Chapter 5ppt small business and their importance.pptx

Outline
 Definition of Marketing
 Marketing Mix Elements
 Market Segmentation
 Competitive Analysis
 Marketing Strategies
Customer and service concept
 Customer Handling and Satisfaction

INTRODUCTION
 Business firms and non-profit organizations
engage in marketing.
 Products marketed include goods as well as
services, ideas, people, & places.
 Marketing activities are targeted at market
consisting of product purchasers who may
be individuals and groups that influence the
success of an organization.
 The foundation of marketing is exchange.

Meaning and definition of Marketing
 “Marketing is a societal process by which individuals or
groups obtain what they need and want through creating,
offering and freely exchanging products and services of
value with other”. Philip Khotler
 “Marketing as knowing and understanding the customer as
well that the product or service fits him and sells itself.”
Piter Druker
 “Marketing is a set of processes for creating,
communicating and delivering value to customers and for
managing customer relationships in way that benefit the
organization and its stakeholder.” AMA

Meaning and definition of Marketing
 Marketing is the process of satisfying the organization’s
stakeholders and creating value for these stake-holders.
 Stakeholders are persons or organizations that have a
relationship with the organization. Every organization has
a different set of stakeholders.
 The success of a company is determined to a large degree
by how it manages and satisfies the relationship with its
stakeholders.

 Typically stakeholders are ….

 Marketing is to deliver satisfaction and value to all of its
stakeholders so concern and a responsibility for marketing
is must. Therefore The firm must know :
what its stakeholders want
An efficient way of delivering satisfaction,
How to do all these things without upsetting any one
in its sphere. It is a balancing act.
For example: the firm drop the price and make its
customers happy, but shareholders unhappy, and
employees are upset because they will not receive their
annual bonus due to low profits.

 Marketing answers the following questions:
 Who are my customers?
 What are my customer’s needs and wants?
 How can I satisfy my customers’?
 How do I make a profit as I satisfy my
customers?

Core Concepts of Marketing
Needs, Wants and Demand
Need: - Human Need is a state of deprivation of some basic
satisfaction.
 People require food, clothing, shelter, safety and belonging and esteem.
Wants: - Wants are desires for specific satisfiers of needs.
Human wants are continually shaped and reshaped by social
forces and institutions including religious institutions (mosque,
church), schools, families and business cooperation.
 Eg. A person needs food but wants spaghetti

Conti---
 Demands: - Demands are wants for specific products that are
backed by ability and willingness to buy them.
 Wants become demand when supported by purchasing power.
 Companies must therefore measure not only how many people
want their product but, more importantly how many would
actually be willing and able to buy it.
 Product: - is anything that can be offered to satisfy a need or want.
Products broadly classify as tangibility and intangibility features.
 Value: - is the consumer’s estimate of the products overall capacity
to satisfy his or her needs.
 According to DeRose, value is “the satisfaction of customer
requirement at the lowest cost of acquisition, ownership and use”.

Conti….
 Cost: - is the amount of money that are going to be
expended or already incurred to acquire a product.
 Exchange: - is the act of obtaining a desired product from
someone by offering something in return.
 Transaction: - is the trade of values between two parties.
 Market: - consists of all the potential customers sharing a
particular need or want who might be willing and able to
engage in exchange to satisfy their need or want.

Importance of Marketing
 Then potential buyers must be informed about the products existence and the benefits it offers through
various forms of promotion. The kinds of utility that marketing provides in the process are as follows:
1. Form Utility: Form utility is associated primarily with
production- the physical or chemical changes that make a
product more valuable.
2. Place Utility: Place utility exists when a product is readily
accessible to potential customers.
3. Time Utility: Time utility means having a product available
when you want it.
4. Information Utility: Information utility is created by informing
prospective buyers that a product exists. Unless you know a
product exists and where you can get it, the product has no
value.
5. Possession Utility: Possession utility is created when a customer buys the
product-that is, ownership is transferred to the buyer.

Marketing Philosophies
 There are five competing concepts under which
organizations can choose to conduct their marketing
activities:
1. The Production Concept
2. The Product Concept
3. The Selling Concept/Sales Concept
4. The Marketing Concept
5. The Societal Marketing Concept
6. Relationship Marketing

1. The Production Concept
 It holds that consumers will favor products that are
widely available and low in cost.
Managers of production-oriented organization concentrate
on achieving high production efficiency and wide
distribution.
The assumption that consumers are primarily interested in
product availability and low price holds in at least two
situations.
 The first is where the demand for a product exceeds supply, as in
many developing countries.
 The second situation is where the product’s cost is high and
has to decrease to expand the market.

2.The Product Concept
The product concept holds that consumers will favor
those products that offer the most quality,
performance or innovative features.
Managers in product-oriented organization focus their
energy on making superior products and improving
them over time.
In such situation, customers are ready to pay high
prices for product extra features.

