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Understanding Marketing
Definitions of marketing:
1) American marketing Association: Marketing refers to the performance of
business activities that direct the flow of goods and services from the producers to
the consumers.
2)
Business activity
Human needs are not invented by marketers but they are basic parts of human beings.
2. Want(s)
Are the forms taken by human needs as they are shaped by culture and individual
personality. Wants are described in terms of objects that satisfy human needs. Wants are
individual but resources are limited..
3. Demand Are human wants backed by buying power.
4. Products.
People satisfy their needs and wants with product. A product is anything that can be
offered to a market for attention, acquisition, use or consumption that might satisfy a
want or a need. A product include physical object services, persons, place, organization
and ideas.
5. Customer value
Is described as what the products or the service offer in comparison with the price.
Customer value can be expressed as:
CV = Benefits of the product
Price
CV is perceived value
6. Customer satisfaction. Is the extent to which product perceived performance matches
buyers expectation. If product performance is below the expectation buyer is dissatisfied.
If it matches or exceeds expectation the buyer is satisfied or delighted.
7. Exchange.
satisfied.
(i)
(ii)
(iii)
(iv)
(v)
8. Market. Originally the term market stood for the place where buyers and sellers
gathered to exchange their goods. However, today the term market refers to all sets of
actual and potential buyers of a product or service. These buyers share a particular need
or want that can be satisfied through exchange.
The interaction between the sellers and the buyers. This interactions brings about what is
referred to as a simple marketing system.
Industry
collection of
sellers
Product/service
Money
Market
collection of
buyers
Feedback (information
This concept hold that consumers will favour those products that offer the highest quality
performance and features. Managers in production oriented organizations focus their
energy on making high quality products and improving them over time. The mangers
assume that buyers admire well made products and are wishing to pay more for the
product.
3. The Selling concept
Holds that consumers if left alone will ordinarily not buy enough of the organization
products. The companies guided by this philosophy undertake aggressive selling and
promotion effort. This concept assume that consumers typically show buying resistance
and need to be persuaded into buying more. This concept is practiced more aggressively
with unsought goods that buyers normally do not think of buying e.g insurance
companies. Selling concept assumes that customers who are persuaded into buying the
product would like it and if they dont they will not tell others about it. The customer
would forget about the bad experience and buy it again e.g materials industry.
4. The marketing concept
Marketing concept tend to challenge the previous three concepts. It holds that the key to
achieving organizational goals consist of determining the needs and wants of target
market and delivering the desired satisfaction more efficiently and effectively than
competitors do.
This concept rest on four pillars / elements
a) market focus
b) customer orientation
c) coordinated marketing
d) profitability
a) Marketing focus: involves focusing on specific market has no company can
operate in every market and satisfy every need. In other words it means
determining the market that the company wants to save or to exploit.
Increased competition
Globalization
Technological advances
Political uncertainties
(ii)
(iii)
(iv)
They buy competitors product break to component and analyze the product in
terms of its ingredient
(v)
(vi)
Through observation
Market research
Market research is one of the activities that falls with marketing research definition it has
a narrow focus.
Market research involves gather information about the market for a particular product or
service.
Types of marketing research
A marketer can undertake
(i)
(ii)
(iii)
(iv)
(v)
resources limitation
Ti should also be of sufficient size and selected using probability method where
possible.
The term population here mans those who meet the criteria chosen for marketing
research. Therefore it does not mean everyone living in a country or town.
1. Bias: a bias sample may occur when a sampling is out of date and excludes *
need in the population or when some individuals is selected decline to response.
2. insufficient data: this fault occur when a sample is too small to be reliable as a
source of information about an entire population.
3. Hawthorne effect:
4. Omission of an important factor. Data collected from a sample may be incomplete
due to omission of a question in the questionnaire.
5. misinterpretation of data: it is common when opera headed questionnaires are
used, since the response are more than one word there may be difficulty in
interpreting the results correctly.
4. Collection of the data
Marketing research information is composed of primary data and secondary data
Primary data: is collected specifically for the purpose of marketing research or for the
problem at hand.
