CMA102 (Second Edition January2017)

1|Page
Mr F. Kufakunesu
INTRODUCTION TO MARKETING MANAGEMENT
Definitions:

Marketing
 Marketing refers to the managerial process of identifying, anticipating and fulfilling
customer needs and wants profitably (Chatered Institute of Marketing)
 Marketing according to William J. Stanton, Michael J. Etzel, Bruce J. Walker and
Djaslim Saladin, (2001:2) is “…a total system of business activities which are
designed to distribute goods which can satisfy wants and reach the target as well as
the objective of organization”.
 Another definition from American Marketing Association (Lamb et al, 2001:6),
Marketing is the process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, and services to create exchanges that
satisfy individual and meet organization goal.
 Marketing according to Philip Kotler and Gary Amstrong (2001:7) is a social and
managerial process that can enable individuals and groups reach their needs through
the creation and exchange of products and value with other people.
Management
 According to Harold Koontz, "Management is the art of getting things done through
others and with formally organized groups”.
 According to George R. Terry, ''Management Is a distinct process consisting of
planning, organising, actuating and controlling; utilising in each both science and
art, and followed in order to accomplish pre-determined objectives.“
 According to F.W. Taylor, "Management is the art of knowing what you want to do
and then seeing that they do it in the best and the cheapest way”.
Marketing Management
Marketing management is the process of planning and executing the conception,
pricing, promotion, and distribution of ideas, goods, and services to create exchanges
that satisfy individual and organizational goals (Kotler 2001).
We see marketing management as the art and science of applying core marketing
concepts to choose target markets and get, keep, and grow customers through
creating, delivering, and communicating superior customer value.

Who does marketing?

A marketer is someone seeking a response (attention, purchase, vote, donation, etc.)
from another party called the prospect.
Marketers are responsible for stimulating demand for a company‘s product.
Marketing managers seek to influence the level, timing, and composition of demand
to meet the organisation‘s objectives.

What does a Marketer offer?

Marketing people, according to Kotler and Keller (2009:46-47), are involved in marketing ten
types of entities. The list below outlines these entities:
Goods
These are physically tangible items offered to the market for acquisition towards fulfilment of
a specific need. Physical goods constitute the bulk of production and marketing efforts.

2|Page
Mr F. Kufakunesu
Services
A service is any act or performance that one party can offer to another that is essentially
intangible and does not result in the ownership of anything.
Murti Sumarni (2002:17) posits that, “a service is an activity or an advantage which can be
given by a party to another party which is mostly intangible and cannot affect ownership, and
its production or is not related to any tangible product.”
Events
Marketers promote time-based events such as trade shows, artistic performances, and
sporting events. However, goods and services are used to facilitate events marketing
Experiences
By orchestrating several services and goods, a firm can create and market experiences such as
Walt Disney World‘s Magic Kingdom.
Persons
Celebrity marketing is a major business.
Places
Cities, states, regions, and whole nations compete actively to attract tourists, factories, and
new residents. This is still the category of services marketing
Properties
Are intangible rights of ownership of either real property (real estate) or financial property
(stocks and bonds)
Organisations
Actively work to build a strong, favourable, and unique image in the minds of their target
publics.
Information
Can be produced and marketed as a product. Schools, universities, and others produce
information and then market it.
Ideas
Every market offering includes a basic idea. Products and services are platforms for
delivering some idea or benefit (Kotler and Keller, 2009:47).

Who is targeted by Marketers?

Customers
A customer is an individual, organization or a group of people who buys goods and/or
services from a supplier for reselling or consumption

Consumers
A consumer is an organization, individual or a group of people who buy/s goods and/or
service for final use.

Evolution of Marketing

The Production Philosophy

Pride and Ferrell trace the production philosophy to as far back as 1850s, through to the
1900s (Pride and Ferrell 1989). This was the period of industrial revolution in the United
States. At this period the country witnessed growth in electricity generation, rail
transportation, division of labour, assembly lines, and mass production. These made it

3|Page
Mr F. Kufakunesu
possible to produce goods more efficiently with new technology and new ways of using
labour. Despite the increase in production of goods with these emerging ways of production,
there was heavy demand for manufactured goods Prode and Ferrell (1989). The production
philosophy is premised on the assumption that consumers will favour products that are available and
highly affordable (Kotler and Armstrong 2008). This required that businesses’ concentration were
directed toward product improvement and efficient distribution of goods.
According to Schiffman and Kanuk (2009), the production philosophy assumes that “consumers are
mostly interested in product availability at low prices; its implicit marketing objectives are cheap,
efficient production and intensive distribution”.

Product Philosophy
The product philosophy was the dominant marketing philosophy at the dawn of 1900s and
continued to the 1930s. The production orientation assumes that consumers will prefer
product based on its quality, performance and innovative features [Kotler and Armstrong
2008]. This means that the company knows its product better than anyone or any
organization. Since the company has the great knowledge and skill in making the product, it
also assumes it knows what is best for the consumer. The product concept compelled
companies to ensure improving product quality, and introduce new features to enhance
product performance; as much as possible. These were done without consulting the customer
to find his or her view on these product features. Yet products were produced with the
customer in mind.
During the product era, organizations were able to sell all of the products that they made.
Demand exceeded supply, hence the emphasis on production rather than the customer was
quiet an appropriate business thought at the time. Most goods were in such short supply that
companies could sell all that they made. Consequently, organizations did not
need to consult with consumers about designing and producing their products. A
product philosophy often leads to the company focusing on the product rather than on the
consumer needs that must be satisfied, which leads to ‘marketing myopia’ [Levitt 1960].
In the Contemporary market, the product concept cannot survive.

Selling Philosophy
Came after the product era, and has the shortest period of dominance compared to the two
preceding philosophies. It began to be dominant around 1930 and stayed in widespread use
until about 1950.
The emphasis of selling philosophy was to create a department to solely be responsible for
the sale of the company’s product; while the rest of the company could be left to concentrate
on producing the goods (Perreault and McCarthy 1999).
The concept assumes that “consumers are unlikely to buy the product unless they are
aggressively persuaded to do so – mostly that ‘hard sell’ approach” (Schiffman and Kanuck
2009)
The emergence of the selling philosophy was necessary because of increase in production of
variety of goods after the Industrial Revolution, as companies became more efficient in
production. The increase in amount of product and types of products led to competition
which eventually led to the end of product shortages and the emergence of surpluses. (Supply
exceeding Demand)
It was because of the surpluses that organizations turned to the use of advertising and
personal selling to reduce their inventories and sell their goods. The selling philosophy also
enabled part of the organization to keep focusing on the product, via the product philosophy.

4|Page
Mr F. Kufakunesu
However, this selling concept is still available in the contemporary market especially when
dealing with unsought goods eg insurance, etc.
Though the marketing philosophy has become the prescription for facing competition, “old
habits die hard” (Miller and Layton 2001) and even to date some companies still hold to the
fact that they must use the ‘hard sell’ approach for business success and prosperity.

Marketing Philosophy
Its business dominance started during the 1950s (Pride 2008) and continues until the twenty
first century. This philosopgy assumes that the starting point for any marketing process is the
customer needs and wants, and no longer the aggressive selling. The key assumption
underlying the marketing philosophy is that “an organization should make what it can sell,
instead of trying to sell what it has made” (Schiffman and Kanuck 2009). The marketing
concept is an “outside-in” approach (Kotler and Armstrong 2008), and it moves focus away
from the product to the market).
These views are consistent with an earlier proposition by, Shaw (1912:736), who noted:
“goods are being made to satisfy rather than to sell”. The marketing concept starts with a
well-defined market, focuses on customer needs, and integrates all the marketing activities
that affect the customers. In turn, it yields profits by creating lasting relationship with the
right customers based on customer value satisfaction”.

The Societal Marketing Philosophy

This emerged in the 1970s and has since overlapped with the marketing philosophy. The
concept assumes that there is a conflict between consumer short-term wants and society’s
long-run interest, and that organizations should focus on a practice that ensures long run
consumer and societal welfare. Kotler and Armstrong (2008) consider the societal marketing
orientation as the best business philosophy to be adopted by organisations. They suggested:
“this new concept represents an attempt to harmonize the goals of business to the
occasionally conflicting goals of society’. They conclude: “the organisation’s task is to
determine the needs, wants and interest of target markets and to deliver the desired
satisfactions more effectively and efficiently than competitors in a way that preserves or
enhances the consumer’s and society’s well-being”.
This was with the hope that, a happy society is more likely to buy and to recommend a firm’s
product, while an angry society will refuse purchase of a company’s product even if it could
satisfy the needs of the customer. The appropriateness of societal marketing philosophy is
deduced from the fact that it supports a socially responsible behavior of organizations
Profit + Environmental Care

The Holistic Marketing Philosophy

The holistic marketing concept is a 21st century business thinking (Kotler and Keller 2009).
The concept is based on the “development, design, and implementation of marketing
programs, processes and activities that recognizes their breadth and interdependencies (Kotler
and Keller 2009). According to Kotler and Keller (2009) holistic marketing recognizes that
“everything matter” in marketing. Holistic marketing is thus based on the assumption that the
approach to marketing should be the adoption of all activities of marketing. Thus, holistic
marketing includes internal marketing, performance marketing, integrated marketing and
relationship marketing. Holistic marketing concept seems to be an embodiment of marketing
practice rather than a concept or philosophy of business.
A marketing concept is “a way of thinking; a management philosophy guiding an
organisation's overall activities (affecting) all the efforts of the organisation, not just its

5|Page
Mr F. Kufakunesu
marketing activities" (Dibb, Simkin, Pride and Ferrell 1997). The concept looks at internal
marketing, performance marketing, integrated marketing and relationship marketing, which
are all typical activities of marketing. The concept fails to acknowledge other activities of
business such as production, management style, organisation culture and other non-marketing
factors of business that make a firm business orientated. Thus, the holistic marketing concept
[4] should better be viewed as a summary of what effective and efficient marketing involves
rather than a business philosophy, and for that matter a marketing concept, because a
marketing concept means more than just marketing functions (Dibb et al 1997)as suggested
by Kotler and Keller’s (2009)

Roles of a Marketing Manager

A marketing manager is responsible for making several decisions and monitoring marketing
activities. However, the duties and responsibilities of a manager vary from company to
company and from time to time. Below are some of the common roles of a marketing
manager

Developing Marketing Strategies and Plans

A strategic marketing plan is a blueprint which outlines the intended future of an
organisation. It contains issues like the environmental scanning results, goals, strategies,
Assumptions, implementation and controlling plans among other things. A marketing
manager can be given such a task to develop strategic marketing plan.
Capturing Marketing Insights/ Marketing intelligence
A marketing manager can also be responsible of capturing insights from the customers and
taking them back to the organization for better planning and decision making. This can be
done through various ways like, Marketing intelligence and marketing research among
others.
Connecting with Customers
It is also a responsibility of the marketing manager to connect with consumers and establish
relationship/s with them for the betterment of the organisation.
Building Strong Brands
A marketing manager must also put efforts on how to develop strong and competitive brands
through the use of various brand elements. An organisation must aim to boost its brand
equity.
Shaping the Market Offerings
After collecting the information on customer needs, wants and insights, the marketing
manager is then responsible for shaping the market offerings so as to better fulfill customer
needs and wants more that the competitors do (Kotler and Keller 2006).
Delivering Value
Customers must receive value for their money since they also offer value to the organisation.
the marketing manager must monitor the value delivery processed and ensure that value is
being delivered as anticipated, (Kotler 2011).
Creating Successful Long-Term Growth
In the strategic marketing plans there must be goals for long-term growth of the organisation.
For the organisation to remain alive, it must have long-term success goals.
Managing Marketing Information Systems
Information for marketing decision making is of importance, the marketing manager is then
responsible for determining the ways of collecting, storage and distribution of such
information (Stanton 2006).

