Marketing Management

STUDY GUIDE BMMK5103 Marketing Management
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CENTRE FOR GRADUATE STUDIES
STUDY GUIDE
BMMK5103
Marketing Management
Writer: Arman Hj Ahmad
DeveIoped by: Centre for nstructional Design and Technology
Open University Malaysia
First Edition, December 2012
Copyright Open University MaIaysia (OUM), December 2012, BMMK5103
All rights reserved. No part of this work may be reproduced in any form or by any means
without the written permission of the President, Open University Malaysia.

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INTRODUCTION TO STUDY GUIDE
This Study Guide is intended for Open University Malaysia's BMMK5103
Marketing Management. t comes in TWO parts, as described below:
Part One comprises the Course Introduction, which gives you an overview
of the course. More specifically, it provides you with the course synopsis,
objectives, learning outcomes and study load. There is a brief description of
the main textbook(s), which you must read to fulfil the course requirements.
There is also a list of additional reading references. You are encouraged to
go into myVLE to check out the assessment, assignment and final
examination formats.
Part Two comprises the Learning Guide. This starts with an overview, a
recommended weekly study schedule to guide your learning process, and a
brief description of the various elements in the Learning Guide. There is also
a list of topics to be covered. For each topic, you are given the specific
learning outcomes, a topic overview and a listing of the focus areas,
together with assigned readings and the pages where information on the
focus areas is found. To consolidate your learning and test your
understanding, a summary of the main content covered and study questions
are provided at the end of each topic.
Finally, there are two appendices, Learning Support and Study Tips, to
help you walk through the course successfully.
Please read through this Study Guide before you commence your course.
We wish you a pleasant study experience.

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Contents
Part One: Course Introduction ................................................................. 05
Synopsis .......................................................................................... 05
Objectives ........................................................................................ 05
Learning Outcomes ......................................................................... 06
Study Load ....................................................................................... 06
Main Textbook(s) ............................................................................ 06
Additional Recommended Readings................................................ 07
Assessment .................................................................................... 07
Part Two: Learning Guide ......................................................................... 09
Overview .......................................................................................... 09
Topic 1 ............................................................................................ 11
Topic 2 ............................................................................................ 21
Topic 3 ............................................................................................ 31
Topic 4 ............................................................................................ 36
Topic 5 ............................................................................................ 44
Topic 6 ............................................................................................ 52
Topic 7 ............................................................................................ 61
Topic 8 ............................................................................................ 70
Topic 9 ............................................................................................ 77
Appendices ................................................................................................ 85
Appendix A: Learning Support ........................................................ 85
Appendix B: Study Tips ................................................................... 86
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PART ONE: COURSE INTRODUCTION
Synopsis
Due to the changing environment, firms are now increasingly recognising the
importance of developing intelligence and strategic insights about market
and consumers. This course focuses on enhancing your understanding on
the aspects of marketing management particularly in the area of marketing
management strategies and implementation, a task undertaken in most
companies at the strategic business unit level.
The course will cover the major aspects of marketing decision-making: role
of marketing in business organisations; analysing marketing opportunities;
developing marketing strategies; and implementing and controlling marketing
efforts. The course is interactive in nature, involving discussions, case
analysis and assignments.
This course introduces you to aspects of marketing and markets particularly
on the understanding of marketing and market analysis. The course then
goes on to cover the issues of marketing strategies development specifically
the areas of segmentation, positioning and new product development as well
as the development of pricing strategies and pricing programmes. There are
also important topics such as marketing channel design and development,
marketing communication and promotional mix decisions. This course
concludes with discussion on aspects of marketing implementation and
control with one special topic which is international marketing management.
Objectives
The general aims of this course are to:
1. Facilitate you in appreciating the importance of marketing in ensuring
continued success of business organisations;
2. Help you understand the marketing process and its underlying
concepts; and
3. Assist you in developing and implementing marketing plans and
programmes.

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Learning Outcomes
By the completion of this course, you should be able to:
1. Apply the knowledge of the various concepts in marketing and the
importance of marketing in ensuring continued success of business
organisations;
2. Define the marketing process;
3. Apply the concepts learned in formulating marketing strategies for
various business situations;
4. Apply the conceptual understanding into marketing plans and
programmes; and
5. Make appropriate decisions in marketing management.
Study Load
t is a standard OUM practice that learners accumulate 40 study hours for
every credit hour. As such, for a three-credit hour course, you are expected
to spend at least 120 hours of learning. Table 1 gives an estimation of how
the 120 hours can be accumulated.
TabIe 1: Allocation of Study Hours
Activities No. of Hours
Reading course materials and completing exercises 60
Attending 5 seminar sessions (3 hours for each session) 15
Engaging in online discussions 15
Completing assignment(s) 20
Revision 10
Total 120
Main Textbook(s)
Kotler, P., & Keller, K. L. (2006). Marketing management (12th ed.).
New Jersey: Prentice Hall.
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AdditionaI Recommended Readings
Boone, L. E., & Kurtz, D. L. (2004). Contemporary marketing (11th ed.).
Mason, Ohio: Thomson Learning.
Boyd, W., & Warker, C., (2002). Marketing management: A strategic decision
making approach (4th ed.). New York: McGraw Hill.
Karunakaran, K. (2008). Marketing management. Mumbai, ndia: Himalaya
Publishing House.
Kotler, P. (2003). Marketing management (14th ed.). New Jersey: Prentice
Hall.
Lancaster, G., & Reynolds, P. (2006). Management of marketing. UK: Taylor
& Francis.
Peter, P., & Donrelly, H., (2003). A preface to marketing management
(9th ed.). New York: McGraw-Hill.
Assessment
Please refer to myVLE for information on the assessment format and
requirements.

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PART TWO: LEARNING GUIDE
Overview
This Learning Guide is arranged by topic. t covers essential content in the
main textbook and is organised to stretch over TEN study weeks, before the
examination period begins. Use this Learning Guide to plan your
engagement with the course content. You may follow the recommended
weekly study schedule in Table 2 to help you progress in a linear fashion,
starting with Week 1.
TabIe 2: Recommended Weekly Study Schedule
Topic Week
Topic 1: Understanding Marketing 1
Topic 2: Analysing Market 2
Topic 3: Segmenting Market 3
Topic 4: Brand Positioning 4
Topic 5: Developing and Managing Products 5
Topic 6: Pricing Strategies and Programmes 6
Topic 7: Designing and Managing Communication Efforts 7
Topic 8: Designing and Managing Channels and Distribution 8
Topic 9: mplementation and Control 9-10
Each topic in the Learning Guide comprises the following sections (refer to
Figure 1):
x Learning Outcomes: Outline the specific tasks to be accomplished;
x Topic Overview: Briefly explains what the topic touches on so as to
provide a general interpretative framework for understanding the topic
content;
x Focus Areas: dentify the main and sub areas to be covered;
x Assigned Readings: Help you to navigate the main textbook and reading
materials;
x Content Summary: Provides an interpretative framework for
understanding the core content; and
x Study Questions: Help you to focus on key subject areas.

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Figure 1: Organisation of the Learning Guide
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Topic 1: Understanding Marketing
Learning Outcomes
By the end of this topic, you should be able to:
1. Explain the importance of marketing;
2. Explain various fundamental marketing concepts; and
3. Discuss marketing orientation towards the marketplace.
Topic Overview
n this topic, you will be able to know the reasons marketing is very
important. n addition, you will also learn what exactly marketing is. You will
be able to answer questions such as, "How could marketing help an
organisation succeed?", "Why do marketers need to deal with exchange and
transaction in marketing?", "What is marketed?" and Who markets?" There
will also be important information about the evolution of marketing concepts
and philosophies that guide companies in practising marketing from ancient
times to date. Fundamental marketing concepts will be presented at the end
of the topic.
Focus Areas and Assigned Readings
Focus Areas Assigned Readings
Kotler, P., & Keller, K. L. (2006).
Marketing management (12th ed.). New
Jersey: Prentice Hall.
1.1 Definition of Marketing and
Marketing Management
Chapter 1, pp 25-29.
1.2 The Core Marketing Concept Chapter 1, pp 31-33.
1.3 Marketing Orientations Chapter 1, pp 39-40.
1.4 Customer Value Chapter 2, pp 55-58.
1.5 Customer Retention Chapter 5, pp 161-163.
1.6 Marketing Management Tasks Chapter 1, pp 48-49.

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Content Summary
This topic highlights the main features of marketing especially the definition
and core concepts of marketing, important orientations which guided
marketers from ancient times to the modern age, aspects and elements of
customer value, importance of customer retention and issues of marketing
management tasks.
1.1 Definition of Marketing and Marketing Management
Marketing is an organisational function and a set of processes for creating,
communicating and delivering value to customers and for managing
customer relationships in ways that benefit the organisation and its
stakeholders. Marketing management is the art and science of choosing
target markets and getting, keeping and growing customers by creating,
delivering and communicating superior customer value.
Marketers are skilled at managing demand: they seek to influence its level,
timing and composition for goods, services, events, experiences, persons,
places, properties, organisations, information and ideas. They also operate
in four different marketplaces: consumer, business, global and non-profit.
Marketing is not done only by the marketing department. t needs to affect
every aspect of the customer experience. To create a strong marketing
organisation, marketers must think like executives in other departments and
executives in other departments must think more like marketers.
The American Marketing Association offers the following formal definition:
Marketing is the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large.
Marketing management is the art and science of choosing target markets
and getting, keeping and growing customers by creating, delivering and
communicating superior customer value.
We can distinguish between a social and managerial definition of marketing.
A social definition of marketing is that marketing is a societal process by
which individuals and groups obtain what they need and want by creating,
offering, and freely exchanging products and services of value with others.
Managers sometimes think of marketing as the art of selling products but
many people are surprised when they hear that selling is not the most
important part of marketing! Selling is only the tip of the marketing iceberg.
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Marketers market 10 main types of entities: goods, services, events,
experiences, persons, places, properties, organisations, information and
ideas. Lets take a quick look at these categories. These are as follows:
(a) Goods Physical goods constitute the bulk of most countries
production and marketing efforts.
(b) Services As economies advance, a growing proportion of their
activities focus on the production of services. The Malaysian economy
today produces a 70%-30% services-to-goods mix.
(c) Events Marketers promote time-based events, such as major trade
shows, artistic performances and company anniversaries such as
Akademi Fantasia, mam Muda, MasterChef Malaysia and many
others.
(d) Experiences By orchestrating several services and goods, a firm can
create, stage and market experiences. Walt Disney Worlds Magic
Kingdom allows customers to visit a fairy kingdom, a pirate ship or a
haunted house.
(e) Persons Artists, musicians, CEOs, physicians, high-profile lawyers
and financiers and other professionals all get help from celebrity
marketers.
(f) PIaces Cities, states, regions and whole nations compete to attract
tourists, residents, factories and company headquarters such as Cuti-
Cuti Malaysia.
(g) Properties Properties are intangible rights of ownership to either real
property (real estate) or financial property (stocks and bonds).
(h) Organisations Organisations work to build a strong, favourable and
unique image in the minds of their target public.
(i) Information The production, packaging and distribution of
information are major industries.
(j) Ideas Every market offering includes a basic idea. Products and
services are platforms for delivering some idea or benefit.
Marketing managers seek to influence the level, timing and composition of
demand to meet the organisations objectives. Eight demand states are
possible:
(a) Negative demand Consumers dislike the product and may even pay
to avoid it.
(b) Non-existent demand Consumers may be unaware of or
uninterested in the product.