Secondary Data: is information that already exist somewhere having been collected for
another purpose.
For secondary data to be useful the research must ensure that the data is relevant,
accurate, recent and reliable.
Various methods of collecting primary data
(i)
Observation method
(ii)
Questionnaire method
(ii)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
They are carried out among panel of wholesalers and retailers, a research firm sends
auditors to selected outlets at regular interval to counts stocks and delivers thus enabling
an estimate output to be made.
5. Analysis of the data and interpretation of the results
The analysis or evaluation of the data collected is carried out using statistical techniques
such as multiple-regression analysis, factor reanalysis, discriminant analysis etc.
6. Presentation of the report or report writing
This is the final step of the marketing research process the report should be written in
understandable and simple language for a providing adequate explanation. This will make
it easier for decision makers to apply the findings and diminishes the likelihood that a
report would be misused or ignored entirely. Elements of a report reporting writing
Kibera and Waruingi.
MARKETING SEGMENTATION
1. Marketing segmentation: is dividing a market into different distinct groups of buyers
with different needs, characteristics or behaviour who may require separate products or
marketing mix.
Marketers undertake marketing segments because they may not have the resources
required to serve the entire markets.
The basis for segmentations consumer market
A marketer must understand the different segmentation variables that might be used to
segment a consumer market.
The major segmentation variables are :
(i)
Geographical factors
(ii)
Demographic factors
(iii)
Psychographic factors
Dividing a market into different geographical units such as nation, state, provinces, cities,
locations, districts, residential areas etc means that the company must use geographical
basis /variables to segment markets. The rationale of dividing the market in the bases of
geography is that people from one regions have almost similar behaviour in terms
consumption patterns and usage of the product. E.g some behaviours are similar to
consumption i.e Germania drink more bear per capital than any other field and station
consuming more wine and Americans coffee.
2. Demographic factors
It is commonly used for dividing the market and it involves dividing the market into
groups based on variables such as age, gender ,family size, family lifestyle, income,
occupation, education, religion, race and nationality.
Consumer need and wants vary closely with demographic variables.
Demographic variables also are easier to ensure than most other types of variables.
Aspects of demographics
Gender: it is a part of demographic segment. It involves * a market into different groups
based on sea. It used clothing, cosmetics, magazines.
Education: Better educated consumers demand high quality in both goods and services.
Product market segmented by education include; Radio and TV programmes, books and
magazines.
Income: many companies target high income consumption with luxury goods and
convenient services. Other targets middle class and still others target low income class.
Income segmentation is used by marketers of automobile clothings, cosmetics and travel
industry.
Occupation rate nationally, religion and ethnic.
2. Psychographic factors
2.
Accessibility. The market segment identified must be effectively reach and served
through communication and transportation. Such must segment cannot be accesses
or unreachable.
3.
4.
2. Marketing Targeting
This is the process of evaluating each market segment attractiveness and selecting one
or more segments to enter.
(i) The factors used to evaluate market segments attractiveness
1. Segment size and growth
Markets collect and analyze data on current segments sales, growth rate and expected
profitability. Large companies may choose to target those segment with large current
sales, high growth rate and high profit margin. Small companies on the other hand target
segment that are smaller unless attractive but are potentially profitable for them.
2. Segment structural attractiveness
It can be established by evaluating factors such as
(i)
(ii)
(iii)
Alternative market coverage strategies which can be used by the companies once the
target market has been selected.
1. Undifferentiated marketing strategy
This strategy ignores the market segment difference and goes after the whole market with
one product or service. It is also refer to as mass marketing.
The company which used this strategy designed a product a marketing need that appeal to
the largest number of buyers. This company rely on mass distribution, mass production,
mass advertising etc
This strategy offer the following advantages
(i)
(ii)
Disadvantages
(i)
(ii)
large market segments may be less profitable because they attract a lot of
competition.
The strategy is appealing to companies with limited resources e.g Johnson and Johnson
Co. limited which concentrated only on the children market.
