COMRADE SM SUNTAI

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TARABA STATE POLYTECHNIC SUNTAI

SCHOOL OF ADMINISTRATIVE AND BUSINESS STUDIES (SABS)

SUNTAI

FIRST SEMESTER

LECTURE NOTE

ON:

PRINCIPLES OF MARKETSING

COURSE CODE BUS 1110

PREPARED FOR

DBA I

DEPARTMENT OF BUSINESS ADMINISTRATION

COMPILED BY

COMRADE S.M. SUNTAI

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DEFINITION OF MARKETING

According to the American marketing association (AMA) board of directors

Marketing is the activity, set of institutions, and processes for creating,

communicating, delivering and exchanging offerings that have value for

customers, clients, partners, and society at large

Dr. Philip Kotler defines marketing as the science and art of exploring,

creating, and delivering value to satisfy the needs of a target market at a

profit. Marketing identifies unfulfilled needs and desires.

Marketing is an ongoing communications exchange with customers in a way

that educates, informs and builds a relationship over time. The overtime part

is important because only over time can trust be created.

Professor Philip kotler explained that marketing was meeting the needs of

your customer at a profit.

Marketing is creating irresistible experiences that connect with people

personally and create the desire to share with others. Saul colt-Head

Rebecca Lieb, defines Marketing is a strategic and tactical multifaceted

process that supports sales as well as customer service and retention. The

primary stages include identifying target audiences, developing a marketing

communications strategy that usually includes several methods and channel

(e.g. advertising, PR, content, event, broadcast) measuring and assessing

results, and constantly refining the process based on learning and

marketplace developments. Marketing can also become a feedback loop

between an organization and its customers and prospects that helps to inform

and shape the business going forward.

From the foregoing definitions it can be noted that marketing requires

1. Finding out what customers need

2. Developing a product or service to satisfy customer needs

3. Positioning the product or service to satisfy customer needs

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4. Determining appropriate mix decisions to price promote and distribute

the product or service.

For marketing to take place at least four factors are required

1. Two or more parties with unsatisfied needs

2. Desire and ability to satisfy this needs

3. A forum for the parties to communicate

4. There must be something of value to exchange

Objectives of marketing

1. Creation of demand: - the marketing management’s first objective is to

create demand through various means. A conscious attempt is made to

find out the preferences and tastes of the consumers. Goods and

services are produced to satisfy the needs of the customers.

2. Customer satisfaction: - the marketing manager must study the

demands of customers before offering them any goods or services.

Selling the goods or services is not that important as the satisfaction of

the customer’s needs

3. Market share; - every business aims at increasing the market share, i.e.

the ratio of its sales in the economy. For instance, both Pepsi and Coke

compete with each other to increase their market share. For this they

have adopted innovative advertising, innovative packaging, sales

promotion activities etc.

4. Generation of profits;-the marketing department is only the

department which generates revenue for the business. Sufficient profits

must be earned as a result of sale of want-satisfying products. If the firm

is not earning profits, it will not be able to survive in the market.

5. Creation of goodwill and public image;- to build up the public image of

a firm over a period is another objective of marketing department

provides quality products to customers at reasonable prices and thus

creates its impact on the customers. The marketing manager attempts

to raise the goodwill of the business by initiating image-building

activities such a sales promotion, publicity and advertisement, high

quality, reasonable price, convenient distribution outlets, etc.

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Importance of marketing

1. Marketing helps in transfer, exchange and movement of goods. Goods

and services are made available to customers through various

intermediaries via wholesalers and retailers’ etc. marketing is helpful to

both producers and customers

2. Marketing is helpful in raising and maintaining the standard of living of

the community. Marketing is above all the giving of a standard of living

to the community

3. Marketing create employment. Marketing is complex mechanism

involving many people in one form or the other. The major marketing

functions are buying, selling, financing, transport, warehousing, risk

bearing and standardization, etc.

4. Marketing is a source of income and revenue. The performance of

marketing functions is all important, because it is the only way through

which the concern could generate revenue or income and bring in

profits

5. Marketing acts as a basis for making decisions. A businessman is

confronted with many problems in the form of what, when, how much

and whom to produce? In the past problems was less on account of local

markets. There was a direct link between producer and consumer

6. Marketing acts as a source of new ideas. The concept of marketing is

dynamic concept. It has changed altogether with the passage of time.

