PRINCIPLES OF MARKETING (MKT 2013)
MODULE
PRINCIPLES OF MARKETING
(MKT 2013)
PREPARED BY: JUN JUHAIZI JUHARI 0
Jun Juhaizi Juhari
Marketing Lecturer
Marketing Department
PRINCIPLES OF MARKETING (MKT 2013)
CHAPTER 1:
MARKETING IN A CHANGING WORLD: CREATING CUSTOMER VALUE
& SATISFACTION
LEARNING OBJECTIVES:
1. Define marketing.
2. Explain the core marketing concepts.
3. Describe the marketing management philosophies/orientations.
WHAT IS MARKETING?
Marketing is a social and managerial process whereby individuals and groups obtain what they
need and want through creating and exchanging products and value with others.
It is the process by which companies create value for customers and build strong customer
relationships in order to capture value from customer in return. (Kotler & Armstrong, 2016)
It is the management process responsible for identifying, anticipating, and satisfying customer
requirements profitably. (CIM)
CORE MARKETING CONCEPTS
To explain this definition, the following important core marketing concepts will be examined:
1) Needs, Wants and Demands
2) Marketing Offers (Products, Services and Experiences)
3) Value and Satisfaction,
4) Exchanges, Transactions and Relationships
5) Markets
Needs, Wants and Demand
Needs
▪ A state of felt deprivation
▪ The most basic concept underlying marketing is that of human needs.
▪ Human needs are states of lacking something necessary in a person.
▪ It is a basic part of human makeup.
▪ They include:
✓ Basic Physical needs – food, clothing, warmth, and safety.
✓ Social needs for belonging and affection.
✓ Individuals needs for knowledge and self-expression.
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Wants.
▪ The form taken by human needs as they are shaped by culture and individual personality.
▪ Wants are shaped by one’s society and are described in term of objects that will satisfy needs.
▪ A hungry person in the United State might want a Big Mac, but a hungry person in Malaysia
might want Nasi Goreng
Demands.
▪ Human wants that are backed by buying power.
▪ People have almost unlimited wants but limited resources.
▪ Thus they want to choose products that provide the most value and satisfaction for their
money.
▪ When backed by buying power, wants become demands.
▪ Consumers view products as bundles of benefits and choose products that give them the
best bundle for their money.
▪ For example, A Honda Civic means basic transportation, affordable price and fuel economy.
Given their wants and resources, people demand products with the benefits that add up to
the most satisfaction.
Products, Services and Experiences
People satisfy their needs and wants with products and services.
Product - anything that can be offered to a market for attention, acquisition,
use or consumption that might satisfy a want or need. It includes physical
object, services, persons, places, organization and ideas. The concept of
product is not limited to physical objects. Anything capable of satisfying a need
can be called a product. In addition to tangible goods, products include services.
Service – Any activity or benefit that one party can offer to another that is
essentially intangible and does not result in the ownership of anything .e.g.
Banking, airline, hotel, air conditioner services, etc.
Broadly defined, products also include other entities such as experiences,
persons, places, organizations, activities and ideas. For example, consumers
decide which entertainers to watch on television, which places to visit on
vacation, which organizations to support through contributions and which
ideas to adopt.
Value, Satisfaction and Quality
Consumers usually face a broad array of products and services that might satisfy a given need.
How do they choose among these many products and services? Consumers make buying choices
based on their perceptions of the value that various products and services deliver
Customer value – The differences between the values the customer gains from owning and using
a products and the costs of obtaining the product.
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For example, FedEx customers gain a number of benefits. The most obvious being fast and reliable
package delivery. However when using FedEx, customers also may receive some status and
image values. Using FedEx usually makes both the package sender and the receiver feel more
important.
Customers do not often judge products values and costs accurately or objectively but they act
on perceived value. Customer’s satisfaction depends on a product’s perceived performance in
delivery value relative to a buyers expectations.
Customer Satisfaction - is the extent to which a product’s perceived performance in delivering
value matches a buyer’s expectation. If the product’s performance falls short of the customer’s
expectation, the buyer is dissatisfied. If the performance matches expectation, the buyer is
satisfied. If performance exceeds expectations, the buyer is delighted
Customer expectation Customer satisfaction
Below expectation Dissatisfied
Match expectation Satisfied
Exceed expectation Delight
Outstanding marketing companies go out of their way to keep their customers satisfied. Satisfied
customers make repeat purchase and they tell others about their good experience with the
product. The key is to match customer expectations with companies’ performance. Smart
companies aim to delight customers by promising only what they can deliver, then delivering
more than they promise.
Satisfaction is the difference between products’ perceived performance in delivery value relative
to buyer’s expectations before a product.
Quality - Quality can be defined as “freedom from defects”. Quality has a direct impact on
product or service performance. This is closely linked to customer value and satisfaction.
Customers satisfaction link to quality, lead the company adopted Total Quality Management
programs, designed to constantly improve the quality of their products services and marketing
processes. Quality has a direct impact on product performance and hence on customer
satisfaction.
Exchanges, transactions and relationships
Exchange – The act of obtaining a desired object from someone by offering something in returns.
For example, hungry people could find food by hunting, fishing, or gathering fruits. They could beg
for food or take food from someone else. Or they could offer money or others in return for food.
Transaction – A trade between two parties that involves at least two things of value, agreed upon
conditions, a time of agreement and a place of agreement. One party gives X to another party
and gets Y in return. For example, you pay RM2000 for a television set.
Relationship marketing – The process of creating, maintaining, and enhancing strong, value-laden
relationships with customers and other stakeholders. Beyond creating short term transaction,
marketers need to build long term relationship with valued customers, distributors, dealers and
suppliers.
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Markets
Markets - The set of all actual and potential buyers of a product or services. These buyers share a
particular need or want that can be satisfied through exchanges and relationships. The term
market also stood for the place where buyers and sellers gathered to exchange their goods such
as village square.
Size of markets depends on:
1) Number of people who exhibit the need
2) Have resources to engage in exchange
3) Willing to offer these resources in exchange for what they want
MARKETING MANAGEMENT PHILOSOPHIES/ORIENTATIONS
We define marketing management as the analysis, planning, implementation and control of
program designed to create, build and maintain beneficial exchanges with target buyers for the
purpose of achieving organizational objectives. So, what philosophy should guide these
marketing efforts?
There are five orientations (philosophical concepts to the marketplace have guided and continue
to guide organizational activities):
1. The Production Concept
2. The Product Concept
3. The Selling Concept
4. The Marketing Concept
5. The Societal Marketing Concept
The Five Concepts Described
1) The Production Concept
❑ The philosophy that consumers will favor products that are available and highly affordable
and that management should therefore focus on improving
production and distribution efficiency.
❑ This concept is the oldest of the concepts in business.
❑ It holds that consumers will prefer products that are widely
available and inexpensive.
❑ Managers focusing on this concept concentrate on
achieving high production efficiency, low costs, and mass
distribution.
❑ They assume that consumers are primarily interested in product
availability and low prices.
❑ This orientation makes sense in developing countries, where consumers are more
interested in obtaining the product than in its features.
❑ For example, Henry Ford’s whole philosophy was to perfect the production of the Model T
so that its cost could be reduced and more people could afford it.
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2) The Product Concept.
❑ This orientation holds that consumers will favor those products that
offer the most quality, performance, or innovative features that
organization should therefore devote its energy to making
continuous product improvements.
❑ Managers focusing on this concept concentrate on making
superior products and improving them over time.
❑ They assume that buyers admire well-made products and
can appraise quality and performance.
❑ However, these managers are sometimes caught up in a love
affair with their product and do not realize what the market needs.
❑ Management might commit the “better-mousetrap” fallacy, believing that a better
mousetrap will lead people to beat a path to its door.
❑ For example, Samsung came out with some innovative products Samsung’s folding phone
- otherwise known as the Galaxy X.
3) The Selling Concept.
❑ The idea that consumers will not buy enough of the organization’s
products unless the organization undertakes a large scale selling
and promotion efforts.
