
 Businesses are now at risk of foreign takeovers e.g Land Rover and Jaguar by Tata.
 Anti-globalisation pressure groups may comment negatively about a multinational
company. E.g Coca Cola is under pressure to limit production in some Indian state
due to shortage of water.
 Decrease in profitability for domestic firms when more imports flood local markets

International Marketing
 113

Refers to the selling of products in markets other than the original domestic markets. The rapid
development of major developing countries is leading to huge marketing opportunities for
businesses that are prepared to sell their products and services in these international markets.
The decision to expand into an international market is a key one for any business. It is
potentially very costly, firstly in terms of the market research needed, then to set up the
distribution systems and marketing plans. This kind of expansion must match the objectives of
the business and there must be resources of money and the right people available.

Why sell products in other countries : These are also the factors influencing the
decision to enter an international market

 To maximise profits

 When the home market is saturated

 To reduce risk of failure

 Poor trading conditions in the home market

 Legal differences creating opportunities abroad. Fewer restrictions abroad can create
opportunities for local firms to export goods to those countries
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 To escape competition in the home market

 To meet management goals of growth

Identifying, Selecting and Entering an International market

Identifying an International Market

Market research should be done. SWOT analysis is carried out to get a clear picture of the market

SWOT ANALYSIS

Strengths Weaknesses (controllable)

 Strong ethical position  Inefficiency due to large size market
 Excellent research facilities and the lack of control
 Expansion in new markets  High advertising budget
 Brand loyalty  Inexperienced workers
Opportunities Threats (uncontrollable)
 Increasing incomes and population  Risk of economic downturn
 Growth of the market  Emergence of competitors
 Buying other companies  Increase in inflation and interest rates
 Foreign government support  Restrictive laws from governments

Selecting an international market

Factors influencing the Selection of an International Market

a) Product Factors: the business must consider its product in relation to possible markets

b) Organisational Factors: the business must consider its objectives, risk and resources.

C) Market Factors: market factors are key in selecting the final choice and these include:

 Size of the market

 Potential growth prospects of the market

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 Nature of competition

 Existing and possible distribution channels

 Costs of setting up distribution channels

 Political and cultural factors affecting the market

 Economic factors e.g currency used and its stability, tariffs, government incentives etc

Entering an International Market

Once the business has selected a market to sell to, it must decide how it will do it. The choice
will be determined by the strategy of the business. This in turn is determined by the objectives
and resources of the business.
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Methods of entering an international market:

Direct Foreign investments: the business may set-up subsidiaries in foreign countries. Direct
investments refers to constriction of production facilities or offices in other countries. Toyota
opened subsidiaries in South Africa. The subsidiaries will have centralised control from the
Head Office in the Home or parent country. The firm will be able to produce and distribute in the
host country. Thus the product must the have a marketing plan designed to achieve objectives.

Benefits of this method

 The business will be able to avoid trade barriers

 The business may be able to get government support especially if they have invested in
critical areas or if they are socially responsible.
 There is no agent or joint venture partner to consult with or take joint decisions with.
Thus all profits after tax belong to the organisation
 Lower costs e.g the decrease in transport and labour costs.
Limitations

 Set-up costs are very high

 The firm is required to have country specific understanding of the way businesses
operates which may increase costs
 It is more time consuming than taking over an existing firm
 Foreign operations may be subject to changes in government policy. Foreign firms
may be asked to comply with certain government policies like nationalisation,
indenisation etc
NB: Foreign Investments is suitable for large businesses where there are tax advantages,
government aid, trade barriers and a long-term commitment.

Exporting: refers to the marketing and selling of goods and services to other countries.
Production is done in the domestic economy and goods are sold in other countries. The
business will need to find an importer and a transport provider and deal with the government.
An agent may be used to arrange the practical details of selling. Agents often organises sales
through existing channels in return for a commission or agency fee.
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Exporting can be done directly or indirectly. Direct exporting occurs when the business sell
goods directly to foreign customers. Indirectly through intermediaries in international trade like
agents or trading companies.

Benefits exporting Directly

 The company has complete control over the distribution of goods

 Agents may be having other deals with other companies and as a result may not be fully
committed
 Saves on costs since no commission is given to the intermediaries.
 Customer feedback is obtained directly by the business.
Benefits of exporting indirectly

 The agents have full knowledge about the local market hence make more sales per given
period
 Transport and administrative procedures become the responsibility of the agent
 Less costly as fewer staff is involved in selling goods abroad.
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Problems of exporting directly

 The business lacks important knowledge about the local market

 More hustles of arranging transport and storage facilities
 The business must employ sales personnel to deals with foreign buyers
Problems of exporting indirectly

 Commission should be paid to the agents

 The agents may be having products from other firms to sell as well and they may not be
fully committed.
 Lack of personal touch with the foreign customers.
Franchising: a franchise business (franchisor) charges a fee to other businesses (franchisee).
In return for this money the franchisee obtains the right to use trademarks, logos, recipes,
promotional material and the use of the brand. This means that the franchising business has
few start-up costs apart from marketing. Examples include. McDonalds, Wimpy, Connaught
Plaza restaurants etc

Benefits of opening a franchised business

 Few start-up costs

 Fewer chances of new business failing as an established brand product are being used
 Advice and training offered by the franchisor
 Supplies obtained from established and quality-checked suppliers
 Franchisors agrees not to open another branch in the area
Problems of opening a franchised business

 Share of profits or revenue has to be paid to franchisor each year

 Initial franchise fee can be expensive
 Local promotions may still have to be paid by the franchisee
 The franchisee is forced to get raw materials from certain suppliers only
 Strict rules over pricing and layout of the outlet reduces the owner’s control over their own
business.
NB: It is suitable for businesses selling services
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Joint Ventures: refers to an alliance where two or more businesses agrees to contribute
products, services and or capital to a common commercial enterprise. It is a business
agreement in which organisations agree to develop a new corporate identity separate from their
own, for a specific period of time.