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(c) Latent demand Consumers may share a strong need that cannot be
satisfied by an existing product.
(d) DecIining demand Consumers begin to buy the product less
frequently or not at all.
(e) IrreguIar demand Consumer purchases vary on a seasonal,
monthly, weekly, daily or even hourly basis.
(f) FuII demand Consumers are adequately buying all products put into
the marketplace.
(g) OverfuII demand More consumers would like to buy the product
than can be satisfied.
(h) UnwhoIesome demand Consumers may be attracted to products
that have undesirable social consequences.
1.2 Core Marketing Concepts
(a) Needs Needs are basic things that an individual requires to live and
survive. We all look to satisfy our basic needs before we move on to
higher level needs.
(b) Wants Wants are shaped by culture and individual personality.
Wants come after needs have been fulfilled.
(c) Demands These are human wants that are backed by buying power
or purchasing power. Demand exists when a person is able and willing
to buy. Demand = Needs + Wants + Purchasing Power.
(d) Segmentation This is the process of segregating, separating,
breaking and splitting a big market into distinct and different groups of
smaller markets.
(e) Target Market This is a group of people or organisations for which a
marketer designs, implements and maintains the marketing mix (4P)
intended to meet the needs of that group, resulting in a mutually
satisfying exchange.
(f) Marketing Environment Refers to all forces and factors that
influence the success or failure of any marketing activities of
companies.
(g) Exchange Refers to the act of giving up something to someone in
return for what the other person has to offer.
(h) Transaction When an agreement is reached, a transaction takes
place. A transaction is a trade of values between two or more parties.
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(i) VaIue t reflects the perceived tangible and intangible benefits and
costs to customers. Value can be seen as primarily a combination of
quality, service and price (customer value triad).
(j) Satisfaction This is a person's comparative judgments resulting from
a product's perceived performance (or outcome) in relation to his or her
expectations.
(k) Positioning Refers to the way a product is defined by consumers on
important attributes. t is the process of placing the product in
consumers minds relative to competing products.
(l) Marketing ChanneIs nterdependent organisations which depend on
one another to make sure that the process of distributing the products
is smooth and the products reach the consumers. There are three
types of channels: communication, distribution and service.
(m) SuppIy Chains A longer channel stretching from raw materials to
components to final products that are carried to final buyers. The
supply chain represents a value delivery system.
(n) Competition ncludes all actual and potential rival offerings and
substitutes that a buyer might consider.
(o) Brand Refers to name, term, sign, symbol 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.
(p) Offering A set of benefits offered to customers to satisfy their needs.
1.3 Marketing Orientations
t is the review of the evolution of earlier marketing ideas. These orientations
guide marketers, shape the marketing landscape, control marketing activities
and influence marketers in managing marketing efforts and performing
marketing activities. There are several marketing orientations. These are as
follows:
(a) The Production Concept This concept holds that consumers prefer
products which are widely available and inexpensive. Making the
products easily available and affordable to most customers will give
companies the advantage of selling the products very well in the
market. The production and quantity of the production are keys to
success in marketing activities.
(b) The Product Concept This concept holds that consumers favour
products which offer the most quality, performance or innovative
features. The product quality is an important part of most marketing
strategies and is the key to success in marketing activities.

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(c) The SeIIing Concept This concept holds that consumers and
businesses will ordinarily not buy enough of the organisations
products, therefore, the organisation must undertake aggressive selling
and promotion efforts.
(d) The Marketing Concept This concept holds that the key to achieving
organisational goals consists of the company being more effective than
competitors in creating, delivering and communicating superior
customer value to chosen target markets.
(e) SocietaI Marketing Concept This concept holds that the
organisations task is to determine the needs, wants and interests of
target markets and to deliver the desired satisfaction more effectively
and efficiently than competitors in a way that preserves or enhances
the consumers and the societys well-being.
(f) The HoIistic Marketing Concept This concept is based on the
development, design and implementation of marketing programmes,
processes and activities that recognise their breadth and
interdependencies. Holistic marketing acknowledges that everything
matters in marketing and that a broad, integrated perspective is often
necessary. t includes relationship marketing, integrated marketing,
internal marketing and performance marketing.
1.4 Customer VaIue
The task of any business is to deliver customer value at a profit. n a
hypercompetitive economy with increasingly informed buyers faced with
abundant choices, a company can win only by fine-tuning the value delivery
process and choosing, providing and communicating superior value.
Value creation and delivery can be divided into three phases:
(a) Choosing the value (segments the market, selects target market,
develops offering).
(b) Providing the value (product features, prices and distribution channels).
(c) Communicating the value (sales force, nternet, advertising and
communication tools).
Michael Porters Value Chain identifies nine strategically relevant activities
that create value and costs in a specific business (five primary and four
support activities). These are as follows:
(a) Primary activities:
(i) nbound logistics (material procurement).
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(ii) Operations (turn into final product).
(iii) Outbound logistics (shipping and warehousing).
(iv) Marketing (marketing and sales).
(v) Servicing (service after the sale).
(b) Support activities:
(i) Procurement.
(ii) Technology development.
(iii) Human resource management.
(iv) Firm infrastructure.
Holistic marketers address three key management questions:
(a) VaIue expIoration dentify new value opportunities.
(b) VaIue creation Efficiently create more promising new value
offerings.
(c) VaIue deIivery Deliver new value offerings more efficiently.
Developing strategy requires understanding of the relationships and
interactions among these three spaces.
(a) n value exploration, marketers need to consider:
x Customers cognitive space (reflects existing and latent needs and
includes participation, stability, freedom and change).
x Companys competence space (broad versus focused scope of
business and depth physical versus knowledge-based capabilities).
x The collaborator resource space (horizontal and vertical
partnerships).
(b) n value creation marketers need to:
x dentify new customer benefits from the customers view.
x Utilise core competencies.
x Select and manage business partners from its collaborative
networks.
(c) n value delivery, marketers need:
x Proficiency in customer relationship management (dentify who the
customers are and respond to different customer opportunities).

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x nternal resource management (integrate major business processes
within a single family of software modules).
x Business partnership management (allow the company to handle
complex relationships with its trading partners).
1.5 Customer Retention
Buyers satisfaction is a function of the products perceived performance and
the buyers expectations. Recognising that high satisfaction leads to high
customer loyalty, companies must ensure that they meet and exceed
customer expectations.
Losing profitable customers can dramatically affect a firms profits. The cost
of attracting a new customer is estimated to be five times the cost of keeping
a current customer happy. The key to retaining customers is relationship
marketing.
There are several important activities in customer retention. They are:
(a) Customer relationship management (CRM);
(b) Personalising marketing;
(c) Customer empowerment;
(d) Customer reviews and recommendations;
(e) Attracting and retaining customers;
(f) Reducing defection;
(g) Managing the customer base; and
(h) Building loyalty.
1.6 Marketing Management Tasks
Marketing management is important because it:
(a) Helps marketers to determine how the organisation will deploy (find,
organise, arrange, allocate, distribute and use) resources within its
environment and satisfy its long-term goals.
(b) Provide insight on how the company will organise itself to implement
the marketing plan and marketing strategies.
(c) Help the company to properly make correct and suitable series of
decisions on the markets in which the organisation will operate, the
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type of products/services it will offer and the basis of the competitive
position.
(d) Serve as roadmap and guideline that directs the company and its
business towards the attainment of its long-term goals and objectives.
(e) Early plan of the strategy helps the company and its business to see
the future potential success it could achieve as well as future potential
threats it will face.
(f) Strategy becomes a prevention tool to protect the company and its
business from making mistakes in the future.
(g) Strategy becomes the master plan for achieving the long-term goals
and objectives of a business.
The following are marketing management tasks that are crucial for marketers
in developing, implementing, controlling and managing the marketing
activities of their organisation. These tasks are:
(a) Developing marketing strategies and plans (Chapter 2).
(b) Capturing marketing insights (Chapters 3 and 4).
(c) Connecting with customers (Chapters 5, 6 and 7).
(d) Building strong brands (Chapters 9, 10 and 11).
(e) Shaping market offerings (Chapters 12 and 13).
(f) Delivering value (Chapters 15 and 16).
(g) Communicating value (Chapters 17, 18 and 19).
(h) Creating long-term growth (Chapters 20, 21 and 22).
The basic stages in marketing management are:
(a) AnaIysis (Need for thorough research on any market a company is
interested in).
(b) PIan (A segment or segments of a market will be selected and the
company must first develop the objectives and then the 4P plan for the
selected segment or segments).
(c) Organise (The company must gather the necessary resources to
implement the marketing plan).
(d) ImpIement (The company implements the marketing plan).
(e) ControI (The company must review the performance of the plan to see
if it has achieved the stated objectives. f the review shows any
problem then the company must take the necessary corrective
actions).

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Study Questions
1. Explain the importance of marketing.
2. List and explain some fundamental marketing concepts.
3. Discuss the marketing orientation towards the marketplace.
Case Study Questions
Answer ALL questions in the following case studies:
(a) Nike Case Study (please refer to pages 51 and 52).
(b) Google Case Study (please refer to pages 52 and 53).
(c) Cisco Case Study (please refer to pages 79 and 80).
(d) ntel Case Study (please refer to pages 80 and 81).
(e) Nordstrom Case Study (please refer to pages 169 and 170).
(f) Harley Davidson Case Study (please refer to pages 170 and 171).
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Topic 2: AnaIysing Market
Learning Outcomes
1. Describe the meaning of market demand and how to estimate current
and future demand;
2. Analyse the market environment;
3. Distinguish between consumer market and business market; and
4. Discuss the various strategies to be a market leader and to compete
effectively.
Topic Overview
n preparing a good marketing plan, it is important that marketers have
knowledge of the consumers and the market they belong to. This topic will
discuss this knowledge. You will also be able to better understand the
consumer market and business market as well as their characteristics. You
will be exposed to the factors that commonly influence and motivate
customers and business people buying or not buying a product. This will help
you understand the psychological elements of consumers and businesses
and simultaneously facilitate the process of understanding their buying
decision process. Furthermore, this topic discusses the important concepts
of market opportunities and market demand and how to estimate the current
and future demand followed by macro environment analysis. The last part of
this topic is about some strategies to compete effectively and how to become
a market leader in this turbulent market.

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2.1 Market Demand Chapter 3, pp 107-108.
2.2 Estimating Current Demand Chapter 3, p 110.
2.3 Estimating Future Demand Chapter 3, p 112.
2.4 Analysing the Macro
Environment
2.5 Understanding the Consumer
Market
Chapter 6 pp 173-177.
2.6 Understanding Buyer Behaviour Chapter 6, pp 188-195.
2.7 Understanding Business Market Chapter 7 pp 205-212.
2.8 Understanding Business
Behaviour
Chapter.7 pp 217-223.
2.9 Understanding Strategies for
Market Leader
Chapter 11 pp 321-326.
2.10 Competition Strategies Chapter 11 pp 327-330.
Content Summary
This topic highlights the main features in the analysis of marketing of any
product or service.
2.1 Market Demand
The marketers first step in evaluating marketing opportunities is to estimate
total market demand.
Market demand for a product is the total volume that would be bought by a
defined customer group in a defined geographical area in a defined period in
a defined marketing environment under a defined marketing programme.
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There are eight types of demand, which are:
(a) Negative demand Consumers dislike the product and may even pay
a price to avoid it.
(b) Non-existent Demand Consumers may be unaware or uninterested
in the product.
(c) Latent Demand Consumers may share a strong need that cannot be
satisfied by an existing product.
(d) DecIining Demand Consumers begin to buy the product less
frequently or not at all.
(e) UnwhoIesome Demand Consumers may be attracted to products
that have undesirable social consequences.
(f) IrreguIar Demand Consumer purchases vary on a seasonal,
monthly, daily, or even an hourly basis.
(g) FuII Demand Consumers are adequately buying all products put in
the marketplace.
(h) OverfuII Demand Too many consumers would like to buy the
product than can be satisfied.
2.2 Estimating Current Demand
n order to examine current demand, marketers need to use practical
methods to estimate it. There are several ways of estimating current
demand. These are:
(a) Estimate total market potential;
(b) Estimate the area market potential; and
(c) Estimate the total industry sales and market shares.
Total market potential is the maximum sales available to all firms in an
industry during a given period, under a given level of industry marketing
effort and environmental conditions. A common way to estimate total market
potential is to multiply the potential number of buyers by the average quantity
each purchases, times the price.
Companies must allocate their marketing budget optimally among their best
territories; they need to estimate the market potential of different cities,
states and nations. Two major methods are the market-buildup method, used
primarily by business marketers and the multiple-factor index method, used
primarily by consumer marketers.

