CHAPTER THREE

MARKETING MANAGEMENT

Introduction Introduction • Marketing is the business function that Marketing is the business function that

identifies unfulfilled needs and wants, defines identifies unfulfilled needs and wants, defines and measures their magnitude, determine and measures their magnitude, determine which target market the organization can best which target market the organization can best serve decides on appropriate products, serve decides on appropriate products, services and programs to serve these markets .services and programs to serve these markets .

• Marketing management is the process of Marketing management is the process of planning and executing the conception, pricing, planning and executing the conception, pricing, promotion, and distribution of ideas, goods and promotion, and distribution of ideas, goods and services to create exchange that satisfies services to create exchange that satisfies individual and organizational goalsindividual and organizational goals

Importance of Marketing Importance of Marketing

• Discovering what goods and Discovering what goods and services consumers need and services consumers need and wantwant

• Providing these items for the Providing these items for the customerscustomers

Core Concepts of MarketingCore Concepts of Marketing• Need: is a state of felt deprivation of some Need: is a state of felt deprivation of some

basic satisfaction..basic satisfaction..• Wants: Wants are desires for specific satisfiers Wants: Wants are desires for specific satisfiers

of needs. of needs. • Demands: are wants for specific products that Demands: are wants for specific products that

are backed ability to and willingness to buy are backed ability to and willingness to buy them. them.

• Products: is anything that can be offered to Products: is anything that can be offered to satisfy a need or want. satisfy a need or want.

• Value: is the difference between the benefits Value: is the difference between the benefits that the customer gains from owning and using that the customer gains from owning and using a product and the costs of obtaining the a product and the costs of obtaining the product.product.

• Cost: the investment incurred in the acquisition Cost: the investment incurred in the acquisition of the product or the services.of the product or the services.

Core Concepts of MarketingCore Concepts of Marketing• Satisfaction:Satisfaction:• Exchange: is the act of obtaining a desired Exchange: is the act of obtaining a desired

product from someone by offering something in product from someone by offering something in return. return.

• Transaction: consists of a trade of values between Transaction: consists of a trade of values between two parties. two parties.

• Relationship Marketing: A marketing effort sought Relationship Marketing: A marketing effort sought to build up long term relationship with customers, to build up long term relationship with customers, distributors, dealers and suppliers. distributors, dealers and suppliers.

• Markets: consists of all the potential and actual Markets: consists of all the potential and actual customers sharing a particular need or wantcustomers sharing a particular need or want

Classification of MarketsClassification of Markets• Classification of Markets on the Basis of Free Classification of Markets on the Basis of Free

Intercourse: Intercourse: • Perfect MarketsPerfect Markets• Imperfect MarketsImperfect Markets

• Markets on the Basis of Time Classification:Markets on the Basis of Time Classification:– Very Short Period MarketVery Short Period Market– Short Period MarketShort Period Market– Long Period MarketsLong Period Markets

• Classification the Basis of the Position of Sellers:Classification the Basis of the Position of Sellers:– Primary MarketsPrimary Markets– Secondary MarketsSecondary Markets– Terminal MarketsTerminal Markets

• Classification on the Basis of the Consumer Classification on the Basis of the Consumer Characteristics: Characteristics: • Consumer Markets Consumer Markets • Industrial MarketsIndustrial Markets

Marketing PhilosophiesMarketing Philosophies• The production concept holds that The production concept holds that

consumers will favor those products that are consumers will favor those products that are widely available and low in cost. widely available and low in cost.

• The product concept holds that consumers The product concept holds that consumers will favor those products that offer that most will favor those products that offer that most quality, performance, or innovative features. quality, performance, or innovative features.

• The selling concept holds that consumers The selling concept holds that consumers will ordinarily not buy enough of the will ordinarily not buy enough of the organization's products; therefore organization's products; therefore organization must undertake an aggressive organization must undertake an aggressive selling and promotion effort.selling and promotion effort.

Marketing PhilosophiesMarketing Philosophies• The marketing concept holds that the key to The marketing concept holds that the key to

achieving organizational goals consists of being achieving organizational goals consists of being more effective than competitors in integrating more effective than competitors in integrating marketing activities toward determining and marketing activities toward determining and satisfying the needs and wants of target satisfying the needs and wants of target markets. markets.