❑ This is another common business orientation. It holds that
consumers and businesses, if left alone, will ordinarily not buy
enough of the selling company’s products.
❑ The organization must, therefore, undertake an aggressive selling
and promotion effort.
❑ This concept assumes that consumers typically show buying
inertia or resistance and must be coaxed into buying.
❑ It also assumes that the company has a whole battery of effective selling and promotional
tools to stimulate more buying.
❑ Most firms practice the selling concept when they have overcapacity.
❑ Their aim is to sell what they make rather than make what the market wants.
❑ For example, blood donations and insurance policies fall in the category of sale concept,
where the marketer thinks that their job is done after completing the transaction.
4) The Marketing Concept.
❑ The marketing management philosophy that holds achieving
organizational goals depends on determining the needs and
wants of target market and delivering the desired satisfaction
more effectively and efficiently than competitors do.
❑ This is a business philosophy that challenges the above three
business orientations. Its central tenets crystallized in the 1950s.
❑ It holds that the key to achieving its organizational goals (goals of the
selling company) consists of the company being more effective than competitors in
creating, delivering, and communicating customer value to its selected target customers.
❑ The marketing concept rests on four pillars: target market, customer needs, integrated
marketing and profitability.
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❑ Lets take an example of 2 eternal rivals – Pepsi and Coke – Both of these companies have
similar products. However the value proposition presented by both is different. These
companies thrive on the marketing concept. Where Pepsi focuses on youngsters, Coke
delivers on a holistic approach. Also the value proposition by Coke has been better over
ages as compared to Pepsi which shows that coke especially thrives on the marketing
concept, i.e it delivers a better value proposition as compared to its competitor.
❑ The difference between selling concept and marketing concept are as follow:
5) The Societal Marketing Concept.
❑ This concept holds that the organization’s task is to
determine the needs, wants, and interests of
target markets and to deliver the desired
satisfactions more effectively and
efficiently than competitors (this is the
original Marketing Concept). Additionally,
it holds that this all must be done in a way
that preserves or enhances the consumer’s
and the society’s well-being. to
❑ The purpose of the social marketing concept is also
satisfy the needs and requirements of customers before making any profit. But the
emphasis of this concept is to make the company to fulfill social responsibilities for the
sustainable future in the long term. The marketing strategy of businesses and companies
should include both customers and society as well.
❑ The idea of the social marketing concept is that the businesses should satisfy the needs
and wants of customers, but this target should be aligned with the long-term interest of the
society.
❑ This orientation arose as some questioned whether the Marketing Concept is an
appropriate philosophy in an age of environmental deterioration, resource shortages,
explosive population growth, world hunger and poverty, and neglected social services.
❑ For example, Adidas is one of the top leading sportswear companies in the world. When it
comes to the environment, Adidas is committed to manufacture its products that could
be reused over and over again.. TESCO promotes Greener Earth Campaign.
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CHAPTER 2:
STRATEGIC PLANNING AND MARKETING PROCESS
LEARNING OBJECTIVES:
1. Explain companywide strategic planning and its four steps
2. Discuss SWOT analysis
3. Describe the managing marketing activities-planning, implementation and control.
STRATEGIC PLANNING
Strategic Planning - The process of developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing opportunities.
The Importance of Strategic Planning:
i) Strategic planning encourages management to think ahead systematically.
ii) Forces the company to sharpen its objectives and policies
iii) Leads to better coordination of company efforts.
iv) Provide clearer performance standard for control.
Steps in Strategic Planning
Corporate Level Business Unit, Product
and Market Level
Defining the Setting and Designing the Planning,
company company business marketing, and
mission objectives portfolio other functional
goals strategies
Strategic planning sets the stage for the rest of the planning in the firm.
It involves defining a clear company mission, setting supporting company objectives, designing a
sound business portfolio, and coordinating functional strategies. (Refer diagram above)
i) At the corporate level, the company first defines its overall purpose and mission.
ii) This mission then is turned into detailed supporting objectives that guide the whole company.
iii) Next the headquarters decides what portfolio of businesses and products is best for the
company and how much support to give each one.
In turn each business and product unit must develop detailed marketing and other departmental
plans that support the company wide plan.
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Thus, marketing planning occurs at the business unit, product and market levels. It supports
company strategic planning with more detailed planning for specific marketing opportunities.
To be good in marketing, companies also need to pay attention to the management. Managing
the marketing process requires the four marketing management functions – analysis, planning,
implementation and control.
CONDUCT SITUATION ANALYSIS (SWOT)
Marketing analysis is the complete analysis of the company’s situation in a SWOT analysis that
evaluates the company’s:
i) Strengths
ii) Weakness
iii) Opportunities
iv) Threats
Strengths include internal capabilities, resources, and positive situational factors that may help to
serve company customers and achieve company objectives.
Weaknesses include internal limitations and negative situational factors that may interfere with
company performance.
Opportunities are favorable factors or trends in the external environment that the company may
be able to exploit to its advantage.
Threats are unfavorable factors or trends that may present challenges to performance.
Identifying the SWOT help the marketer to find attractive opportunities and to avoid environmental
threats.
MARKETING PLANNING
Deciding on marketing strategies that business will help the company attain its overall strategic
objective. A detailed marketing plan is needed for each business, product or brand.
Contents of a marketing plan
1 Executive Summary Brief summary of the main goals and recommendation
Describe the target market and company’s position in it. It
2 Current marketing situation include information about market, product performance,
competition and distribution.
3 Threats and opportunity Assesses major threats and opportunities that the product
analysis might face to anticipate negative or positive development
that might have an impact on the firm and its strategies.
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4 Objectives and issue What the company would like to attain during the plan’s
5 Marketing strategy term and discusses key issues that will affect their attainment
6 Action programs
7 Budget Eg:
8 Controls Objective: To increase market share to 30 percent
Issue: How should this increase be done.
Marketing logic by which the business unit hopes to achieve
its marketing objectives consist of specific strategies for
target markets, positioning, the marketing, the marketing mix
and marketing expenditure level.
Spells out how marketing strategies will turn into specific
action programs that answer the several relevant questions.
What need to be done? Who is involved? How much does it
cost?
Details a supporting marketing budget that is essentially a
projected profit-and-lost statement. It includes expected
revenue, expected cost and projected profit.
Outline the control that will be used to monitor progress and
allow higher management to review implementation results
and spot products that are not meeting their goals. It
includes measures of return on marketing investment.
MARKETING IMPLEMENTATION
Marketing implementation is the process that turns marketing strategies and plans into marketing
actions in order to accomplish strategic marketing objectives.
Involves day-to-day, month-to-month activities that effectively put the marketing plan to work.
Implementation address the Who, Where, When and How.
Company can gain competitive advantages through effective implementation. Successful
marketing implementation depends on how well the company blends its people, organization
structure, decision and reward system, and company culture into a cohesive action program that
support its strategies.
Marketing strategies will be successful implemented if it’s fit with the company culture, the system
of values and beliefs shared by people in the organization
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MARKETING CONTROL
Marketing Control is the process of measuring and evaluating the results of marketing strategies
and plans, and taking corrective action to ensure that marketing objectives are achieved.
Four steps involved:
i) Set specific marketing goal
ii) Measure the performance in the marketplace
iii) Evaluates the causes of any differences between expected and actual performance
iv) Take corrective action to close the gaps between the goals and performance – maybe
require changing the action when necessary
Operating Control – Involves checking ongoing performance against the annual plan and taking
corrective action when necessary.
Strategic control - involves looking at whether the company’s basic strategies are well matched
to its opportunity. A major tool for Strategic Control is a marketing audit – A comprehensive,
systematic, independent and periodic examination of a company’s environment, objectives,
strategies, and activities to determine problem areas and opportunities and to recommend a
plan of action to improve the company’s marketing performance.
Marketing audit is a comprehensive, systematic, independent, and periodic examination of a
company’s environment, objectives, strategies, and activities to determine problem areas and
opportunities
Return on marketing investment (ROI) is the net return from a marketing investment divided by the
costs of the marketing investment. Marketing ROI provides a measurement of the profits
generated by investments in marketing activities.