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Besides estimating total potential and area potential, a company needs to
know the actual industry sales taking place in its market. This means
identifying competitors and estimating their sales. The industry trade
association will often collect and publish total industry sales, although it
usually does not list individual company sales separately. With this
information, however, each company can evaluate its own performance
against the industrys.
2.3 Estimating Future Demand
The few products or services that lend themselves to easy forecasting
generally enjoy an absolute level or a fairly constant trend and competition
that is either non-existent (public utilities) or stable (pure oligopolies). n most
markets, in contrast, good forecasting is a key factor in success.
Companies commonly prepare a macroeconomic forecast first, followed by
an industry forecast, followed by a company sales forecast.
How do firms develop their forecasts? They may create their own or buy
forecasts from outside sources such as marketing research firms, which
interview customers, distributors and other knowledgeable parties. All
forecasts are built on one of three information bases: what people say, what
people do or what people have done.
There are several ways of estimating future demand. They are:
(a) Survey of buyers intentions;
(b) Composite of sales force opinions;
(c) Expert opinion;
(d) Past-sales analysis; and
(e) Market-test method.
2.4 AnaIysing the Macro Environment
The marketing environment refers to all forces and factors that influence the
success or failure of any marketing activity of companies. The environment is
made up of two types of environmental forces micro environment and
macro environment.
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Marketers find many opportunities by identifying trends (directions or
sequences of events that have some momentum and durability) and
megatrends (major social, economic, political and technological changes that
have long-lasting influence).
Within the rapidly changing global picture, marketers must monitor six major
environmental forces: demographic, economic, social-cultural, natural,
technological and political-legal.
n the demographic environment, marketers must be aware of worldwide
population growth; changing mixes of age, ethnic composition and
educational levels; the rise of non-traditional families; and large geographic
shifts in population.
n the economic arena, marketers need to focus on income distribution and
levels of savings, debt and credit availability.
n the social-cultural arena, marketers must understand peoples views of
themselves, others, organisations, society, nature and the universe. They
must market products that correspond with societys core and secondary
values and address the needs of different subcultures within a society.
n the natural environment, marketers need to be aware of the publics
increased concern about the health of the environment. Many marketers are
now embracing sustainability and green marketing programmes that provide
better environmental solutions as a result.
n the technological arena, marketers should take account of the accelerating
pace of technological change, opportunities for innovation, varying R&D
budgets and the increased governmental regulation brought about by
technological change.
n the political-legal environment, marketers must work within the many laws
regulating business practices and with various special-interest groups.
Strategies for DeaIing with the Environment
(a) Reactive strategy
x A company looks at the developments in the environment first and
then decides what actions to take. For example, a fashion house
may note that one of its rivals has come out with a new fashion line.
t will do nothing and instead observe how the new fashion line is
performing in terms of sales and profits.

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x f the new fashion line does well, the company may then decide to
come up with their version of the new fashion.
(b) Proactive strategy
x A company does not look to others but decides to initiates changes
in the environment.
x The fashion house, in this case, will decide to introduce a new fashion
without giving any thought to what other companies are up to.
2.5 Understanding the Consumer Market
A consumer market is made up of individuals and households. A consumer
market buys goods and services for personal consumption. The buyers in
the consumer market are end consumers.
2.6 Understanding Buyer Behaviour
Consumer behaviour is influenced by three factors: cultural (culture,
subculture and social class), social (reference groups, family, and social
roles and statuses), and personal (age, stage in the life cycle, occupation,
economic circumstances, lifestyle, personality and self-concept). Research
into these factors can provide clues to reach and serve consumers more
effectively.
Four main psychological processes affecting consumer behaviour are
motivation, perception, learning and memory.
To understand how consumers actually make buying decisions, marketers
must identify who makes and has input into the buying decision; people can
be initiators, influencers, deciders, buyers or users. Different marketing
campaigns might be targeted at each type of person.
The typical buying process consists of the following sequence of events:
problem recognition, information search, evaluation of alternatives, purchase
decision and post-purchase behaviour. The marketers job is to understand
the behaviour at each stage. The attitudes of others, unanticipated
situational factors and perceived risk may all affect the decision to buy, as
will consumers levels of post-purchase product satisfaction, use and
disposal, and the companys actions.
Consumers are constructive decision makers and subject to many contextual
influences. They often exhibit low involvement in their decisions, using many
heuristics as a result.
27
What hinders consumers from buying our products in the consumer market?
(a) Attitude of others (positive, negative and passive attitude); and
(b) Buying risks (functional risk, physical risk, financial risk, social risk,
psychological risk and time risk).
2.7 Understanding Business Market
A business market is made up of companies, organisations, sectors and
industries. A business market buys goods and services to be used to make
other goods or to help with the production process. The buyers in the
consumers market are business and organisation customers.
2.8 Understanding Business Behaviour
Organisational buying is the decision-making process by which formal
organisations establish the need for purchased products and services, and
then identify, evaluate and choose among alternative brands and suppliers.
The business market consists of all the organisations that acquire goods and
services used in the production of other products or services that are sold,
rented or supplied to others.
Compared to consumer markets, business markets generally have fewer and
larger buyers, a closer customer supplier relationship and more
geographically concentrated buyers. Demand in the business market is
derived from demand in the consumer market and fluctuates with the
business cycle. Nonetheless, the total demand for many business goods and
services is quite price inelastic. Business marketers need to be aware of the
role of professional purchasers and their influencers, the need for multiple
sales calls, and the importance of direct purchasing, reciprocity and leasing.
The buying centre is the decision-making unit of a buying organisation. t
consists of initiators, users, influencers, deciders, approvers, buyers and
gatekeepers. To influence these parties, marketers must be aware of
environmental, organisational, interpersonal and individual factors.
The buying process consists of eight stages called buyphases:
(a) Problem recognition;
(b) General need description;
(c) Product specification;
(d) Supplier search;

28
(e) Proposal solicitation;
(f) Supplier selection;
(g) Order-routine specification; and
(h) Performance review.
Business marketers must form strong bonds and relationships with their
customers and provide them added value. Some customers, however, may
prefer a transactional relationship. Technology is aiding the development of
strong business relationships.
The institutional market consists of schools, hospitals, nursing homes,
prisons and other institutions that provide goods and services to people in
their care. Buyers for government organisations tend to require a great deal
of paperwork from their vendors and to favour open bidding and domestic
companies. Suppliers must be prepared to adapt their offers to the special
needs and procedures found in institutional and government markets.
2.9 Understanding Strategies for Market Leader
A market leader has the largest market share in the relevant product market.
To remain dominant, the leader looks for ways to expand total market
demand and attempts to protect and perhaps increase its current share.
A market challenger attacks the market leader and other competitors in an
aggressive bid for more market share. There are five types of general attack;
challengers must also choose specific attack strategies.
A market follower is a runner-up firm willing to maintain its market share and
not rock the boat. t can play the role of counterfeiter, cloner, imitator or
adapter.
A market nicher serves small market segments not being served by larger
firms. The key to nichemanship is specialisation. Nichers develop offerings to
fully meet a certain group of customers needs, commanding a premium
price in the process.
2.10 Competition strategies
As important as a competitive orientation is in todays global markets,
companies should not overdo the emphasis on competitors. They should
maintain a good balance of consumer and competitor monitoring.
29
There are several ways of competing in a very turbulent market. They are:
(a) Market-Challenger Strategies;
(b) Defining the Strategic Objective and Opponents(s);
(c) Choosing a General Attack Strategy;
(d) Choosing a Specific Attack Strategy;
(e) Market-Follower Strategies; and
(f) Market-Nicher Strategies.
Study Questions
1. Describe consumer characteristics which influence buying behaviour.
2. dentify the major psychological processes which influence consumer
responses to the marketing programme.
3. Describe how consumers make purchasing decisions.
4. Discuss how marketers analyse consumer decision making.
5. Explain three factors that influence consumer behaviour.
6. A buyer's decisions are influenced by four personal characteristics.
Discuss these characteristics.
7. Explain four key psychological processes which influence consumer
responses.
8. Discuss three of the best-known theories of human motivation.
9. Differentiate between selective attention, selective distortion and
selective retention.
10. Choose a product that you recently purchased. As a consumer, you go
through five stages of the buying-decision process. Explain these
stages with examples.
11. Consumers may perceive six types of risk in buying and consuming a
product. dentify these risks.
12. Marketers use four techniques to try to convert a low-involvement
product into one of higher involvement. Discuss these techniques.
13. Describe what the business market is and how it differs from the
consumer market.
14. Examine the buying situations that organisational buyers face.
15. dentify who participates in the business-to-business buying process.

30
16. Describe how business buyers make their decisions.
17. Discuss how companies can build strong relationships with business
customers.
18. Explain how institutional buyers and government agencies do their
buying.
19. Describe 10 major business markets characteristics.
20. Explain the difference among straight re-buy, modified re-buy and new
task.
21. Differentiate the role of prime contractors and second-tier contractors.
22. There are seven roles in the purchase decision process. Examine
these roles.
23. People are not buying products; they are buying solutions to two
problems. Explain what the problems are.
24. Robinson and Associates have identified eight stages in the business
buying-decision process and called them buy phases. Describe these
stages in detail.
25. Buyer-supplier relationships differ according to four factors. dentify
these factors.
26. Buyer-supplier relationships are classified into eight categories.
Discuss these categories.
27. Define specific investments and opportunism.
28. dentify and explain the strategies available for market leaders.
29. Explain the effective competition strategies for marketers.
Answer ALL Questions in the following case studies:
x Microsoft Case Study (please refer to pages 115 and 116).
x Ferrero Case Study (please refer to pages 116 and 117).
x Disney Case Study (please refer to pages 200 and 201).
x kea Case Study (Please refer to pages 201 and 202).
x Accenture Case Study (please refer to pages 230 and 231).
x General Electric (GE) Case Study (please refer to pages 232 and 233).
x Samsung Case Study (please refer to pages 343 and 344).
x BM Case Study (please refer to pages 344 and 345).
31
Topic 3: Segmenting Market
Learning Outcomes
1. Define what market segment is;
2. Explain how marketers segment business market and consumer
market;
3. Explain how marketers segment the market effectively; and
4. Discuss how market segmentation is developed, measured and
managed.
Topic Overview
Segmentation is important for marketers before they could enter into a
profitable market and sell their products. By having segmentation in mind,
the marketers could also identify potential customers by analysing the target
market. Therefore, this topic will prepare you with segmentation skills. This
topic discusses and examines issues related to performing market
segmentation. As a crucial step before selecting the target market, marketers
need to understand the strategies and bases for segmenting the consumer
market and business market. The topic also prepares readers on
understanding the effective segmentation criteria. t ends with the strategic
steps in performing market segmentation.

32
3.1 Market Segmentation Chapter 8, p 236.
3.2 Bases for Segmenting Consumer
Market
3.3 Bases for Segmenting Business
Market
Chapter 8, p 252.
3.4 Effective Segmentation Criteria Chapter 8, p 253.
3.5 Evaluating and Selecting Market
Segment
Chapter 8 p 254.
Content Summary
This topic will prepare you with the skills of segmentation and examines
issues related to identifying market segments and targets. This topic
highlights the main features in the analysis of market segmentation as the
important step before any further marketing activities could take place.
3.1 Market Segmentation
t is the process of dividing a big market into meaningful, relatively similar
characteristics and identifiable parts.
t is also the process of segregating, separating, breaking up and splitting a
big market into a distinct and different group of smaller markets.
This smaller market consists of buyers who need and want different product
types, different price amounts and different styles of promotion. They are
located in various places.
The following are reasons why segmentation is important:
(a) To better understand the specific categories of needs, wants and
preferences of consumers in a big market;
33
(b) To better analyse the actual competition. Each need belongs to certain
products and these products will compete with competitors in the same
category;
(c) To easily facilitate the process of fulfilling changing market demand;
and
(d) To efficiently allocate company resources.
There are three categories of segment. These categories are:
(a) Homogeneous segment All consumers have almost the same
preferences, needs and wants and the market shows no natural
segments.
(b) Diffused segment All consumers have totally different preferences,
needs and wants and the market shows many different segments.
(c) CIustered segment All consumers in the diffused segment are
grouped according to their needs and wants.
There are several steps of segmenting the market. These steps are as
follows:
(a) Select a market or product category for study;
(b) Choose the bases for segmentation;
(c) Select segmentation descriptors;
(d) Profile and analyse the segments;
(e) Select the target market; and
(f) Design, implement and maintain appropriate marketing mixes.
3.2 Bases for Segmenting the Consumer Market
(a) Geographic segmentation Marketers divide the market into different
geographical groups such as nations, regions, states, counties, cities
and neighbourhoods.
(b) Demographic segmentation Marketers divide a market into groups
based on personal variables such as age, gender, family size, family
life cycle, income, occupation, education, religion, race and nationality.
(c) Psychographic segmentation Marketers divide a market into
different groups based on the combination of demographics and
psychological aspects of consumers such as social class, life style and
personality characteristics.