Such changes have far reaching effects on production and distribution.

With the rapid change in tastes and preference of people, marketing has

to come up with the same

7. Marketing is helpful in development of an economy. Adam smith has

remarked that nothing happens in our country until somebody sells

something. Marketing is the kingpin that sets the economy revolving.

The marketing organization, more scientifically organized, makes the

economy strung and stable, the lesser the stress on the marketing

function, the weaker will be the economy.

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Features of marketing

Some of the important features of marketing are as follows

1. Customer focus; -the marketing function of a business is customer-

centered. It makes an attempt to study the customer needs, and goods

are produced accordingly. The business existence depends on human

needs. In a competitive market, the goods that are best suited to the

customer are the ones that are well accepted

2. Customer satisfaction; - a customer expects some services or benefits

from the product for which payment is made. If this benefits more than

the amount paid, then the customers are satisfied. In long run, customer

satisfaction helps to retain market demand.

3. Objective oriented; -All marketing activities are objective oriented.

Different objectives are fixed at different levels, but the main objective is

to earn profit from business along with the satisfaction of human wants.

4. Marketing is both art and science; - art refers to a specific skill that

required in marketing activities of any type of business. Science refers

to a systematic body of knowledge, based on facts and principles. The

concepts of marketing include a bunch of social sciences such as

economics, sociology, psychology and law.

5. Continuous and regular activity; - marketing is an activity designed to

plan, price, promote and distribute products. At the same time; it also

addresses both the current and future consumers.

6. Exchange process; - marketing involves exchange of goods, services

and ideas with the medium of money. Exchange takes place between

sellers and buyers. Most marketing activities are concerned with the

exchange of goods. Functions such as distribution, after-sale services

and packaging help in the exchange process

Factors influencing marketing

1. Population growth; - the increase in population naturally increases the

demand too. Markets are made up of people. Increase in population

causes increasing the markets, increasing the consumers, who have

increased demand for goods

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2. Increasing household; - the growth of demand for household products

is more than it is to the total population at any time. Joint family system

has become unpopular because of many reasons. most families are sub-

divided and this increases the number of families and their demands

3. Disposal of income; - automation in industries, births of many new

firms etc. open the door of employment. Thus people have increased

their income and in turn aim for more satisfaction and more comforts.

When income continues to increase, the purchasing power also

increases.

4. Surplus income; - the people have surplus income left after meeting the

expenses on essential items. This surplus amount will be on non-

necessary products or luxury goods

5. Technological development; - science and technology improve day by

day. New inventions of products take place often. None will have the

guarantee that his products will always possess good demand in the

market.

6. Mass communication media; -the growth of mass communication

media- newspapers, magazines, radio, television etc. facilities the buyers

to learn about the new products available for sale. The buyers get

information about the new products, faster and more effectively before

the products come to the market.

7. Credit purchase; -credit purchase through hire-purchase schemes and

installment schemes are common today. Credit purchase pushes sales.

The customers enjoy the facilities and this widens the market

8. Changing social behavior; - the social pattern is changing. It is essential

for any product or service to keep pace with the change in order to

survive in the market.

9. Transport facilities; - the fast and easier transport facilities have

resulted in urban-rural interaction regularly and also global tours are

becoming very common. These have helped to change customer’s

attitude towards marketing activities

10. Increase in competition; - with industrialization, the

manufacturing base gone up and a large number of organizations are

manufacturing consumers products and giving rise to competition.

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The five marketing concept

1. Production concept

2. Product

3. Selling concept

4. Marketing concept

5. Societal marketing concept

1. The production concept

When the production concept was defined, a production oriented business

dominated the market. This was from the beginning of capitalism to the mid

1950’s. During the era of the production concept, businesses were concerned

primarily with production, manufacturing, and efficiency issues. Companies

that use the production concept have the belief that customers primarily want

products that are affordable and accessible

2. The product concept

This product works on an assumption that customers prefer products of

greater quality and price and availability doesn’t influence their purchase

decision. And so company develops a product of greater quality which usually

turns out to be expensive

3. The selling concept

Production and product concept both focus on production but selling concept

focuses on making an actual sale of the product. Selling concept focuses on

making every possible sale of the product, regardless of the quality of the

product or the need of the customer

4. The marketing concept

A company that believes in the marketing concept places the customer at the

center of the organization. All activities are geared towards the customer. A

business, aims to understand the needs and wants of a customer

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5. The societal marketing concept

This is relatively new marketing concept. While the societal marketing

concept highlights the needs and wants of a target market and the delivery of

better value than its competition, it also emphasizes the importance of the

well-being of customers and society as a whole (customer welfare or societal

welfare)

THE MARKETING MIX

The marketing mix refers to specific techniques or tactics designed by an

organization to stimulate acceptance of its ideas, products, or services. Each

mix is unique and specially designed for the given product and market

segment. The mix is centered on four variables known as the 4p’s of

marketing.

