Bba 840 Manual - 11th August 2014

KENYATTA UNIVERSITY
DIGITAL SCHOOL OF VIRTUAL AND OPEN LEARNING

IN COLLABORATION WITH
SCHOOL OF BUSINESS
DEPARTMENT OF BUSINESS ADMINISTRATION
BBA 840: MARKETING MANAGEMENT
WRITTEN BY:
DR WANJIRA KINYUA-NJUGUNA
Copyright©Kenyatta University, 2014
All Rights Reserved
Published By:
KENYA UNIVERSITY PRESS
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INTRODUCTION
This course introduces postgraduate students to the area of marketing with a focus on the
underlying managerial implications. The traditional marketing areas are examined to prepare
learners for subsequent advanced marketing courses suitable for strategic decision making in
organizations.
COURSE PURPOSE
The main purpose of this course is to introduce students to the essential concepts, skills and
knowledge in the field of marketing in order to develop skills to apply in marketing practice. The
growth of marketing and its importance to world economies has called for a need for future
marketing managers to be well prepared for the challenges posed by the changing market
environment. It is therefore the aim of this course to supply the market with such a manager who
can adequately handle the challenges in marketing of products, services as well as ideas.
COURSE OUTCOMES
At the end of this course, the learners should be able to:

 Develop a capacity for understanding the problems, opportunities and activities
involved in Marketing Management.
 Improve skills related to marketing decision making
 Explore the managerial implications of marketing concepts
 Apply the elements of the marketing mix in formulating marketing strategies
 Form critical opinions on issues affecting marketing now and in the future.
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TABLE OF CONTENT
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INTRODUCTION..........................................................................................................................3
COURSE PURPOSE......................................................................................................................3
COURSE OUTCOMES.................................................................................................................3
TABLE OF CONTENT.................................................................................................................4
MARKETING MANAGEMENT: THE CORE CONCEPTS.....................................................14
LECTURE ONE...........................................................................................................................14
1.1 INTRODUCTION..........................................................................................................14
1.2 LECTURE OBJECTIVES.............................................................................................14
1.3 SUBTOPIC 1 CORE MARKETING CONCEPTS......................................................14
1.4 SUBTOPIC 2 DIFFERENT MARKETING ORIENTATIONS...................................15
1.5 SUBTOPIC3......................................................................................................................
MARKETING AND CHANGE (STRATEGIC MARKETING TRIANGLE)............18
1.6 SUMMARY...................................................................................................................19
NOTE.............................................................................................................................19
1.7 ACTIVITIES..................................................................................................................19
1.8 FURTHER READING...................................................................................................19
1.9 SELF-TEST QUESTIONS............................................................................................19
1.10 GLOSSARY...................................................................................................................19
ANSWER TO SELF-TEST QUESTIONS.............................................................................20
REFERENCES.........................................................................................................................20
ENVIRONMENTAL ANALYSIS..............................................................................................22
LECTURE TWO..........................................................................................................................22
2.1 INTRODUCTION..........................................................................................................22
2.2 LECTURE OBJECTIVES.............................................................................................22
2.3 SUBTOPIC 1 KEY FACTORS IN THE MARKETING ENVIRONMENT................22
2.3.1 Sub Subtopic 1 Internal Marketing Environment..................................................22

2.3.2 Sub Subtopic 1 Micro Marketing Environment.....................................................23
2.3.3 Sub Subtopic 1 Macro Marketing Environment....................................................24
2.4 SUBTOPIC 2 THE SWOT ANALYSIS......................................................................26
2.5 SUBTOPIC 3 RESPONDING TO THE MARKETNG ENVIRONMENT.................27
2.6 SUMMARY...................................................................................................................28
NOTE.......................................................................................................................................28
2.7 ACTIVITIES..................................................................................................................28
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MARKETING MANAGEMENT: THE CORE CONCEPTS
LECTURE ONE
1.1 INTRODUCTION
This lecture introduces the learner to the basic concepts of marketing management as well as their
environment of application. It focuses on marketing management concepts, marketing
philosophies/orientation and marketing and change inter-linkage also referred to as strategic
marketing triangle.
1.2 LECTURE OBJECTIVES
By the end of this lecture, the learner should be able to:

 Describe the concept of marketing management
 Discuss relevance of marketing in management practice
 Identify and explain various marketing orientations
 Illustrate how marketing orientation influence marketing and other decisions within the
organization
1.3 SUBTOPIC 1 CORE MARKETING CONCEPTS
 Market: People or institutions with sufficient purchasing power, authority, and willingness
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to buy. A market consists of all the potential customers sharing a particular need or want
who might be willing and able to engage in exchange to satisfy that need or want.
 Marketing: According marketing staff of the Ohio state university: marketing has been
described … as a business activity; as a group of related business activities; as a trade
phenomenon; as a frame of mind; as a sense of business purpose; as an economic
process; as a structure of institutions; as the process of exchanging or transferring
ownership of products; as a concentration, equalization and dispersion; as the creation of
time, place and possession utilities; as a process of demand and supply adjustment; and
as many other things.
 The American Marketing Association has recently defined the term marketing as an
organizational function and a set of processes for creating, communicating and delivering
value to customers and for managing customer relationships in ways that benefit the
organization and its stakeholders (Wilkie, 2005).
 Marketing therefore is the process of anticipating and understanding customer needs,
developing and delivering value to customers to satisfy their needs and wants, doing so
effectively and efficiently, better than the competitors and at a profit.
 Marketing management is the process of planning and executing the conception, pricing,
promotion and distribution of ideas, goods and services to create exchanges that satisfy
individuals and organizational goals.
 Marketing philosophy is usually presented as one of a number of managerial philosophies
which constantly compete for visibility within the organization (Morgan, 1996).
 Target Market – themarket segment selected by an organization upon which it
concentrates its marketing efforts.
 Utility is the consumer’s estimate of the product’s overall capacity to satisfy his or her
needs.
 Value is a ratio between what the customer gets and what he gives. The customer gets
benefits and assumes costs. The benefits include functional benefits and emotional
benefits. The costs include Monetary Costs, time costs, energy cost and psychiccosts.
 A transaction consists of a trade of values between two parties e.g. money transaction or
barter transaction. A transaction involved several dimensions i.e. at least two things of
value, agreed upon conditions, a time of agreement and a place of agreement.
 Relationship Marketing: Development and maintenance of long-term, cost-effective
exchange relationships with individual customers, suppliers, employees, and other
partners for mutual benefit.
 Marketing mix is the set of marketing tools that the firm uses to pursue its marketing
objectives in the target market. It is the set of controllable variables and their levels that
the firm uses to influence the target market. They include product/service, price, place
promotion and for services, the other additional three include people, physicals and
processes.
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1.4 SUBTOPIC 2 DIFFERENT MARKETING ORIENTATIONS
Marketing philosophies or orientations defines the way of thinking adopted by

the management of an organization in making marketing decisions. It forms the foundation upon
which decisions are made within that organization. Marketing orientations include:
1. The production concept
This holds that consumers will favour those products that are widely available and low in cost.
Managers of production oriented organization concentrate on achieving high production
efficiency and wide distribution coverage. A production orientation’s major shortfall lies in the
fact that it does not consider whether the goods and services that the business produces most
efficiently also meet the needs of the market place. On the other hand when the competition is
weak or demand exceeds supply a production orientation company can survive and even
prosper.
2. Product concept
The product concept holds that consumers will favour those products that offer the most quality,
performance and features. Managers in these products oriented organization focus their energy
on making good products and improving them overtime.
3. Selling concept
It holds that consumers and business if left alone will ordinarily not buy enough of the
organization product. The organization must therefore undertake an aggressive selling and
promotion effort. This concept assumes that consumers typically show a buying inertia or
resistance and must be coaxed into buying.
It also assumes that the company has a whole battery of effective selling and promotion tools to
stimulate more buying. Selling focuses on the needs of the seller i.e. it is pre-occupied with the
seller’s needs to convert his product into cash.
Selling takes an inside-out perspective i.e. it starts with the factory, focuses on the existing
products and calls for heavy selling and promoting to produce profitable sales.
4. Marketing concept
This holds that the key to achieving its organizational goals consist of the company being more
effective than competitors in creating, delivering and communicating customer values to its
chosen target market.
Marketing focuses on the needs of the buyer i.e. it is pre-occupied with the idea of satisfying the
needs of the customers by means of product and the whole cluster of things associated with
creating, delivering and finally consuming it.
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The marketing concept takes an outside in perspective i.e. it starts with a well defined market,
focuses on customer needs and coordinates all the activities that will affect the customers and
produces profits by satisfying customers.
The marketing concept rests on four pillars
1) Target market
Companies do best when they choose their target markets carefully and prepare tailored
marketing programs or strategies.
2) Customer needs
Customer retention is more critical than customer attraction. The key to customer retention is
customer satisfaction. A satisfied customer:
 Talks favourably to other about the company and its products
 Buys again
 Pay less attention to competing brands/products and advertising
 Buys other products that the company adds to its line
Today marketing aims to delight the customer i.e. going beyond meeting the mere expectations
of the customer.
3) Integrated marketing
When all the company departments’ work together to serve the customers interests, the result is
integrated marketing.
Integrated marketing takes place on two levels.
 The various marketing functions e.g. advertising, personal selling, customer service,
product management, marketing research e.t.c. must work together. All marketing
functions must be integrated from the customer’s point of view.
 Marketing must be embraced by the other departments. They must also think customers
to foster teamwork among all departments. The company carries out internal marketing
as well as external marketing.External marketing is marketing directed at people outside
the company while internal marketing is the task of hiring, training and motivating able
employees who want to serve customers well.
4) Profitability
The ultimate purpose of the marketing concept is to help organizations achieve their objectives.
Profitability should be the bench-mark or the ultimate arbiter of success.
5) Societal Marketing Concept

This holds that the organization should determine the needs, wants and interests of target
markets. It should then deliver the desired satisfaction more effectively and efficiently than
competitors in a way that maintains or improves the consumers and the society well-being.
According to the societal marketing concept a pure marketing concept overlook possible conflicts
between short-run consumer wants and long-run consumer welfare.
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The societal marketing concept calls upon marketers to balance three considerations in settling
their marketing policies i.e. company profit, consumer wants or needs and society interests.
Originally most companies based their marketing decisions largely on short-run company
profit. Eventually they begun to recognize the long-run importance of satisfying consumer
wants and the marketing concept emerged.
1.5 SUBTOPIC 3 MARKETING AND CHANGE (STRATEGICMARKETING TRIANGLE)
Marketers need to attend to the strategic triangle: customer, competitors and the company (and
its stakeholders) in order to address the new challenges facing businesses including: new
customer expectationsnew competitorsways of doing business and new types of organization.
The strategic triangle can be illustrated as shown in the diagram below:
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The reason why businesses and firms need a competitive orientation is that customers have a
choice, and they can compare the firm’s offering with what competitors are offering. As such
companies have to strive to outdo their competitors by understanding them and providing more
value to customers better than the competitors.
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1.6 SUMMARY
Marketing is a social process that aims to anticipate and understand customers’ needs, to
develop and deliver value to them in a competitive, effective, efficient and profitable manner in
order to satisfy the needs. The marketing mix allows the company to vary its strategies at
different times as they have control over them. At the same time marketing decisions are
influenced by various marketing orientations including production, product, selling, marketing
and societal. Addressing consumer needs requires the interaction of customers, company and
competitors as well as the recognition of the changes occurring in the environment, which is
commonly referred to as the strategic marketing triangle.
NOTE
The kind of a marketing orientation adopted by an organization is highly influenced by its

leadership and has an implication on the quality and type of marketing decisions made within that
organization.
1.7 ACTIVITIES
Evaluate the marketing orientation applied by the following companies and give justification:
 EABL
 Bidco
 Unilever
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1.8 FURTHER READING
Read the cases provided in the addresses below to understand the role of marketing
management in organizations and your role as a manager.
 http://www.sagepub.com/upm-data/40142_Chapter1.pdf
 http://www.marketingsherpa.com/article/case-study/drip-campaign-data-management
 http://sentinelinnovation.com/images/userfiles/MarketingManagement_CS(1).pdf
1.9 SELF-TEST QUESTIONS
 Discuss the various marketing philosophies that exist

 What is the role of a manager in marketing
 What is the link between marketing and change
1.10 GLOSSARY
Marketing philosophies or orientations defines the way of thinking adopted by the management
of an organization in making marketing decisions.
Production philosophy – focus on production efficiency, mass production and distribution
Product philosophy – focus on product features, quality, product research, innovation and
improvement
Selling philosophy – focus on promotional activities to sell as much as possible regardless of
whether it is what customers are looking for.
Marketing philosophy – adopts customer, competitor, profit and integrated marketing focus.
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ANSWER TO SELF-TEST QUESTIONS
 Discuss the various marketing philosophies that exist

o Production philosophy
o Product philosophy
o Selling philosophy
o Marketing philosophy
o Societal marketing philosophy
 What is the role of a manager in marketing
o Carry out analysis of all the factors in the marketing environment
o Enhancing delivery of value to the customers
o Information gathering and dissemination
o Making appropriate decisions that match up with the changes occurring in the
marketing environment
o Develop strategies that enable a company gain competitive advantage.
 What is the link between marketing and change
 Marketing is driven by the changes in the marketing environment
 Marketing decisions are actions taken against changes that are occurring among the
customers, the competitors and the company as well
 Change facilitates marketing activities to be altered to accommodate all aspects.
 Marketing decisions such as product, price, promotion and place are all influenced and
varied according to the changes occurring in the marketing environment
 When laws of the country change, the activities within an organization especially marketing
issues have also to be changed.
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REFERENCES
Text Books
 Datta, D. &Datta, M. (2006). Marketing Management. New Delhi: Vrinda Publications.
 Homburg, C., Kuester, S. &Krohmer, H. (2009). Marketing Management, A Contemporary

Perspective. London: McGraw Hill.
 Kotler P. And Keller K. (2011). Marketing Management, 12th Edition (Upper Saddle River, New
Jersey: Prentice Hall.
 Kotler, P. (2009): Marketing Management: Analysis, Planning, Implementation and Cotrol,9 th.ed.
NewDelhi: PrenticeHall.
 Kotler, P. (2003). Marketing Management, Analysis, Planning, Implementation and Control, 8 th
Edition. New York: Prentice Hall.
Journals and Periodicals
 Journal of Marketing
 Journal of Marketing Research
 Journal of Consumer Research
 Journal of marketing and consumer research
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ENVIRONMENTAL ANALYSIS
LECTURE TWO
2.1 INTRODUCTION
This lecture introduces the learner to the various elements that make up marketing environment. It
describes three main categories of marketing environment including internal marketing
environment, microenvironment and macro environment. It also enables the learner to understand
how fluctuations and alterations in the marketing environment influence decision making within
organizations. This lecture will also equip learner with some of the strategies employed by
organizations to respond to changes in the environment.

 Describe the concept of marketing environment
 Discuss how each element in the marketing environment influence marketing decisions
 Develop mechanisms that organizations can employ to tap to the changing environment to their
advantage.
 Develop different strategies that firms can utilize to respond to the environmental change.
2.3 SUBTOPIC 1 KEY FACTORS IN THE MARKETING ENVIRONMENT
A company’s marketing environment consists of the actors and

forces outside marketing that affect marketing management’s ability to develop
and maintain successful transactions with its target customers. The marketing
environment offers both opportunities and threats. They influence marketing
activities of a firm. They affect the team’s ability to develop and maintain
successful relationships with their target market.
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2.3.1 Sub Subtopic 1 Internal Marketing Environment
The internal environment is made up of factors within the firm itself. Examples
include:
 employees – their skills, attitude, commitment, creativity and innovativeness
 company policy and strategies,
 capital assets,
 the firm's structure and
 the firm's products (materials).
 Top management – leadership and value systems
 Management philosophy
 Networks and partnerships established at the top level of management
These factors can be controlled by the firm and they influence a lot of marketing decisions. For
example: Marketing managers make decisions within the plans made by top
management and marketing plans must be approved by top management before
they can be implemented.
2.3.2 Sub Subtopic 2 Micro Marketing Environment

 Intermediaries – the services they offer, the products they carry, their locations, the
markets they serve, the competitors that they work with and the assortment of products
that they carry. They link the producer and the consumer. They are involved creating:
Time utility, Place utility, Possession utility and Form utility. Intermediaries determine the
success of product delivery as they determine whether: Customers get the products at
the right time, at the right place, in the right form and whether they get access and
ownership of the same.
 Shareholders – their demands especially return on investment, their influence on the
management and the board – the members, their values. Shareholder pressure to
increase profits will affect organizational strategy. Relationships with shareholders need
to be managed carefully as rapid short term increases in profit could detrimentally affect
the long term success of the business.
 The publics – These are other groups who have an interest in the activities of the
business. They can affect business activities positively or negativelyincluding media,
activist groups, and government agencies.
Each of these variable influences marketing decisions. For example, when customers’ tastes
and preferences change, the company has to vary its product decisions in order to produce
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that which meet these needs. When customers’ purchasing power decreases, the company
has to change the pricing and make it low or produce a cheaper product for the purposes of
adapting to the change in the customers.
Some of the factors within the micro environment can be controlled whilst others cannot.
This is determined by the strategies that the company employs to deal with these forces. To
analyze a firm’s micro environment a stakeholder analysis is carried out.

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2.3.3 Sub Subtopic 1 Macro Marketing Environment
It is made up of factors that affect the firm on a long term basis. These are also
referred to as PESTEL factors. Macro environment factors are not close to the firm. Macro
environment factors are uncontrollable factors but still influence internal and micro environment
which ultimately affect a company strategy. To analyse a firm's macro environment a PESTEL
Analysis is carried out where the following factors are analyzed.
 Legislation - Business legislation has three main purposes:
o to protect companies from unfair competition,
o to protect consumers from unfair business practice and
o to protect the interests of society from unbridled business behaviour.
 A major purpose of business legislation and enforcement is to change business with the
social costs created by their products or production processes. Evaluation of legal factors
focuses on:
o Employment laws
o Taxation laws
o interest rate laws
o Laws governing trade practices such as tariffs, importation duties, e.t.c
 Laws governing business ownership the economy - All businesses are affected by national and
global economic factors. National (and global) interest rates and fiscal policies are set around
economic conditions. The climate of the economy dictates how consumers, suppliers,
creditors and other organizational stakeholders behave within society. In the current
business world, organizations are affected by economies throughout the world and not just
the countries in which they are based or operate from. For example: A global credit crunch
originating in the USA contributed towards the credit crunch in the UK in 2007/08. Cheaper
labour in developing countries affects the competitiveness of products from developed
countries. An increase in interest rates in the USA will affect the share price of UK stocks.
Adverse weather conditions in India may affect the price of tea bought in an English café.
Other factors that should be considered include: Interest rates, inflation rates, recession,
taxation rates and foreign exchange rates. For example an economy undergoing recession
will have high unemployment, low spending power and low stakeholder confidence. This has
an implication on the performance of organizations. A successful organization will respond to
economic conditions and stakeholder behaviour.
 Technological change - technological advances have greatly changed the manner in which
businesses operate. Organizations use technology in many ways, they have:
 Technology infrastructure such as the internet and other information exchange
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systems including the telephone and conference calling.
 Technology systems incorporating a multitude of software which help them
manage their business.
 Technology hardware such as mobile phones, computers, photocopiers and fax
machines which transmit and record information
 Technology has created a society which expects instant results. This technological
revolution has increased the rate at which information is exchanged between
stakeholders.
 A faster exchange of information can benefit businesses as they are able to react
quickly to changes within their operating environment.
 However an ability to react quickly also creates extra pressure as businesses are
expected to deliver on their promises within ever decreasing time scales.
 For example the Internet is having a profound impact on the marketing mix
strategy of organizations.
 Consumers can shop 24 hours a day from where ever they want and however they
want via smart phones, laptops and tablets.
 New discoveries and innovations
 Speed of technology transfer
 Rates of obsolescence – products and services
 Internet – access to information
 Thus forces that create new technologies create new product and market
opportunities.
 These forces require that marketers keep abreast of the latest development and
where possible incorporate advancements to maintain the organization’s
competitiveness.
 This challenge is made move difficult by the quickening pace of technological
change.
 Socio-cultural - Social forces affect our attitudes, interests and opinions. These forces shape
who we are as people, the way we behave and ultimately what we purchase. Evaluation of
social cultural factors should focus on: demographic factors of the social group, socio
stratification – e.g. families, friends, norms and taboos, taboos, culture, language, belief
systems and cultural practices. Other cultural characteristics that can affect marketing
decision making include:-
o Persistence of cultural values e.g. most Americans believe in working, getting married,
giving to charity and being honest.
o Shifts in secondary cultural values e.g. the impact of popular music groups, movie
personalities and other celebrities on young people hairstyling, clothing and sexual
norms. Marketers want to predict cultural shifts in order to spot new opportunities or
threats etc.
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 Environmental-natural factors - Focuses on management of the natural resources.
Resources are increasingly becoming scarce Protection and management of the remaining
resources is a concern of many organizations. Scarcity - leads to global sourcing and
relocation of industries
 Political - Political factors can create advantages and opportunities for organizations. They
can place obligations and duties on organizations. Political factors determine the Legislation
to be put, market regulations, trade agreements, tariffs or restrictions, type of governance
e.g. communist, democratic, dictatorship. Political factors also influence political stability
anddiplomatic relationships.
2.4 SUBTOPIC 2 THE SWOT ANALYSIS
SWOT analysis is a tool for auditing an organization and its environment. SWOT
analysis is the first stage of planning and helps marketers to focus on key issues. Strengths and
weaknesses are internal SWOT factors. Opportunities and threats are external SWOT factors.
Strength is a positive internal factor. A weakness is a negative internal factor. An opportunity is a
positive external factor. A threat is a negative external factor. We should aim to turn our
weaknesses into strengths, and our threats into opportunities. SWOT will give managers options
to match internal strengths with external opportunities. The outcome should be an increase in
‘value’ for customers – which hopefully will improve our competitive advantage. The main
purpose of SWOT analysis has to be to add value to our products and services so that we can:
 recruit new customers,
 retain loyal customers, and
 extend products and services to customer segments over the long-term
Simple rules for successful SWOT Analysis
 Be realistic about the strengths and weaknesses of your organization
 SWOT analysis should distinguish between where your organization is today, and where it
could be in the future.
 SWOT should always be specific. Avoid grey areas.
 Always apply SWOT in relation to your competition
 Avoid complexity and over analysis
 SWOT analysis is subjective. To achieve much make it segment specific.
 USE TOGETHER WITH OTHER TOOLS SUCH AS: PESTEL ANALYSIS, PORTERS FIVE FORCES
MODEL, STAKEHOLDER ANALYSIS
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2.5 SUBTOPIC 3 RESPONDING TO THE MARKETNG ENVIRONMENT
 Response to the marketing environment depends on the nature of the marketing

environment and the attitude of the company to the marketing environment. A
marketing environment can either be friendly, hostile, too competitive. “There are
three kinds of companies: those who make things happen, those who watch things
happen, and those who wonder what’s happened.”
 Many companies view the marketing environment as an uncontrollable element to
which they must react and adapt. They passively accept the marketing environment
and do not try to change it.
 They analyze the environmental forces and design strategies that will help the
company avoid the threats and take advantage of the opportunities the environment
provides.
Marketers and organizations can respond in three basic ways to their environment –
o Proactive – The Company tries to influence the environment factors
o Passive – The Company continually adapts to the environment changes
o Reactive – the wait for things to happen and then you take action
 A reactive response involves changing the marketing mix in response to environmental
changes. This is the most common type of response. The best organizations are able to
respond quickly to environmental changes and capitalize on them. In reacting to
changes in your external environment, marketers should still be driven by an
overarching vision, mission, and strategy which provide clarity in how to react to
change with tactics that are adaptive and responsive.
 A less common response is to be proactive, or to try to change the environment before
it changes the marketplace. For example, a pharmaceutical company may employ
lobbyists to change laws related to their business. Rather than simply watching and
reacting, these firms take aggressive actions to affect the publics and forces in their
marketing environment. Such companies hire lobbyists to influence legislation affecting
their industries and stage media events to gain favorable press coverage.
They run advertorials (ads expressing editorial points of view) to shape public opinion.
They press lawsuits and file complaints with regulators to keep competitors in line, and
they form contractual agreements to better control their distribution channels.
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2.6 SUMMARY
Marketing environment covers all aspects that have an influence on the decisions made within an
organization at all levels. These include internal company factors, micro environment factors and
macro economic factors. Either of these can provide opportunities, threats, strengths or
weaknesses to the organization. A company’s response to the forces in the environment can
either be passive, reactive or proactive.
NOTE

