JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY

COURSE OUTLINE HPS 2110: PRINCIPLES OF MARKETING

Lesson one; Overview of marketing management

Marketing concept and its relevance to marketing management
Importance of marketing
Lesson two; Marketing environment
Internal, external environment and their implication to marketing.
Lesson three; Marketing research
Steps, marketing information system
Importance of marketing research
Lesson four; Consumer behavior
Definition and its implication
Consumer vs organizational markets
Reasons for consumer and institutional buyer behavior
Types of consumer buying decisions in the market place
CAT ONE
Lesson six; Marketing mix
Product/service policy
Lesson seven; Place; Channel and physical distribution policy and business logistics
Lesson eight; Price; pricing policy
Lesson nine; Promotion; marketing communication policy,
Marketing planning, analysis and control.
Lesson ten; Environmental and ethical dimension of marketing
CAT TWO
Course evaluation
Cats/Assignment/ Presentation 30%
Final examination 70%
Total 100%

Reference textbooks

Principles of marketing by Philip Kotler

1
INTRODUCTION TO MARKETING

‘Marketing is the management process responsible for identifying and satisfying customers’
needs profitably.’-Chartered Institute of Marketing, World’s leading professional association
of marketers.

‘Marketing is a societal process by which individuals and groups obtain what they need and
want through creating, offering and freely exchanging products and services of value with
others.’- Philip Kortler, marketing guru.

‘Marketing is what the whole company does to achieve customer preference and thereby its
own goals.’- Frederick E. Webster, marketing guru.

‘Marketing is a business process, which seeks to match an organization’s human, financial

and physical resources with overall competitive strategy.’ Mike Meldrum, Cranfield School
of Management.

‘Marketing is managing profitable customer relationships. The twofold goal of marketing is

to attract new customers by promising superior value and to keep and grow current customers
by delivering satisfaction. Successful companies know that if they take care of their
customers, market share and profit will follow. Sound marketing is critical in the success of
every organization.

‘Marketing is the process by which companies create value for customers and build strong
customer relationship in order to capture value from customers in return. Many people think
marketing is only selling and advertising. This is only but the tip of the marketing iceberg.
Today marketing must be understood not in the old sense of making a sale ie telling and
selling but in the new sense of satisfying customer needs. A marketer must understand
consumer needs, develop products and services that provide superior customer value, prices,
distributes, and promotes them effectively, these products will easily sell. Marketing mix is a
set of marketing tools, that work together to satisfy customer needs and build customer
relationships.

2
 Terms in Marketing

 Need

 Want

 Demand

 Product

 Service

 Customer value

 Quality

HISTORICAL DEVELOPMENT OF MARKETING

Marketing concepts/philosophy/orientations/doctrine

They are:

a) Production concept

It holds that customers will favour products that are available and affordable. The aim of a
marketer is to focus on how to improve production and distribution since economy was
characterized by shortage. It’s useful:

1. When the demand for a product exceed supply. The marketer should look for ways of
increasing production levels

2. When the product cost is too high. Mangers need to improving productivity in order
to bring down cost.

b) Product concept

It holds that consumers will buy products of high quality, performance and features.
Production processes at this stage are still seen from the producer’s point of view.

c) Selling concept

It holds that consumers will not buy products until some large scale selling is undertaken
despite the fact that consumers look for quality products.

Marketing is still seen at the producer’s point of view.

Concentration is on sales transactions rather than building relationship with consumers.

It has two assumptions:

3
 1. Consumers who are forced to buy a product will eventually like the product.

2. If they do not like it they will eventually forget the disappointment and but it later.

d) Marketing concept

It holds that the achievement of the organizational goals depend on determining the needs and
wants of the customers of the target market and delivering consumer satisfaction effectively
and efficiently.

After developing the strategy under the marketing concept on the integrated marketing
programme involving all the four p’s is invented.

Marketers are able to realise profit and sales though repeat buying and consumer patronage.

e) Societal marketing concept

It holds that marketers are not only concerned with the satisfying the needs of consumers in
the short run but are also concerned with consumer welfare.

It also contends that pure marketing overlooks the possible conflicts between consumers’
shortrun wants ant their long-term welfare.

To enhance this, the government has come up with laws to control various sectors of the
economy particularly consumptions.

ROLE OF MARKETING IN SOCIETY

1. It has enabled consumers to consume products that would have not been consumed
i.e. provide accessibility of product worldwide due to international trade etc.