6|Page
Mr F. Kufakunesu
MARKETING OF SERVICES VERSUS MARKETING OF GOODS
Definitions
Services
 A service is an activity or series of activities of more or less intangible nature that
normally, but not necessarily, take pace in interactions between the customer and
service employees and/or physical resources or goods and/or system of the service
provider, which are provided as solutions to customer problems (Gronroos, 1990).
 Definition of service according to Murti Sumarni (2002:17) is an activity or an
advantage which can be given by a party to another party which is mostly intangible
and cannot affect ownership, and its production or is not related to any tangible
product.”
Goods
 A good is any tangible offering presented to the market to be acquired by the
customer in order to satisfy a need or want.

Characteristics of Services
The special nature of services stems from several distinctive characteristics. These
characteristics not only create special marketing challenges and opportunities, but they often
result in marketing programs that are substantially different from those found in product
marketing. Below is a brief outline of services characteristics:

Intangibility:
 Since services are essentially intangible, it is impossible for customers to sample, to
taste, feel, see, and hear or smell-services before they buy them (Lovelock and Wirtz
2011).
 This feature of services places some constraints on a marketing organization. The
burden falls mainly on a company promotional program. For example, the sales force
and advertising department most concentrate on the benefits to be derived from the
service, rather than emphasizing the service itself.
 To reduce uncertainty, buyers look for signs of service quality. They draw
conclusions about quality from place, people, equipment, communication, material,
and price that they can see.
 Therefore, the task of a service provider is to make the service a bit tangible in a
qualitative form in one way or the other. This calls for physical paraphernalia to make
the service tangible.
 For example, a bank that wants to convey the idea that its services are quick and
efficient. It must make this positioning strategy tangible in every aspect of customers
contact. The bank’s physical selling must suggest quick and efficient service.
Inseparability
 Service often cannot be separated from the person of the seller. There is simultaneous
production and consumption of the services.
 For example, dentists create and dispense almost all their services at the same time
whilst the patient is also receiving the service benefits.
 That is service inseparability means that services cannot be separated from their
providers, whether the providers are people or machines.
 It is difficult to duplicate services unless there is technological innovation. Eg A
lecturer cannot teach part2 and Part1 students concurrently unless it is a common
course which allows students to be combined.
Strategies to deal with inseparability

7|Page
Mr F. Kufakunesu
 a) The services provider can learn to work on with larger groups,
b) The services organization can train more service providers.
Heterogeneity/ Variability: -
 Service variability means that the quality of services depends on who provides them,
as well as when, where and how they are provided (Palmer 2005).
 For example, some hotels have reputations for providing better service than others.
Within a given hotel- a receptionist/employee may be cheerful and efficient, whereas
another standing just a few meter may be unpleasant and slow.
 The service output cannot be standardized. Each unit of the service is somewhat
different from other units of the same service. For example, an airline does not give
the same quality of service on each trip (Lovelock and Wirtz 2011).
Strategies to deal with service variability.
 Service firms can select and train their personnel carefully.
 They can make service employees more visible and accountable to consumers and
 A firm can check customers’ satisfaction regularly through suggestion boxes,
complaint system, customer surveys, and comparison shopping among other methods.
Perishability
 Service perishability means that services cannot be stored for later sale or use. For
example, unused electric power, empty seats in a stadium, and idle mechanics in a
garage, all represent business that is lost forever.
 In addition, many doctors charge patients for missed appointments because the service
value existed only at that time and disappeared when the patient did not show up. The
market for services fluctuates considerably by season, by day of the week, and hour of
the day.
 In conclusion, it therefore means that service industries/providers should be sensitive
to the services provided taking into consideration where, when and how they are
provided.
Non Ownership
 A service is bought and consumed but cannot be owned. You can pay for a vehicle
repair service, but you will not own the mechanic or the garage. You can pay for a
haircut, but you will not take with you either a barber man of a shaving machine.
What remains with the customer is just the benefit of a service.

Differences between goods and services

Goods Services
Tangible Intangible
Can be produced and sold later Simultaneous production and consumption
Can easily be standardized Difficult to standardize
Transfer of ownership No Ownership transfer
Can be tested, smelt, felt or examined before Cannot be felt, smelt, or examined before
purchase purchase

Challenges in services marketing

 Need to create a convincing physical environment;
 Need to train customers especially when customers are to participate in service
delivery;
 A risk of creating a competitor or industrial espionage as the services are
manufactured and delivered in the presence of customers;

8|Page
Mr F. Kufakunesu
  Difficulties in monitoring the continual standard of service delivery due to services
heterogeneity;
 Challenges in closing the knowledge gap between the customer’s real expectations
and what the organization perceives them to be;
 Convincing lost customers is difficult unless there is a service recovery action;
 Managing demand is difficult in services marketing.

Marketing mix for services

Unlike product marketing, the marketing of service is more complicated due to the
characteristics of a service. Services call for the extra three (3) Ps which are People, Process
and physical evidence. The other four (4) Ps just operate in services marketing the similar
way to which they operate in the marketing of physical goods.
People
 Since the service is heterogeneous, intangible, inseparable, this calls for better internal
marketing practices like recruitment and selection, training, motivation and
monitoring of employees to make sure that services can be properly designed,
delivered, standardised and distributed.
Physical Evidence
 It is mainly due to the intangibility nature of the service that physical evidence
becomes a prerequisite for a successful service marketing venture.
 The servicescape comes in for tangibilising the service and giving customers a
positive anticipation of a service prior to purchase.
Processes
 Due to simultaneous production and consumption of services, the service processes
must not be left uncontrolled.
 There is a need to control the service processes so as to guarantee customer
satisfaction under different tolerance zones.

9|Page
Mr F. Kufakunesu
MARKETING RESEARCH
Definition
Marketing research refers to the systematic design, collection, analysis and reporting of data
findings relevant to a specific marketing situation facing the company (Kotler and Keller
2013).

Marketing Research versus Market Research?

Marketing research includes every research which is related to marketing activities eg
product research, promotional research, pricing research, market research among other things.
Market research is a type of marketing research which is mainly centered on the market
variables eg market size, market trends, customer needs etc.

#NB Market research is a subset of Marketing Research.

Importance of a Marketing research

Identifying and solving the problem areas in your business
Understand the needs of existing customers and why they chose your service/product
over competitors
Identify new business opportunities and changing market trends
Recognize new areas for expansion, and increase your customer base
Discover potential customers and their needs, which can be incorporated into your
products/services
Set achievable targets for business growth, sales, and latest product developments
Make well-informed market decisions about your services and develop effective
strategies etc.

Types of Marketing Research

Product Research
Promotional Research
Market Research
Distribution research
Pricing Research
Satisfaction Research
Sales Research

Challenges in conducting marketing researches

Costs eg transport, printing, communication etc
Cultural barriers and restrictions
Time constraints
Defining a research problem
Volatility of customer needs and wants
Ethical issues

10 | P a g e
Mr F. Kufakunesu
Marketing Research Process

Define the problem and research objectives

Research Process
Develop the Research Plan

Marketing
Collect the data

Analyse the data

Present the findings

Make the Decision

Kotler and Keller (2013:99)

11 | P a g e
Mr F. Kufakunesu
MARKETING INFORMATION SYSTEMS
A Marketing information system (MKIS) consists of people, equipment and procedures to
gather, sort, analyse, evaluate and distribute needed, timely and accurate information to
marketing decision makers (Kotler and Keller 2013)

Components of the MKIS

Marketing Environment where information is collected
Marketing Information Systems collects data from the marketing environment which
comprises of:
Target markets
These are organisations, individuals or groups which the marketing organization is
currently endeavoring to satisfy. Eg Agritex will be targeting farmers as its target
market.
Marketing Channel Members
These can be upstream and/or downstream supply chain members. A marketing
organisation can collect market information from such. eg Delta beverages, Dairibord
among others collect information from upstream members (famers) and downstream
members (Wholesalers, Retailers among others).
Competitors
Competition includes all the actual and potential rival offerings and substitutes a
buyer might consider. In collecting marketing information and intelligence, the
marketing manager must consider both rival and substitute product providers. Eg
Uniliver when considering competition for Stork Margarine product, it’s wise to

12 | P a g e
Mr F. Kufakunesu
 check with other margarine products like Flora, Romi, Ola etc and also the substitutes
like peanut butter and salad and honey.
Publics
These are stakeholers of the organisations which are not necessarily targeted, but they
affect the operational activities of the organisation, eg Labour Unions, Legal
practitioners among others. it is wise to continuously get updates concerning those
publics
Macro environmental forces
This refers to the aggregate forces which affect not only the focal organisation but
almost any organisation. These include the Political, Economic, Sociological,
Technological, Ecological and Legal forces.

Ways of developing and mobilizing information

1. Internal Records
 These are internal to the organization and they supply data for the Marketing
Information Systems.
 To sport important opportunities and potential problems, marketing managers rely on
internal records of (orders, sales, costs, inventory levels, receivables and payables).
 The above mentioned records are of importance to the marketing managers and need
to be analyzed thoroughly and kept confidential.
2. Marketing Intelligence
 Marketing intelligence system is a set of procedures and sources that managers use to
obtain everyday information about the development in the marketing environment
(Kotler and Keller 2013).
 The marketing managers collect marketing intelligence in a variety of ways such as:
Reading Newspapers
reading books
Reading Trade publications
Talking to customers and distributors
Ghost shopping
Talking to suppliers
Meeting with other managers from other companies
Using social media and online resources
Marketing intelligence also help in marketing decision making and can be used in
conjunction with marketing research findings.
3. Marketing Research
 Marketing research refers to the systematic design, collection, analysis and
reporting of data findings relevant to a specific marketing situation facing the
company (Kotler and Keller 2013).
 Marketing research collects and analyses data from the external and internal
environment. It supplies marketing managers with information necessary for
decision making.
 For further information, refer back to the notes on marketing research
4. Information analysis
 Data collected from various sources through various means eg marketing research,
marketing intelligence and internal records is analysed to provide information for
marketing decision making.