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CHAPTER 3:
THE MARKETING ENVIRONMENT
LEARNING OBJECTIVES:
1) Describe the microenvironment forces that affect the company ability to serve its customers.
2) Explain how changes in microenvironmental forces affect marketing decisions.
3) Describe the macro environment forces that affect the company ability to serve its customers.
4) Explain how changes in macro environmental forces affect marketing decisions.
INTRODUCTION
Marketing Environment - 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. Successful companies know the
vital importance of constantly watching and adapting to the changing environment.
A company’s marketers take the major responsibility for identifying significant changes in the
environment.
THE COMPANY’S MICROENVIRONMENT
Company’s Microenvironment - The forces close to the company that affect its ability to serve its
customers – The company, suppliers, marketing channel firms, customer markets, competitors and
publics
Marketing management ‘s job is to
attract and build relationships with
customers by creating customer value
and satisfaction.
However, marketing managers cannot
accomplish this task alone. Their success
will depend on other actors in the
company’s microenvironment.
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1) The Company
▪ In designing Marketing Plans, marketing management takes other company groups into
account such as top management, finance, research and development, purchasing,
manufacturing and accounting.
▪ Example: Marketing managers must also work closely with other departments in the
organization. The finance department is concerned with finding and using funds to carry
out the marketing plan. R&D focuses on the problem of designing safe and effective
products, as well as the processes used. Purchasing concerns it with getting supplies and
materials and manufacturing is responsible for producing the desired number of cartons
of finished product.
▪ These interrelated groups form the internal environment.
1 Top management Set company mission, objectives, broad strategies and
policies
2 Finance Concern with finding and using funds to carry out the
marketing plan
3 R&D Focuses on designing safe and attractive product.
4 Purchasing Worries about getting supplies and materials
5 Manufacturing Responsible for producing the desired product quality
and quantities of the product
6 Accounting Measure revenues and cost to help marketing know
how well it is achieving its objectives
▪ Marketing manager must work closely with other company department.
▪ All the functions must think consumer and they should work in harmony to provide superior
customer value and satisfaction
2) Suppliers
▪ Suppliers are an important link in the company’s overall customer ‘value delivery system’.
They provide resources needed by the company to produce its goods and services.
▪ Supplier developments can seriously affect marketing. Marketing managers must watch
supply availability – supply shortages or delays, labor strikes, and other events can cost
sales in the short run and damage customer satisfaction in long run.
▪ Marketing managers also monitor the price trends in their key inputs. Rising supply costs
may force price increases that can harm the company’s sales volume.
3) Marketing Intermediaries
▪ Marketing intermediaries are firms that help the company to promote, sell, and distribute
its goods to final buyers.
▪ They include resellers, physical distribution firms, marketing service agencies, and
financial intermediaries.
a) Resellers.
i) Resellers are distribution channel firms that help the company find customers or
make sales to them.
ii) Include Wholesaler and retailers who buy and resell merchandise.
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iii) Selecting and working with wholesalers is not easy. No longer do manufacturers
have many small, independent resellers from which to choose.
iv) They now face large and growing reseller organizations. These organizations
frequently have enough power to dictate terms
b) Physical distribution Firms.
i) Physical Distribution firms help the company to stock and move goods from their
points of origin to their destinations
ii) Working with warehouse and transportation firms, a company must determine the
best ways to store and ship goods, balancing factors such as cost, delivery, speed
and safety.
iii) e.g. warehouse, transportation firm.
c) Marketing Services Agencies
i) Marketing Services Agencies are the marketing research firms, advertising
agencies, media firms and marketing consulting firms that help the company
target and promote its products to the right markets.
ii) When the company decides to use one of these agencies, it must choose carefully
because these firms vary in creativity, quality, service and price.
d) Financial Intermediaries.
i) Financial Intermediaries include banks, credit companies, insurance companies,
and other businesses that that help finance transactions or insure against the risk
associated with the buying and selling of goods.
ii) Most firms and customers depend on financial intermediaries to finance their
transactions.
iii) Like suppliers, marketing intermediaries form an important component of the
company’s overall value delivery system.
4) Customers
There are 5 types of customers. The company needs to study its markets closely. Each market has
special characteristic that call for careful study by the seller
a) Consumer market – consist of individuals and household that buy goods and services for
personal consumption.
b) Business Market - buy goods and services for further processing or for use in their
production process
c) Reseller Markets – buy product and services to resell at a profit
d) Government market – made up of government agencies that buy goods and services to
produce public services or transfer the goods and services to other who need them
e) International Market – consist of this buyer in other countries including consumers,
producers, resellers and government
5) Competitors
▪ The marketing concepts states that to be successful, a company must provide greater
customer value and satisfaction than its competitors. Thus, marketer must do more than
simply adapt to the needs of target consumers.
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▪ They must also gain strategic advantage by positioning their offerings strongly against
competitors’ offerings in the minds of consumers. No single competitive marketing strategy
is best for all companies.
▪ Each firm should consider its own size and industry position compared to those of its
competitor. Large firms with dominant positions in an industry can use certain strategies
that smaller firms cannot afford. Small firms can develop strategies that give them better
rates of return than large firms enjoy.
6) Publics
Publics - Any group that has an actual or potential interest in or impact on an organization’s ability
to achieve its objectives.
1 Financial - Influence the company’s ability to obtain funds.
Publics - Banks, investment house, and stockholders are the major
2 Media financial publics
publics
- Carry news, features and editorial opinion.
- Newspapers, magazines and radio and television stations.
- Management must take government development into
3 Government account.
Public - Marketer must often consult the company’s lawyers on issues of
product safety, truth in advertising and other matters
- A company’s marketing decisions may be questioned by
4 Citizen Action consumers organizations, environmental groups, minority
Publics groups and others
- Public relations Department can help it stay in touch with
consumers and citizen groups.
- Neighborhood residents and community organizations.
5 Local Publics - Appoint a community relations officer to deal with the
community, attend meeting, answers questions and contribute
to worthwhile causes
6 General - A company needs to be concerned about the general public’s
Public attitude toward its product and activities.
- The public’s image of the company affects its buying.
7 Internal - Include workers. Managers, volunteers and the board of
Publics director.
- When employees feel good about their company, the positive
attitude spills over to external publics
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THE COMPANY’S MACROENVIRONMENT
Company’s Macroenvironment - The
larger societal forces that affect the
microenvironment – demographic,
economic, natural, technological,
political, and cultural forces
The company and all actors operate
in a larger macroenvironment of
forces that shape opportunities and
pose threats to the company
1) Demographic Environment
▪ Demography is the study of human populations in terms of size, density, location, age,
gender, race, occupation and other statistics.
▪ The explosive world population growth means growing to human needs to satisfy – growing
market opportunities.
▪ Marketers keep close track of demographic trends and development s in their markets
both at home and abroad which includes family structures, changing age, geographic
population shifts, educational characteristics and population diversity.
2) Economic Environment
▪ Economics is the factors that affect consumer buying power and spending patterns.
▪ Nations vary greatly in their levels and distribution of income. Some countries have
subsistence economies.
a) Subsistence Economies – Country population that consume most of their own
agricultural and industrial output – this country offer few market opportunities
b) Industrial Economies – Constitute rich markets for many different kinds of goods
▪ Changes in major economic variables such as income, cost of living, interest rates and
savings and borrowing patterns have a large impact on the marketplace.
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3) Natural Environment
▪ It is referring to natural resources that are needed as inputs by marketers or that are
affected by marketing activities. Environmental concerns have grown steadily during the
past three decades.
▪ Marketer should be aware of several trends in natural environment as below:
a) Shortages of raw material.
▪ Air and water may seem to be infinite resources, but air pollution chokes many
of the world’s largest cities.
▪ Renewable resources such as forest and food have to be used widely.
▪ Nonrenewable resources, such as oil, coal and various minerals pose a serious
problem
▪ Firms making products that require these scarce resources resource face large
cost increases, even while the materials are available.
b) Increased pollution.