 Analysis of the marketing environment is the starting point of any marketing and
organizational decision made in an organization.
 Regardless of the response to the external environment, marketers should be driven by an

overarching vision, mission, and strategy, all of which provide clarity in how to react to
change with tactics thatare adaptive and responsive.
2.7 ACTIVITIES
Carry out environmental analysis for Brookside Milk Company Lt and detail the implication of
each environmental factor on the achievement of its goals.
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2.8 FURTHER READING
Read the cases listed below for company response to marketing environment
 http://www.scribd.com/doc/4621331/Responding-to-a-Changing-Marketing-
Environment-Castrol-Casae-Study
 http://businesscasestudies.co.uk/jessops/responding-to-changes-in-the-market-
environment/#axzz32uZpy4wO
 http://blog.businesscasestudies.co.uk/619/responding-to-the-external-environment-2/
 http://j2response.com/case-studies/
a) Explain how macro environment factors influence decisions within the organization
b) Discuss various strategies that companies can employ to respond to changes in the
marketing environment
2.10 GLOSSARY
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The internal environment is made up of factors within the firm itself.
Marketing environment consists of the actors and forces outside marketing that
affect marketing management’s ability to develop and maintain successful
transactions with its target customers.
Macro environment factors are uncontrollable broad factors that influence activities of an
organization.
Micro environment is made up of factors that are close to the firm and affect it on a 'day to
day'basis; usually these factors interact with the firm involved in the same industry.
SWOT analysis is a tool for auditing an organization and its environment. SWOT analysis is the
first stage of planning and helps marketers to focus on key issues.
 Macro environmental factors uncontrollable broad factors that influence businesses. Political factors,
legal factors, socio cultural factors, technological factors and ecological or natural environmental
factors. All these have an implication on the decisions made in an organization. Economic factors
cover aspects such as inflation rates, exchange rates, interest rates, barriers to trade e.t.c. For
example an increase in interest rates raises the cost of finance required by organizations to produce.
As a result an organization may refrain from producing a particular product or produce and charge a
high price. When the inflation rates are high, the cost of living goes up reducing the amount available
to invest in organizations or in purchase of recreational products. This requires organizations to
change their decisions to cope with this
 Various strategies can be used to respond to changes in the marketing environment, including:
o Reactive – this is where you take action after changes have occurred. Strategies associated
with this include: lowering prices, increasing promotional activities, exiting the market,
increasing investment
o Proactive – this involves anticipating what might happen in the future – strategies used here
include: new product development, rebranding, repositioning, venturing into new markets,
diversification
o Passive – where you leave things as they are. Strategies associated with this include selling
the same product at the same price using the same marketing tools.
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REFERENCES
Text Books
 Datta, D. &Datta, M. (2006). Marketing Management. New Delhi: Vrinda Publications.
 Homburg, C., Kuester, S. &Krohmer, H. (2009). Marketing Management, A Contemporary

 Kotler P. And Keller K. (2011). Marketing Management, 12th Edition (Upper Saddle River,
New Jersey: Prentice Hall.
 Kotler, P. (2009): Marketing Management: Analysis, Planning, Implementation and
Cotrol,9th.ed. New Delhi: Prentice Hall.
 Kotler, P. (2003). Marketing Management, Analysis, Planning, Implementation and
Control, 8th Edition. New York: Prentice Hall.
26
ANALYZING BUYER BEHAVIOUR
LECTURE THREE
3.1 INTRODUCTION
The purpose of this lecture is to facilitate the learner to understand consumer behaviour. More
specifically it will enable learners to understand factors that influence consumer behaviour, how
consumers make purchase decisions as well as how product or service evaluation is carried out. It
will also focus on some of the models that explain consumer behaviour. The learner should ensure
that they understand the place of customers/buyers in the marketing environment.

 Describe the factors influencing consumer/buyer behaviour
 Discuss how changes in consumer purchase patterns influence decisions making within
organizations
 Describe the process that the customer goes through in making a purchase decision
 Establish the relationship between understanding consumer behavior and decision making in an
organization
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3.3 SUBTOPIC 1 CHARACTERISTICS/FACTORS AFFECTING CONSUMERBEHAVIOUR
Consumer behavior is a discipline that enables an organization and its

management to understand customers in terms of:
◦ Who the customers are?
◦ What they buy?
◦ Why they buy?
◦ What influences their purchases?
◦ Where they buy?
◦ When they buy?
◦ How often do they buy?
◦ In what quantities do they buy?
◦ How they buy?
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3.3.1 Sub Subtopic 1 External Factors
This covers factors that are external to consumers. They include:

◦ Macro environmental factors – discussed earlier
◦ Micro environmental factors – discussed earlier
◦ Marketing mix – these are the controllable variables of any company including
price, place, promotion, product, people, physical evidence and processes.
Each of the highlighted factors have an implication on buyer’s behavior. For example
 Macro environmental factors such as economic factors influence the purchasing power of the
customers this way influencing how much they are willing to spend and at the same time the
quantities they are willing to buy, when and where.
 Macro economic factors such as social cultural factors influence what is acceptable within a
specific social setting. This influences what members of such communities consume and also what
they buy
 Micro economic factors such as competitors influences the number of alternative or substitute
products that are available to the consumers. This way they provide a wide variety which gives
customers choice.
 The power of the supplier influences the prices set on inputs and this influences the finished
products prices. This has a bearing on what customers can buy and the quantity.
 The price charged on a product will determine whether a customer buys or not especially in a
price oriented market
 The level of promotion that is used to encourage buyers to buy the product also influence
consumers purchase.
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3.3.2 Sub Subtopic 2 Individual Characteristics
These are factors that are internal to an individual consumer and also those
relating to his socialization as well as interactions. They include:
◦ Psychological factors – motivation, learning, perception, attitude,
◦ Personal factors - age, economic status, occupation, lifestyles, self concept,
personality
◦ Social factors – roles and responsibility, family, social class, reference group, social
status
◦ Cultural factors – socialization, where you were brought up, the norms, religious
beliefs
Each of the listed factors has an influence on what we buy, when, where and why. For example
 Customers with positive attitude towards a brand will choose it from other competing products
regardless of the prices.
 When a consumer is buying items to be used by all members of the family, the final decisions is
influenced mainly by the preference of the majority of the family members.
 When purchasing, customers tend to make judgment based on what they have heard from
friends, peers, family members or their role models.
 The age of a consumer determines what they have to buy and why for example, a young person
will buy what is fashionable and acceptable among their age mates.
3.4 SUBTOPIC 2 BUYER DECISIONS MAKING PROCESS
 These are the steps that a customer goes through before he respond with a specific
response to the stimuli influencing his purchases.
 It indicates that consumer purchase is not one off action but it involves various stage.
 The time taken to make a purchase decision is determined by:
◦ Importance of the product
◦ The value of the product – measured in price
◦ How often the product is bought
◦ Level of information that the customer has
◦ Accessibility of the product
The process includes the following steps
 Problem recognition or need identification – purchase are made to satisfied needs and
desires currently not satisfied
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 Information search – external sources and internal sources. Determine information
sources for your customers
 Alternative evaluation – evaluated against customers expectations such as quality, price,
quantity, uses, as well as the attitude of others especially those who are close to them or
unexpected situational factors such a scarcity.
 Purchase decision – this can be for trial or repeat purchase. The marketer must
understand the factors that provoke feelings of risk in consumers and must respond with
information and support that will reduce the perceived risk.
 Post purchase behavior - This is determined by the level of satisfaction or dissatisfaction
of the consumer after purchasing, consuming or using the product or service. A
dissatisfied consumer can react in a number of ways:
 She can decide not to buy again;
 The consumer can talk negatively - negative publicity;
 Demand a refund;
 Take legal action
 This would result in loss of customers requiring the organization to invest heavily in order
to get new ones.
 A satisfied consumer can react in a number of ways:
 She can decide to buy again (repeat purchase or become a regular user;
 The consumer talk positively – positive publicity – which attract other customers
for the organization
 Become a loyal customer cutting costs for the business as they do not have to
spend more money to convince them.
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3.5 SUBTOPIC 3 CONSUMER ADOPTION PROCESS
The adoption process focuses on the mental process through which an

individual passes from this first hearing about an innovation to final adoption.
 Awareness:- The consumer becomes aware of the innovation but lacks information
about it.
 Interest:- The consumer is stimulated to seek information about the innovation
 Evaluation:- The consumer considers whether to try the innovation.
 Trial:- The consumer purchases the innovation improve his/her for trial to estimate of
its value
 Adoption:- The consumer decides to make full and regular use of the innovation.
However, it is important to note that consumers do not adopt a new innovation at the
same rate. As a result, consumers can be categorized into the following adopters
categories:
 Innovators (2.5%) – Are venturesome i.e. they are willing to try new ideas at some
risk
 Early adopters (13.5%) –guided by respect i.e. they are opinion leaders in their
community and adopt new ideas early but carefully.
 Early majority (34%) – Are deliberate i.e. they adopt new ideas before the average
person although they are rarely leaders.
 Late majority (34%) – Are skeptical i.e. they adopt an innovation only after a
majority of people have tried it.
 Laggards (16%) – Are tradition bound i.e. they are suspicious of changes, mix with
other tradition bound people and adopt the innovation only when it takes on a
measure of tradition itself.

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3.6 SUMMARY
Consumers behave differently depending on what they are buying, time available, how often the
product is bough, the value of the product and the importance. In this case consumers’ portray
routine, complex, variety seeking and impulse buying behaviours. Consumer behaviour therefore
enables managers to understand consumers when buying, acquiring, consuming or accessing
specific products or services. Consumer behaviour is influenced by a variety of factors including
marketing mix, macro environmental factors, psychological factors, social factors, cultural factors
as well as individual characteristics. A consumer purchase decision is process consisting of
various stages including: need recognition, information search, evaluation of alternatives,
purchase and post purchase decision. These steps are integrated when a customer is buying a
new innovation, through the adoption process consisting of awareness, interest, evaluation,
purchase for trial, future purchases which can be repeat purchases or regular
purchases(adoption) depending of the level of satisfaction.
NOTE
Consumer purchase decision is highly influenced by image created in the minds of the consumer
through various promotional activities.
3.7 ACTIVITIES
 Reflect on what influenced you to live where you live?

 What was the role of the friends in making your decision where to live?
 If you are to purchase a piece of land in Kenya, what would influence your decisions, what
process would you go through?
 Establish the relationship that exists between your purchase behavior and your socio-
cultural context.
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3.8 FURTHER READING
Read the cases provided in the addresses below for further contextualization and
conceptualization of consumer behaviour.
 http://www.mbaknol.com/management-case-studies/case-study-on-consumer-behaviour-
gillette/
 http://www.slideshare.net/marhenbun/mark-671-consumer-behaviour-case-study
 http://www.starbucks.com
 http://www.slideshare.net/mahdimesbahi/consumer-behaviour-case-starbucks
a) How do social and personal factors influence consumer purchasing behavior

b) What is the relevance of understanding consumer behavior to managers?
3.10 GLOSSARY
Consumer behaviour – a discipline that study consumers and the processes they use to
choose, use (consume), and dispose of products and services.
Consumer decision making process – the steps a consumer goes through in deciding whether to
purchase a product or not.
Consumer adoption process – the process a consumer goes through from first hearing about a
production until he become a regular user
Marketing mix – controllable factors that influence consumer purchase including: product, price,
place, promotion, process, people and physical evidence.
Post purchase behaviour – the behaviour of a consumer towards a product after using the
product. It can either be positive or negative depending on the level of satisfaction.
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How do social and personal factors influence consumer purchasing behaviour?

 Social classes are defined as groups more or less homogenous and ranked against each
other according to a form of social hierarchy. Even if it’s very large groups, we usually find
similar values, lifestyles, interests and behaviors in individuals belonging to the same
social class.
 People from different social classes tend to have different desires and consumption
patterns. Disparities resulting from the difference in their purchasing power, but not only.
According to some researchers, behavior and buying habits would also be a way of
identification and belonging to its social class.
 Beyond a common foundation to the whole population and taking into account that many
counterexample naturally exist, they usually do not always buy the same products, do not
choose the same kind of vacation, do not always watch the same TV shows, do not always
read the same magazines, do not have the same hobbies and do not always go in the
same types of retailers and stores.
 For example, consumers from the middle class and upper class generally consume more
balanced and healthy food products than those from the lower class. They don’t go in the
same stores either. If some retailers are, of course, patronized by everyone, some are
more specifically targeted to upper classes such as The Fresh Market, Whole Foods
Market, Barneys New York or Nordstrom. While others, such as discount supermarkets,
attract more consumers from the lower class.
 Some studies have also suggested that the social perception of a brand or a retailer is
playing a role in the behavior and purchasing decisions of consumers.
 In addition, the consumer buying behavior may also change according to social class. A
consumer from the lower class will be more focused on price. While a shopper from the
upper class will be more attracted to elements such as quality, innovation, features, or
even the “social benefit” that he can obtain from the product.
What is the relevance of understanding consumer behavior to managers?

• Buying patterns – It helps determine the type and volume of products and services that
consumers buy over time.
• Buying locations – It helps in determining where customers actually buy their products
from.
• Customer motivation – It allows us to understand what motivates a customer in making
certain buying decisions. For instance, are they buying products for someone else?
• Sources of Information – It helps us understand how consumers receive and process
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information regarding an organization’s products and services.
• Customer need satisfaction- It helps organization to identify the needs of its consumers
thus focus their energies towards the satisfaction of those needs.
REFERENCES
Text Books
 Datta, D. &Datta, M. (2006).Marketing Management. New Delhi: Vrinda Publications
 Homburg, C., Kuester, S. &Krohmer, H. (2009).Marketing Management: A Contemporary
Cotrol,9th.ed. NewDelhi: PrenticeHall.

36
MARKET SEGMENTATION, TARGETING AND POSITIONING
(STP)
LECTURE FOUR
4.1 INTRODUCTION
The purpose of this lecture is to enable a learner to appreciate the rationale behind organizations
decisions to focus and produce products for only specific group of customers. In particular it will
enable them to understand how market segmentation occurs, the purpose, market targeting and
positioning. It will also enable them to understand the link between segmentation, targeting and
positioning. Bases for segmenting consumer markets and the application of these there concepts
in marketing mix decisions will also be discussed.

 Describe the concept of market segmentation and explain its rationale
 Discuss the linkage between market segmentation, targeting and positioning
 Carry out market segmentation, targeting and positioning for an industry of their own
choice
 Determine positioning strategies for specific sectors in an industry of their own
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4.3 SUBTOPIC 1 MARKET SEGMENTATION
 Market segmentation is the process of dividing a total heterogeneous market for a good or
service into several segments. Each of which tends to be homogeneous in all significant
aspects.
 It may be defined as a process of splitting or dividing potential customers into certain
groups or segments sharing similar levels of needs. The definition explains that the process
is simply a division of markets into target groups.
 It is creating sub-sets of a market based on similar characteristics of consumers with
similar demands and providing them with a product to satisfy their need in a much better
way than it could have been otherwise.
 The process that involves aggregating prospective buyers into groups that have common
needs and will respond to similar to a marketing action.
Why segment markets:
 It allows a business to vary its marketing mix and promotion to different segments of its
target market
 Segmentation helps a company focus on the needs and desires of the customers most
likely to purchase its products.
 It also helps a business identify and understand its competition
 It also can have a higher ratio of marketing dollars spent to dollars returned to the
business.
Some of the factors that have made organizations opt for segmentation include:
 globalization,
 increased numbers of competitors,
 more diversity among customers,
 technology,
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4.3.1 Sub Subtopic 1 Market Segmentation Procedure
Factors to consider when segmenting

1. Size- Find out if the segment is actual or potential or of sufficient size to justify the
development of a differentiated marketing strategy
2. Incremental cost- The additional cost to incur in seeking satisfy a particular segment and if
they will be recovered with additional profit over that which could be anticipated if the
market were not segmented in the first place
3. Size of intersegment differences- The greater the size of the intersegment differences the
more the justification for segmentation and treating segments as separate markets.
4. Durability of differences- the longer the differences last between the segments the
greater the justification for distinguishing them.
5. Cyclical volatility-the more stable a segment the better.
6. Compatibility with other segments- it should seek to define segments which are mutually
reinforcing rather than in opposition to one another
7. Degree of fit- the company should seek to build up on its strengths
8. Degree of competition- the best segments are those in which there is an absence of direct
competition
Steps in the Segmentation Process

 Define and analyze the market—determine market parameters (based on characteristics
that may include or exclude customers from a group).
 Identify and describe potential segments—decide on the most useful dimensions or
variables for selecting members of potential market segments; then aggregate customers
into homogeneous groups, develop a profile of the characteristics of each group, etc.
 Select the segment(s) to be served—select segments by evaluating against predetermined
criteria, then rank according to the organization’s ability to serve the market profitably
while providing customer satisfaction.
 Determine the product positioning strategy—determine the best “fit” between a product
and a market according to features most desired by customers; consider competitors’
positioning strategies, organizational goals, and the market situation.
 Design and implement the marketing program—develop a tactical plan (marketing mix)
and determine objectives for the marketing program; all elements of the marketing mix
must be consistent with the selected positioning strategy.
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4.3.2 Sub Subtopic 2 Bases for Segmenting Consumer Markets
1. Geographic Segmentation is known as Geographic Segmentation. Examples of such

A market segmented into sub-markets on the basis of geographic location division are nations,
states, regions, provinces, districts, counties, cities or even neighbourhoods. An international firm
may divide its market on the basis of nations and then move further down to the level of cities
and neighbourhoods. A national company may start with at the level of counties/regions and
move down to cities and other sub-levels. Geographic segmentation is important as there are
many factors contributing to the varying needs of consumers across different regions of the
world. For example E.A.B.L distributes products such as Álvaro and Malta in areas like Garrisa
where non-alcoholic beverages are sold.
2. Demographic Segmentation
A market split into sub-segments on the basis of variables such as age, gender, family, income,
education, religion, culture, occupation, profession, ethnicity etc is known as demographic
segmentation. To make it simpler, it is the division of market on the basis of demographics. We
will discuss each variable briefly here.
Age: This is one of the most effective ways of demographic segmentation. Modern firms use this
as a very useful marketing tactic to create and retain their customers’ right from birth to death.
EABL different advertisements and media campaigns target people of different ages such as
children, teens, adults and senior citizen.
Ethnic Segments: The multi-cultural societies’ potential customers may all be located in the same
geographic location but their needs and wants and ways to satisfy these needs and wants are
different. Companies have successfully segmented their markets on ethnic basis all over the
world in areas where the demand needs to be met that way. For example Kenya Commercial
Bank has the sharia-compliant account [interest free] for the Muslim community.
Gender: Gender segmentation is another powerful and successful segmentation and can be seen
in areas like clothing, cosmetics, beauty products, hair styles, careers, cars, insurance and now
even education. Perfume companies target men and women separately with their various model
and brands Girls like pink bags while boys may go for blues or blacks. .
There is a huge scope of demographic segmentation and is not limited to age, ethnicity and
gender only. Other bases for this type of segmentation are like Life Cycle Stage, Income groups,
sexual orientations, family size, education and many others.
3. Psychographic Segmentation
Life style, social class and personality may be the basis for psychographic segmenting of markets.
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Examples of life styles segments would be people drinking coffee or tea, weight watchers,
seekers of less fatty food. Products based on life styles may be highly customized to appeal to a
particular way of life. Younger people’s life-style requirements may be a great deal different than
of those who are above their age group. Examples of social class segments are holidays, hotels
and air travel tickets targeting people of a particular class. The consumer in psychographic
segmentation may have the same income level and gender but they may have different
inclinations and a unique style of living. They may have different personalities determining their
likes and dislikes for a particular class of products.
4. Behavioural Segmentation
Behavioural segmentation is based on the variables of the actual behaviour of the consumer. For
instance, some users may be classed as heavy users while others as light users. Some may be just
first time user while other are occasional users only. To summarise the behavioural segment may
consist of the following variables: user status, usage rate, benefits sought, occasions, brand
loyalty, e.t.c.
Multi-attribute segmentation – where you combine more than one method of segmeantion, eg.
Demographic and geographic segementation together
4.3.3 Sub Subtopic 3 Effective Market Segmentation

 The five main requirements of a market segment to ensure that it is effective are that
they must be measurable, actionable, accessible, substantial and differential. If each of
these requirements are met market segmentation is likely to occur in a successful and
effective way.
 Measurable. A market segment must be measurable in terms of its size, purchasing power
and profiles.
 Actionable. In order for effective segmentation to occur a market segment must also be
actionable. This means that effective programs can be designed for serving and attracting
the segments.
 Accessible. They should be easy to reach and serve.
 Substantial. For effective segmentation, a market segment should be large or profitable
enough to serve. They should be the largest possible homogeneous group that is worth
pursuing with a marketing program that has been tailored.
 Differential. Market segments need to be distinguishable conceptually and must respond
in different ways to the different marketing mix programs and elements.
These requirements help determine whether market segments will contribute towards effective
segmentation or not. Breaking down the requirements into these categories allows them to be
41
analyzed and addressed individually to make the process as efficient as possible.
 The five main requirements of a market segment to ensure that it is effective are that
they must be measurable, actionable, accessible, substantial and differential. If each of
these requirements are met market segmentation is likely to occur in a successful and
effective way.
 Measurable. A market segment must be measurable in terms of its size, purchasing power
and profiles.
 Actionable. In order for effective segmentation to occur a market segment must also be
actionable. This means that effective programs can be designed for serving and attracting
the segments.
 Accessible. They should be easy to reach and serve.
 Substantial. For effective segmentation, a market segment should be large or profitable
enough to serve. They should be the largest possible homogeneous group that is worth
pursuing with a marketing program that has been tailored.
 Differential. Market segments need to be distinguishable conceptually and must respond
in different ways to the different marketing mix programs and elements.
 These requirements help determine whether market segments will contribute towards
effective segmentation or not. Breaking down the requirements into these categories
allows them to be analyzed and addressed individually to make the process as efficient as
possible.
4.4 SUBTOPIC 2 TARGET MARKETING
 After segmenting the markets into various potential segments, the company should then
evaluate the various segments. It should then select the target segments and decide
which market strategy it will adopt. Target marketing focus on directing your marketing
endeavors toward a group of people. After dimensions have been selected to use in
defining the segments, segments then must be identified in the market under study.
 A target market is a group of customers that the business has decided to aim its
marketing efforts and ultimately its products and services towards.
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4.4.1 Sub Subtopic 1 Evaluating and Selecting Target Segments
Several factors are considered when evaluating probable target segments