• The societal marketing concept holds that the The societal marketing concept holds that the organization’s task is to determine the needs, organization’s task is to determine the needs, wants and interests of target markets and to wants and interests of target markets and to deliver the desired satisfaction more effectively deliver the desired satisfaction more effectively efficiently than competitors in a way that efficiently than competitors in a way that preserves or enhances the customer’s and preserves or enhances the customer’s and society’s well being.society’s well being.

Market SegmentationMarket Segmentation• Market Segmentation: Identifying and develop profile Market Segmentation: Identifying and develop profile

of distinct groups of buyers who might require of distinct groups of buyers who might require separate products and/or marketing mixes.separate products and/or marketing mixes.

• Geographic segmentation is the dividing of an overall Geographic segmentation is the dividing of an overall market into homogeneous groups on the basis of market into homogeneous groups on the basis of population location. population location.

• Demographic segmentation is dividing and over all Demographic segmentation is dividing and over all market into homogeneous group based upon market into homogeneous group based upon population characteristicspopulation characteristics

• Psychographic segmentation utilizes behavioral Psychographic segmentation utilizes behavioral profiles developed from analyses of the activities, profiles developed from analyses of the activities, opinions, interest and life styles of consumers. opinions, interest and life styles of consumers.

• Behavioral Segmentation: Potential segments may be Behavioral Segmentation: Potential segments may be divided into two Users and non-users. divided into two Users and non-users.

• Market Targeting: For market targeting Market Targeting: For market targeting sellers first evaluate the profile of and sellers first evaluate the profile of and profit potential of each segment. The profit potential of each segment. The seller decides how many segments to seller decides how many segments to cover based upon the size and growth of cover based upon the size and growth of the segment, its structural attractiveness the segment, its structural attractiveness and company’s objectives and resources.and company’s objectives and resources.

• Product Positioning: is an act of designing Product Positioning: is an act of designing company’s offer and image so that target company’s offer and image so that target market understands and appreciates market understands and appreciates what company stands for in relation to its what company stands for in relation to its competitors.competitors.

Marketing Mix Elements Marketing Mix Elements • Product means the goods and service Product means the goods and service

combination the company offers to the combination the company offers to the target market.target market.

• Price is the amounts of money customers Price is the amounts of money customers have to pay to obtain the product.have to pay to obtain the product.

• Place includes company activities that make Place includes company activities that make the product available to target consumers. the product available to target consumers.

• Promotion means activities that Promotion means activities that communicate the merits of the product and communicate the merits of the product and persuade larger consumers to buy it. persuade larger consumers to buy it.

ProductProduct• A product is anything that can be offered to a A product is anything that can be offered to a

market for attention, acquisition, use or market for attention, acquisition, use or consumption that might satisfy a want or need. consumption that might satisfy a want or need.

• Products can be classified in three groups according Products can be classified in three groups according to their durability or tangibility.to their durability or tangibility.

• Non durable goods: are tangible goods that normally Non durable goods: are tangible goods that normally are consumed in one or few users.are consumed in one or few users.

• Durable goods: are those tangible goods that usually Durable goods: are those tangible goods that usually survive many userssurvive many users

• Services: are activities, benefits or satisfactions that Services: are activities, benefits or satisfactions that are offered for saleare offered for sale

Product Product • Based on the purpose that products Based on the purpose that products

are acquired:are acquired:• Consumer products are products Consumer products are products

bought by the final consumers for bought by the final consumers for personal consumptionpersonal consumption

• Industrial products are products bought Industrial products are products bought by individuals and organizations for by individuals and organizations for further processing or for use in further processing or for use in conducting businessconducting business

Consumer ProductsConsumer Products• Convenience products: are products that Convenience products: are products that

consumers usually buy with a minimum consumers usually buy with a minimum of comparison and buying effort. of comparison and buying effort.

• Shopping products: are less frequently Shopping products: are less frequently purchased products. purchased products.