13 | P a g e
Mr F. Kufakunesu
  The four components of information development (Marketing intelligence,
Internal records, Marketing research and Information analysis) work together in
mobilising and processing information.

Uses of Information

According to Marketing Information Systems model of, Information gathered and developed
by various ways from various sources is of critical importance to the marketing manager and
the whole organization. Marketing managers mainly make use of the information in
undertaking the following activities:
 Analysis and comparisons
 Planning
 Implementation
 Organizing
 Leading
 Controlling

Critiques of Marketing Information Systems

Advantages
Boost information resources
Facilitate informed decision making
Helps in enlightened planning
Facilitates forecasting
Facilitates Organized Data collection. Thus MIS helps you to organize your database
thereby improving productivity.
Storage of Important Data
Acts as a foundation to strategy formulation
The possibility of reducing operational costs if managed properly
Optimizing the services offered to customers,
Identifying target markets and new segments and managing inventories.
Disadvantages
The system depends basically, on individuals in the supply, summary, generation, and
dissemination, and interpretation of data
It is difficult to maintain since it makes use of IT hence prone to various threats
It can be a costly process if poorly managed.
Calls for other departments to participate and can create conflicts

14 | P a g e
Mr F. Kufakunesu
CONSUMER AND ORGANIZATIONAL BUYER MANAGEMENT
Definitions
Consumer behavior
The study of how individuals, groups, and organizations elect, buy, use, and dispose of
goods, services, ideas, or experiences to satisfy their needs and wants(Kotler and
Keller2013).
Schiffman (2007) defines consumer behavior as “the behaviour that consumers display in searching for,
purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs”
Consumer behaviour is the activities people undertake when obtaining, consuming and
disposing of products and services. (Blackwell et al. 2001)

Organizational Buyer Behavior

Organizational buying Behavior , according to Webster and Wind (1972), is ‘the decision
making process by which formal organizations establish the need for purchasing products and
services and identify, evaluate and choose among alternative brands and suppliers’. One of
the important aspects of this definition is that organizational buying behavior is a process
rather than a static, once-off event

Determinants of Consumer Behaviour

 Age and life cycle stage

Consumers usually change their buying patterns and habits over their life time.
Choices in clothing, fashion, and recreation usually depend on age.

 Life Style
“The habits, attitudes, tastes, moral standards, economic level, etc., that together
constitute the mode of living of an individual or group”. (The Random House
Dictionary of the English Language, 1987)
Life style is a person’s pattern of living. It differentiates individuals and determines
consumption patterns

 Personality
Personality means a set of distinguishing human psychological traits that lead to
relevantly consistent and enduring responses to environmental stimuli (including
buying bahaviour) (Kotler and Keller 2013:178)
The concept of personality refers to a person’s unique psychological make-up and
how it consistently influences the way a person responds to his or her environment.
Personality is not easily changed, but it is affected by major life events like marriage,
divorce, childbearing etc (Schiffman and Kanuck 2009). We often describe
personality referring to traits like: Confidence; dominance; sociability; defensiveness;
adaptability.

 Self
It is the way in which a person regards him/herself.
Consumers’ self-concepts are reflections of their attitudes toward themselves.
Whether these attitudes are positive or negative, they will guide many purchase
decisions, products can be used to boost self-esteem or to reward the self.

15 | P a g e
Mr F. Kufakunesu
  Psychological factors
A person’s buying choices are further determined by various psychological factors
viz. motivation, perception, learning, belief and attitudes. Marketers have very little
control over these variables and therefore call for great attention on these factors to
tune their marketing strategies.
a) Motivation
The psychological theories of Sigmund Freud and Abraham Maslow focus on the
need for identifying motivational aspect of consumers.
b) Perception
Perception is the process by which people select, organize and interpret information to
form a meaningful picture of the world (Schiffman and Kanuck 2003). Under a
similar environment, customers can behave differently. It is because of the fact that
the individuals receive, organize and interpret the sensory information on an
individually unique way. Usually perception is influenced by the background of the
perceiver.
c) Consumer Learning
Consumer learning is the process by which individuals acquire the purchase and
consumption knowledge and experience they apply to future related behaviour
(Schiffman, and Kanuck 2003).
Learning theorists stress that most human behaviour is learned. Learning occurs
through the interplay of drives, stimulus, cues, responses and reinforcement. Learning
describes changes in an individual behaviour arising from experience.
Pavlov and Skinner also postulated some conditioning propositions which depended
much on learning.
d) Beliefs
Belief is a descriptive thought that a person has about something. People have certain
beliefs towards certain products and services. Beliefs are also acquired through
learning. Beliefs can highly influence consumer buying decision making.
e) Attitudes
Attitude is a person’s consistently favourable or unfavourable evaluation of feelings
and tendencies towards an object or an idea. Attitudes are difficult to change. A
person’s attitudes may fit into a person and to change this may require difficult
adjustments. This affects consumer buying behaviours.

Consumer decision making Process

Need Identification/Problem Awareness

Information Search

Evaluation of alternative Solutions (products)

Selection of an appropriate Solution (product/s)

Post-purchase evaluation of decision

16 | P a g e
Mr F. Kufakunesu
Consumer decision making process

 Need Recognition. Someone realizes that s/he has got a need

 Information Search: The effort put by the customer to find information concerning the
item which fully meet his/her need prior to purchase
 Evaluation of Alternatives: The effort to compare and contrast offerings in order to
come up with the right product which satisfy the intended need
 Purchase: The decision to procure the ptoduct item

 Post-Purchase Evaluation: This is the comparison of the product’s actual performance

against the anticipated performance

Organisational Buying Behaviour

Decision Making Unit (DMU)

A buyer is a business which engages in the buying of goods and/or service for the sake of
reselling or further processing. They usually make buying decisions which are complicated
and more evaluative compared to the consumers.
The buying decisions for the buying organisations are made by the Buying decision-making
unit which is referred to as the buying center by Webster and Wind
Members of the buying center play the following roles:
Initiators: Users or others in the organization who request for something to be purchased
Users: Those who will use the product or service. They usually help in specifying product
requirements
Influencers: people who influence the buying decision often by helping define
specifications and providing dimensions of alternative evaluations
Deciders: people who decide on product requirements or on suppliers
Approvers: People who authorize the proposed actions of deciders or buyers
Buyers: people with formal authority to select the supplier and arrange the purchase
terms.
Gatekeepers: People who have the power to prevent sellers or information from reaching
members of the buying center.

Segmentation Targeting and Positioning Strategies (STP strategies)

Segmentation of consumer markets

This is the division of a heterogeneous market into small homogenous sub-groups.
Segmentation Variables
Geographic
Demographic
Psychographic
Behavioural
Benefit Sought

Segmentation of Industrial Markets

There are several models and approached to the segmentation of industrial markets. Below is
the nested approach by Bonoma and Shapiro

17 | P a g e
Mr F. Kufakunesu
The nested Approach
Demographics
Operating variables
Purchasing Approach
Situational factors
Personal characteristics

The Nested Approach by Bonoma and Shapiro

Variable Summarized Description

Demographics General descriptions eg:
Industry Type
Company Size
Location
Operating Variables Company Technology
Product and Brand- Use Status
Customer capabilities (strenths eg finance)

Purchasing Purchasing function of the Organisation

Approach Power Structures
Buyer-Seller relationships
Purchasing criteria
General purchasing policiies

Situational factors Urgency of order fulfilment

Product application/use
Size of order

Personal These are personal characteristics of individuals participating in the buying

Characteristics decision making unit

Targeting
This is the approach of aiming to satisfy specific group/s of individuals or organisation’s
needs and wants through providing goods and services tailored made specifically for them.

Positioning
It is the act of designing a company’s offering and image to occupy a distinctive place in the
minds of the target market (Kotler and Keller 2013:298)

18 | P a g e
Mr F. Kufakunesu
MANAGING CUSTOMER VALUE, SATISFACTION AND LOYALTY

Customer Value
Customer Value is the difference between the customer gains from owning and using a
product and the costs of obtaining the product.

The value chain

Harvard’s Michael Porter has proposed the value chain as a tool for identifying ways to
create more customer value.
According to this model, every firm is a synthesis of activities performed to design, produce,
market, deliver, and support its product.
The value chain identifies nine strategically relevant activities—five primary and four
support activities—that create value and cost in a specific business.
The primary activities are (1) inbound logistics, or bringing materials into the business; (2)
operations, or converting materials into final products; (3) outbound logistics, or shipping out
final products; (4) marketing, which includes sales; and (5) service.
Specialized departments handle the support activities—(1) procurement, (2) technology
development, (3) human resource management, and (4) firm infrastructure.

Each and every element must be operated with the customer in mind.

Customer Satisfaction
The extent to which a product’s perceived performance matches a buyer’s expectations.
In general, satisfaction is a person’s feelings of pleasure or disappointment that result from
comparing a product’s perceived performance (or outcome) to expectations. If the
performance falls short of expectations, the customer is dissatisfied. If it matches
expectations, the customer is satisfied. If it exceeds expectations, the customer is highly
satisfied or delighted. Customer assessments of product performance depend on many
factors, especially the type of loyalty relationship the customer has with the brand.
If customers are satisfied they can become more loyal.
Customer Expectations
Development of customer expectations
From past buying experiences
Friends‘ and associates‘ advice
Marketers‘ and competitors‘ information and promises

Satisfaction Equations and Expressions

CS = CE –CP

19 | P a g e
Mr F. Kufakunesu
Where: CS = Customer Satisfaction
CE = Customer Expectation
CP = Customer Perception
Satisfaction Equation
CE- CP = 0
Customer Delight Expression
CP – CE > 0 (Positive)
Cognitive Dissonance/ Dissatisfaction Expression
CP – CE < 0 (Negative)

Reasons for monitoring customer satisfaction

Kotler and Keller (2013) posit that, “Wise firms measure customer satisfaction regularly,
because it is one key to customer retention. A highly satisfied customer generally stays loyal
longer, buys more as the company introduces new and upgraded products, talks favorably to
others about the company and its products, pays less attention to competing brands and is
less sensitive to price, offers product or service ideas to the company, and costs less to serve
than new customers because transactions can become routine”.

