Marketing and Sales Management Grade 11

1.1. Marketing and Sales Management as an

area of study
Marketing and Sales Management is a crucial area of study that focuses on understanding and applying strategies,
techniques, and principles to effectively market and sell products or services.
Studying marketing and sales management provides individuals with valuable insights and skills to succeed in various
business roles, including marketing coordinator, sales managers, account executives, and business development
professionals
Key aspects of marketing and sales management as an area of study includes:
1. Consumer behavior involves analyzing how individuals and groups make purchasing decisions, their motivations,
needs, and preferences. By studying consumer behavior, marketers can develop strategies to effectively target and
engage their audience, tailor products or services to meet their needs, and create compelling marketing messages.
2. Market research: It involves collecting and analyzing data to identify market trends, customer insights, and
competitive landscape. Market research helps marketers make informed decisions, develop marketing strategies, and
allocate resources effectively.
3. Marketing strategy: It involves determining target markets, positioning products or services, creating value
propositions, and establishing marketing mix elements such as product, price, place (distribution), and promotion.
Marketing strategy aligns with the overall business goals and guides the implementation of marketing activities.
4. Sales techniques: Studying sales management provides individuals with knowledge of sales techniques, negotiation
skills, customer relationship management, and sales process optimization. It equips sales professionals with the ability to
identify customer needs, build relationships, overcome objections, and drive revenue growth.
5. Customer relationship management (CRM): CRM focuses on managing and nurturing customer relationships
throughout the customer lifecycle. It involves implementing strategies and tools to acquire, retain, and maximize the
value of customers. Studying CRM helps individuals understand customer loyalty, customer satisfaction, and customer
retention strategies, enabling them to build strong, long-term relationships with customers.
6. Digital marketing and sales: With the rise of digital technologies, studying marketing and sales management also
encompasses understanding digital marketing channels and techniques. This includes social media marketing, search
engine marketing, content marketing, email marketing, and data analytics. Studying digital marketing equips individuals
with the skills to leverage online platforms, engage with digital consumers, and measure the effectiveness of digital
marketing campaigns.
7. Retail Management: It focuses on the strategies and practices involved in running successful retail businesses.
Retail management encompasses everything from inventory management and pricing strategies to store layout
and customer service. As the retail industry continues to evolve, with shifting consumer preferences and
technological advancements, the role of retail managers becomes increasingly vital. Studying retail management
equips how to optimize operations, enhance the customer experience, and drive profitability in a competitive
marketplace.
8. Promotion: Marketing and Sales Management involves highlighting the importance of these skills and
knowledge in achieving organizational objectives. It involves showcasing the impact that effective marketing
and sales strategies can have on business success, whether through increased market share, revenue growth, or
brand loyalty.
9. Ethical and legal considerations:
Marketing and sales management cover ethical and legal considerations in advertising, sales practices, and customer
privacy. Understanding and adhering to ethical and legal guidelines are essential for building trust, maintaining brand
reputation, and ensuring compliance with regulations.
Studying marketing and sales management
-provides individuals with a well-rounded skill set to navigate the complex and evolving business landscape.
-It equips individuals with the ability to analyze consumer behavior, develop effective marketing strategies, implement sales
techniques, build customer relationships, and leverage digital channels.
-Help individuals contribute to the success of businesses in driving revenue growth, building strong brands, and delivering
value to customers.

1.2. Professional Careers in Marketing and Sales Management

• Retail sales associates: -
perform many roles including stocking shelves, assisting store customers and cashiering.
-work in department, grocery, hardware and electronics stores.
- assist in changing the price of products and switching out promotions.
-Some work primarily in the returns and exchange department.
• Telemarketers
delivers sales pitches and encourages prospective customers to make a purchase. They work primarily over the phone
calling numbers that appear in their database. Most commonly, they read from a prepared script that contains
information about the products and services. Some telemarketers may answer incoming calls and use a different
strategy to persuade people to buy.
• Business development manager:
Identifies new business opportunities, develops strategic partnerships, and expands market reach.
• Copywriter:
-create written content that persuades people to take action.
-work for companies and agencies or as freelancers.
-conduct research and understand the core audience before writing targeted content to increase the chances of positive
reception.
• Sales representative:
possess excellent communication and customer service skills that help them sell products and services. Sales
representatives work with customers to help them understand the benefits of a product or service. They work to meet
sales goals, negotiate prices, close transactions and complete sales reports. Builds and maintains relationships with key
clients, understands their needs, and works to maximize customer satisfaction.
• Insurance agent:
involves selling various forms of insurance like health, life, auto and homeowner policies. Once policies go into effect,
agents assist with insurance claims and policy adjustments. They may also perform inspections on properties and
vehicles. Insurance agents communicate with their clients on a regular basis to ensure they understand their plans.
• Digital marketing manager:
Oversees digital marketing efforts, including website management, social media campaigns, and online advertising,
marketing campaigns on various social media platforms.
• Marketing manager:
Responsible for developing and implementing marketing strategies, managing marketing campaigns, and overseeing
marketing teams.
They lead their teams in developing new advertising techniques and promotional material. Marketing managers monitor
the progress of their efforts and make decisions regarding budget and time constraints.
• Market research analyst:
-Conducts market research, analyzes data, and provides insights to support marketing and sales decisions.
-They track the analytics of campaigns, identify market trends and watch competitors' activity closely.
• Sales manager
Leads sales teams, sets sales targets, develops sales strategies, and monitors sales performance.
Monitor the progress of their associates and mentor them as needed.
Create sales reports and work to ensure total customer satisfaction.
• Product manager
manages the lifecycle of a product, conducts market research, defines product features, and creates marketing plans.
Product managers lead and direct communication between team members in various departments throughout the
development and delivery process.
• Brand manager
Focuses on building and managing brand identity, developing brand strategies, and ensuring brand consistency.

1.3. Branches of marketing

Each branch focuses on a specific aspect of marketing strategy
and tactics.
1. Digital marketing
focuses on marketing efforts conducted through digital channels such as websites, search engines, social media
platforms, email, mobile apps, and online advertising.
It includes strategies like search engine optimization (SEO), content marketing, social media marketing, pay-per-click
(PPC) advertising, and email marketing.
2. Content marketing
Content marketing is the practice of creating and distributing valuable and relevant content to attract and engage a
target audience.
 It involves creating blog posts, articles, videos, infographics, podcasts, and other forms of content to educate, entertain,
or inform the audience, with the ultimate goal of driving profitable customer action.
3. Branding and advertising
Branding focus on creating a distinct and recognizable brand identity that sets a company apart from its competitors. It
involves developing a brand strategy, designing logos, selecting brand colors, defining brand voice, and creating brand
messaging.
Advertising involves promoting a brand, product, or service through various paid media channels like television, radio,
print, outdoor billboards, and online ads.
4. Market research
It is the process of gathering and analyzing data about the market, customers, competitors, and industry trends.
It helps in understanding customer needs and preferences, identifying market opportunities, evaluating the competition,
and making informed marketing decisions.
5. Public relations
PR involves managing the communication and relationships between an organization and its target audience, the media,
and the public. It includes activities like media relations, press releases, public appearances, events, crisis management,
and reputation management.
6. Product marketing
focuses on promoting and positioning a specific product or service in the market.
It involves conducting market research, defining the target audience, developing product messaging and positioning,
creating marketing collateral, and supporting the product launch.
7. Influencer marketing
involves collaborating with influential individuals or content creators to promote products or services. These influencers
have a dedicated following and can impact the purchasing decisions of their audience. Influencer marketing is often done
through sponsored content, endorsements, or partnerships with influencers.
8. Relationship marketing
emphasizes building and nurturing long term relationships with customers. It
involves strategies like personalized communication, loyalty programs, customer retention initiatives, and customer
relationship management (CRM) systems to enhance customer satisfaction and loyalty.
9. International marketing
focuses on marketing products or services in foreign markets. It involves understanding cultural differences, adapting
marketing strategies to local markets, addressing language barriers, complying with international regulations, and
conducting market research specific to each target country or region.
10. Social marketing:
It stands out as a branch dedicated to promoting behaviors that benefit society or individuals' well-being. Social
marketing aims to influence behaviors to bring about positive societal change. It
addresses issues such as public health, environmental conservation, education, and community development. Unlike
traditional marketing, which promotes products or services for profit, social marketing seeks to promote behaviors
for the social good. It employs marketing principles and strategies to encourage desired actions, such as adopting
healthier habits, recycling, or supporting social causes.
1.4. The Role of Marketing Manager

• Research new opportunities: As a marketing manager, you are responsible for researching new marketing
opportunities for the company they represent. This involves using primary and secondary research tactics to determine
target audience behaviors, such as their interests, dislikes, and personality and considering how they could affect the
company's marketing strategy.
Marketing managers use research to stay up to date on current industry trends and keep track of top-performing
competitors.
• Develop marketing strategies: A marketing strategy is a business plan that outlines how they reach prospective
customers when launching their next product or service. Marketing managers typically put these strategies in place and
they are always in accordance with the company's overall goals and values.
• Implement marketing strategies: Once completed, marketing strategies need to launch in full capacity. This is the
first practical step in launching a product or service. A marketing manager monitors the progress of the strategy,
commonly changing and adapting it when problems occur. It's important that, as a marketing manager, you oversee all
aspects of the plan and ensure they coincide with one another and run smoothly.
• Oversee cross-functional marketing teams: A marketing manager's work is highly collaborative. They work
alongside several other professionals to guarantee the success of a marketing strategy. They also ensure that teams
perform functions in a cohesive manner by standardizing marketing processes.
• Manage the marketing budget: Senior executives usually set a budget for each marketing campaign before it gets
underway. As a marketing manager, you need to account for all marketing costs and allocate funds appropriately,
ensuring you remain within budget.
• Create programs and campaigns to support sales: Marketing managers support several activities that help
increase sales and build revenue for the company. They plan and produce events, such as conferences, product
launches, and webinars. Depending on what events are in place, marketing managers select appropriate marketing
programs needed to support them. Marketing managers produce informational materials for sales representatives so
that they can answer any customer questions and market the product well.
• Manage external communications: Marketing managers maintain strong communications with customers, media
outlets, vendors, advertising agencies, and business partners to transport the company's message. These relationships
help build awareness and increase sales opportunities.
• Maintain the company's social media presence: Today, social media interaction plays an important part in a
business' success. A good social media presence shows you are a reputable business and trusted by consumers. It allows
you to market products through engaging content and through various formats to reach a larger audience. Marketing
managers ensure that all social media channels reflect the company image and post regularly to increase engagement
rates.
• Keep executives up to date throughout marketing campaigns: Marketing managers update senior leadership on
the progress of marketing campaigns and report results obtained from metric interpretation. Marketing managers report
 their findings in a way that allows executives to make actionable decisions to increase the success of their business going
forward.
• Plan for the future: This involves readjusting sales policies, such as discounting previous products to account for
upgrades, and deciding how to adapt marketing techniques. Previous sales help determine future sales, expenses and
revenues.
1.5. The Role of Sales Manager
The role of a sales manager is to lead, manage, provide leadership, guidance, strategic direction and support to a team
of sales professionals to achieve sales targets and drive revenue growth for a company.
1. Setting sales targets
sales managers are responsible for setting sales targets and objectives in alignment with the overall business goals. They
analyze market trends, competitive landscape, and sales data to establish realistic and challenging sales targets for the
team.
2. Sales planning and strategy
sales managers develop sales strategies and plans to achieve the sales targets. They identify target markets, customer
segments, and sales channels. They also develop pricing strategies, promotional activities, and sales campaigns to
maximize sales opportunities.
3. Team management
sales managers recruit, train, and manage a team of sales representatives. They provide coaching, mentoring, and
performance feedback to help team members improve their sales skills and achieve their targets. Sales Managers also
establish sales territories; assign sales quotas, and monitor individual and team performance.
4. Sales forecasting and reporting
sales managers analyze sales data, market trends, and customer insights to forecast future sales and revenue. They
prepare sales reports, performance dashboards, and sales forecasts to provide visibility into the sales pipeline and track
progress towards targets. They also communicate sales results and analysis to senior management.
5. Relationship management
sales managers build and nurture relationships with key customers, partners, and stakeholders. They participate in
customer meetings, negotiate contracts, and resolve any issues or concerns. Sales managers also collaborate with
marketing, product, and other departments to ensure alignment and support the overall sales effort.
6. Sales training and development
sales managers provide ongoing training and development opportunities to their team members. They conduct sales
training sessions, workshops, and role-playing exercises to enhance sales skills, product knowledge, and customer
engagement techniques.
7. Collaboration and communication
sales managers collaborate with other departments, such as marketing, operations, and customer service, to ensure
seamless coordination and customer satisfaction. They communicate sales strategies, goals, and performance updates to
the team and senior management. Sales Managers also gather market intelligence and customer feedback to inform
product development and business strategies.
8. Motivating the team
Motivating the sales team is a huge part of being a sales manager. Many sales managers cultivate energetic work
personalities, designed to encourage their team and get them to close more deals. The sales manager is typically in
charge of administering incentive programs, which involves finding a delicate balance between motivating sales reps and
protecting profit.
9. Sales performance evaluation
sales managers evaluate individual and team performance against sales targets and key performance indicators (KPIs).
They conduct regular performance reviews, identify areas for improvement, and provide coaching or corrective action
when necessary. They recognize and reward high-performing sales representatives and develop performance
improvement plans for underperforming team members.
Overall, sales managers are instrumental in driving the sales function of an organization.
Unit Summary
Marketing and sales management is a dynamic and essential field of study that focuses on the strategies and techniques
used to promote and sell products or services effectively. It is a vital area of study and offers diverse professional
opportunities. The branches of marketing cater to different aspects of the marketing process, while marketing and sales
managers have distinct roles in planning, implementing, and optimizing marketing and sales strategies to achieve
organizational success.