34
(d) BehaviouraI segmentation Marketers divide a market into groups
based on their knowledge, attitudes, uses or responses to a product.
Occasions, benefits sought, user status, usage rate and loyalty status
are some of the bases which can be used to segment under this type of
base of segmentation.
3.3 Bases for Segmenting the Business Market
(a) GeographicaI segmentation This approach calls for a company to
segment its market using variables such as company location.
(b) Demographic segmentation The company divides a market using
variables such as industry and company size.
(c) BehaviouraI segmentation The company divides a market using
variables such as benefits sought, user status, usage rate and loyalty
status.
3.4 Effective Segmentation Criteria
(a) MeasurabIe The types of variables used can be measured e.g. age,
income, gender and family size. Certain types of variables which are
difficult to measure e.g. personality should be avoided.
(b) AccessibIe t is important that a marketer picks segments which are
capable of being reached with a companys promotional and
distribution plan.
(c) SubstantiaI The marketer must choose segments which consist of a
lot of target market and prospects which offer high sales and profit
potential.
(d) DifferentiabIe One segment must be different from other segments
in terms of response to different marketing mix, otherwise the different
segments are considered one segment.
(e) ActionabIe The effective programmes can be formulated for
attracting and serving the segments. The company must have the
necessary resources in order to implement 4P plans in the
segment/segments it has chosen.
35
3.5 EvaIuating and SeIecting Market Segments
Several factors should be considered before evaluating the segments, which
are:
(a) Segments overaII attractiveness Marketers should look at the
number of potential target markets. The higher the number of target
markets, the better the segments. n addition, the number of potential
prospects should also be high as an indicator of attractive market
segment.
(b) Companys objectives and resources Marketers should look at the
level of competition and the cost as well as potential sales and profits.
The lower the competition, the better the segment. The better the cost
and the more effective the cost, the better the segment. Same goes for
sales and profit. f there is a good and high potential for a business to
get high sales and profit, the better the segment.
Study Questions
1. Define market segment.
2. Explain how marketers segment the business market.
3. Discuss how marketers segment the consumer market.
4. Explain how marketers segment the market effectively.
5. Discuss how market segmentation is developed.
6. List the techniques to measure the effectiveness of market
segmentation.
7. dentify the strategies to manage the market segment.
x HSBC Case Study (please refer to pages 259 and 260).
x BMW Case Study (please refer to pages 260 and 261).

36
Topic 4: Brand Positioning
Learning Outcomes
1. Describe brand positioning and how companies can develop and
establish brand positioning;
2. Explain the positioning process and how companies can evaluate their
positioning effectiveness;
3. Define brand differentiation; and
4. Discuss the available brand differentiation as the best positioning
strategy.
Topic Overview
You are now ready to conquer the target market after the market
segmentation process and identifying potential customers. The next step is
to focus on the potential offerings particularly on the brand. One of the
important activities here is to create value and equity in the brand. The
purpose is to stand up higher than the competitors. This topic will help you to
further understand the concept of equity and value in brands. This topic will
examine issues related to creating brand equity. t comprises the following
sections: defining brand equity, drivers of brand equity, measuring brand
equity, managing brand equity and devising a branding strategy. The topic
also discusses the issues of customer equity.
Brand equity and value will not work without brand positioning. Marketers
need to position a brand in the customers' minds so that they will remember
the brand wherever they go and whatever they do. The question is, how to
position a brand? How can we make customers remember our brand? This
topic will help you answer all these questions. This topic also focuses on
several important issues of positioning. Firstly, you will be exposed to the
concept of brand positioning, followed by a discussion of the positioning
process. The topic also covers issues of brand positioning development,
establishment as well as brand positioning evaluation. The final issue
discussed is brand differentiation strategies.
37
Marketing management (12th ed.).
4.1 Brand Equity
4.2 Building Brand Equity
4.3 Measuring Brand Equity
4.4 Managing Brand Equity
4.5 Devising Brand Strategy
4.6 Customer Equity
4.7 Developing Brand Positioning
4.8 Establish Brand Positioning
4.9 Brand Differentiation Strategy
Chapter 9, p 289.
Chapter 10, pp 297-306.
Chapter 10, p 308.
Chapter 12, pp 350-354.
Content Summary
This topic highlights the main features in the analysis of brands to be offered,
specifically the aspects of brand equity development and management,
brand strategy, brand positioning and brand differentiation strategy.
4.1 Brand Equity
A brand is a name, term, sign, symbol, design, or some combination of these
elements, intended to identify the goods and services of one seller or group
of sellers and to differentiate them from those of competitors. The different
components of a brand brand names, logos, symbols, package designs and
so on are brand elements.
Brands are valuable intangible assets that offer a number of benefits to
customers and firms and need to be managed carefully. The key to branding
is that consumers perceive differences among brands in a product category.
Brand equity should be defined in terms of marketing effects uniquely
attributable to a brand. That is, different outcomes result in the marketing of
a product or service because of its brand, compared to the results if that
same product or service was not identified by that brand.

38
There are three key ingredients of customer-based brand equity:
(a) Brand equity arises from difference in consumer response.
(b) Differences in response are a result of consumers brand knowledge.
Brand knowledge consists of all thoughts, feelings, images,
experiences, beliefs and so on that become associated with the brand.
(c) Brand equity is reflected in perceptions, preferences and behaviour
related to all aspects of the marketing of a brand.
The roles of brands include:
(a) Consumers learn about brands through experiences with the product
and its marketing programme.
(b) Brands perform valuable functions for the firm.
(c) A credible brand signals a certain level of quality so that satisfied
buyers can easily choose the product again.
(d) Brand loyalty provides predictability and security of demand for the firm
and creates barriers to entry for other firms.
(e) Branding can be a powerful means to secure a competitive advantage.
(f) To firms, brands represent enormously valuable pieces of legal
property that can influence consumer behaviour, be bought and sold,
and provide their owner the security of sustained future revenues.
4.2 BuiIding Brand Equity
Building brand equity depends on three main factors:
(a) The initial choices for the brand elements or identities making up the
brand;
(b) The way the brand is integrated into the supporting marketing
programme; and
(c) The associations indirectly transferred to the brand by links to some
other entity (the company, country of origin, channel of distribution, or
another brand).
There are several important activities that need to be carried out in building
brand equity. They are:
(a) Choosing brand elements;
(b) Developing brand elements;
39
(c) Designing branding programmes; and
(d) Linking a brand to a secondary brand.
4.3 Measuring Brand Equity
Several important activities need to be carried out in building brand equity,
which are:
x Direct approach;
x ndirect approach;
x Brand audit; and
x Brand tracking.
n the direct approach, marketers assess the actual impact of brand
knowledge on consumer response to different aspects of the marketing.
n the indirect approach, marketers assess potential sources of brand equity
by identifying and tracking consumer brand knowledge structures.
n brand audit, marketers use consumer-focused series of procedures to
assess the health of the brand, uncover its sources of brand equity, and
suggest ways to improve and leverage its equity.
n brand tracking, marketers collect quantitative data from consumers on a
routine basis over time to provide marketers with consistent baseline
information about how the brands and marketing programmes are
performing.
4.4 Managing Brand Equity
Several important activities need to be carried out in managing brand equity,
which are:
x Brand reinforcement; and
x Brand revitalisation.
Brand reinforcement is the activity associated with getting consumers who
have tried a particular brand to become repeat purchasers and with
attracting new users.
Brand revitalisation is the activity associated with the process of making the
old brand look new, refreshing old sources of brand equity or creating new

40
sources of brand equity due to changes in consumer tastes and preferences,
the emergence of new competitors or new technology, or any new
development in the marketing environment.
4.5 Devising Brand Strategy
Several important activities need to be carried out in devising brand strategy,
which are:
x Branding name decisions;
x Brand extensions; and
x Branding portfolios.
Branding name decision is the process of increasing the brand equity by
developing and placing a brand name for a product. The brand name can
come from:
x ndividual names;
x Blanket family names;
x Separate family names for all products; and
x Combo (combination of corporate names and individual names).
Brand extension is the process of using and combining the existing strongest
brand names on a new different product category. Marketers will use the
existing strongest brand name on the new category of product, as an
example, the Protex brand (existing strongest brand name) with a new
category of product (Hair Shampoo). The name for this new shampoo is
Protex Hair Shampoo.
A brand portfolio is a group of all the different brands under a larger umbrella
brand owned by a particular business or organisation (e.g. Nestle). This
would encompass all brands offered in the marketplace, including co-brands
and sub-brands. t is also about the collection of multiple brands in a
company which comes from various product lines. We must manage the
portfolio to increase the relationships between all sub-brands and co-brands
in a strategic way to aid in the development, maintenance and enhancement
of brand building.
41
4.6 Customer Equity
The customer equity perspective focuses on bottom-line financial value. ts
clear benefit is its quantifiable measures of financial performance.
Brand equity and customer equity both emphasise the importance of
customer loyalty.
Brand equity emphasises strategic issues in managing brands and creating
and leveraging brand awareness and image with customers. t provides
much practical guidance for specific marketing activities.
Brand equity and customer equity both matter no brands without
customers and no customers without brands.
4.7 DeveIoping Brand Positioning
Brand positioning is the act of designing the companys brand and image to
occupy a distinctive place in the mind of the target market. t is also known
as the process of screwing and permanently placing the image and the
brands offered (name, features and colours) in the customers mind. t is also
known as the process of arranging the brand to occupy a clear,
distinguishable and desirable relative to competitors brands in the mind of
the target market and consumers.
Developing a positioning requires the determination of a frame of reference
by identifying the target market and the resulting nature of the competition
and the optimal points-of-parity and points-of-difference brand associations.
There are several issues need to be highlighted by marketers in developing
the brand positioning. These issues are:
(a) Competitive frame of reference;
(b) Points-of-difference; and
(c) Points-of-parity.
n the Competitive Frame of Reference, marketers need to define a
competitive frame of reference for a brand position to see the degree of
differentiation needed. They must determine the category membership (what
problem we are competing with and what the close substitutes of our brand
are).

42
n points-of-difference, marketers need to identify the attributes or benefits
consumers strongly associate with a brand, positively evaluate and believe
that they could not find the same extent with a competitive brand.
n points-of-parity, marketers need to identify factors that are not necessarily
unique to the brand but may in fact be shared with other brands.
4.8 EstabIish Brand Positioning
Once they have determined the brand positioning strategy, marketers should
communicate it to everyone in the organisation so that it guides their words
and actions.
One helpful schematic to do so is a brand-positioning bullseye. Constructing
a bullseye for the brand ensures that no steps are skipped in its
development. Marketing Memo: Constructing a Brand Positioning Bullseye
outlines one way marketers can formally express brand positioning.
To communicate a company or brand positioning, marketing plans often
include a positioning statement. The statement should follow the form: To
(target group and need), our (Brand), is (the concept) that (what the POD is
or does).
4.9 Brand Differentiation Strategy
To build a strong brand and avoid the commodity trap, marketers must start
with the belief that you can differentiate anything. The obvious means of
differentiation and often most compelling ones to consumers, relate to
aspects of the product or service.
The obvious means of differentiation, and often the ones most compelling to
consumers, relate to aspects of the product and service (reviewed in
Chapters 12 and 13).
(a) EmpIoyee differentiation Companies can have better-trained
employees who provide superior customer service.
(b) ChanneI differentiation Companies can more effectively and
efficiently design their distribution channels coverage, expertise and
performance to make buying the product easier and more enjoyable
and rewarding.
(c) Image differentiation Companies can craft powerful, compelling
images that appeal to consumers social and psychological needs.
43
(d) Service differentiation A service company can differentiate itself by
designing a better and faster delivery system that provides more
effective and efficient solutions to consumers.
Brands can be differentiated on the basis of a number of different product or
service dimensions: product form, features, performance, conformance,
durability, reliability, repairability, style and design, as well as service
dimensions such as ordering ease, delivery, installation, customer training,
customer consulting, and maintenance and repair.
Study Questions
1. Describe brand positioning.
2. dentify and explain how companies can develop brand positioning.
3. Discuss the strategies available for marketers in establishing brand
positioning.
4. List and explain the positioning process.
5. State how companies can evaluate their positioning effectiveness.
6. Define brand differentiation.
7. Discuss the available brand differentiation strategies.
(a) Procter & Gamble Case Study (please refer to pages 291 and 292).
(b) Mc Donald Case Study (please refer to pages 293 and 294).
(c) Louis Vuitton Case Study (please refer to pages 317 and 318).
(d) Philips Case Study (please refer to pages 318 and 319).
(e) Caterpillar Case Study (please refer to pages 372 and 373).
(f) Toyota Case Study (please refer to pages 374 and 375).