From the above paragraph it can be deduced that customer satisfaction can:
Increases customer retention
Increases organisationl sales
Promotes new product development
Promotes corporate image
Increases customer awareness through referrals
Strengthens the organisation’s competitive stance/posture
Increases profits

Customer Loyalty
Loyalty refers to a commitment to rebuy or repartronise a preferred product or service (Kotler
and Keller 2013).
The link between customer satisfaction and customer loyalty is not directly proportional. In
some cases unsatisfied customer can be loyal to the organisation’s offerings due to various
reasons eg, Lack of alternatives, lack of exposure, budget constraints etc.
Below is the loyalty segmentation model by Dick and Basu.
Strong
Relative Attitude

Latent Loyalty Genuine Loyalty

Spurious
Weak

No Loyalty Loyalty

Low High
Repeat Purchase
Spurious Loyalty

20 | P a g e
Mr F. Kufakunesu
This is when customers repeatedly patronize the product, but having a weak relative attitude
towards that product. This can be due to unavailability of other products eg in rural areas,
limited financial resources among other variables. This kind of loyalty is dangerous and it
triggers false organizational projections. Therefore, there is no need for a marketing manager
to sit and relax assuming that everything is in order, by only considering sales and repeat
patronage. There is threat of new entry in such markets.
Genuine Loyalty
This is a situation whereby repeat purchases are due to the strong positive relative attitude
towards a product. This kind of loyalty is very difficult to attain. Furthermore, it establishes
entry barriers once attained
Latent Loyalty
This is a situation whereby a customer does not repeatedly patronize the company’s offering
but having a strong relative attitude towards the offerings. This can happen due to several
reasons like, Budget constraints, Unavailability of goods, Decision making authority etc.
Customers of this kind are not difficult to manage since they already have a positive attitude
towards the organisation’s products.
No Loyalty
These are customers with a weak relative attitude towards the company’s offering and they
even do not what to buy the product repeatedly. In many cases these will be the competitors’
customers. They are difficulty to win in many cases. However, once identified, they can be
targeted and in future they can be convinced and develop a strong relative attitude.

Methods of building Customer Loyalty

Lori Greenwell, (2000) identifies 10 Methods of increasing customer loyalty
1. Thank customers for doing business with you. The value of the product or service will
determine what is appropriate. High cost service deals warrant a hand-written note; even
smaller cost transaction companies can send pre-printed appreciation notes to customers on a
scheduled basis.
2. Stay in contact with existing and past clients on a consistent basis. By not forgetting
them, they won’t forget you. Phone calls, notecards or postcards, newsletters, and email are
only some ideas. Consider also opportunities for personal contact, a good idea in our high-
tech, low-touch world.
3. Give the customer more than they expect. Anticipate a need and fill it. Answer a question
before they ask it. Delivering more than they expect is one of the most powerful ways to gain
customer loyalty.
4. Listen. Take time to truly listen to what your customers say, and if they don’t volunteer
information—ask for it.
5. Pay attention to the obvious. Mind your manners. Use please and thank you. Be on time
for meetings. Promptly return phone calls and e-mail messages.
6. Make realistic promises—and be consistent. It is far better to promise something in a week
and deliver in three days than the other way around.
7. Share information. Send pertinent articles or information that may be valuable or simply
interesting to a client. Always look for ways to help customers learn.
8. Give referrals to clients. Send business back to a client whenever possible, and let them
know you are doing it.
9. Explain how things work. If you sell a product, show how to use it. If you sell a service,
explain what the customer can do to maximize its value.
10. Have fun! Really enjoy your customers, develop relationships, look upon them as your
extended family. On occasion, treat a customer to something fun to show your appreciation.
Use your imagination!

21 | P a g e
Mr F. Kufakunesu
MANAGING COMPETITION AND THE MARKETING
ENVIRONMENT

Environmental Scanning
This is a continuous process of evaluating the internal and external organizational
environment for better planning and decision making.

Importance of Environmental Scanning

Van der Walt, Strydom, Marx and Jooste (1996) assert that the importance of environmental
scanning is clear from the following points:
The environment is continually changing, so purposeful scanning by management is
necessary to keep abreast of change
Scanning is necessary to determine which factors in the environment pose a threat to
the enterprise‘s present goals and strategy
Scanning is also necessary to determine which factors in the environment present
opportunities for the more effective attainment of the goals of the enterprise by
modifying its present strategy
Enterprises that scan the environment systematically are more successful than those
that do not.

Dimensions of environmental scanning

Macro-Environmental analysis (PESTEL Analysis)
This seeks to analyse the external aggregate variables which affect the whole industry and not
a just single organizational entity.
Some call it PEST analysis. It is one of the popular frameworks used in the analysis of macro
environments. It helps in identifying opportunities and threats. The elements are as follows:

Political Factors
 Political alliances
 Monopoly Restrictions
 Foreign trade regulations
 Trade unions Power
 Political stability
 Taxation policies
 Pressure groups
The political factors are sometimes referred to as legal factors

Economic Factors
 Business cycles
 Money Supply
 Inflation Rates
 Unemployment
 GDP and GNP Trends
 Investment levels etc.

22 | P a g e
Mr F. Kufakunesu
Socio-Cultural Forces
 Demographics
 Life styles
 Social Mobility
 Education Levels
 Consumerism
 Attitudes
 Behaviour and behaviour patterns

Technological Factors
 Industrial R&D Expenditure
 PDLs
 Speed of technology transfer
 Diffusion of innovation
 Technological Shifts
 The direction of technological transfer

Ecological Factors
These are natural environmental factors which hinder or facilitate strategy formulation and
implementation, eg:
 Relief Features
 Fluvial Features
 Wild life
 vegetation
 Seasonal variations etc

Legal factors
 Legal structures
 Operational Boundaries
 trade Restrictions
 International trade regulations
 Company registrations ETC.

SWOT Analysis
This is one of the important situational analysis tools. SWOT Stands for, Strengths,
Weaknesses, Opportunities and Threats. It divides the internal and external factors into
positive and negative. Internal factors are divided into (Strengths and weaknesses) i.e
Company strategies, resources and position in relation to competition. External Factors are
also divided into (Opportunities and Threats) presented by the external macro and micro
environment.

Strengths
These are positive internal factors which can help the firm in the marketing of its products eg:
 Low cost advantage
 managerial experience
 production efficiency

23 | P a g e
Mr F. Kufakunesu
  Production Capacity
 Capital Base (econet)
 Transportation ets

Weaknesses
These are internal organisational factors which are not good for the firm in terms of
performance rating. They need to be minimised. eg;
 Poor Product Quality
 Poor Corporate image
 Limited production capacity
 Cost disadvantage
 Lack of managerial experience
 poor capital Base
 Poor labour Relations
 Poor Vision
 Poor Customer Base ETC

Opportunities
These are the external factors which can be taken advantage of and boots the firm’s current
position. The opportunities must be solicited, identified and taken advantage of. The ability to
capitalise on opportunities is also a factor of organisational Strengths. Examples:
 New Customer needs and or wants.
 Competitor failure
 Competitor withdrawal
 Economic Well-being
 Better Customer Relations
 Increase in resource suppliers
 Market Growth and Expansion

Threats
These are external factors which may hinder the firm’s success. They include the following:
 Increase in competition
 Changing Customer tastes and preferences
 Economic down-turn
 Power Shortages
 New Product alternatives EG Green Packet, Powertel Internet providers other than
Telecel, Econet, Net-One, TelOne and Africom.
 Price Controls (Legal Framework changes eg in 2007-2008) Zimbabwe. etc

Customer analysis
Customers may be the end users (Consumers) and/or intermediaries.
They are of value to the marketing organisation. Analysing them minimise the chances of
marketing Myopia.
Customer analysis seeks to address several questions including the following:
 Who are my customers?
24 | P a g e
Mr F. Kufakunesu
  What do they buy?
 Why do they buy?
 When do they buy?
 How many are they?

Competitor Analysis

This is the analysis and comparison of the organisation’s performance against that of the
competitors. This implies that ratings will be used for each and every key success factor.
Below is an example of the competitor analysis is done in Masvingo:

Image Cost Managerial Innovation Service Product

advantage experience Quality quality

N Richards 5/10 9/10 4/10 4/10 3/10 7/10

FABS 3/10 3/10 3/10 3/10 5/10 6/10
Nyaningwe 2/10 2/10 3/10 2/10 3/10 6/10
TV SALES 7/10 2/10 4/10 5/10 6/10 6/10
AMICOs 5/10 7/10 3/10 5/10 3/10 6/10
HALSTEDS 4/10 5/10 5/10 3/10 5/10 5/10
BILCRO 3/10 6/10 4/10 3/10 7/10 6/10

This is more advantageous compared to the SWOT analysis since it uses ratings and this can
enable an organisation to consider the competitor’s performance, rather than underestimating
the competitors’ performance. However, this is difficult since competitor information will be
protected.

Industrial Analysis
Michael porter’s five forces framework

Michael Porter provided a framework that models an industry as being influenced by five
forces. The strategic business manager seeking to develop an edge over rival firms can use
this model to better understand the industry context in which the firm operates.

Porter's 5 Forces Framework

25 | P a g e
Mr F. Kufakunesu
Degree of rivalry
This describes the intensity of competition among the existing firms in the industry.
Highly Competitive industries generally earn low profits because the cost of competition is
high. The Degree of Rivalry is influenced by the following factors:
 Exit barriers
 Exit Barriers
 Industry growth
 Industry concentration
 Fixed costs/Value added
 Intermittent overcapacity
 Product differences
 Switching costs
 Brand identity
 Diversity of rivals
 Corporate stakes

Supplier power
This aims to diagnose the degree to which the suppliers can influence the performance of
rival firms in an industry. Below are the factors which affect the bargaining power of
suppliers:
 Impact of inputs on cost or differentiation
 Supplier concentration
 Switching costs of firms
 Importance of volume to supplier
 Differentiation of inputs
 in the industry
 Presence of substitute inputs
 Threat of forward integration
 Cost relative to total purchases in industry

Threat of substitutes
 Switching costs
 Buyer inclination to substitute
 Price-performance trade-off of substitutes

Threat of new entrants

This is the risk that new competitors will emerge and thereby stiffening the competition. It is
influenced by the Entry barriers eg:
 Access to inputs
 Government policy
 Absolute cost advantages
 Economies of scale
 Brand identity
 Switching costs
 Access to distribution Networks
 Expected retaliation
 Proprietary products
26 | P a g e
Mr F. Kufakunesu
  Capital requirements
 Proprietary learning curve

Buyer power / Bargaining power of Buyers.

This is the influence of buyers/Customers in an industry. The bargaining power of Buyers is
influenced by the following variables:
 Buyer information
 Buyer volume
 Brand identity
 Price sensitivity
 Threat of backward integration
 Product differentiation
 Buyer concentration vs. industry
 Substitutes available
 Buyers' incentives
 Bargaining leverage

27 | P a g e
Mr F. Kufakunesu
MANAGING PRODUCTS
Product
Kotler and Keller (2013) refer to a product as “…anything that can be offered to the market
to satisfy a want or need including physical goods, services experiences, events, persons,
places, properties, organizations, information and ideas”.

