UNIT I: Fundamental Concepts of Marketing

1. Introduction to Marketing
Marketing is a social and managerial process where individuals and groups obtain what they need and want
through creating, offering, and exchanging products of value with others. It is integral to business success and
involves ethical and social responsibilities in both domestic and global environments.

2. What Is Marketing?
Marketing focuses on delivering customer satisfaction profitably by:
1. Attracting new customers through superior value.
2. Retaining current customers by ensuring satisfaction.

Key Insight: Modern marketing is about satisfying customer needs, not just telling and selling.

Activity 1: Selling vs. Marketing

- Selling: Occurs after product production; focuses on transactions.
- Marketing: Begins before production; involves understanding needs, creating value, and building
relationships.

3. Definitions of Marketing
1. American Marketing Association (AMA):
Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of
ideas, goods, and services to create exchanges that satisfy individual and organizational goals.

2. Evans and Berman:

Marketing involves:
- Anticipating demand.
- Managing demand (stimulation, facilitation, regulation).
- Satisfying demand.

4. Core Concepts of Marketing

1) Needs, Wants, and Demands
- Needs: Basic human requirements (e.g., food, shelter).
- Wants: Needs shaped by culture and personality (e.g., hamburger vs. rice).
- Demands: Wants backed by purchasing power (e.g., luxury cars).

2) Product or Offering
Products satisfy needs and wants and include:
- Goods (e.g., cars).
- Services (e.g., healthcare).
- Experiences, events, persons, places, properties, organizations, information, and ideas.

3) Value and Satisfaction

- Value: Ratio of benefits to costs (functional + emotional benefits vs. monetary + time costs).
- Ways to Increase Value:
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 - Raise benefits.
- Reduce costs.
- Combine both strategies.

4) Exchange and Transactions

- Exchange Conditions:
- Two parties with something of value.
- Communication and delivery capability.
- Freedom to accept/reject offers.
- Transactions: Agreements involving value trade, time, and place.

5) Relationships and Networks

- Relationship Marketing: Building long-term ties with customers, suppliers, and distributors.
- Marketing Network: A system of mutually beneficial business relationships.

6) Markets
A market consists of actual and potential buyers of a product.

7) Marketing Management
Managing demand and customer relationships to achieve organizational goals.

5. Demand Management
Marketing managers address various demand states:
Demand State Marketing Task
Negative Demand Change beliefs via redesign, lower prices, or promotion.
No Demand Connect product benefits to consumer needs.
Latent Demand Develop new products to meet unfulfilled needs.
Declining Demand Revitalize demand through remarketing.
Irregular Demand Balance demand using pricing or incentives (Syncro-Marketing).
Full Demand Maintain demand by improving quality and satisfaction.
Overfull Demand Reduce demand temporarily (Demarketing).
Unwholesome Demand Discourage consumption (e.g., fear messages, price hikes).

Example (Ethiopia):
- Negative: Royal Crown mineral water.
- Latent: Harmless cigarettes.
- Overfull: Mugher cement.

6. Marketing Management Philosophies

1) Production Concept
Focus: High efficiency, low costs, mass distribution.
Use Case: High demand or cost reduction needed.
Risk: Ignoring customer preferences.

2) Product Concept
Focus: Quality, performance, innovation.
Risk: Marketing myopia (overlooking customer needs).

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3) Selling Concept
Focus: Aggressive sales/promotion for unsought goods.
Risk: Short-term transactions, low satisfaction.

4) Marketing Concept
Focus: Customer needs, integrated efforts, profitability.
Pillars:
- Target market.
- Customer needs (stated, real, unstated, delight, secret).
- Integrated marketing (internal/external alignment).
- Profitability.

5) Societal Marketing Concept

Focus: Balance company profits, customer wants, and societal welfare.
Example: Eco-friendly products.

Concept Focus Perspective

Selling Seller’s needs Inside-out
Marketing Customer needs Outside-in
Societal Marketing Customer + societal needs Long-term welfare

7. Types of Customer Markets

1. Consumer Markets: Personal use (e.g., households).
2. Business Markets: Further processing (e.g., raw materials).
3. Reseller Markets: Resale for profit (e.g., retailers).
4. Government Markets: Public services.
5. International Markets: Global buyers.

Customer Relationship Stages:

Suspects → Prospects → First-time → Repeat → Clients → Members → Advocates → Partners.

8. Marketing Mix (4 P's and 4 C's)

Traditional 4 P's:
- Product: Quality, design, branding.
- Price: Discounts, payment terms.
- Place: Distribution, logistics.
- Promotion: Advertising, PR, sales.

Customer-Centric 4 C's:
- Customer Solution (vs. Product).
- Customer Cost (vs. Price).
- Convenience (vs. Place).
- Communication (vs. Promotion).