These are:-

1. Product

2. Price

3. Promotion

4. Place (physical distribution)

1. Product: - this is anything that be offered to a market for attention,

acquisition, use or consumption that might satisfy a need. It includes

persons, places, organizations and ideas e.g. cloths, dry cleaning

services, idea for developing a new product, a person applying for a job.

2. Price: - this is the amount for which product, service or ideas is offered

for sale irrespective of its worth or value to a potential buyer

3. Promotion: -this is the use of communication techniques to persuade or

convince prospective customer to develop positive attitude towards a

product. Promotion tools include: advertising, personal selling, sales

promotion, publicity and public relations.

4. Place: - this involves the physical distribution of goods and services.

That is the movement of materials and finished goods from point of

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origin to point of use or consumption in order to meet the need of the

customer

MARKET AND TYPES OF MARKETS

In marketing, market is defined as all actual and potential customers sharing a

particular need or want who might be willing and able to engage in exchange

to satisfy that need or want.

Marketing can also be defined as a legal environment where exchange of

goods and services takes place

Types of Market

1. Physical markets: -physical market is a set up where buyers can

physically meet the sellers and purchase the desired merchandise from

them in exchange of money. Shopping small, departmental stores, retail

stores are examples of physical markets.

2. Non-physical markets/virtual markets: -in such markets, buyers

purchase goods and service through internet. There is no physical

interaction; instead the transaction is done through internet. Example

buying goods online

3. Auction market: - in an auction market the seller sells his goods the

highest bidder.

Market of intermediate goods: - such market sell raw materials (goods)

required for the final production of goods.

4. Black market: - a black market is a setup where illegal goods like drugs

and weapons are sold

5. Knowledge market: - knowledge market is a setup where which deals

with the exchange of information and knowledge based products. E.g.

consultancy

6. Financial market: -market dealing with exchange of liquid assets is

called financial market.

7. Stock market: - a form of market where sellers and buyers exchange

shares is called stock market

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8. Bond market: - a market place where buyers and sellers are engaged in

the exchange of securities, usually in the form of bonds is called bond

market. A bond is contract signed by both the parties where one party

promises to return money with interest at fixed interval.

9. Foreign exchange market: - in such type of market, parties are

involved in trading of currency. In a foreign exchange market (also

called currency market, one party exchange one country’s currency with

equivalent quantity of another countries currency.

10. Predictive market: - is a setup where exchange of goods or

service takes place for future. Transactions are mostly based on

speculation. The buyer benefits when the market goes up and is a lot

when the market crashes.

MARKETING ENVIRONMENT

The marketing operates in two environments, the micro and macro

environment

The micro or controllable environment: - marketing management’s job is to

build good relationships with customers by creating customer value and

satisfaction. Marketing managers require working closely with other

departments, suppliers, marketing intermediaries, customer, competitors and

various publics that may constitute a coherent company’s value delivery

network

a. The company: - in designed marketing plans, marketing management

must take other company groups into account. Groups such as finance,

research and development (R &D), purchasing, operations and

accounting. All those groups form part of the internal environment

b. Suppliers: -supplier forms an important link in the company’s overall

customer’s value delivery system. Suppliers are those firms land

individuals that provide the resources needed by the marketing

company to produce goods and or services.

c. Marketing intermediaries or facilitating organizations: -marketing

intermediaries are in depended businesses that perform all activities

necessary to move products from manufacturing to ultimate consumers.

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They include resellers, physical distribution firms, marketing service

agencies, and financial intermediaries create place utility by stocking

products where customers are located

5. Customers: - they are the actual buyers of a product. The customer is

kings an age long parlance that is very true in today’s marketing world.

Marketing organization must treat their customers as very important

groups of people living in the world.