▪ Industry will almost always damage the quality of the natural environment.
▪ Disposal of chemical and nuclear wastes
▪ Dangerous mercury level in the ocean
▪ Quantity of chemical pollutants in the soil and food supply
▪ The littering of the environment with non-biodegradable bottles, plastics and
other packaging materials.
c) Increased in government intervention in natural resources management.
▪ The governments of different countries vary in their concern and efforts to
promote a clean environment.
▪ Some like the German government vigorously pursue environmental quality.
▪ Others, especially many poorer nations do little about pollution, largely because
they lack the needed funds and political will.
▪ Even the richer nations lack the vast funds and political accord needed to
mount a worldwide environmental effort.
▪ The general hope is that companies around the world will accept more social
responsibility, and that less expensive devices can be found to control and
reduce pollution.
▪ Concern for the natural environment has spawned the so-called green
movement.
▪ Today, enlightened companies go beyond what government regulations
dictate. They are responding to consumer demands with the ecologically safer
products, recyclable or biodegradable packaging, better pollution controls,
and more energy –efficient operations.
▪ E.g. Mc Donald’s has eliminated polystyrene cartons a now uses smaller,
recyclable paper wrappings and napkins.
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4) Technological Environment
▪ The technological environment is perhaps the most dramatic force now shaping our world.
▪ It is forces that create new technologies, creating new technologies, creating new
product and market opportunities.
▪ Technology released wonders such as antibiotics, organ transplant, notebook computers
and internet. Technology also released horror such as nuclear missiles, chemical weapons
and assault rifles.
▪ It has released mixed blessings such as the automobile, television and credit cards. The
technological environment changes rapidly. Think of all today’s common products that
were not available 100 years ago, or even 30 years ago.
▪ Our attitudes toward technology depends on whether we are more impressed with its
wonder or its blunder. New technologies create new markets and opportunity, however,
every new technology replace an older technology
▪ The business related to the old technology will decline, so the marketer should watch the
technological environment closely. The challenge in technology not only technical but
also commercial – practical and affordable. Marketer should be aware of all regulation
when applying new technologies and developing new products.
▪ As products and technology become more complex, the public’s needs to know that they
are safe. Thus, government agencies investigate and ban potentially unsafe product.
Marketers should be aware of these regulations when applying new technologies and
developing new product.
5) Political Environment
▪ It refers to Laws, government agencies, and pressure groups that influence and limit various
organizations and individuals in a given society.
▪ Political factors are government regulations that influence business operation positively
and negatively. Managers must keep a bird’s eye view over political factors. These factors
may be current and impending legislation, political stability and changes, freedom of
speech, protection and discrimination laws are factors affecting business operation and
activities.
What Political Factors Affect Business Environment?
▪ With a change in administration policies, there arise political factors that can change the
entire business scenario. These changes can be economic, legal or social and can include
the following factors:
1. Tax and economic policies: Increasing or decreasing rate of taxes is a good
example of a political component. Government regulations may raise the tax rate
for some businesses and can lower the same for others due to specific reasons. This
decision will directly impact businesses. This is why maintaining a strategy which
can deal with such situations is very important.
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2. Political stability: Lack of political stability within a country can significantly impact
the operations of a business. This can especially be true for businesses that are
operating on the global scale. For instance, a hostile takeover can take over a
government. Eventually, such a situation will lead to looting, riots and general
disorder within the environment. Such situations can disrupt business operations
and activities which can have a major impact on its bottom line.
3. Foreign Trade Regulations: Every business has a need to expand business operation
to other countries. However, political background of a country can influence the
desire for a business to expand its operations. Tax policies that are particularly
controlled by the government can induce a particular business to expand
operations in different regions whereas; other tax policies can hinder the process
of business expansion for some industries. Government initiatives, which have been
designed to support local businesses, might work against international companies
when the question is of their competitiveness in a foreign region.
4. Employment Laws: Employment laws are made to protect the rights of employees
and include every aspect of employer/employee relationship. Employment law is
an aspect that is very complex and involves several pitfalls as well. When
businesses’ are in touch with the latest developments in this law, they can manage
to take their business in the right direction however, those who get it wrong needs
to be completely prepared for the expensive results it will generate.
▪ It involves laws that covering the issue of:
✓ Competition
✓ Fair trade practice
✓ Environmental protection
✓ Product safety
✓ Truth in advertising
▪ Reasons of enacting business legislation:
✓ Protect companies from each other – such as prevent unfair competition.
✓ Protect consumers from unfair business practiced.
✓ Protect the interest of society against unrestrained business behavior.
6) Cultural Environment
▪ Cultural is Institution and other forces that affect society’s basic values, perceptions,
preference and behaviors.
▪ The following cultural characteristics can affect marketing decision making:
1) Persistence of Cultural Value.
▪ People in a given society hold many beliefs and values. Their core beliefs and value
have a high degree of persistence. Core belief and value passed on from parents
to children and are reinforced by schools, mosque, business and government
▪ Secondary beliefs and values are more open to change. E.g. For muslims market in
Malaysia, believing that they are only allowed to take only halal food is a core
belief. Believing that Nasi Lemak is the common breakfast is a secondary belief.
Marketer have some chance of changing secondary values, but little chance of
changing core values.
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2) Shifts in Secondary Cultural Value.
▪ Although core values are fairly persistent, cultural swings do take place E.g. Popular
music group, young people’s hair styling etc
▪ Marketers want to predict cultural shifts in order to spot new opportunities or threats.
▪ The major cultural values of a society are expressed in people’s views of themselves
and others, as well as in their views of organization, society, nature and the universe:
a. People View of Themselves.
- People vary in their emphasis on serving themselves versus serving others.
- Some peoples seek pleasure, fun. Others seek self-realization through
religion
b. People Views of Others.
- Shift from ‘me society’ to a ‘we society’ in which more people want to be
with and serve others.
- Materialism, flashy spending and self-indulgence are being replaced by
more sensible spending, saving, family concerns and helping others
c. People’s Views of Organization.
- People vary in their attitudes towards corporations, government agencies,
trade unions universities and other organizations.
- By and large, people are willing to work for major organizations and expect
them, in turn to carry out society’s work.
d. People’s View of Society.
- People vary in their attitudes towards their society
- Patriots defend it, reformers want to change it, and malcontents want to
leave it.
- People’s orientation to their society influences their consumption patterns,
levels of savings and attitudes toward the market place.
e. People’s Views of Nature.
- People vary in their attitude toward the natural world
- Some feel ruled by it, others feel in harmony with it and still others seek to
master it
- More recently people have recognized that nature is finite and fragile – that
can be destroyed or spoiled by human activities
- Love of nature leading to more camping, hiking, boating and others
outdoor activities.
- Business have to respond by offering more products and services catering
to these interest.
f. People’s View of the Universe.
- People vary in their beliefs about the origin of the universe and their place
in it.
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CHAPTER 4:
CONSUMER MARKET AND CONSUMER BUYER BEHAVIOR
LEARNING OBJECTIVES:
1. Define the consumer market and consumer buyer behaviour.
2. Describe the stages in the buyer decision process.
3. Explain the four major factors that influence consumer buyer behaviour
DEFINITION OF CONSUMER MARKET AND CONSUMER BUYER BEHAVIOUR
Consumers make many buying decisions every day. Most large companies research consumer
buying decisions in great detail to answer questions about: what consumers buy, where they buy,
how and how much they buy, when they buy and why they buy.
A firm needs to analyze buying behavior for:
• Buyers reactions to a firms marketing strategy has a great impact on the firms success.
• The marketing concept stresses that a firm should create a Marketing Mix (MM) that
satisfies (gives utility to) customers, therefore need to analyze the what, where, when and
how consumers buy.
• Marketers can better predict how consumers will respond to marketing strategies.
Consumer market – Refer to all the individuals and households who buy or acquire goods and
services for personal consumptions
Consumer buyer behaviour – is the buying behaviour of final consumers: individuals and
households who buy goods and services for personal consumption.