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 UNIT 2:- THE MARKETING ENVIRONMENT

Introduction
The marketing environment consists of external actors and forces that influence a company's ability to develop
and maintain successful relationships with its target customers. Understanding this environment helps
businesses identify opportunities and mitigate threats. The marketing environment is broadly classified into:
1. Microenvironment – Forces close to the company that directly impact its operations.
2. Macroenvironment – Larger societal forces that indirectly affect the company.

2.1 Classification of Marketing Environment

Microenvironment
The microenvironment includes forces directly connected to the company and its ability to serve customers. These forces
are:
1. The Company Itself
- Includes internal departments like top management, finance, R&D, purchasing, manufacturing, and accounting.
- Marketing managers must align strategies with company objectives and collaborate with other departments.

2. Suppliers
- Provide resources needed for production.
- Key concerns:
- Supply availability (shortages, delays, labor strikes).
- Price trends of key inputs (rising costs may lead to price increases).

3. Marketing Intermediaries
- Help promote, sell, and distribute products.
- Types:
- Resellers (wholesalers, retailers).
- Physical distribution firms (warehousing, transportation).
- Marketing service agencies (advertising, research firms).
- Financial intermediaries (banks, insurance companies).

4. Customers
- Five types of customer markets:
1. Consumer markets (individuals buying for personal use).
2. Business markets (companies buying for production).
3. Reseller markets (retailers, wholesalers).
4. Government markets (public services procurement).
5. International markets (global buyers).

5. Competitors
- Companies must offer better value than competitors.
- Strategies vary based on firm size and industry position.

6. Publics
- Groups that influence the company’s operations:
1. Financial publics (banks, investors).
2. Media publics (news outlets).
3. Government publics (regulatory bodies).
4. Citizen action publics (NGOs, activists).
5. Local publics (community organizations).
6. General public (public perception).
7. Internal publics (employees, management).

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Macroenvironment
The macroenvironment includes broader societal forces that shape opportunities and threats. The six major
forces are:

1. Demographic Environment
- Study of human populations (size, age, gender, occupation, etc.).
- Key trends:
- Rapid global population growth.
- Aging populations in developed countries.
- Geographic shifts (urbanization, migration).

2. Economic Environment
- Factors affecting consumer purchasing power:
- Income levels.
- Savings and credit availability.
- Economic stability (subsistence vs. industrial economies).

3. Natural Environment
- Concerns:
- Shortages of raw materials.
- Increased pollution and environmental damage.
- Government regulations on sustainability.

4. Technological Environment
- Rapid advancements create opportunities and risks.
- Key trends:
- Faster pace of technological change.
- High R&D budgets.
- Regulatory challenges (privacy, safety).

5. Political Environment
- Laws, regulations, and government policies affecting business.
- Trends:
- Increasing legislation (consumer protection, antitrust laws).
- Growth of public interest groups.
- Emphasis on corporate social responsibility (CSR).

6. Cultural Environment
- Society’s values, beliefs, and behaviors.
- Key aspects:
- Core vs. secondary values (persistence vs. change).
- Shifts in consumer attitudes (e.g., preference for ethical brands).

2.4 Impact of the Environment on Marketing

Environmental factors influence marketing in four ways:
1. Constraints – Laws or competition may limit strategies.
2. Success Determinants – Economic or cultural shifts affect outcomes.
3. Opportunities – New technologies or trends create markets.
4. Mutual Influence – Marketing can shape societal values (e.g., eco-friendly products).

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UNIT 3 : ANALYZING COMPETITORS AND DESIGNING MARKETING STRATEGIES

1. Introduction to Competitor Analysis and Marketing Strategies

- Relationship Marketing: Focuses on building long-term customer relationships to enhance satisfaction and
loyalty.
- Competitor Analysis: Involves identifying, assessing, and formulating strategies against competitors to gain a
competitive advantage.

2. Customer Satisfaction in a Competitive Environment

Key Strategies for Competitive Advantage
1. Superior Customer Value: Difference between total customer value and total customer cost.
2. Superior Satisfaction: Depends on product performance relative to customer expectations.
3. Superior Quality: Attributes like performance, durability, and design influence preference.

Benefits of Highly Satisfied Customers

- Less price-sensitive.
- Longer loyalty.
- Positive word-of-mouth marketing.

Customer Relationship Marketing (CRM)

- Goal: Deliver long-term value by maintaining strong relationships.
- Requires cross-departmental collaboration.

3. Competitive Marketing Strategies

3.1 Competitor Analysis
Steps:
1. Identify Competitors
- Industry Approach: Competitors are firms offering similar products (e.g., Coca-Cola vs. Pepsi).
- Market Approach: Competitors satisfy the same customer needs (e.g., coffee brands competing for
consumer dollars).

2. Analyze Competitors’ Strategies, Objectives, Strengths, and Weaknesses

- Strategies: Identify strategic groups (firms with similar strategies).
- Objectives: Profit maximization, market share growth, technological leadership, etc.
- Strengths/Weaknesses: Assess using benchmarks (e.g., market share, customer perception).