1. Size and Growth: A company should find out what is the size of the market potential of
each market segment. The growth characteristic of the market segment can be easily
worked out once a long term market demand or market potential is forecasted. This
analysis will indicate what is the size and estimated market growth of each segment.
2. Profitability Analysis: The steps involved in estimating profitability of each potential
market segments are as follows:
a) Identify major activities that are relevant to sales and distribution costs
b) Convert the natural or traditional expenses into functional expenses.
c) Allocate functional expenses to market expenses
3. Prepare profitability of each market segment Competitive Analysis: Profit Potential and
the ability of an industrial marketer to penetrate a particular market segment depends on
careful analysis of the strengths and weaknesses of existing or potential competitors both
domestic and foreign.
4. Company Objectives and Resources: An industrial firm should ask itself whether each
potential segment is in line with the firms long term objectives, if not some segments
should be eliminated. A company will succeed in a segment if it has certain resources or
strengths which are superior to competitors
5. Role of brand - Would the firm be required to create a new brand, or could an existing
brand be leveraged into the new target market, or is brand relatively unimportant?
6. Competitors - How dominant are the established competitors? What degree of

competitive rivalry exists? Are there significant indirect competitors (or close substitute
products)?
7. Distribution channels - How easy would it be to gain access to the appropriate
distribution channels? What level of new investment would be required in this regard?
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4.4.2 Sub Subtopic 2 Advantages of Targeting
Small companies have broad targeting advantages in marketing when they

properly identify their key customers. This process involves studying key characteristics
personalities and buying behaviours of customers. That way business can better meet the needs
of their customers. Companies that use target marketing also know when certain trends or
changes impact the tastes and preferences of their core customers. They can then adjust their
marketing strategies accordingly.
Products: One advantage of target marketing is the ability to offer the right products. A product
manager who properly targets her customers knows their age range. She focuses on products
that meet their needs, solve their problems or help them in some way. For example, in
multichoice the bouquets have channels that target different age groups like cartoons for
children and documentaries for old folks.
Price: Companies that target their customers in marketing are also more informed about the
prices customers will pay for products and services. Savvy marketers know the average incomes
of their primary customers. They have a general idea if their customers are price sensitive or not.
Small-business owners can better support their understanding of customer price sensitivity
through marketing research. This can be accomplished by asking customers the maximum prices
they would pay for certain products in a phone survey, for example DSTV targets high and
medium income earners and GOTV targets middle income earner
Advertising: Small-business owners who implement target marketing are usually more efficient
and effective with their advertising. They are more efficient because they don't waste money
advertising to people outside their target audience. Companies using target marketing are more
effective because they reach the right consumers with messages that are more applicable. Small
companies can also choose the best media sources for their advertising by targeting certain
customers. Most media companies inform their advertisers of the demographic groups they
typically reach. For example, GOTV is mostly advertised in local radio stations
Geography: Small companies that use target marketing also know where their customers live.
Business owners operating locally may be able to pinpoint certain neighborhoods from which
they attract business. Moreover, customers' tastes and preferences vary in different geographical
regions. Companies can be more efficient in meeting those customers' preferences through
target marketing. For instance DSTV and GOTV mobile devices are preferred mostly by residents
in the urban centres than in the rural centres.
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4.4.3 Sub Subtopic 3 Target Market Strategies
No one strategy will suit all consumer groups, so being able to develop specific
strategies for your target markets is very important.
There are three general strategies for selecting your target markets:
• Undifferentiated Targeting: This approach views the market as one group with no individual
segments, therefore using a single marketing strategy. This strategy may be useful for a
business or product with little competition where you may not need to tailor strategies for
different preferences.
• Concentrated Targeting: This approach focuses on selecting a particular market niche on
which marketing efforts are targeted. Your firm is focusing on a single segment so you can
concentrate on understanding the needs and wants of that particular market intimately.
Small firms often benefit from this strategy as focusing on one segment enables them to
compete effectively against larger firms.
• Multi-Segment Targeting: This approach is used if you need to focus on two or more well
defined market segments and want to develop different strategies for them. Multi segment
targeting offers many benefits but can be costly as it involves greater input from
management, increased market research and increased promotional strategies.
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4.5 SUBTOPIC 3 MARKET POSITIONING
 Positioning is how the firm wants its product or services to be perceived by the target
customers. For example multi-choice is perceived as the best in the coverage of live
football games
 Positioning is developing a product and brand image in the minds of consumers. It can
also include improving a customer's perception about the experience they will have if
they choose to purchase your product or service. The business can positively influence
the perceptions of its chosen customer base through strategic promotional activities and
by carefully defining your business' marketing mix.
 Effective positioning involves a good understanding of competing products and the
benefits that are sought by your target market. It also requires you to identify a
differential advantage with which it will deliver the required benefits to the market
effectively against the competition. Business should aim to define themselves in the eyes
of their customers in regards to their competition.
 Market positioning is the manipulation of a brand or family of brands to create a positive
perception in the eyes of the public.
4.5.1 Sub Subtopic 1 Benefits of Market Positioning
 Good positioning cements the product in the customer's awareness. It gives the customer
information about the product in a unique way that resonates and states their mind forever.
If executed correctly, positioning creates value, ensuring that customer will pay more for the
product because they understand and agree with the product's position. This execution
requires using advertising to explain to consumers the similarities and differences between
the product and competing products so that customers understand why they should pay a
premium. For instance DSTV packages are better because of the supersport live matches as
opposed to zuku.
 Companies can choose to extend their positioning to create a brand. A brand is a
company name that labels a product or family of products and carries a distinct position in
the minds of customers. Brands that customers see as positive command premium prices.
Brands can extend their market position to new products that the parent company
introduces. This is an advantage over companies who don't have brand positioning because
unbranded new offerings can't command a premium. For example multichoice brands include
DSTV, GOTV, DSTV mobile and GOTV mobile.
 If customers see enough positive differences between a product position and its
46
competitors position the product becomes differentiated. This means that the product has
the competitive advantage and many customers believe that the product performs better and
in ways that competing products cannot perform. The customer may feel that they have an
advantage over other people who don't use the product. Customers who tell others about
this advantage further differentiate by making word-of-mouth category claims, enhancing the
product's position and spreading favorable information about the brand. DSTV has the best
channel listing ranging from sports, movies, documentaries as opposed to other digital
providers.
 It increases sales for the organization
 It provides brand visibility
 Can give a company competitive advantage
4.5.2 Sub Subtopic 2 Positioning Strategies
 Positioning on specific product features -If your product or service has some unique
features that have obvious value this may be the way to go.
 Positioning on benefits - Strongly related to positioning on product features. Generally,
 Positioning for a specific use - Related to benefit positioning. E.g. The blue band advert.
This works best when you can teach your customers how to use your product or when
you use a promotional medium that allows a demonstration.
 Positioning for user category - A few examples: "You've Come a Long Way Baby," "The
Pepsi Generation" and "Breakfast of Champions." Be sure you show your product being
used by models with whom your customers can identify.
 Positioning against another product or a competing business - A strategy that ranges
from implicit to explicit comparison. Implicit comparisons can be quite pointed; for
example, Avis never mentions Hertz, but the message is clear. Also Orange and
Safaricom. Explicit comparisons can take two major forms. The first form makes a
comparison with a direct competitor and is aimed at attracting customers from the
compared brand, which is usually the category leader. The second type does not attempt
to attract the customers of the compared product, but rather uses the comparison as a
reference point.
 Product class disassociation - A less common type of positioning. It is particularly
effective when used to introduce a new product that differs from traditional products.
Lead-free gasoline and tubeless tires were new product classes positioned against older
products. The trick is to find out who are the potential brand switchers or experimenters
and find out what it would take to get them to try your product or service. The obvious
disadvantage of dealing with those who try new products is that they may move on to
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another brand just as easily. Brand loyalty is great as long as it is to your brand.
 Hybrid bases - Incorporates elements from several types of positioning. This is particularly
true in smaller towns where there aren't enough customers in any segment to justify the
expense of separate marketing approaches.
4.6 SUMMARY
Market segmentation, targeting and positioning are aspects that work together to enable an
organization to gain competitive advantage. Through segmentation, an organization is able to
identify markets with opportunities and those that are less competitive. Through targeting the
organization is able to select the target market with greater potential and that which contributes
to the achievement of organizational goals. Through positioning, the organization is able to
achieve to create a positive image and occupy a customer’s most preferred perceptual map.
These three have to be interlinked to achieve organizational objectives.
NOTE
You never make any marketing mix decisions until you define your target market
4.7 ACTIVITIES
Read the case below and interpret the positioning strategies used and why?
What is happening to these brands in Kenya? How would you use positioning to the advantage
of the companies involved?
Car manufacturer Daewoo in the UK, has successfully positioned them as the family value model.
Before Volkswagen purchased Skoda it had a negative image and known as a cheap car make in
the UK. However Volkswagen have successfully repositioned the brand so it is now known as a
"good" make which regularly wins car of the year awards. Positive comments from the car
industry combined with successful design changes have changed the perception of consumers
about the Skoda brand.
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4.8 FURTHER READING
Read the cases provided for further understanding of STP process

 http://www.networkedinsights.com/downloads/casestudies/Almay-Case-Study-Networked-
Insights.pdf
 http://www.networkedinsights.com/downloads/casestudies/Almay-Case-Study-Networked-
Insights.pdf
a) Explain how segmentation, targeting and positioning can be used by managers to improve an
organization’s performance
b) What is positioning, how would position a product offered by your company.
49
4.10 GLOSSARY
Behavioural segmentation is based on the variables of the actual behaviour of the consumer. For
instance, some users may be classed as heavy users while others as light users.
Concentrated Targeting: This approach focuses on selecting a particular market niche on which
marketing efforts are targeted.
Demographic segmentation isa market split into sub-segments on the basis of variables such as
age, gender, sex, family, income, education, religion, culture, occupation, profession, ethnicity.
Geographical segmentation is when a market is segmented into sub-markets on the basis of
geographic location.
Market segmentation is the process of dividing a total heterogeneous market for a good or
service into several segments.
Concentrated Targeting: This approach focuses on selecting a particular market niche on which
marketing efforts are targeted.
Psychographic segmentation involves segmenting the market according to life style, social class
and personality.
A target market is a group of customers that the business has decided to aim its marketing efforts
and ultimately its products and services towards.
Target marketingis the process of directing your marketing endeavors toward a group of people.
Undifferentiated Targeting: This approach views the market as one group with no individual
segments, therefore using a single marketing strategy.
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What is positioning, how would position a product offered by your company

 User positioning
 Product benefit positioning
 Use positioning
 Price positioning
 Quality positioning
 Product bundling positioning
 Competitor positioning
Segmentation, Targeting and Positioning can be used by a manager to improve an
organization’s performance by:
 Understanding Customer needs: Customer needs are complex and very unique to
every person, some customers because of their status in the society want to maintain
their status quo by literally taking premium products e.g. EABL produces a range of
spirits e.g. Jonnie walker which is a premium brand targeting a certain class of people.,
some like buying small packages, e.g. those who prefer Guinness as their brand of
choice can not only have it in 500ml bottle but also in the 330ml bottle. some love bulk
hence the new innovation of canning beer where one can now buy in a pack of six,
some love just the colour of the package e.g. Tusker Malt, therefore if an organization is
able to identify all these needs that means – Customer migration from the informal to
formal beer sector (e.g. due to health reasons, consumerism, will be reduced and
therefore retaining customers and attracting new ones.
 Defend Market share: Segmenting business and consumer markets is important to

maintain existing market share and expand it. A successful company needs to gain
competitive advantage by looking closely at the specific needs of customers and
devising strategies to provide maximum benefit and value. EABL has 94% market share
in beer, with its Tusker Larger as the strongest brand, this need to be defended from
competition, e.g. Summit Lager (Keroche), SAB Miller, etc. In the premium beer
category, EABL has to defend its market share (96%), particularity from Heineken.
Therefore the manager needs to work closely with the innovations team to be able to
come up with products that suite the customers’ needs so as to retain its market share.
 Profit Potential: Target marketing and positioning creates new potential customers and
new ideas for new products and services. By basically catering and providing for almost
everyone in the target market and even identifying new markets that means the
organization will be growing so fast and producing a variety of products and this will as
a result maximize the company’s profits. EABL is one of the few companies which are
viewed as most successful and which have a history of making a lot of profit, this has
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been made possible through its continuous market research and innovations e.g.
through repackaging e.g. Tusker, introduction of new products e.g. snap etc. by its
participating power and the ability to oversee a market gap and working towards filling
it.
 Growth: Segmenting, targeting and positioning the markets creates further
opportunities for business growth. Specific groups require specific products. Here an
organization identifies a segment of its market that have some specific common
characteristic which require a product of its own, e.g. Muslims at Garrisa may not
partake in alcohol but they may prefer a soft drink instead therefore this motivates the
organization to try and satisfy this need by designing a product that is compatible for
the customer’s needs. This will consequently increase the total production of that
organization and as a result the organization will grow and expand its services even
across boarder. E.g. exporting of Tusker in Sudan and the U.K. Increase distribution of
mainstream and premium spirits (Baileys, JW Red), Build up further beer distribution
consumption, especially in of trade e.g. using cans. Increase out volumes to Senator keg
let coverage for Senator in rural areas by converting of the informal beer market also
encourages growth.
 Retaining Customer: Firms can establish a life-long relationship with their consumers
via formulating an effective market segmenting strategy. Sometimes consumers ought
to leave a certain market simply because of health reasons, e.g. the introduction of
Tusker life was targeting those that are health cautious and are checking their calories
intake and also the diabetics. Others just want to change. Therefore if an organization is
able to identify such people in the market then they will be able to retain them to their
market by designing an alternative product, a good example from the EABL is those
people who once in their life have realized that alcoholic products do not do good to
their health, so they want to stop using them, EABL were able to oversee this and so
they designed an alternative products like Malta and Alvaro, simply because they do not
want to lose their customers.
 Right Target Market: The Company’s resources are utilized for producing the right
product for the right customer. It enables a marketing firm to use its marketing
resources in the most efficient manner in the selected target market. The marketing
firm selects the most promising market segment and concentrates all attention on that
segment only. This offers best results to the firm in terms of sale, profit and consumer
support as compared to the results available from spending such resources on the total
market. A better example for our case is for the non-alcoholic drinks, apparently we do
not see adverts for these products, the reason might be for as much as it contains the
EABL market share but it is not that promising than the alcoholic ones.
 Facilitate effective advertising: Advertising media can be more effectively used
because only the media that reach the segments can be employed. It makes advertising
result oriented because it designs advertising for a specific segment, hence minimizing
the adverting cost. For example for the Tusker export and Tusker Sudan products, their
52
adverts are run in their respective countries where the target the specific needs of
customers and devising strategies to provide maximum benefit and value, also the
advertisement of snap that targets ladies of a certain age group.
 Identify areas of improvement; Segmenting targeting and positioning enables the
managers through the sales team to identify areas of improvement e.g. there is limited
differentiation between the merchandize found across different outlet segments we
could drive additional sales and tactically upsell by introducing clear segmented
execution standards, e.g. More brand differentiation between outlet segments Better
brand prioritization within the individual outlet.
 Competitive strategies: The manager is able to come up with strategies through market
analysis, that help him to counter competition for instance, Tusker and Guinness
account for 60% of all branded coolers in Kenya However, several attacker brands are
finding their way into the market, like Heineken. Several strategies could be employed
to defend shares against competition, e.g. Fill up outlets space with own branded
coolers, to prevent easy access and share of shelf for attackers. Launch of a super-
premium brand to match international premium entrants like Heineken.
 Workforce: Depending on the size and the demands of the market the manager will be
able to strengthen the customer marketing team through resources and skills and build
a strong network of distributors that have the potential to grow with EABL.
 Good Will: Segmentation, targeting and positioning builds strong relationship between
customer and organisation. In this era of competition every organisation wants to make
more profit and enjoy competitor advantages. The big organizations are keeping
growing because they are fulfilling customers need. The small organizations are still
remaining small organizations as they do not have enough resources to fulfill
customer's values. This is the reason big organization are attracting customers because
of dividing market in to different segments and targeting each segment by providing
their needs and values.
53
REFERENCES
Text Books
 Datta, D. &Datta, M. (2006). Marketing Management. New Delhi: Vrinda Publications
 Homburg, C., Kuester, S. &Krohmer, H. (2009). Marketing Management: A Contemporary
Cotrol,9th.ed. NewDelhi: Prentice-Hall.
54
MARKETING INFORMATION SYSTEMS AND FORECASTING
LECTURE FIVE
5.1 INTRODUCTION
The quality of the decisions made within organizations, are dependent on the
quality of information that the decisions makers have. The purpose this lecture there is to enable
the learner to appreciate the importance of marketing information systems and describe the ole
that they play in ensuring the information is provide to the decision makers at the right time, in
the right quality and in the right format. This lecture therefore focuses on components of
marketing information systems, sources of marketing information systems, marketing research
and their relevance in decision making.

 Describe the concept of marketing information systems
 Discuss marketing research process
 Carry out marketing specific research and provide information relevant to decision makers
 Establish the link between the four sources of data.
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5.3 SUBTOPIC 1 COMPONENTS OF MARKETING INFORMATION SYSTEMS
• A marketing information system is a system which analyses and assesses marketing information,
designed to support marketing decision-making. This information is gathered continuously from
sources inside and outside an organization. Management has five distinct functions and each
requires support from an MIS. These are: planning, organising, coordinating, decisions and
controlling.
• According to Jobber (2007) Marketing Information system is a "system in which marketing
data is formally gathered, stored, analysed and distributed to managers in accordance
with their informational needs on a regular basis.
• Kotler, et al. (2006) defines it as "people, equipment, and procedures to gather, sort,
analysed, evaluate, and distribute needed, timely, and accurate information to marketing
decision makers.”
Role of MIS
 Timely Market information provides a basis for monitoring & evaluating emerging market
trends.
 Market information forms a basis for demand forecasting i.e. how much the market can
consume.
 Market information assist in identifying segmentations in the market this can be useful in
customizing products to meet market demands.
 MIS identifies marketing opportunities & strategies
 It helps an organization realise the forces affecting the marketing activity and the impact
of these forces. These forces could be external or internal; controllable or uncontrollable.
 It provides a basis for decisions such as productdevelopment or improvement, pricing,
packaging, distribution, media selection, and promotion.
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•
5.4 SUBTOPIC 2 INTERNAL RECORDS
Information collected over time from a company’s customers, however its

underutilized/unappreciated as most organizations do not see it value. For example from
invoices you can get information on:
- Highest selling product type per region: identifies market niches for different
products.
- Highest selling pack type/size – Identifies the acceptable pack size among your
consumers.
- Volumes sales per territory - Identifies which areas to increase marketing initiatives
- Volume of sale by sales persons- Identifies skilled/competent workers.
- Volume of sale per customer- Identifies committed Customers
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5.5 SUBTOPIC 3 MARKETING INTELLIGENCE SYSTEM
A marketing intelligence system is a set of procedures and data sources used by

marketing managers to sift information from the environment that they can use in their decision
making. Ways of gathering market intelligence include:
a) Unfocused Scanning -Magazines, Newspapers, Journals, talking to customers,
producers & Suppliers. Its generally observing and conversing.
b) Semi-Focused Scanning - More deliberate, train sales force to note Customers
complaints, request, issues raised by distributors & Competitors steps.
c) Informal Search- Encourage Intermediaries such as Collectors, retailers, Traders &
other middlemen to collect Market intelligence.
d) Formal Search -
Critically focuses on the
- Competitive insight
- Market Insight
- The company can set-up customer advisory panels consisting of representatives of
customers or a company's largest customers or its most outspoken or sophisticated
customers.
- The company can purchase information from outside suppliers such as Marketing
Research Firms.
- The organization can establish a Marketing Information Center to collect information. The
center can be equipped with newspapers, radios, televisions, magazines etc all of which
can be harnessed continually to acquire information
- The company can motivate distributors, retailers, and other intermediaries to pass along
important intelligence concerning the activities of competitors
-
5.6 SUBTOPIC 4 MARKETING RESEARCH PROCESS
 Marketing Research is the systematic collection, analysis and reporting data and findings
relevant to specific marketing situations facing a company. This includes research on the
effects of pricing, advertising and other marketing variables.
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 Five steps
1 2 3
Locating and Implementing

Designing the
defining issues the research
research project
or problems and Plan, Collecting and
research objectives Analyzing data
4 5
Interpreting Reporting
research findings research findings
5.7 SUBTOPIC5 DECISION SUPPORT SYSTEMS
 This concludes how the information gathered is used to make the Marketing decisions.
This is an information system that helps with decision making in the formation of a
marketing plan. These are sets of techniques that can help businesses form a decision
about their product or service.
 The decisions can be based around whether they should keep a product or not, whether
to move into new markets or when to change a pricing strategy.
 The reason for using marketing decision support systems is because it helps to support
the software vendors planning strategy for marketing products. Marketing models
available are mostly scientific & Computerized, this include:
 Time series sales modes
 Brand switching models
 Linear programming
 Elasticity models (price, incomes, demand, supply)
 Regression and correlation models
 Analysis of Variance (ANOVA) models
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5.8 SUBTOPIC 6 CLASSIFICATIONS OF MARKETING INFORMATION SYSTEMS
 Planning systems – These provide information on sales, costs and competitive activity,
together with any kind of information which is needed to formulate plans.
 Control systems - These provide continuous monitoring of marketing activities and
enable marketing executives to identify problems and opportunities in the marketplace.
At the same time, they permit a more detailed and comprehensive review of
performance against plans.
 Marketing research systems - such systems allow executives to test decision rules and
cause/effect hypotheses. This permits the assessment of the effects of marketing
actions and encourages improved learning from experience.
 Monitoring systems - these systems provide management with information concerning
the external environment in which they are operating.
5.9 SUBTOPIC 7 FORECASTING DEMAND AND LEVELS OF MARKET MEASUREMENT

• Based on historical sales & demand data, organizations can create long term demand forecasts
which can be used for capacity planning as well as shorter term estimates of demand which can
be used for tactical or operational planning of manufacturing, logistics and staffing .
Steps in Demand Forecasting
Determination of the demand forecasts is done through the following steps:
1. Identify the products that are to be considered as part of the forecast process. Doing so
helps to create a sense of focus for the effort and make it easier to gauge the public's
recognition and attraction to those products.
2. Set parameters for the demand forecast. Establish a specific time frame for the
projection, such as the beginning of the second quarter to the end of that same quarter in
the upcoming business year. This makes it easier to include events that are highly likely to
occur in that time frame and have some effect on consumer demand for the product
under consideration.
3. Determine the target market for the product. The market may be composed of
demographics that have to do with age, gender, location or any other set of identifying
characteristics desired.
4. Gather data relevant to the effort to forecast demand. Information such as a breakdown
in population within targeted areas, dividing by age groups or economic classes, can often
help make it easier to determine the approximate number of sales to anticipate during
the period under consideration.
5. Calculate the actual forecast. While there are several different formulas used for this
60
process, most will require assuming that a fixed percentage of the target market will
consume the product a certain number of times during the forecast period.
Methods of Forecasting
• Qualitative approach: Used when the situation is vague and little data exists e.g. new
products and technologies. It involves intuition and experience. Techniques used in this
approach are: Jury of execution opinion, Sales force composite, Delphi methods and
consumer market survey.
This is done if a company does not have historical data on products' sales.
1. Jury of executive opinion: The opinions of a small group of high-level managers are
pooled and together they estimate demand. The group uses their managerial experience,
and in some cases, combines the results of statistical models.
2. Sales force composite: Each salesperson is asked to project their sales. Since the
salesperson is the one closest to the marketplace, he has the capacity to know what the
customer wants.
3. Delphimethod: A panel of experts is identified where an expert could be a decision
maker, an ordinary employee, or an industry expert. Each of them will be asked
individually for their estimate of the demand. An iterative process is conducted until the
experts have reached a consensus.
4. Consumer market survey: The customers are asked about their purchasing plans and
their projected buying behaviour. A large number of respondents is needed here to be
able to generalize certain results
• Quantitative approach: Used when the situation is stable and historical data exists. For
example existing products and current technology. It involves mathematical techniques
and uses Time series and causal models for calculation.
• This is done using the following methods
• Time series model: The forecast is based only on past values and assumes that factors
that influence the past, the present and the future sales of your products will continue.
• Causal model: It uses a mathematical technique known as the regression analysis that
relates a dependent variable (for example, demand) to an independent variable (for
example, price, advertisement, etc.) in the form of a linear equation.
Market Measurement
 Market measurement and market forecasting are management tools through which the
markets which are investigated are expressed in quantitatively measurable entities
 Market measurement focuses on the current size and characteristics, where as market
forecasting only looks at the future market situation.
Levels of Market measurement
 Consumer level: Provides information on the number of final users defined in different
market segments
 Product level: Provides information on the total number of current buyers of a
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product
 Geographical level: Dividing the total market into geographic terms and expressing
measurements in this terms
 Time levels: A market measurement should be specific in terms of the times of
purchase and provide information on the different time periods such a monthly,
seasonal and annual sales
Methods of Market measurement

 The chain ratio method - This method involves the percentage calculation of the number
of people who are expected to buy the product in the future. This is called the buying
intention
 Market build-up method - It involves the determination of all potential buyers of a
product and the quantity they will buy. These two figures are then multiplied to obtain
the market potential for the particular product.
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5.7 SUMMARY
Marketing information systems provide quality information to decision makers, on the right time
and in the right format. Information can be from company’s records, marketing intelligence,
marketing research or the decision support systems existing in an organization. This information
is used to make decisions such as marketing decisions and forecasting. Demand forecasting can
be done using various methods such as executive jury, time series, and market surveys e.t.c. The
information gathered can also be used to for market measurement.
NOTE
Valuable information delivered late and in the wrong format is irrelevant to

any decision maker.
5.8 ACTIVITIES
Guided by the practical example given in the further reading section, evaluate
other resource planning and customer relationship management information systems that
organizations can utilize to achieve an advantage in information management and meeting
consumer needs.
5.9 FURTHER READING
Marketing Information Systems: A practical example in Africa
Oshochemical Industries Ltd.