Need to understand:
- why consumers make the purchases that they make?
- what factors influence consumer purchases?
- the changing factors in our society.
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THE BUYER DECISION PROCESS
It consists of 5 stages: need recognition, information search, evaluation of alternatives, purchase
decision and post-purchase behavior.
The Buyer Decision Process
How consumers make buying decisions?
1) Need Recognition:
❑ The first stage of the buyer decision process, in which the consumer recognizes a problem
or need
❑ The need can be triggered by internal stimuli when one of the person’s normal needs –
hunger, thirst, sex- rises to a level high enough to become a drive.
❑ Example : Farhana might felt the need for a new computer.
❑ At this stage, the marketer should research consumers to find out what kinds of needs or
problem arise, what brought them about, and how they led the consumer to this particular
product.
2) Information Search:
❑ The stage of the buyer decision process in which the consumer is aroused to search for
more information; the consumer may simply have heightened attention or may go into
active information search.
❑ Example: farhana may actively look for reading materials, phone friends and gather
information in other ways to buy a new computer.
❑ At this stage, the consumer can obtain information from any several sources. These include
personal sources (family, friends, neighbors), commercial sources ( advertising,
salespeople,dealers,packaging, displays), public sources ( mass media, consumer rating
organizations) and experiential sources (handling, examining, using the product).
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3) Evaluation of Alternatives:
❑ The stage of the buyer decision process in which the consumer uses information to
evaluate alternative brands in the choice set.
❑ Example : Farhana has narrowed her choices to four computers and she is interested in
several attribute ; ease of use, price, etc
❑ Marketers should study buyers to find out how they actually evaluate rand alternatives. If
they know what evaluative processes go on, marketers can take steps to influence the
buyer’s decision.
4) Purchase Decision:
❑ The buyer’s decision about which brand to purchase.
❑ Generally, the consumer’s purchase decision will be to buy the most preferred barns, but
two factors can come between the purchase intention and the purchase decision.
❑ Example: if Farhana’s father feels strongly that Farhana should buy the lowest-prices
computer, then the chances of Farhana’s buying a more expensive computer will be
reduced.
5) Postpurchase Behavior:
❑ The stage of the buyer decision process in which consumers take further action after
purchase, based on their satisfaction or dissatisfaction.
❑ If the product falls short of expectation, the consumer is disappointed; if it meets
expectations, the consumer is satisfied; if it exceeds expectation, the consumer is
delighted.
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CHARACTERISTIC AFFECTING CONSUMER BEHAVIOR
Source from: Google image
1. Cultural Factors
The marketer needs to understand the role played
by the buyer’s culture, subculture and social class.
A) Culture
❑ the set of basic values, perceptions, wants
and behaviors learned by a member of
society from family and other important
institutions.
❑ Culture is the most basic cause of a
person’s wants and behavior. Human behavior is largely learned. Growing up in a society,
a child learns basic values, perceptions, wants, and behaviors from the family and other
important institutions.
❑ A person normally learns or is exposed to the following values: achievement and success,
activity and involvement, efficiency and practicality, progress, material comfort,
individualism, freedom, humanitarianism, youthfulness, and fitness and health
❑ For example, business representatives of a U.S. community trying to market itself in Taiwan
found this out the hard way. Seeking more foreign trade, they arrived in Taiwan bearing
gifts of green baseball caps. It turned out that the trip was scheduled a month before
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Taiwan elections, and that green was the color of the political opposition party. Worse yet,
the visitors learned after the fact that according to Taiwan culture, a man wears green to
signify that his wife has been unfaithful. The head of the community delegation later noted,
“I don’t know whatever happened to those green hats, but the trip gave us an
understanding of the extreme differences in our cultures.” International marketers must
understand the culture in each international market and adapt their marketing strategies
accordingly.
B) Subculture
❑ a group of people with shared value systems based on common life experiences and
situations.
❑ Each culture contains smaller subcultures or groups of people with shared value systems
based on common life experiences and situations.
❑ Subcultures include nationalities, religions, racial groups, and geographic regions.
❑ Many subcultures make up important market segments, and marketers often design
products and marketing programs tailored to their needs.
C) Social class
❑ relatively permanent and ordered divisions in a society whose members share similar
values, interest and behaviors.
❑ Social class is not determined by a single factor, such as income, but is measured as a
combination of occupation, income, education, wealth, and other variables.
❑ Marketers are interested in social class because people within a given social class tend to
exhibit similar buying behavior.
❑ Social classes show distinct product and brand preferences in areas
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2. Social Factors
A consumer’s behavior also is influenced
by social factors, such as the consumer’s
small groups, family, and social roles and
status.
A) Groups
❑ Groups that have a direct influence
and to which a person belongs are
called membership groups.
❑ In contrast, reference groups serve as direct (face to- face) or indirect points of
comparison or reference in forming a person’s attitudes or behavior. Reference groups to
which they do not belong often influence people.
❑ Marketers try to identify the reference groups of their target markets. Reference groups
expose a person to new behaviors and lifestyles, influence the person’s attitudes and self-
concept, and create pressures to conform that may affect the person’s product and
brand choices.
❑ The importance of group influence varies across products and brands. It tends to be
strongest when the product is visible to others whom the buyer respects. Manufacturers of
products and brands subjected to strong group influence must figure out how to reach
opinion leaders—people within a reference group who, because of special skills,
knowledge, personality, or other characteristics, exert influence on others.
❑ Many marketers try to identify opinion leaders for their products and direct marketing
efforts toward them. In other cases, advertisements can simulate opinion leadership,
thereby reducing the need for consumers to seek advice from others.
❑ The importance of group influence varies across products and brands. It tends to be
strongest when the product is visible to others whom the buyer respects. Purchases of
products that are bought and used privately are not much affected by group influences
because neither the product nor the brand will be noticed by others.
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B) Family
❑ Family members can strongly influence buyer behavior. The family is the most important
consumer buying organization in society, and it has been researched extensively.
Marketers are interested in the roles and influence of the husband, wife, and children on
the purchase of different products and services.
❑ Husband-wife involvement varies widely by product category and by stage in the buying
process. Buying roles change with evolving consumer lifestyles.
❑ Such changes suggest that marketers who’ve typically sold their products to only women
or only men are now courting the opposite sex. For example, with research revealing that
women now account for nearly half of all hardware store purchases, home improvement
retailers such as Home
❑ Depot and Builders Square have turned what once were intimidating warehouses into
female friendly retail outlets. The new Builders Square II outlets feature decorator design
centers at the front of the store. To attract more women, Builders Square runs ads targeting
women in Home, House Beautiful, Woman’s Day, and Better Homes and Gardens. Home
Depot even offers bridal registries.
❑ Similarly, after research indicated that women now make up 34 percent of the luxury car
market, Cadillac has started paying more attention to this important segment. Male car
designers at Cadillac are going about their work with paper clips on their fingers to simulate
what it feels like to operate buttons, knobs, and other interior features with longer
fingernails. The Cadillac Catera features an air-conditioned glove box to preserve such
items as lipstick and film. Under the hood, yellow markings highlight where fluid fills go.
❑ Children may also have a strong influence on family buying decisions. For example, it ran
ads to woo these “back-seat consumers” in Sports Illustrated for Kids, which attracts mostly
8- to 14- year-old boys. “We’re kidding ourselves when we think kids aren’t aware of
brands,” says Venture’s brand manager, adding that even she was surprised at how often
parents told her that kids played a tie-breaking role in deciding which car to buy. In the
case of expensive products and services, husbands and wives often make joint decisions.
C) Roles and Status
❑ A person belongs to many groups—family, clubs, organizations.
❑ The person’s position in each group can be defined in terms of both role and status.
❑ A role consists of the activities people are expected to perform according to the persons
around them
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3. Personal factors
3) PERSONAL FACTORS
A buyer’s decisions also are
influenced by personal
characteristics such as the buyer’s
age and lifecycle stage, occupation,
economic situation, lifestyle, and
personality and self-concept.