Advantages
Companies which used this strategy achieve strong market possession because of its
greater knowledge of the segment needs and special reputation that it acquired.
Disadvantages
Conceptual marking strategy involves higher than normal risk because large competitors
may differ to enter the same segment, for this reason many companies prefer to diversify
in several market segment.
Factors to be considered when choosing a market coverage strategy
1.
2.
3.
4.
5.
6.
growth stage differentiated strategy appropriate for the products at the maturity
stage
7.
8.
3. Market positioning
Market positioning: is arranging for a product to occupy a clear, distinctive and
desirable place in relation to competing products in the minds of the target consumers.
Product positioning: is the way the product is defined by consumers on the important
attributes or the place the product occupy n consumes mind relative to competitors
products.
How companys can position their products
Positioning strategies on basis of the following
1. Specific product attributes basis: examples of product attribute are economy,
performance, safety, durability etc
2. Benefits they offer business example of product are tooth paste. Example of
benefit consumer get from using tooth paste include no Colgate cavities, good
taste, fresh breath etc
3. usage occasion positioning strategy. There is positing a product on the basis of
occasion is used e.g beer during celebrations.
4. Positioning product from competitors. Though product may be similar to a
competitors a marketer may choose to differentiate it. E.g 7 up is unticoke.
aspirin, steel. Other companies offer products that can be highly differentiated
such as automobile, furniture, hence a company face an abundance of design
parameters. It can offer a variety of standard or optimal features not provided by
competitors e.g Volvo provides new and better safety features etc. Style and
design can be also important differentiating factors. Company can differentiate
theory of
consumer behaviour.
This model of consumer behaviour focuses on the question how do consumer respond to
various marketing stimulus that the company might use.
Other stimuli
Buyers responses
Product
price place
promotion
Economic
factors
Technological
Political /legal
Socio-cultural
Demographic etc
Buyers
characteris
tics
Product choice
Brand choice
Dealers choice
Purchasers timing
choice
Purchase amount
Buyer
decision
process
Social class
2.
Culture
3.
4.
Family
5.
6.
Occupation
7.
Income
8.
9.
Attitude
10.
Beliefs
11.
Motivations
12.
Perceptive
1. Culture culture is the most basic cause of a person wants and behaviour.
Culture is define as a set of basic values, perception, wants, beliefs and behaviour
learned by a member of society or family and other important institution.
2. Family: Family members can strongly influence buyer behaviour. The buyers
parents and nuclear family.
(ii)
(iii)
Decider a person who makes decision either to buyer not to buy the product
(iv)
(v)
8. strugglers: they are people with lowest income and too few sources. They tend to
be brand loyal consumers.
4. Personality and self concepts: personality is defined as a persons unique
psychological characteristics that lead to relatively consistent and lasting
responses on his/her own environments. Personality is usually described on suck
traits as aggressive, social, emotional, creative, defensive, dominating e.g coffee
makers associates high coffee consumption with sociability.
The buyers decision process
The buyers decision process is a model or theory that explain that buying start long
before actual purchase and continues long after.
It is explained in terms of five stages. Namely
a) Problem recognition
b) Information search
c) Evaluation of alternatives
d) Purchase decision
e) Post purchase behaviour
Problem
recognition
Information
search
Evaluation of
alternatives
Purchase
decision
Post Purchase
behaviour
This process encourages the marketer to focus on the entire buying process rather than
the purchase decision. The model seems to imply that consumer pas through all the five
stages with every purchase. However, in case of routine purchases, consumers keep some
of these stages.
Types of buying behaviour
1.
2.
3.
4.
durable products
The consumer is likely to follow all the five consumer behaviour stages e.g buying of
automobile, car and other machinery products
2.
habitual buying behaviour. Consumer are likely to behaviour when products are
purchased or bought frequently.
-
Hence consumer might skip some consumer between stages e.g purchase of
household goods like bread, ea, sugar and salt etc
3.
for the sake of variety rather than because of dissatisfaction. Examples of products
are : biscuits, yoghurt.