3.The Selling Concept/Sales Concept
 It holds that consumers, if left alone, will ordinarily not buy
enough of the organization product.
 The organization must therefore undertake an aggressive
selling and promotion effort.
 This concept assumes that consumers typically show buying
inertia or resistance and must be coaxed into buying.
 It also assumes that the company has made available a whole
battery of effective selling and promotion tools to stimulate
more buying.
 It is practiced more aggressively with unsought goods, those goods that buyers normally do
not think of buying, such as insurance, encyclopedia, and funeral plots.

4.The Marketing Concept
It holds that the key to achieving organizational goals
consists of being more effective than competitors in
integrating marketing activities toward determining and
satisfying the needs and wants of target markets.
The marketing concept has been expressed as
 Meeting needs profitably”
 Find wants and fills them”
 Love the customers, not the product etc.”

Selling and Marketing Concept Contrasted
PointofDifference Selling Marketing
Startingpoint Factory Marketplace
Focus Existingproduct Customerneed
Means Sellingandpromotion Integratedmarketing
End ProfitthroughVolume Profitthroughsatisfaction

5.The Societal Marketing Concept
 It holds that the organization should determine the needs,
wants and interests of target markets.
It should then deliver the desired satisfactions more
effectively and efficiently than competitors in a way that
maintains or improves and enhance the consumers and the
society’s well-being.

6. Relationship Marketing
 Relationship marketing is the practice of building long
term satisfying relations with key parties-customers,
suppliers, distributors- in order to retain their long
term preferences and business.
 The ultimate outcome of relationship marketing is the
building of a unique company asset called a marketing
network.
 In this case, customer experience rather than customer
satisfaction is the most critical component in
relationship marketing.

Summary of the Marketing Philosophy
Production  Consumers favor products that are available and highly affordable
 Improve production and distribution
 Availability and affordability is what the customer wants’
Product  Consumers favor products that offer the most quality,
performance and innovative features
 ‘A good product will sell itself’
Sales
 Consumers will buy products only if the company promotes/ sells these products
 ‘Creative advertising and selling will overcome consumers’ resistance and convince them to
buy’
Marketing  Focuses on needs/ wants of target markets and delivering satisfaction
better than competitors
 ‘The consumer is king! Find a need and fill it’
Relationship
marketing
 Focuses on needs/ wants of target markets and delivering
superior value

Marketing Information Systems
 Every firm must organize the flow of information to its
marketing managers.
• Companies are studying their manager’s information needs
and designing marketing information system to meet these
needs.
 A marketing information system consists of people, equipment
and procedure to gather, sort, analyze, evaluate and distribute
needed timely and accurate information to marketing decision
makers.
• The marketing information system is illustrated as fig 5.1
below:

Marketing Research
 Marketing research is the systematic and objective
identification, collection, analysis, and dissemination of
information for the purpose of assisting management in
decision making related to the identification and solution of
problems and opportunities in marketing.
 There are three Functional Roles of Marketing Research. These are:
 Descriptive Function - the gathering and presentation of statements of fact.
 Diagnostic (analytical) Function - The explanation of data.
 Predictive Function - Specification of how to use the descriptive and diagnostic
research to predict the result of a planned marketing decision.

Marketing Research Components
 Marketing researchers deal with many aspects of a market including the following:
 Market size: this deals with the number or value of units sold to a market in a given
period.
 Market Share: this one is about a specific corporation’s share of the market size out of
the whole market of a product or products of the same purpose.
 Market penetration: this is a marketing strategy which is used to know when a
company enters/penetrates a market with current products to get better market share by
lowering the price of a product.
 Brand equity research – this research is conducted to know how favorably
consumers view the brand.
 Buyer decision processes research – this part of marketing research activity is used
to determine what motivates people to buy and what decision-making process they use.

Customer Satisfaction Research
 Distribution channel audits - to assess distributors’ and retailers’ attitudes
toward a product, brand, or company.
 Marketing effectiveness and analytics - Building models and measuring
results to determine the effectiveness of individual marketing activities.
 Mystery Consumer or Mystery shopping – here the researcher acts as a
shopper. This is often used for quality control or for researching
competitors' products.
 Positioning research – this research is mostly conducted to answer
questions like
 How does the target market see the brand relative to competitors?
 What does the brand stand for?

Customer Satisfaction Research
 Price elasticity testing – here the objective of the research is to
determine how sensitive customers are to price changes
 Sales forecasting - to determine the expected level of sales given the
level of demand with respect to other factors like advertising
expenditure, sales promotion etc.
 Segmentation research – this type of research helps to determine the
demographic, psychographic, and behavioral characteristics of
potential buyers.
 Test marketing – this is a small-scale product launch used to
determine the likely acceptance of the product when it is introduced
into a wider market.