44
Topic 5: DeveIoping and Managing Products
Learning Outcomes
1. Define what a product is;
2. Explain the new product development process;
3. Explain the process of consumer adoption of a new product and the
factors influencing the product adoption; and
4. Discuss how marketers could manage the product offering by
considering the issues of product mix decision, product line decision
and brand decision.
Topic Overview
We had learnt how to increase strengths in the brands and how to compete
effectively. We also understand what is happening in the market. We
identified the segments and markets that we want to target. Now, it is time to
focus on the company's offerings. This topic will prepare you with the skills
needed to build excellent strategies for the products to be sold. This topic
examines strategies in setting products by emphasising new product
characteristics and classifications, new product development and its process,
the consumer adoption process as well as the factors that influence the
adoption. The final strategies discussed are the product offering
management strategies, product mix decisions, product line decisions and
brand decisions.
45
5.1 ntroduction to New Products Chapter 20, pp 589-594.
5.2 New Product Development
Process
Chapter 20, pp 595-610.
5.3 Process of Consumer
Adoption Towards New
Products
Chapter 20, p 611.
5.4 Factors nfluencing the New
Products Adoption
Chapter 20, p 611.
5.5 Managing Product Offerings Chapter 12, pp 357-355.
5.6 Product Mix Decisions Chapter 12, pp 364-371.
5.7 Product Line Decisions Chapter 12, pp 359-361.
5.8 Product Life Cycle Strategies Chapter 11, pp 332-336.
Content Summary
This topic highlights the main features in products and new product offerings.
t focuses on the issues of new product development, consumer adoption,
product management, product decisions and product life cycle strategies.
5.1 Introduction to New Products
Once a company has segmented the market, chosen its target customer
groups and identified their needs, and determined its desired market
positioning, it is ready to develop and launch appropriate new products and
services. Marketing should participate with other departments in every stage
of new product development. A company can add new products through
acquisition or development.
The acquisition route can take three forms:
(a) The company can buy other companies.
(b) t can acquire patents from other companies.
(c) t can buy a licence or franchise from another company to come up
with a comprehensive set of goals since resources are usually limited.

46
The deveIopment route can take two forms:
(a) t can develop new products in its own laboratories called organic
growth.
(b) t can contract with independent researchers or new-product
development firms to develop new products.
New products range from new-to-the-world products that create an entirely
new market to minor improvements or revisions of existing products. Most
new-product activity is devoted to improving existing products.
New products can fail for many reasons such as:
(a) Shortage of important ideas in certain areas;
(b) Fragmented markets;
(c) Social and governmental constraints;
(d) Cost of development;
(e) Capital shortages;
(f) Shorter required development time;
(g) Poor launch timing;
(h) Shorter product life cycles; or
(i) Organisational support.
5.2 New Product DeveIopment Process
There are eight stages in the new product development process: idea
generation, screening, concept development and testing, marketing strategy
development, business analysis, product development, market testing and
commercialisation. At each stage, the company must determine whether the
idea should be dropped or moved to the next stage.
Stages of new product development include:
(a) dea generation;
(b) dea screening;
(c) Concept development and concept testing;
(d) Marketing strategy development;
(e) Business analysis;
47
(f) Product development;
(g) Market testing; and
(h) Commercialisation.
5.3 Process of Consumer Adoption towards New Products
The consumer adoption process is the process by which customers learn
about new products, try them, and adopt or reject them. Today, many
marketers are targeting heavy users and early adopters of new products
because both groups can be reached by specific media and tend to be
opinion leaders.
Stages in the adoption process include:
(a) Awareness;
(b) nterest;
(c) Evaluation;
(d) Trial; and
(e) Adoption.
5.4 Factors InfIuencing New Product Adoption
The consumer-adoption process is influenced by many factors beyond the
marketers control, including consumers and organisations willingness to try
new products, personal influences, and the characteristics of the new
product or innovation.
Factors InfIuencing the Adoption Process
Marketers recognise the following characteristics of the adoption process:
(a) Differences in individual readiness to try new products;
(b) Effect of personal influences;
(c) Differing rates of adoption; and
(d) Differences in organisations readiness to try new products.
Some products catch on immediately, whereas others take a long time to
gain acceptance. Five characteristics influence the rate of adoption of an
innovation, which are as follows:
(a) ReIative advantage The degree to which the innovation appears
superior to existing products.

48
(b) CompatibiIity The degree to which the innovation matches the
values and experiences of the individuals.
(c) CompIexity The degree to which the innovation is relatively difficult
to understand or use.
(d) DivisibiIity The degree to which the innovation can be tried on a
limited basis.
(e) CommunicabiIity The degree to which the beneficial results of use
are observable or describable to others.
(f) Other characteristics that influence the rate of adoption are:
x Costs;
x Risk and uncertainty;
x Scientific credibility; and
x Social approval.
5.5 Managing Product Offerings
Product is the first and most important element of the marketing mix. Product
strategy calls for making coordinated decisions on product mixes, product
lines, brands, and packaging and labelling.
n planning its market offering, the marketer needs to think through the five
levels of the product:
(a) Core benefit;
(b) Basic product;
(c) Expected product;
(d) Augmented product; and
(e) Potential product.
Products can be non-durable goods, durable goods or services. n the
consumer goods category, products are convenience goods (staples,
impulse goods, emergency goods), shopping goods (homogeneous and
heterogeneous), specialty goods or unsought goods.
The industrial goods category has three subcategories: materials and parts
(raw materials and manufactured materials and parts), capital items
(installations and equipment), or supplies and business services (operating
supplies, maintenance and repair items, maintenance and repair services,
and business advisory services).
49
5.6 Product Mix Decisions
Most companies sell more than one product. A product mix can be classified
according to width, length, depth and consistency. These four dimensions
are the tools for developing the companys marketing strategy and deciding
which product lines to grow, maintain, harvest and divest.
To analyse a product line and decide how many resources should be
invested in that line, product line managers need to look at sales and profits
and market profile.
A product mix consists of various product lines. A companys product mix
has a certain width, length, depth and consistency. This is what we call
product mix dimension. Therefore, the dimensions are:
(a) Width;
(b) Length;
(c) Depth; and
(d) Consistency.
The width of a product mix refers to how many different product lines the
company carries. The length of a product mix refers to the total number of
items in the mix. The depth of a product mix refers to how many variants are
offered of each product in the line.
The consistency of the product mix refers to how closely related the various
product lines are in end use, production requirements, distribution channels
or some other way.
5.7 Product Line Decisions
n offering a product line, companies normally develop a basic platform and
modules that can be added to meet different customer requirements.
Product line managers need to know the sales and profits of each item in
their line in order to determine which items to build, maintain, harvest, or
divest.
n deciding the product line, the company needs to make several decisions.
These decisions are:
(a) Product Line Length
(b) Line Stretching

50
(c) Line Filling
(d) Line Modernisation, Featuring and Pruning
The company should also look at the sales and profits of the product lines.
Here, a company can classify its products into four types that yield different
gross margins, depending on sales volume and promotion.
5.8 Product Life CycIe Strategies
The Product life Cycle model charts the life of a product from the beginning
to the end.
The product is introduced into the market at the introduction stage, then
grows during the growth stage, reaches maturity during the maturity stage
and dies at the decline stage.
t is important for a marketer to know what happens to the product at each
stage and then plot strategies to counter the stage the product is going
through.
A companys positioning and differentiation strategy must change as the
product, market, and competitors change over the product life cycle (PLC).
The following are a few assumptions related to product life cycle:
(a) Products have a limited life.
(b) Product sales pass through distinct stages, each posing different
challenges, opportunities and problems to the seller.
(c) Profits rise and fall at different stages of the product life cycle.
Products require different marketing, financial, manufacturing, purchasing
and human resource strategies in each life-cycle stage.
n the introduction stage, the product is newly introduced in the market.
Consumers are ignorant and not aware of the introduction of the product and
profits are very low or negative at the moment. This is caused by the heavy
expenses incurred during the product introduction stage and low sales
volume.
At the growth stage, sales increases tremendously. Consumers are aware of
the existence of the product in the market and they have purchased the
product for the first time. Profit increases and is at a profit-making level.
Competitors start entering the market and offering the same or similar
products.
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At the maturity stage, profits and sales start to reach the maximum level. The
other companies start to offer similar or identical products. Therefore,
consumers have options. At this moment, competition is tough and there are
many competitors in the market.
At the decline stage, sales and profits decline until there are no more sales
or profits. This happens because there is a better product replacement, new
technology exists, or the consumers are bored of the old product. They do
not want to purchase them anymore.
Study Questions
1. Define what a product is.
2. List and explain the three levels of products in the market.
3. Define end-user products and industrial products.
4. Distinguish between end-user products and industrial products.
5. Explain the stages in a product life cycle.
6. Explain the suitable marketing strategies (4Ps) in each and every stage
in the product life cycle.
7. Explain the new product development process.
8. Explain the process of consumer adoption towards new products.
9. dentify the factors influencing product adoption.
10. Discuss how marketers could manage the product offering by
considering the issues of product mix decision.
11. Explain what is product line and discuss the various decisions
pertaining to product lines that marketers need to make.
x Samsung Case Study (please refer to pages 343 and 344).
x BM Case Study (please refer to pages 345 and 346).
x Caterpillar Case Study (please refer to pages 372 and 373).
x Toyota Case Study (please refer to pages 374 and 375).
x Apple Case Study (please refer to pages 613 and 614).
x RM Case Study (please refer to pages 614 and 615).

52
Topic 6: Pricing Strategies and Programmes
Learning Outcomes
1. Define what is price;
2. Explain the price setting process;
3. dentify how a company adapts prices to meet varying circumstances
and opportunities;
4. Explain when a company should initiate a price change; and
5. Describe how a company should respond to a competitor's price
change.
Topic Overview
Many organisations fail to market their products not because they do not
understand the market, compete wrongly, do not install high equity in their
brands, fail to position their offerings or do not have good strategies for their
products. The answer is because they priced their products wrongly. n order
to prevent this from happening, this topic prepares you to know how to price
products correctly and set up excellent pricing strategies for the products to
be sold. This topic presents pricing strategies. t starts with an understanding
of pricing concepts followed by ways to set prices. The strategies in adapting
pricing are presented next, besides strategies in initiating and responding to
price changes.
53
6.1 ntroduction to Price and Pricing
6.2 Price Setting Process
6.3 Price Adoption
6.4 nitiating and Responding to
Price Changes
Chapter 14, pp 405-406.
Chapter 14, pp 411-424.
Chapter 14, pp 425-428.
Chapter 14, pp 429-431.
Content Summary
This topic highlights the main features in the price setting process. The
aspects of pricing management, pricing development process, price adoption
as well as the strategies associated with price changes will be discussed
further.
6.1 Introduction to Price and Pricing
Despite the increased role of non-price factors in modern marketing, price
remains a critical element of the marketing mix. Price is the only element that
produces revenue; the others produce costs.
Price is the amount of money charged for goods or services, or the sum of all
the values that customers give in order to gain the benefits of having or using
the goods or services.
Marketers recognise that consumers often actively process price information,
interpreting prices in terms of their knowledge from prior purchasing
experiences, formal communications and point-of-purchase or online
resources.
6.2 Price Setting Process
A firm must set a price for the first time when it develops a new product,
when it introduces its regular product into a new distribution channel or
geographic area, and when it enters bids on new contract work. The firm
must decide where to position its product on quality and price.