Unit Review
Questions
Part One: Multiple Choice Questions
Instruction: Choose the correct answer form the given alternatives
1. Which one of the following is career opportunity in marketing and sales management?
A. Public relation D. Accountant
B. Profession E . A and C
C. Brand manager
2. Which one of the following is the responsibility of a marketing manager?
A. Setting sales target D. Implement marketing strategy
B. Plan E. All are answers
C. Manage external communication
3. Marketing and sales management as an area of study includes all, except
A. Market research C. Consumer behavior
B. Digital marketing and sales D. Promoter
4. Branches of marketing include:
A. Digital marketing C. Relationship marketing
B. B. Market research D. All are answers
5. Which of the following is the role of sales manager?
A. Setting sales target C. Price setting
B. Product development D. Promotion
 UNIT 2
INTRODUCTION TO MARKETING
Introduction
Marketing is a fundamental concept and practice that plays a crucial role in the success of businesses and organizations. It is
a dynamic discipline that involves identifying and satisfying customer needs and wants through the creation,
communication, and delivery of value. Marketing encompasses a wide range of activities aimed at understanding

customers, developing products or services, setting prices, promoting offerings, and delivering them to target markets.
Marketing deals with customers and marketers need to understand customer needs and wants and the market place within
which they operate.

2.1. Definition of Marketing

Marketing is the process of creating, communicating, delivering, and exchanging offerings that have value for customers,
clients, partners, and society at large.
It involves understanding customer needs and wants, identifying target markets, designing goods and services that meet
those needs, promoting and selling them, and ultimately building and maintaining relationships with customers to drive
business growth and profitability.

2.1.1. Pillars of Marketing Concepts

The marketing concept encompasses several pillars that are fundamental to understanding and implementing effective
marketing strategies.
1. Need, wants and Demand
Need: A need is a basic requirement or necessity that is inherent to human beings. It refers to the physiological or
psychological desires for something that fulfills a deficiency. They are the states of felt deprivation. Needs are universal and
fundamental, such as the need for food, shelter, clothing, safety, love, self-esteem, and self-actualization. They are the
underlying motivations that drive human behavior and create demand for products, services, or ideas that fulfill those
needs.
Want: Wants are specific desires or preferences that individuals have in order to fulfill their needs.
Wants are shaped by factors such as culture, personal experiences, and individual tastes. For example, while food is a basic
need, the specific want may be a desire for Enjera or a particular brand of food. Marketers aim to create products or services
that not only fulfill needs but also align with and satisfy consumers' wants.
Demand: refers to the willingness and ability of individuals to purchase a particular product, service, or idea at a given
price and time. It is influenced by factors such as wants, needs, income levels, market conditions, and consumer behavior.
Understanding and analyzing demand patterns is crucial for marketers to determine market opportunities and develop
effective marketing strategies.
Product
Product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a need
and/or want. It includes physical objects, services, persons, places, organizations and ideas. Other names for a product
would be the offer, value package, or benefit bundle. A famous football player like Lionel Messi, is a product (person)
bought by many countries and clubs. The Soufomar cave and Lalibella Wewn Church are products (place) that provides
historical thought and cross-cultural experience. To sum up a product is its benefits.
Marketers focus on developing and positioning products that meet customer needs and provide value.
2. Value, Cost and Satisfaction
Value: Value is the perceived benefit or worth that customers believe they receive from a product or service in relation to
its cost. It is the customer's assessment of the benefits gained compared to the sacrifices made. Value can be a combination
of factors such as product quality, features, performance, convenience, service, and emotional appeal. Marketers aim to
create and communicate value propositions that differentiate their offerings and demonstrate why they are superior to
competitors.
Cost: Cost refers to the total investment or sacrifice that customers incur to acquire and use a product or service. It
includes both monetary costs, such as the purchase price, fees, and ongoing expenses, as well as non-monetary costs, such
as time, effort, and emotional costs. Marketers need to consider the perceived cost and ensure that it aligns with the value
provided. They may employ pricing strategies, discounts, or payment options to make the cost more attractive to customers.
Satisfaction: Satisfaction is the customer's overall evaluation of a product or service after it has been purchased and used.
It reflects the extent to which the offering meets or exceeds customer expectations. When customers are satisfied, they are
more likely to repurchase, recommend the product to others, and develop loyalty towards the brand. Marketers focus on
delivering quality products, providing excellent customer service, and managing customer relationships to enhance
satisfaction levels.
3. Exchange and Transaction
Exchange: Exchange is the core concept of marketing. It refers to the process of obtaining a desired product, service, or
idea from someone by offering something of value in return. In a marketing context, exchanges occur when consumers are
trying to maximize satisfaction with goods and services, the need for exchange arises.
As a means of satisfying needs, exchange has much in its favor. People do not have to pray on others or depend on
donations. Not must they possess the skills to produce every necessity for themselves. They can concentrate on making
things they are good at making and trade them for needed items made by others. Thus, exchange allows a society to
produce much more than it would with any alternative system.
For an exchange to occur, several conditions must be satisfied.
➢ At least two people needed for an exchange to occur
➢ Must have something of value to exchange (product or money)
➢ Need to be able to communicate
➢ Must be able to exchange
➢ Must want to exchange
These conditions simply make exchange possible. Whether exchange actually takes place depends on the parties’ coming to
an agreement. If they agree, we must conclude that the act of exchange has left both of them better off, or at least not
worse off. Whereas exchange is the core concept of marketing, a transaction is marketing’s unit of measurement.
Transaction: A transaction is a specific occurrence of an exchange, where two or more parties agree to trade something of
value. It involves the transfer of ownership or rights to a product, service, or idea. Transactions can be monetary (involving
the exchange of money) or non-monetary (involving bartering or other forms of non-monetary exchange). Transaction is a
trade between two parties that involves:-
➢ At least two things of value
➢ Agreed up on conditions
➢ Time of agreement, and
➢ Place of agreement.
The process of exchange transaction is carried out in a market. In transaction, we must be able to say that one party gives x
to another party and gets y in return. For example, you may pay birr 28000 for a TV set. This is a classic monetary
transaction, but not all transactions involve money.
In a barter transaction, you might trade your old refrigerator in return for a neighbor’s second hand TV set.
Relationship and Network
Relationship: Relationship emphasizes the long-term engagement and nurturing of customer relationships. It recognizes
that strong, ongoing relationships with customers are key to business success. Relationship marketing goes beyond
individual transactions and focuses on building customer loyalty, trust, and satisfaction. It involves understanding customer
needs, delivering personalized experiences, and consistently providing value to customers. Marketers employ strategies
such as loyalty programs, personalized communication, and customer service excellence to foster and strengthen these
relationships.
Network: Network involves building a network of independent distributors or salespeople who promote and sell products
or services directly to consumers. This marketing model relies on interpersonal relationships and word-of-mouth marketing.
Network marketing companies typically provide training, support, and incentives to their distributors, who, in turn, recruit
new distributors and earn commissions based on their sales and the sales of their recruits. The strength of the network and
the relationships within it play a crucial role in the success of network marketing.
Market, Marketers and Prospect
Market: Market is defined as a group of actual and potential customers with needs to satisfy, money to spend, and
willingness to spend it. It is the target audience that businesses identify and serve with their products, services, or ideas.
Understanding the market involves conducting market research to gather information about customer demographics,
preferences, behaviors, and market trends.
Marketers: Marketers are the individuals or organizations responsible for creating, communicating, and delivering value
to the target market. They play a crucial role in understanding customer needs, developing offerings that meet those needs,
and promoting them effectively. Marketers employ various strategies and tactics to influence customer perceptions, drive
demand, and generate sales. They analyze market trends, competitors, and consumer behavior to make informed decisions
and create marketing plans that align with business objectives.
Prospects: Prospects, also known as potential customers or leads, are individuals or organizations that have shown
interest in a product, service, or idea and have the potential to become customers. Prospects are typically identified
through lead generation activities such as advertising, direct marketing, referrals, or online inquiries. Marketers focus on
converting prospects into customers through targeted marketing efforts, nurturing relationships, and guiding them through
the buyer's journey.
Understanding and integrating these pillars into marketing strategies and activities is essential for businesses to effectively
meet customer needs, create value, generate demand, and build long-term relationships.
Dear students! So far, the term market is defined from different angle and pillars of marketing concepts are discussed
briefly. Now it is your turn to answer the following self-check questions

Self-check 2-1: Instruction: Match column “A” “with column “B”

Column A Column B
 _______1. Goods A. Willingness and ability to buy

_______2. Need B. Potential customers

_______3. Market C. Shaped by culture

_______4. Demand D. Intangible

_______5. Prospect E. Basic necessity

_______6. Want F. Perceived benefit of product

_______7. Service G. Food items

H. Buyer and seller

2.2. Meaning of Marketing Management

According to Philip Kotler Marketing Management is “the analysis, planning, implementation, and control of programs to
create, build, and maintain mutually beneficial exchanges and relationships with target markets for the purpose of
achieving organizational objectives”.
According to the American Marketing Association: Marketing management is the process of planning and executing the
conception, pricing promotion and distribution of ideas, goods and service to create exchanges that satisfy individual and
organizational objectives.

Marketing management refers to the process of planning, executing, and controlling the activities related to the promotion,
distribution, and sale of goods or services to meet the desired objectives of an organization.