2. It has raised the standards of living of the market

3. Through marketing, goods and services find their way into the trading blocs thereby
increasing sales and increasing accessibility to market.

4. Proper marketing management brings the various interfaces closer to the

communities i.e. shopping at the internet, entertainment through the internet etc.

5. It leads to creation of employment for the nationals due to the numerous activities

6. Leads to the preservation of the environment through the enactment of laws e.g. laws
of environmental control, consumer movements.

4
Challenges facing marketing managers

a) The world economy and globalization:

The world has undergone:
i. Radical transformation occasioned by competition and liberalization of
markets
ii. Has reduced geographical and cultural distances due to improved
infrastructure and communication.
iii. The markets are expanding as well as regional blocs.
b) Changes in technology:
It is a major driving force in connections. Technological advances, creating new ways
of life about the customers creating products and services tailored towards
maintaining customer needs.
c) The income gap:
Marketing managers must be concerned with the massive disparity in income. Despite
the fact that wages has increased real purchasing power has declined. This has been
accelerated by inflationary tendencies.

Other challenges include:

i. Most markets are characterized by aging population and increasing women to
th job market.
ii. Later marriages
iii. More divorces
iv. Single and smaller families
v. Emergence of distinct ethnic consumer groups
vi. Emergence of more varied lifestyles

MARKET SEGMENTATION

The process of dividing a heterogeneous market into segments made up of elements which
are similar.

Levels of Market Segmentation

1. Mass marketing:

This is using the same marketing programme to target the whole population. The seller
engages in mass production, distribution and promotion of one product for buyers.

However, many factors have made mass marketing difficult due to changing preferences
and tastes, technological advances, consumption patterns etc. hence most companies are
now moving from mass marketing to target marketing.

2. Target or Segment marketing.

5
 The seller distinguishes major market segments, targets one or more and develops
products. Marketers isolate broad segments that make up a market and adopting the
marketing strategy to match the needs of each segment. Also referred to as differential
marketing.

3. Niche marketing:

A marketer focuses on sub segments of natures with distinct traits that may see the
special combination of benefits. A niche is more narrowly defined group typically a
small market whose needs are not well served.

Niching offers small companies an opportunity to compete by focusing their limited

resources on serving nature that may be important or overlooked by larger
competitors.

4. Micro marketing:

This is the tailoring of products and marketing programmes to suit tastes and
preferences of specific individuals and locations. It’s divided into:

a) Local marketing: is the tailoring of brands and promotions to the needs and
wants of a local neighbour group.

b) Individual marketing: the ultimate level of market segmentation and the micro
marketing becomes individual marketing where the company tailor makes
their products and marketing programmes to suit the needs of individual
customers.

Bases of marketing segmentation

1. Geographic: dividing market into geographic markets

2. Demographic: dividing the market into demographic variables e.g. family, age etc.

3. Psychographic: dividing the market into lifestyle or personality, attitude etc.

4. Behaviouristic: dividing buyers on basis of knowledge of attitude towards use of or

response to marketers’ belief that the following behaviouristic variables can be used
as a point for market segmentation: occasion, benefits, wage etc.

Relevance of market segmentation

1. Efficient use of resources and enables companies to build profitable segments

2. Helps in designing appropriate marketing strategies.

6
3. Helps in product development.

4. Encourages flexibility and leads to differential pricing, enables marketers to review

activities of segments and make adjustments

5. Leads to confidence in terms of specialization hence making selling easier.

6. Encourages training of customers and staff

Product positioning and targeting

Positioning is the company offering an image to occupy a distinctive place in the

target market’s mind. Every marketer therefore needs to develop a distinctive
position in the minds of customers by emphasizing that they are the best in the
industry in terms of attributes desired by the customers.

Product positioning strategy

An organization can benefit from many positioning strategies in the market e.g.
single product positioning is best, however, double positioning could be used i.e. if a
company says we offer the safest and most desirable, cheapest and quality.

Product positioning strategies can include:

1. Attribute positioning: marketers must be able to identify certain features or attributes

desired by customers and emphasizes on theme e.g. size, durability, quality etc.

2. In relation to competitor: the best strategy is placing the product next to the
competitor.

3. Price and quality positioning: some retail shops are known for high quality
merchandise e.g. Nakumatt. Marketers should strive to upgrade their fashion and
quality image of new low price hence.

4. Product use: marketers position this product as meeting a specific need by the
customers.

5. Target market: marketers must always look for other markets and strive hard to
provide products that meet local need thus adapting to every need of each market.