New Product Development

A new product can be new to the market, new to the organization or even new to the world.
Reasons for new product development
Meet customer needs
Broaden the market
Utilizing excess capacity
Fight competition
Spreading Risk
Reasons for new product failure
New products continue to fail at estimated rates as high as 50 percent or even 95 percent in
the United States and 90 percent in Europe. They fail for many reasons: ignored or
misinterpreted market research; overestimates of market size; high development costs; poor
design or ineffectual performance; incorrect positioning, advertising, or price; insufficient
distribution support; competitors who fight back hard; and inadequate ROI or payback
(Kotler and Keller 2013).
New Product development process
Idea Generation
Idea Screening and Evaluation
Business Analysis
Concept development
Test Marketing
Commercialisation

Portfolio Analysis (BCG Matrix)

28 | P a g e
Mr F. Kufakunesu
Dogs
 Those are businesses that have a weak MS in a low growth market
 Typically they generate either low profit or return a loss
 The decision faced by the company is either to hold or divest
Question Marks (Low market Share High market Growth)
They operate in high growth markets but have low relative market share. They generally
require considerable sums of cash to invest in plant, equipment or manpower.
Stars (High market Share High market Growth).
Those businesses/products which have moved to a position of market leadership in a high
growth market. Their cash needs are often too high with cash being spent on order to
maintain the market share and keep competitors at bay.

Cash Cows
When the rate of market growth begins to fall, stars typically become the company’s cash
cows. The term cash cow was generated from the fact that, these are products which generate
considerable sums of cash due to lower growth rate. They are milked to feed other portfolios.

Strategies to be pursued from the study of the BCG Matrix

Build
 Increasing the SBU’s MS in order to strengthen its position
 This strategy can be used for question marks or stars
Hold
 The Primary objective is to maintain the current market share
 It is typically used for cash cows, to ensure that they continue generating maximum
amounts of Cash
Harvest
By following the harvesting strategy, the management tries to increase short-term cashflows
as far as possible even at the expense of the SBU’s long-term future. it can be used for weak
cash cows, dogs question marks following disaster sequence
Divest (terminate)
The essential objective here is to rid the organisation of the SBU that act as a drain on its
profits. or To realise that resources can be used to greater effectiveness elsewhere in the
business. it can be used for dogs.
Pros (Advantages of Using the BCG Matrix)
 It is an easy-to-use guide that helps managers to think about the investment needs of
portfolio businesses
 It provides a useful basis for thinking about priorities across a spread of activities

29 | P a g e
Mr F. Kufakunesu
Cons (Disadvantages of Using the BCG matrix)
 It is a guide to investment rather than strategy
 It rest on important assumptions that business planning is just driven by two factors,
Market growth and market share ignoring several factors eg competitive adva,
customer needs etc.
 Cash flow is seen as to be dependent on market growth and market share. In practical
this is not necessarily correct.
 market share is rarely as easily defined as the model suggests
 The models also fails to come up with terms in which the nature of strategy and the
form of competitive advantage that will lead to success.

30 | P a g e
Mr F. Kufakunesu
 MARKETING COMMUNICATIONS
A concept of marketing communications planning that recognizes the added value of a
comprehensive Plan that evaluates the strategic roles of a variety of communication
disciplines—For example, general advertising, direct response, sales promotion, and public
relations—and Combines these disciplines to provide clarity, consistency, and maximum
communications Impact (Belch and belch 2004)

Evolution of Integrated Marketing Communications (IMC)

 During the 1980s many firms came to see the need for a strategic integration of their
promotional tools.
 Those firms began to move towards the process of IMC, which involves coordinating
various promotional elements and other marketing activities that communicate with
the firm’s customers.
 Advertisings agencies also moved on from primary advertising to the IMC
perspective and hence the old concept was forsaken
 Advertising agencies became a “one stop shop” with all coordinated communication
plans
 Advertising agencies also began to be involved in non-advertising areas so as to gain
popularity
 The American Association of Advertising Agencies (4As) Developed one of the first
definition of IMC which was used by Belch and Belch (2004).
 However, the advocates of IMC like Don Schultz of North Western University argue
for a broader perspective that considers all sources of brand or company contact that a
customer or prospect has with a product or a service.
 Schultz and others advocated for a bigger picture approach to the planning, marketing
and promotional programs and coordinating various communication functions.
 The whole marketing program must be integrated, not just the. communication mix
elements.
 IMC is not just a fad, but a permanent change in the marketing of goods and services.
 There is an increase in the competition which is giving birth to Relationship
marketing, which also triggers IMC Movements.

IMC mix elements

Integrated Marketing Communications

Advertising Direct Interactive Sales Publicity/ Personal

marketing / Promotion Public Selling
Internet Relations
marketing
Advertising
Advertising is defined as any paid form of non-personal communication about an
organization, product, service, or idea by an identified sponsor.26 the paid aspect of this
definition reflects the fact that the space or time for an advertising message generally must be
bought. The non-personal component means that advertising involves mass media (e.g., TV,
radio, magazines, newspapers) that can transmit a message to large groups of individuals,

31 | P a g e
Mr F. Kufakunesu
often at the same time. The non-personal nature of advertising means that there is generally
no opportunity for immediate feedback from the message recipient (except in direct-response
advertising). Therefore, before the message is sent, the advertiser must consider how the
audience will interpret and respond to it
Direct marketing
One of the fastest-growing sectors of the US economy is direct marketing,
In which organizations communicate directly with target customers to generate a response
and/or a transaction. Traditionally, direct marketing has not been considered an element of
the promotional mix. However, because it has become such an integral part of the IMC
program of many organizations and often involves separate objectives, budgets, and
strategies, we view direct marketing as a component of the promotional mix.
Sales promotion
Is generally defined as those marketing activities that provide extra value or incentives to the
sales force, the distributors, or the ultimate consumer and can stimulate immediate sales.
Sales promotion is generally broken into two major categories: consumer-oriented and trade-
oriented activities. Consumer-oriented sales promotion is targeted to the ultimate user of a
product or service and includes couponing, sampling, premiums, rebates, contests,
sweepstakes, and various point-of-purchase materials. These promotional tools encourage
consumers to make an immediate purchase and thus can stimulate short term sales.
Trade-oriented sales promotion is targeted toward marketing intermediaries such as
wholesalers, distributors, and retailers. Promotional and merchandising allowances, price
deals, sales contests, and trade shows are some of the promotional tools used to encourage the
trade to stock and promote a company’s products (Belch and Belch 2006).

Publicity/ Public Relations

Publicity refers to non-personal communications regarding an organization, product, service,
or idea not directly paid for or run under identified sponsorship. It usually comes in the form
of a news story, editorial, or announcement about an organization and/or its products and
services. Like advertising, publicity involves non-personal communication to a mass
audience, but unlike advertising, publicity is not directly paid for by the company. The
company or organization attempts to get the media to cover or run a favorable story on a
product, service, cause, or event to affect awareness, knowledge, opinions, and/or behavior.
Techniques used to gain publicity include news releases, press conferences, feature articles,
photographs, films, and videotapes.
Personal selling,
A form of person-to-person communication in which a seller attempts to assist and/or
persuade prospective buyers to purchase the company’s product or service or to act on an
idea. Unlike advertising, personal selling involves direct contact between buyer and seller,
either face-to-face or through some form of telecommunications such as telephone sales
(Belch and Belch 2006).

Benefits of IMC
 Consistent messages
 Cost saving
 Avoid duplication of tasks (time saving)
 operational Efficiency
 Better use of Media
 Greater agency accountability
 Creation of better internal working relations
 Creation of relationship with customers

32 | P a g e
Mr F. Kufakunesu
Disadvantages of IMC
 Time consuming if poorly managed
 can increase costs if poorly managed
 Difficult to carry
 Continuously changing customer needs and environmental factors makes the process
tiresome
 In case of a wrong perception made by the orgn, emphasis via coordinated efforts can
worsen the matter
 Difficult to monitor and coordinate

33 | P a g e
Mr F. Kufakunesu
MANAGING PRICING POLICIES AND STRATEGIES
Price
Kotler et-al (2009:369) posit that, “price is not just a number on a tag or an item”. Kotler et-
al (2009) and Kerin et-al (2009) concur that, price is all around us, like rent for apartment,
tuition for education, a fee to the physician or dentist, a fare for the bus, airline or taxi, an
interest for the borrowed money, a premium for an insurance service, a retainer to the lawyer,
a commission to the sales person a wage to the worker and a salary to an executive.
Furthermore Kerin at-al (2009) argue that, “Although economists would disagree, many
marketers feel the income taxes are the price we pay for the privilege of making money”.

Pricing Theories

Naive pricing theory

Naive price theory is grounded on the assumption that price will stay the same. The theory
states that the only thing determining tomorrow's price is today's price. Naive price theory is
a perfectly natural way of dealing with prices if you do not understand what determines them
(Friedman 1990). The use of this theory is least plausible because prices are volatile. Just as it
makes very little sense to assume that as a baby grows older he/she remains the same size, it
makes no more sense to assume that the market price of a good remains the same when you
change its cost of production, its value to potential purchasers, or both.
One must understand the causal relations involved. According to Friedman (1990), although
the theory may have errors, the alternative to correct economic theory is not doing without
theory (sometimes referred to as just using common sense) but the alternative to correct
theory is incorrect theory.

Game pricing theory

According to Ezeudu (2005), it is a collection of tools for predicting outcomes of a group of
interacting agents where an action of a single agent directly affects the payoff of other
participating agents. It is the study of multi-person decision problems (Gibbons 1992). It
could also be referred to as a bag of analytical tools designed to help us understand the
phenomena that we observe when decision-makers interact (Osborne and Rubinstein 1994).
Myerson (1997) defines it as the study of mathematical models of conflict and cooperation
between intelligent rational decision-makers.
According to Diamantopoulos (1991), game theory studies interactive decision-making.
There are two key assumptions underlying this theory:
1) Each player in the market acts on self-interest. They pursue well-defined exogenous
objectives; i.e., they are rational. They understand and seek to maximize their own payoff
functions.
2) In choosing a plan of action (strategy), a player considers the potential responses/reactions
of other players. She takes into account her knowledge or expectations of other decision
makers’ behavior; i.e., the reasons strategically. A game describes a strategic interaction
between the players, where the outcome for each player depends upon the collective actions
of all players involved (Bolton and Lemon 1999).
Eg Oligopoly markets

Pricing strategies
There are several pricing strategies applicable in the marketing of goods and services. Here
are just a few:

34 | P a g e
Mr F. Kufakunesu
Cost oriented pricing strategy
Cost based-pricing approaches determine prices primarily with data from cost of production.
Its main advantage is that data is readily available. .It does not take competition into
consideration. It also does not examine customer‘s willingness to pay (Hinterhuber 2008).
Two methods are normally used here, they are cost plus method and direct or marginal cost
pricing (Jobber 2004).
a) Cost plus method: One simple and common approach to price determination is the naive
cost plus method. It involves the addition of a predetermined margin to the full unit cost
of production and distribution without reference to prevailing demand conditions
(Ezeudu 2005). Usually a reasonable mark-up is added to unit cost (Chaneta 2011).
b) Mark-up pricing: according to (Farese, Kimbrell and Woloszk 2003) markup is the
difference between the price of an item and its cost that is generally expressed as a
percentage. The whole essence of markup is for it to cover the expenses of running the
business and include the intended profit (Farese, et al., 2003; Kevin, et al., 2004)
Competitors oriented pricing strategy
It is using competitor‘s price as a starting point for price setting (Blythe 2005).
It is easy since data is always and readily available, but however, it is done without
consulting customers.
a) Going rate pricing: It is setting a price for a product or service using the prevailing
market price as a basis. Going rate pricing is usually practiced in with homogeneous
products with very little variation from one producer to another, such as aluminum or
steel (Kevin, et al., 2004). Going rate pricing is a pricing strategy where firms examine
the prices of their competitors and then set their own prices broadly in line with these.
Going rate pricing is most likely to occur where:
There is a degree of price leadership taking place within a particular market.
Businesses are reluctant to set significantly different prices because of the risk of
setting off a price war, which would reduce profits to all firms.
There is a degree of collusion taking place between firms.
b) Competitive bidding: the most usual process is the drawing up of detailed specifications
for a product and putting the contract out to tender and potential suppliers quote a price
that is confidential to themselves and the buyer(sealed bids) (Jobber 2004). All other
things being
c) Predatory pricing: This is a pricing policy in which a firm deliberately charges lower
price with the intention of driving out competitors from the market while remaining the
dominant or even monopoly firm in that industry after which it will start the actions
characteristic of a monopoly (Lamb, Hair and McDaniel 2004; Brassington and Pettit
2006). Sometimes prices are pitched below the cost of production. This usually favors
the consumers since they get so much value for their money.
Demand based pricing: Demand based pricing looks outward from the production line and
focuses on customers and their responsiveness to different price levels (Brassington and
Pettitt 2006). They are prices based on the customers‘demand for a product.
Value based pricing: Customer value-based pricing uses the value that a product or service
delivers to a segment of customers as the main factor for setting prices (Hinterhuber 2008).
Customer value-based pricing is increasingly recognized in the literature as superior to all
other pricing strategies (Ingenbleek et al 2003).
Prestige pricing strategy: This involves setting a high price to a product to indicate its high
quality. This can also be called premium pricing. According to Cannon and Morgan (1990)
"… to some target customers, relatively high prices seem to mean high quality or high
status”.

35 | P a g e
Mr F. Kufakunesu
Dynamic pricing: Haws and Bearden (2006) define dynamic pricing as a strategy in which
prices vary over time, consumers, and/or circumstances. It can also be referred to as adjusting
prices continually to meet the characteristics and needs of individual customers and situations
(Kotler and Armstrong 2008).
Differential pricing: Differential pricing involves selling the same product to different
buyers under a variety of prices (Bearden, Ingram and Laforge 2004) which means different
prices are used for different segments (Brassington and Pettitt 2006). It is the same as
discriminatory pricing policy especially when the cost of production and selling of the
product are essentially the same.
Psychological pricing: Psychological pricing refers to applying prices that appeal to the
customer‘s emotions (Blythe 2005). A pricing approach that considers the psychology of
prices and not simply the economics; the price is used to say something about the product
(Kotler and Armstrong 2008). Psychological pricing is very much a customer based pricing
method, relying on what it does on the consumer‘s emotive responses, subjective assessments
and feelings towards specific purchases (Brassington and Pettitt 2006).
Bundle pricing: Bundle pricing has to do with including several products in a single package
that is sold at a single price (Farese, Kimbrell and Woloszy 2003). Brassington and Pettitt
(2006) see it as assembling a number of products in a single package to save the consumer
the trouble of searching out and buying each one separately. This can increase sales of the
organization.
Odd even pricing: It involves using price ranges that are usually in odd numbers just under
even numbers which are more appealing to consumers (Businessdictionary.com 2013). The
psychological principle at work here is that odd numbers (₦79, ₦9.95, ₦499) convey a
bargain image (Farese, Kimbrell and Woloszy 2003).

Pricing Strategies for New Products

a) Price skimming
Stanton et-al (1996) posit that, “market skimming involves setting a price that is high in
the range of expected prices”. Barker (1994:417) also highlights that skimming pricing
entails setting a high initial price which yield a high profit margin over a relatively small
volume and generally for a short period of time”. More so Nickels et-al (2002:448)
highlight that, “a skimming pricing strategy is one in which a new product is priced high
to make optimum profit while there is still little completion”. Wilson et-al (1992:332)
argue that, “with a skimming objective, the marketer enters the market with a high price
and only gradually lowers it as he seeks a greater number of market segments.
Furthermore, Kotler and Keller (2006:438) argue that, “companies unveiling a new
technology favour setting high prices to maximise market skimming”. Kerin et-al
(2009:356) concur that, “a firm introducing a new or innovative product can use price
skimming, setting the highest initial price that the customers really desiring the product
are willing to pay”.

b) Penetration
Nickels et-al (2002) describe penetration pricing as a strategy in which a product is priced
so low to attract many customers and discourage competition. Stanton et-al (1996:311)
posit that, “in market penetration pricing a low initial pricing is set to reach the mass
market immediately”. They also argue that this strategy can be employed at a later stage
in the product life cycle. More so Barker (1994:417) states that, “market penetration
pricing is when the firm prices low; sacrificing short term profits to aim at a dominant
market share”. Furthermore, Kerin et-al (2009:357) define penetration pricing as, “the
setting of low prices to new products to appeal immediately to the mass market”.

36 | P a g e
Mr F. Kufakunesu
Factors to be considered when setting a price:
Costs; Customers; Competition; Capacity

Process of coming up with a price

Peter and Donnelly’s General pricing model.
Peter and Donnelly (2009:166) also come up with a general pricing model which is illustrated
below:

Setting pricing objectives

Evaluate product-price relationships

Estimate costs and other price limitations

Analyse profit potential

Set initial price structure

Change price as needed

Fig 2.4: Source: Peter and Donnelly (2009:166)
The above model postulates that in making pricing decisions, there are several steps to be
taken. These steps are considered as viable steps to reach proper decision

Kotler’s six step procedure

Kotler and Keller (2006:437) indicate that, “a firm has to follow a six step procedure which
includes:

1. Selecting a pricing objective

2. Determining demand
3. Estimating costs
4. Analyse competitors’ prices, costs and offers
5. Selecting a pricing method
6. Selecting the final price

Fig 2.3: Source: Kotler and Keller (2006:437)

The above steps may also be used as a guide line in pricing decision making, (Kotler and
Keller 2006).

37 | P a g e
Mr F. Kufakunesu
LOGISTICS AND DISTRIBUTION MANAGEMENT
Logistics is the . . . “process of planning, implementing, and controlling the efficient,
effective flow and storage of goods, services, and related information from point of origin to
point of consumption for the purpose of conforming to customer requirements”.

Key components of Logistics – Support activities

1. Warehousing (Space determination, stock layout, configuration, stock placement)
2. Materials handling (equipment selection & replacement policies, order-picking
procedures, stock storage & retrieval)
3. Purchasing (supply source selection, purchase timing, purchase quantities)
4. Protective packaging (designed for handling, storage, protection from loss/damage)
5. Cooperation with production/operations (specify aggregate quantities, sequence & time
production output, schedule supplies)
6. Information maintenance (info collection, storage & manipulation, data analysis, control
procedures)

Physical distribution/Transport Modes

Road
Rail
Sea
Air
Pipeline
Online

Supply chain members

Types of flow in Logistics

1. Physical flow describes movement of goods from raw material that is processed in
various stages of manufacture until it reaches the final consumer. In the case of a towel
manufacturer raw material is cotton yarn which flows from the grower via transporters to
the manufacturer’s warehouses and plants.
38 | P a g e
Mr F. Kufakunesu
2. Title flow is the passage of ownership from one channel institution to another; when
manufacturing towels, title to raw materials passes from the supplier to the manufacturer.
Ownership of finished towels passes from manufacturer to the wholesaler or retailer and
then to the final consumer.
3. Information flow involves the directed flow of influence from activities such as
advertising, personal selling, sales promotion and publicity from one member to other
members in the system. Manufacturers of towels direct promotion, and information flows
to retailers or wholesalers, known as trade promotion. This type of activity may also be
directed to end consumers, i.e. ‘end user’ promotion.

Distribution Intensity
An important consideration when formulating channel policy is the degree of market
exposure sought by the company. Choices available include:
1. Intensive distribution where products are placed in as many outlets as possible. This is
most common when customers purchase goods frequently, e.g. household goods such as
detergents or toothpaste. Wide exposure gives customers many opportunities to buy and
the image of the outlet is not important. The aim is to achieve maximum coverage.
2. Selective distribution where products are placed in a more limited number of outlets in
defined geographic areas. Instead of widespread exposure, selective distribution seeks to
show products in the most promising or profitable outlets, e.g. high-end ‘designer’
clothes.
3. Exclusive distribution where products are placed in one outlet in a specific area. This
brings about a stronger partnership between seller and re-seller and results in strong
bonds of loyalty. Part of the agreement usually requires the dealer not to carry competing
lines, and the result is a more aggressive selling effort by the distributor of the company’s
products, e.g. an exclusive franchise to sell a vehicle brand in a specific geographical
area, in return for which the franchisee agrees to supply an appropriate after sales service
back-up.

Distribution Channel Selection

1. Market Considerations:
The nature of the market is a key factor influencing the choice of channels of distribution.
a) Consumer or industrial market: If the product is meant for industrial users, the
channel of distribution will be a short one.
b) Number and location of buyers: If buyers are few in many cases it is profitable to use
direct channels
c) Size of order: Direct selling is convenient and economical where customers place
order in big lots as in case of industrial goods.
d) Customers buying habits
2. Product Considerations: The type and nature of the product influence the number and
type of middlemen to be chosen for distributing the product.
a) Unit value: Expensive products are usually sold directly while cheaper ones go
through middlemen.
b) Perishability: Perishables eg fruits, vegetables among others need shorter channels
compared to non-perishables.
c) Bulk and weight: Usually heavy and bulky products are distributed directly to
minimize handling costs. Eg coal, bricks, stones, etc.
d) Standardisation: In many cases non-standardised goods require shorter channels
compared to standardized ones.

39 | P a g e
Mr F. Kufakunesu
 e) Technical nature: Industrial products requiring demonstration, installation and after-
sales service are often sold directly. Consumer products go through various
middlemen.
f) Product Range: An organization with a wide product range can prefer to establish its
own outlet compared to the one with a single product line.
g) Newness of the product: A new product needs greater promotional effort and few
middlemen may like to handle it. As the product gains acceptance in the market, more
middlemen may be employed for its distribution.
3. Middlemen Considerations: The cost and efficiency of distribution depend largely upon
the nature and type of middlemen as given in the following factors:
a) Availability: When middlemen as desired are not available, an entrepreneur may have
to establish his own distribution network.
b) Attitudes: Middlemen who do not like a firm’s marketing policies may refuse to
handle its products.
c) Services: Use of those middlemen is profitable who provide financing, storage,
promotion and after-sales services.
d) Sale Potential: An entrepreneur generally prefers a dealer who offers the greates
potential volume of sales.
e) Costs: Choice of a channel should be made after comparing the costs of distribution
through alternative channels. (Proximity)

40 | P a g e
Mr F. Kufakunesu
MANAGING SALES
Sales Management is the planning, direction, and control of the personnel, selling activities of
a business unit including recruiting, selecting, training, assigning, rating, supervising, paying,
motivating, as all these tasks apply to the personnel sales-force (American marketers
association (AMA).