6. Competitors: - a firm rarely stands alone in its efforts to satisfy a given

customer market. Its efforts to serve the market are matched by similar

efforts on the parts of others, that is to say, the competitors. To be

successful as the marketing concept states, a company must provide

greater customer value and satisfaction than its competitors do

7. Publics: - the company marketing environment also includes various

publics. A public is any group that has an actual or potential interest in

or impact on an organization’s ability to achieve its objectives.

The macro environment or uncontrollable marketing environment

Macro environment factors act external to the company and are quite

uncontrollable. These factors do not affect the marketing ability of the concern

directly but indirectly the influence marketing decisions of the company.

1. Demographic forces: Different market segments are typically impacted

by common demographic forces, including country/region; age;

ethnicity; education level; household lifestyle; cultural characteristics

and movements.

2. Economic factors: The economic environment can impact both the

organization’s production and the consumer’s decision making process.

3. Natural/physical forces: The Earth’s renewal of its natural resources

such as forests, agricultural products, marine products, etc must be

taken into account. There are also the natural non-renewable resources

such as oil, coal, minerals, etc that may also impact the organization’s

production.

4. Technological factors: The skills and knowledge applied to the

production, and the technology and materials needed for production of

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products and services can also impact the smooth running of the

business and must be considered.

5. Political and legal forces: Sound marketing decisions should always

take into account political and/or legal developments relating to the

organization and its markets.

6. Social and cultural forces: The impact the products and services your

organizations brings to market have on society must be considered. Any

elements of the production process or any products/services that are

harmful to society should be eliminated to show your organization is

taking social responsibility. A recent example of this is the environment

and how many sectors are being forced to review their products and

services in order to become more environmentally friendly.

Micro and macro environments have a significant impact on the success of

marketing campaigns, and therefore the factors of these environments should

be considered in-depth during the decision making process of a strategic

marketer. Considering these factors will improve the success of your

organization’s marketing campaign and the reputation of the brand in the long

term.

IMPORTANCE OF MARKETING IN AN ECONOMY

Generally, marketing is important to the organizations in an economy, the

consumers in an economy, the nation’s economy and the world at large.

Specially, marketing is important in the following areas in economy

1. Demand management: - through marketing, the demand pattern of the

consumers can be directed and sharpened to achieve overall national

demand objective

2. Creation of employment opportunities: - marketing exposes one too

many related fields such as product management, advertising, retailing,

international marketing etc.

3. Acquisition of foreign exchange: - international or export marketing

can help in generating foreign exchange in the economy

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4. Competition: - marketing activities stimulate competition to the benefit

of the consumers in an economy

5. Creation of wider markets: - marketing activities stimulate demand

thereby increasing the size of the company’s product penetration as

well as creating wider markets.

6. Helping national development: - it helps in national economic

planning efforts by providing very useful data on consumer behavior

pattern. This led to better quality control, and production effectiveness

and improves national income

7. Education: - it helps in educating and disseminating vital information

about products in a country

8. Improves standard of living: - marketing activities helps to improves

the people quality of life by offering good product at the right price and

at right time

PRODUCT

A product is defined as anything offered for sale for the purpose of satisfying a

want or need on both sides of the exchange process. This includes a tangible

objects that marketer refer to as good as well as an intangible service, an idea,

a place, or an organization.

Product classification

1. Durable goods: - goods that are used or consumed over long period of

time, usually at least several years, example include house, fans, plants

and machineries, motor vehicles

2. Non-durable goods: - goods that are used or consumed over a short

period of time or after one on few use e.g. food, office equipment

Classification of consumer product

Consumer products are product bought to be used by the consumer. They do

not require further processing.

1. Convenience products: - relatively in expensive products that buyers

or users buy frequently without much thought and effort

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2. Shopping products: - products that costly and involves more risk than

convenience products, thereby causing buyer and user to invest more

time and efforts when making the selection or buying decision.

3. Special products: - these are products last long and most costly and are

unique or so specialized that buyer and user are willing to expend great

effort to seek out and acquire them. Consumer rarely accepts

substitutes

4. Unsought products: - These are products the consumer knows of their

existence but rarely demand for them. E.g. encyclopedia, casket

Classification of industrial products

1. Raw materials: - become part of another physical product e.g. goods

found in natural state, minerals, forest products, sea products,

agricultural products etc

2. Fabricating material and parts: - become an actual part of the finished

product. Have already been processed to some extent fabricating materials

require a little more processing e.g. iron turned into steel, flour to bread,

yam yarn to cotton etc.