Marketing Research Process
Since research is a process which consists of a number of steps to be
accomplished in a logical and systematic manner marketing research consists
of the following related phases:
Step 1: Define the research purpose or objectives
Step 2: Research Design Formulation
Step 3: Gather at this stage secondary data,
Step 4. Gather Primary Data
Step 5: Data Processing and Analysis
Step 6: Report Preparations and Presentation

Marketing Intelligence
 Market intelligence is the systematic process of gathering,
analyzing, supplying and applying information (both qualitative and
quantitative) about the external market environment.
 Intelligence is evaluated information.
 Marketing intelligence is used to determine:
 Current and future market needs,
 Changes in the business environment that may affect the size and
nature of the market in the future.
 Environment that may affect the size and nature of the market in
the future.

The Importance of Marketing Intelligence
Marketing intelligence provides the following benefits;
 Market and customer orientation – promote external focus.
 Identification of new opportunities.
 Smart segmentation.
 Early warning of competitor moves.
 Minimizing investment risks.
 Quicker, more efficient and cost-effective information.

Ways to Undertake Marketing Intelligence
i. Unfocused scanning: Any information that may be useful is gathered
without any specific purpose in mind.
ii. Semi-focused scanning: no specific purpose. The manager is not in search
of particular pieces of information that he/she is actively searching but does
narrow the range of media that is scanned.
iii. Informal search: - limited and unstructured attempt to obtain information
for a specific purpose. For example, entering the business of importing
frozen fish from a neighbouring country may make informal inquiries as to
prices and demand levels of frozen and fresh fish.
iv. Formal search: - this is a purposeful search for information in some
systematic way.

5.2 The Marketing Mix Elements
 Product: is anything that can be offered to a market to
satisfy a want or need. Products include physical goods,
services, experiences, events, persons, places, properties,
organizations, information, and ideas.
 It includes physical objects or services being sold,
together with: packaging, image, brand name and
warranty and, physical attributes that influence
consumer’s perceptions such as: colors, shapes, sizes and
materials.

 Price: is the monetary unit required for a purchase, and
from an entrepreneur’s view point, it is the unit of income
( it is the only element in the marketing mix that produces
revenue)
 It is the amount of money charged for a product, It
communicates information about the products value,
image and competition.
 Promotion: is the act of communication that provides
consumers with information about a company’s products,
its services or the venture itself.
 It includes: advertising, personal selling, direct
marketing, public relations.

 Distribution: is concerned with how products or
services are made available to customers. Distribution
can mean the physical channels or transporting products
from manufacturers to end user.
 It includes agents, wholesalers, retailers and etc…

Market Segmentation
 Market segmentation is breaking down a market into
groups of customers with similar characteristics.
 The key for most small firms is to concentrate their
efforts and resources on one or more closely defined
market segments.
 Research studies show a relationship between profitability
and firms that do this and thereby gain a high share of that
market segment.
 Basis for segmentations are geographic, demographic,
psychographic and behavioral.

Competitive analysis
Competitive analysis refers to determining the
strengths and weaknesses of competitors and
designing ways to take opportunities or tackle
threats posed by competitors.

Uses of Competitive Analysis
 Competitive analysis is important for businesses since it has the advantages stated as
follow:
 It helps management understand its competitive advantages/
disadvantages relative to competitors.
 It generates understanding of competitors’ past, present (and
most importantly) future strategies.
 It provides an informed basis to develop strategies to achieve
competitive advantage in the future (e.g., how will
competitors respond to a new product or pricing strategy?)
 It helps forecast the returns that may be made from future
investments.

Uses of Competitive Analysis
 Competitive analysis is a method of gathering data about competitors from
different sources. It should answer the following questions:
 Who are your competitors?
 What customer needs and preferences are you competing to meet?
 What are the similarities and differences between their products/services
and yours?
 What are the strengths and weaknesses of each of their products and
services?
 How do their prices compare to yours? How are they doing overall?
 How do you plan to compete? Offer better quality services? Lower prices?
More support? Easier access to services? How are you uniquely suited to
compete with them?

Steps of Competitive Analysis
1. Identify your competitors
2. Gather information about competitors
3. Gathering Information on Competitors
4. Analyzing the Competition
5. Develop a pricing

Marketing Strategies
A marketing strategy is a formulated plan that describes
how a new venture will compete.
It focuses on the enterprises activities related to
competing in its market niche. subsequently providing
guidelines for decisions about strategic objectives,
allocation of resources, and responsibilities required to
implement a marketing plan.
Strategic Objectives: Entrepreneurs should be able to
establish objectives that can be easily measured.

Marketing strategy
 A marketing strategy is a process that can allow an
organization to concentrate its limited resources on the
greatest opportunities to increase sales and achieve a
sustainable competitive advantage.
 Marketing strategy is a method of focusing an
organization's energies and resources on a course of
action which can lead to increased sales and dominance
of a targeted market.