Product decisions
Marketing mix variables
Ingredients
Product, price, place and promotion which the marketing manager must come up or blend
to suit the target market. A company can have several combinations of the marketing mix
depending o n the number of target market being exploited.
The four marketing mix variables are referred to as controllable factors.
These variables can be change by the marketing according to the changes in the
environment.
The way the variables are mixed may be determined by the
(i)
(i)
Convenience goods
(ii)
Shopping goods
(iii)
Specialty goods
(iv)
Unsought goods
Convenience goods: are the consumer goods bought frequently, immediately and
with minimum comparison and buying effort. These government are usually low
in price distributed widely and mass promoted e.g sugar, bread, milk, tissue paper,
toilet soap etc. consumer are likely to exhibit established buying behaviour.
(ii)
Shopping goods are more durable. This type of goods are usually bought after
long planning and shopping allow. This type of purchase are also less frequent
and before purchase customers compare the various brands, quality, style and
prices they are highly priced and they are distributed selecting in fewer outlet,
they are promoted through advertising and personal selling examples are TV
sets, weighing machines, refrigerators, cookers, cars
They are also referred to as whites appliances. Consumers are likely to exhibit
complex buying behaviour.
(iii)
(iv)
Unsought goods: these are goods that the consumer do not know about or know
about but does not normally think of buying. Consumer has mutual product
awareness and knowledge and there products, or goods and if they are aware they
have little or negative interest. The power i.e low or high. The distribution also
varies, they may be distributed intensively or selectively or exclusively. In relative
to promotion they require aggressive promotion more so aggressive personal
selling. Examples: new products, life insurance.
(i)
(i)
(ii)
Capital items
(iii)
Materials and parts include raw material, manufactured material and parts. Raw
materials consist of farm products, and natural products. Manufactured materials
and parts consists of component materials and component pats.
(ii)
Capital items : they include installations and accessories. They aid in production
or operations. Installations includes buildings, factories, offices, generator,
elevations. Accessories include office equipment e.g tax machine, firm stocks,
computer, photocopies.
(iii)
The products takes time to be accepted in market therefore sales are low
There are few firms in the market selling the same product
Profits are negative due to low sales and product developments expenses
The unit cost of production falls with rise in production and consumption
Price to remain static for a time and they aimed at penetrating the market
Competition is high during this stage because many firms want to benefit from
profit or increasing sales and high demand
Promoting products
Promotion mix; it is the specific mix of advertising, personal selling, sales promotion and
public relations a company uses to purse its advertising and marketing objectives.
There are four major promotion tools
1. Advertising: it is any paid form of non personal penetration and promotion of ideas,
goods or services by an identified sponsor
2. Personal selling: personal presentation by the firms sale for the purpose of making
sales and building customer relationship
3. Sales promotion short term incentives to encourage the purchase or sale of a
product or service.
4. Public relation: building good relations with the company e.g various publics by
obtaining favourable publicity, building up a good corporate image and handling or
heading off unfavourable rumours, stories and events .
Advertising includes: printing, broadcasting, outdoor and other forms of
Personal selling includes: sales presentation, trade shows and incentive programs . sales
promotion includes point of purchase displays, premium, coupons, specially advertising
and demonstrations.
Steps in developing effective communication
There are two major parties in a command the sender and the receiver
Steps are as follows:
1. Sender the party sending the message to another party
message
8. Feedback the part of the receiver response communicated to the sender
9. Noise the unplanned static or distortion during the communication
process which results in the receivers getting a different message than the
one the sender sent e.g poor TV reception.
Sender
Encoding
Message
media
Decoding
Noise
Feedback
Response
Receiver
Stage in the product life cycle. New products typically need large advertising
budgets to build awareness and to gain consumer trial. Mature brands usually
require lower budgets as a Ratio to sale.
(ii)
Market share. High market share brands usually need more * spending as a
percentage of sales than low share *.