3. Installation: - are manufactured industrial products e.g. diesel engines,

blast furniture, steel mill etc.

4. Accessory equipment: - used in the production operations of an

industrial firm but it does not have significant influence on the scale of

operation in this firm. It does not become an actual part of the finished

product. Its life is shorter than installation but longer than operating

supplies e.g. office equipment, cash registers, small power tools.

5. Operating suppliers: - the convenience goods of industrial field. They

are short-lived low period items, purchased with minimum effort. Aid in

operation but not become part of finished goods e.g. university,

heating/cooling fuel, washing supplies

Six essential elements of a product marketing strategy

Here are six essential elements of a strong product marketing strategy:

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1. Product

It may be obvious, but the first step to developing a strong product marketing

strategy is making sure you have a strong product. Before you even start

putting together your strategy, you need to make sure the product is created

with the customer in mind and aligns with their needs.

People don’t want to just buy things; they want to solve their problems. So,

ask yourself what problem your product solves for the customer. How will it

make their lives better? Answering these questions will help you determine

the right messaging for promotion down the road.

The value your product provides is more important than its capabilities. In

other words, you should focus more on the benefits of your product, rather

than its features. Each feature should be developed for a purpose and provide

some benefit to the customer. You should have an innovative product, or at

least one that solves a common business challenge.

2. Audience

Just like your product needs to be created with your audience in mind, your

strategy should also be created with your audience in mind. To do that, you

need to truly understand the individuals in your audience and know

everything you can about them.

Start by doing some research and gathering any information you can about

your intended audience, such as:

Age

Gender

Marital status

Education

Profession

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Better yet, interview your customers. Set up phone calls or meetings and ask

them about their preferences. Listen to how they talk and the language they

use. This can help form your narrative.

According to Cintell, high performing companies are 2.3 times more likely to

research their buyers’ drivers and motivations. Any information can be

helpful in uncovering your audience’s preferences and how best to market

your product to those individuals. Once you have all your information

gathered, start building buyer personas.

In your research, you’ll probably discover some patterns among your

audience. These commonalities can be grouped together to create buyer

personas, or an archetype of what your ideal customer looks like and how

they behave. This way, you can focus on marketing to one buyer persona at a

time, rather than to your whole audience.

3. Messaging

It’s not enough to just think about your audience through product

development. You need to communicate with your audience. According to

Customer Thermometer, 57 percent of consumers feel trust when they’re

emotionally connected to a brand, and that emotional connection is built

through your messaging.

Your product massaging should be built around a narrative. Narratives are the

easiest way to get your audience to connect with your product because they

are relatable and will resonate with your audience.

To craft an effective story, you need to identify your product’s unique selling

proposition. What is the main value for the user? Hone in on one key message

that will drive your narrative.

4. People

Developing and promoting a product requires a multi-team effort. However,

keeping multiple teams on the same page is no easy task. Product marketers

need to be the bridge between sales, marketing, engineering, and development.

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They need to bring the teams together and make sure everyone is on the same

page.

According to The Chartered Institute of Marketing, only 35 percent of

marketers believe they understand their role in delivering a branded customer

experience. It’s the product marketer who is responsible for educating and

informing the entire team and organization to ensure everyone knows their

part.

With so many people working on one project, it’s easy for miscommunication

and disorganization to derail your progress. A product roadmap can bring all

the teams and internal stakeholders into alignment.

The product roadmap provides a summary of the entire product marketing

plan and guides the team on what will happen in each step of the process.

With this document, you can maintain visibility throughout the entire project

and ensure all those involved know what’s going on.

5. Promotion

Having a great product and well-thought-out strategy isn’t where the work

stops. You can’t expect your audience to flock to purchase your product if they

know nothing about it. You need to get the word out through strategic

promotion.

According to CEB, 58 percent of consumers have tried new brand in the last

three months that they didn’t even know about a year ago. Because those

brands invested in promotion, those customers were able to learn about them.

Your promotion plan needs to get your message in front of the right audience

at the right time. If you’ve done your research and built your buyer personas,

you should have no problem identifying the right audience.

But timing is also important. Besides researching your audience, you should

also be doing research on the market overall. You need to ensure you have a

strong product-market fit and that your launch is timed well to be the most

effective.