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Osho Chemical Industries Limited is a leading Manufacturer, marketer and distributor of Crop
protection, Animal Health Products, Public Health, Industrial chemicals, Farm Equipment, allied
products and services. The company has been operating in the Industrial Area of Nairobi, Kenya,
since 1993.Customer acquisition and retention is important for Oshochemicals, in addition to
provision of quality goods and service. To make this achievable, the organization has invested in
different marketing intelligent systems. These systems are:
 Microsoft Dynamics NAV: Oshochemicals uses an Enterprise Resource Planning tool

known as Microsoft Dynamics NAV to Create & track sales orders and run analysis tools
based on customer trends. Navision consists of a centralized database made up of all
customers, products and vendors. The departments which use the system for daily
transactions include: Production, Warehouse, finance and order processing. With a
centralized system and database, the organization finds it easy to track orders made by
customers and monitor any changes in buying trends.
 Microsoft Dynamics CRM: Microsoft Dynamics CRM is a customer relationship
management (CRM) tool which drives sales productivity and marketing effectiveness
through social insights, business intelligence, and campaign management.
• Oshochemicals has been using this system for the past two years to help
develop leads (prospective customers), nurture contacts, track their
marketing activities, and keep their customers happy.
• The system runs on a centralized database, which stores all customer-
related information.
• Users can connect to the CRM user-interface using a desktop PC, laptop,
mobile phone or tablet.
• The sales and marketing departments use the system to:
• Create New Leads and opportunities (prospective customers)
• Store contact information for all customers (accounts)
• Store all sales & marketing material e.g. product brochure and catalogues.
• Create segmentation of the accounts and leads based on region, industry
and interests.
 SMS Mobile Marketing -Oshochemicals uses SMS marketing and campaigns to reach out
to end users (farmers). The organization has been using this tool to reach out to farmers
through radio campaigns, which have a country-wide outreach and are conducted
periodically.
• The marketing department liases with several radio stations in remote areas to carry out
radio programs. These radio programs serve several purposes:
• Educating farmers on company products and issues affecting their plants and animals.
• Getting information from listeners (farmers) on any diseases affecting their plants or
animals.
• Establishing new contacts (farmers) through the SMS channel.
Examples of Demand Forecasting & Market Trends

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Demand Forecasting: Real Estate Company
If the demand for housing is currently high, a real estate company can make a decision to
increase the cost of housing. It can also decide to expand to new regions, where cost of building
is relatively low e.g. companies targeting Machakos county.
Real Estate companies can also estimate the demand for a certain region if they realize that
infrastructure for that particular region is being developed. For example, cost of land and housing
along Thika road increased after the completion of the Highway.
Demand Forecasting: Inventory Management

Demand forecasting and estimation is critical for inventory management. Businesses buy
inventory based upon demand forecasts. For example, Supermarkets increase their stock of
certain items during holiday season because they know from past data that demand increases. If
businesses do not use accurate demand forecasting and estimation methods, they risk
purchasing too much or too little inventory. Businesses with too much inventory might lose some
of it to time and expiration dates.
Demand for tellers in a bank:

A bank might observe the number of customers filling up the queues to determine if more tellers
are required. If the queues are relatively longer on certain periods e.g. beginning of the month,
then they might decide to increase tellers on those particular days.
Demand for customers in a food chain.

A food chain e.g. Kenchic might use historical data to determine the number of customers it
serves. For example if the customer base is increasing, the management can decide to expand by
opening up more food chains.
Market Trend analysis : Website Upgrade

Many organizations go to great lengths to make their website more usable, but fail to asses
impacts before and after the upgrades. A Customer survey that asks visitors to rate the website
on a certain scale should have a mean that is flat before the upgrade. After the upgrade, Trend
Analysis can reveal the "jump" or "decline" in satisfaction levels of your customers. This can also
be used to simulate, by using focus groups or a representative sample, the potential increase or
decrease in satisfaction levels. This data can be further used for various cost/benefit analyses.
65
a) Explain the importance of marketing information systems

b) Differentiate between marketing research and marketing intelligence
5.11 GLOSSARY
A demand forecast is the prediction of what will happen to your company's

existing product sales.
A marketing information system is a system which analyses and assesses marketing information,
designed to support marketing decision-making.
A marketing intelligence system is a set of procedures and data sources used by marketing
managers to sift information from the environment that they can use in their decision making.
Market measurement focuses on the current size and characteristics.
Marketing Research is the systematic collection, analysis and reporting data and findings
relevant to specific marketing situations facing a company.
Explain the importance of marketing information systems

• Organized data collection.
• A broad perspective of the market.
• Collective storage of important data.
• An avoidance of crises.
• Coordinated marketing plans.
• Speed in obtaining sufficient information to make decisions.
• Data amassed and kept over several time periods.
• The ability to do a cost-benefit analysis.
• Competitive pressures: Accurate MIS allows for an Organizations to have the ability to
66
compete, to produce, and to market developed products more quickly than competitors
• The steady increase in consumer expectations and what they expect of products, in terms
of its ability to satisfy their needs & consequences, accurate decision making has an
impact on the organization's success and sustainability.
• The emergence of large segmented markets: the widespread production and distribution
opportunities, require functional MIS to meet demand accurately.
Differentiate between marketing research and marketing intelligence
 Marketing Research is the systematic collection, analysis and reporting data and findings
relevant to specific marketing situations facing a company. This includes research on the
effects of pricing, advertising and other marketing variables.
 A marketing intelligence system is a set of procedures and data sources used by
marketing managers to sift information from the environment that they can use in their
decision making.
REFERENCES
Text Books
 Alan Buttery, Rick Tamaschke, (1996). The use and development of marketing information systems
in Queensland, Australia. Marketing Intelligence & Planning, 14 (3),29 - 35
 Datta, D. &Datta, M. (2006). Marketing Management. New Delhi: Vrinda Publications
 Homburg, C., Kuester, S. &Krohmer, H. (2009). Marketing Management: A Contemporary
 http://www.businessdictionary.com/definition/marketing-information-system.html
 http://www.business2community.com/marketing/5-steps-to-a-marketing-information-system
67
PRODUCT DECISIONS
LECTURE SIX
6.1 INTRODUCTION
This lecture introduces the learner to the marketing mix and especially the product
which forms the basis of all the other elements of the marketing mix. It will enable the learner to
understand why specific products are produced for specific markets and not others. Product
levels, new product development, product life cycle, product development and product mix
decisions will be discussed.

 Describe how product levels influence consumer decisions and positioning of the product/service
 Discuss product life cycle strategies how they can be applied in a changing marketing environment
 Determine the product strategies that organizations can use in various marketing situations.
6.4 SUBTOPIC 1 PRODUCT AND SERVICE DECISIONS

 Product Style and Design Style- simply describes the appearance of a product. Styles can
be eye catching or yawn producing. A sensational style may grab attention and produce
pleasing aesthetics, but it does not necessarily make the product perform better.
 Design- is more than skin deep--it goes to the very heart of a product. Good design
contributes to a product's usefulness as well as to its looks.
 Packaging: Packaging can be very expensive but important aspects to consider are: Size,
unit type, weight and volume.
 Labelling: This is the printed information that appears on or with the product. It does not
only serve to express the contents of the product, but may act as a promotional material.
 Branding: A brand is a name, term, sign, symbol, or design, or a combination of these
intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of competitors.
 Product support services: Most important in reviewing product service decisions is to
review the existing services and obtaining new ones. Also review the services and put
together a service that delights the customers and yield more benefits for the company.
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Assess the value of current services and obtain ideas for new services. Survey customers
to determine satisfaction with current services and any desired new services.
6.5 SUBTOPIC 2 PRODUCT AND SERVICE LEVELS
The product levels help in defining a product in a better manner. A product can be divided into
three levels which are a series of different features and benefits that help in segmentation,
targeting and positioning, pricing and promotion etc.
Level one: Core Product: Also known as the benefits and is general intangible in nature. Core
products may vary depending on the objective of the organization. The car itself would not be
the core product. The core product would be convenience to the customers. Customers can also
travel by bus or taxi, but they may prefer cars because of convenience as well several times
because of status symbol. Thus the core product in case of the company will be convenience and
value for money whereas for another company it would be the status symbol.
Level two: Actual Product :After a decision has been reached by the firm on the core product,
the next step is the production/ Manufacturing of the actual product. Actual products are
quantifiable in nature and have properties like color, branding, quality etc. From the above
example, if your core product is a social status, the actual product will be a very high quality
expensive product but if the product is a convenience product, the production would be on the
basis of Value for money.
Level three: Augmented Product: These are the byproducts of the core and actual products.
They might be complete products within themselves. From our example above, a car needs
regular servicing, warranty etc. These become tertiary products or augmented products.
These three levels can be summarized in the diagram below-
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6.6 SUBTOPIC 3 NEW PRODUCT DEVELOPMENT
When developing a new product, a company should:

 Identify all the features that are offered by all its major competitors.
 Second, identify important features/benefits used in making purchase decisions.
Determine the overall ranking of features by importance and relate the importance of
each feature to its "uniqueness".
For a new product to succeed in the market: it must have desirable qualities, uniqueness and the
features should be communicated to the users effectively.
A new product can be:
 Continuous Innovation- There is no new buyer behaviour to learn, i.e. -products not
previously marketed by the firm, but by others.
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 Dynamic/ Continuous Innovation- minor education needed for consumers to adopt
product.
 Discontinuous Innovation- entirely new consumption patterns.
New products fail due to-
 Lack of differentiating advantage
 Poor marketing plan
 Poor timing
 Target market too small
 Poor product quality
 No access to market
Stages in new product development

1. Idea generation: New ideas can be generated by:
 Conducting marketing research to find out the consumers' needs and wants.
 Inviting suggestions from consumers.
 Inviting suggestions from employees.
 Brainstorming suggestions for new-product ideas.
 Searching in different markets viz., national and international markets for new-product
ideas.
 Getting feedback from agents or dealers about services offered by competitors.
 Studying the new products of the competitors.
2. Idea screening: Most companies have an "Idea Committee." This committee studies all the
ideas very carefully. They select the good ideas and reject the bad ideas. Before selecting or
rejecting an idea, the following questions are considered or asked:
 Is it necessary to introduce a new product?
 Can the existing plant and machinery produce the new product?
 Can the existing marketing network sell the new product?
 When can the new product break even?

3. Concept testing: It is different from test marketing. In this stage of concept testing, the
company finds out:
 Whether the consumers understand the product idea or not?
 Whether the consumers need the new product or not?
 Whether the consumers will accept the product or not?
Here, a small group of consumers is selected. They are given full information about the new
product and there feedback obtained.
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4. Business analysis: Here, a detailed business analysis is done. The company finds out whether
the new product is commercially profitable or not. Under business analysis, the company finds
out.
 Whether the new product is commercially profitable or not?
 What will be the cost of the new product?
 Is there any demand for the new product?
 Whether this demand is regular or seasonal?
 Are there any competitors of the new product?
 How the total sales of the new product are?
 What will be the expenses on advertising, sales promotion, etc.?
 How much profit the new product will earn?
So, the company studies the new product from the business point of view. If the new product is
profitable, it will be accepted else it will be rejected.
5. Product development: The Company produces the product in small quantities and decides to
introduce the new product in the market. It will take all necessary steps to produce and distribute
the new product. At this stage, all departments involved in the development to the final delivery
of the product to consumers come into play.
6. Test marketing: Test marketing means to introduce the new product on a very small scale in a
very small market. If the new product is successful in this market, then it is introduced on a large
scale. The success or failure of the product is then measured and decision for introduction into
the larger market is made.
7. Commercialization: If the test marketing is successful, then the company introduces the new
product on a large scale, say all over the country. The company makes a large investment in the
new product. It produces and distributes the new product on a huge scale. It advertises the new
product on the mass media like TV, Radio, Newspapers and Magazines, etc.
8. Review of market performance: The Company should continuously monitor the performance
of the new product. Below questions are important to ask-
 Is the new product accepted by the consumers?
 Are the demand, sales and profits high?
 Are the consumers satisfied with the after-sales-service?
 Are the middlemen happy with their commission?
 Are the marketing staffs happy with their income from the new product?
 Are the competitors introducing a similar new product in the market?
 Is the Marketing manager changing the marketing mix according to the changes in the
environment?
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6.7 SUBTOPIC 4 PRODUCT LIFE CYCLE STRATEGIES
The product life cycle: The period of time over which an item is developed, brought to market
and eventually removed from the market. It has 4 very clearly defined stages, each with its own
characteristics that mean different things for business that are trying to manage the life cycle of
their particular products.
 Introduction Stage– This stage of the cycle could be the most expensive for a company
launching a new product. The size of the market for the product is small, which means
sales are low, although they will be increasing. On the other hand, the cost of things like
research and development, consumer testing, and the marketing needed to launch the
product can be very high, especially if it’s a competitive sector.
 the strategies associated with this stage include:
o skimming strategies – rapid and slow skimming strategies
o penetration strategies – rapid and slow penetration strategies
 Growth: in this stage
 costs reduced due to economies of scale
 sales volume increases significantly
 profitability
 public awareness
 competition begins to increase with a few new players in establishing
market
 prices to maximize market share
 Maturity /saturation stage– this stage is characterized by:
 costs are very low as you are well established in market & no need for
publicity.
 sales volume peaks
 increase in competitive offerings
 prices tend to drop due to the proliferation of competing products
 brand differentiation, feature diversification, as each player seeks to
differentiate from competition with "how much product" is offered
 very profitable
 Decline or Stability stage – this has the following features

 costs become counter-optimal
 sales volume decline or stabilize
 prices, profitability diminish
 profit becomes more a challenge of production/distribution efficiency than
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increased sales
6.8 SUBTOPIC 5 IMPLICATIONS OF PLC ON BUSINESS PLANNING BUDGETING
 At the introductory stage pricing can be geared at least to the recovery of costs,
and possibly to what the market will bear. As there is little or no competition, this is a time to
be bold about prices.
 From the budgeting point of view, target for sales and profits should not be set too high at
the introductory stage but need to set a demanding level for the subsequent stage of growth.
 When the product reaches the growth stage, production needs to be planned at peak levels
to meet increasing sales; distribution needs to be geared up to moving goods to the point of
sale as efficiently as possible.
 From the planning point of view, this is the period of peak activity to ensure that the product
realizes the benefits of maximum availability to the consumer at a time of minimum
competition from rival products.
 As sales increase and competition begins to appear this is the time to take advantage of the
flexibility of pricing, by reducing prices just at the moment when competitors have to bear
their own development costs. Budgets at this stage can set maximum profits targets with
confidence.
 During the maturity stage competition will tend to be at its highest and this is a time for
utilizing advertising to help beat off the worst effects of this competition. It is also a time to
consider further reduction prices. At this stage both sales and profits will need to be
budgeted at a lower level.
 At the saturation stage, as sales begin to stagnate, efforts can be directed towards a variety of
sales promotion activities to boost flagging sales and demoralize competitors by offering
special offers to both consumer and dealers etc.
 At this stage, earnings from the growth period can be used to support some of the costs
incurred in subsidiary sales. Profit targets should continue to be set but at a nominal level.
By now production resources should be curtailed considerably in the face of the slow-down in
sales.
 As the decline stage approaches, budgeted costs should be set at the lowest possible levels as
the whole product life cycle begins to wind down for good. By now replacement products
should be well under way and another cycle about to begin.
6.9 SUMMARY
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Product development is the first aspect considered in the marketing mix. It covers the bundle of
attributes offered to customers for use, consumption, possession or ownership. Product
decisions involves determining the product level of interest to the customers, new product
development, launching a new product into the market, product life cycle and strategies and
product development. The success of the organization is based on the type of product they offer
and whether it meets the expectations of the customers.
NOTE
A product can only be defined by consumer needs and their preferred

bundle of attributes
6.10 ACTIVITIES
 Evaluate how companies like Nakumatt and Brookside have utilized

product levels to their own advantage.
 Review the use of product strategies by Equity Bank in the East Africa Countries.
a) Differentiate between the various product/service levels
b) Describe the various strategies used in each stage of the product life cycle.
6.13 GLOSSARY
Actual products are quantifiable in nature and have properties like color,
branding and quality.
Augmented Product: These are the byproducts of the core and actual products.
A brand is a name, term, sign, symbol, or design, or a combination of these intended to identify
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the goods or services of one seller or group of sellers and to differentiate them from those of
competitors.
Core Product: Also known as the benefits and is general intangible in nature. It is what the
customer gets after using a product.
A product is a bundle of attributes that a consumer is willing to sacrifice something to access, for
use or consumption.
The product life cycleis the period of time over which an item is developed, brought to market
and eventually removed from the market.
Differentiate between the various product/service levels

 Level one: Core Product :Also known as the benefits and is general intangible in nature. Core
products may vary depending on the objective of the organization. The car itself would not
be the core product. The core product would be convenience to the customers. Customers
can also travel by bus or taxi, but they may prefer cars because of convenience as well several
times because of status symbol. Thus the core product in case of the company will be
convenience and value for money whereas for another company it would be the status
symbol.
 Level two: Actual Product - After a decision has been reached by the firm on the core
product, the next step is the production/ Manufacturing of the actual product. Actual
products are quantifiable in nature and have properties like color, branding, quality etc. From
the above example, if your core product is a social status, the actual product will be a very
high quality expensive product but if the product is a convenience product, the production
would be on the basis of Value for money.
 Level three: Augmented Product - These are the byproducts of the core and actual products.
They might be complete products within themselves. From our example above, a car needs
regular servicing, warranty etc. These become tertiary products or augmented products.
Describe the various strategies used in each stage of the product life cycle.
 Skimming strategies
 Penetration strategies
 Product modification
 Intensive distribution
 Extensive distribution
 Market modification
 Harvesting
 Increased investment
 New product development
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REFERENCES
Text Books
 Datta, D. &Datta, M. (2006): Marketing Management. New Delhi: Vrinda Publications
 Homburg, C., Kuester, S. &Krohmer, H. (2009): Marketing Management, a contemporary
perspective. London: McGraw Hill.
 Slater, S. F., &Narver, J. C. (1994) Does competitive environment moderate the market
orientation – performance relationship? Journal of Marketing, 58(January): 46-55.
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PRICING DECISIONS
LECTURE SEVEN
7.1 INTRODUCTION
The success of any organizations products and services is largely determined by the
prices set for them. The rationale of this lecture is to enable learners to appreciate relevance of
pricing in achieving organizational goals considering that it is the only marketing mix element that
generates income. The focus of this lecture will be pricing objectives, pricing strategies, factors
influencing pricing decisions of an organization and the uses of a price especially in
differentiation.