(iii)
Competition and cluster. In a market with many competitor sand high advertising
spending, a brand must advertise more heavily to be heard above the noise in the
market
(iv)
Advertising frequency. When many repetitions are needed to present the brands
message to consumers, the advertising budget must be large
(v)
Product differentiation. A brand that closely resembles other brands in its product
class (bear, soft rinks, lamb detergents) requires heavy advertising to set it apart.
c) Advertising strategy
It consists of two major elements creating advertising messages and selecting
advertising media.
Creating advertising messages i.e the exchanging message environment.
creative copy
7 up is not a cola
the uncola
It includes consumer promotion samples, coupons, rebates price off premiums, contests
etc
Trade promotions buying allowances, freed goods, merchandize allowances,
cooperative advertising, push money, dealer sales
Sales force promotion bonus, contest, sales rallies etc.
It is designed to motivate the sales force and make sales force selling efforts more
effective.
Sales promotion are used by many organs such as manufacturer, distributors, retailers,
trade association and non profit organizations.
Setting sales-promotion objectives
Sales promotion objectives vary widely: consumer promotions, trade promotions,
consumer relationships building.
Thus if properly designed, every sales promotion tool has consumer relationships
building potential.
Selecting sales promotion tools.
Description of the main consumer and trade promotion tools.
Consumer promotion include the following:
Samples are offers of a trial amount of a product. Some samples are free or others, the
company changes a small amount to offset its cost.
Coupons are certificates that give buyers a saving when they purchase specified products.
Premiums are goods offered either free or at low cost as an incentive to buy a product.
Contests, sweepstakes and games give consumers the chances to * something, such as a
trips, cash or goods by luck or through extra effort.
A sweepstake calls for consumes to submit their names for a drawing.
A game presents consumers with something bingo numbers, missing letters every time
they buy which may or may not help them to win a prize.
Trade promotion
Trade promotion can persuade retailers or wholesales to carry a brand, give it shelf space,
promote it in advertising and push it to consumers.
Manufacturers normally offer allowances, discounts and free
middleman and consumer to purchase their good and services in large quantities.
Discount is reduction in price on purchase during a stated period of time
Allowance: promotion money paid by manufactures to retailers in return to an agreement
to feature the manufactured products in some way.
Business promotion * e.g convention and business shows
Developing
unfavourable rumours, stories and events. Public relations departments may perform nay
or all of the following functions:
Press relations or press agentry. Creating and placing information in the media to attract
attention to the product or service.
Product publicity. Publicizing specific products
Lobbying. Building and maintaining relations with legislators and government officials
to influence legislation and regulation.
Speeches, special events, written materials, audio visual materials, corporate identity
matinees and public service activities are important tool used in PR.
-
Major PR decisions
Setting PR objectives
Public relations results are difficult to measure because PR is used with other promotive
tools and its impact is often indirect. If PR is used before other tools come into play, its
contribution is easier to evolution. The easiest measure of publicity effectiveness is the
number of exposures in the media. PR people give the client a clipping book showing
all the media that comes news about the product.
The role of personal selling
There are many types of personal selling jobs and the role of personal selling can vary
greatly from one company to another. The nature of personal selling. The people who do
the selling go by many names: sales people, sales representative, account activities, sales
consultants, sales engines, marketing representatives etc
Sales person is an individual
the following
the rate of sales growth slows down and the product reaches a period of maturity
competitions is intensive and weak competition have the market (weak companies
exit the market)
the early and late majority buy the product during this stages
the cost of production is lower compare to the growth stage, due to mass production
or economies of scale
the marketer objective is maximized profit while depending on the market share
the company look for ways of prolonging the product life by adopting the following
market strategies
(i)
(ii)
(iii)
4. Decline stage
Product sales and profit decline during this stage and the stage is characterized by the
following:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Unprofitable distribution outlet are faced out and the company goes back to
selective distribution
(viii)
The promotion is reduced to the level that will retained consumers who are
loyal to the product or brand
(ix)
(x)
The company during this stage may take any of three options to deal with the
decline challenges
(xi)
To maintain the brand without change in hope that competitive will leave the
industry
(xii)
The traditional life cycle theory presuppose increasing competition and falling prices
during growth stage of the market and also the gradual elimination of competitors is
not quite true.