A) Age and Family Life-Cycle Stage:
❑ People change the goods
and services they buy over
their lifetimes. Tastes in food, clothes, furniture, and recreation are often age related.
Buying is also shaped by the stage of the family life cycle—the stages through which
families might pass as they mature over time. Marketers often define their target markets
in terms of life-cycle stage and develop appropriate products and marketing plans for
each stage. Traditional family life-cycle stages include young singles and married couples
with children.
B) Occupation
❑ A person’s occupation affects the goods and services bought. Blue-collar workers tend to
buy more rugged work clothes, whereas white-collar workers buy more business suits.
Marketers try to identify the occupational groups that have an above-average interest in
their products and services.
❑ A company can even specialize in making products needed by a given occupational
group.
❑ For example, computer software companies will design different products for brand
managers, accountants, engineers, lawyers, and doctors.
C) Economic Situation
❑ A person’s economic situation will affect product choice. Marketers of income-sensitive
goods watch trends in personal income, savings, and interest rates.
❑ For instance, if economic indicators point to a recession, marketers can take steps to
redesign, reposition, and reprice their products closely.
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D) Lifestyle
❑ People coming from the same subculture, social class, and occupation may have quite
different lifestyles.
❑ Lifestyle is a person’s pattern of living as expressed in his or her psychographics. It involves
measuring consumers’ major AIO dimensions—activities (work, hobbies, shopping, sports,
social events), interests (food, fashion, family, recreation), and opinions (about themselves,
social issues, business, products).
❑ Lifestyle captures something more than the person’s social class or personality. It profiles a
person’s whole pattern of acting and interacting in the world.
❑ Several research firms have developed lifestyle classifications. It divides consumers into
eight groups based on two major dimensions: self-orientation and resources. Self-
orientation groups include principle-oriented consumers who buy based on their views of
the world; status-oriented buyers who base their purchases on the actions and opinions of
others; and action-oriented buyers who are driven by their desire for activity, variety, and
risk taking.
❑ Consumers within each orientation are further classified into those with abundant
resources and those with minimal resources, depending on whether they have high or low
levels of income, education, health, self-confidence, energy, and other factors.
Consumers with either very high or very low levels of resources are classified without regard
to their self-orientations (actualizers, strugglers). Actualizers are people with so many
resources that they can indulge in any or all self-orientations. In contrast, strugglers are
people with too few resources to be included in any consumer orientation.
E) Personality and Self-Concept
❑ Each person’s distinct personality influences his or her buying behavior. Personality refers
to the unique psychological characteristics that lead to relatively consistent and lasting
responses to one’s own environment. Personality is usually described in terms of traits such
as self-confidence, dominance, sociability, autonomy, defensiveness, adaptability, and
aggressiveness.
❑ Personality can be useful in analyzing consumer behavior for certain product or brand
choices. For example, coffee marketers have discovered that heavy coffee drinkers tend
to be high on sociability. Thus, to attract customers, Starbucks and other coffeehouses
create environments in which people can relax and socialize over a cup of steaming
coffee.
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❑ Many marketers use a concept related to personality—a person’s self-concept (also
called self-image). The basic self-concept premise is that people’s possessions contribute
to and reflect their identities; that is, “we are what we have.”
❑ Thus, in order to understand consumer behavior, the marketer must first understand the
relationship between consumer self-concept and possessions. For example, the founder
and chief executive of Barnes & Noble, the nation’s leading bookseller, notes.
4. Psychological Factors
A person’s buying choices are
further influenced by four major
psychological factors: motivation,
perception, learning and beliefs and
attitudes.
a. Motivation
❑ A person has many needs at
any given time. Some are
biological, arising from states
of tension such as hunger,
thirst, or discomfort. Others
are psychological, arising from the need for recognition, esteem, or belonging.
❑ Most of these needs will not be strong enough to motivate the person to act at a given
point in time. A need becomes a motive when it is aroused to a sufficient level of intensity.
❑ A motive (or drive) is a need that is sufficiently pressing to direct the person to seek
satisfaction. Psychologists have developed theories of human motivation. Two of the most
popular—the theories of Sigmund Freud and Abraham Maslow—have quite different
meanings for consumer analysis and marketing.
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Source from: Google image
Maslow’s Theory of Motivation
Maslow’s answer is that human needs are arranged in a hierarchy, from the most pressing to the
least pressing. In order of importance, they are physiological needs, safety needs, social needs,
esteem needs, and self-actualization needs. A person tries to satisfy the most important need first.
When that need is satisfied, it will stop being a motivator and the person will then try to satisfy the
next most important need. For example, starving people (physiological need) will not take an
interest in the latest happenings in the art world (self-actualization needs), nor in how they are
seen or esteemed by others (social or esteem needs), nor even in whether they are breathing
clean air (safety needs). But as each important need is satisfied, the next most important need will
come into play.
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c. Perception
❑ A motivated person is ready to act. How the person acts is influenced by his or her own
perception of the situation. All of us learn by the flow of information through our five senses:
sight, hearing, smell, touch, and taste. However, each of us receives, organizes, and
interprets this sensory information in an individual way.
❑ Perception is the process by which people select, organize, and interpret information to
form a meaningful picture of the world.
❑ People can form different perceptions of the same stimulus because of three perceptual
processes: selective attention, selective distortion, and selective retention. People are
exposed to a great amount of stimuli every day. For example, the average person may
be exposed to more than 1,500 ads in a single day. It is impossible for a person to pay
attention to all these stimuli. Selective attention—the tendency for people to screen out
most of the information to which they are exposed—means that marketers have to work
especially hard to attract the consumer’s attention.
❑ Even noted stimuli do not always come across in the intended way. Each person fits
incoming information into an existing mind-set. Selective distortion describes the tendency
of people to interpret information in a way that will support what they already believe.
Selective distortion means that marketers must try to understand the mind-sets of
consumers and how these will affect interpretations of advertising and sales information.
d. Learning
❑ When people act, they learn. Learning describes changes in an individual’s behavior
arising from experience.
❑ Learning theorists say that most human behavior is learned. Learning occurs through the
interplay of drives, stimuli, cues, responses, and reinforcement.
e. Beliefs and Attitudes
❑ Through doing and learning, people acquire beliefs and attitudes. These, in turn, influence
their buying behavior.
❑ A belief is a descriptive thought that a person has about something.
❑ Buying behavior differs greatly for a tube of toothpaste, a tennis racket, an expensive
camera, and a new car. More complex decisions usually involve more buying participants
and more buyer deliberation.
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QUESTIONS FOR DISCUSSION:
1. What are the main stages of the consumer buying decision-making process?
2. Differentiate between the internal and external stimuli that might trigger the buying process
3. What are the potential sources of information that a consumer might use in the buying
process?
4. Why is post-purchase evaluation important for :
a) the consumer, and
b) the marketer
5. Summarize some of the ways in which marketers can help the consumer at each stage in the
decision-making process
6. How do perception and learning affect consumer decision making and how can the
marketer influence these processes>
7. What is an attitude and why are attitudes so difficult to change?
8. Summarize the stages of Maslow’s hierarchy of needs and their marketing implications.
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CHAPTER 5 :
MARKET SEGMENTATION, TARGETING AND POSITIONING FOR
COMPETITIVE ADVANTAGE
LEARNING OBJECTIVES:
1. Define the three steps of target marketing: market segmentation, target marketing and
market positioning.
2. Discuss the major bases for segmenting consumer market.
3. Explain how companies identify attractive market segments and choose a target marketing
strategy.
4. Discuss how companies position their products for maximum competitive advantage in the
marketplace.
STEPS OF TARGET MARKETING
Three main activities of target marketing are segmenting, targeting and positioning.
These three steps make up what is commonly referred to as the S-T-P marketing process.
Source from : Google image
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STEP 1 : MARKET SEGMENTATION
Dividing a market into distinct groups with distinct needs, characteristics, or behavior who
might require separate products or marketing mixes.
STEP 2 : TARGET MARKETING
The process of evaluating each market segment’s attractiveness and selecting one or more
segments to enter.