6. Product class: sometimes a company’s positioning strategy may involve associating

its product with a common social class.

7. Social responsibility: this is an attempt by businesses to increase their credibility and

build a reputation among its public.

7
Errors in market positioning

a) Under positioning: is a strategy that can give a vague idea about a product e.g.
Smirnoff says as clear as crystal

b) Over positioning: this kind of a product can be associated with a high class or
prestigious consumers to assume that all products are expensive which they could
afford some at lower prices.

c) Confused positioning: this may result from company’s making many claims and using
brand positioning often and confusing consumers’ minds e.g. computer industry

d) Doubtful positioning: customers may find it hard in view of product claims i.e. price
of manufacturers e.g. a manufacturer may offer high price thinking that he/she is
providing many features which is a justification of high prices.

Product differentiation strategy

It is an act of designing a meaningful difference to distinguish a product from others. Tools

of differentiation include:

i. Form: size, shape

ii. Features: varying features, characteristics that supplement

iii. Performance: quality that meets customers’ expectations

iv. Durability: expected life of a product

v. Reliability: probability that the product, which depend on attributes the market is
looking for.

vi. Prefer ability: easy to install, repair and maintain.

vii. Style: attractive products to buyers ready to pay for products that are attractively
designed.

viii. Design: totality or features that affect how product looks and function in terms of
customer requirements.

8
MARKETING MIX ELEMENTS

They are:

a) Price

b) Place

c) Product

d) Promotion

Levels of a product

i. Core product: marketers concern is to identify the core benefit and understand the
total consumer experience that surrounds the purchase of the product

ii. Actual products: benefits into actual products by emphasizing on features and other
attributes of the product combined to deliver the core products.

iii. Expected product: a set of attributes and conditions that buyers normally expect when
they purchase the product.

iv. Augmented product: customers desire beyond expectation therefore marketers should
build an augmented product around the core and actual product by offering additional
consumer services and benefits.

v. Potential product: it encompasses all the transformations and augmentation that a

product might undergo in the future. Companies should therefore search aggressively
to satisfy the consumers.

Production classification

1. Consumer products: are products meant for final consumption.

They are classified into:

i. Convenient goods: e.g. staple foods, impulse goods, emergency goods. Are frequently
bought goods, minimum comparison and buying efforts.

ii. Shopping goods: expensive products and infrequently bought by consumers.

Customers compare them on basis of price, suitability etc.

iii. Specialty: products with unique characteristics of which buyers are willing to make a
special purchase. Customers do not compare prices.

iv. Unsought goods: products that the consumer does not know about or knows about
them but does not think of buying them.

9
 2. Industrial products: are products purchased by individual
organizations for further processing or for use in conducting
businesses.

NEW PRODUCT DEVELOPMENT PROCESS

A new product is a good or service or idea that is perceived by both existing and potential
consumers as new. The process involves six steps:

1. Idea generation: generate as many ideas as possible from all sources

2. Idea screening: to evaluate the information to identify those those are worth
developing. Management must determine ideas warrant to that idea.

3. Forecasting the sales, profits, benefits and costs. Here the ideas must progress into
reality.

4. Product development: marketers develop a full concept developed to full product that
appeals to the consumer.

5. Test marketing: a corresponding target market is used to test the concept. Here design
and variables may be adjusted as a result of test findings.

6. Commercialization and launching: marketers must go into full production and launch
the product considering:

a) Time at the right time immediately after developing the idea.

b) Geographic strategy i.e. where to launch the product.

c) Target market prospects

d) How to enter the market.

PRODUCT LIFE CYCLE

Introduction: strategies like skimming and penetration

Growth

Maturity

Declining stage

10
 3 4
1 2

Criticisms of PLC

1. Time period: it is not easy to predict the life of a product

2. The shape of the curve:

a) sales decline fast

b) Sales have lumps

c) Sales increase and drop fast

11
 3. Product definition not given

Adopter categories

2 4

2
2 Early
Late
1 majority 5
Early majority
adopters 34% 34%
Innovators 2.5% Laggards 16%
13.5%s

Characteristics of adopter categories

a. Innovators (2.5%): this group falls under the high income group. They tend to be
relatively younger and are more receptive to unfamiliar things.

b. Early adopters (13.5%): it contains the greatest number of opinion leaders or role
models the strategy is price skimming.

c. Early majority (34%): this is the largest group targeted by the marketers. They make a
deliberate move to adopt that new product or innovation just before the average.