3. Assess Competitors’ Reaction Patterns

- Laid-back: Slow/no reaction.
- Selective: Reacts only to certain attacks (e.g., price cuts).
- Tiger: Swift and strong reactions.
- Stochastic: Unpredictable reactions.

4. Select Competitors to Attack or Avoid

- Strong vs. Weak: Weak competitors are easier to target but offer less profit.
- Close vs. Distant: Compete with similar firms but avoid destroying closest rivals.
- Good vs. Bad: Support "good" competitors (follow industry rules); attack "bad" ones (disrupt equilibrium).

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3.2 Competitive Strategies (Porter’s Generic Strategies)
1. Cost Leadership: Lowest-cost producer (e.g., Walmart).
2. Differentiation: Unique product benefits (e.g., Apple).
3. Focus: Niche market specialization (e.g., Rolex).

Market Position Strategies

1. Market Leader (e.g., Coca-Cola):
- Expand total market (new users, uses, or usage).
- Defend market share (e.g., continuous innovation).
- Increase market share (profitable expansion).

2. Market Challenger (e.g., Pepsi):

- Attack Strategies: Frontal (direct competition), indirect (exploit weaknesses), or diversification.

3. Market Follower:
- Imitate leaders to avoid innovation costs (e.g., generic brands).

4. Market Nicher:
- Specialize in small, underserved segments (e.g., luxury brands).

4. Designing Marketing Strategies

4.1 Business Portfolio Analysis
- Strategic Business Unit (SBU): Independent division/product line with its own mission, competitors, and
profit responsibility.
Portfolio Planning Methods
1. BCG Matrix:
- Stars: High growth, high share (invest).
- Cash Cows: Low growth, high share (harvest profits).
- Question Marks: High growth, low share (build or divest).
- Dogs: Low growth, low share (divest).
2. GE Model:
- Evaluates industry attractiveness (market size, growth) and business strength (market share,
competitiveness).
4.2 Growth Strategies
1. Intensive Growth (Ansoff Matrix):
- Market Penetration: Increase share in current markets.
- Market Development: Enter new markets (geographic expansion).
- Product Development: Launch new products for existing customers.
- Diversification: New products for new markets.
2. Integrative Growth:
- Backward: Acquire suppliers.
- Forward: Acquire distributors.
- Horizontal: Acquire competitors.

3. Diversification:
- Concentric: Related products (synergies).
- Horizontal: Unrelated products for current customers.
- Conglomerate: Completely new industries.
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UNIT 4 MARKET SEGMENTATION, TARGETING, AND POSITIONING

1. Introduction to Target Marketing

- Mass Marketing: Producing and distributing one product for all buyers (e.g., Coca-Cola’s early single-product
strategy).
- Target Marketing: Identifying market segments, selecting target segments, and positioning products to meet
their needs.
- Key Steps:
1. Market Segmentation: Dividing the market into distinct groups.
2. Market Targeting: Evaluating and selecting segments to enter.
3. Market Positioning: Creating a distinct image for the product.

2. Market Segmentation
Why Segment?
- Buyers are numerous, scattered, and varied in needs.
- Companies have limited resources to serve all markets effectively.

Levels of Segmentation
1. Mass Marketing: No segmentation; one product for all (e.g., Ford Model T).
2. Segment Marketing: Broad segments (e.g., luxury vs. economy car buyers).
3. Niche Marketing: Subgroups within segments (e.g., Chinese restaurants in Addis Ababa).
4. Micro Marketing:
- Local Marketing: Tailoring to local needs (e.g., regional promotions).
- Individual Marketing: Customizing for individual customers (e.g., mass customization).

Bases for Consumer Market Segmentation

1. Geographic: Nations, regions, cities (e.g., localizing products for urban vs. rural areas).
2. Demographic: Age, gender, income, education (e.g., toys for children, luxury cars for high-income groups).
3. Psychographic: Lifestyle, social class, personality (e.g., eco-friendly products for environmentally conscious
consumers).
4. Behavioral:
- Occasions: When products are used (e.g., orange juice at breakfast).
- Benefits Sought: Different needs (e.g., toothpaste for whitening vs. cavity protection).
- User Status: Non-users, first-time users, regular users.

Requirements for Effective Segmentation

- Measurable: Size and characteristics can be quantified.
- Substantial: Large enough to be profitable.
- Accessible: Reachable via marketing channels.
- Differentiable: Segments respond uniquely to marketing efforts.
- Actionable: Can design effective strategies for the segment.

3. Market Targeting
Evaluating Segments
1. Size and Growth: Potential profitability.
2. Company Objectives and Resources: Alignment with goals and capabilities.
3. Structural Attractiveness: Competition, substitute products, buyer/supplier power.

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 Target Market Strategies
1. Undifferentiated (Mass) Marketing: One offer for the entire market (e.g., staple goods like salt).
2. Differentiated Marketing: Separate offers for multiple segments (e.g., car models for different income
groups).
3. Concentrated Marketing: Focus on one or few niches (e.g., Tesla targeting premium electric car buyers).