Marketing management encompasses various activities, including market research, product development, pricing,
advertising, sales promotion, distribution channel management, and customer relationship management. Effective
marketing management requires understanding customer needs and preferences, identifying target markets, developing
marketing strategies, designing marketing campaigns, and monitoring and adjusting marketing efforts based on market
feedback and performance metrics. It involves making decisions on product positioning, branding, pricing strategies,
promotional activities, and distribution channels to effectively reach and satisfy customers.
2.3. Objectives of Marketing Management

The main objective of all business enterprises is to satisfy the customer needs and attain maximum profit. In the similar
way, marketing management aims to accomplish these business objectives effectively. The objectives of marketing
management can vary depending on the specific organization, industry, and market conditions. Some of the basic objectives
of marketing management are as follows:
1. Increasing sales: One of the primary objectives of marketing management is to drive sales growth. This involves
developing marketing strategies and tactics to attract new customers, retain existing customers, and encourage repeat
purchases. Increasing sales volume and revenue is often a key goal for organizations.
2. Building brand awareness and equity: Marketing management aims to create and strengthen brand
awareness, recognition, and equity. By effectively positioning the brand in the market and communicating its unique value
proposition, marketing efforts help build a positive brand image and reputation, which can lead to increased customer
loyalty and market share.
3. Expanding market share: Marketing management seeks to increase the organization's market share by gaining a
larger portion of the target market. This can be achieved through various strategies such as market penetration (increasing
sales to existing customers), market development (attracting new customers in existing markets), or product diversification
(expanding into new markets with new products).
4. Customer relationship management: Marketing management aims to build and maintain strong relationships
with customers. This involves understanding customer needs, preferences, and behaviors, and developing strategies to
engage and satisfy them. By cultivating long-term customer relationships, organizations can increase customer loyalty,
retention, and advocacy.
5. Enhancing customer satisfaction: Marketing management focuses on delivering value to customers and
ensuring their satisfaction. By consistently meeting or exceeding customer expectations, organizations can enhance
customer satisfaction levels, which can lead to increased loyalty, positive word-of-mouth, and repeat business.
6. Maximizing profitability: Marketing management aims to optimize the organization's profitability by effectively
managing pricing strategies, cost structures, and resource allocation. This involves analyzing market dynamics, competitor
pricing, and customer value perceptions to set optimal prices that balance customer satisfaction and profitability.
7. Adapting to market changes: Marketing management involves monitoring market trends, customer preferences,
and competitive forces to identify opportunities and threats. An objective of marketing management is to proactively adapt
marketing strategies and tactics to respond to changing market dynamics and maintain a competitive advantage.
8. Improving product or service innovation: Marketing management plays a role in driving product or service
innovation and development. By understanding customer needs and market trends, marketing managers can identify
opportunities for new product introductions, product enhancements, or service improvements that meet customer
demands and create a competitive edge.
These objectives are not exhaustive, and organizations may have additional or specific objectives based on their unique
circumstances and goals. Marketing management involves setting clear objectives, developing strategies to achieve them,
and continually evaluating and adjusting marketing efforts to ensure they align with organizational goals.

2.4. Marketing Management Philosophies

Marketing management encompasses various philosophies or orientations that guide decisionmaking and strategic
approaches. There are five competing concepts under which organizations conduct their marketing activity.
1. The Production Concept: This concept holds that consumers will favor those products that are widely available
and accessible at low in cost. Management of production oriented organization concentrates on achieving high production
efficiently and wide distribution coverage. Organizations that appreciate this concept assume that consumers like products
that are widely available and accessible at low cost. The production concept is one of the oldest concepts guiding sellers.
The assumption that consumers are primarily interested in product availability and low price.
2. The Product Concept: Under this concept, marketing managers assume that consumers will prefer those
products that offer (provide) the most quality, performance, with good features. Managers in this product oriented
organizations focus their energy on making quality products and improving them over time. These managers assume that
buyers admire well-made products and can select, purchase and appreciate product quality. Products oriented companies
often design their products with little or no customer input. These managers are caught up in a love affair with their product
and fail to appreciate that the market may be less “turned on.”The product concept leads to “marketing myopia” a focus on
the product greater than on the customer’s need.

3. The Selling Concept: Under this philosophy/concept/, marketing managers assume that consumers purchase
products if the organization undertakes an aggressive selling and promotion effort. Therefore, firms emphasize and direct
their effort on promotion and selling of their products. Most firms practice the selling concept when they introduce new
products and when they have over capacity. The selling concept holds that consumers, if left alone, will ordinarily not buy
enough of the organization’s products. The organization must therefore undertake an aggressive selling and promotion
effort. The concept assumes that consumers typically show buying inertia or resistance and have to be coaxed into buying,
and that the company has available a whole battery of effective selling and promotion tools to stimulate more buying.

The selling concept is practiced most aggressively with “unsought goods,” those goods that buyers normally do not think of
buying such as insurance, encyclopedias, and funeral plots. These industries have perfected various sales techniques to
locate prospects and hard sell them on product benefits.

4. The Marketing Concept: The marketing concept is different from the above three concepts. Managers who
follow this concept assume that the key to achieving organizational goals lies in determining the needs and wants of
consumers and delivering or providing the desired satisfaction, more efficiently and effectively, than competitors. The
selling concept focuses on the needs of the seller; whereas the marketing concept focuses on the needs of the buyer.
Selling is preoccupied with the seller’s need to convert his product into cash. Marketing is preoccupied with the idea of
satisfying the customers’ needs of the product and the whole cluster of things associated by creating and delivering the
product. The marketing concept rests on four main pillars, namely target market, customer needs, coordinated marketing,
and profitability. These are shown in the figure below:

The Selling Concept

Starting point Focus Means Ends

Factory Products Selling & Profits through
promotion sales volume

The Marketing Concept

Starting point Focus Means Ends

Target market Customer Coordinated Profit through
Needs marketing Customer
Satisfaction
5. Societal Marketing Concept: It holds that an organization should determine the needs, wants, and interests of
the target markets and deliver the desired satisfaction more effectively and efficiently than competitors in a way that
maintains or improves the customer’s and the society’s well-being. The societal marketing concept calls for balancing all
three considerations-company profits, consumer wants, and society’s interests.
The production concept emphasizes efficient production and distribution of goods at low costs, suitable for
industries where consumer demand outstrips supply or where cost-effective production is crucial. This philosophy
is relevant in industries with standardized products and price-sensitive consumers, where businesses focus on
achieving economies of scale and cost leadership. On the other hand, product concept prioritizes continuous product
innovation and improvement.

Conversely, the selling concept is relevant in markets where there is low consumer interest or high competition,
emphasizing aggressive sales and promotional tactics to stimulate demand and drive sales. While this approach may
yield short-term results, it may not foster long-term customer relationships or sustainable growth. In contrast, the
marketing concept, which focuses on understanding and satisfying customer needs through integrated marketing
efforts, is increasingly relevant in today's customer-centric business environment. This philosophy emphasizes
building strong customer relationships, delivering superior value, and adapting to changing market dynamics to
drive long-term success. Finally, the societal marketing concept is applicable in industries where social and
environmental issues are of paramount importance, emphasizing businesses' responsibility to address societal
concerns while meeting consumer needs. As consumers become more socially conscious, businesses that adopt
ethical and socially responsible practices can enhance their reputation and competitiveness in the marketplace.
Self-check 2-3: Say True or False to the following questions

1. Management of production oriented organization concentrates on achieving high product quality

2. Under selling concept, marketing managers assume that consumers purchase products if the organization
undertakes aggressive selling effort.
3. The starting concept for marketing philosophy is on identifying customer needs and wants.
4. Societal marketing concept focuses on mass production and distribution of products.
5. Marketing managers of product concept focuses on improving product quality and features.

2.6. The Different States of Demand

Dear students! Do you know anything about demand states? If not, do not worries the whole of the following topic
revolves around these basic questions. Let us proceed with the discussion of demand states.

In marketing, the concept of demand refers to the desire, willingness, and ability of customers to purchase a particular
product or service at a given price and time. Demand can vary based on several factors, and it can be classified into
different states. The following are the different states of demand:
1. Negative Demand: This is a state in which all or the major parts of the market, dislikes the product and may even pay
a price to avoid it. Examples are vaccination, alcoholic employees, dental work, and seat belts. The corresponding
marketing task is to analyze why the market dislikes the product and whether product redesign, lower price, or more
positive promotion can change the consumer beliefs and attitudes.
2. No Demand: This is a case where target customers may be unaware of or uninterested in or indifferent to a particular
product. For example, farmers may not know about a new farming method; college students may not be interested in
taking foreign language courses. Marketing managers are concerned with finding ways to connect the product’s
benefits with the user’s needs and interests.
3. Latent Demand: Consumers have a want that is not satisfied by any existing product or service. This state of demand
where many customers share a strong need for something that does not exist in the form of actual product is called
LATENT demand. Identifying latent demand can present opportunities for organizations to introduce new products or
services that fulfill unmet needs.
4. Falling Demand: Sooner or later, every organization faces falling demand for one or more of its products. For
example, Churches/Mosques have seen their membership decline, and private colleges have seen fewer applications.
The marketer must find the causes of market decline and re-stimulate demand by finding new markets, changing
product features, or creating more effective communication.
Irregular demand refers to demand that fluctuates unpredictably, with significant variations in the quantity demanded over
time. Full demand is the total quantity of a good or service that consumers are willing and able to purchase at a given price.
This represents the maximum potential demand for a product. Overfull demand occurs when the quantity demanded
exceeds the available supply, leading to shortages and intense competition among consumers to obtain the limited goods.
Unwholesome demand is demand for products or services that are considered unethical, harmful, or illegal. This type of
demand presents significant social and economic challenges.

The demand levels and corresponding marketing tasks are summarized as follows:
State of demand Marketing task Formal Name
1. Negative demand Disabuse demand Conversional marketing
2. No demand Create demand Stimulation Marketing
3. Latent demand Develop demand Developmental marketing
4. Falling demand Revitalize demand Remarketing marketing
5. Irregular demand Synchronize demand Synchro-marketing
6. Full demand Maintain Maintenance marketing
7. Overfull demand Reduce demand De-marketing marketing
8. Unwholesome demand Destroy demand Counter marketing
2-4: Choose the correct answer to the following questions
1. The state of demand that the market dislikes the product and may even pay price to avoid it.
A. No demand B. Vaccination C. Taking foreign language courses D. Latent demand

2. Which one is a marketing task for failing demand for a product?

A. Conversational marketing B. Counter marketing
C. De-marketing D. Latent demand
3. The demand for a product is higher than the company can or wants to handle. This refers to:
 A. Overfull demand B. Unwholesome demand
C. Latent demand D. Irregular demand
4. Which one is the marketing task for full demand?
A. Conversional marketing B. Synchro-marketing
C. De-marketing D. Maintain
5. Many customers share a strong need for something new that does not exist in the form of actual product. This refers to:
A. Full demand B. Failing demand
C. Latent demand D. Negative demand

Unit Summary
Marketing is a customer-centric process that aims to create value, satisfy customer needs, and achieve organizational goals.
Marketing management involves planning and implementing marketing strategies to achieve specific objectives. The
objectives of marketing management include increasing market share, enhancing brand awareness and customer loyalty,
achieving customer satisfaction, generating sales and revenue growth, and establishing a sustainable competitive
advantage.
The pillars of marketing concepts are guiding principles that shape marketing strategies. These includes need, want,
demand, product (goods, services and idea), value, cost and satisfaction, exchange and transaction, relationship and
network, market, marketer and prospect

Marketing management philosophies guide decision-making. These philosophies include production concept, product
concept, selling concept, marketing concept, and societal marketing concept. They dictate the company's focus, whether it
be on production efficiency, product quality, aggressive selling, customer needs, or societal well-being.
The state of demand refers to the current level of consumer interest and desire for a product or service. It can be
influenced by various factors, such as market conditions, consumer preferences, and competitive offerings.
 Unit Review
Questions
Part One: Discussion Questions
Instruction: Give brief answer for the following questions
1. Define marketing and marketing management
2. Briefly explain pillars of marketing concepts
3. Write objectives of marketing management
4. Explain marketing management philosophies
 UNIT 3
SCAN THE MARKETING ENVIRONMENT
3.1. The Marketing Environment
Marketing management decisions are not made in a vacuum. It is affected by numerous factors both within and outside of
the marketing department of an organization. For example, the laws of the country affect the type of product companies
can produce and how they should produce. Competition affects marketing performances. Customers, labor union, suppliers,
social factors, culture, demography and the like affect marketing performance. Intuit marketers, therefore, need to
continuously monitor both the internal and external environment and assess the way it affects their performance and
develop a marketing mix program that enables them to capitalize on the opportunities.
The marketing environment refers to the internal and external factors and forces that influence an organization's marketing
activities and decision-making. It consists of various components that impact an organization's ability to meet customer
needs, create value, and achieve its marketing objectives.