12
 d. Late majority (34%): a sceptical group of the target market and they adopt new ideas
only after the average time.

e. Laggards (16%): last group of the target market to adopt the new product or
innovation

Stages in the adoption process

1. Awareness: consumers become aware of the new product and lack information
therefore marketers should avail information.

2. Interest: consumers become interested in the new product and seek information about
the product

3. Evaluation: consumer considers whether trying the product makes sense. If evaluation
is satisfactory he/she tries the new products.

4. Trial: the consumer tries the product on small scale to improve his/her estimate of the
new product.

5. Adoption: based on the trial and regular evaluation. The consumer decides to make
regular use of the product.

Limitations of adoption process

Not adequately acknowledged that need awareness may proceed to adoption

Does not adequately provide if the rejection of the product after its trial.

It does not recognize that evaluation occurs throughout the decision making process and not
only at evaluation stages.

It does not adequately amount for possibility that the five stages may always occur in the
specific order

It does not include post purchase evaluation which may lead to strengthening the
relationship or consumer dissonance.

13
 PPRICING DECISIONS

Price is a measure of value exchange by the buyer for the value offered by the seller i.e.
price should reflect the cost of the seller for producing the product

Procedure in price setting

1. Selective price objectives: i.e. what the company wants to accomplish with the price
i.e.

I. Profit objective

II. Sales

III. Competitive

IV. Price leadership

2. Estimate the demand curve: marketers must estimate the demand curve to estimate
the quantities of products.

3. Estimate the cost curve: at what cost to produce this may vary at different levels of
accumulated production and at different levels of accumulated production and at
different levels of production curve.

4. Examine the competitors’ cost, prices and offers

5. Select one of the following price policies

a. Cost plus pricing: all cost incurred during production and add a reasonable
amount

b. Value based pricing: based on buyer’s perception and not to the sellers. Also
called psychological pricing.

c. Demand oriented pricing: based on the demand level prevailing in the market
i.e. marketers set a high price in high demand.

d. Competition oriented pricing: price based on how competitors change i.e.

similar product

e. Professional pricing: used by professional and qualification or experience i.e.

they charge special fees or variable fees.

f. Promotional pricing: marketers temporarily price products below the least or

cost price and sometimes the cost sales to increase the shortrun sales.

g. Geographical pricing: an organization decides to have different prices for

different geographic locations appreciating that consumers in different
regions have different characteristics.

14
 Importance of pricing

a. A means of regulating economic activities i.e. keeps the economy in

balance.

b. Has considerable impact on the consumers

c. It is one of the 4 Ps that can be changed quickly and respond to its

environment.

d. Determines entire marketing strategies for a company.

DISTRIBUTION DECISION

This is an important component of the marketing mix concerned with the process which the
products made available for the consumer.

It is beneficial to every organization to give a thorough consideration to the place

component of the marketing mix.

Examples of channels of distribution

 Zero channel: producer----------consumer

 One level: producer---retailer---consumer

 Two level: producer---wholesaler---retailer---consumer

Factors that affect distribution channel

1. Customer characteristics: marketers must understand the characteristics of the target

market; high class, low class etc. customer buying habits, place purchased and
quantity.

2. Product characteristics: depend on nature of the product in terms of durability and

perishability and product usage.

3. Company characteristics: company objectives, financial status products make first

channel experience and the desired degree of control.

4. Middleman characteristics: marketers are concerned with the middlemen served their
financial standing, services they offer availability of storage capacity.

5. Competitive characteristics: marketers should choose channel members used by other

competitors in the industry.

15
 6. Environmental characteristics: include factors like economic, political, legal etc. such
factors may affect channel selection.

Functions of channel members

Contacting function: finding and communicating with prospective members

Providing marketing information or feedback i.e. channel members gather and

distribute market research about the market information needed for planning.

Bulk breaking into smaller units so that they fit and shape the offer to the buyer’s
needs including activities such as grading, packaging, branding etc.

Physical distribution of products

Demand stimulation: develop and have persuasive communication of the product

through promotional mix.

Advance credit to their clients taking this burden away from manufacturers.

Storage capacity: channel members must have warehouses

Negotiation

Risk taking

Types of distribution

 Intensive distribution: products are carried by as many outlets as possible i.e. anyone
can do the distribution.

 Selective distribution: a selective channel is used by manufacturers of specialty goods

I.e. products are found in few selected outlets.

 Exclusive distribution: an agreement with a particular channel distributor where the

manufacturer give exclusive permission to one distributor to market the product.

16