STEP 3 : MARKET POSITIONING
Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing
products in the minds of target consumers.
MARKET SEGMENTATION
“The act of dividing the markets into specific
groups of consumers/buyers who share
common needs and who might require
separate products/and or marketing
mixes” (Kotler, 2016).
Through market
segmentation,
companies divide
large,
heterogeneous
markets into smaller
segments that can be reached more
efficiently and effectively with products
and services that match their unique
needs.
There are major variables (bases of
segmentation) that might be used in segmenting consumer market: Geographic,
demographic, psychographic and behavioral variables.
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Bases for Segmentation
1) Demographic segmentation
Demographic segmentation divides the markets into groups based on variables such
as age, gender, family size, income, occupation, education, religion, race and
nationality.
Demographic factors are the most popular bases for segmenting the consumer
group.
One reason is that consumer needs, wants, and usage rates often vary closely with
the demographic variables. Moreover, demographic factors are easier to measure
than most other type of variables.
a) Age:
It is one of the most common demographic variables used to segment markets.
Some com-panies offer different products, or use different marketing approaches
for different age groups.
For example, McDonald’s targets children, teens, adults and seniors with different
ads and media. Markets that are commonly segmented by age includes clothing,
toys, music, automobiles, soaps, shampoos and foods
b) Gender:
Dividing a market into different groups based on gender: male or female
Gender segmentation is used in clothing, cosmetics and magazines.
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c) Income:
Markets are also segmented on the basis of income.
Income is used to divide the markets because it influences the people’s product
purchase.
It affects a consumer’s buying power and style of living.
Income includes housing, furniture, automobile, clothing, alcoholic, beverages,
food, sporting goods, luxury goods, financial services and travel.
d) Family lifecycle:
Product needs vary according to age, number of persons in the household, marital
status, and number and age of children.
These variables can be combined into a single variable called family life cycle.
Housing, home appliances, furniture, food and automobile are few of the
numerous product markets segmented by the family cycle stages.
e) Religion
Businesses may divide markets by religion or religious groups such as Muslim, Jewish,
Hindu, Buddhist, etc.
Example : Al-Quran is selling for Muslims.
f) Occupation
Divide markets by occupations.
Example : professional and technical managers, officials and proprietors, clerical,
sales, students, unemployed.
g) Education
Businesses may divide markets by education system
Example : Selling Textbook for Primary and Secondary School Education.
h) Race
Businesses may divide markets by races such as Asian, Hispanic, Black, White.
Example : Maybelline focus on Asian skin tone in selling their cosmetics products.
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i) Generation
Businesses may divide markets by generation such as Baby boomer, generation X,
Generation Y, Millennial. Example : Medical equipment for old folks.
j) Nationality
Businesses may divide markets by nationality or country of origin such as Malaysia,
British, France, China, etc,
Example: Made in China products.
2) Geographic segmentation
Geographic segmentation refers to dividing a market into different geographical
units such as nations, states, regions, cities, or neighbourhoods.
For example, national newspapers are published and distrib-uted to different cities
in different languages to cater to the needs of the consumers
Geographic variables such as climate, terrain, natural resources, and population
density also influence consumer product needs.
Companies may divide markets into regions because the differences in geographic
variables can cause consumer needs and wants to differ from one region to another.
E.g. rural,semi-rural, urban or suburban.
3) Psychographic segmentation
Psychographic segmentation is dividing groups based on social class, lifestyle and
personality traits @ characteristics.
In the case of certain products, buying behaviour predominantly depends on social
class, lifestyle and personality characteristics.
a) Social Class
Social class can be divided into upper class, middle class and lower class.
Many companies deal in clothing, home furnishing, leisure activities, design
products and services for specific social classes.
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b) Personality characteristics:
It refers to a person’s individual character traits, attitudes and habits. Here markets
are segmented according to competitiveness, introvert, extrovert, ambitious,
aggressiveness, etc.
This type of segmentation is used when a product is similar to many compet-ing
products, and consumer needs for products are not affected by other
segmentation variables.
c) Lifestyle:
It is the manner in which people live and spend their time and money.
Lifestyle analysis provides marketers with a broad view of consumers because it
segments the markets into groups on the basis of activities, interests, beliefs and
opinions.
Companies making cosmetics, alcoholic beverages and furniture’s segment
market according to the lifestyle.
4) Behavioral segmentation
In behavioural segmentation, buyers are divided into groups on the basis of their
knowledge of, attitude towards, use of, or response to a product.
Behavioural segmentation includes segmentation on the basis of occasions, user status,
usage rate loyalty status, buyer-readiness stage and attitude.
a) Occasion
Buyers can be distinguished according to the occasions when they purchase a product,
use a product, or develop a need to use a product. It helps the firm expand the product
usage.
For example, Cadbury’s advertising to promote the product during wedding season is
an example of occasion segmentation.
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PRINCIPLES OF MARKETING (MKT 2013)
b) User status:
Sometimes the markets are segmented on the basis of user status, that is, on the basis of
non-user, ex-user, potential user, first-time user and regular user of the product.
Large compa-nies usually target potential users, whereas smaller firms focus on current
users.
c) Usage rate:
Markets can be distinguished on the basis of usage rate, that is, on the basis of light,
medium and heavy users.
Heavy users are often a small percentage of the market, but account for a high
percentage of the total consumption.
Marketers usually prefer to attract a heavy user rather than several light users, and vary
their promotional efforts accordingly.
d) Loyalty status:
Buyers can be divided on the basis of their loyalty status—hardcore loyal (con-sumer
who buy one brand all the time), split loyal (consumers who are loyal to two or three
brands), shifting loyal (consumers who shift from one brand to another), and switchers
(consum-ers who show no loyalty to any brand).
e) Buyer readiness stage:
The six psychological stages through which a person passes when deciding to purchase
a product.
The six stages are awareness of the product, knowledge of what it does, interest in the
product, preference over competing products, conviction of the product’s suitability,
and purchase.
Marketing campaigns exist in large part to move the target audience through the buyer
readiness stages.
f) Benefits Sought:
Dividing the market into groups according to the different benefits that consumers seek
from the product.
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PRINCIPLES OF MARKETING (MKT 2013)
MARKET TARGETING
The firm now has to evaluate the various segments and decide how many and which ones
to target.
a) Evaluating market segments
The firm must look into 3 factors: 1) segment size and growth. 2) segment structural
attractiveness and 3) company objectives and resources:
1) Segment size and growth:
the company must collect and analyze data on current segment sales, growth rates and
expected profitability for various segments
such companies may select segments that are smaller and less attractive but that are
potentially more profitable for them
2) Segments structural attractiveness
Need to examine major structural factors that affect long run segment attractiveness
A segment is less attractive if it already contains many strong and aggressive
competitors
The existence of many actual or potential substitute products may limit prices and profits
that can be earned in a segment
The relative power of buyers also affects segments attractiveness
Buyers with strong bargaining power try to force prices down, demand more services
and set competitors against one another
A segment may be less attractive if it contains powerful suppliers who can control prices
or reduce the quality or quantity of ordered goods and services
3) Company objectives and resources
Some attractive segment could be dismissed quickly because the strength needed to
compete successfully in a segment and cannot readily obtain them, it should not
enter the segments
The company should enter only segments in which it can offer superior value and gain
advantages over competitors
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PRINCIPLES OF MARKETING (MKT 2013)
b) Selecting target market segments
Then the company must decide which and how many segments it will target
A target market consists of a set of buyers who share common needs or characteristics
that the company decides to serve.
Because buyers have unique needs and wants, a seller could potentially view each buyer
as a separate target market.
Then, the seller might design a separate marketing program for each buyer.
They can target in many ways as below:
1) Undifferentiated (mass) marketing
A market coverage strategy in which a firm decides to ignore market segments differences
and go after the whole market with one offer
It focuses on what is common in the needs of consumers rather than on what is different
Designs product to the largest number of buyers
It aims is to give the product a superior image in people’s minds
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PRINCIPLES OF MARKETING (MKT 2013)
2) Differentiated (segmented) marketing
A market coverage strategy in which a firm decides to target several market segments
and designs separate offers for each
By offering product and marketing variations to segments, companies hope for higher
sales and a stronger position within each market segments
But differentiated marketing also increases the costs of doing business.