The marketing environment may be divided into two as:

External environment (forces) and

Internal environment (forces)

3.2. The External Marketing Environment

The external environment is the totality of major institutions and forces that are external and potentially relevant to the
firm. It can in turn be reclassified into macro and micro environment.

3.2.1. The External Macro Marketing Environment

The macro environment can be divided into six major components: Demographic, Economic, competitive, technological,
social and cultural, and political and legal.
a. Demographic Environment: Demography is the study of human population and its distribution. It is important to
marketing executives because people constitute markets. Marketers have to analyze the marketing variables composed of
age, sex, family, occupation, education, race, religion and nationality so that we can develop and distribute products
depending on their need and wants.

b. Economic Environment: People alone do not make market. They must have money to spend and willingness to
spend it. Total purchasing power is a function of current income, prices, savings and credit availability. Marketers should
have to analyze these variables so that they can develop products and price them depending on the purchasing power of
the people. It is depending on the analysis of these variables that we can forecast the demand for our products.
Therefore, the following factors should be considered:
i. Inflation (rise in price levels)
ii. Disposable personal income (income after paying taxes)
iii. Discretionary income (income after paying for their basic needs such as food, shelter, clothing and other basic
necessities). Reductions in discretionary income hurt sellers of discretionary goods and services, such as
automobiles, large appliances and vacations.

c. Technological Environment: Technology has a tremendous impact on our lives- life styles, consumption patterns
and economic well-being underlying any economic activity. This environment is the technological base, the technical skills
and equipment that affect the way an economy’s resources are converted to output. Marketers must help their firms
decide what technical developments will be acceptable to society. With the growing concern about environmental pollution
and the quality of life, some attractive technological developments may be rejected because of their long-run effects on the
environment.

Farther more organizations have to see the possible side effects of technology and the emergence of improved substitute
products that can adversely affect their operations.

d. Physical Environment: The physical environment is concerned with the availability of natural physical resources.
Marketers should be aware of the threats and opportunities associated with four trends in the physical environment.
• Potential shortages of raw materials:
• Unstable cost of energy
• Increased level of pollution
• Changing the role of government in environmental protection.
e. Political and legal: Any organization operates within the framework of the political and legal systems. Similarly
marketing system should also follow the rules, regulations and restrictions of the government. Nowadays there is an
increasing amount of legislation regulating businesses, and marketing should strictly adhere to these regulations.
f. Social and cultural: Socio-cultural environment has a great impact on marketing systems. Cultural patterns, life
styles, social values, beliefs and attitudes are changing much faster. Consequently, the socio-cultural environment affects
how and why people live and behave as they do- which affects customer buying behavior and eventually the economic,
political and legal environment. The socio-cultural environment affects marketing in the following ways:
▪ Emphasis on the quality of life rather than quantity of goods.
▪ Attitude towards health and fitness
▪ Impulse buying
▪ Desire for convenience

3.2.2. The External Micro Marketing Environment

The microenvironment consists of five components. The first is the organization’s internal environment-its several
departments and management levels - as it affects marketing management's decision making. The second component
includes the marketing channel firms that cooperate to create value: the suppliers and marketing intermediaries (middlemen,
physical distribution firms, marketingservice agencies, financial intermediaries). The third component consists of the five
types of markets in which the organization can sell: the consumer, producer, reseller, government, and international
markets. The fourth component consists of the competitors facing the organization. The fifth component consists of all the
publics that have an actual or potential interest in or impact on the organization’s ability to achieve its objectives: financial,
media, government, citizen action, and local, general, and internal publics.
So the microenvironment consists of six forces close to the company that affect its ability to serve its customers:

a. Suppliers: Suppliers are firms and individuals that provide the resources needed by the company and its
competitors to produce goods and services. They are important links in the company’s overall customer “value delivery
system.” Here the following considerations are important:
o Supply availability (such as supply shortages).
o Monitoring of price trends of key inputs. Rising supply costs must be carefully monitored.
b. Marketing Intermediaries: Are firms that help the company to promote, sell, and distribute its goods to final
buyers.
▪ Resellers are distribution channel firms that help the company find customers or make sales to them. These include
wholesalers and retailers who buy and resell merchandise. Resellers often perform important functions more
cheaply than the company can perform itself. However, seeking and working with resellers is not easy because of the
power that some demand and use.
▪ Physical distribution firms help the company to stock and move goods from their points of origin to their
destinations. Examples would be warehouses (that store and protect goods before they move to the next
destination).
▪ Marketing service agencies (such as marketing research firms, advertising agencies, media firms, etc.) help the
company target and promote its products.
▪ Financial intermediaries (such as banks, credit companies, insurance companies, etc.) help finance transactions
and insure against risks.
 c. Customers: The Company must study its customer markets closely since each market has its own special
characteristics. These markets normally include:
▪ Consumer markets (individuals and households that buy goods and services for personal consumption).
▪ Business markets (buy goods and services for further processing or for use in their production process).
▪ Reseller markets (buy goods and services in order to resell them at a profit).
▪ Government markets (agencies that buy goods and services in order to produce public services or transfer them to
those that need them).
▪ International markets (buyers of all types in foreign countries).
d. Competitors: Every company faces a wide range of competitors. A company must secure a strategic advantage
over competitors by positioning their offerings to be successful in the marketplace. No single competitive strategy is best
for all companies.

e. 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. A company should prepare a marketing plan for all of their major publics as well as their customer
markets. Generally, publics can be:

▪ Financial publics: influence the company’s ability to obtain funds. ▪ Media publics: carry news, features, and
editorial opinion.
▪ Government publics: take developments into account.
▪ Citizen-action publics: a company’s decisions are often questioned by consumer organizations.
▪ Local publics: includes neighborhood residents and community organizations.
▪ General publics: a company must be concerned about the general public’s attitude toward its products and services.

3.3. The Internal Marketing Environment

The environmental forces that influence organizations marketing program are not limited to the external forces. It is also
shaped by the internal environment. The Internal variables are inherent in an organization and are controlled by
management. The external variables are those which cannot be coordinated and controlled by the management.
Any marketing system is influenced by the internal non-marketing resources that include production facilities, financial
capability, human resources, company location, research and development capability, and company image. In fact,
management controls these internal variables.
If management is considering adding a new product, for example, it must determine whether the existing production
facilities and expertise can be used. If the new product requires a new plant or machinery, financial capability enters the
picture.
Another environmental consideration here is the necessity of coordinating marketing and nonmarketing activities in an
organization. The notion of encouraging cooperation and minimizing conflicts should not be limited only to relationships
involving marketing with other departments. The environment within the marketing department certainly can have a
considerable effect on marketing system.
Sometimes the existing marketing environment will shape or change the marketing planning. For example: management
may be considering adding a new product to enter a new market. However, the decision may be against it because the
firm’s distribution system and the existing sales force cannot handle the proposed product.

Unit Summary
The marketing environment consists of various factors that influence an organization's ability to meet its marketing
objectives. It includes both internal and external factors.
The internal marketing environment comprises factors that are within the organization's control. These include the
organization's mission, vision, objectives, resources, and internal stakeholders such as employees, management, and
culture. The external marketing environment consists of factors that are beyond the organization's direct control. This
environment includes the macro environment and the micro environment.
The macro environment refers to the broader societal forces that impact the entire industry or market. These include
political, economic, social, technological, environmental, and legal factors. On the other hand, the micro environment refers
to the specific forces and actors that directly influence an organization's operations and its ability to serve its target market.
These include suppliers, customers, competitors, intermediaries, and publics.

Understanding and analyzing the internal and external marketing environment is crucial for organizations to develop
effective marketing strategies, organizations can adapt to changes, identify opportunities, and mitigate risks. It enables
them to align their marketing efforts with market demands, customer preferences, and organizational goals, ultimately
leading to more successful marketing outcomes.

Review Questions
Part One: Multiple Choice Questions
Instruction: Choose the correct answer form the given alternatives
1. All of the following are factors in the external environment affecting marketing except:
A. Company location D. Political and legal factors
B. Economic conditions E. Competition
C. Technology
2. Marketing managers cannot control _____, but they can sometimes influence it.
A. Production facility D. The distribution strategy
B. The external environment E. Product pricing
C. Company image
3. _____ factors are environmental factors that include our attitudes, values, and lifestyles.
A. Competitive D. Social
B. Economic E. Demographic
C. Political
4. All of the groups within a company are called the ________.
A. Culture D. Technology
B. Diversity E. Demography
 C. Internal environment
5. A radio station that carries news, features, and editorial opinions about your area is which type of public?
A. Financial D. Local
B. Media E. Government
C. Political
 UNIT 4 CONSUMER BUYING BEHAVIOR
Introduction
The aim of marketing is to meet and satisfy target customers’ needs and wants. The field of consumer behavior studies how
individual, groups, and organization select, buy, use, and dispose of goods, services, ideas of experiences to satisfy their
needs & desires.
Understanding consumer buying behavior and "Knowing customers" are never simple. Customers may state their needs and
wants but act otherwise. They may not in touch with their deeper motivations. They may respond to influences that change
their mind at the last minute.
Nevertheless, marketers must study their target customers’ wants, perception, preferences, and shopping & buying
behavior.

4.1. Meaning of Consumer behavior

Consumer buying behavior studies how consumers buy, use, and dispose the product of the company where as consumer
market is all the individuals and households that buy or acquire goods and services for their personal and family
consumption. For example, Addis Ababa consumer market consists of millions of people who consume each year goods and
services worth a significant sum of Birr. Consumers make many business decisions every day. Most large company’s research
consumer buying decisions in great detail to answer questions about what consumers where they buy, how and how much
they buy, when they buy, and why they buy.
Consumer behavior is the study of individuals, groups, or organizations and the processes they use to select, secure, use,
and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the
consumer and society.

The consumer market consists of all individuals and households who buy or acquire goods and services for personal
consumption. Consumers vary tremendously in ages, incomes, educational levels, mobility patterns and tastes. Marketers,
thus, try to distinguish different consumer groups to develop products or services tailored to their needs. Consequently, the
need for the analysis of buyer behavior arises because it is through the study of buyer behavior that marketers can
distinguish the need of different market segments or consumer groups effectively. In fact, the buyer, the product, the seller
and the situational characteristics interact to yield the buying outcome.