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Communicating through the right channels is also important. Look to where

your audience spends time, and include a mix to reach different segments of

your audience. Your promotion plan could include:

Email

Social media

Social media advertising

TV advertising

Direct email such as brochures

Website

You should promote your product through the channels that make the most

sense for your brand and audience. Make sure you plan your promotion well

in advance to ensure everything runs smoothly once you’re ready to launch.

6. Analysis

Your product marketing strategy needs to be just that – strategic. You can’t

expect your strategy to have perfect results, and you need to be tracking those

results to learn from them.

The Chartered Institute of Marketing finds that only 48 percent of marketers

are consistently measured brand, customer-related, and non-financial metrics

of success. If you’re not measuring, how will you know how to improve?

Once you’ve implemented your promotion plan and your product has gone to

market, you need to watch and listen to find out how successful you are. Focus

on several key metrics to track, such as email clicks, website form submissions,

reach, share of voice, and, of course, conversions.

Look at both what did well and where you went wrong. If possible, adjust your

strategy as you go along, using the lessons you learn to guide your product

marketing strategies in the future.

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THE PRODUCT DEVELOPMENT PROCESS

New product development is a process of taking a product or service from

conception to market. The process sets out a series of stages that new

products typically go through, beginning with ideation and concept

generation, and ending with the product's introduction to the

market. Occasionally, some of the stages overlap or vary depending on the

nature of the business.

Key stages in the process of product or service development

The process involves eight key stages:

1. Idea generation – brainstorming and coming up with innovative new ideas.

2. Idea evaluation - filtering out any ideas not worth taking forward.

3. Concept definition - considering specifications such as technical feasibility,

product design and market potential.

4. Strategic analysis - ensuring your ideas fit into your business' strategic

plans and determining the demand, the costs and the profit margin.

5. Product development and testing - creating a prototype product or pilot

service

6. Market testing - modifying the product or service according to customer,

manufacturer and support organizations’ feedback. This involves deciding the

best timing and process for piloting your new product or service.

7. Commercialization – determining the pricing for your product or service

and financing marketing plans.

8. Product launch – a detailed launch plan can help ensure a smooth

introduction to market.

In most cases, a phased approach to the product development process will

help you keep schedule, resources and costs under control.

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THE PRODUCT LIFE CYCLE

A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.

The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below:

Product Life Cycle Diagram

Introduction Stage

In the introduction stage, the firm seeks to build product awareness and develop a market for the product. The impact on the marketing mix is as follows:

Product branding and quality level is established and intellectual property protection such as patents and trademarks are obtained.

Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.

Distribution is selective until consumers show acceptance of the product.

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Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.

Growth Stage

In the growth stage, the firm seeks to build brand preference and increase market share.

Product quality is maintained and additional features and support services may be added.

Pricing is maintained as the firm enjoys increasing demand with little competition.

Distribution channels are added as demand increases and customers accept the product.

Promotion is aimed at a broader audience.

Maturity Stage

At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit.

Product features may be enhanced to differentiate the product from that of competitors.

Pricing may be lower because of the new competition. Distribution becomes more intensive and incentives may be offered to

encourage preference over competing products. Promotion emphasizes product differentiation.

Decline Stage

As sales decline, the firm has several options:

Maintain the product, possibly rejuvenating it by adding new features and finding new uses.

Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.

Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.

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The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.

Marketing channel refer to the entire ecosystem required for getting products

(tangible goods and intangible services) from the point of production to the point

of consumption; this includes people, organizations and all the required activities

Channel management is defined as the process where the company develops

various marketing techniques and sales strategies to reach its customer base.

The distribution channel is a more focused term that refers to the chain of

intermediaries through which the product passes until it reaches the end

consumer.

Traditional channel strategies

Strategic channel marketing and distribution is about getting the product to the end

user in the most effective way. Depending on the nature of the product and the

market, numerous intermediaries may be involved.

Take for example the manufacturer of an FMCG such as a chocolate bar. It would

be highly impractical for the manufacturer to sell it to the final consumer; some

intermediaries are involved. In this case:

Transporter

Wholesaler

Retailer, and finally

The consumer

The above is a traditional distribution channel, but many variations might exist.