 Identify and discuss factors influencing pricing decisions
 Discuss product life cycle strategies how they can be applied in a changing marketing
environment
 Develop practical outlines of how pricing strategies can facilitate an organization to remain
competitive in the market.
 Establish the relationship between pricing decisions and pricing objectives as well as
organizational objectives.
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7.3 SUBTOPIC 1 INFLUENCES OF PRICING DECISIONS
 Price is the value exchanged for a product or service in a marketing

exchange.
 It is the opportunity cost that the customer is willing to incur to acquire, consume,
possess or use a good or service
 It is what the seller is willing to accept in exchange for his goods and services.
 Price represents the revenue earning side of the mix
Influences on pricing include:
 The customer – their purchasing behaviour, the factors influencing their purchases,
 Competitors – their current prices, their power in the market, type of the product they
offer, their strategies, (whether they maintain prices, reduce prices,
 Environment – economic, ecological, social cultural, technological, political and legal
 The company – costs, profit expectations, their market position, the type of product
onoffer,
 Location of the target markets
 Company objectives
7.4 SUBTOPIC 2 PRICING OBJECTIVES
 Pricing Objectives refer to the goal /aims an organization wants to achieve

through pricing. Pricing objectives provide guidance to decision makers in formulating
price policies, planning pricing strategies and setting actual prices. Once a pricing
objective has been chosen, a pricing strategy that meets the pricing objective must also
be selected.
 The pricing objectives you select will guide your choice of pricing strategy. There is need
to have a firm understanding of product attributes and the market to decide which pricing
objective to employ.
 Pricing objectives can change depending on the business and market conditions hence do
not have to tie an organization. As business and market conditions change, adjusting your
pricing objective may be necessary or appropriate.
 Assigning product prices is a strategic activity. The price you assign will impact how
consumers view your product and whether they will purchase it.
 Price also helps differentiate your product from those of your competitors.
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 However, the price you assign must be in line with your other marketing strategies and
the product attributes.
Pricing objectives includes:
 Profit maximization - seeks to maximize current profit, taking into account revenue and
costs. Current profit maximization may not be the best objective if it results in lower long-
term profits.
 Current revenue maximization - seeks to maximize current revenue with no regard to
profit margins. The underlying objective often is to maximize long-term profits by
increasing market share and lowering costs.
 Maximize quantity - seeks to maximize the number of units sold or the number of
customers served in order to decrease long-term costs such warehouse costs
 Maximize profit margin - attempts to maximize the unit profit margin, recognizing that
quantities will be low.
 Quality leadership - use price to signal high quality in an attempt to position the product
as the quality leader.
 Partial cost recovery - an organization that has other revenue sources may seek only
partial cost recovery.
 Survival - in situations such as market decline and overcapacity, the goal may be to select
a price that will cover costs and permit the firm to remain in the market. In this case,
survival may take a priority over profits, so this objective is considered temporary.
 Status quo - the firm may seek price stabilization in order to avoid price wars and
maintain a moderate but stable level of profit.
To arrive at specific pricing strategies, the following steps are followed:
 What mix of products are you offering? The mix of products you have available will
either limit or broaden the pricing strategies available for you to use.
 Who or what is your target market? The demographics of your target market will help
you identify appropriate pricing objectives and strategies. Are target customers interested
in value, quality, or low cost?
 Are you distributing your product wholesale or retail? Your method of product
distribution can impact the pricing objectives and strategies you are able to use. Direct
marketing gives you more control than wholesale marketing over how products are
grouped, displayed, and priced.
 What is the estimated life cycle of your product/service? With a short estimated life
cycle, it will be necessary to sell greater quantities of product or generate larger profit
margins than with products where the life cycle is longer.
 What is the projected demand for the product? When demand for a product is
expected to be high, you have more flexibility in choosing pricing strategies because
customers are less likely to be concerned with price and packaging since they really want
your product. For example, consider the prices people are willing to pay when new video
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game consoles debut.
 Are there other entities, such as the government, that may dictate the price range for
your product? Some products, such as milk, have government-imposed regulations
limiting the price that can be charged.
 Manufacturing cost
 Market place condition & Competition
 Business and financial goals – Future plans
Setting a product/service price is a process comprising of the following steps:

 Set pricing objectives - for example, profit maximization, revenue maximization, or
price stabilization (status quo)
 Develop marketing strategy - perform market analysis, segmentation, targeting,
and positioning.
 Make marketing mix decisions - define the product, distribution, and promotional
tactics.
 Estimate the demand curve - understand how quantity demanded varies with
price.
 Calculate cost - include fixed and variable costs associated with the product.
 Understand environmental factors - evaluate likely competitor actions,
understand legal constraints, etc.
 Determine pricing - using information collected in the above steps, select a pricing
method, develop the pricing structure, and define discounts.
7.5 SUBTOPIC 3 PRICING STRATEGIES
Pricing strategies used in marketing all depend on the product, the target market,
the competition, the product's life cycle and the firm's expectation of expansion and distribution
of the product. Pricing strategy refers to method companies use to price their products or
services. A pricing strategy is an approach or a course of action designed to achieve pricing and
marketing objectives. They help marketers to solve the practical problems of establishing prices.
There are 5 main categories:
 Cost based pricing strategies - Involves adding a shilling amount or percentage to the
cost of the product. It also involves calculations of desired profit margins. These strategies
include:
 Cost plus pricing - It is the process of adding a specified shilling amount or percentage
to the sellers cost to establish the price of a product. It simply involves working out the
average cost per unit produced (total cost divided by output) and then adding a
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percentage mark up. This strategy is also known as full cost pricing or absorption
pricing
 Mark-up Pricing - A products price is derived by adding a predetermined percentage of
the cost called mark-up, to the cost of the product. Markup can be stated as
percentage of the cost or as a percentage of the selling price.
 Marginal cost pricing - this is the addition to the total cost for producing one extra unit
of output. Some businesses have very high fixed costs (costs that do not vary with
output) and very low variable costs (costs that do vary with output therefore once their
fixed costs have been recovered, they can sell at any price above the variable (now the
marginal cost) This is because the extra units sold will only add small amount to their
total costs, so the business can still be profitable as along as these costs are covered.
 Contribution pricing - This is similar to marginal-cost pricing in that it mainly considers
the variable costs of production. Businesses will want to make sure that their variable
costs, such as raw materials, are covered, but also need a contribution towards the
fixed costs of the business, such as rent on the factory. Example the fixed costs for a
product are 400/=.The variable costs are 6/= per unit. 100 units are sold. The business
decides to price the product at 11/= this means 5/= per unit sold will go towards the
fixed costs. The fixed costs of 400/= will be covered by the first 80 units sold. Any more
sold beyond 80, will each add 5/=to profits. If 100 are sold the total profit would be 20 x
5 = 100/=.
 New product pricing strategies - these are used when launching a new product.
Companies bringing out a new product face the challenge of setting prices for the first time.
They can choose between two broad strategies market-skimming pricing and market-
penetration pricing.
 Price Skimming – this is charging the highest possible price that buyers who most desire
the product will pay. This is most commonly seen with new and innovative products,
such as new mobile phones. The price is set high initially to gain those customers who
will pay almost any price to get their hands on the latest gadget. Once the business has
profited from selling to those customers, it drops the price to tempt other customers
who may have been put off by the high price originally. When Sony introduced the
world’s first high definition television (HDTV) to the Japanese market in 1990, the high-
tech sets cost $43,000. These televisions were purchased only by customers who could
afford to pay a high price for the new technology. Sony rapidly reduced the price over
the next several years to attract new buyers. By 1993 a 40 inch HDTV for about $2,000,
a price that many customers could afford. An entry level HDTV set now sells for less
than $500 in the United States, and prices continue to fall. In this way, Sony skimmed
the maximum amount of revenue from the various segments of the market.
 Penetration Pricing - Prices are set below those of competing brands to penetrate a
market and gain a significant market share quickly. For this to work, the firm wishes to
discourage rivals from entering the market; the firm wishes to shorten the initial period
of the product life cycle, in order to enter growth and maturity stages as quickly as
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possible; Significant economies of scale and experience effects are anticipated when
high volumes are achieved and The market is known to be price sensitive. For example,
Equity Bank’s no account balance required product. The high sales volume results in
falling costs, allowing the company to cut its price even further. For example Dell used
penetration pricing to enter the personal computer market, selling high-quality
computer products though lower-cost direct channels. Its sales soared when IBM, Apple
and other competitors selling though retail stores could not match its prices.
 Competition Based Pricing/ Market Based Pricing strategies – these are pricing
strategies that are determined by the marketing environmental factors such as the
demand and supply, competitive rivalry, the number of substitute products, competitors
prices, e.t.c. these include:
 Demand based pricing - When this type of pricing is used, customers pay a higher price
when the demand for the product is strong and a lower price when demand is weak.
 Competition based pricing/ market stabilization pricing - This is where by the prices of
a firm products are primarily influenced by the competitors’ prices. A firm that uses this
type of pricing may choose to price below competitors’ prices, above competitors’
prices, or at the same level.
 Price leadershippricing - this exists where a dominant organization in a market sets a
price for its products and its rivals feel compelled to match that price. This may be
because there is one large business in the industry coupled with lots of smaller
competitors with far less market power to set prices. Example - Petrol/gas stations will
often have policies where they agree to match local rivals’ prices. This practice has
brought about claims of illegal agreements by businesses to fix prices at an artificially
high level and exploit customers. However, it is very hard to prove that this collusion
has actually occurred.
 Product mix PricingStrategies- The strategy for setting a product’s price is often
changed when the product is part of a product mix. In this case, the firm looks for a set of
prices that maximizes the profits on the total product mix. Pricing is difficult because the
various products have different demand and costs and face different degrees of
competitions. They Include:-
 Product line pricing - Entails setting the price steps between various products in a product
line based on cost differences between the products, customers’ evaluations of different
features and competitors’ prices. The price steps should take into account cost differences
between the products in the line, customer evaluations of their different features and
competitors’ prices.
 Captive Pricing - Is pricing the basic product in a product line low, while pricing related items at
a higher level. For instance charging a low price for cameras and a higher price for films.
 Premium Pricing - Is pricing the highest-quality or most versatile products higher than other
models in the product line. Examples of products that use this type of pricing are kitchen
appliances, beer, ice-ream ,etc
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 By product pricing – this is setting a price for by products in order to make the main product’s
price more competitive. In producing processed meats, petroleum and agricultural products
other products, there are often by-products. If the by-products have no value and getting rid of
them is costly, this will affect the pricing of the main product. Using by-product pricing, the
manufacturer will seek a market for these by-products and should accept any price that covers
more than the cost of storing and delivering them. Sometimes the by-products can even turn
out to be profitable.
 Product bundle pricing – this entails combining several products and offering the bundle at a
reduced price. Using product bundle pricing, sellers often combine several others products and
often the bundle at a reduced price. For example Galittos and Chicken inn bundle chicken, fries
and a drink at a combo price Air Arabia operating in Kenya are known to offer vacation prices
that include airfares, accommodation, meals and entertainment. Zuku are offering cable
service, phone service and high speed internet connections at a low combined price.
 Promotional pricing strategies – these are also referred to as price adjustment strategies.
Companies usually adjust their basic prices to account for various customer differences, changing
situations as well as to increase sales of a product. It is important to note that promotional pricing
strategies are employed along other strategies and they run for a limited period of time. These
include:
 Loss leader pricing – Here supermarkets or department stores drop the price on well known
brands to stimulate additional store traffic. But manufacturers typically disapprove of their
brands being used as loss leaders because this practice can dilute the brand image as well as
cause complaints from other retailers who charge the list (normal) price.
 Special event pricing – Sellers will establish special prices in certain seasons to draw in more
customers.
 Cash rebates – Consumers are offered cash rebates to encourage their purchase of the
manufacturer product within a specified time period (e.g. bata)
 Low interest financing – Instead of decreasing its product price, the company can offer
customers low interest financing e.g. auto-makers can announce 3% financing to attract
customers.
 Longer payment terms- Sellers especially mortgage banks and auto companies stretch their
loans over longer periods and thus lower monthly payments
 Warranties and services contracts – The company promote sales by adding a free warranty
offer or service contract.
 Psychological pricing – where the price is set in order to attract the mind of the customer, for
example, ensuring that the prices are odd numbers, for example Kshs 379, or setting a price
that make the customer judge it as a low, e.g. Kshs 999.
 Psychological discounting – This strategy involves putting an artificially high price on a product
and then offering it at substantial savings e.g. was Kshs.359 and now Kshs.299.
 Discriminatory pricing strategies - this occurs when a Company sells a product or service at two or
more prices that do not reflect a proportional difference in cost. They include:
 Customer segment pricing- Different customer groups are charged different prices for the
same product or service e.g. museums often charge a lower admission fee to students.
 Time pricing – Prices are varied by season, month, day or hour.
 Product form pricing – Different versions of the product are priced differently but not
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proportionately to their respective costs.
 Image pricing – Different versions of the product are priced at 2 different levels based on
image differences e.g. perfume manufacturers.
 Location pricing – The same product is priced differently at different locations even though the
cost of offering at each location is the same e.g. seat prices in a theatre.
 Differential Pricing – this is charging different prices to different buyers for the same quality and
quantity of product. It can occur in several ways including the following:
 Negotiated pricing - Occurs when the final price is established through bargaining between the
seller and the customer. For instance prices for cars, houses and used equipment.
 Secondary – market pricing - It means setting one price for the primary marketing and a
different price for another market when the price charge in the secondary market is lower.e.g
purchasing a product during off peak times.
 Periodic Discounting - Is the temporary reduction of prices on a patterned or systematic basis,
for example seasonal sales offered by retail shops.
 Random Discounting - Is the temporary reduction of prices on an unsystematic basis. This is usually
done to attract new customers.
7.6 SUMMARY
The price set on a product is determined by the marketing environment factors,

the pricing objectives and the objectives that the organization intends to achieve among other
factors. Some of the pricing strategies that an organization can pursue include product
maximization, increase market share, to gain competitive advantage and to differentiate it.
Several pricing strategies are used including cost based, market oriented, product mix and
promotional pricing strategies.
NOTE
Pricing decisions are the only marketing mix element that generate revenue
and can be varied in the shortest time possible
7.7 ACTIVITIES
Evaluate the pricing strategies used by the following companies and describe the kind of pricing
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objectives they could be pursuing
 House of Maji
 East Africa Breweries Limited
 Unilever
 Coca Cola
 Vivo Energy
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7.8 FURTHER READING
Read the follow case analysis for Safaricom and understand how the company has used different
pricing strategies to achieve its objectives.
Safaricom Kenya Ltd - use of different pricing strategies

 Safaricom is one of the organizations that have used pricing to achieve a number of its
objectives
 Safaricom used Market penetration pricing as its strategy at its entry into the market. Its
objective was to secure market share. To date, Safaricom has the largest market share in
Kenya among all mobile operators with over 20 million customers and is currently the
most profitable company in Eastern Africa.
 Product Line Pricing – There are different services offered by the mobile operator. For
example if you are a prepaid customer you can load airtime using the scratch cards and
would be charged a standard rate. On the other hand customers that are under the
postpaid are charged differently for Kshs. 1,000 they are able to access 900 minutes talk
time Safaricom to Safaricom, 100 minutes talk time to other networks, 250 MB data
bundles and 100 SMS’s Safaricom to Safaricom.
 Market Skimming – This was also used on products such as sale of modems when they
first came into the market. The first modems were sold for Kshs. 10,000 and now we have
seen the price coming down to Kshs. 2,500.
 Promotional Pricing – We have seen the network in the past temporarily price products
below the list price to increase short run sales. Mobile subscribers would be given free
airtime upon loading their phones with airtime.
 Captive Product Pricing - The Company has used this strategy in its post paid services. A
flat rate is charged for Kshs. 1,000 and any calls above the postpaid calling plans are
charged a variable amount.
a) Explain any three promotional pricing strategies

b) What factors influence pricing decisions?
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7.10 GLOSSARY
Price is the consideration that a customer is willing to offer to access a product or service
Pricing objectiveis what the organization intends to achieve with its pricing decisions
Pricing strategyis the method used in pricing, or mechanisms of pricing.
Psychological pricingis setting a price which attracts the consumer by appealing to his/her mind
that the product price is relatively cheaper.
Psychological discountingis the reduction of prices to appeal to the mind of the consumer that
the price has significantly reduced.
a) Explain any three promotional pricing strategies

 Loss leader pricing
 Psychological pricing
 Psychological discounting
 Special events pricing
 Cash rebates
b) What factors influence pricing decisions?
 Marketing mix decisions
 Inflation rates
 Competitors prices
 Customers purchasing power
 Level of technology
 Government policies
 Availability of the product
 Cost of production
REFERENCES
Text Books
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89
DISTRIBUTION DECISION
LECTURE EIGHT
8.1 INTRODUCTION
The purpose of this lecture is facilitate learners to appreciate the role of place or
distribution in ensuring that products are accessible to consumers at the right time, where they
want them, in the right quantities and designs. This lecture therefore will focus on distribution
strategies, marketing channels, marketing channel design decisions, channel management and
logistics management.

 Describe the role of place decisions in ensuring accessibility of the product
 Develop a write up organizations of their own choice describing the various distribution
strategies that the organizations should use achieve their objectives.
 Develop marketing channels for a consumer product of their own choice.
8.3 SUBTOPIC 1 MARKET COVERAGE/DISTRIBUTION CHANNELS
Distribution is more than supply and demand; it's about timing and ensuring that you have the
proper resources to efficiently get your product/service to your consumer. It's also about
satisfying your customer's needs and wants according to their schedule. It is ensuring the
customers have the right product, at the right time, in the right place in the right format.
Distribution ensures accessibility of the product and services to the customers for satisfaction of
needs and wants. In making distribution decisions you have to decide on the number of outlets
and where they will be located, the type of channels to use, how to manage them as well as
logistics management.
Market coverage is the number of active retail and/or wholesale outlets (relative to a saturation
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level) that sell a specific firm's brands in a given market. It refers to a strategy that is followed by
a company with regard to covering its target market with the distribution network. There may be
different levels of intensity and coverage through distribution in the different sales territories in
the market. While selecting channels of distribution the marketer must decide about the
number of customers it wishes to reach and the intensity of distribution, and then has to employ
one of the three different distribution strategies:
• Intensive distribution – this means mass distribution in all outlets. For many products,
total sales are directly linked to the number of outlets used (e.g. cigarettes, candy, battery
cells, bread, biscuits, etc.). Products which are of mass use like bread, salt, etc. or relate
to impulse purchase such as chocolates or too small and simple, marketers go for
intensive distribution. In these cases the customer loyalty is found to be low. Customers
can buy any brand if their choice brand is not available.
• Selective distribution - this means carefully chosen distributors e.g. speciality goods such
as car garage. An advantage of this approach is that the producer can choose the most
appropriate or best-performing outlets and focus effort (e.g. training) on them. Selective
distribution works best when consumers are prepared to “shop around”- in other words –
they have a preference for a particular brand or price and will search out the outlets that
supply.
• Exclusive distribution - Only specially selected resellers or authorized dealers (typically
only one per geographical area) are allowed to sell the ‘product’. Exclusivity is a strategy
often used to establish a particular image of a product or brand. Using a limited number
of distribution channel partners helps to create an image of exclusivity. It’s also a
measure of quality control by using only distributors who specialize within that industry.
Distribution channel partnerships require both the manufacturer and the distribution
partners to take a larger stake in one another’s survival. Exclusive distribution: creates
high dealer loyalty and considerable sales support, provides greater control, limits
potential sales volume and success of the product is dependent upon the ability of a
single intermediary.
8.4 SUBTOPIC 2 MARKETING CHANNELS
A marketing or distribution channel is a set of interdependent organizations

involved in the process of making a product or service available for use or consumption by the
consumer or business centre. Different channels are used to sell different types of products
namely:
• Consumer Products
• Industrial Products
• Services
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Two types of marketing channels exist:
 Direct – use of own company sales representatives and direct mails or the internet.
 Indirect – use of intermediaries/third parties/middle men. These may include:
• retail outlets owned by your company or by an independent merchant or chain
• wholesale outlets of your own or those of independent distributors or brokers
• direct mail via your own catalog or flyers
• telemarketing on your own or through a contract firm
• cyber marketing, surfing the newest frontiers
• Agent (who acts on behalf of the producer)
Reasons in favour of direct distribution
An organization may prefer to use direct distribution channel against indirect for the following
reasons:
• When it is a technical product requiring demonstrations
• Lethargic intermediaries i.e. wholesalers and retailers will try to sell all the products they
handle and will not favour one manufacturer products.
• When no intermediaries exist to sell the product.
• A small target market
• When they want to control the price
• Establish lasting relationship with the customers
Reasons in favour of indirect distribution
An organization may prefer to use indirect distribution channel against direct for the following
reasons:
• When it is considered to be Cheaper
• Financial resources can be more profitably employed elsewhere
• A lack of retailing expertise
• A lack of sufficient/wide assortment of products to sell
• When the market is big and geographically distributed
• When there is no other way of reaching the consumers
8.5 SUBTOPIC 3 FUNCTIONS OF MARKETING CHANNELS
Marketing channels performs the following functions:

• Information: The collection and dissemination of marketing research information about
potential and current customer, competitors and other forces in the marketing
environment.
• Promotion: The development and dissemination of persuasive communication about the
company offers in order to attract customers.
• Negotiation: The attempt to reach final agreements on price and other terms so that
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transfer of ownership or possession can be effected.
• Ordering: The backward communication of intention to buy by the marketing channel
members to the manufacturer.
• Financing: The acquisition and allocation of funds required to finance inventories at
different levels of the marketing channels
• Risk taking: The assumption of risk connected with carrying out the channel work.
• Physical possession: The successive storage and movement of physical products from
producer to the final customers.
Selection of a particular market channel is determined by the objectives and the services
provided by each.
8.6 SUBTOPIC 4 MARKETING CHANNEL DESIGN DECISIONS
To ensure customers have accessibility to the product, the company has to

ensure that they design the channels appropriately and make appropriate decision on whom to
use and why they are preferred.
The channel design decisions requires a company to determine the actual design, define the
objectives to be achieved using the channels designed and constraints that are likely to be faced
in the implementation and identifying and evaluating the major channel alternatives. The
designing of a manufacturer’s channel system varies depending on the environmental conditions
existing in market which can be opportunities or threats. However, for appropriate channel
design organizations need to have a clear understanding of the service output levels that
consumers desire, so that when the channel choice is made it delivers the same if not more.
Marketing channel design decisions covers the following elements:
• Analyzing service output levels desired by customers – this focuses on what customers are
looking for, including:
– Lot size/bulk breaking
– Waiting and delivery time
– Spatial convenience
– Product variety or assortment
– Service back-up
• Establishing channel objectives and constraints such as
– Increase the availability of the good or service to potential customers.
– Satisfy customer requirements by providing high levels of service.
– Ensure promotional effort.
– Obtain timely and detailed market information.
– Increase cost- effectiveness.
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– Maintain flexibility.
• Identifying and evaluating the major channel alternatives - This covers three elements
– Type of intermediary – the company should identify if intermediaries are to be use or
not. If so, which ones are available to carry out the marketing flows? It is important
for the company to seek innovative marketing channels.
– The number of intermediaries to be used at each channel level – this is determined
by the intensity of market coverage desired by the company. It can be selective,
intensive or exclusive.
– Terms and responsibilities of each channel member – it is important to clearly define
what each player in the channel will be doing. It also covers the policies that will
govern the relationship between the producer and the intermediaries chosen.
• Evaluating the major channel alternatives - The firm must evaluate each alternative against
– Economic criteria. Each channel alternative will produce a different level of sales
and costs. It is important to determine the sales levels that would be produced by
a company sales force compared to a sales agency and the costs of selling different
volumes through each channel.
– Control criteria. Next, evaluation must be broadened to consider control issues
with the two channels. Using a sales agency poses more of a control problem.
– Adaptive criteria. Each channel involves some long-term commitment and loss of
flexibility. A company using a sales agency may have to offer a five-year contract.
8.7 SUBTOPIC 5 CHANNEL MANAGEMENT
Channel management is a technique for selecting the most efficient channels or

routes to market for your products and services, and deriving the best results from those
channels by applying appropriate financial, marketing or training resources. It covers the
following aspect:
 Selecting and recruiting channel member - The recruitment process, screening involves elimination of
applicants who do not match the criteria set for the position. This would include the following steps:
• Identify and document your needs
• Identify selection criteria
• Select channel partners
• Use selection criteria to make a decision
 Motivating channel members – this involves giving the dealers a reason to carry your product. This
can be achieved through two main strategies, that is pull and push strategies.
• Pull strategy: motivates the end user to approach your channel of distribution and "call out" for
your value offer . . . Pull strategy examples are
o Media releases
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o Rebate programs
o Exhibitions
o Direct mail campaigns
o End user seminars
o Telemarketing efforts
• Push strategy these types of promotions push your value offer through the channel. Push
strategy examples are:
o Travel incentive programs
o Merchandise programs
o Training programs
o Monetary SPIFFS (special promotional incentive factory funds
o Special discounts or allowances
 Evaluating channel members – this includes measuring and monitoring to ascertain the level of
performance of the companies channel members of the company. The scope and the frequency of
evaluation is determined by:
o Degree of the manufacturer’s control over channel members
o Relative importance of channel members
o Nature of the product
o Number of channel members
It covers the following:
• Developing criteria for measuring channel member performance: these can include;
– Sales performance of channel members
– Inventory maintenance of channel members
– Selling capabilities of channel members
– Attitudes of channel members
– Competition faced by channel members
– General growth prospects of channel members
•Periodically evaluating the channel members’ performance against the criteria

•Recommending corrective actions to reduce the number of inadequate performances
•Modifying channel arrangements
SUBTOPIC 6 PHYSICAL DISTRIBUTION OR LOGISTICS MANAGEMENT
 Logistic management is the process of planning, implementing & controlling the

effective and efficient flow of goods or services from the point of origin to the point of
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consumption. Logistics management helps companies reduce expenses and enhance customer
service. Logistics is the management of the flow of goods or services between the point of
origin and the point of consumption in order to meet the requirements of customers or
corporations.
 Logistics addresses not only the problem of outbound distribution (moving products from the
factory to customers) but also the problem of inbound distribution (moving products and materials
from suppliers to the producer).
 It involves the management of entire supply chains, value-added flows from suppliers to final
users. Thus, the logistics manager's task is to coordinate activities of suppliers, purchasing agents,
marketers, channel members, and customers. These activities include forecasting, information
systems, purchasing, production planning, order processing, inventory, warehousing, and
transportation planning.
The key logistic functions in a supply chain include:
 Transportation: Marketers need to take an interest in their company's transportation decisions.