Market Coverage Strategies

1. Single-Segment Concentration: Focus on one segment (high risk if segment declines).
2. Selective Specialization: Multiple attractive segments (diversifies risk).
3. Product Specialization: One product for multiple segments (e.g., Canon cameras for professionals and
amateurs).
4. Market Specialization: Serve all needs of one customer group (e.g., medical supplies for hospitals).
5. Full Market Coverage: Serve all segments (only for large firms, e.g., Coca-Cola).

4. Differentiation and Positioning

Differentiation Strategies
- Product: Features, performance, design (e.g., Apple’s sleek designs).
- Services: Delivery, installation, customer support (e.g., Amazon’s fast shipping).
- Personnel: Trained, courteous staff (e.g., Ritz-Carlton’s customer service).
- Channel: Distribution efficiency (e.g., Dell’s direct-to-consumer model).
- Image: Brand symbolism (e.g., Nike’s “Just Do It” slogan).

Positioning
- Definition: Creating a distinct image in the consumer’s mind relative to competitors.
- Steps:
1. Identify Competitors: Analyze competing brands.
2. Determine Perceptions: Map consumer preferences (e.g., perceptual mapping).
3. Select Position: Choose a unique, desirable position (e.g., Volvo = safety).
4. Communicate the Position: Use marketing mix to reinforce the image.

Effective Positioning Criteria

- Important, distinctive, superior, preemptive, affordable, and profitable.

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UNIT 5: Managing Products, Product Lines, and Brands

1. Introduction to Product Management

- Product Definition: A product is anything offered to the market to satisfy a want or need, including physical
goods, services, ideas, places, or organizations.
- Product Strategy: Involves coordinated decisions on individual products, product lines, and product mix.
- Classification:
- Consumer Goods: Bought by final consumers (e.g., toothpaste, cars).
- Industrial Goods: Used to produce other goods/services (e.g., machinery, raw materials).

2. Five Levels of a Product

1. Core Product: Fundamental benefit (e.g., hotel → rest/sleep).
2. Actual Product: Physical product with features (e.g., hotel room with bed, towels).
3. Expected Product: Attributes buyers expect (e.g., clean room, quiet).
4. Augmented Product: Extra benefits (e.g., hotel with room service).
5. Potential Product: Future transformations (e.g., smart hotel rooms).

Example (University Education):

- Core: Higher education.
- Actual: Campus, faculty, courses.
- Expected: Critical discussions, practical applications.
- Augmented: Job placement, sports facilities.
- Potential: Online learning platforms.

3. Product Hierarchy
1. Need Family: Core need (e.g., security).
2. Product Family: Solutions (e.g., savings/income).
3. Product Class: Functional group (e.g., insurance).
4. Product Line: Related items (e.g., life insurance).
5. Product Type: Form (e.g., term life insurance).
6. Brand: Identifier (e.g., Ethiopian Insurance Corp.).
7. Item: Variant (e.g., 1L Highland water).

4. Product Classifications
A. Durability & Tangibility
- Non-durable: Consumed quickly (e.g., soap).
- Durable: Long-lasting (e.g., refrigerators).
- Services: Intangible (e.g., haircuts).

B. Consumer Goods
1. Convenience Goods:
- Bought frequently, minimal effort (e.g., toothpaste).
- Subtypes: Staples (regular), Impulse (unplanned), Emergency (urgent).
- Marketing: Wide distribution, heavy advertising.
2. Shopping Goods:
- Compared for quality/price (e.g., furniture).
- Marketing: Fewer outlets, retailer collaboration.
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3. Specialty Goods:
- Strong brand preference (e.g., luxury cars).
- Marketing: Exclusive outlets, joint advertising.
4. Unsought Goods:
- Not actively sought (e.g., insurance).
C. Industrial Goods
- Raw materials, machinery, supplies.

5. Product Mix & Line Decisions

- Product Mix Dimensions:
- Width: Number of product lines (e.g., P&G: detergents, toothpaste).
- Length: Total items (e.g., P&G: 23 items).
- Depth: Variants per product (e.g., Crest: 6 variants).
- Consistency: How closely related lines are.

- Line Stretching:
- Down-market: Add cheaper products (e.g., BMW → Mini).
- Up-market: Add premium products (e.g., Toyota → Lexus).
- Two-way: Stretch both directions.
- Line Filling: Add variants within current range (e.g., new toothpaste flavors).

6. Branding
- Definition: Name/symbol identifying a product (e.g., Nike).
- Brand Equity: Value from loyalty/awareness (e.g., Coca-Cola).
- Branding Options:
1. Manufacturer’s Brand: Owned by producer (e.g., Sony).
2. Private Brand: Owned by retailer (e.g., Walmart brands).
3. Licensed Brand: Use another’s brand (e.g., Disney merchandise).
4. Co-branding: Joint brands (e.g., Sony-Ericsson phones).

Why Branding Matters:

- Builds trust, justifies premium pricing, differentiates products.