54
n setting pricing policy, a company follows a six-step procedure. t selects its
pricing objective. t estimates the demand curve, the probable quantities it
will sell at each possible price. t estimates how its costs vary at different
levels of output, at different levels of accumulated production experience,
and for differentiated marketing offers. t examines competitors costs, prices
and offers. t selects a pricing method. t selects the final price.
The firm has to consider many factors in setting its pricing policy. There is a
six-step procedure in setting a price:
(a) Selecting the pricing objective;
(b) Determining demand;
(c) Estimating costs;
(d) Analysing competitors costs, prices and offers;
(e) Selecting a pricing method; and
(f) Selecting the final price.
There are six pricing objectives:
(a) Survival;
(b) Maximum current profit;
(c) Maximum market share;
(d) Maximum market skimming;
(e) Other objectives; and
(f) Product-quality leadership.
Customers are also less price-sensitive when:
(a) There are few or no substitutes or competitors;
(b) They do not readily notice the higher price;
(c) They are slow to change their buying habits;
(d) They think the higher prices are justified; and
(e) Price is only a small part of the total cost of obtaining, operating, and
servicing the product over its lifetime (total cost of ownership TCO).
There are six price-setting methods:
(a) Markup pricing;
(b) Target-return pricing;
55
(c) Perceived-value pricing;
(d) Value pricing;
(e) Going-rate pricing; and
(f) Auction-type pricing.
An increasing number of companies base their price on the customers
perceived value. They must deliver the value promised by their value
proposition, and the customer must perceive this value. Perceived value is
made up of several characteristics:
(a) Buyers image of the product performance;
(b) Channel deliverables;
(c) The warranty quality;
(d) Customer support;
(e) Suppliers reputation;
(f) Trustworthiness; and
(g) Esteem.
6.3 Price Adoption
Companies do not usually set a single price, but rather a pricing structure
that reflects variations in geographical demand and costs, market-segment
requirements, purchase timing, order levels and other factors. Several price-
adaptation strategies are available:
(a) Geographical pricing;
(b) Price discounts;
(c) Allowances;
(d) Promotional pricing; and
(e) Discriminatory pricing.
n geographical pricing, the company decides how to price its products for
different customers in different locations and countries.
n price discounts, most companies will adjust their list price and give
discounts and allowances for early payment, volume purchases and off-
season buying.

56
n promotional pricing, companies can use several pricing techniques to
stimulate early purchase:
(a) Loss-leader pricing;
(b) Special-event pricing;
(c) Special customer pricing;
(d) Cash rebates;
(e) Low-interest financing;
(f) Longer payment terms;
(g) Warranties and service contracts; and
(h) Psychological discounting.
n differentiated pricing, companies often adjust their basic price to
accommodate differences in customers, products, locations and so on.
Price discrimination occurs when a company sells a product or service at two
or more prices that do not reflect a proportional difference in costs.
(a) n first-degree price discrimination, the seller charges a separate price
to each customer depending on the intensity of his or her demand.
(b) n second-degree price discrimination, the seller charges less to buyers
who buy a larger volume.
(c) n third-degree price discrimination, the seller charges different
amounts to different classes of buyers:
x Customer-segment pricing;
x Product-form pricing;
x mage pricing;
x Channel pricing;
x Location pricing; and
x Time pricing.
For price discrimination to work, certain conditions must exist:
(a) The market must be segmentable and the segments must show
different intensities of demands;
(b) Members in the lower-price segment must not be able to resell the
product to the higher-price segment;
57
(c) Competitors must not be able to undersell the firm in the higher-price
segment;
(d) The cost of segmenting and policing the market must not exceed the
extra revenue derived from price discrimination;
(e) The practice must not breed customer resentment and ill will; and
(f) The particular form of price discrimination must not be illegal.
6.4 Initiating and Responding to Price Changes
Firms often need to change prices. A price decrease might be brought about
by excess plant capacity, declining market share, a desire to dominate the
market through lower costs or economic recession. A price increase might
be brought about by cost inflation or overdemand. Companies must carefully
manage customer perceptions in raising prices.
Companies must anticipate competitor price changes and prepare a
contingent response. A number of responses are possible in terms of
maintaining or changing price or quality.
The firm facing a competitors price change must try to understand the
competitors intent and the likely duration of the change. Strategy often
depends on whether a firm is producing homogeneous or non-homogeneous
products. A market leader attacked by lower-priced competitors can seek to
better differentiate itself, introduce its own low-cost competitor or transform
itself more completely.
Several circumstances might lead a firm to cut prices:
(a) Excess plant capacity;
(b) A drive to dominate the market through lower costs.
(c) Either the company starts with lower costs or initiates price cuts in the
hope of gaining market share and lower costs.
A price-cutting strategy involves possible traps:
(a) Low-quality trap;
(b) Fragile market-share trap;
(c) Shallow-pockets trap; and
(d) Price-war trap.

58
The circumstances provoking price increases are:
(a) Cost inflation;
(b) Rising costs unmatched by productivity gains squeeze profit margins
and lead companies to regular rounds of price increases;
(c) Companies often raise their prices by more than the cost increase in
anticipation of further inflation or governmental price controls, in a
practice called anticipatory pricing; and
(d) Over-demand.
The price can be increased in the following ways:
(a) Delayed quotation pricing;
(b) Escalator clauses;
(c) Unbundling; and
(d) Reduction of discounts.
Several techniques help consumers avoid sticker shock and a hostile
reaction when prices rise:
(a) Sense of fairness must surround any price increase.
(b) Customers must be given advance notice so that they can do forward
buying.
(c) Sharp price increases need to be explained in understandable terms.
(d) Making low-visibility price moves first is also a good technique:
x Eliminating discounts;
x ncreasing minimum order sizes;
x Curtailing production of low-margin products; and
x Creating new economy brands.
Given strong consumer resistance, marketers go to great lengths to find
alternate approaches that avoid increasing prices when they otherwise would
have done so. Here are a few popular ones:
(a) Substituting less-expensive materials or ingredients. (Many candy bar
companies substituted synthetic chocolate for real chocolate to fight
cocoa price increases.)
(b) Reducing or removing product features. (Sears in the United States
engineered down a number of its appliances so that they could be
priced competitively with those sold in discount stores.)
59
(c) Removing or reducing product services such as installation or free
delivery.
(d) Using less-expensive packaging material or larger package sizes.
(e) Reducing the number of sizes and models offered.
(f) Creating new economy brands. (Jewel food stores in the United States
introduced 170 generic items selling at 10% to 30% less than national
brands.)
n responding to competitor price changes, the brand leader can respond in
several ways:
(a) Maintain price;
(b) Maintain price and add value;
(c) Reduce price;
(d) ncrease price and improve quality; and
(e) Launch a low-price fighter line.
f a company wants to respond to the competitors price changes, the
marketers should consider:
(a) The product's stage in the life cycle;
(b) The product's importance in the companys portfolio;
(c) The competitors intentions and resources;
(d) The markets price and quality sensitivity;
(e) The behaviour costs of with volume; and
(f) The companys alternative opportunities.
Study Questions
1. Define what price is.
2. Provide internal and external factors which influence the amount of
price charged on a product.
3. Explain the five pricing approaches available for marketers.
4. Explain the two pricing strategies of a new product in the market.
5. Explain the price setting process.
6. Discuss how a company adapts prices to meet varying circumstances
and opportunities.

60
7. Explain when a company should initiate a price change.
8. Discuss the strategies available for marketers to respond to a
competitor's price change.
x E-Bay Case Study (please refer to pages 433 and 434).
x Southwest Airlines Case Study (please refer to pages 434 and 435).
61
Topic 7: Designing and Managing Communication
Efforts
Learning Outcomes
1. Explain the relationship between communication and promotion;
2. dentify how a company could develop effective communication;
3. Explain the various communication channels; and
4. Explain the important promotional mixes.
Topic Overview
We have learnt how to increase strengths on the brands and compete
effectively. We also understand what is happening in the market. We
identified the segments and markets that we want to target. We have already
installed high equity and value in our brands. We have created superb
strategies for all our products. We priced them carefully to gain maximum
profit and to reach customer satisfaction. What is next? The answer is, to
inform, to persuade and to remind customers about our offerings. Some
organisations do not do this well. As for them, when everything is ok, the
brands will speak for themselves. Yes, it may work for some brands but not
all the time. No matter how good your brand is, you still need to promote and
communicate it to customers. Now, it is the time to focus on how a company
could promote its offerings.
n this topic, we will discuss the marketing communication mix, the
communication process, steps in developing effective communication,
promotional mix strategy and integrated communication. Marketing
communication, or better known as marketing promotion, is one of the most
important marketing mix elements. Products do not get sold on their own
without promotion, although they have features that are desired by
consumers, are attractively priced and are easily obtainable. Consumers
also may not be aware of the products' existence or the advantages of the
products compared to other products that are readily available in the market
if the elements of promotion are not there. Therefore, this topic is crucial as it
could help marketers to promote their brands and offerings effectively.

62
7.1 ntroduction to Marketing
Communication and Promotion
Chapter 17, pp 496-500.
7.2 Marketing Communication
Process
Chapter 17, pp 502.
7.3 Steps in Developing Effective
Marketing Communication
Chapter 17, pp 504-506.
7.4 Selecting Marketing
Communication Channels
Chapter 17, pp 508.
7.5 Marketing Communication
Mixes
Chapter 17, pp 512-516.
7.6 Communication Mix Marketing:
Advertising
Chapter 18, pp 526-540.
Sales Promotion
Chapter 18, pp 541-542.
Public Relations
Chapter 18, pp 549-550.
Direct Marketing
Chapter 19, pp 557-562.
Personal Selling
Chapter 19, pp 582-584.
Content Summary
This topic highlights the main features in the promotional management. The
aspects of effective communication development and management will be
revealed. You will learn about marketing communication mixes such as
advertisement, sales promotion, public relations, direct marketing and
personal selling.
63
7.1 Introduction to Marketing Communication and Promotion
Marketing communications are the means by which firms attempt to inform,
persuade and remind consumers directly or indirectly about the products
and brands they sell.
Marketing communications represent the voice of the brand and are a
means by which firms can establish a dialogue and build relationships with
consumers.
By strengthening customer loyalty, marketing communications can contribute
to customer equity. Marketing communications also work for consumers
when they show how and why a product is used, by whom, where and when.
Marketing communication is directly related and linked to marketing
promotion. The promotional activities involve the elements of marketing
communication.
Marketing communications in almost every medium and form have been on
the rise and some consumers feel they are increasingly invasive. Marketers
must be creative in using technology but not intrude in consumers lives.
7.2 Marketing Communication Process
Marketers should understand the fundamental elements of effective
communication. The marketing communication process can be explained
using the two models presented in the textbooks. These are:
(a) Macro model of the communication process; and
(b) Micro model of consumer responses.
The drawback of this model is that it over-emphasises input acquisition, thus
reducing the importance of educational process and outputs.
7.3 Steps in DeveIoping Effective Marketing Communication
There are five steps in developing effective communications. The five basic
ones are:
(a) dentifying the target audience;
(b) Determining the objectives;
(c) Designing the communications;

64
(d) Selecting the channels; and
(e) Establishing the budget.
7.4 SeIecting Marketing Communication ChanneIs
Selecting efficient channels to carry the message becomes more difficult as
channels of communication become more fragmented and cluttered. There
are three types of communication channels. These are:
(a) PersonaI Communication ChanneIs
x Personal communication channels involve two or more persons
communicating directly face-to-face, person to audience, over the
telephone, or through e-mail.
x Personal communication channels derive their effectiveness
through individualised presentation and feedback.
x Advocate channels consist of company salespeople contacting
buyers in the target market.
x Expert channels consist of independent experts making statements
to target buyers.
x Social channels consist of neighbours, friends, family members and
associates talking to target buyers.
(b) Non-PersonaI (Mass) Communication ChanneIs
x Non-personal communication channels are communications
directed to more than one person and includes media, sales
promotions, events and publicity. Media includes print, broadcast,
network, electronic and display media. Sales promotions consist of
consumer promotions, trade promotions, and business and sales-
force promotion.
x Events and experiences include sports, arts, entertainment and
cause events. Public relations include communications directed
internally or externally to consumers, other firms, media and
government. Much of the recent growth of non-personal channels
has been with events and experiences.
x A company can build its brand image through creating or
sponsoring events. Companies are searching for better ways to
quantify the benefits of sponsorship and are demanding greater
accountability.
65
x Companies can create events designed to surprise the public and
create a buzz.
(c) Integration of Communication ChanneIs
x Although personal communication is often more effective than
mass communication, mass media might be the major means of
stimulating personal communication.
x Mass communications affect personal attitudes towards behaviour
through a two-step process:
(i) deas flow from mass media to opinion leaders; and
(ii) From opinion leaders to the less media-involved population
groups.
7.5 Marketing Communication Mixes
Companies must allocate the marketing communications budget over the
eight major modes of communication:
(a) Advertising;
(b) Sales promotion;
(c) Public relations and publicity;
(d) Events and experiences;
(e) Direct marketing;
(f) nteractive marketing;
(g) Word-of-mouth marketing; and
(h) The sales force.
7.6 Marketing Communication Mix: Advertising
Advertising is any paid form of non-personal presentation and promotion of
ideas, goods, or services by an identified sponsor. Advertisers include not
only business firms but also charitable, non-profit and government agencies.
Advertising can be used to build up a long-term image for a product or trigger
quick sales. Advertising can efficiently reach geographically dispersed
buyers. Certain types of advertising require large budgets; others do not.
Just the presence of advertising might have an effect on sales. Consumers
might believe that the advertised brand offers good value.