The choice of transportation carriers affects the pricing of products, delivery performance, and
condition of the goods when they arrive—all of which will affect customer satisfaction. In shipping
goods to its warehouses, dealers, and customers, the company can choose among five
transportation modes: rail, truck, water, pipeline, and air.
 Warehousing: Every company must store its goods while they wait to be sold. A storage function
is needed because production and consumption cycles rarely match. A company must decide on
how many and what types of warehouses it needs and where they will be located. The company
might use either storage warehouses: Storage warehouses store goods for moderate to long
periods or Distribution centers are designed to move goods rather than just store them. They are
large and highly automated warehouses designed to receive goods from various plants and
suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible.
 Inventory control:Inventory levels also affect customer satisfaction. The major problem is to
maintain the delicate balance between carrying too much inventory and carrying too little.
Carrying too much inventory results in higher-than-necessary inventory-carrying costs and stock
obsolescence. Carrying too little may result in stock outs, costly emergency shipments or
production, and customer dissatisfaction. In making inventory decisions, management must
balance the costs of carrying larger inventories against resulting sales and profits. During the past
decade, many companies have greatly reduced their inventories and related costs
through just-in-time logistics systems. Through such systems, producers and retailers carry only
small inventories of parts or merchandise, often only enough for a few days of operations. New
stock arrives exactly when needed, rather than being stored in inventory until being used. Just-in
time systems require accurate forecasting along with fast, frequent, and flexible delivery so that
new supplies will be available when needed.
 Order Processing: The small business owner is concerned with order processing—another physical
distribution function — because it directly affects the ability to meet the customer service
standards defined by the owner. If the order processing system is efficient, the owner can avoid
the costs of premium transportation or high inventory levels. Order processing varies by industry,
but often consists of four major activities: a credit check; recording of the sale, such as crediting a
sales representative's commission account; making the appropriate accounting entries; and
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locating the item, shipping, and adjusting inventory records.
 Technological innovations, such as increased use of the Universal Product Code, are contributing
to greater efficiency in order processing. Bar code systems give small businesses the ability to
route customer orders efficiently and reduce the need for manual handling. The coded
information includes all the data necessary to generate customer invoices, thus eliminating the
need for repeated keypunching.
 Another technological innovation affecting order processing is Electronic Data Interchange. EDI
allows computers at two different locations to exchange business documents in machine-readable
format, employing strictly-defined industry standards. Purchase orders, invoices, remittance slips,
and the like are exchanged electronically, thereby eliminating duplication of data entry, dramatic
reductions in data entry errors, and increased speed in procurement cycles.
 Protective packaging and materials handling: Another important component of a small business
physical distribution system is material handling. This comprises all of the activities associated
with moving products within a production facility, warehouse, and transportation terminals. One
important innovation is known as unitizing—combining as many packages as possible into one
load, preferably on a pallet. Unitizing is accomplished with steel bands or shrink wrapping to hold
the unit in place. Advantages of this material handling methodology include reduced labor, rapid
movement, and minimized damage and pilferage.
 A second innovation is containerization—the combining of several unitized loads into one box.
Containers that are presented in this manner are often unloaded in fewer than 24 hours, whereas
the task could otherwise take days or weeks. This speed allows small export businesses adequate
delivery schedules in competitive international markets. In-transit damage is also reduced
because individual packages are not handled en route to the purchaser.
 Customer service: Customer service is a precisely-defined standard of customer satisfaction which
a business intends to provide for its customers. In today's fast-paced, technologically advanced
business environment, such systems often involve the use of specialized software that allows the
owner to track inventory while simultaneously analyzing all the routes and transportation modes
available to determine the fastest, most cost-effective way to deliver goods on time.
 Integrated Logistics Management
 Today, more and more companies are adopting the concept of integrated logistics management.
This concept recognizes that providing better customer service and trimming distribution costs
requires teamwork, both inside the company and among all the marketing channel organizations.
Inside, the company's various functional departments must work closely together to maximize the
company's own logistics performance. Outside, the company must integrate its logistics system
with those of its suppliers and customers to maximize the performance of the entire distribution
system.
 Cross-Functional Teamwork Inside the Company - In most companies, responsibility for various
logistics activities is assigned to many different functional units—marketing, sales, finance,
manufacturing, purchasing. Too often, each function tries to optimize its own logistics
performance without regard for the activities of the other functions. However, transportation,
inventory, warehousing, and order-processing activities interact, often in an inverse way. For
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example, lower inventory levels reduce inventory-carrying costs. But they may also reduce
customer service and increase costs from stock outs, back orders, special production runs, and
costly fast-freight shipments. Because distribution activities involve strong trade-offs, decisions by
different functions must be coordinated to achieve superior overall logistics performance. The
goal of integrated logistics management is to harmonize all of the company's distribution
decisions. Close working relationships among functions can be achieved in several ways. Some
companies have created permanent logistics committees made up of managers responsible for
different physical distribution activities. Companies can also create management positions that
link the logistics activities of functional areas. Many companies have a vice president of logistics
with cross-functional authority. The important thing is that the company coordinate its logistics
and marketing activities to create high market satisfaction at a reasonable cost.
 Building Channel Partnerships - The members of a distribution channel are linked closely in
delivering customer satisfaction and value. One company's distribution system is another
company's supply system. The success of each channel member depends on the performance of
the entire supply chain. Companies must do more than improve their own logistics. They must
also work with other channel members to improve whole-channel distribution. Today, smart
companies are coordinating their logistics strategies and building strong partnerships with
suppliers and customers to improve customer service and reduce channel costs. These channel
partnerships can take many forms. Many companies have created cross-functional, cross-
company teams.
 Other companies partner through shared projects. For example, many larger retailers are working
closely with suppliers on in-store programs. Channel partnerships may also take the form of
information sharing and continuous inventory replenishment systems. Companies manage their
supply chains through information. Suppliers link up with customers to share information and
coordinate their logistics decisions. Here are just two examples: Today, as a result of such
partnerships, many companies have switched from anticipatory-based distribution systems to
response-based distribution systems. In anticipatory distribution, the company produces the
amount of goods called for by a sales forecast. It builds and holds stock at various supply points,
such as the plant, distribution centers, and retail outlets. A response-based distribution system, in
contrast, is customer triggered. The producer continuously builds and replaces stock as orders
arrive. It produces what is currently selling.
 Third-Party Logistics - Third-party logistics providers are firms that perform most or all of the
logistics functions that manufacturers, suppliers, and distributors would normally perform
themselves. Today, 77 percent of manufacturers listed in the Fortune 500 outsource one or more
logistics functions, at least on a limited basis. Ryder Systems, UPS Supply Chain Solutions, FedEx
Supply Chain Services, DHL, and Penske Logistics are just a few of the companies that specialize in
handling logistics functions for their clients. Companies may use third-party logistics providers for
several reasons:
 First, because getting the product to market is their main focus, these providers can often do it
more efficiently and at lower cost than clients whose strengths lie elsewhere. According to one
study, outsourcing warehousing alone typically results in 10 percent to 15 percent cost savings.
Another expert estimates that companies can save 15 percent to 25 percent in their total logistics
costs by outsourcing.
 Second, outsourcing logistics frees a company to focus more intensely on its core business.
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 Finally, integrated logistics companies understand increasingly complex logistics environments.
This can be especially helpful to companies attempting to expand their global market coverage.
8.9 SUMMARY
Customer value delivery is determined by the accessibility of the products, when, where and in
the format that the customers prefer. This therefore requires the company to make decisions on
the market coverage strategies, marketing channels and logistics management decisions. Three
main distribution or market coverage strategies exist including inclusive, selective and exclusive.
An organization can use either direct or indirect marketing channels depending on the objective,
target market and its capability. Marketing channels need to be managed by ensuing that proper
design is done, proper recruitment and selection of channel members, motivation of the
members as well as evaluation of their performance. Further, the product have to be moved
from one place to another through logistics management which covers the following activities:
customer service, transportation, order processing, warehousing, packaging and handling.
NOTE
Even if the product/service how good, if it is not accessible to the

customers, when, when and in the form they need it, it is bound to fail in that market
8.10 ACTIVITIES
Citing practical examples, clearly make distribution or place decisions for the
following companies:
 Bidco company Ltd
 Samsung
 Delloite and Touche
 Kenyatta University
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8.11 FURTHER READING
Read the cases below and conceptualize the role of distribution decisions in achieving
organizational objectives.
MOTOROLA SOLUTIONS EMPOWERS PARTNERS AND CHANNEL ACCOUNT MANAGERS TO

EXECUTE ON JOINT MARKETING PLANS WITH CCI’S PLANNER AND MDF SOLUTIONS
Motorola Solutions is a leading provider of mission-critical communication solutions for

enterprise and government customers. Through leading-edge innovation and communications
technology, it is a global leader that enables its customers to be their best in the moments that
matter. With over 300 managed partners to support, the UK-based Motorola Solutions EMEA
channel marketing team is focused on enabling partner success. In 2010, the company relied on
an outdated system to manage partner data. As the company refined their market development
fund (MDF) program strategy and annual joint marketing planning process with partners, their
back-end infrastructure wasn’t flexible enough to adapt and scale as strategic changes were
made.
Challenges - The client’s business was impacted in the following ways:
 Complicated and inflexible legacy system

 Partners could not access the system to review joint marketing plans,
create campaigns, or review MDF approvals/claims
 Unable to group activities into a campaign to track business-level outcomes
 Unable to load budgets, so regular manual reporting was required to
prevent overspend
 Inflexible approval process
CCI Solution Mix
 12-week professional services engagement and deployment of CCI’s Joint Marketing

Planner and MDF modules
 Configured and customized CCI’s MDF and Joint Marketing Planner modules
 Implemented waterfall funding allocation for improved budget management
 Alignment of partner goals and marketing objectives though plan and campaign structure
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Results
 Strong partner adoption – 84% of partners submitted 414 joint marketing plans within the
first 90 days of program
 100% improved visibility into regional marketing budgets and activities
 Optimized MDF budget and improved marketing ROI through balancing of marketing mix
 Positive feedback from partners
Further cases can be found in the following addresses.
 http://wpcd.ezyield.com/wp-content/uploads/2012/04/002037_EZYield-Mini-Case-Studies-Best-
Western.pdf
 http://www.fatpipeinc.com/case_studies/Generic-case-
studies/FatpipeCaseStudyOtherChannelManagementWarp.pdf
 http://www.siteminder.com/clients/case-studies/hotel-leisure-business-de-vere-group-increase-
revenue-by-over-30-with-siteminders-channel-manager/
 Resellers, Consumers File Suit Against Apple
http://www.thechannelinsider.com/article2/0,1895,1768399,00.asp
 Microsoft’s Channel Focus Appeals to ISVs
http://www.thechannelinsider.com/article2/0,1895,1833854,00.asp
 Channel Conflict and Coordination in the e-Commerce Age:
http://omis.scu.edu/pdf/POMS-channels-2003-0402.pdf
 Best Practices for Channel Management
http://newsroom.cisco.com/dlls/tln/newsletter/2002/september/part1.html
a) Describe the various distribution/market coverage strategies

b) Why would an organization prefer to use indirect marketing channel over direct marketing
channel?
8.13 GLOSSARY
Market coverage is the number of active retail and/or wholesale outlets (relative
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to a saturation level) that sell a specific firm's brands in a given market.
A distribution channel is a set of interdependent organizations involved in the process of making
a product or service available for use or consumption by the consumer or business centre.
Channel management is a technique for selecting the most efficient channels or routes to market
for your products and services, and deriving the best results from those channels by applying
appropriate financial, marketing or training resources.
Logistics management is the process of planning, implementing & controlling the effective and
efficient flow of goods or services from the point of origin to the point of consumption.
a) Describe the various distribution/market coverage strategies

 Intensive distribution – this is mass distribution in order to achieve market penetration and
market share
 Selective distribution – where you use more than two but not one channel. The focus is to
increase reach but avoid over supply in the marker
 Exclusive distribution – focus on one dealer handling products, so as to maintain quality, provide
training, control competition and counterfeiting as well as focus on a niche market.
b) Why would an organization prefer to use indirect marketing channel over direct marketing channel?
 When they have no retailing expertise
 When they have limited assortment of goods/products
 When it is viewed as cheap
 When the target market is large and widely distributed across the geographical market
 When it is the only available channel of distribution
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REFERENCES
Text Books

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PROMOTION DECISIONS
LECTURE NINE
9.1 INTRODUCTION
This lecture will enable learners to understand the role of promotion or marketing
communication on positioning and communicating about a product. It will enable them to
understand and evaluate various promotional tools. It will focus on promotional objectives,
promotional mix, developing promotional strategies as well as the role of integrated marketing
communications in the achievement of marketing and organizational objectives.

 Describe the role of promotion decisions in positioning a company and its products/services
 Develop a promotional mix of a product targeting children.
 Describe the rationale of integrated marketing communications strategies in achieving promotional
objectives.
9.3 SUBTOPIC 1 PROMOTIONAL OBJECTIVES

In the case of products that a customer has not previously purchased or has not
purchased in a long time, the promotional efforts may be directed at getting the customer
to try the product. For products with an established customer-base, promotion can
encourage customers to increase their purchasing by providing a reason to purchase
products sooner or purchase in greater quantities than they normally do.
• Provide Information – Some promotion is designed to assist customers in the search
stage of the purchasing process. In some cases, such as when a product is so novel it
creates a new category of product and has few competitors, the information is simply
intended to explain what the product is and may not mention any competitors. In other
situations, where the product competes in an existing market, informational promotion
may be used to help with a product positioning strategy.
• Reinforce the Brand – Once a purchase is made, a marketer can use promotion to help
build a strong relationship that can lead to the purchaser becoming a loyal customer. For
instance, many retail stores now ask for a customer’s email address so that follow-up
emails containing additional product information or even an incentive to purchase other
products from the retailer can be sent in order to strengthen the customer-marketer
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relationship.
9.4 SUBTOPIC 2 PROMOTIONAL MIX
This focuses on the tools, techniques and methods that an organization can use to achieve
marketing objectives. The choice of the promotional mix is determined by the target audience,
the promotion objective, the cost, media availability, government policies and the
product/service that are to be communicated. Promotional mix includes:
 Advertising - Any paid form of non-personal communication of ideas or products in the "prime
media": i.e. television, newspapers, magazines, billboard posters, radio, cinema etc. Advertising is
intended to persuade and to inform. The two basic aspects of advertising are the message (what you
want your communication to say) and the medium (how you get your message across).
 Personal selling - This is a process by which a person persuades the buyer to accept a product or a
point of view or convince the buyer to take specific course of action through face to face contact. It is
an act of helping and persuading through the use of oral presentation of products or services. The
personal selling may focus initially on developing a relationship with the potential buyer, but will
always ultimately end with an attempt to "close the sale".
 Sales promotion - is any activity that offers an incentive for a limited period to obtain a desired
response from the target audience or intermediaries which includes wholesalers and retailers. It
stimulates consumer demand, market demand and improve product availability. Examples: Contests,
product samples, Coupons, sweepstakes, rebates, tie-ins, self-liquidating premiums, trade shows,
trade-ins, and exhibitions.
 Publicity - Non-personal stimulation of demand for a product, service or business unit by generating
commercially significant news about it in published media or obtaining favorable presentation of it on
radio, television or stage. Non-personal stimulation of demand for a product, service or business unit
by generating commercially significant news about it in published media or obtaining favorable
presentation of it on radio, television or stage
 Corporate communications/public relations – this is the deliberate, planned and sustained effort to
establish and maintain mutual understanding between an organization and its public.
 Exhibitions: Exhibitions provide a chance to try the product by the customers. It is an avenue for the
producers to get an instant response from the potential consumers of the products.
 Direct Marketing is reaching the customer without using the traditional channels of advertising such
as radio, newspaper, television etc. This type of marketing reaches the targeted consumers
with techniques such as promotional letters, street advertising, catalogue distribution, fliers etc.
 Packaging - this involves the development of a container and a graphic design for a product.
Packaging communicates to the person buying it right up until they make the decision to plunk down
their money and take it home. If it's sitting on a shelf with eight similar products, it can't just look
nice, it has to scream its message out in order to get noticed. Your packaging should be noticeable
within three seconds in a store-shelf situation.
 Branding - A brand is an identifying name term, design or symbol or any other feature that identifies
one sellers goods or services as a distinct from those of others. A brand name is the part of a brand
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that can be spoken-including letters, words and numbers.
 Online tools – such as websites, social media including face book, linked in, chats, blogs, twitter, other
online aspects such as e-commerce activities, celebrity online branding.
9.5 SUBTOPIC 3 DEVELOPING PROMOTIONAL STRATEGIES
To develop winning promotional strategies:

– Relentlessly promote competitive advantage
– Focus on keeping customers first and attracting new ones
– Personalise, Personalise, personalise!
– Seek to be different, creative and unconventional
The following steps are included in developing promotional strategies :
• Think about your target audience.
• Take a survey of all the possible combinations of products and services you can offer to
people.
• figuring out how and when to run your promotion.
Promotion strategies include:
 Online promotion strategies - With this type of strategy, you can reach a massive audience or
focus in on a specific group of people to market to. You could choose to display advertising on
related websites or send out emails to market to your target market. You might even consider
using pay-per-click marketing, which is a strategy that allows you to pay only when someone clicks
on an ad and visits your website.
 Traditional media - For example, you could set up an ad campaign that revolves around TV or
radio advertising. Using print media is another way that you can reach a large audience. If you
integrate your marketing into different mediums, it is important to make sure that your message
is consistent across all of them. This way, you will repeat your message and create brand
awareness moving forward.
 Push promotion strategy - With this type of strategy, you aim to push your products out into the
marketplace through promotions and sales. You have to use a talented sales force to show your
products to customers and then sell the product. This type of marketing is generally used for
products that people do not know about but could have some use for if they were to become
aware of them.
 Pull promotional strategy - With this type of promotional strategy, you try to generate interest in
your products. With this strategy, you will create enough interest that consumers will ask
specifically for your products in stores. When this happens, you can create word-of-mouth
advertising for your products. With this strategy, it might take a large budget for marketing to get
the process started. Then, once you get a reputation developed, you can generally bring in regular
sales without spending as much on advertising.
 Integrated marketing communications strategy.
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9.6 SUBTOPIC 4 INTEGRATED MARKETING COMMUNICATIONS STRATEGY
Integrated marketing communications strategy is a management concept that is

designed to make all aspects of marketing communication such as advertising, sales promotion,
public relations, and direct marketing work together as a unified force, rather than competing
each to work in isolation. All of these communications tools work better if they work together in
harmony rather than in isolation. Their sum is greater than their parts - providing they speak
consistently with one voice all the time, every time.
Integrated marketing communications strategy takes advantage of a combination of

communication tools and media to spread a message. By combining various tools, marketers are
able to ensure that their audience is reached and can leverage the various tools in ways that are
most effective. Integrated marketing draws upon the power of traditional advertising and public
relations efforts, as well as the use of new, online communication tools that include social media.
An integrated marketing communication plan is an inside-out method that aims to unify your
brand's message across all communication channels and departments. In ensuring that your
departments are working in concert, you can present your customers with a consistent brand and
a more powerful message. These strategies include:
 Consistent Messaging: One of the most important strategies of integrated marketing communication
is consistent messaging. As you develop a marketing message, create a basic script that can be used
by anyone in your company. Train every member of your staff, from the janitor to the Chief Executive
Officer, in the established company message so that they can tailor it to the individual situation. Work
it into your website copy, brochures, advertisements, public relations statements, sales pitches and
company meetings. By presenting a united front to your audience, you can ensure that customers will
hear a similar message from all points of entry. For example, when Kenyatta University launched the
Digital School, you will find the consistency of the message online, on banners, in the newspapers and
social sites. The message here is “Digitize Masomo the Anywhere School”.
 Internal Integration: To ensure that your marketing is helping all parts of your company, work on
internal integration. Start a program that encourages data sharing across all departments so that
everyone is working with the same information. When your staff knows about projects and initiatives
in other departments, they can help suggest refinements and use the information as part of their own
marketing efforts. With an overview of the company's internal workings, you can better create
campaigns that support departmental and company-wide initiatives by adjusting scheduling, writing
new copy or pushing different products or features. Examples are the Mobile phone operators where
all their staff are required to subscribe to the Mobile Operator’s services. This will make them own the
system.
 Relationship Building: Integrated marketing communication relies on strong relationships with
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customers, and adjusts strategies based on their needs. By seeing customers as people and building
relationships that allow them to provide feedback; you can help your brand react to changes in the
market. As part of your marketing program, work in time to talk directly to your customers. When you
take their advice, follow up on questions, and implement the changes they need, you can strengthen
the relationship and reinforce the quality of your brand. An example is the Safaricom Customer Care
where calls are recorded and analyzed to determine any recurrent trends which will be forwarded to
be analyzed so as to prevent recurrence of the problem thereby improving on quality.
 Build Brand: A strong brand can be a powerful marketing tool, and part of integrated marketing
communication involves creating a consistent, unified brand identity. Work with each part of your
company to build a brand that lets customers know who you are. Across each part of your company,
from the physical office space to the website, ensure consistency of colours, visual elements,
photography style, fonts, and representative imagery. Each thing that a customer interacts with, from
a business card to a delivery truck sighting, should look and feel the same. In doing so, you can create
name recognition and an immediately identifiable brand. An example is Safaricom which has been
able to carry out countrywide branding making its customers associate the Green colour with the
Company.
Components of IMC
Integrated Marketing Communication weaves diverse aspects of business and marketing

together. These include:
 Organizational culture
 The organization's vision and mission

 Attitudes and behaviors of employees & partners
 Communication within the company
e. g. the uniform of Safaricom employees is green across the country thereby making the
employees relate with the organization.
 Four P's/seven P's
 Price, pricing plans, bundled offerings

 Product (product design, accessibility, usability)
 Promotion
 Place (point of purchase, in-store/shopper experience)
 Processes
 Physical evidence
 People
E.g. Standardized rates in Safaricom services, Lower calling rates, wide variety of
products M-Pesa and easy accessibility of Safaricom services has enabled Safaricom to
position itself as the leading Mobile Company and most profitable Companies in East
and Central Africa.
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 Promotional mix
 Advertising - This includes:
 Broadcasting/mass advertising: broadcasts, print, internet advertising, radio,
television commercials
 Outdoor advertising: billboards, street furniture, stadiums, rest areas,
subway advertising, taxis, transit
 Online advertising: mobile advertising, email ads, banner ads, search engine
result pages, blogs, newsletters, online classified ads, media ads
 Direct marketing - This includes direct mail, telemarketing, catalogues, internet

sales, text messaging, websites, online display ads, fliers, catalogues
distribution, promotional letters, outdoor advertising, telemarketing and
coupons. Safaricom has been able to market its new products using this
method where they send its customers messages of new products and also use
coupons and outdoor advertising to advertise its new products.
 Online marketing - Social Media such as Facebook, Twitter and YouTube.
Safaricom has a strong online presence and an instance is YouTube where a
Safaricom advertisement is played before the actual video.
 Sales and customer service - Sales materials such as brochures and

presentations and efficient customer service. Safaricom has been able to
leverage their Customer Service to be able to retain their customers and have a
competitive advantage of their competitors.
 Public Relations - Public relations includes carrying out special events,

interviews, conference speeches, industry awards, press conferences,
testimonials, news releases, publicity stunts, community involvement and
charity involvement. Safaricom recently sponsored the Groove Awards which
was meant to recognize the leading gospel artistes in the region.
 Sales Promotions - This refers to contests, coupons, product samples, prizes,

rebates and special events. Safaricom has been able to have a number of
promotions such as “BonyezaUshinde” where they gave their customers an
opportunity to win money through usage of their services.
 Trade shows - This includes product demonstrations such as Safaricom Open

Day where they display their various products to the Customers.
 Corporate philanthropy - This includes donations, volunteering and charitable actions.