For example, there are ‘distributors’ who would take product directly from the

manufacturer, and then use their distribution network to supply the retailers. So the

channel would resemble:

Manufacturer — distributor — retailer — consumer

For very large retailers who have relatively few stores (such as the mass

discounters), consumers could be supplied directly:

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Manufacturer — retailer — consumer

For someone manufacturing an item on a small scale from their home, we have the

simplest form of distribution:

Manufacturer — consumer

The above refers to the B2C (business to consumer) market. There is also the B-B

(business to business) which caters specifically for organizations as customers. For

example, the sugar required in the manufacture of the chocolate bar in the example

above would come straight from the manufacturer of the sugar, since it would be a

bulk order. The channel could then be expanded:

Sugar manufacturer — chocolate manufacturer — wholesaler — retailer — consumer

One size does not fit all

The above channels with the various intermediaries are not set in stone, as many

other variations exist. For example, there are also ‘agents’ who can operate in

many different ways. Some will purchase the goods directly from the manufacturer

and then distribute to their network. It is not only the resources they have (such as

delivery trucks) but also the relationship they have with the retailers where they

have agreed to payment terms and an efficient billing and collection process.

It is also possible to have hybrid distribution channels. For example, a computer

company can use its own sales force to sell to large accounts, its outbound

telemarketing facility to sell to medium sized businesses, and direct internet sales

for the end user. They could also use affiliate partners which they can add to the

channel ‘mix’.

A manufacturer might also require various channel strategies, which would include

the delivery channel, a service channel, as well as a sale channel. For example, the

computer company could use FedEx as the delivery channel, the Internet and the

telephone as sales channels, and license local technicians for repairs.

Setting channel strategy is a dynamic and often complex process. Technology is

just one driver encouraging the firm to adapt their channel strategies. With

computerization and enhanced control from a central location now made possible,

vertical marketing systems (VMS) are becoming easier to adopt. A VMS enables

the producer, wholesaler, and retailer to act as a unified system. In this case, there

is one predominant ‘owner’ who is referred to as the Channel Captain.

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For example, a food retailer may want to ensure that its produce is organic and

farmed sustainably. It may also require that the produce remains in a cold chain

from the beginning of the production process to the shelf. In this case, the retailer

would either own the other players or have a contract with them to ensure the

consumer gets what is promised.

Driven by consumer perception

When designing a marketing channel, there are numerous factors that need to be

taken into consideration that relate to the final consumer’s expectations:

1. Time expectation of the customer.

If the customer expects to walk into a retail store as a matter of course, then

the product would require intensive distribution to make the product as

widely available as possible, aiding convenience. Should the customer find it

acceptable to wait a few days, then direct sales on the Internet would be a

possibility.

2. Order size.

The end consumer expects to buy a single item, and retail would in most

cases be the appropriate channel. Alternatively, a car hire company like Avis

would prefer to purchase their cars en masse and would do so either with a

dealer group or a broker who specializes in that type of sale.

3. Service required.

If intensive service and backup are required, these need to be provided for in

the channel. Car dealerships, for instance, need to offer convenient access to

their customers, and that demands a strategic geographical spread. The

establishment of a dealer with service capabilities needs to match the

location of their targeted customer base.

4. Convenience

McDonald’s has an extensive network of stores that makes it a convenient

purchase in the fast food category. Ferrari dealers on the other hand, cater to

a very select market, and such a luxury goods consumer would accept the

fact that there is not a Ferrari dealership on every street corner.

5. Cost saving: - Consumers are willing to make certain sacrifices in exchange

for cost savings. The success of mass-market discount stores is that the

consumer expects to make some sacrifices in service for the saving it affords

them.

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Competition versus cooperation

Although all players are aiming for the same result — customer satisfaction —

 conflicts do arise. An example of a vertical channel conflict occurs when a car

dealer, for instance, does not adhere to the specific guidelines set by the

manufacturer.

Channel conflict can also be horizontal, where two of the same brand dealers are in

disagreement with pricing models (where the one dealer discounts heavily, setting

a benchmark that gives all dealers a lower profit margin).

Conflict can also exist in a multi-channel scenario. This becomes prevalent where

there are two or more channels for the distribution of the manufacturer’s product.

In this case, an agent could be appointed in a country to serve as a sole distributor,

but a retail chain can sell such vast quantities that they demand the manufacturer

supplies them directly as well.

The future of channel strategies

With the advent of drone deliveries and driverless cars, the future for distribution is

a disruptive one. A consumer may very well be able to purchase on Amazon with a

few clicks and the drone could bring the order to their door in a matter of hours.