7. Packaging & Labeling

- Packaging Functions:
- Protection, promotion, convenience.
- Levels: Primary (tube), Secondary (box), Shipping (case).
- Labeling:
- Identifies, describes, grades, promotes (e.g., nutrition labels).

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UNIT 6: PRODUCT DEVELOPMENT AND PRODUCT LIFE CYCLE STAGES

1. Introduction to New Product Development (NPD)

- Organizations must continuously develop new products to stay competitive due to changing consumer tastes,
technologies, and competition.
- Products have limited life spans and must be replaced to avoid decline.
- Key to successful innovation: Total-company effort, strong planning, and a systematic NPD process.

2. New Product Development Process (8 Stages)

1. Idea Generation
- Objective: Systematically search for new product ideas.
- Sources:
- Internal: R&D, employees (executives, engineers, salespeople).
- External: Customers (surveys, complaints), competitors (analyzing their products), distributors, suppliers,
trade shows, and government agencies.
- Idea Management System: Appoint an idea manager, form a committee, encourage stakeholder contributions,
and reward best ideas.

2. Idea Screening
- Objective: Evaluate and filter ideas to focus on viable ones.
- Method: Use standardized forms to assess market size, competition, costs, and potential ROI.
- Criteria: Alignment with company goals, feasibility, and profitability.

3. Concept Development and Testing

- Definitions:
- Product Idea: Initial idea for a product.
- Product Concept: Detailed version in consumer terms.
- Product Image: Consumer perception of the product.
- Testing: Present concepts to target consumers (e.g., via descriptions, prototypes, or virtual reality) to gauge
appeal.

4. Marketing Strategy Development

- Objective: Design an initial marketing plan.
- Components:
- Target market, positioning, sales goals (short and long-term).
- Pricing, distribution, and marketing budget for Year 1.
- Long-term profit and strategy outlook.

5. Business Analysis
- Objective: Assess financial viability.
- Steps:
- Review sales forecasts (based on similar products or surveys).
- Estimate costs (production, marketing, R&D) and profits.
- Use break-even analysis to evaluate risk.

6. Product Development
- Objective: Turn the concept into a tangible product.
- Process:
- R&D creates prototypes.
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 - Rigorous functional testing for safety and performance.
- High investment stage; may take months/years.

7. Market Testing
- Objective: Test the product in limited markets to assess acceptance.
- Focus: Evaluate marketing mix (pricing, promotion, distribution).

8. Commercialization
- Objective: Full-scale launch.
- Key Tasks:
- Internal marketing to maintain enthusiasm.
- Monitor product performance post-launch.

9. Post-Introduction Evaluation
- Objective: Review market response and adjust strategies.
- Actions: Modify delivery, staffing, or marketing mix based on feedback.

3. Reasons for New Product Failure

- Overestimated market size.
- Poor product design or features.
- Incorrect positioning, pricing, or promotion.
- High development costs.
- Strong competitor retaliation.
- Ignoring market research findings.

4. Product Life Cycle (PLC) Stages

1. Introduction Stage
- Characteristics:
- Low sales, high costs, negative profits.
- Little competition; focus on innovators.
- Strategies:
- Heavy promotion to educate consumers.
- High pricing (cost-plus) or penetration pricing.
- Selective distribution.

2. Growth Stage
- Characteristics:
- Rapid sales increase, rising profits.
- More competitors enter; focus on early adopters.
- Strategies:
- Improve product quality/add features.
- Expand distribution, enter new segments.
- Shift advertising to brand preference.
- Lower prices to attract more buyers.

3. Maturity Stage
- Characteristics:
- Sales peak; profits stabilize/decline.
- Intense competition; focus on middle majority.
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- Strategies:
- Market Modification: Convert non-users, enter new segments, increase usage.
- Product Modification: Improve quality, features, or style.
- Marketing Mix Adjustment: Adjust pricing, distribution, advertising, or services.

4. Decline Stage
- Characteristics:
- Sales and profits decline; focus on laggards.
- Competitors exit.
- Strategies:
- Harvest (reduce investment, milk profits).
- Divest (sell or discontinue the product).
- Niche targeting (focus on loyal segments).

5. Critique of PLC Concept

- Limitations:
- PLC patterns vary widely in shape/duration.
- Hard to identify the current stage (e.g., maturity vs. temporary plateau).
- PLC can be influenced by marketing strategies rather than being inevitable.

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UNIT 7 PRICING

1. Definition and Importance of Price

- Price: The amount of money charged for a product or service. Broadly, it is the sum of all values exchanged
for the benefits of having or using the product/service.
- Buyer’s Market: Price is what the consumer is willing to pay.
- Seller’s Market: Price is what the seller charges.
- Characteristics of Price:
1. Revenue Generator: Only element in the marketing mix that produces revenue (others are costs).
2. Flexibility: Prices can be adjusted quickly compared to product features or distribution channels.
3. Competitive Challenge: Pricing is a major issue for marketing executives.