66
Developing an advertising programme is a five-step process:
(a) Set advertising objectives;
(b) Establish a budget;
(c) Choose the advertising message and creative strategy;
(d) Decide on the media; and
(e) Evaluate communication and sales effects.
Because of the many forms of advertising, it is difficult to make
generalisations. However, the following qualities can be noted:
(a) Pervasiveness;
(b) Amplified expressiveness; and
(c) mpersonality.
7.7 Marketing Communication Mix: SaIes Promotion
Sales promotion consists of mostly short-term incentive tools, designed to
stimulate quicker or greater purchase of particular products or services by
consumers or the trade.
n using sales promotion, a company must establish its objectives, select the
tools, develop the programme, pre-test the programme, implement and
control it, and evaluate the results.
Companies use sales-promotion tools to draw a stronger and quicker buyer
response, including short-run effects such as highlighting product offers and
boosting sagging sales.
Sales promotion offers three distinct benefits:
(a) Ability to be attention-getting;
(b) ncentive; and
(c) nvitation.
7.8 Marketing Communication Mix: PubIic ReIations
Public relations (PR) include a variety of programmes designed to promote
or protect a companys image or its individual products. Marketing public
relations (MPR), to support the marketing department in corporate or product
67
promotion and image making, can affect public awareness at a fraction of the
cost of advertising and is often much more credible.
The main tools of PR are publications, events, news, community affairs,
identification media, lobbying and social responsibility (or the so-called
PENCLS of PR).
Marketers tend to underuse public relations, yet a well-thought-out
programme coordinated with the other promotion-mix elements can be
extremely effective. The appeal of public relations and publicity is based on
three distinctive qualities:
(a) High credibility;
(b) Ability to catch buyers off guard; and
(c) Dramatisation.
7.9 Marketing Communication Mix: Direct Marketing
Direct marketing is an interactive marketing system that uses one or more
media to affect a measurable response or transaction at any location. Direct
marketing, especially electronic marketing is showing explosive growth.
Direct marketers plan campaigns by deciding on objectives, target markets
and prospects, offers, and prices. Next, they test and establish measures to
determine the campaigns success.
Major channels for direct marketing include face-to-face selling, direct mail,
catalogue marketing, telemarketing, interactive TV, kiosks, Web sites and
mobile devices.
The many forms of direct marketing direct mail, telemarketing and nternet
marketing share three distinct characteristics. Direct marketing is:
(a) Customised;
(b) Up-to-date; and
(c) nteractive.
7.10 Marketing Communication Mix: PersonaI SeIIing
Personal selling is the most effective tool at the later stages of the buying
process, particularly in building up buyer preference, conviction and action.
Personal selling involves sales person or better known as salespeople. They
are the one who approaches the customers individually.

68
Salespeople serve as a companys link to its customers. The sales
representative is the company to many of its customers and it is the
representative who brings back to the company much-needed information
about the customer.
Designing the sales force requires choosing objectives, strategy, structure,
size and compensation. Objectives may include prospecting, targeting,
communicating, selling, servicing, information gathering and allocating.
Determining strategy requires choosing the most effective mix of selling
approaches. Choosing the sales force structure entails dividing territories by
geography, product, or market (or some combination of these). To estimate
how large the sales force needs to be, the firm estimates the total workload
and how many sales hours (and hence salespeople) will be needed.
Compensating the sales force entails determining what types of salaries,
commissions, bonuses, expense accounts, and benefits to give, and how
much weight customer satisfaction should have in determining total
compensation.
There are five steps in managing the sales force:
(a) Recruiting and selecting sales representatives;
(b) Training the representatives in sales techniques and in the companys
products, policies, and customer-satisfaction orientation;
(c) Supervising the sales force and helping reps to use their time
efficiently;
(d) Motivating the sales force and balancing quotas, monetary rewards and
supplementary motivators; and
(e) Evaluating individual and group sales performance.
Effective salespeople are trained in the methods of analysis and customer
management, as well as the art of sales professionalism. No single approach
works best in all circumstances, but most trainers agree that selling is a six-
step process: prospecting and qualifying customers, pre-approach,
presentation and demonstration, overcoming objections, closing, and follow-
up and maintenance.
69
Personal selling has three distinctive qualities:
(a) Personal interaction;
(b) Cultivation; and
(c) Response.
Study Questions
1. Define marketing promotional mix.
2. List the four steps in developing effective communication in promotion.
3. List the available techniques and approaches of budgeting a
promotional programme.
4. List the seven elements of effective communication in promotion.
5. Explain the relationship between communication and promotion.
6. dentify how a company could develop effective communication
7. Explain the various communication channels.
8. Explain the important promotional mixes.
x Red Bull Case Study (please refer to pages 520 and 521).
x Target Discount Retailer Case Study (please refer to pages 521 and
522).
x Coca Cola Case Study (please refer to pages 553 and 554).
x Gillete Case Study (please refer to pages 554 and 555).
x Facebook Case Study (please refer to pages 584 and 585).
x Oxford University Case Study (please refer to pages 586 and 587).

70
Topic 8: Designing and Managing ChanneIs and
Distribution
Learning Outcomes
1. Define marketing channels;
2. dentify the important roles of marketing channels to marketers;
3. Explain the importance of marketing channels and the important
decisions in designing the channels as well as in managing them;
4. Discuss the concept of channel conflict; and
5. Explain the strategies to manage the channel conflict.
Topic Overview
After having successfully promoted our products to the target market,
customers will start demand, have interest in our products and start to place
orders. t is now the time for us to deliver the products to the customers at
the right quantity, right time, right specifications and right quality. n order to
facilitate the transfer of products to the end consumers, we could use direct
or indirect distribution methods. Most firms or producers use intermediaries
to carry their outputs to the market and to the end consumers. This
intermediary channel is a marketing channel and it is also known as a
distribution channel. The marketing channel is one of the important elements
of the marketing mix. Marketing channel decisions have direct effects on
other marketing activities. Therefore, in this topic, we will discuss the
definition of marketing channels, the importance of marketing channels to
businesses and organisations, the roles of marketing channels in marketing
and the issues of channels management and channel designs. The dynamic
issues of channels distribution will be presented followed by discussion on
the aspects of managing channel conflict.
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8.1 ntroduction to Marketing Channels Chapter 15, p 436.
8.2 The mportance of Marketing
Channels
Chapter 15, p 438.
8.3 The Roles of Marketing Channels Chapter 15, pp 440-443.
8.4 Channels Design Decisions Chapter 15, pp 444-448.
8.5 Channels Management Decisions Chapter 15, pp 449-452.
8.6 Channels Conflict, Cooperation
and Competition
Content Summary
This topic highlights the main features in the analysis of marketing channels
and distribution. The aspects of product placing such as the channel design
decisions, channel management decisions and conflict management among
channels members also will be discussed in further detail.
8.1 Introduction to Marketing ChanneIs
Most producers do not sell their goods directly to final users; between them
stands a set of intermediaries performing a variety of functions.
These intermediaries constitute a marketing channel (also called a trade
channel or distribution channel).
Marketing channels are sets of interdependent organisations involved in the
process of making a product or service available for use or consumption.
Some intermediaries buy, take title to and resell the merchandise; they are
called merchants.
Others search for customers and may negotiate on the producers behalf but
do not take title to the goods; they are called agents.

72
Still others assist in the distribution process but neither take the title to the
goods nor negotiate purchases or sales; they are called facilitators.
8.2 The Importance of Marketing ChanneIs
A marketing channel system is the particular set of marketing channels
employed by a firm. Decisions about the marketing channel system are
among the most critical facing management. n the United States, channel
members collectively earn margins that account for 30 to 50 percent of the
ultimate selling price.
Marketing channels also represent a substantial opportunity cost:
(a) Converting potential buyers into profitable orders is one of the chief
roles of marketing channels.
(b) Marketing channels must not just serve markets, they must also make
markets.
The channels chosen affect all other marketing decisions:
(a) The companys pricing depends on whether it uses mass-
merchandisers or high-quality boutiques.
(b) The firms sales force and advertising decisions depend on how much
training and motivation dealers need.
n addition, channel decisions involve relatively long-term commitments to
other firms as well as a set of policies and procedures. n managing its
intermediaries, the firm must decide how much effort to devote to push
versus pull marketing.
(a) A push strategy involves the manufacturer using its sales force and
trade promotion money to induce intermediaries to carry, promote and
sell the product to end users. The push strategy is appropriate where
there is low brand loyalty in a category, brand choice is made in the
stores, the product is an impulse item and product benefits are well
understood.
(b) A pull strategy involves the manufacturer using advertising and
promotion to induce consumers to ask intermediaries for the product,
thus inducing the intermediaries to order it. The pull strategy is
appropriate when there is high brand loyalty and high involvement in
the category, when people perceive differences between brands and
when people choose the brand before they go to the store.
73
8.3 The RoIes of Marketing ChanneIs
Why would a producer delegate some of the selling jobs to intermediaries,
relinquishing control over how and to whom the products are sold? Through
their contacts, experience, specialisation and scale of operation,
intermediaries make goods widely available and accessible to target
markets, usually offering the firm more effectiveness and efficiency than it
can achieve on its own.
A marketing channel performs the work of moving goods from producers to
consumers. t overcomes the time, place and possession gaps that separate
goods and services from those who need and want them.
Members of the marketing channel perform a number of key functions. Some
functions constitute a forward flow of activity from the company to the
customer. Other functions constitute a backward flow from customers to the
company.
The specific roles of marketing channels are:
(a) Buying and assortment building;
(b) Bulk breaking;
(c) Warehouse and storage;
(d) Financing;
(e) Risk bearing;
(f) Market nformation gathering/ providing information;
(g) Management services and advice;
(h) Contact;
(i) Matching;
(j) Negotiations;
(k) Physical distribution/ transportation; and
(l) Promotion.
8.4 ChanneI Design Decisions
To design a marketing channel system, marketers analyse customer needs,
establish channel objectives, identify major channel alternatives and
evaluate major channel alternatives. The following are the various decisions
which need to be made by marketers when designing channels. These are:

74
(a) Analysing customers desired service output levels;
(b) Establishing objectives and constraints;
(c) dentifying and evaluating major channel alternatives;
(d) Types of intermediaries;
(e) Number of intermediaries;
(f) Terms and responsibilities of channel members; and
(g) Evaluating the major alternatives.
8.5 ChanneI Management Decisions
After a company has chosen a channel system, it must select, train, motivate
and evaluate individual intermediaries for each channel. t must also modify
channel design and arrangements over time.
The following are the various decisions which need to be made by marketers
when managing channels. They are:
(a) Selecting channel members;
(b) Training and motivating channel members;
(c) Channel power;
(d) Channel partnerships;
(e) Evaluating channel members;
(f) Modifying channel design and arrangements;
(g) Channel evolution;
(h) Channel modification decisions; and
(i) Global channel considerations.
8.6 ChanneIs ConfIict, Cooperation and Competition
Some channel conflict can be constructive and lead to better adaptation to a
changing environment, but too much is dysfunctional. The challenge is not to
eliminate conflict but to manage it better.
Several mechanisms for effective conflict management include:
(a) Strategic justification;
(b) Dual compensation;
75
(c) Superordinate goals;
(d) Employee exchange;
(e) Joint membership;
(f) Co-option;
(g) Diplomacy, mediation and arbitration; and
(h) Legal recourse.
Study Questions
1. Define marketing channels.
2. List the importance of marketing channels to businesses and
organisations.
3. List the roles of marketing channels in marketing.
4. List the steps in designing effective marketing channels.
5. Explain the strategies available for marketers in managing the
channels.
6. dentify the types of decisions that need to be made in order to design
the channels effectively.
7. List and explain the types of decisions that need to be made in order to
manage the channels effectively.
8. What is channel conflict?
9. dentify and explain the source of channel conflict.
10. Discuss the possible solutions to channel conflict.
11. A group of entrepreneurs is planning to start a food processing
company. Comment on the likely evolution of the company's marketing
channels.
12. Members of a marketing channel perform three types of functions.
Provide examples of these three functions in the context of a publishing
company which publishes books and magazines.
13. Garolds Stores operates as a low price retailer. t offers home fashion
products, such as wall decor, frames, candles, bath and bedding
products, furniture, home accents and kitchen products. The firm has
showrooms and retail stores across United States. Customers can buy
products in three different ways: (a) they can place orders online and
have the products shipped to their homes; (b) they can buy directly
from the showrooms and retail outlets; or (c) they can place orders
online and pick them up from the nearest showroom. What are the