Sales forecasting:
Sales forecast is a best guess about customer demend for a company’s goods in a particular
time period (Moon and Mentzer 1999)

Methods,
Judgmental Methods
Naive: It relies on Recent historical data and sales which are obtained with minimal
effort. It assumes that the best possible guess for future sales is today’s sales
(Makridakis, Wheelwright and Hyndman 1998)
Jury of Executive opinion: This is a method where executives from different
departments of the company meet and agree on the number/s which the forecast can
take. There is a risk of an over-optimistic forecast since executives hope for a positive
future.
Sales force composite: This is the use of the salesforce in predicting future sales.
sales people are closer to the customers compared to executives (Moon and
Mentzer1999)
Counting Methods
Industrial Survey: This is the process of analyzing the views of customers through
primary or secondary research in order to predict sales.
Intention to buy: This is where the company asks their potential customers whether
they have the intention to buy their product or not.
Time Series
Moving averages: It seeks to analyse the historical trends in order to predict future
values
Exponential smoothening: It is almost the same with the moving average approach
Causal Methods
Simple regression Analysis: This tries to relate external forces to demand. It analyses
the relationship between variables and hence allows forecasting.
Multiple Regression Analysis: This uses more variables than the simple regression
Analysis.
Econometric methods

Critiques of Sales Forecasting

Advantages of Sales Forecasting
Monitoring Cash Flows
Purchasing decisions
Planning and targeting
Managing salesforce
Disadvantages of Sales Forecasting
Can limit creativity
Risky
Can be biased
Can be misleading

41 | P a g e
Mr F. Kufakunesu
CREATING SUCCESSFUL LONG-TERM GROWTH
Importance of growth in business
 Increased profits
 Spreading the risk
 Competitive strength
 Employee performance is boosted due to job security
 Motivation of employees

Growth impediments in Business

 Finance
 Failure to identify opportunities
 Human resources
 Competition
 Environmental factors

Ansoff Growth Strategies

The Ansoff Matrix was invented by H. Igor Ansoff. It was firstly published in his article
"Strategies for Diversification" in the Harvard Business Review (1957)

Product/s
Current New
Current

Market Product
Penetration Development
Market/s

Market Diversification
Development
New

Market Penetration:
When companies enter markets with their existing products or services it is called
market penetration
Increasing the existing share in the existing market to facilitate further growth.
Market penetration is considered a low risk method to grow the business
Market Development
When companies develop existing products into new markets, it is known as market
development.
Taking existing product into new markets, for example, expanding sales from purely
the domestic market into the African market.

42 | P a g e
Mr F. Kufakunesu
 The product can also be targeted to another customer segment. Either way, both
strategies can lead to additional earnings for the business
Product Development
Companies develop new products in existing markets. This is called product
development.
Offering new products or modifying existing products into the existing markets.
Diversification
An organization that introduces new products into new markets has chosen a strategy
of diversification.
Either with related products and markets or unreleated products that are totally
unconnected with the existing products and markets.
Related diversification describes how companies stay in a market with which they
have some familiarity.

43 | P a g e
Mr F. Kufakunesu
MARKETING PLANNING

It is a broad set of guidelines as to show how the firm is to accomplish its strategic goals. marketing
plan is a living document that guide the Company throughout the year, a blueprint of future activity.

Vision
This is the overall goal of the business. It is broadly stated and it has to be used by managers
to develop their objectives

Mission Statement
These are statements that organizations develop to share with managers, employees and if
need be customers (Kotler and Keller 2013)
A Mission statement helps as a strategic guideline towards achieving the organizational
vision.

Situation Analysis
This is the process of scrutinizing the marketing environment in order to determing the
organizational stance.
It takes various analyses eg:
Competitor analysis
Customer analysis
Macro-environmental (PESTEL) analysis
Industry Analysis
Portfolio Analysis

Marketing Objectives
 Objectives, in simple terms, are where the business is heading for, and Strategies are
the means for getting there.
 The objectives are goals that the company would like to attain during the plan's term.
(Kotler Et al 1999).
 A specific result that a person or system aims to achieve within a time frame and with
available resources. (Business dictionary).
 An objective is derived from a goal, has the same intention as a goal, but it is more
specific, quantifiable and verifiable than the goal.

Characteristics of a Good Marketing Objective

SMART is a mnemonic acronym, giving criteria to guide in the setting of objectives, for
example in project management, employee-performance management and personal
development

1. Specific

 The objective must target a specific area for improvement.

 A specific goal has a much greater chance of being accomplished than a general
goal.
 A specific goal might answer the questions: What? When? Who? ETC

44 | P a g e
Mr F. Kufakunesu
2. Measurable

 The objective must be quantifiable or at least suggest an indicator of progress.

 Establish concrete criteria for measuring progress toward the attainment of each goal
you set.
 This includes answering the questions (How many? How Much? etc.) It generally
helps us to know that we are there or not.

3. Attainable/ Achievable:

 When you identify goals that are most important to you, you begin to figure out ways
you can make them come true.
 You to consider the attitudes, abilities, skills, and financial capacity to reach them.
You begin seeing previously overlooked opportunities to bring yourself closer to the
achievement of your goals.
 There must means for you to be able to reach the achieve the
4. Relevant
 Goals should be instrumental to the mission of the department (and ultimately, the
institution).
 Why is the goal important? How will the goal help the department achieve its
objectives?
 Develop goals that relate to the staff member’s key accountabilities or link with
departmental goals that align with the institutional strategic goals.

5. Time-related

Specify when the result(s) can be achieved.

It is essential that goals have a timeframe or target date. A commitment to a deadline helps a
team focus their efforts towards completion of the goal and prevents goals from being
overtaken by other unrelated routine tasks that may arise. A time restrained goal is intended
to establish a sense urgency.

Examples
i) To increase Market share by 10% by 31 December 2018
ii) To increase profitability by 15% by 31 December 2020
iii) Boosting customer satisfaction by 20% by 31 December 2017
iv) Enhance brand awareness by 30% by the end of December 2018

Marketing Strategies
Strategy is from the Greek word “Strategos” which means the manoeuvres to conquer an
enemy. It was an ancient term used in the battle-field.
Strategy Definition
 Strategy is a plan, a "how," a means of getting from here to there. from (Henry
Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning )
 Strategy answers the question: What are the ends we seek and how should we achieve
them? (George Steiner)
 A strategy is generally a means of achieving the set goals or objective/s.

45 | P a g e
Mr F. Kufakunesu
Characteristics of a good Marketing Strategy
1. Repeatable
That's great that a marketing tactic works once, but will it work again?
Find a way to do things that work well (and hopefully pay for themselves), when they're
repeated over and over again.
2. Measurable
Pick marketing strategies and tactics that allow you to measure your progress along the way.
3. Flexible
In a dynamic marketplace, flexibility isn't just nice to have, it's an essential. If something is
not working, you need to be able change it quickly. You need to leave room for chnge.
4. Testable
A good strategy must be testable at a smaller scale before being implemented on a large scale
to minimize chances of falling into a pit.
5. Scalable
It must be possible to increase the scale of your strategy if it is working properly.
6. Variable
Marketing strategies with tactics that are too repeatable, measurable, and testable can be
boring. People like consistency, but they also want something that they don't expect. People
like surprise. So make your marketing strategy multi-faceted, and also introduce elements
into your marketing strategy that they don't predict. Build it into your plan.
7. Momentum-able
A good strategy must allow acceleration.

Examples of marketing strategies

Marketing strategies are generated from the marketing mix Elements namely Product, Price
Place, promotion, Processes, people and physical evidence.
Product strategies
These are marketing strategies cantered on the product eg
 New product development
 Branding
 Rebranding
 Positioning Repositioning
 Adding frills,
 Removing product frills
Pricing Strategies
 Penetration
 Skimming
 Premium
 Predatory
 Bundling ETC
Place/Distribution Strategies
 Mass Distribution
 Exclusive distribution
 Selective distribution
Promotional Strategies
These are communication strategies i.e
 Advertising
 Personal selling
 Direct marketing

46 | P a g e
Mr F. Kufakunesu
  Sales Promotion
 Exhibitions
 ETC
Process strategies
 Quickening Complaint handling Processes
 Speeding Booking Processes
 Controlling Service delivery processes
 Personal service
 Self-services
 ETC
People Strategies
 Training employees
 Employee recruitment
 Employee motivation
 Compensation of employees etc
Physical Evidence / Servicescape strategies
 Layout designing strategies
 Air conditioning
 Airt freshening
 Lighting
 Signs Etc

Implementation of Marketing Strategies

Implementation is the execution of the planned activities. Implementation can be guided by
McKinsey 7Ss Framework. It can be clearly planned for using the implementation matrix
What? By Who? When? Where? HOW?
Promotion Communications Beginning of every Bindura Posters
Supervisor month starting Flyers
June 2016
Pricing Marketing and June 2016 Bindura Undercutting
Finance Manager competitor
prices
Product Production August 2016 Harare Extending
Manager product lines
Place Logistics Supervisor July 2016 Bindura Mass
Urban Distribution
and rural

Control and Evaluation

Feedforward

Concurrent

Feedback

Contingency Planning

47 | P a g e
Mr F. Kufakunesu
GENERIC/BROAD STRATEGIES
Strategies they range in scale, some are specific and some are broader. Michael Porter also managed
to identify some of the generic strategies as follows:

Porter’s Generic Strategies

Michael Porter postulated the following generic competitive strategies:

1. Cost Leadership
 Cost leadership means having the lowest per-unit (i.e., average) cost in the industry – that
is, lowest cost relative to your rivals.
 This could mean having the lowest per-unit cost among rivals in highly competitive
industries, in which case returns or profits will be low but nonetheless higher than
competitors,
 Or, this could mean having lowest cost among a few rivals where each firm enjoys
pricing power and high profits.
 Note that cost leadership is defined independently of market structure.
Cost leadership is a defendable strategy because:
a) It defends the firm against powerful buyers. Buyers can drive price down only to the level
of the next most efficient producer.
b) It defends against powerful suppliers. Cost leadership provides flexibility to absorb an
increase in input costs, whereas competitors may not have this flexibility.
c) The factors that lead to cost leadership also provide entry barriers in many instances.
Economies of scale require potential rivals to enter the industry with substantial capacity
to produce, and this means the cost of entry may be prohibitive to many potential
competitors.