2. Factors Affecting Pricing Decisions

Internal Factors
1. Marketing Objectives:
- Survival (short-term, low prices to cover costs).
- Current profit maximization (set prices for maximum profit).
- Market share leadership (low prices to gain market share).
- Product quality leadership (high prices for premium quality).
2. Marketing Mix Strategy:
- Price must align with product design, distribution, and promotion.
- Target Costing: Start with an ideal selling price based on customer value, then design costs to meet that
price.
3. Costs:
- Fixed Costs: Do not vary with production (e.g., rent, salaries).
- Variable Costs: Vary with production (e.g., materials, labor).
- Total costs = Fixed + Variable costs.
4. Organizational Considerations:
- Who sets prices? Top management, product managers, or sales teams.

External Factors
1. Market and Demand:
- Demand Curve: Shows the relationship between price and quantity demanded (usually inverse).
- Types of Markets:
- Pure Competition: Many buyers/sellers, differentiated products.
- Oligopolistic Competition: Few sellers, sensitive to competitors’ pricing.
- Pure Monopoly: Single seller (e.g., government-regulated monopolies).
2. Consumer Perceptions:
- Consumers evaluate price against perceived value.
- High price ≠ high value → no purchase; low price ≠ low profit.
3. Competitors’ Actions:
- Monitor competitors’ costs, prices, and reactions.
- Pricing strategies depend on whether the offer is superior, inferior, or similar to competitors.

3. Approaches to Setting Prices

Demand-Oriented Approaches
1. Skimming Pricing:
- High initial price for innovative products, lowered over time.
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 - Conditions: Patent protection, high perceived quality, limited competition.
2. Penetration Pricing:
- Low initial price to attract mass market.
- Conditions: Price-sensitive market, high production volume, discourages competitors.
3. Prestige Pricing:
- High price to signal quality/status (e.g., luxury brands).
4. Price Lining:
- Set prices at specific points (e.g., Birr59, Birr79, Birr99).
5. Odd-Even Pricing:
- Psychological pricing (e.g., Birr499.99 instead of Birr500).
6. Target Pricing:
- Set price based on consumer willingness to pay, then adjust product features.
7. Bundle Pricing:
- Combine products for a single price (e.g., vacation packages).
8. Yield Management Pricing:
- Dynamic pricing based on demand/time (e.g., airlines, hotels).

Cost-Oriented Approaches
1. Standard Markup Pricing:
- Add fixed percentage to cost (common in retail).
- Formula:
Markup Price = Unit Cost/(1 - Desired Return on Sales)
2. Experience Curve Pricing:
- Prices decline as production experience increases (learning effect).

Profit-Oriented Approaches
1. Target Profit Pricing:
- Set price to achieve specific profit target.
- Formula:
Profit = (PriceQuantity) – [Fixed Cost + (Variable CostQuantity)]
2. Break-Even Analysis:
- Determine sales volume needed to cover costs.
- Formula:
BEP (units) = Fixed Cost/(Price-Variable Cost)
3. Target Return-on-Sales/Investment:
- Set price to achieve profit as a percentage of sales or investment.

Competition-Oriented Approaches
1. Above/At/Below-Market Pricing:
- Price relative to competitors (e.g., Rolex uses above-market pricing).
2. Loss-Leader Pricing:
- Sell below cost to attract customers (e.g., retail promotions).

4. Special Price Adjustments

Discounts
1. Quantity Discounts:
- Non-cumulative (per order) or cumulative (over time).
2. Seasonal Discounts:
- Encourage off-season purchases.
3. Trade Discounts:
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 - Reduce prices for resellers based on channel position.
4. Cash Discounts:
- Incentive for early payment (e.g., "2/10 net 30").

Allowances
1. Trade-In Allowances:
- Discount for trading in old products.
2. Promotional Allowances:
- Compensation for promoting a product.

Geographical Adjustments
1. FOB Origin Pricing:
- Buyer pays shipping from seller’s location.
2. Uniform Delivered Pricing:
- Seller includes shipping costs in price.
- Variants: Single-zone, multiple-zone, freight absorption, basing-point pricing.

5. Legal and Regulatory Aspects

1. Price Fixing:
- Illegal collusion to set prices (common in oligopolies).
2. Price Discrimination:
- Charging different prices to different buyers (illegal if anti-competitive).
3. Deceptive Pricing:
- Misleading tactics (e.g., bait-and-switch, false comparisons).
4. Predatory Pricing:
- Below-cost pricing to eliminate competitors (illegal).

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 UNIT 8 - Marketing Channels

1. Introduction to Marketing Channels

- Purpose: To move goods from producers to consumers, ensuring products reach final consumption points.
- Definition: A set of independent organizations involved in making a product/service available for use or
consumption.
- Importance:
- Channel decisions are complex and long-term.
- Channels affect and are affected by other marketing mix elements (product, price, promotion).