It is more expensive to develop and produce products
Developing separate marketing plans for separate segments requires extra marketing
research, forecasting, sales analysis, promotion planning and channel management
3) Concentrated marketing
A market coverage strategy in which a firm goes after a large share of one or few
segments or niches
The company have a limited resource
The firm goes after a large share of one or few segments or niches
It is smaller and may attract only one or few competitors.
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PRINCIPLES OF MARKETING (MKT 2013)
4) Micro marketing
The practice of tailoring products and marketing programs to the needs and wants of
specific individuals and local customer groups –includes local marketing and individual
marketing
Local marketing: tailoring brands and promotions to the needs and wants of local
customer groups –cities, neighborhood and even specific stores
Individual marketing – tailoring products and marketing programs to the needs and
preferences of individual customers-also labeled “market-of one marketing”, customized
marketing” and one to one marketing
Factors to be considered when choosing a target marketing strategy
Companies need to consider several factors when choosing a target marketing:
1. Company resources – if resources limited, concentrated marketing makes the most sense
2. Degree of Product variability – undifferentiated marketing is suited for uniform products,
products that can vary in design are more suited to differentiated or concentration
marketing
3. Product’s life cycle stage – when a firm introduce a new product, it may be practical to
launch only one version and undifferentiated marketing or concentrated marketing may
make the most sense
4. Market variability – if most buyers have the same taste, buy the same amounts and react
the same way to marketing efforts, undifferentiated marketing is appropriate
5. Competitor’s marketing strategies – when competitors use differentiated or concentrated
marketing, a firm can gain an advantage by using differentiated or concentrated
marketing
JUN JUHAIZI JUHARI 43
PRINCIPLES OF MARKETING (MKT 2013)
MARKET POSITIONING FOR COMPETITIVE
Then the company must decide what position it wants to occupy in those segments
Product position – the way the product is defined by consumers on important attributes-the
place the product occupies in consumer’s minds relative to competing products
Positioning involves implanting the brand’s unique benefits and differentiation in consumers’
mind
Example, Mercedez on luxury , and Porsche and BMW on performance
After the organisation has selected its target market, the next stage is to decide how it wants
to position itself within that chosen segment.
Positioning refers to ‘how organisations want their consumers to see their product’.
They must plan position that will give their products the greatest advantage in selected target
markets, and they must design marketing mixes to create these planned positions.
It refers to what message about the product or service is the company trying to put across?
For instance, Car manufacturer Daewoo in the UK, has successfully positioned themselves as
the family value model. The UK car Skoda brand which has been taken over by Volkswagen
has been re-positioned as a vehicle which had negative brand associations, to one which
regularly wins car of the year awards. The positive comments from the industry and attributes
of this vehicle is has changed the perception of consumers about the Skoda brand.
Choosing A Positioning Strategy
Some firms find it easy to choose their positioning strategy.
For example, a firm well known for quality in certain segments will go for this position in a
new segment if there are enough buyers seeking quality.
The positioning task consists of three steps:
1) identifying a set of possible competitive advantage upon which to build a position.
2) choosing the right competitive advantaged
3) selecting an overall positioning strategy.
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PRINCIPLES OF MARKETING (MKT 2013)
1) Identifying a set of possible competitive advantage upon which to build a position.
Competitive advantage : an advantage over competitors gained by offering consumers
greater value, either through lower prices or by providing more benefits that justify higher
prices.
A company or market offer can be differentiated along the lines of products, services,
people and image.
Positioning Strategies:
1) Product Differentiation : differentiated its physical products on features,
Products that can be
performance, or style and design.
The company can differentiate their products on such attributes as consistency,
durability, reliability, or repairability.
Example, Volvo provides new and better safety features.
2) Service Differentiation
Companies gain services differentiation through speedy, convenient or careful
delivery.
For example, delivery is a major marketing tactic to differentiate your services. Just
look at the popularity of Pizza Hut or Dominos and the only reason these 2 brands
are popular because of their claim of “30 minutes delivery or free”.
3) People Differentiation
hiring and training better people than their competitors do.
People differentiation requires that a company select its customer-contact
people carefully and train them well.
Disney people are known to be friendly and upbeat.
For example, IBM offers people who make sure that the solution customers want is
the solution they get.
4) Image Differentiation
A company or brand image should convey product’s distinctive benefits and
positioning. Example, Intel inside logo can provide strong company or brand
recognition and image differentiation.
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PRINCIPLES OF MARKETING (MKT 2013)
2. Choosing the right competitive advantages
It now must choose the ones on which it will build its positioning strategy.
It must decide how many differences to promote and which ones.
How many differences to promote?
Many marketers think that companies should aggressively promote only one benefit to the
target market
Example : Unilever introduced the first three in one bar soap –Lever 2000- Offering
cleansing, deodorizing and moisturizing benefits
A company needs to avoid three major positioning errors :
1. Underpositioning : failing ever to really position the company at all
they do not really know anthing special about it.
2. Overpositioning : giving buyers too narrow a picture of the company
3. Confused positioning : leaving buyers with a confused image of a company.
Which Differences to promote?
The company must follow the following criteria:-
1) Important : the difference delivers a highly valued benefit to target buyers
2) Distinctive : Competitors do not offer the difference,or the company can offer it in
more distinctive way
3) Superior : The difference is superior to other ways that customers might obtain the
same benfit
4) Communicable : The difference is communicable and visible to buyers
5) Preemptive : Competitors cannot easily copy the difference
6) Affordable : Buyers can afford to pay for the difference
7) Profitable: The Company can introduce the difference profitably.
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PRINCIPLES OF MARKETING (MKT 2013)
3) Selecting an overall positioning strategy
Consumers typically choose products and services that give them the greatest value
Thus, marketer want to position their brands on the key benefits that they offer relative to
competing brands
The full positioning of a brand is called the brand’s value proposition – the full mix of benefits
upon which the brand is positioned
Below is the figure that shows possible value proposition:
Price
More the Same Less
More More for More for More for
The Same more the same less
Less The same
for less
Less for
much less
More for more :
- providing the most upscale product or service and charging a higher price to cover the
higher costs
- Example: Mercedes Benz automobiles offer superior quality, performance, style and
change a price to match prestige to buyer
- Seller offer “only the best” can be found in every product category.
More for the same:
- companies can attack a competitor’s more for more positioning by introducing a brand
offering comparable quality but at a lower price.
- Example : Toyota introduced its Lexus line with a “more for the same” value proposition
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PRINCIPLES OF MARKETING (MKT 2013)
The same for less:
- Offering “the same for less” can be a powerful value proposition-everyone likes a good
deal.
- Example: Dell Computer offers equivalent quality computers at a lower price for
performance. They offer many brands as department stores but deep discounts
Less for much less :
- a market almost always exists for products that offer less and therefore cost less
- Meeting consumer’s lower performance @ quality requirement at a much lower price.
More for less:
- The Company will offer better products and lower prices for a given level of performance.
Developing a Positioning Statement
Positioning statement is a statement that summarizes company or brand positioning
It takes this form: To (target segment and need) our ( brand ) is (concept) that ( point-of
difference)
For example ; “To busy professionals who need to stay organized, Palm Pilot is ab electronic
organizer that allows you to back up files on your PC more easily and reliably than
competitive products”.
Source from: Google image
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PRINCIPLES OF MARKETING (MKT 2013)
QUESTIONS FOR DISCUSSION:
1. Find examples of products that depend strongly on demographic segmentation, making sure
that you find at least one example for each of the main demographic variables.
2. Choose a consumer market and discuss how it might be segmented in terms of benefit
sought.
3. For each targeting strategy, find examples of organizations that use it. Discuss why you think
they have chosen this strategy and how they implement it.
JUN JUHAIZI JUHARI 49
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