• Specialty products: are products with Specialty products: are products with unique characteristic or brand unique characteristic or brand identification identification

• Unsought products: are products that the Unsought products: are products that the consumer either does not know or does consumer either does not know or does know but normally do not think of buyingknow but normally do not think of buying

Industrial ProductsIndustrial Products• Materials and parts: refers to those Materials and parts: refers to those

products that make up the final products that make up the final product of the companyproduct of the company

• Capital items: are products that aids Capital items: are products that aids in the buyers production or operation. in the buyers production or operation.

• Supplies and services: refer to those Supplies and services: refer to those products that are consumed in the products that are consumed in the production process or operation of production process or operation of buyers. buyers.

New Product Development• There are some sequential steps that companies There are some sequential steps that companies

need to pass through in developing new need to pass through in developing new product.product.

• Idea GenerationIdea Generation• Idea ScreeningIdea Screening• Concept Development and TestingConcept Development and Testing• Developing Marketing StrategyDeveloping Marketing Strategy• Business AnalysisBusiness Analysis• Product DevelopmentProduct Development• Test MarketingTest Marketing• CommercializationCommercialization

Product Life CycleProduct Life Cycle

Price• It is the amount of money charged It is the amount of money charged

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

• Factors Considered When Setting Factors Considered When Setting PricesPrices

• InternalInternal• External External

Factors Affecting Pricing Factors Affecting Pricing • Internal factors affecting pricingInternal factors affecting pricing• Marketing objectivesMarketing objectives• Marketing mix strategyMarketing mix strategy• CostsCosts• Organizational considerationOrganizational consideration• External factors affecting pricingExternal factors affecting pricing• The market and demandThe market and demand• Competitor’s costs, prices and offersCompetitor’s costs, prices and offers• Other external factorsOther external factors

Pricing ApproachesPricing Approaches• Cost Plus PricingCost Plus Pricing• Market Oriented PricingMarket Oriented Pricing• Following CompetitorsFollowing Competitors• Negotiated PricesNegotiated Prices• Breakeven PriceBreakeven Price• Creative PricingCreative Pricing

PromotionPromotion• Promotion decision has two main objectives: to Promotion decision has two main objectives: to

inform and influence another party.inform and influence another party.• Advertising- any paid form or non-personal Advertising- any paid form or non-personal

presentation and promotion of ideas, goods or presentation and promotion of ideas, goods or services. services.

• Sales promotions- a variety of short-term incentives Sales promotions- a variety of short-term incentives to encourage trial or purchase of a product or a to encourage trial or purchase of a product or a service.service.

• Personal Selling is a personal presentation by the Personal Selling is a personal presentation by the firm’s sales forces for the purpose of making sales firm’s sales forces for the purpose of making sales and building customer relationships.and building customer relationships.

• Public relations is very believable news stories, Public relations is very believable news stories, features, and events seem more real and believable features, and events seem more real and believable

Place• distribution of products, covering distribution of products, covering

both channel of distribution and both channel of distribution and physical distribution physical distribution

• The common channels of The common channels of distribution are: distribution are:

• Channels to Consumer Products Channels to Consumer Products • Channels for Industrial ProductsChannels for Industrial Products

Channels to ConsumerChannels to Consumer

• Producer to ConsumerProducer to Consumer• Producer to Retailer to ConsumerProducer to Retailer to Consumer• Producer to Wholesaler to Producer to Wholesaler to

Retailer to ConsumerRetailer to Consumer• Producer to Agent to Wholesaler Producer to Agent to Wholesaler

to Retailer to Consumerto Retailer to Consumer

Channels for Industrial Channels for Industrial ProductsProducts• Producer to Industrial UserProducer to Industrial User• Producer to Agent Middlemen to Producer to Agent Middlemen to

Industrial UserIndustrial User

References • Shanka, Mesay Sata. 2012. "Bank service quality, customer satisfaction

and loyalty in Ethiopian banking sector." Journal of Business Administration and Management Sciences Research 1 (1):01-09.

• Sata, Mesay. 2013. "Factors affecting consumer buying behavior of mobile phone devices." Mediterranean Journal of Social Sciences 4 (12):103.