Some products have no maturity stage and after introduction and growth
they go
straight to decline others have a second growth period after an initial decline and still
others have no introduction but go straight to rapid growths.
Products mix/portfolios decisions.
The product mix is all the product lines and items that a company offers to the market.
Consumer product
Blue band
Close up
Omo
Royco
Life bouy
Cowboy
Product mix
Product mix width. It is described as the number product lines that the company carries or
offers to the market.
Product mix depth: it is described as the average number of items per product line.
Product mix consistency: it is described as the closeness of the products items in the
products mix in terms of marketing and/or production characteristic.
Product lines: it is a group of products that are closely related because they function in a
similar manner and to the same market though the same types of outlets or they fall
within a given product range.
(ii)
Stretching downwards
(ii)
Stretching upwards
(iii)
Stretching downwards
High
prices
Reduce price
and quality
Present
producer
New producer
Low
prices
Low quality
High quality
Stretching upwards
High
prices
Low
prices
Increase
price and
quality
New
production
Present
production
Low quality
High quality
Present
production
New
production
company may be attracted by faster growth rate, or high profit margin at the
higher end of the market
consumer
The product moves direct from producer to final consumer. It is also referred to as direct
marketing. It is common with marketing of industrial products and the marketing of
perishable goods and in case of customer made product. Customer made product are
those products made according to the specification of the consumer e.g furniture, clothing
etc.
2. One level channel of distribution
Producer
Retailer
consumer
large retailer such as super markets like Uchumi, Nakumatt are able to buy
directly from the manufacturer because of the volume of their orders
3. Prudery
Wholesaler
Retailer
consumer
This channel is more complicated because it makes use of two market intermediaries
namely wholesalers, retailers. It is also called two level channel of distribution.
The alternative level of channel distribution is as follow
Producer
Agent
Retailer
consumer
the two alternative channels is commonly used in international markets and in domestic
markets by the traders. Most consumers produces are distributed using this channel of
distribution e.g cigarettes, toothpaste, edible food, companies like EA Breweries, Coca
cola, Uniliver, Palmolive make use of this distribution.
4. Producer
Agent
wholesaler
Retailer
Consumer
these
characteristics will directly or indirectly influence the channel choice e.g where
customers are widely and sparsely scattered it would be difficult to sell direct to the
consumer or to use zero channel level of distributor, hence, along channel of distribution,
may be more useful. i.e two or three level channel of distribution. Again in terms of
composition of the market is made of industrial and household customers a combination
of short and long channels of distribution an be used e.g industrial customers zero
channel is more appropriate.
(ii) Product characteristics
They include perishability of the product. It also includes whether the product is for
household industrial consumption and it will also include the technical aspect as well as
the size of the product. Where products are highly perishable short channels are
appropriate, whoever, long channels can be used if hose product can be preserved through
processing. Custom made products such as tailor made clothes, furniture etc are
distributed directly to the buyer, thus a zero channel distribution is used.
(iii) Company characteristics
It include company objectives, financial status, product mix, past channel experiences
and the desired degree of channel control.
To sell directly to the consumers, the marketer must open up retail outlet and the cost of
doing this may be very high for some companies, therefore companies whose financial
status is weak, may find selling directly to the consumer difficult
due to financial
constraints. If a company want to retina highly degree control over the price the
consumer pay the company is likely to use short channel of distribution or sell directly to
the consumer. If a company has a wide and divergent product mix may be use for other
products and short channels is others e.g Unilever use long channels to distribute
consumer goods and short channels to distribute industrial goods, therefore the channel
use to distribute product are partly determined by company characteristics.
iv) Middlemen characteristics
the major factor here are the market the middleman serve, their financial requirement
their reliability, the service that they provide to consumer and their availability.