2. Definitions of Marketing Channels

1. Rolnicki: The path a product takes from manufacturer to end user.
2. Stern: A set of interdependent organizations making products/services available for consumption.
3. Rosenbloom: An external contractual organization managed to achieve distribution objectives.
- Key Terms:
- External: Exists outside the firm.
- Contractual Organization: Parties involved in buying/selling/transferring title.
- Operates: Management’s involvement in channel affairs.
- Distribution Objectives: Goals guiding channel design.

3. Marketing Intermediaries (Middlemen)

Term Description
Middleman Any intermediary between manufacturer and end-user.
Agent/Broker Acts on behalf of the manufacturer without taking title.
Wholesaler Sells to retailers/other intermediaries (common in consumer markets).
Retailer Sells directly to consumers.
Distributor Performs multiple functions (e.g., selling, inventory, credit).
Dealer General term for intermediaries (e.g., retailers, wholesalers).

4. Marketing Channel Functions

A. Transactional Functions
- Buying: Purchasing for resale.
- Selling: Promoting and soliciting orders.
- Risk Taking: Assuming inventory risks (e.g., obsolescence).
B. Logistical Functions
- Assorting: Combining products from multiple sources.
- Storing: Holding inventory for customer convenience.
- Sorting: Breaking bulk into smaller quantities.
- Transporting: Moving products to customers.
C. Facilitating Functions
- Financing: Extending credit.
- Grading: Quality inspection and grading.
- Marketing Research: Providing market data.

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5. Direct vs. Indirect Channels
A. Direct Channels (Zero-Level)
- Definition: Manufacturer sells directly to consumers without intermediaries.
- Methods:
1. Door-to-Door Selling: Salesmen approach customers directly (e.g., Sholla Milk).
2. Manufacturer’s Sales Branches: Owned outlets (e.g., Alameda Textile Factory).
3. Direct Mail: Products mailed to consumers (e.g., newspapers like "Reporter").
B. Indirect Channels
- Definition: Uses intermediaries (wholesalers, retailers, agents).
- Types of Intermediaries:
1. Wholesalers:
- Buy in bulk from producers, sell to retailers.
- Functions: Bulk-breaking, warehousing, financing, market info.
- Types:
- Merchant Wholesalers: Take title (full-service or limited-service).
- Brokers/Agents: No title; facilitate transactions (e.g., manufacturer’s agents).
2. Retailers:
- Sell directly to consumers.
- Classification:
- By Service Level: Self-service, limited-service, full-service.
- By Product Line: Specialty stores, department stores, supermarkets.
- By Pricing: Discount stores, off-price retailers.
3. Agents:
- Represent manufacturers (no title; common in import/export).

6. Flows in Marketing Channels

Flow Type Description
Product Flow Physical movement from producer to consumer.
Negotiation Flow Buying/selling interactions (excludes transporters).
Ownership Flow Transfer of title (excludes transporters).
Information Flow Exchange of data among all parties (includes transporters).
Promotion Flow Advertising, sales promotions (includes ad agencies).
Payment Flow Bills paid via banks.

7. Channel Structure
A. Channel Length
1. Zero-Level (M → C): Direct sales (e.g., heavy machinery).
2. One-Level (M → R → C): One intermediary (e.g., retail chains).
3. Two-Level (M → W → R → C): Traditional for consumer goods (e.g., soap, sugar).
4. Three-Level (M → A → W → R → C): Common in import/export.

B. Intensity of Distribution
Type Description Example
Exclusive Toyota. Limited to one intermediary per area. MOENCO for
Selective Few intermediaries; focused relationships. Wristwatch brands.
Intensive Maximum intermediaries for wide coverage. Chewing gum, soap.

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8. Variables Affecting Channel Structure
A. Market Variables
- Geography: Distance → More intermediaries.
- Size: Large markets → More intermediaries.
- Density: Scattered buyers → More intermediaries.
- Behavior: Small quantities/seasonal buying → Long channels.

B. Product Variables
- Bulk/Weight: Heavy products → Short channels.
- Perishability: Short channels for fresh goods.
- Unit Value: Low value → Long channels.
- Standardization: Custom products → Direct channels.

C. Company Variables
- Financial Capacity: More capital → Direct channels.
- Managerial Expertise: Lack of skills → More intermediaries.
- Objectives: Desire for control → Short channels.

D. Intermediary Variables
- Availability/Cost: High cost → Fewer intermediaries.

9. Channel Conflict
- Definition: Disagreements over roles/rewards among channel members.
- Types:
1. Horizontal Conflict: Between same-level members (e.g., retailer vs. retailer).
2. Vertical Conflict: Between different levels (e.g., wholesaler vs. retailer).