4.2. Factors Affecting Consumers Buying Behavior

The factors influencing consumer-buying behavior consist of cultural, social, personal, and psychological factors.
I. Cultural Factors
Cultural factors exert the broadest and deepest influence on consumer behavior. They include culture, subculture, and social
class.
a) Culture: is a set of learned beliefs, values, attitudes, habits and forms of behavior that are shared by
society and are transmitted from generation to generation within that society. It is the complex of symbols and
artifacts created by a given society and handed down from generation to generation as determinants and
regulators of human behavior. The symbols may be intangible (attitudes, beliefs, values, languages,
religion) or tangible (tools, housing, products, and works of art). In short, culture implies a totally learned and
handed down way of life.
 Culture is the most determinant of a person's wants and behavior because human behavior is largely learned. Then
marketers should seriously consider the culture in choosing target markets and preparing marketing programs. For example,
the introduction of processed horsemeat in Ethiopia would be meaningless while it is delicious and highly demanded in
Europe. This shows us that culture may determine the success or failure of a business organization.

b) Subculture: Each culture contains smaller groups or subcultures, and each of these provides more specific
identification and socialization for its members. These subcultures can be identified in the form of nationality,
religion, race, and geographical locations such as urban-rural distribution.
From these explanations, it is easy to understand a specific product or attribute may mean different things to different
subcultures.
c) Social Class: Virtually all-human societies exhibit social stratification. Social classes are relatively
homogenous and enduring divisions in a society, which are hierarchically ordered, and whose members share
similar values, interests and behavior. Roughly, any society can be divided into three major groups: upper, middle
and lower classes.
Under normal conditions, social classes have several characteristics:
• Persons within a given social class tend to behave more alike.
• Persons are ranked as occupying inferior or superior positions according to their social class.
• Social class is not indicated by any single variable but is measured as a weighted function of one's occupation, income,
wealth, education, value orientation, and so on; and
• Social class is continuous rather than discrete, with individuals able to move into a higher social class or drop into a lower
one.
Marketers want to focus their effort on one of a few social classes because social classes show distinct product and brand
preferences in such areas as clothing, home furnishings, leisure activity; and automobiles.
II. Social Factors
A consumer's behavior is influenced not only by broad cultural factors but also by social factors, such as the consumer's
reference groups, family, and social roles and statuses.
a) Reference Groups: A reference group may be defined as a group of people who influence a person's
attitudes, values, and behavior. Each group develops its own standards of behavior that they serve as guides for
the individual members. The members share these values and are expected to conform to the group's normative
behavioral patterns.
Consumer behavior is influenced by the small groups to which consumers belong or aspire to belong. These groups may
include family, close friends, neighbors, fellow worker. People are also influenced by groups in which they are not members,
called aspiration groups (such as sports, heroes and movie stars). A marketer would like to know whether a consumer'
decisions to purchase his product and brand are importantly influenced by reference groups, and if so which reference
groups. This enables the marketer to select a specific market segment as a target market.
b) Family:
Family group exerts the strongest and most enduring influence on our perceptions and behavior. The family is the most
important consumer buying organization in society. Marketers are thus interested in the roles and relative influence of the
husband, wife and children in the purchase of a large variety of products and services. The dominance of each member has
different effects on the purchase of goods and services. For example, if the wife is dominant, the emphasis of purchase can
be households and furniture; and if the husband is dominant the priority may be life insurance, automobile etc. In fact, the
dominance of each family member varies for different sub decisions of a product category (such as when and where to buy).
c) Social Roles and Statuses: A person participates in many groups, such as family, clubs, and organizations.
A person's position in each group can be defined in terms of role and status. A role consists of the activities that a
person is expected to perform according to the persons around him or her. People choose products that
communicate their role and status in society. For example, a minister or company manager buys a car, clothing,
housing and others that best fit his role and status as expected by the society.
III. Personal Factors
A buyer's decisions are also influenced by personal outward characteristics, notably the buyer's age and lifecycle state,
occupation, economic circumstances, personality and self-concept.
a) Age and Life-Cycle Stage: The goods and services that people buy change over their lifetime. The types
of food and cloth people need changes with age. People's task in clothes, furniture, and recreation is related to
age. Marital status, presence or absence of children, and their ages also affect buying decision. Marketers term
these factors collectively as family life cycle.
b) Occupation: A person's occupation will lead to certain wants and needs for goods and services.
Accordingly, the clothes, households, furniture, recreational systems needs and tastes, etc for a manager of a
certain corporation is different from the proletariat of corporation.
c) Economic Circumstances: The buying decision that a person makes is tremendously affected by the
economic conditions of the person. The income that he/she earns, the attitude towards spending and saving, the
borrowing power and so on affect his/her buying decision.
d) Personality and Self-Concept (Self - Image): Personality is another factor that affects the buying behavior of a
person. It describes the person's distinguishing character, traits, attitudes and habits. A person can be creative or
conventional, active or passive etc. The attitude of people or mental picture towards themselves is also called self-concept or
self-image. Thus, people buy products which fit their assumed self-image.
IV. Psychological Factors
The psychological factors that influence the buying behavior of an individual are motivation, perception, learning, and beliefs
and attitudes.
a) Motivation: A person has certain needs. Some of the needs are biogenic that arise from psychological states of tension
such as the need for food, drink, and others. Some of the needs are psychogenic which arise from psychological states of
tension such as the need for social affinity, recognition, respect and so on.
A need becomes a motive when it is aroused to a sufficient levee of intensity. A motive or drive is a stimulated need intense
enough to motivate the person to act towards the goal of satisfying the need. After the need is satisfied the person's tension
is reduced and he/she returns to a state of equilibrium. Thus, one's buying decision is affected by the degree of need.
Perception: Even a person is motivated to act; his/her buying decision to act is affected by his/her perception of the
situation. Two individuals may perceive the same thing differently because people perceive what they want to perceive, they
don't perceive what they see. All of us may see a certain act or product but all of us may not perceive it.
Perception is the process by which an individual selects, organizes and interprets information inputs to create a meaningful
picture of the world. We perceive things or situations using our five sense organs. However, each of us attends organizes and
interprets the sensory information in an individual way. This results in differences in perception that in turn results in
differences in the buying attitudes and buying decisions.
b) Learning: As a factor influencing a person's perception, learning may be defined as changes in behavior
resulting from previous experiences excluding the behavioral changes attributable to instinctive responses or
temporary states of the person such as hunger of fatigue. Thus most behavior is learned. Then the learning
experiences that man has acquired in the similar conditions or different circumstances affect the buying decision of
the person.
c) Beliefs and Attitudes: Through the learning process, people acquire their beliefs and attitudes. These in
turn influence their buying behavior.
Belief is a descriptive though that a person holds about something. It may depend on real knowledge, opinion or faith. An
attitude involves a person's enduring favorable or unfavorable cognitive evaluations, emotional feelings or action tendencies
toward some object or idea. Attitudes involve thought processes as well as emotional feelings, and they vary in intensity.
People have attitudes concerning religion, politics, clothes, music, and food and so on. They result in liking and disliking
things, moving toward or moving away from them. Attitudes function in people's lives to enable them to have a fairly
consistent behavior toward similar classes of objects, thus they economize in energy and though, and are very difficult to
change.
4-1: Choose the best answer from the given alternatives
1. Any individual who purchases goods and services from the market for his/her end-use is called a____________
A. Customer B. Purchaser C. Consumer D All are answers
2. _________ is the action and decisions process or people who purchase goods and services for personal consumption.
A. Consumer attitude B. Consumer interest C. Consumer behavior. D. Consumer interpretation.
3. _________ is one of the most basic influences on an individual’s needs, wants, and behavior.
A. Brand B. Culture C. Product D. Price
4. ___________ develops on the basis of wealth, skills and power.
A. Economical classes B. Psychological Factor C. Competitors D. Social classes
5. If a consumer tells friends “I like my car more than any other car on the road,” then the consumer has expressed an _
A. Rule B. Attitude C. Belief D. Cue
6. _ is the process by which people select, organize, and interpret information to form a meaningful picture of the world.
A. Readiness B. Selectivity C. Perception D. Motivation

7. __is (are) a person’s unique psychological characteristics that lead to relatively consistent and lasting responses to his or
her own environment.
A. Personality B. Psychographics C. Demographics D. Lifestyle
8. As a form of a reference group, they ___________ are ones to which the individual wishes to belong.
A. Secondary groups B. Facilitative groups C. Primary groups D. Aspiration groups
9. If a consumer describes a car as being the “most economical car on the market,” then this descriptor is a __
 A. Rule B. Attitude C. Belief D. Cue
10. A(n) ____consists of the activities people are expected to perform according to the persons around them.
A. Status B. Attitude C. Role D. Behavior

4.3. The Consumer Buying Decision Process

The buying decision making process is a problem-solving approach consisting of five stages. However, potential buyers can
withdraw at any state prior to the actual purchase and some stages can be skipped. A total state approach is likely to be used
only in certain buying situations such as in buying high priced products, infrequently purchased articles and first time
purchase of a product.
The buying decision process involves the following five steps.

Need Information Evaluation Purchase Postrecognition search of

decision purchase alternatives behavior

1. Need Recognition
The process starts when unsatisfied need (or motive) creates an inner tension. The need may have been dormant until it was
aroused by an external stimulus such as advertisement or sight of the product. Or it may be a physiological need. Or perhaps
dissatisfaction with the present product creates tension. Once the need has been recognized, often consumers become
aware of conflicting uses for their scarce resources, time, priority, approval by the family and reference groups etc.
2. Information Search
Once a need has been recognized and the conflict solved, both product and brand alternatives must be identified. A certain
need may be satisfied by different products. Suppose a person wants to buy an entertainment good. This can be a video, TV,
smart phone etc. If the man's choice is smart phone, depending on his ability to buy, he has still to choose on among several
brands such as Samsung, Apple, Huawei, etc.

The search for alternatives is influenced by factors such as time and money cost, the information the consumer has acquired
from past experience and other sources and the amount of the perceived risk if a wrong selection is made.

3. Evaluation of Alternatives
After all the reasonable alternatives have been identified, the consumer has to evaluate each alternative with respect to
certain qualities of a product such as shape, color, effectiveness, portability, comfort, cost, tastes, size, operation system and
etc.

4. Purchase Decision
After searching for and evaluating alternatives, the consumer must decide whether or not to buy. Once the alternatives are
evaluated, the consumer forms a ranked set of preferences among the alternatives. Normally the consumer develops
purchase intention before making a purchase decision certain factors may intervene between forming a purchase intention
and purchase decision. The factors that influence purchase intentions are attitude of others, anticipated situational factors
and unanticipated situational factors. The decision of an individual to modify, postpone, or avoid a purchase decision is
heavily influenced by the perceived risk because consumers assume risk when deciding to buy a certain product.

5. Post Purchase Behavior

After purchasing and trying the product, the consumer will experience some level of satisfaction or dissatisfaction.
Satisfaction and dissatisfaction are two contrasting states that individuals experience in response to products,
services, experiences, or situations. Satisfaction refers to the positive feeling or contentment that arises when
expectations are met or exceeded, while dissatisfaction arises when expectations are not fulfilled, leading to feelings
of disappointment or unhappiness.

The degree of satisfaction or dissatisfaction is of great importance to marketers because consumers will engage in post
purchase actions accordingly. The buyer's feelings after the sale can influence repeat sales and what the buyer fells others
about the product.
4-2:
1. Which of the following is not one of the five stages of the buyer decision process?
A. Need recognition B. Brand identification C. Information search
D. Purchase decision
2. According to the buyer decision process suggested in the text, the first stage is characterized as being one of __________
A. Awareness B. Information search C. Need recognition D. Demand formulation
3. The stage in the buyer decision process in which the consumer is aroused to search for more information is
called____________
A. Information search B. Evaluation of alternatives C. Search for needs D. Perceptual search.
4. How the consumer processes information to arrive at brand choices occurs during which stage of the buyer decision
process?
A. Need recognition B. Information search C. Purchase decision D. Evaluation of alternatives
5. With respect to post purchase behavior, the larger the gap between expectations and performance:
A. The greater likelihood of re-purchase
B. The greater the customer’s dissatisfaction
C. The less likely the consumer will be influenced by advertising
D. The less likely the consumer will need sales confirmation and support
4.4. Model of Consumer Buying Behavior

Consumer behavior models are theories that identify consumers' behavior patterns and explain why or how they make
purchasing decisions. Buyer behavior includes factors such as their personal beliefs, interests, education, background and
goals.
Companies often use these models to determine how consumers in a certain market may react to certain products, pricing
and product features, advertisements and competitors. This often assists them in making certain marketing or business
development decisions. Using consumer behavior models may also help businesses retain and satisfy customers.
 Fig: Model of Consumer buying behavior
The starting point for understanding buying behavior is the stimulus- response. Marketing and environmental stimuli enter
the buyer’s consciousness. The buyer’s characteristics and decision process lead to purchase decisions.

Self-check 4-3:
Write marketing stimuli and other stimuli that influence consumer buying decision.
1. As a buyer what is your decision after gathering information about goods and services and compare different
brands?

Unit Summary
Consumer behavior refers to the study of how individuals, groups, or organizations make decisions to select, purchase, use,
and dispose of goods, services, ideas, or experiences to satisfy their needs and wants.
Factors affecting consumer behavior include cultural, social, personal, and psychological factors. The buying decision process
of consumers consists of several stages. It starts with recognizing a need or problem, followed by information search,
evaluation of alternatives, the actual purchase decision, and post-purchase evaluation.