An example is Safaricom Foundation and Bring Zack Home which was for the
construction of the spinal cord hospital
 Participation of all within the organization – this can be achieved through internal
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marketing.
When these diverse aspects of business and marketing are weaved together properly an effective
campaign can be achieved. Effective campaigns are demonstrated on the Integrated Brands
showcase which recognizes brands that are innovative, strategic and successfully growing their
sales. By effectively leveraging each communication channel greater impact can be achieved
together than achieved individually. This will eventually lead to the attainment of the
organization's goals and objectives.
9.7 SUMMARY
Promotion decisions focus on any form of marketing communication that is created

by an organizations aimed at achieving specific objectives such as create awareness, stimulate
demand, create interest, positioning and reinforcing a brand, remind the customers as well as
provide information. Promotion objectives can be achieved using various tools also referred to
as promotional mix. They include advertising, sales promotion, personal selling, exhibitions,
online tools, corporate communications and publicity among others.
NOTE
 Promotional mix for any organization should be audience specific

 Sell your ideas starting with the internal market
9.8 ACTIVITIES
 Develop a promotional plan targeting youths in Nairobi aimed at communicating about

education and health living
 What media would you use and why?
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9.9 FURTHER READING
Read the cases in these addresses:

 http://www.icmrindia.org/casestudies/catalogue/Marketing/MKTG137.htm
 http://businesscasestudies.co.uk/infiniti/using-sponsorship-to-increase-brand-
awareness/introduction.html#axzz38j11WQ8L
 http://businesscasestudies.co.uk/jd-sports/creating-a-winning-marketing-mix/#axzz38j11WQ8L
a) Compare and contrast advertising and personal selling promotional tools

b) Explain the components of an integrated marketing communications programme.
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9.11 GLOSSARY
Promotionis any form of communication carried out by the organization to

create awareness, remind, encourage, create a positive image, to position and persuade
customers about a company’s products, services and the company itself.
Promotional mix consist of tools and techniques used by organizations to achieve their
promotion objectives
Integrated marketing communication is the application of consistent brand messages across

both traditional and non-traditional marketing channels.
a) Compare and contrast advertising and personal selling promotional tools

advertising Personal selling
It is a paid for form of communication Paid for but carried out directly
Objective is to create awareness and remind Objective is to encourage customers is to
Has a wide reach Has limited reach
In short run it is expensive but in the long run It is expensive in the long run but cheap in
it is cheap short run
It is a non personal form of communication There is personal interaction with the target
market
It is not possible to get the feedback You can get the feedback from the customers
directly
b) Explain the components of an integrated marketing communications programme.

 Organization culture
 Promotional mix
 Four/seven Ps of marketing
 Participation of all within the organization
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REFERENCES
Text Books
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MARKETING PLAN
LECTURE TEN
10.1 INTRODUCTION
The purpose of this lecture is to enable learners to appreciate the value of marketing
plans in facilitating achievement of organizational objectives. It will focus on the concept of
marketing plan, the elements of a marketing plan. It will also evaluate importance of a marketing
plan.

 Develop a marketing plan for a company of their own choice
 Prepare a write up to be presented to the management describing why marketing plans are
important
 Illustrate how the various aspects covered in the module fit in within the marketing plan.
10.3 SUBTOPIC 1 DEFINING A MARKETING PLAN
Marketing plan is a written document that details the necessary actions to

achieve one or more marketing objectives. It can be for a product or service a brand, or a product
line. Marketing plans cover between one and five years. A marketing plan may be part of an
overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan.
While a marketing plan contains a list of actions, a marketing plan without a sound strategic
foundation is of little use.
Marketing planning is the process of developing and implementing a plan to identify, anticipate
and satisfy consumer demand, in such a way as to make a profit. The two main elements of this
plan are market research to identify and anticipate customer requirements and the planning of
an appropriate marketing mix to meet these requirements. Market research involves gathering
and recording information about consumers, market, product, and the competition in an
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organized way. The information is then analyzed and used to inform marketing decisions. There
are three main ways of gathering information for market research: internal information already
held by an organization, external primary information and external secondary information.
Marketing planning can then be used:
 To assess how well the organization is doing in its markets.
 To identify current strengths and weaknesses in these markets.
 To establish marketing objectives to be achieved in these markets.
 To establish a marketing mix for each market designed to achieve organizational objectives
 Marketing plan allows you to visualize clearly both where you are going and what you want to
accomplish along the way.
 It details the very important steps required to get you from where you are to where you want
to be.
 In compiling and developing the marketing plan, you it helps to think through how long it will
take to accomplish each step and what resources in money, time and effort you will need.
10.4 SUBTOPIC 2 PURPOSE OF A MARKETING PLAN
Marketing plans serves the following purposes:

• To assess how well the organization is doing in its markets.
• To identify current strengths and weaknesses in these markets.
• To establish marketing objectives to be achieved in these markets.
• To establish a marketing mix for each market designed to achieve organizational objectives
• Marketing plan allows you to visualize clearly both where you are going and what you want to
accomplish along the way.
• It details the very important steps required to get you from where you are to where you want
to be.
• In compiling and developing the marketing plan, you it helps to think through how long it will
take to accomplish each step and what resources in money, time and effort you will need.
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10.5 SUBTOPIC 3 IMPORTANCE OF A MARKETING PLAN
A marketing plan will:

• Act as a road map - this tells you how to get from the beginning of the plan to reach your
objectives and goals. The plan as a road map describes the environment in which you are
likely to find yourself along the way. It might describe the geographical terrain as well as
the type and classification of the various road arteries, items, distances, and available
stops for emergencies, gasoline.
• Assist in management control and implementation of strategy – as you proceed various
problems may interfere with the planned strategy. Marketing plan will allow you to plot
and redirect your activities toward alternate paths in order to arrive at your objective with
minimum difficulty. You will be able to see clearly the difference between what is
happening during the implementation of your strategy and what you had planned to
happen. This will give you control of the situation and allow you to take the corrective
action necessary to put your project back on track and to keep it on track t reach your
final objective.
• Inform new participants of their roles in implementing the plan and reaching your
objectives – successful implementation of a strategy requires integration of many actions,
usually by many different people and departments both inside and outside the
organization. Having marketing plan enables you to describe the vision in detail. It allows
everyone to see how their actions fit in with the actions of others. New people may be
assigned to activities involving your plan. Marketing plan is therefore a document that
can be used to inform all participants of your objectives and how and why there
objectives will be met; by whom; with what and when
• Assist in helping to obtain resources for implementation – a marketing plan plays an
important part in persuading those who have the authority to allocate limited resources –
money, people and other assets. With scarce resources you must convince these
individual that you are going to use capital, goods and labour in the most effective and
efficient manner.
• Stimulate thinking and the better use of limited resources – a good marketing plan will
help you make the most of what you have. It will also hep you obtain differential
advantage over your competition, which leads to success.
• Help in the organization and assignment of responsibilities, tasks and timing – a
marketing plan clearly outline the responsibilities that need to be undertaken. It also
allows for scheduling o all activities to maximize the impact of the strategy.
• Help you become aware of problem, opportunities and threat in the future – the
marketing plan documents problem that exists and anticipate those that are to occur. It
also enables you to think strategically and to consider that must be done about
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opportunities, problems and threats that lie ahead.
10.6 SUBTOPIC 4: MARKETING PLANNING PROCESS
This is comprises of the following steps:

 Analysis – this involves the analysis of the marketing environment, that is, macro
environment, microenvironment and internal environment. The marketing environment
surrounds and impacts upon the organization. The microenvironment influences the
organization directly while the macro environment comprises of factors that are out of the
company’s control. Internal environment relates to the five M’s of management [machines,
money, men, materials, markets/methods]
 Develop marketing objectives – these define the end results o be achieved. They are the
starting point of the marketing plan. Objectives should be smart and should seek to answer
the question ‘where do we want to go’. They enable a company to control its marketing plan,
help to motivate individuals and teams to reach a common goal and provide an agreed,
consistent focus for all function of an organization.
 Developing the strategies –these state the means of achieving the laid out objective. This
should be guided by the target market that has been chosen by the company. That is, each
target market might require different strategies depending on the nature and the
characteristic of that market. Strategies revolve around the marketing mix and STP.
 Marketing tactics/detailed plans and programs – these provide details on specific activities
that are to be carried out to achieve the specified objectives. The convert strategy into
implemental tasks. They are guided by the marketing mix. They ensure that the plan it
turned into action
 Marketing control – this is focuses on ensuring that what has been planned is achieved and
objectives fulfilled. It involves measurement, evaluation and monitoring. If an objective
states where you want to be and the plan sets out a road map to your destination, then
control tells you if you are on the right route or if you have arrived at your destination.
10.6 SUBTOPIC 5 SECTIONS OF MARKETING PLAN

• To dominate the market
 Marketing Tactics – this focuses on the Ps of marketing. Tactics tell us how we shall carry
out our strategy. List every action required to implement each of the strategies described
in the above section and the timing of these actions. These tactical actions are described
in terms of what is called the “marketing mix” or the “4 (or 7)Ps” of marketing namely
Product, price, promotion and place. The 4Ps are tactical variables because they are
actions taken to accomplish the strategy you developed in the preceding section.
 Budgeting – determine how much it will cost in terms of financial, human, material and
equipment as key resources. On the basis of draft product benefits and features, price
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incentives, distribution channels, proposed promotions, and the evaluation plan,
summarize funding requirements and compare them with available and potential funding
sources. Outcomes at this step may necessitate revisions of strategies, the target market,
goals, or the need to secure additional funding sources. A final budget is presented in this
section, delineating secured funding sources and reflecting any contributions from
partners.
 Implementation and control - Here we calculate the break-even-point and forecast other
important information to help control the project once it has been implemented. We also
compute the sales projections and cash flow on a monthly basis for a 3 year period and
calculate start-up costs in a monthly budget. After implementation, this information can
be used to keep track of the project.
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10.7 SUMMARY
The rationale of understanding marketing and its components is to ensure that a

company develops correct plans that can enable it to achieve the desired results. For this to be
achieved, the managers in an organization should ensure that the plan is all inclusive. It should
be based on accurate information gathered through environmental analysis which should cover
internal and external. When this is done proper objectives, plans, strategies and tactics are
developed. Success of a plan is based on its implementation which covers actual activities to be
carried out, monitoring and evaluation of the plans.
NOTE
A market plan starts your long journey to marketing and organizational success
10.8 ACTIVITIES
 Develop a marketing plan of a company’s operating at:

o Local level
o County level
o National level
o International
o global
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Read the summary below of Haco-Tiger E. A Ltd on use of marketing plan as
highlighted by one of their employee
Haco Industries was established in the early 1970’s as single-product manufacturer. In 2008,
HACO got into a Joint Venture partnership with Tiger Brands of South Africa. Tiger brands are
South Africa’s largest food manufacturer and manufactures food and consumer products. The
Joint venture granted Tiger Brands unrivalled East Africa market access via HACO’s established
distribution chain whilst HACO benefits from Tiger Brands outstanding portfolio of FMCG
products. Haco Tiger Brands is now one of the region’s leading FMCG manufacturers, supplying a
wide range of products to the entire East African and COMESA Market
OUR MISSION
Adding Value to Everyday Life
OUR VISION
The most valued and admired branded consumer goods company.
OUR VALUES
In order to achieve our stated Mission and Vision, the following principles and values will guide
our daily conduct and decision-making;
Consumers are our Business Integrity in Everything We Do. A Passion for Excellence Value People
and Treat Them with Dignity Continue to Re-Invest in our Society.
Haco Tiger E.A ltd deals in 5 categories of products
 Bic : (Stationery)-Biros, evolution pencils, markers, colors, crayons, plastics(rulers& pegs),

lighters, Shavers
 Personal care:
Hair care: Miadi, Black silk, TCB, Motions
Skin care: Amara, Plamers, Ingrams
 Home care: So soft, Ace bleach, JeyesBloo liquid toilet cleaner. JeyesBloo blocks, Ace LTC
 Food: Purity baby food, confectionery-beacons chocolate, culinary- all gold, cross
&Blackwell, spaghetti
Therefore with this in mind, a marketing plan influences market mix decisions at Haco Tiger E.A
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ltd in the following ways:
Helps us determine the role/importance of the particular product in the business portfolio
by undertaking a market overview of the product.
A marketing plan assists in doing product and packaging reviews to ensure all features
deemed important by clients are present and the product is in the desired form at a
market acceptable rate.
While undertaking a situation analysis of the environment(external and internal) in the
market plan, it assists in analyzing competitors, brand performance, Brand positioning,
Brand Health with regards to Awareness, Usage, Purchase rate, Loyalty review
Market plan facilitate in undertaking price review. If an item is found to be slow moving as
it is expensive, a price review is done to correct this.
Marketing plan outlines distribution and channel reviews i.e. which markets to penetrate.
Currently we are in Uganda, Tanzania, Ethiopia, Rwanda, Burundi, Congo, Cameroon,
Sudan.
Budgets help in planning promotional activities to be undertaken for the products the
bigger the budget the aggressive and wide spread the promotional activities and vise
versa.
Brand managers are held accountable to create awareness of the products while sales
persons are tasked with making sales by ensuring place-distribution of products is
sufficient.
The activity grid found in the market plan highlights what kinds of promotion activities will
be carried out and costs tied to them. Media i.e. radio, TV, print-magazine. Branded wear
and vehicles, signage.
By undertaking the SWOT analysis we are able to determine our brand STRENGHTS and
brand WEAKNESSES where innovation plans come in to better the product. Also, we
analyze OPPORTUNITIES e.g. bringing in new products to the market, pursuing new
markets as well as our THREATS i.e. our biggest and main competitors.
COMPETITOR
PRODUCT
BIC biros and shavers TP, AIM biros, shavers-gillette, super max
Miadi and black silk Loreal-dark and lovely
Amara lotion&pure jelly, Palmers, Ingrams Nivea, Vaseline creams &pj-Unilever
Sosoft, Ace Bleach, Bloo liquid toilet Sta soft- colgate palm olive , Jik-reckitt,
cleaner Harpic
Beacons chocolate, purity Cadbury chocolate, nestle-baby foods
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10.10SELF-TEST QUESTIONS
a) What are the element of a marketing plan

b) What is the importance of marketing plan to an organization
10.11 GLOSSARY
Marketing plan is a written document that details the necessary actions to achieve one or more
marketing objectives. It can be for a product or service a brand, or a product line. Marketing
plans cover between one and five years.
Marketing objectives define what the company wants to achieve in marketing function.
Marketing strategies are means used by companies to achieve their marketing objectives
including new product development, diversification and market development.
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a) What are the element of a marketing plan

o Environmental scanning – this covers industry analysis, market audit, macro environmental
analysis, internal environment analysis
o SWOT analysis – this provides a framework detailing the strengths, weaknesses, opportunities
and threats to a company. It forms the reference point upon which we are able develop our
objectives and come up with budgets as it forms the reference for resources and the
company’s competencies.
o Marketing objectives and the strategies – this describe what is to be achieved and how it is to
be achieved
o Tactics – these focus on the marketing mix and they define the operational plans, specifically,
what, when, who, where, why. It focuses on translating the overall corporate and marketing
objectives and strategies into actions.
o Budgeting – this involves the financial analysis of how much it will cost to implement specific
actions
o Implementation and control – this involves monitoring and evaluation of activities to ensure
the target objectives are achieved effectively and efficiently for the success of the
organization.
b) What is the importance of marketing plan to an organization
• Budget - Marketing professionals often have to sell company leaders on the importance of A
formal marketing plan provides a clear reference point for activities throughout the planning
period.
• Marketing plans are included in business plans, offering data showing investors how the company
will grow and what kind return they will get on their investment.
• Marketing plans make the marketing team look at the environment in which they operate.
• Marketing plans can be written to fulfill the requirements of the yearly planning Process within
the marketing department.
• The competitive business environment in addition to the current financial crisis makes it
mandatory to have a business plan if you want funding for your company.
• Makes the marketing team look at their past decisions and understand their results
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REFERENCES
Text Books
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MANAGING GLOBAL MARKETING PROGRAMS
LECTURE ELEVEN
11.1 INTRODUCTION
As the business environment has changed, to a level where the whole world has
become a global market, this lecture will introduce the learner to dynamics of global markets. It
will discuss global market, global marketing environment and how to design and manage global
marketing programs.

 Discuss the challenges posed by the global marketing environment to local firms.
 Evaluate global marketing environment for a Kenyan company intending to venture into the global
market.
11.3 SUBTOPIC 1 NATURE OF GLOBAL MARKETS
Given that businesses do not operate in isolation, environmental analysis is an important step for
developing strategic plans as well as short term plans. Whether an organisation markets its goods
and services domestically or internationally, the definition of marketing still applies. However,
the scope of marketing is broadened when the organisation decides to sell across international
boundaries, this being primarily due to the numerous other dimensions which the organisation
has to account for. For example, the organisation's language of business may be "English", but it
may have to do business in the "French language". This not only requires a translation facility, but
the French cultural conditions have to be accounted for as well. Doing business "the French way"
may be different from doing it "the English way". This is particularly true when doing business
with the Japanese.
When organisations develop into global marketing organisations, they usually evolve into this
from a relatively small export base. Some firms never get any further than the exporting stage.
Marketing overseas can, therefore, be anywhere on a continuum of "foreign" to "global". It is
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well to note at this stage that the words "international", "multinational" or "global" are now
rather outdated descriptions. In fact "global" has replaced the other terms to all intents and
purposes. "Foreign" marketing means marketing in an environment different from the home
base, it's basic form being "exporting". Over time, this may evolve into an operating market
rather than a foreign market. One such example is the Preferential Trade Area (PTA) in Eastern
and Southern Africa where involved countries can trade inter-regionally under certain common
modalities.
In "global marketing" the mode of operation is very different from local or national marketing.
Organizations begin to develop and run operations in the targeted country or countries outside
of the domestic one. In practice, organizations evolve and the table below outlines a typology of
terms which describes the characteristics of companies at the four different stages in the process
of evolving from domestic to global enterprises.
Stage one Stage two Stage three Stage four Global

Management Domestic International Multinational
emphasis
Focus Domestic Ethnocentric Polycentric Geocentric
Marketing Domestic Extension Adaption Extension
strategy
Structure Domestic International Worldwide area Adaption creation
matrix/mixed
Management Domestic Centralised top down Decentralised Integrated
style bottom up
Manufacturing Mainly Mainly domestic Host country Lowest cost
stance domestic worldwide
Investment policy Domestic Domestic used Mainly in each host Cross subsidization
worldwide country
Performance Domestic Against home Each host country Worldwide
evaluation market share country market share market share
 Ethnocentrism - home country orientation - exporting surplus.