Achieving a low cost position usually requires the following resources and skills:
a) Large up-front capital investment in new technology, which hopefully leads to large
market share in the long-run, but may lead to losses in the short-run.
b) Continued capital investment to maintain cost advantage through economies of scale and
market share.
c) Process innovation – developing cheaper ways to produce existing products.
d) Intensive monitoring of labor, where workers frequently have an incentive-based pay
structure (i.e., a contract which includes some combination of a fixed-wage plus piece-
rate pay).

48 | P a g e
Mr F. Kufakunesu
 e) Tight control of overhead.

Cost Leadership risks

Maintaining cost leadership can be risky because:
 Innovations nullify past inventions and learning, and hence cost leadership requires
continual capital investment to maintain cost advantage.
 Exclusive attention to cost can blind firms to changes in product requirements.
 Cost increases narrow price differentials and reduce ability to compete with competitors’
brand loyalty.

2. Differentiation

 Differentiating the product offering of a firm means creating something that is perceived
industry wide as being unique.
 It is a means of creating your own market to some extent.
 There are several approaches to differentiation:
a) Different design
b) Brand image
c) Number of features
d) New technology etc

A differentiation strategy may mean differentiating along 2 or more of these dimensions.

Advantages of a differentiation Strategy

a) It insulates a firm from competitive rivalry by creating brand loyalty; it lowers the price
elasticity of demand by making customers less sensitive to price changes in your
products.
b) Uniqueness, almost by definition, creates entry barriers and reduces substitutes. This
leads to higher margins, which reduces the need for a low-cost advantage.
c) Higher margins give the firm room to deal with powerful suppliers.
d) Differentiation also mitigates buyer power since buyers now have fewer alternatives.

Achieving a successful strategy of differentiation usually requires the following:

a) Exclusivity, which unfortunately also precludes market share and low cost advantage.
b) Strong marketing skills.
c) Product innovation as opposed to process innovation.
d) Applied R&D.
e) Customer support.
f) Less emphasis on incentive based pay structure.

Risks of each Strategy:

Each generic strategy is based on erecting different kinds of defences against the competitive
forces, and hence they involve different risks.

Differentiation Risks:

49 | P a g e
Mr F. Kufakunesu
  Cost differentiation between low cost firms and differentiating firms becomes too large to
hold customer loyalty.
 Buyers’ trade-off features, service, or image for price.
 Buyers’ need for differentiation is volatile.
 Imitation decreases perceived differentiation.

3. Focus or Niche Strategy

 Here the marketer focuses on a particular buyer group, product segment, or geographical
market.
 Whereas low cost and differentiation are aimed at achieving their objectives industry
wide, the focus or niche strategy is built on serving a particular target (customer, product,
or location) very well.
 Note, however, that a focus strategy means achieving either a low cost advantage or
differentiation in a narrow part of the market. For reasons discussed above, this creates a
defendable position within that part of the market.
 This implies that it can be low cost focus or focused differentiation.

50 | P a g e
Mr F. Kufakunesu
COMPETITIVE POSITIONS AND STRATEGIES
As competition continues in stable markets, competitive positions gradually develop. Such positions
can act as guidelines for strategy formulation. Below are the most common competitive positions:

 Market Leader
 Market Challenger
 Market Follower

Market Leader Strategies

 In the majority of industries there is one firm that is generally recognized to be the leader.
 It typically has the largest market share and, by virtue of its pricing, advertising intensity,
distribution coverage, technological advance and rate of new product introductions, it
determines the nature, pace and bases of competition.
 It is this dominance that typically provides the benchmark for other companies in the industry.
However, it needs to be emphasized that market leadership, although often associated with
size, is in reality a more complex concept and should instead be seen in terms of an
organization’s ability to determine the nature and bases of competition within the market.
 A distinction can therefore be made between market leadership that is based primarily upon
size, and what might be termed ‘thought leadership’ that is based not so much upon size, but
upon innovation and different patterns of thinking.
The strategies of a market leader are as follows:

1. Expand total market

 find new users
 determine new uses for existing products
 more usage (encourage the current users to use more of the product

2. Defensive strategies

a) Position Defense (Fortress Strategy)

This is the most common defensive strategy, and is highly appropriate for a market leader.
This is a strategy whereby the defending organization will be trying by all means to protect
the status quo. It concentrates solely on holding the leadership position (Rogers 2001)
Advantages
 This can enable the organization to remain on the leadership position.
 Boost organizational understanding of the existing market

Disadvantages
 The strategy can end up harnessing the available organizational resources and thereby
minimizing the chances of diversification.
 Defending organizations lack the zeal to attack

b) Flank Defense

51 | P a g e
Mr F. Kufakunesu
This is a strategy usually employed by large companies to protect their weaker area(s) or to
establish a base for possible counterattack of a competitor’s flank attack strategy. (Rogers
2001).
Advantages
 This can minimize the chances of being attacked by other players in the industry
 This can also boost the organization’s image and well-being.
Disadvantages
 The organization can end up focusing more on weaknesses rather than strengths. This
can have a negative bearing on the company’s overall performance.
 There is a chance of trying to defend the areas where no one will or is aiming to
attack.

c) Pre-emptive Defense

This is a defensive strategy in which a company protects itself from competitive attack by
attacking the competitors first. However, this strategy requires good and up-to-date
competitive marketer intelligence. (Rogers 2001).
Recognizing the limitations of both position defense and contraction defense, many
strategists have recently begun to recognize the importance of pre-emptive defense. This
involves gathering information on potential attacks and the, capitalizing upon competitive
advantages, striking first. (Wilson, Pearson and Gilligan 2005)
Advantages
The organization can gain from the first mover advantage
Disadvantages
This can trigger hostile competitive retaliation.

d) Counteroffensive (Counterattack) Defense

It is sometimes referred to as “wait and see” strategy. It is characterized by a strong, direct

and aggressive response to a competitor’s attack. The player waits for the competitor to
attack and then takes a counter attack. This strategy is backed by proper timing. (Jobber
2004).
Advantages
It gives the organization a better picture of the competitor’s actions and intensions prior to
any action. This can help in planning and allocation of resources.
Disadvantages
The competitor can gain the first mover advantage.

e) Mobile Defense

This strategy is usually used by a market leader, and it involves broadening the defender’s
market reach or product diversification in order to strengthen its overall defensive positions.
Being in some markets and places where the competitors are not participating.
Advantages

52 | P a g e
Mr F. Kufakunesu
This can create more competitive attributes
Spreading the risk and expanding the market
Disadvantages
Can strain organizational resources and can also limit specialization.

f) Contraction Defense

This is usually referred to as ‘Strategic withdrawal’. It involves sparing resources and

avoiding certain markets, or activities with the aim of moving in a different direction. This
will at the end of the day surprise the competitor.
Advantages
This can shock the competitors.
Better use of organizational resources
Disadvantages
The competitor can take advantage of the areas from which you withdraw your efforts.

g) Psychological defense strategy

This is a strategy of scarring off competitors from attacking you by leaking misleading
information that you are going to do something devastating if you are attacked – such as
responding with an enormous price cut.
Advantages
Can create fear and uncertainty to competitors
The organization can earn respect from competitors
Disadvantages
Risky, if known by competitors

Defensive and offensive strategies

53 | P a g e
Mr F. Kufakunesu
Market Challenger Strategies

The market challengers usually attack the competitors.

Targets of attack:
1. Mkt leader not in tune with mkt: vulnerable
 Dissatisfied customers
 Technology shifted
2. Firm its own size -- underfinanced, not doing job
3. Small and regional firms -- underfinanced
 Discount or cut prices
 Cheap goods
 Innovate products and distribution
 Improve services
 Advertise heavily
 Proliferate the range
 Reduce costs

1. Frontal attack:
This is a direct attack strategy. In this strategy, attacker matches its opponent’s price,
advertising methods, price and distribution. The one which has better and more resources
win`s the market. This can be done by matching: Prices; Advertising Methods; Products; and
distribution among other things.
Advantages
The organization can win business at the expense of competitors if this strategy is managed
properly
Disadvantages
Can trigger hostile competition
Can also limit creativity and diversification since the organization’s actions will be
influenced by the competitor.

2. Flank attack
Make strategies in such a way that focuses on the weak part of the opponents. Attackers find
that weaknesses and attack on the same to acquire more market. This can be done through:
spotting uncovered customer needs not served by leaders; identify shifts in mkt segments;
de-campaign the competitors in areas of weaknesses; Price to outcompete poor competitor’s
products; Identify and overcome the leader’s failures.
Advantages
Can take the competitor by surprise
It minimizes chances of hostile retaliation
Capitalizing on the weaknesses of the competitor

54 | P a g e
Mr F. Kufakunesu
3. Encirclement attack/blitzkrieg
Launching a new product in the market that is very similar to the opponents to capture the
wide area of market. Or doing a grand offensive of opponents in many fronts via blitz. In this
strategy, the attacker will attack the competitor from various angles.
This can be done through:
 Attacking and capturing a wide slice of territory;
 Grand offensive in many fronts
 Attacker offers everything leader offers & more Case:
Advantages
This can surprise the competitor
Retaliation is difficult
Disadvantages
This can be costly

4. Bypass attack
This is also referred to as an indirect assault. Attackers attack where opponents are not
looking and by finding a new market segment. This is done by concentrating on easier market
segments to broaden your base. It involves diversifying into unrelated products, new
geographic areas, and/or entering new technological areas.
3 alternative bypass attack strategies:
 Diversify into unrelated products
 New geographical markets
 Leapfrog into new technologies
Advantages
Minimizing hostility
Spreading risky
Disadvantages
Can be costly

5. Guerrilla attack
A marketing tactic in which a company uses surprise and/or unconventional interactions in
order to promote a product or service. These are the actions aimed at harassing &
demoralizing the opponent. This is a very excellent strategy for small companies. This can
include:
 Events Marketing
 Discount Pricing
 Sales Promotion

55 | P a g e
Mr F. Kufakunesu
Market Follower Strategies
Theodore Levitt argues that a strategy of product imitation might be as profitable as a
strategy of product innovation. Imitation is a bit cheaper than innovation.
The market follower strategies are:

1. Counterfeiter
The counterfeiter duplicates the leader’s product and packages and sells it on the black
market or through disreputable dealers. Music firms, Apple, and Rolex have been plagued
by the counterfeiter problem, especially in Asia.

2. Cloner

The cloner emulates the leader’s products, name, and packaging, with slight variations.
For example BIVI, KIVI, KIME etc

3. Imitator
The imitator copies some things from the leader but differentiates on packaging,
advertising, pricing, or location. The leader doesn’t mind as long as the imitator doesn’t
attack aggressively. E.g Dendairy versus Dairibord products.

4. Adapter
The adapter takes the leader’s products and adapts or improves them. The adapter may
choose to sell to different markets, but often it grows into a future challenger, as many
Japanese firms have done after improving products developed elsewhere. Techno versus
Samsung Android phones.

56 | P a g e
Mr F. Kufakunesu
57 | P a g e
Mr F. Kufakunesu