The model of consumer behavior often follows the stimulus-response paradigm. It suggests that external stimuli (such as
marketing messages) trigger consumer responses through internal psychological processes (such as perception and
motivation).
Unit Review Questions
Part One: Discussion Questions
Instruction: Give brief answer for the following questions
1. Define consumer behavior?
2. Briefly explain factors affecting consumer buying behavior?
3. Discuss the buying decision process of consumers?
PROJECT WORK
Project 1:
Assume that you are a marketing officer for a new start-up company that manufactures organic skincare products. You are
responsible for launching a new product in a competitive market.
Task 1: Develop a comprehensive product launch campaign that includes market research, target audience identification,
messaging, media selection, and promotional activities.
Task 2: Design a creative and engaging campaign that generates excitement and drives sales.
Task 3: Present your campaign plan, including timelines and budget, to the marketing and sales teams for approval.
Project 2:
Assume that you are a sales manager for a multinational technology company. Your team has experienced a decline in sales
in a particular region. Your company wants to implement a customer relationship management system to enhance customer
relationships and improve sales effectiveness in the region.
Task 1: Conduct a thorough analysis of the sales performance in the region and identify the root causes of the decline and
propose strategies to improve sales performance.
Task 2: Select a suitable customer relationship management solution; develop a plan for its implementation,
Project 3:
Assume that you are a marketing officer for a local electronics company planning to expand its market into a new market.
Macro and micro environmental factors may impact your company's marketing strategies and operations in the new market.
Your company wants you to analyze macro and micro environmental factors.
Task 1: Conduct a macro environmental analysis of the target market.
Task 2: Perform a micro environmental analysis of your company's industry and competitive landscape.
Task 3: Develop a strategy to respond to marketing environmental change effectively.

Project 4
You are a marketing consultant for a retail clothing brand. Your task is to conduct market survey to identify the factors that
influence consumer behavior when making clothing purchase decisions and to analyze the buying decision process of
consumers in that category. You are also expected to apply a consumer behavior model to analyze consumer behavior in the
context of a specific product category.
Task 1: Conduct qualitative research to understand consumer behavior in the industry.
Task 2: Develop a marketing campaign to influence consumer buying decisions.
Task 3: Design a comprehensive strategy that utilizes various marketing elements such as advertising, social media,
experiential marketing, and influencer partnerships.

Answer Key for Self-check Questions

Unit One: Answer key to check your progress questions Self-check 1-1:
 1. Refer topic 1.1 Self-check 1-2:
1. Refer topic 1.2 Self-check 1-3:
1. Refer topic 1.3 Self-check 1-4:
1. Refer topic 1.4 Self-check 1-5:
1. Refer topic 1.5

Unit Two: Answer key to check your progress questions

Self-check 2-1: Matching
1. G 2. E 3. H 4. A 5. B 6. C 7. D
Self-check 2-2:
1. Refer topic 2.2
2. Refer topic 2.3
Self-check 2-3: True/False:
1. FALSE 2.TRUE 3.TRUE 4.FALSE 5.TRUE
Self-check 2-4: Multiple Choice
1. B 2. B 3. A 4. D 5. C

Unit Three: Answer key to check your progress questions Self-check 3-1:
1. Refer topic 3.1.
2. Refer sub-topic 3.2.1.
3. Refer sub-topic 3.2.2.
Unit Four: Answer key to check your progress questions

Self-check 4-1: Multiple Choice

1. A 2. C 3. B 4. D 5. B
6. C 7. A 8. D 9. C 10. A
Self-check 4-2: Multiple Choice
1. B 2. C 3. A 4. D 5. B
Self-check 4-3:
1. Refer topic 4.3.
2. Refer topic 4.3.
References
Kotler, P., & Armstrong, G. (2021). Principles of marketing (18th ed.). Pearson.

Jobber, D., & Lancaster, G. (2019). Selling and sales management (11th ed.). Pearson.

Tanner, J. F., & Raymond, M. A. (2019). Principles of marketing. Flat World Knowledge.

Cron, W. L., & DeCarlo, T. E. (2020). Dalrymple's sales management (11th ed.). Wiley.

Ingram, T. N., LaForge, R. W., Avila, R. A., Schwepker, C. H., & Williams, M. R. (2020). Sales management: Analysis and
decision making (10th ed.). Routledge.

Dwyer, F. R., & Tanner, J. F. (2019). Business marketing: Connecting strategy, relationships, and learning (5th ed.). McGraw-
Hill Education.

Weitz, B. A., Castleberry, S. B., & Tanner, J. F. (2020). Selling: Building partnerships (10th ed.). McGraw-Hill Education.

Moncrief, W. C., Marshall, G. W., & Rudd, J. M. (2015). Contemporary sales force management (11th ed.). Routledge. Bellizzi,
J. A., & Hasty, R. W. (2019). Retail management (3rd ed.). Waveland Press.

MUDOUL 2
UNIT 1

THE CONCEPT OF PROFESSIONAL ETHICS

 Introduction
Being a professional means taking care, being courteous, and following conventional business norms. Professionalism
serves a gatekeeping function. Individuals judge messages, and in turn the sender of those messages. Professionalism is the
conduct, behavior and attitude of someone in a work or business environment. A person doesn't have to work in a specific
profession to demonstrate the important qualities and characteristics of a professional.
A person can be called as a professional based on the standards of education, training, specific knowledge and skill she/he
possesses in order to fulfill the requirements of a particular task assigned to him/her. Professional workplace behavior is
necessary for the long-term success of a business, whether it's a big corporation or small business.
The concept of professional ethics helps you understand the set of values and standards of work discipline in charge of
changing the culture of ethics in their respective organizations as role models in accepting and implementing their
professional code of ethics. This will create an attractive and conducive working environment for both consumers and the
public as a whole, which will enable them to be served effectively and efficiently without discrimination or in accordance
with ethical standards.

1.1. Concept of Profession and Professionalism

The word profession can be defined as a vocation or occupation requiring, especially, usually advanced education,
knowledge and skill. Thus, the term profession refers to the knowledge, skill and ability which can be obtained through
formal education and training. A person who attained a certain specialized skill is known as a professional. It should also be
acceptable by society. On the other hand, professionalism is defined as “the skill, good judgment, and polite behavior that is
expected from a person who is trained to do a job well”
Although each profession requires people with specific skills and talents, every efficient employee should have general
professional qualities. These qualities can help you show employers that you are a well-rounded individual. Those who are
highly respected and admired in their roles exude professionalism.

1.2. Characteristics of professionalism

Professional characteristics refer to the qualities a person exemplifies in a business environment. Professionalism includes
standards for behavior and the employee's ability to embody the company's values and do what their employer expects of
them. Professionalism is necessary for the long-term success of any business, large or small. It ensures that customer
relationships are maintained, employee interactions are positive and that a company meets its goals and objectives. A
characteristic of professionals in the workplace includes:
1. Professional appearance: Professionals should always strive for a professional appearance, including appropriate
attire and proper hygiene and grooming. Clothing should always be clean and ironed properly. Pants, dresses, formal
skirts, crisp white shirts and leather shoes are all appropriate for a professional's wardrobe.
2. Reliable: Professionals are dependable and keep their commitments. They do what they say they will do and don't
overpromise. Professionals respond to colleagues and customers promptly and follow through on their commitments in
a timely manner. Punctuality is a key aspect of this professional characteristic. It's always important to clarify any areas
of uncertainty when dealing with customers or members of your team to ensure there are no mistaken assumptions or
surprises.
3. Ethical behavior: Embodying professionalism also means to be committed to doing the right thing. Honesty, open
disclosure and sincerity are all characteristics of ethical behavior. Many organizations include a commitment to ethical
behavior in their code of conduct. Professionals can adopt a personal code of conduct and make the same commitment
on an individual basis.
4. Organized: A professional keeps their workspace neat and organized so that they can easily find items when they
need them. All files and paperwork should be in place and, if they have to deliver a presentation, all materials should be
ready well in advance so there are no unexpected delays.
5. Accountable: Just as a professional accepts credit for having completed a task or achieved a goal, they also are
accountable for their actions when they fail. They take responsibility for any mistakes that they make and take
whatever steps necessary to resolve any consequences from mistakes. They are accountable and expect accountability
from others.
6. Professional language: People who behave with professionalism monitor every area of their behavior, including how
they talk. They minimize the use of slang and avoid using inappropriate language in the workplace. They even are
conscientious of the language they use in informal settings.
7. Separates personal live from professional life: Professionals understand the importance of separating their
personal lives from their professional lives. While professionals may experience the same challenges in their personal
lives as others, they maintain a clear separation between their professional lives and workplace demeanor.
8. Positive attitude: Part of being a professional means maintaining a positive attitude while working. A positive attitude
will improve a professional's overall performance and increase the likelihood of a positive outcome.
9. Emotional control: Professionals understand the importance of maintaining their composure and staying calm in all
situations. By remaining calm, even during challenging moments, others can rely on them to be rational and of sound
judgment.
10. Effective time management: An employee who knows how to manage their time well is viewed by their peers as a
professional. Time management ability include showing up at the office on time in the morning, being on time for
meetings and letting someone in the office know if they suspect that they might be late.
11. Focused: A professional is clear about their goals and understands what they need to accomplish to achieve them.
They know how to stay focused on their work to maintain their productivity. Professionals recognize the importance of
maintaining focus to improve the quality of their work and be as efficient as possible.
12. Poised: Being poised means maintaining a straight posture, making eye contact when communicating and helping and
establish a friendly and professional presence. Being poised means also staying calm during times of heightened
pressure.
13. Respectful of others: Professionals always treat others with respect. They understand that though humor is
appropriate in the workplace, they should always use it with respect to others. The only time that professionals engage
in conversations about other people is if they are evaluating their performance and looking for constructive ways to
improve their performance in the workplace.
14. Strong communicator: This means that they not only can effectively and efficiently convey messages to others but
also that they can actively listen to and understand what others are telling them. By engaging in open and constructive
communication with others, professionals can collaborate more effectively and accomplish a lot.

1.3. Fundamentals of Professional Ethics

Professional workers are in charge of changing the culture of ethics in their respective organization. They are expected to
be role models in accepting and implementing their professional code of ethics. As a result, a fertile and conducive work
environment will be created and effective, efficient, just, and ethical services be delivered to the customers and the public
at large.

Ethics is the critical examination and evaluation of what is good, evil, right and wrong in human conduct. A specific set of
principles, values and guidelines for a particular group or organization. It examines the rational justification for our moral
judgments; it studies what is morally right or wrong, just or unjust. In a broader sense, ethics reflects on human beings and
their interaction with nature and with other humans, on freedom, on responsibility and on justice

Professional ethics refers to ethics that enables professionals to distinguish what is right from what is wrong using morality
as standard of evaluation. Professional ethics can be conceived as a parameter by which actions and behaviors of a
professional can be determined as right or wrong.
In absolute terms all professions do not have the same set of values and standards such as accountants, managers, lawyers,
trainers, medical doctors, engineers and technicians etc.

1.4. Common Principles of Professional

Ethics
There are fundamental principles of professional ethics that apply to all professions, regardless of their specific
specialization. They are:
• Punctuality: Punctuality refers to the state of being strictly observant of an appointed or regular time across all
professions. A worker should be punctual not only when he/she meets deadlines and when he/she is always available
during working hours.
• Honesty and integrity: Honesty refers to the art of telling the truth. Employers and institutions expect their workers
to be honest. Integrity is the quality of being honest and showing a consistent and uncompromising adherence to

strong moral and ethical principles and values.