Benefits of a joint venture

 Risk is shared between the business and venture partners

 Sharing of skills, knowledge and resources
 Trade barriers are not relevant
Problems of a joint venture

 There may be conflicts between the venture partners

 There is loss of control
 One business may not have the incentive to be efficient
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Licensing: it involves a contractual agreement to distribute the product or services in return for a
fee.

Benefits of licensing

 This means there is a low initial costs

 much of the risk is borne by the licensee
 trade barriers are avoided
 licensee may have full knowledge of the local market
Problems of licensing

 the business lose control of the marketing process

 the business must pay a fee to the licensee
 The contract can be terminated at any time.
NB: It is suitable when there are strong legal property rights.

Acquiring existing foreign business: the business can merge or take over a foreign
company. Many Chinese companies are entering global markets through this route. Lenovo
obtained the IBM PC business in 2004. Using this method, the business directly acquires
brand names, distribution networks, experienced employees and customer relationships

Benefit of acquiring foreign firms

 risk of failure is reduced

 customer relationships are maintained
 a faster way to penetrate foreign markets
 skilled and experienced staff can be retained
Problems of acquiring foreign firms

 lot of paper work is involved when merging two firms

 more capital is required when buying a business which is already performing well.
Challenges faced when trying to enter foreign markets

Political differences: changes in the governments can cause instability in the country. Wars
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can increase the risk of doing business in foreign lands. Acts of terrorism or threats of civil
violence, which might lead to the
destruction of a company’s assets, will all add to the problems of marketing abroad.

Economic differences: in some economies the GDP will be falling making it difficult for firms
to survive. Inflation rates may also be rising and business operations will be crippled.

Social differences: the structure of the population may differ greatly between the mother
country and the host country. The role of women and the importance of marriages in societies
vary substantially and other social factors may have an impact on the types of products to be
sold in those markets

Legal difference: products allowed in one country may be illegal in other countries. For
example, guns can be sold in USA, but are illegal in other countries. It is also illegal to advertise
directly to children below the age of 12 on Swedish TV. Product safety and product labelling
controls are much stricter in the EU than in some African states.
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Cultural Difference: cultural differences are not written down as laws are, yet they can
powerfully impact on people’s behaviour. Cultural differences are often related to religious
beliefs and moral values. Failure to
recognise cultural difference can have disastrous effects on a firm’s marketing strategies.
Firms must also take note of the language differences. Some words have unfortunate
meanings when translated into another language. Colours can have different significance too
e.g black is associated with mourning in the Far East.

Strategies in global marketing

Pan Global Marketing: involves marketing products and services to global markets in many
different markets using a single strategy. It refers to the selling of the same goods in the same
way in different countries. The business must build a consistent brand image, use the same
logos, colours and advert styles that give customers the same message which ever country
they are in. Examples of Pan Global businesses include Coca Cola, Nike, Toyota and Nestle.

Benefits of Pan Global Marketing

 saves on costs since the same product can be produced for all markets
 a common identity for the product can be established.
Problems of Pan Global Marketing

 legal restrictions can vary across nations. It is illegal to use promotions involving
gambling in certain countries
 brand names do not always translate effectively into other languages. They might even
cause offence or unplanned embarrassment for the company
 setting of the same price in different countries may not lead to profit maximisation
 firms must develop different products to suit cultural or religious variations.
Global localisation: occurs where the products are marketed in a way which allows for local
differences. Sales are maximised when the marketing strategies take account of local cultural
differences. Many businesses are now using segmentation in their global markets to target
particular countries or groups of customers in order to achieve their objectives.

Benefits of Global Localisation

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 profit and sales maximisation

 local needs, tastes and cultures are reflected in the marketing mix of the business
 products are made in such a way that they meet certain minimum quality standards in each
country
Problems of Global localisation

 there will be additional costs of adapting the products to suit cultural variations
 the business can no longer benefit from the economies of scale
Questions

Desjardins offers finance and accountancy services to construction businesses. The

business is considering expanding into neighbouring countries. Advise the business on
which method of entry it should adopt

[10]
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2. Explain the Pan Global Marketing [4]

3.Explain the benefits of entering into a joint venture when expanding into international markets
[8]

4. Explain the main factor that a business must consider when identifying and selecting
a country to start exploiting [10]

5. Assess the negative and positive effects of globalisation on marketing plans of a business
[12]

6. How might growth in BRICS influence globalisation [6]

7. Explain the main features of globalisation [4]

8. Explain the reasons why McDonalds decided to enter international markets [8]

9. Assess the importance of marketing planning to a new product of your choice [10]

Essays

10. Recommend to a marketing director of one of your country’s largest manufacturers of

consumer goods the best way to sell its products in another country’s market that it has not
yet entered.
[20]

11. ‘Pan Global marketing is the only way forward –we must establish a global identity and
sell in all markets using the same mix.’ Discuss whether this approach is likely to be
successful for a manufacturing of quality ice cream.[20]