 Polycentrism - host country orientation - subsidiary operation.
 Regiocentrism - regional orientation - world market strategies.
 Geocentrism - world orientation - world market strategies.
The above are global marketing orientations.
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11.4 SUBTOPIC 2 THE GLOBAL MARKETING ENVIRONMENT
Of all the steps in formulating strategy, no one step is as important as the ability to assess the
"environmental" factors in international marketing. Taking account of cultural, economic and
political differences is a must when dealing with different markets. More will be said on these
factors in later chapters. Environmental analysis allows the organisation to cluster markets
according to similarities and differences, based on the environmental "uncontrollable" factors.
The global "uncontrollables" are in addition to the organisation's domestic "uncontrollables" so
need to be treated with extra care. It must be noted that according to the "relationship"
marketing school of thought, the so called "incontrollables" can be made more "controllable" by
building relationships with the influences of these factors. For example, if an exporter of
horticultural produce wishes to be able to anticipate changes in the political environment, it may
build a relationship with certain politicians who may have intimate knowledge of the political
system.
Global marketing environment can be divided into macro and micro environment. Though, the
global environmental analysis describes the macro environment of a company. Obviously, a
company is influenced by its environment. Many global environmental factors, especially
economical or social factors, play a big role in a company’s decisions, because the analysis and
the monitoring of those factors reveal chances and risks for the company’s business. This
environmental framework also gives information about location issues. A company is thereby
able to determine its location sites. The environmental factors include:
 Political factors:
Companies face multi-political systems all over the world. While they have to cope with the
whims and fancies of dictatorial attitudes of rulers in some nations, they also get a warm
welcome in development-oriented countries. The instability of political systems of nations due to
recurrent elections, upheavals of the existing governments by civil wars, court rulings and other
internal and external conflicts make the business of multinationals quite unpredictable. In such
circumstances, an international firm needs to protect its interests by familiarising itself tot only
with the economic systems but also with the political systems, political environment and the laws
of the land.
Multinational firms face labour leaders, environmentalists, non-governmental organizations and
social activists for one reason or the other. many times international firms will have to harbour
and harness political bosses and opponents to make them initiate new rules, regulations and
amendments in the existing rule books so that the firms can run their business smoothly.
In the analysis of political environment, an international firm looks into the following essential
aspects of the countries they are operating in:
 Political systems and global business – the challenge of global competition toady has caused
numerous and profound changes in the political environment in which businesses must find
128
they way and consequently, the ways in which nation states act and react to each other. the
political systems can either be:
o Collectivism vs individualism – collectivism refers to political system that stresses the
primacy of the collective goal over individual goals and the needs, welfare and
benefits of a society as a whole. Individualism states that every man should have
freedom to pursue his economic and political aims and that the welfare and interest
of the individual should take precedence over interests of the state.
o Socialism – this states that individual rights should be sacrificed for the good of the
majority and that property should be owned in common. There should be state
ownership of the basic means of production, distribution and exchange to ensure no
exploitation of the labour class takes place and that workers are fully compensated for
their labour by the state.
o Communism vs.social democrats – communism believes that socialism can be
achieved only through a violent revolution and totalitarian dictatorship. Social
democrats on the other hand held the view that socialism could be achieved by
democratic means and that dictatorship was not in favour of public good.
 Independence and sovereignty of a state – a state that has its own legal entity free from any
foreign power control, which enjoys full legal and constitutional control on its geographical
territory, and is free to enter into any kind of trade agreement with other nations has an
advantage. In such states citizen rights are subject to the laws enacted by the political and
legal system of the established constitution. Foreign businessmen and firms and visitors
must abide by and respect the legal rights of this state to govern their actions when they
enter its boundaries.
 Interdependence of nations – today no nation can exist on its own, isolating its citizens from
the developments taking place across the globe. The governments and their stability, in away
are dependent on what is happening economically and politically not only in their immediate
neighbourhoods, but also across distant nations. E.g. the fall of Afghanistan, US war in Iraq,
Piracy in the coast of Somalia, all have had an effect across the globe. The flow of capital
today depends upon a nation’s willingness to open the door to other countries, and thereby
giving up a part of its sovereignty and authority to other countries in order to ensure the
citizens of the world can coexist and reap the rewards of all round development taking place.
 Issue of home country vis-à-vis the host country – international firms operating in different
countries have to strictly adhere to the laws and regulations of home country from which
they originate and the host country in which they operate. They thus have to be aware of
political problems that can arise because of conflict of interests of both countries. It is
advisable to avoid entry into a country that is hostile to your home country. The day-to-dy
functioning, policy making, local NGOs and political parties ideologies, both in home country
and host country do affect companies’ business prospects abroad.
 Type of government – this will focus into various aspects such as government stability,
government economic management, government policy, attitude towards foreign
investment, attitude towards foreign managers, relationship with parent company’s home
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government, anti-private sector influence, administrative procedures, closeness of
government to people, the international stance of government
 Legal Environment
The legal environment of a country pertains to the rules, laws and the constitutional provisions
that regulate the behaviour of the citizens, residents of the country and business and other
entities, along with the process by which countries enforce the laws and provide redressal system
to all of their grievances. The laws of a country regulate business practices, and define the
manner in which business transactions are to be executed and set down the rights and duties and
obligations that each party to business must adhere to. Two main issues are of importance to an
international firm operating in a foreign country. These are
 Legal frameworks: Internationally, business gets affected by three main legal frameworks
when it spreads into multi-country operations:
 International laws – international bodies comprising different country memberships set
up and regulate their rules and regulations wit mutual consent which each member
country should follow [e.g. WTO].
 Host country laws – international marketing firms must abide by the laws of the country
in which they operate which may be different form the laws in their country of origin.
 Home country laws – the laws, rules and regulations laid down by each government in its
won country become the home country laws for all companies and businesses originating
from that country. E.g. Pepsi and Coke still abide to the US laws.
 legal systems
 Common law – this is based on traditions [country’s legal history] , precedents [legal
cases and decisions given by the courts of law in the country] and customs followed for
centuries in a country. It has its foundation in the English Common Law. Majority of
commonwealth countries share this system of law.
 Civil [code] law – this is based on a very detailed set of laws that are organised into codes.
These codes specify what constitutes legal behaviour. It has its roots in the Roman law.
Many countries apply this, such as America, China, Taiwan, South Korea, Japan, Russia
and most of Europe. The judicial courts rely upon the detailed written legal codes rather
than interpretation of tradition, precedent and customs. This system does not have much
flexibility.
 Theocratic law - this is based on religious teachings, as enshrined in the religious
scriptures, such as Islamic law, Shariat. E.g moral behaviour, interest- such as segration of
sexes, banning of taking alcoholic and pork products. Islamic law does not allow charging
of taxes on money lent out.
 Other Legal Issues
 Property rights – property means a resource over which an individual or firm or business
holds a legal title such as buildings, inventions, trademarks, brands, ideas and a firm’s
registered name. each individual or firm’s property rights are upheld in different
countries under the legal systems they operate within. The definition and protection that
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laws provide may not be enforced in many countries.
 Private action – this refers to theft, piracy, black mail, encroachments, fraud, by
individuals or groups of offenders.
 Public action – this refers to the situation where law makers themselves, their agents, and
representatives, bureaucrats and members of public bodies, local members of legislative
assemblies indulge in law-breaking activities such as extortion, confiscation of legal
property of others, encroachment and other resources gobbling activities.
 Anticorruption laws –these laws are instituted by countries to prevent business
organizations from using unethical means to wield undue influence over those who
control the flow of business activities in the country.
 Foreign corrupt practices Act –US had passed the foreign corrupt practices act in the
1970s, following revelations that US companies had given bribes to government officials
in foreign countries in order to get lucrative contracts. The law makes it illegal to bribe a
foreign government official for obtaining or maintaining a business that can be influenced
by a foreign official.
 Protection of intellectual property –this prevents duplicity, counterfeiting of products,
misuse of popular bands, undue advantage from the popularity of internationally well-
accepted products by adopting similar sounding phoney names, are some of the way that
violators of intellectual property adopt all over the world to make billions of dollars.
Hence international firms need to be aware of the intellectual property laws ad
regulations adopted by countries all over the world.
 Anti-trust laws – this prevent industries, both at home and host country from getting
monopolistic and anti-competitive, as such anti-consumer association virtually acts as a
blockage for fair competition and leads to undue exploitation of the general consumers.
 Antidumping law –dumping is a type of pricing strategy for selling products in foreign
markets below cost, or below the price charged to domestic customers. It is practised to
capture a foreign market and to damage rival enterprises. Host governments often pass
laws against dumping with a view to protect local industries.
 Cultural Factors and Environment
In trying to understand the needs of consumers from different countries, international marketers
will have to study consumers not only through their geographical and historical background but
also through their cultural background, to understand what is acceptable in their environment.
They will have to understand what colours, symbols, letters, language, signs, photographs,
scenes, backgrounds, religious norms and social customers will be acceptable to these
international clients because in international markets no two cultures form two adjoining and
adjacent countries could be similar.
Marketers must understand the basic need that is governed by culture and the influences and
pressure of society to which the customer belongs. International marketer face diverse and
different cultures in each country, and knowledge in the culture equips them to fashion and
design their products and services as per the need of their customers. The will then work out
131
their distribution plans, evolve marketing and advertising strategies to become effective in their
multi-country marketing efforts. Culture thus is defines as personality of society.
Main constituents of culture

The main constituents of culture that make each culture identifiable and separately distinct
include:
 Ecology or geography – this means the way an individual accepts the process of ecological
factors, the flora and fauna, wildlife, climate, temperatures, topography, natural resources,
rivers, mountains, plains, minerals and other such gifts of God. Such preservation of
resources, their utilisation and development for human needs and their protection and for all
species on the earth speak of culture of that society. Ecology also affects the history,
economy of nations and consumer behaviour.
 Heritage – historical facts have a very strong impact on technological developments, social
institutes, cultural fabric, social norms, attitudes towards new innovations and acceptance of
the times which these were developed.
 Social fabric – this includes religion, family, institutes of education, the social organisations,
the thinking of philosophers, the ruling elite and the ruled multitudes. The social fabric of a
culture speaks of interpersonal and intra-personal relationships the society members
maintain with each other. in societies where close-knit social institutes like family, clan and
tribe still exist, it becomes easy for international marketers to plan and direct advertising
efforts on joint promotions. E.g. in the eastern cultures, family values are derived from small
group norms, which are extended to the enlarged family to the locality or immediate
neighbourhood, to the entire village. In the west family would mean the immediate family
only. Casteism is quite evident in marital relationships. Honour killings exist in Pakistan. An
international marketer has to be fully aware of all such differences in a society.
 Cultural values - Values sustain the behaviour of individuals as well as groups in a society and they are
learned and unlearned form personal, social and cultural interactions and experiences. Once an
organisation dealing in multi-country locations has identified differences in cultural values, it must
understand fully what steps its executives should adopt and what steps can prove detrimental to
business. Each culture has its own set of acceptable and unacceptable individual as well as social
behavioural norms. These are the set of rules that dictate what is morally, ethically and socially
correct for that particular society. These dos and don’ts are also referred to as cultural imperatives,
cultural exclusives and cultural adiophora, which marketers must adhere to, to ensure survival and
continuance in multi-country markets.
 Cultural imperatives – these are the set of norms that ensure that business is conducted in
the same way that locals do, e.g. in India it is respectable to communicate using formal words
while in America everyone can be referred to using first names. Imperatives can also be seen
in the way a society treats its women, whose status in each country differs.
 Cultural exclusives – this refers to activities that only locals may perform and which
foreigners are not expected to follow. Touching the feet of elders and seeking their blessings
is a common practice in India but a foreigner is hardly expected to follow the customer
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 Cultural adiophora – these are local customs that, whether they are followed by foreigners or
not, do not affect the business relationships. Eating with hands and greeting each other with
folded hands are examples.
 The nation as a culture - The nation provides a workable definition of a culture for
international marketing, where similarity among people is both a cause and an effect of
national boundaries. National identity is perpetuated through the rites and symbols of a
country and a common perception of history results form the preservation of national sites
and documents. Nation legalises itself by being a mediator of the different interest. Each
nation possesses certain human, demographic and behavioural characteristics that constitute
its national identity and that may affect a company’s methods of conducting business
effectively in that country.
 Social systems – the social stratification varies from country to country and person’s ranking
is partly determined by individual factors and partly by the affiliation to the given groups.
These can be determined by birth or by other aspects such as religion, political affiliation,
e.t.c. these stratifications affect the buying and living habits of people and they affect
business relationships within that country. Some characteristics and group memberships that
influence a person’s ranking within the country of origin include: caste versus performance
orientation, gender orientation, age-based groups, family-based groups, occupation,
materialism and leisure, expectation of success and reward, assertiveness, need hierarchy,
culture variance, power distance, individualism versus collectivism, uncertainty avoidance,
masculinity versus femininity, trust, future orientation and fatalism[every event is inevitable].
 Language as an element of culture - Language is a unifying force in the face of diversity in many
countries. Spreading of culture is greatly facilitated if there is commonality in language. The
language diversity makes it difficulty for companies to integrate their workforces and to
market their products on a truly national level, as each dialect, nuance and complexity may
differ from culture to culture. International marketer will have to understand both the
written an spoken language and also the non-verbal language o communicate effectively with
the targeted audience. Translating one language directly to another can be quite a task,
making international marketing communication difficult. Some words do not have direct
translation, and common meaning of words is constantly evolving and they can mean
different things in different contexts.
o All languages are complex and reflective of their environment. without knowing the language
of the area, marketers may not be able to perceive the requirements of customers. Besides
spoken ad written languages, there are a host of non-verbal cues, which form a silent
language, e.g shaking hands, it applies to many countries ass a way of doing business, but in
Saudi Arabia a woman may not shake the hand.
o Colours communicate meanings that come from cultural experience, e.g. in most of the
western countries, black is associated with death, while white has the same connotation in
parts of Asia and Purple in Latin America. For products to succeed, their colours must match
the consumers’ frame of reference.
133
o The distance between people during conversation is also a silent language, and this differs
from one society to another. In US the customary distance for business discussion is 5 to 8
feet and for personal business it is 18 inches to 3 feet. When distance is further or closer
than customary, people tend to feel uneasy.
o Body language also communicates volumes and this differ form one country to another, e.g.
yes is represented by nodding in US and India while yes is represented by side ways
movement f the head in Greek, Turk and Bulgarian. One gesture can have several meaning in
different countries.
 Religion as an element of culture - Religion gives meaning and sustenance to a society’s

existence. Through fear and belief of the supernatural, it defines society’s value system,
attitudes and hopes. It provides the reason to multitudes in this world to bravely face the
problems of life and then come together as groups to form distinct culture and civilization.
Religious preaching plays a large role in shaping the consumption behaviour of a society.
Purchase patterns, value calculation, individualism, totalitarianism, social hierarchical
systems, family affiliation, cultural values, family norms, the status of women, the status of
the old and infirm, the institution of marriage, judicial systems and even the jurisprudence
and the criminal code of conduced and the penal codes, all find their origin in the religions of
the world. Religion also determines the food habits o its followers.
 Cultural dynamics -Culture is dynamic, and in order to ensure its survival, it borrows form
everyone and anyone that comes in contact with it. Culture change may come about through
choice or imposition, change by choice may take place as a reaction to social and economic
changes that present new alternative.
 Change by imposition, sometimes called cultural imperialism, occurs when, for example when
countries introduce their legal systems into their colonies by prohibiting established practices and
defining them as criminal. The introduction of some, but not all, elements f an outside culture is
often called creolisation, indigenisation or cultural diffusion.
 Global economic integration has created a certain degree of cultural homogeneity across nations,
posing threat to individuality of original cultures. A global consumer culture will have both the
presence of transnational firms and their brand acceptance spread all over the globe. The
widespread use of capitalism of global business corporation has led to similar living styles, food
habits, emphasis on material values and exhibitionism among a stream of like dressed, like
behaved individuals.
 The global spread of products and services is more viable than selectively marketing the same in a
few selected countries, because the product ca be mass produced and the same promotional
techniques can be use world over to make the business a profitable venture at the optimal costs,
e.g Gillette and McDonalds.
 Globalisation and local cultures - The globalisation of the production and distribution of goods
and services is a welcome development for raising standards of living of many people. it
offers them access to product and services that they would otherwise would not have had the
134
chance t be exposed to… however globalisation has threaten economic viability of locally
made products and vitiates the traditions and culture of the local people by tempting them to
buy foreign made goods, thus killing domestic industry. Globalisation also promotes cultural
products and services such as movies, music and publications which increases exposure of all
societies to foreign cultures.
o Global marketing activities of the multinational companies can also reinforce local cultures,
e.g. satellite has increased the number of regional TV channels many of them in local
languages. Globalization also forces communities to fight to reaffirm their cultures.
 Economic Environment
The economic environment includes factors and trends related to income levels and the
production of goods and services. Economic trends in different parts of the world can affect
marketing activities in other parts of the world. It covers aspects such as:
o The gross domestic product (GDP) represents the total size of a country’s economy
measured in the amount of goods and services produced.
o Consumer wealth and expenditure within the country.
o National interests and inflation rate.
o Are quotas imposed on your product?
o Is there import tariffs imposed?
o Does the government offer subsidies to national players that make it difficult for you
to compete?
o What is the level of new industrial growth? E.g. China is experiencing terrific industrial
growth.
o What is the impact of currency fluctuations on exchange rates, and do your home
market and your new international market – share a common currency? E.g. Polish
companies trading in Eire will use Euros.
o There are of course the usual economic indicators that one needs to be aware of such
as inflation, Gross Domestic Product (GDP), levels of employment, national income,
the predisposition of consumers to spend savings or to use credit, as well as many
others.
 Technological environment
The technological environment includes factors and trends related to innovations that affect the
development of new products or the marketing process. These technological trends can provide
opportunities for new product development; affect how marketing activities are performed, or
both. Consider the following:
 The technological infrastructure of the market.

 Do all homes have access to energy (electricity)
 Is there an Internet infrastructure. Does this infrastructure support broadband or
dial up?
 Will your systems easily integrate with your host countries?
135
o Do copyright, intellectual property laws or patents protect technology in other
countries? E.g. China and Jordan do not always respect international patents.
o Does your technology conform to local laws? E.g. electrical items that run on non-
domestic currents could be dangerous.
o Are technologies at different stages in the Product Life Cycle (PLC) in various
countries? E.g. versions/releases of software.
11.5 SUBTOPIC 3 THE GLOBAL TRENDS IN GLOBALMARKETING ENVIRONMENT
In 2010, the global financial system remained fragile, but economies around the
world began moving toward recovery. Some — especially those in emerging markets — hardly
broke stride, continuing their rapid growth.
Our report, Tracking global trends, looks at six broad, long-term developments that are shaping
our world:
1. Emerging markets increase their global power

2. Clean tech becomes a competitive advantage
3. Global banking seeks recovery through transformation
4. Governments enhance ties with the private sector
5. Rapid technology innovation creates a smart, mobile world
6. Demographic shifts transform the global workforce
Global economies are so tightly interconnected that companies, governments and industries will
soon be forced to cooperate in ways we could not have imagined just a few years ago.
In fact, Ernst & Young believes the six trends are themselves connected by three underlying
drivers that have helped establish each trend and perpetuate it.
1. Demographic shifts. Population growth, increased urbanization, a widening divide

between countries with youthful and quickly aging populations and a rapidly growing
middle class are reshaping not only the business world, but also society as a whole.
2. Reshaped global power structure. As the world recovers from the worst recession in
decades, the rise of relationships between the public and private sectors has shifted the
balance of global power faster than most could have imagined just a few years ago.
3. Disruptive innovation. Innovations in technology continue to have massive effects on
business and society. We're now seeing emerging markets become hotbeds of innovation,
especially in efforts to reach the growing middle class and low-income consumers around
136
the globe.
Six global trends, interconnected by three key drivers of change as illustrated in the diagram
below
Winner and losers
As these trends change the ways in which businesses operate, grow and compete, winners and
losers inevitably will emerge.
The winners will be easy to spot:

They will be the organizations that constantly monitor broad trends in the external
environment, embrace technology and look for talent everywhere, especially among previously
neglected segments of the workforce such as women, minorities and older workers.
Regardless of what industry they are in or where they are headquartered, these
organizations are looking outward. In so doing, they are navigating multiple jurisdictions and
regulatory frameworks while adapting to local environments and attempting to create global
workforces.
They are modifying supply chains to leverage shifting labor cost structures and mitigate
raw materials' price fluctuations.
They are figuring out how cleantech fits into their growth plans and making it an integral
137
part of their future strategy.
National governments, meanwhile, are seeking ways to meet growth agendas while
reducing cost structures and future debt obligations.
Shaping the future
As businesses and governments look to the future, they would do well to remember that
executing on their existing strategy may no longer be good enough. They must think more deeply
about the opportunities and risks presented by the evolving trends, and the driving forces behind
them. With a different mindset, they can re-imagine what is possible, discovering what they can
do that is new, and how best to do it. Those that succeed may find themselves not just
navigating tomorrow’s global trends, but actually shaping them.
11.5 SUMMARY
As the market becomes saturated at the local and national levels, organizations focus on opening
up and venturing into markets outside their local borders. This can be through exports, going
regional, focusing on specific multinational markets or going global. However, to operate in
these markets clear analysis of the market at these levels changes. The marketing environment is
the same but the operation levels changes according to the orientation adopted by the company.
This can either be ethnocentricism, regiocentrism, polycentrism and geocentrism. The actions,
plans and strategies developed by these companies in these markets will be dependent on the
volatility of these factors in the marketing environment. Therefore, careful scanning of the global
marketing environment is necessary.
NOTE
The world has become a global village resulting in more dynamism in marketing environment
138
11.6 ACTIVITIES
Equity Bank Limited, a Kenyan company is planning to venture into Western and Southern Africa
markets. Carry out a international/global environmental analysis and advise them on the actions
they should take and some of the strategies they should employ to achieve their objectives.
Read the cases and the information provided below to further understand global marketing
environment and the trends that are impacting on organizations across the world.
 http://www.ey.com/GL/en/Issues/Business-environment/Six-global-trends-shaping-the-
business-world
 http://www.academia.edu/386983/The_External_Environment_and_Its_Effect_on_Strategi
c_Marketing_Planning_a_Case_Study_for_McDonalds
 http://www.ukessays.com/essays/marketing/environmental-factors-affecting-mcdonalds-
management-functions.php
 http://freecasestudy.wordpress.com/2011/02/22/example-case-study-starbucks/
a) Discuss any two global marketing environmental factors

b) Explain how global marketing environment affect business.
11.9 GLOSSARY
Regiocentrism - this involves the adoption of regional orientation in venturing into the
international market and it is achieved world market strategies.
Geocentrism - this involves the adoption of world orientation in venturing into the international
139
market and it is achieved world market strategies.
Discuss any two global marketing environmental factors

 Technological environment – this focuses on
o The technological infrastructure of the market.
o Do all homes have access to energy (electricity)

o Is there an Internet infrastructure. Does this infrastructure support broadband or
dial up?
o Will your systems easily integrate with your host countries?
o Production technology in use.
 Socio-cultural environment – this focuses on the following aspects
 Language. Will language be a barrier to communication for you? Does your host
nation speak your national language? What is the meaning of your brand name in
your host country’s language?
 Customs: what customs do you have to be aware of within the country? This is
important. You need to make sure you do not offend while communicating your
message.
 Social factors: What are the role of women and family within society?
 Religion: How does religion affect behaviour?
o Values: what are the values and attitudes of individuals within the market?
140
REFERENCES
Text Books
 Albaum G.A., Duerr D., and Strandkov J.S., International Marketing and Export
Management, Prentice Hall Inc, 4th Edition, 2002.
 Cateora R.P, International Marketing, Irwin McGraw-Hill, 9 th edition, 1996.
 Chee H. and Harris R., Global Marketing Strategy, Pitman Publishing, 1998.
 Jain S. C.[1989]. International Marketing Mangement, 2 nd edition, CBS Publishers &
Distributors, Delhi, India.
 Keegan W.J., Global Marketing Management, Prentice-Hall of India Private Limited, 5th
Edition, 1999.
 Paliwoda S., International Marketing, Butterworth Heinemann, 2nd Edition, 1993.
 Paul j. and Kapoor R. [2008]. International Marketing; Text and Cases. Tata McGraw-Hill
Publishing Company Limited, New Delhi, India.
 Terpstra V. and Russow C. L. (2000). International Dimensions of Marketing, 4 th ed. U. S. A,
South-Western College Publishing.

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KENYATTA UNIVERSITY

DIGITAL SCHOOL OF VIRTUAL AND OPEN LEARNING

DEPARTMENT OF BUSINESS ADMINISTRATION

BBA 840: MARKETING MANAGEMENT

At the end of this course, the learners should be able to:

2.3.1 Sub Subtopic 1 Internal Marketing Environment..................................................22

1.2 LECTURE OBJECTIVES

By the end of this lecture, the learner should be able to:

1.3 SUBTOPIC 1 CORE MARKETING CONCEPTS

Marketing philosophies or orientations defines the way of thinking adopted by

5) Societal Marketing Concept

1.5 SUBTOPIC 3 MARKETING AND CHANGE (STRATEGICMARKETING TRIANGLE)

The kind of a marketing orientation adopted by an organization is highly influenced by its

1.9 SELF-TEST QUESTIONS

 Discuss the various marketing philosophies that exist

 Discuss the various marketing philosophies that exist

 Homburg, C., Kuester, S. &Krohmer, H. (2009). Marketing Management, A Contemporary

2.2 LECTURE OBJECTIVES

By the end of this lecture, the learner should be able to:

2.3 SUBTOPIC 1 KEY FACTORS IN THE MARKETING ENVIRONMENT

A company’s marketing environment consists of the actors and

2.3.2 Sub Subtopic 2 Micro Marketing Environment

2.4 SUBTOPIC 2 THE SWOT ANALYSIS

 Response to the marketing environment depends on the nature of the marketing

 Regardless of the response to the external environment, marketers should be driven by an

2.9 SELF-TEST QUESTIONS

ANSWER TO SELF-TEST QUESTIONS

 Homburg, C., Kuester, S. &Krohmer, H. (2009). Marketing Management, A Contemporary

3.2 LECTURE OBJECTIVES

By the end of this lecture, the learner should be able to:

Consumer behavior is a discipline that enables an organization and its

This covers factors that are external to consumers. They include:

3.4 SUBTOPIC 2 BUYER DECISIONS MAKING PROCESS

The adoption process focuses on the mental process through which an

 Reflect on what influenced you to live where you live?

3.9 SELF-TEST QUESTIONS

a) How do social and personal factors influence consumer purchasing behavior

How do social and personal factors influence consumer purchasing behaviour?

What is the relevance of understanding consumer behavior to managers?

Journals and Periodicals

4.2 LECTURE OBJECTIVES

By the end of this lecture, the learner should be able to:

Why segment markets:

Factors to consider when segmenting

Steps in the Segmentation Process

1. Geographic Segmentation is known as Geographic Segmentation. Examples of such

4.3.3 Sub Subtopic 3 Effective Market Segmentation

4.4 SUBTOPIC 2 TARGET MARKETING

Several factors are considered when evaluating probable target segments

6. Competitors - How dominant are the established competitors? What degree of

Small companies have broad targeting advantages in marketing when they

4.5.1 Sub Subtopic 1 Benefits of Market Positioning

4.5.2 Sub Subtopic 2 Positioning Strategies

Read the cases provided for further understanding of STP process

4.9 SELF-TEST QUESTIONS

What is positioning, how would position a product offered by your company

 Defend Market share: Segmenting business and consumer markets is important to

5.2 LECTURE OBJECTIVES

By the end of this lecture, the learner should be able to:

5.4 SUBTOPIC 2 INTERNAL RECORDS