• Proper utilization of resources: A worker in any profession should handle the resources in a way that she/he can
use the resources for a longer time. In other words, avoiding wastage of resources.
• Loyalty and self –efficacy: Any worker, in a given profession must stand for, and not against the employer or the
institution. Moreover, an ethical professional must develop self-efficacy that is an appraisal or evaluation of a
professional about his /her professional and personal competence to succeed in a particular task.
• Working in cooperation with colleagues: A worker of a given profession should make sure that he/she has a good
relationship with other workers. The main rationale behind these codes of professional ethics is to create a fertile and
 good atmosphere for cooperation and better productivity. He/she should serve hand in hand with other professionals
for better productivity and effective provision of service.
• Anti-corruption spirit: One way of fighting corruption is by making professionals comply with the laws, rules, and
regulations of the state.
• Confidentiality: A worker of a given profession needs to keep some information that should be kept secret. For
instance, in case of a physician or nurse he/she has to keep all the information regarding the patient contained in a

patient’s chart.

• Commitment: A professional should help his/her clients and the whole community to maintain and satisfy societal or
public demands.
• Persistent tolerance and democratic culture: Any worker or professional have to develop the ability and
willingness to accommodate differences in ideas, outlooks or views is indispensable .
• Respecting the dignity of people: A professional or worker should respect the dignity of all personnel serving them
in accordance with their basic needs, irrespective of their sex, personal status, and religion or by supernal factors
involved.
• Impartiality/Non-partiality: A professional should treat all equally in his/her service delivery without any
discrimination.
• Accountability and responsibility: Any worker in a given profession has professional responsibilities or
duties. As part of a given organization, everyone is expected to be answerable for his/her actions.
• Transparency: That is, his/her work must be open to the public to whom he/she delivers public services. Confident
professionals who work for the people effectively and efficiently are usually transparent.
• Responsiveness: Responsiveness refers to the extent that a professional satisfies the needs, preferences, or values of
his/her connections and professional relationship with his clients or public, he/she has to be able to reply or respond to

the people’s demand.

1.5. The importance of professional ethics

The importance of professional ethics cannot be overstated. It is essential for building trust and credibility with clients,
colleagues, and the wider community. It also helps to maintain the integrity and reputation of the profession and ensures
that professionals are held accountable for their actions. Being professional can ensure a positive first impression,
successful interpersonal relationships, and a lasting reputation within your organization and industry.

1.6. Ethiopian ethical service delivery

In the Ethiopian context, twelve principles of ethical service delivery are identified as the basis for ethical service delivery in
the working areas and the public at large. Based on these principles, each profession is expected to develop its own
professional codes that address the particular nature of the profession. These are:
i. Integrity: Organizations and personnel demonstrate integrity through a consistency between actions and words
that inspires trust and credibility. Integrity also means keeping promises, honoring commitments, meeting deadlines and
refusing to participate in unscrupulous activities or business dealings.

ii. Loyalty: is proven by never disclosing information learned in confidence and by remaining faithful to coworkers,
clients, business partners and suppliers. Loyal employees avoid conflicts of interest, help build and protect the good
reputation of their company and help boost the morale of their coworkers.

iii. Transparency: embodies honesty and open communication because to be transparent someone must be willing to
share information when it is uncomfortable to do so. Transparency is an individual being honest with himself about the
actions he is taking.

iv. Confidentiality: involves a set of rules or a promise usually executed through confidentiality agreements that
limits the access to or places restrictions on distribution of certain types of information.

v. Honesty: All personnel must be committed to telling the truth in all forms of communication and in all actions. This
includes never purposely telling partial truths, selectively omitting information, making misrepresentations or
overstatements. Honesty also means reliably sharing both good and bad news with equal candor.

vi. Accountability: Accountability requires a total commitment to the ethical quality of all decisions, actions and
relationships. High expectations for ethical behavior drive business practices when an organization and its personnel are
held accountable to fellow employees, consumers, the local community and the wider public in general vii. Serving the
public interest: he term 'public interest' means matters concerning welfare of the people. Public Interest is anything that
affects the rights, health, or finance of the public at large. It is a common concern among citizens in the management and
affairs of local, state, and national government.

viii. Exercising legitimate authority: A legitimate authority is one which is entitled to have its decisions and rules
accepted and followed by others. In the case of law, people feel a personal responsibility to comply voluntarily with those
laws that are created and enforced by legitimate legal authorities.

ix. Impartiality: Impartiality (also called evenhandedness or fair-mindedness) is a principle of justice holding that
decisions should be based on objective criteria, rather than on the basis of bias, prejudice, or preferring the benefit to one
person over another for improper reasons.

x. Respecting the law: Respect is demonstrated by a full commitment to the human rights, dignity, autonomy,
interests and privacy of all personnel. It means recognizing that everyone deserves equal respect and support for sharing
ideas and opinions, without fear of any penalty or form of discrimination.

xi. Responsiveness: Responsiveness means "being able to react quickly," like a sports car whose responsiveness
makes it fun to drive, or a "responding with emotion," like the responsiveness of an audience at the concert of their all-time
favorite singer.
xii. Leadership: Demonstrated by a conscious effort to set a positive example of ethical behavior, leadership is a
commitment to excellence through ethical decision-making. Businesses and business executives maintain their leads by
constantly improving operational efficiency, worker satisfaction and customer approval.
check 1-3: Instruction: Match column “A” “with column “B”
Column A Column B

_______1. Serving the public interest A. Fair mind-ness

_______2. Responsiveness B. Builds reputation of the profession

_______3. Impartiality C. Being responsible for your action

_______4. Accountability D. Being able to react quickly

_______5. Honesty E. Telling the truth

_______6. Importance of professional ethics F. Respect the right of clients

1.7. Characteristics of Work Ethics
Work is an activity that a person engages in regularly to earn a livelihood. A professional job is a career that requires a
specific amount of advanced training and education. A good work ethic can be taught as long as more productive behaviors
are clearly demonstrated to your employees.
Characteristics of work ethics includes:
a) Appearance: Displays proper dress, grooming, hygiene, and manners.
b) Attendance: Attends class, arrives and leaves on time, tells instructor in advance of planned absences, and makes up
assignments promptly.
c) Attitude: Shows a positive attitude, appears confident and has true hopes of self.
d) Character: Displays loyalty, honesty, dependability, reliability, initiative, and self-control.
e) Communication: Displays proper verbal and non-verbal communication skills and listens.
f) Cooperation: Displays leadership skills; properly handles criticism, conflicts, and stress; maintains proper relationships
with peers and follows chain of command.
g) Organizational Skill: Shows skills in management, prioritizing, and dealing with change.
h) Productivity: Follows safety practices, conserves resources, and follows instructions.
i) Respect: Deals properly with diversity, shows understanding and tolerance.
j) Teamwork: Respects rights of others, is a team worker, is helpful, is confident, displays a customer service attitude,
and seeks continuous learning.

1.8. Unethical Behavior in the Workplace

Workplace ethics are a dynamic set of values that vary with people and their definition of a workplace. For some, it is a
physical office they go to every day, while others, their home office. No matter whether you work from home or commute
to work every day, workplace ethics is required to build a successful career. Organizations are known to embrace ethical
practices and behaviors to increase productivity and uphold integrity—while setting a penalty for workers who default
workplace ethics. Workplace ethics are the set of values, moral principles, and standards that need to be followed by both
employers and employees in the workplace. It is the set of rules and regulations that need to be followed by all staff of the
workplace. These ethics are implemented by employers to foster both employee-employee relationship and
employeecustomer relationships. An organization may decide to put these ethics into writing or not—they
are however meant to be followed. Unethical
workplace behaviors include:
• Lies/dishonesties • Corrupt practices
• Taking credit for others hard work • Management/employers unethical behaviors
• Verbal harassment/abuse • Sex for job/promotion
• Violence/forcefulness • Verbal harassment
• Non-office-related work • Undue pressure
• Extended breaks • Unfriendly work environment
• Theft/embezzlement, nepotism • Unrealistic expectations

• Sexual harassment

1.8.1. Solving Unethical Issues at the Workplace

Some guidelines to solve unethical issues at workplace are discussed as follows:
• Have Rules: Organizations need to have predefined rules and regulations regarding workplace ethics. These rules
and regulations should be given to new employees together with their employment contracts. Also having the rules
written at strategic places at the
 workplace will also help remind people about the rules. People tend to unconsciously imbibe things they see every
day.
• Accept Feedback/Complaint: Make it easy for employees to send feedback or complaints in case of harassment,
abuse, or any other unethical activities going on in the workplace.
• List Consequences for unethical behaviors: Consequences for unethical behaviors should also be placed
alongside the rules at strategic places in the organization. That way, if anyone wants to ignore the rules despite seeing
them, the fear of getting punished will stop him or her from going ahead.
• Swift Justice/Disciplinary Action: Some companies often cover up issues of rape, sexual harassment, etc. when
the perpetrator is a high-ranking member of the organization. Things like this should not be accommodated.
Irrespective of who breaks the rule, there should be swift disciplinary action by the organization.
• Conduct on-job ethical training: On-job training and development is vital to workplace ethical practices.

Dear students! So far, we discussed characteristics of work ethics, unethical behavior in the workplace and
mechanism to resolve unethical issue in the workplace. Now it is your turn to answer the following self-check
questions.

Unit Summary
The word profession can be defined as a vocation or occupation requiring, especially, usually advanced education,
knowledge and skill. Thus, the term profession refers to the knowledge, skill and ability which can be obtained through
formal education and training. Professionalism is defined as “the skill, good judgment, and polite behavior that is expected
from a person who is trained to do a job well”. Characteristic of professionalism includes professional appearance, reliable,
ethical behavior, organized, accountable, use professional language, positive attitude, emotional control, effective time
management, focused, poised, respectful to others and strong communicator.
Professional ethics can be conceived as a parameter by which actions and behaviors of a professional can be determined as
right or wrong. Common principles of professional ethics include punctuality, honesty and integrity, proper utilization of
resource, loyalty and self efficacy and etc. Ethical principles of Ethiopian service delivery includes integrity, loyalty,
transparency, confidentiality, honesty, accountability, serving the public interest, exercising legitimate authority, impartiality,
respecting the law, responsiveness, and leadership. Characteristics of work ethics include appearance, attendance, attitude,
character, communication, cooperation, organizational skill, productivity, respect and teamwork.

Unethical workplace behaviors include lies/dishonesties, taking credit for others hard work, verbal harassment/abuse,
violence/forcefulness, taking extended breaks, theft/embezzlement, nepotism, sexual harassment, unrealistic expectations
and etc. Mechanisms of solving unethical workplace behavior includes have rules, accept feedback/complaint, list
consequences for unethical behaviors, swift justice/disciplinary action, conduct on-job ethical training.

Unit review Questions

Part One: Multiple Choice Questions
Instruction: Choose the best answer from the given alternatives
1. A vocation or occupation requiring, especially, usually advanced education, knowledge and skill refers to
A. Profession B. Marketing ethics C. Professional ethics D. Ethics
2. Which one of the following is a characteristic of work ethics?
A. Cooperation B. Organizational skill C. Respect D. All are answers
3. A worker of a given profession needs to keep some information secret. This refers to: A. Confidentiality B.
Impartiality C. Transparency D. Commitment
4. Professionals are dependable and keep their commitments. This refers to:
A. Organized B. Reliable C. Ethical behavior D. Professional appearance
5. The state of being strictly meeting deadline or regular time across all profession refers to:
A. Punctuality B. Integrity C. Anti-corruption spirit D. Confidentiality
6. Which one of the following is unethical behavior in the workplace?
A. Lies B. Good communication skill C. Corrupt practice D. Productivity E. A and C
7. All are importance of professional ethics, except
A. Build trust between clients and workers B. Decrease customer satisfaction
C. Establish accountability D. Improves interpersonal relationship
8. Professionals maintain a straight posture, making eye contact when communicating and helping and establish a friendly
and professional presence.
A. Efficient time management B. Professional language C. Poised D. Team work
9. How to resolve unethical issue at the workplace?
A. Have rules B. Transparency C. Ethical practice D. Enthusiastic
10. Professional understand the importance of maintaining their composure and staying calm in all situations.
A. Emotional control B. Focused C. Respectful for others D. Positive attitude
11. Which one of the following is a principle of professional ethics?
A. Punctuality B. Honesty C. Loyalty D. All are answers

12. Which one of the following is unethical workplace behavior?

A. Cooperation B. Attendance C. Taking extended breaks D. Poised
 UNIT 2 INTRODUCTION TO MARKETING ETHICS
Key Terms: Ethical marketing

Introduction
Ethics has been termed the study and philosophy of human conduct, with an emphasis on the determination of right and
wrong. For marketers, ethics in the workplace refers to rules (standards, principles) governing the conduct of organizational
members and the consequences of marketing decisions. Ethics is defined as an inquiry into the nature and grounds of
morality where morality means moral judgments, standards, and rules of conduct mentioned ethical marketing as,
practices that emphasize transparent, trustworthy, and responsible personal and organizational marketing policies and
actions that exhibit integrity as well as fairness to consumers and other stakeholders. Through ethical marketing,
organizations deliberately apply different sets of moral rights and fairness standards when marketing their products and
services, practices, and behavior in the overall structure. These organizations can then develop a competitive advantage
over time, thereby satisfying the organization’s needs and customers.