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Unit 9 – Promotion

1. Introduction to Promotion
- Definition: Promotion is a key element of the marketing mix, involving communication with target customers
to influence their behavior and achieve marketing objectives.
- Purpose: To inform, persuade, and remind customers about products or services.
- Components of Promotion Mix:
1. Advertising
2. Sales Promotion
3. Public Relations
4. Personal Selling
5. Direct Marketing

2. Advertising
2.1 Definition and Characteristics
- Definition: Paid, non-personal communication by an identified sponsor using mass media to persuade or
influence an audience.
- Key Features:
- Paid form of communication.
- Non-personal (targets a broad audience).
- Identified sponsor.
- Uses mass media (TV, radio, print, digital).

2.2 Advertising Objectives

- Based on Buyer Readiness Stages:
1. Awareness – Making consumers aware of the product.
2. Knowledge – Educating consumers about features.
3. Liking – Creating a positive attitude.
4. Preference – Encouraging preference over competitors.
5. Conviction – Building belief in the product.
6. Purchase – Driving actual buying behavior.

- Based on Purpose:
- Informative Advertising: Used for new products (e.g., explaining features).
- Persuasive Advertising: Used in competitive markets (e.g., brand superiority).
- Reminder Advertising: Used for mature products (e.g., Coca-Cola ads).

2.3 Types of Advertising

1. Brand Advertising – Builds long-term brand identity.
2. Retail Advertising – Promotes store-specific offers.
3. Political Advertising – Used by politicians for campaigns.
4. Direct-Response Advertising – Aims for immediate sales (e.g., infomercials).
5. Business-to-Business (B2B) Advertising – Targets wholesalers, retailers.
6. Institutional Advertising – Enhances corporate image.
7. Public Service Advertising – Promotes social causes.

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 2.4 Advertising Management Process
1. Set Objectives (e.g., brand awareness, sales increase).
2. Budgeting Methods:
- Percentage of Sales: Allocates a fixed % of sales revenue.
- Competitive Parity: Matches competitors' ad spending.
- Objective and Task: Sets budget based on specific goals.
3. Message Development:
- AIDA Model: Attention → Interest → Desire → Action.
- Appeals:
- Rational (e.g., product features).
- Emotional (e.g., humor, fear).
- Moral (e.g., social responsibility).
4. Media Selection:
- Reach: % of target audience exposed.
- Frequency: Number of exposures.
- Impact: Qualitative value of the medium.
5. Evaluation:
- Communication Effect: Did the ad convey the message?
- Sales Effect: Did sales increase?

3. Sales Promotion
3.1 Definition and Benefits
- Definition: Short-term incentives to encourage purchase or sales.
- Benefits:
- Communication: Gains attention.
- Incentive: Offers discounts, freebies.
- Invitation: Encourages immediate action.

3.2 Objectives
- Attract new users.
- Stimulate repeat purchases.
- Increase purchase size.
- Build brand/store traffic.

3.3 Types of Sales Promotion

1. Consumer Promotions:
- Coupons, rebates, samples, contests.
2. Trade Promotions:
- Discounts for retailers, trade shows.
3. Business Promotions:
- Trade allowances, exhibitions.

4. Personal Selling
4.1 Definition and Nature
- Definition: Face-to-face interaction to persuade customers to buy.
- Advantages:
- Builds relationships.
- Immediate feedback.
- Customized solutions.
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 4.2 Types of Personal Selling
1. Order Takers – Process routine purchases (e.g., retail clerks).
2. Creative Selling – Complex sales (e.g., real estate, B2B).
3. Missionary Selling – Builds goodwill (e.g., pharmaceutical reps).

4.3 Personal Selling Process

1. Prospecting – Identifying potential buyers.
2. Approach – Initial contact.
3. Presentation – Need-satisfaction approach.
4. Handling Objections – Addressing concerns.
5. Closing – Finalizing the sale.
6. Follow-up – Ensuring satisfaction.

4.4 Qualities of a Good Salesperson

- Product knowledge.
- Communication skills.
- Persuasiveness.
- Integrity.

5. Direct Marketing
5.1 Definition and Characteristics
- Definition: Interactive system using media to generate direct responses.
- Examples: Email, catalogs, telemarketing.
- Features:
- Non-public (targeted).
- Customizable.
- Interactive.

5.2 Channels
- Direct mail, telemarketing, e-commerce.

6. Public Relations (PR)

6.1 Definition
- Activities to build a positive company image.
- Tools: Press releases, events, sponsorships.
6.2 Marketing PR (MPR)
- Supports product promotion.
- More credible than advertising.

7. Factors Influencing Promotion Mix

1. Type of Product Market:
- Consumer Goods: Heavy on advertising & sales promotion.
- Business Goods: Heavy on personal selling.
2. Push vs. Pull Strategy:
- Push: Targets intermediaries (e.g., trade discounts).
- Pull: Targets end consumers (e.g., ads).
3. Buyer Readiness Stage:
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 - Early stages: Advertising & PR.
- Later stages: Personal selling & sales promotion.
4. Product Life Cycle:
- Introduction: Heavy advertising.
- Maturity: Sales promotions.
5. Company Market Rank:
- Leading brands focus on advertising.
- Smaller brands use sales promotions.

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