Some middlemen may be financially weal and they therefore insist of buying products on
a long credit term and the marketer on the other hand may not be willing to sell products
or credit terms that extend beyond the policy. In this case the producer /marketer may not
make use of such middlemen.
v) Competitive characteristics
the channel use by competitors tend to be regarded as representing the collective wisdom
of the industry, thus the marketer is likely to use the channel used by the competitors
unless his products brand demand a different channel. It is important for the producers
products to be available where the competitors brands are.
vi) Environment characteristics
economical, political,
distribution. It is often argued that when economic condition are depressive marketer
should move the products to the market through the route that is less expensive.
Government restrict the movement of products to only one channel of distribution in that
case the marketer has no choice but, to compiled with government regulations.
2. The rationale for the use of middlemen
Functions performed by middlemen/intermediaries
Some people argue that middlemen or intermediaries are parasites
and should be
eliminated since they are not productive, other people on the other hand argue that
middlemen are vital since they perform certain functions better than the producers and
marketer.
1.Contacting function ;
They reduce the number of sales the customers and this makes it easier to the marketer
and also ensure that the consumer can get the product conveniently without a lot of effort.
***
2. Sorting:
Middlemen sort the products form various producers. In order to come up with an
assortment that is required by the consumers. These functions has the dimension namely;
bulk breaking and bulk building bulk brandy which buy in large units and * the units
down into smaller units suitable for sale. this happens when a producer is large and the
intermediaries buy relatively small quantities at each level of distribution. It is normally a
function done by wholesales and retailers. Bulk buying is the opposite of bulk b*, the
middlemen buys form different producers I and combine the items to make suitable units
for resale, this function is done very well by co-operate societies moreso in the
agricultural sector.
3. Physical distribution function:
It involves the transportation and storage of products as they move form the producer to
the final consumer. Physical distribution has this dimension namely: transportation of the
product and storage of the products.
Transportation create utility of place by ensuring that goods are available where desired.
Storage create utility of time by ensuring that product are available when required. It
facilitates continuous production since the manufactures storage space is consistently
empty. Physical distribution function also help in financing of manufactures.
4. Function of demand stimulation
Middlemen stimulates demand for the producers product through promotion and
advertisement. The difference between the middlemen promotion and the producer
promotion is that the middlemen promote all the products regardless of who is the
manufacturer.
5. Market information function
Middlemen are important sources of information about the market place particularly the
relation are closer and interact with final move than the manufactures. These are flows of
this type of information middlemen to the producer. Producers to the consumer through
middlemen.
Intensity of distribution
How many middlemen should be used at each level of distribution i.e how many
wholesalers? How many retailers? Various options. As far as intensity of distribution, the
producer has three major alterative.
(i)
intensive distribution
(ii)
selective distribution
(iii)
exclusive distribution.
1. Intensive distribution in case of this any middlemen who advocate to distribute the
product is allowed to do so. This option is more common with manufacturer of
convenience goods e.g you find salt and sugar in particularly all types of retail outlets.
2. selective distribution: Those who advocate the use of selective distribution argue
that not every retail outlet wishes to carry a given product should be allowed to do so.
It is argued that if some outlet are allowed to carry out a brand, the prestige of that
brand may be lowered hence selective distribution entails a policy of using less than
(ii)
(iii)
1. New product pricing strategy. Companies developing new product choose between
strategies namely
a. Market skimming pricing strategy
b. Market penetration pricing strategy
Market skimming pricing strategy: A company using the strategy initially set high prices,
to skim revenue layer by layer. Marketing skimming strategy can work well when the
product quantity and image support the high price.
2. Enough buyers want the produce at that price
Competition are not able to enter the market easily to conduct the high price
Market penetration strategy involves setting a low price for a new product in order to
attract a large number of shares and market share. It * penetrating market quickly. It is
favoured by the following consideration.
(i)
market must be price sensitive so that low price produced more market
growth
(ii)
(iii)
II. Price adjustment strategy. Companies usually adjust their prices to account for
various customer differences and changing situations. The following are common price
adjustment strategy.
(i)
Discount pricing and allowance. Most companies adjust their basic price to
reward customers for certain responses such as early payment of bills, large
volume purchase and off season buying. In this case the company reduce the
price by offering cash discounts, quantity discount and seasonal discount.
(ii)