Also, taking into consideration that many products can be digitized — not only

computer programs, but movies and music amongst many other products, channels

of distribution have already been total disrupted. And then we have 3D printers —

 if you need a certain component, then the manufacturers just send you the data and

you can make the part yourself. Our world has changed and access to product will

never be the same again. It’s called progress.

Also, taking into consideration that many products can be digitized  — not only

computer programs but movies and music amongst many other products —

 channels of distribution have already been disrupted. And then we have 3D

printers; if you need a certain component, then the manufacturer just sends you the

data and you can make the part yourself.

Our world is certainly changing, and access to product will never be the same

again. It’s called progress

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There are four basic types of promotion:

1) Advertising

2) Sales Promotion

3) Personal Selling

4) Publicity

Promotion is any form of communication a business or organization uses to

inform, persuade, or remind people about its products and improve its public

image. Product Promotion: 1) explains the major features and benefits of its

products (especially in relation to competitors), 2) tells where the products are

sold, 3) advertises sales on those products, 4) answers customer questions, and 5)

introduces new products.

Institutional promotion is used to create a favorable image for itself. It does not

directly sell a product. What do you think is the intended result of institutional

promotion?

1. Advertising is any paid form of non-personal presentation and promotion

of ideas, goods, or services by an identified sponsor. Its three distinguishing

features are that the time or space devoted to it is paid for it uses a set format

to carry the message rather than personal one-on-one selling it identifies the

sponsor of the message

2. Publicity involves placing newsworthy information about a company,

product, or person in the media. The principal function of publicity is to

build an image.

3. Sales Promotion: All other marketing activities other than personal selling,

advertising, and publicity. It has three unique characteristics:

a) It usually involves short term activities (as opposed to advertising and

publicity which tend to be longer in length).

b) It usually offers some type of incentive to make a purchase.

c) It can be successfully used in all channels of distribution with

manufacturers, wholesalers, retailers, and consumers.

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4. Sales Promotions can be either consumer or trade oriented. Types of Trade

Promotions: Slotting Allowances: A cash premium paid by the manufacturer

to the retailer for the costs involved in placing a new product on its shelves.

The allowance covers the space, retailer’s cents-off specials, charges for

store shelves, penalties if the product does not sell, and store advertising and

display costs.

Types of trade promotion

1. Buying allowances: Price discount given by manufacturers to wholesalers

and retailers to encourage them to either buy a product or buy a larger

quantity of a product. Trade Shows and Conventions: Designed to reach

wholesalers and retailers.

2. Sales Incentives: Awards given to managers and employees who

successfully meet or exceed their company’s set sales quota for a particular

product or line of products.

Consumer Sales Promotions Licensing: Organizations, such as manufacturers,

movie makers, sports teams, and celebrities, may license for a fee their logo,

trademark, trade characters, names and licenses, or personal endorsements to a

business to be used in promoting the business’s products.

Promotional Tie-ins: Involve sales promotional arrangements between one or

more retailers or manufacturers. They combine their resources to do a promotion

that creates additional sales for each partner.

Visual Merchandising and Displays: The coordination of all physical elements in

a place of business so that it projects the right image to its customers. The visual

and artistic aspects of presenting a product to a target group of customers.

(Window, floor, counter display)

Premiums and Incentives: Designed to increase sales by building product loyalty

and attracting new customers. There are four types of popular premiums: coupons

factor packs or in-packs (cereal boxes) traffic builders (pens, calendars) coupon

plans (proof of purchase, soup labels)

Product Samples: A free trial size of a product that is sent through the mail,

distributed door-to-door, or through retail stores and trade shows.

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Personal Selling: Is the most flexible and individualized of the promotion devices

available to business. What are some obvious disadvantages? Promotional Mix: A

combination of different types of promotion.

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REFERENCES

Kotler, p, competitive strategies for new product marketing over the life cycle, management science, December 1965

Kotler, p, Marketing Management, prentice Hall, 2003 (11th edn.)

Ramaswamy, V.S., 2002, Marketing Management, Macmilian Indian, New Delhi.

Kotler p, Armstrong 2008, Principles of Marketing. 9th Edition, Prentice Hall, New Delhi

Philip Kotler (1987) Marketing: An Introduction. Prentice-Hall; International Editions.