Marketing strategy
 A marketing strategy combines product development, promotion,
distribution, pricing, relationship management and other elements;
identifies the firm's marketing goals, and explains how they will be
achieved, ideally within a stated timeframe.
 Marketing strategy determines the choice of target market segments,
positioning, marketing mix, and allocation of resources.
 It is effective when it is an integral component of the overall firm
strategy, defining how the organization will successfully engage
customers, prospects, and competitors in the market arena.

Types of Marketing strategy
1. Pricing Strategy:
Price is the value placed on what is exchanged. Something of value is exchanged for
satisfaction and utility, includes tangible (functional) and intangible (prestige) factors. It
can even be barter.
The following are some of pricing strategies mostly applicable in the real-world
scenario.
 Price Skimming-- charging the highest possible price that buyers who most desire the product will pay.
 Penetration Pricing--- set based on competitors and appropriate when the demand is elastic.
 Cost-plus pricing------any amount that is above unit cost may be considered
 Mark-up pricing---- a certain percentage of the selling price is added to unit cost.
 Competition Oriented Pricing----Considers competitors prices primarily; but the market type matters.
 Odd-even pricing--- this is Psychological pricing method based on the belief that certain
prices or price ranges are more appealing to buyers.

2. Promotion Strategies
Promotion is the communication of the company and its products to customers. Consists of
promotional strategy described as follows.
i) Advertising: It is any paid form of non-personal, one-way, mass communication about an
organization, good, service, or idea by an identified sponsor.
ii) Personal selling: This is the two-way flow of communication between a buyer and seller,
often in a face-to-face encounter, designed to influence a person’s or group’s purchase
decision.
iii) Public relations: Public relation is a form of communication that seeks to change the
perceptions of customers, shareholders, suppliers, employees and other publics about a
company and its products.
iv) Sales promotion: This promotion type involves short term incentives of value such as
discounts, free samples, and prizes to be offered to arouse interest of customers in buying the
good/service.

3. Distribution Strategies
o Marketing Channels are individuals/organizations
involved in the process of making the product available
for use or consumption by consumers.
o Channels are used to improve exchange efficiency. ,
o It defined as maximizing sales and profits.
o Unfortunately, many of these companies often fail to
establish or maintain the most effective distribution
strategies.

o It is divided into Direct and Indirect channels.
Direct channels: In this type of channel, producers
and end users directly interact.
Indirect channels: In this type of channel
intermediaries are inserted between seller and buyer.
Intermediaries include Merchant Wholesalers,
retailers, dealers, agents, brokers; and manufacturer’s
branches and offices.

The following factors should be considered to select the best
channel under the condition of using best distribution strategy.
 Company Factors: financial, human and technological
capabilities of a company to do its business activities.
 Market Characteristics: Geography, market density, market
size, target market
 Product Attributes: perishability, value and sophistication of
the product
 Environmental Forces: those forces that affect the business-
like competition, technology and culture.

Selling and of Customer Service
 Many employees have unclear understanding of what
customer service really is. There are indications everywhere
that there are customer service problems that demand
solutions.
 Customer service is what happens between the customer
determining his/her needs and receiving the desired benefits.
 However, most service providers do not appropriately
understand what service delivery really means.
 For this reason, many organizations fail to improve the
level of their customer service delivery.

The Concept of Service
 Service refers to any activity undertaken to fulfil customer’s
needs.
 It 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.
 Its production may or may not be tied to a physical product.
 Distinctive features of services include intangibility,
inseparability, variability, and perishability as opposed to
goods.

The Concept of Customer
 Customer is a person or organization that buys a
product or service either for use or for resale.
 Customers can be internal (e.g., member of the
organization) or external (customers coming from
outside).
 A thorough understanding of the concept of customer
service enables organizations to provide quality service
by using proper service management approaches.

Strategic Activities needed for Quality
Customer Service Delivery
 Organizations should identify important strategic activities to
ensure consistent, efficient and excellent customer service delivery
using continuous improvement philosophy.
 Especially, the following specific areas should be considered:
1. Establishing a clear customer service strategy.
2. Ensuring that correct people are in place, with the correct skills to
deliver outstanding personal service.
3. Establishing clear material service delivery processes.
4. Improving in terms of process improvement, quality monitoring and
recovery continuously.
5. Participatory Management.

Customer Handling and Satisfaction
Customer handling and satisfaction is a key for successful organizations.
Managers and employees should work hand-in-hand to improve their
service delivery programs.
 The major reasons to lose customers are:
o Poor service,
o Poor quality and
o Rude behaviour.
 The major reasons to attract customers are:
o Considering Customers as an Invaluable Asset
o Reducing Customer Complaints
o Place Yourself in The Customer’s Shoes

Chapter 5ppt small business and their importance.pptx

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