76
benefits that Garolds Stores could achieve by using various channels
to sell to customers?
x Amazon Dot Com Case Study (please refer to pages 465 and 466).
x Tesco Retailer Case Study (please refer to pages 466 and 467).
77
Topic 9: ImpIementation and ControI
Learning Outcomes
1. Explain the trends in marketing practices;
2. Discuss the importance of internal marketing management and socially
responsible marketing in supporting the implementation and control of
marketing activities;
3. dentify the important aspects of marketing implementation and what
are to be done to implement the strategies correctly;
4. Discuss the concept of marketing evaluation and control; and
5. Explain the strategies to evaluate the marketing implementation as well
as the strategies to control the marketing activities.
Topic Overview
There is constant debate on whether strategy or execution is more important.
Yet, a poor plan with great implementation is no better than a good plan with
poor implementation. The truth is that both are necessary for success. This
topic highlights the issues of strategy implementation and control. The
planned strategies should be able to be implemented. Furthermore, it needs
control so that strategised could be implemented correctly and effectively
according to the plan. Therefore, the issues of organisation of marketing
activities will be discussed to increase your understanding of this subject
matter. Marketing implementation strategies and the aspect of marketing
evaluation and control will also be highlighted.

78
9.1 Trends in Marketing Practices
9.2 nternal Marketing
9.3 Socially Responsible Marketing
9.4 Marketing mplementation
9.5 Evaluation and Control
Chapter 22, p 643.
Chapter 22, p 645.
Chapter 22, p 651.
Chapter 22, p 662.
Chapter, 22 pp 663-665 and p 679.
Content Summary
This topic highlights the main features of strategy implementation and
control. This topic is crucial as it will prepare you with extensive knowledge
on how to implement the planned marketing strategies and control them. The
issues of trends in marketing practices will expose you to the aspects of
current issues in marketing practices. You also need to understand the
importance of internal marketing management to support the process of
marketing implementation strategies as well as the evaluation process of the
implementation.
9.1 Trends in Marketing Practices
Recently, marketers have had to operate in a slow-growth economic
environment characterised by discriminating consumers, aggressive
competition and a turbulent marketplace.
As consumers become more disciplined in their spending and adopt a less
is more attitude, it is incumbent upon marketers to create and communicate
the true value of their products and services.
Across all markets, marketing plans and programmes will grow more
localised and culturally sensitive, while strong brands that are well
differentiated and continually improved will remain fundamental to marketing
success.
Businesses will continue to use social media more and traditional media
less. The Web allows unprecedented depth and breadth in communications
79
and distribution, and its transparency requires companies to be honest and
authentic.
Marketers also face ethical dilemmas and perplexing tradeoffs. Consumers
may value convenience, but how do we justify disposable products or
elaborate packaging in a world trying to minimise waste? ncreasing material
aspirations can defy the need for sustainability.
Given increasing consumer sensitivity and government regulation, smart
companies are creatively designing with energy efficiency, carbon footprints,
toxicity and disposability in mind. Some are choosing local suppliers over
distant ones. Auto companies and airlines must be particularly conscious of
releasing CO2 in the atmosphere.
9.2 InternaI Marketing
nternal marketing requires that everyone in the organisation buy into the
concepts and goals of marketing and engage in choosing, providing and
communicating customer value.
Modern marketing departments may be organised in a number of different,
sometimes overlapping ways: functionally, geographically, by product or
brand, by market, in a matrix, and by corporate or division.
Under the marketing concept, all departments need to think customer and
work together to satisfy customer needs and expectations. Yet, departments
define company problems and goals from their viewpoint, so conflicts of
interest and communications problems are unavoidable.
9.3 SociaIIy ResponsibIe Marketing
Effective internal marketing must be matched by a strong sense of ethics,
values and social responsibility. Several forces driving companies to
practice a higher level of corporate social responsibility are:
(a) Rising customer expectations;
(b) Changing employee expectations;
(c) Government legislation and pressure;
(d) nvestor interest in social criteria; and
(e) Changing business procurement practices.

80
n order to be a responsible marketing organisation, marketers need to focus
on the following elements:
(a) Legal behaviour;
(b) Ethical behaviour;
(c) Social responsibility behaviour; and
(d) Sustainability.
The best strategy to show that the marketers are socially responsible is
using cause-related marketing programmes. Cause-related marketing is
marketing that links the firms contributions to a designated cause to
customers engaging directly or indirectly in revenue-producing transactions
with the firm.
A successful cause-marketing programme can improve social welfare; create
differentiated brand positioning; build strong consumer bonds; enhance the
companys public image; create a reservoir of goodwill; boost internal morale
and galvanise employees; drive sales; and increase the firms market value.
Cause-related marketing programmes could backfire if cynical consumers
question the link between the product and the cause and see the firm as
being self-serving and exploitative.
Specifically, from a branding point of view, cause marketing can:
(a) Build brand awareness;
(b) Enhance brand image;
(c) Establish brand credibility;
(d) Evoke brand feelings;
(e) Creating a sense of brand community; and
(f) Elicit brand engagement.
9.4 Marketing ImpIementation
Marketing implementation is the process that turns marketing plans into
action assignments and ensures that such assignments are executed in a
manner that accomplishes the plans stated objectives.
A brilliant strategic marketing plan counts for little if it is not implemented
properly. Strategy addresses what and why of marketing activities.
mplementation addresses the who, where, when and how.
81
Companies today are striving to make their marketing operations more
efficient and their return on marketing investment more measurable.
Marketing costs can amount to as much as a quarter of a companys total
operating budget. Marketers need better templates for marketing processes,
better management of marketing assets and better allocation of marketing
resources.
Marketing resource management (MRM) software provides a set of Web-
based applications that automate and integrate project management,
campaign management, budget management, asset management, brand
management, customer relationship management and knowledge
management.
The knowledge management component consists of process templates,
how-to wizards and best practices. Software packages can provide what
some have called desktop marketing, giving marketers information and
decision structures on computer dashboards. MRM software lets marketers
improve spending and investment decisions, bring new products to market
more quickly.
9.5 EvaIuation and ControI
Marketing control is the process by which firms assess the effects of their
marketing activities and programmes and make necessary changes and
adjustments.
There are four types of marketing controls:
(a) Annual-plan control;
(b) Profitability control;
(c) Efficiency control; and
(d) Strategic control.
A marketing audit is a comprehensive, systematic, independent and periodic
examination of a companys or business units marketing environment,
objectives, strategies, and activities with a view to determining problem
areas and opportunities and recommending a plan of action to improve the
companys marketing performance.
The marketing audit has four characteristics:
(a) Comprehensive;
(b) Systematic;

82
(c) ndependent; and
(d) Periodic.
A marketing audit starts out with a meeting between the company officer(s)
and the marketing auditor(s) to work out an agreement on the audits.
The marketing audit examines six major components of the companys
marketing situation.
Study Questions
1. Explain the trends in marketing practices.
2. Discuss the importance of internal marketing management.
3. dentify the aspects of socially responsible marketing that marketers
need to focus in supporting the implementation and control of
marketing activities.
4. dentify the important aspects of marketing implementation and what
needs to be done to implement the strategies correctly.
5. Discuss the concept of marketing evaluation and control.
6. Explain the strategies to evaluate the marketing implementation.
7. Explain the strategies to control the marketing activities.
8. Describe the functional organisation of a marketing department in
terms of its structure, advantages and disadvantages.
9. Explain the product- or brand-management organisation and list its
advantages and disadvantages.
10. Many companies are beginning to realise that they are not really
market and customer driven, they are product and sales driven. n the
attempt to transform themselves into true market-driven companies,
firms are required to change. Describe and explain what changes are
necessary.
11. What is sustainability? How is it related to the concept of
greenwashing?
12. What are some of the brand benefits that can accrue to a company that
engages in cause marketing?
13. dentify three key success factors in developing and implementing a
social marketing programme.
14. Briefly explain the concept of annual-plan control.
83
15. What is a marketing audit? Explain the four characteristics of a
marketing audit.
16. What are some of the forces that are driving companies to practice
corporate social responsibility?
17. How can firms promote ethical behaviour among their employees?
18. Define cause-related marketing. What is the difference between cause-
related marketing and social marketing?
19. Suicide is one of the leading causes of death worldwide. Develop the
possible objectives of a social marketing campaign which aims to
change people's cognitions, values, behaviours and actions related to
suicide.
20. What is marketing control? List the four types of marketing control.
(a) Starbucks Case Study (please refer to pages 670 and 671).
(b) Virgin Group Case Study (please refer to pages 672 and 673).

84
85
Appendices
Appendix A: Learning Support
TutoriaIs
There are 15 hours of face-to-face facilitation, in the form of FOUR tutorials
of three hours each. You will be notified of the date, time and location of
these tutorials, together with the name and e-mail address of your facilitator,
as soon as you are allocated a group.
Discussion and Participation
Besides the face-to-face tutorials, you have the support of online discussions
in myVLE with your facilitator and coursemates. Your contributions to online
discussions will greatly enhance your understanding of the course content,
and help you do the assignment(s) and prepare for the examination.
Feedback and Input from FaciIitator
As you work on the activities and the assigned text(s), your facilitator will
provide assistance to you throughout the duration of the course. Should you
need assistance at any time, do not hesitate to contact your facilitator and
discuss your problems with him/her.
Bear in mind that communication is important for you to be able to get the
most out of this course. Therefore, you should, at all times, be in touch with
your facilitator, e-facilitator and coursemates, and be aware of all the
requirements for successful completion of the course.
Tan Sri Dr AbduIIah Sanusi (TSDAS) DigitaI Library
The TSDAS Digital Library has a wide range of print and online resources for
the use of its learners. This comprehensive digital library provides access to
more than 30 online databases comprising e-journals, e-theses, e-books and
more. Examples of databases available are EBSCOhost, ProQuest,
SpringerLink, Books24x7, nfoSci Books, Emerald Management Plus and
Ebrary Electronic Books. As an OUM learner, you are encouraged to make
full use of the resources available through this library.

86
Appendix B: Study Tips
Time Commitments for Study
You should plan to spend about 12 hours of study time on each topic, which
includes doing all assigned readings and activities. You must also set aside
time to discuss work online. t is often more effective to distribute the study
hours over a number of days rather than spend a whole day studying one
topic.
Study Strategy
The following is a proposed strategy for working through the course. f you
have difficulty following this strategy, discuss your problems with your
facilitator either through the online forum or during the tutorials.
(i) The most important step is to read the contents of this Study Guide
thoroughly.
(ii) Organise a study schedule (as recommended in Table 2). Take note of
the amount of time you spend on each topic as well as the dates for
submission of assignment(s), tutorials and examination.
(iii) Once you have created a study schedule, make every effort to stick to
it. One reason learners are unable to cope with postgraduate courses
is that they procrastinate and delay completing their course work.
(iv) You are encouraged to do the following:
x Read the Study Guide carefully and look through the list of topics
covered. Try to examine each topic in relation to other topics.
x Complete all assigned readings and go through as many
supplementary texts as possible to get a broader understanding of
the course content.
x Go through all the activities and study questions to better
understand the various concepts and facts presented in a topic.
x Draw ideas from a large number of readings as you work on the
assignments. Work regularly on the assignments as the semester
progresses so that you are able to systematically produce a
commendable paper.
87
(v) When you have completed a topic, review the Learning Outcomes for
the topic to confirm that you have achieved them and are able to do
what is required.
(vi) After completing all topics, review the Learning Outcomes of the course
to see if you have achieved them.

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