2.1. Definition of Marketing Ethics and

Ethical Marketing
Marketing ethics is characterized as the basic principles and values that govern the business that is occupied with
promoting products or services to customers
Marketing ethics is an area that deals with the moral principles behind marketing. Ethics in marketing applies to different
spheres such as in product, pricing, Placing (Distribution), promotion & advertising etc.

Ethical marketing refers to the application of marketing ethics into the marketing process.
Ethical marketing refers to a type of marketing that puts customers, socially responsible/environmental causes, and the
public good first. It means being honest, fair, and responsible in all marketing operations – as well as optimizing presence in
the target market.

Ethical marketing are the marketing practices of promoting fairness, social responsibility, empathy, and honesty by following
ethical standards.
From marketing tactics to marketing decisions and advertising of products and services, all the ethical marketing practices
focus not only on how products would benefit users but also on how they fulfill social responsibility and handle different
ethical issues.

2.2. Importance of Ethics in Marketing

Marketing ethics are essential to the overall growth and development of an organization over time. The applied set of
guidelines and rules paves the way for a morally good, organized roadmap for everyone to follow. The following are the
reasons why ethical marketing is an integral part of the life of an organization:

✓ Long-term gains: The foundation of a company or organization is not just based on its ability to survive the present,
but to plan a bright future. With the adoption of proper marketing ethics, brands can employ prospects with high
credibility, loyalty to customers, significant market share, increased brand value, better sales, and better revenue.
These ethical practices will put their right on their way towards the accomplishment of both short-term and long-term
goals with perfection.

✓ Customer loyalty: This is one of the most important factors in ethical marketing. With the proper adoption of ethics
in terms of business and operation, ethical marketing teams can win the loyalty, trust, and confidence of their
consumers which can go a long way into the future. The natural human tendency to go after the genuine brand surely
gives companies promising gains, both in the present and in the future.

✓ Increased credibility: When the organization looks forward to keeping its promises surrounding its services and
products on a continuous and consistent basis, it slowly and steadily goes towards the path of carving itself into an
authentic and genuine brand in the market and customers’ minds. A good process can even build good respect in front
of investors, peers, competitors, stakeholders, etc.

✓ Increased leadership qualities: When a company follows ethics in marketing for an extended period, it gradually
stations itself as a leader, one who can benchmark its policies and strategies that surround the company’s structure and
functioning. This eventually gives rise to numerous benefits like increased share in the market, higher sales, inspiration
for others, respect, mutual benefits, etc.

✓ The satisfaction of basic human wants and needs: Once an organization is on course for the proper marketing
ethics, it solves the basic needs and wants of its consumers in the form of integrity, trust, and honesty. When this is
displayed for a long time, various other benefits follow.
✓ Display of a rich culture: Not only does such a structure give a positive outlook when seen from the outside, but it
also paves the way for a good structure and environment within the hierarchy internally. This gives rise to higher
production owing to a confident and highly motivated staff.

✓ The attraction of the right talent at the right place: Once the company can create brand value in the market, it
becomes a beacon for prominent individuals for the association. Various people like prospective employees,
consultants, vendors, etc. look forward to associating and working with ethical brands that boost them exponentially.
This further helps them in achieving their goals in a short period successfully.

✓ Reaching financial goals: To function smoothly for more extended periods, the company has to have good financial
partners who can help them grow and make significant progresses in the market. Once the brand follows a proper set
of rules and ethical guidelines, it helps them earn the moral ground necessary to attract such people.

✓ Enhancement of brand value in the market: Once a proper code concerning ethical marketing is followed by the
organization, the public in the form of customers, competitors, stakeholders, etc. look up to such organizations. They
follow such brands with religious dedication, giving them a sufficient boost to mark the market.

2.3. Ethical Issues in Marketing

There are some disagreements and conflicts that give rise to ethical issues in many companies concerning marketing.
There is a fixed set of expectations regarding the business and its transactions and how they have to be carried out. The
following domains have ethical issues concerning functioning marketing:
1. Market Research
It revolves around the collection and analysis of information about consumers as well as competitors and the effectiveness
of marketing campaigns. Ethical issues that might arise during the process are an invasion of privacy and stereotyping.
a) Invasion of privacy:
One of the most serious ethical considerations involved in market research is invasion of privacy. Companies have an
unprecedented ability to collect, store and match information relating to customers that can infringe on a person's right to
privacy. In many instances, the customer does not know or understand the extent of the company's infiltration into his
life. The company uses this information to reach the customer with targeted advertising, but the process of targeting can
have a chilling effect on personal freedom.
b) Stereotyping:
In social psychology, a stereotype is a thought that can be adopted about specific types of individuals or certain ways of
doing things. Marketing campaigns often cast particular groups in stereotypical roles, such as washing powder
advertisements that show women as housewives preoccupied with their laundry. In addition, the stereotypical impression
created by much commercial marketing is that having an abundance of possessions will lead to fulfillment and happiness,
but the opposing message is that the consumer will not be part of the happy group if he does not purchase the product.
2. Market Audience
Excluding potential customers from the market; selective marketing is used to discourage demand from undesirable
market sectors (such as ethnic minorities) are some of the ethical marketing issues associated with the market audience.
Also targeting vulnerable audiences (e.g. children, the elderly) with a marketing campaign is also an ethical marketing
issue.

3. Pricing Ethics
List of unethical pricing practices.
a) Bid rigging: Bid rigging is a form of fraud in which a commercial contract is promised to one party even though for the
sake of appearance several other parties also present a bid. This form of collusion is illegal in most countries. It is a
form of price fixing and market allocation, often practiced where contracts are determined by a call for bids.
b) Dumping (pricing policy): In economics, "dumping" is a kind of predatory pricing, especially in the context of
international trade. It occurs when manufacturers export a product to another country at a price either below the price
charged in its home market or below its cost of production.
c) Predatory pricing: Predatory pricing (also undercutting) is a pricing strategy where a product or service is set at a
very low price, intending to drive competitors out of the market, or create barriers to entry for potential new
competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they
go out of business or choose not to enter the business.
d) Price discrimination: Price discrimination or price differentiation is a pricing strategy where identical or largely
similar goods or services are transacted at different prices by the same provider in different markets or territories
e) Price gouging: Price gouging is a pejorative term referring to a situation in which a seller prices goods or
commodities at a level much higher than is considered reasonable or fair. This rapid increase in prices occurs after a
demand or supply shock.
f) Price fixing: Price fixing is an agreement between participants on the same side in a market to buy or sell a product,
service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a
given level by controlling supply and demand.
g) Price skimming: Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or
service at first, then lowers the price over time. It is a temporal version of price discrimination/yield management. It
allows the firm to recover its sunk costs quickly before competition steps in and lowers the market price.
h) Price war: Price war is commercial competition characterized by the repeated cutting of prices below those of
competitors. One competitor will lower its price, then others will lower their prices to match. If one of them reduces
their price again, a new round of reductions starts. In the short term, price wars are good for buyers, who can take
advantage of lower prices. Often they are not good for the companies involved because the lower prices reduce profit
margins and can threaten their survival.
i) Supra competitive pricing: Supra competitive pricing is pricing above what can be sustained in a competitive
market. This may be indicative of a business that has a unique legal or competitive advantage or of anti-competitive
behavior that has driven competition from the market.
j) Variable pricing: Variable pricing is a pricing strategy for products. Traditional examples include auctions, stock
markets, foreign exchange markets, bargaining and discounts.
4. Ethics in advertising and promotion
a) Issues over truth and honesty: In the recent period, tobacco used to be advertised as promoting health. Today an
advertiser who fails to tell the truth offends against morality in addition to the law.
b) Issues with violence, sex and profanity: mistreatment of women or any human being regarded as a form of sexual
harassment. Violence is an issue especially for children's advertising and advertising likely to be seen by children
c) Taste and controversy: The advertising of certain products may strongly offend some people while being of interest
to others. Examples include: The advertising of condoms has become acceptable in the interests of AIDS prevention,
but are nevertheless seen by some as promoting promiscuity
d) Negative advertising techniques: In negative advertising, the advertiser highlights the disadvantages of competitor
products rather than the advantages of their own. The methods are most familiar from the political sphere
Self-check 2-3: Say True or False to the following questions

1. Compliance with regulation refers to adhering to relevant laws and regulations.

2. Unfairly manipulating consumers like children’s is allowed in conducting business.
3. Consumer data should be used and handled ethically by protecting privacy of consumers.
4. Business organizations should not be responsible for environmental and social impact when conducting business
activity.

2.4. Ethical Marketing Practices

Ethical marketing is a crucial part of any serious business model, setting the standards and principles that guide a
company’s marketing decisions. It requires companies to think beyond profits and consider how their actions affect people
and the planet.
1. Fair trade products: Fair trade is an ethical marketing practice that puts people first, ensuring farmers and
producers receive fair wages for their work and materials. It helps reduce poverty, provide access to education, and
empower communities. With more companies looking to demonstrate their commitment to ethics, fair trade products
are becoming increasingly popular.
2. Sustainable packaging: Sustainable packaging is a crucial part of ethical marketing. It is the use of sustainable
materials and processes to create packaging that lasts, while reducing waste and minimizing environmental impact.
3. Responsible aadvertising: Responsible advertising is an important part of ethical marketing.
It’s all about making sure that ads and campaigns are truthful, not misleading or offensive.

2.5. Corporate Social Responsibility

Corporate social responsibility (CSR) refers to the responsibility that businesses have to society and the environment,
beyond their legal and financial obligations. CSR involves businesses considering the social, environmental, and ethical
impacts of their operations and incorporating these considerations into their decision-making and practices. Here are some
key aspects of CSR for business organizations:
1. Environmental responsibility:
• Reducing carbon footprint and greenhouse gas emissions
• Conserving natural resources and promoting sustainability
• Implementing waste reduction, recycling, and proper waste disposal
• Investing in renewable energy and clean technologies
2. Social responsibility:
• Ensuring fair labor practices, employee well-being, and work-life balance
• Promoting diversity, equity, and inclusion in the workplace
• Providing support and resources for local communities • Engaging in philanthropic activities and charitable
contributions
3. Ethical behavior:
• Adhering to high ethical standards and codes of conduct
• Ensuring transparency and accountability in business operations
• Preventing corruption, bribery, and other unethical practices • Respecting human rights and addressing any human
rights violations
4. Stakeholder engagement:
• Actively engaging with employees, customers, suppliers, and local communities
• Listening to stakeholder concerns and incorporating their feedback • Collaborating with stakeholders to address
social and environmental issues
5. Reporting and disclosure:
• Regularly publishing sustainability reports and CSR initiatives
• Providing transparent and accurate information about the company's impact
• Aligning CSR efforts with recognized frameworks and standards
By embracing Corporate Social Responsibility, businesses can positively contribute to society, enhance their reputation,
attract and retain talent, and create long-term value for their stakeholders. Effective CSR strategies require a holistic
approach, integration across the organization, and a genuine commitment to sustainability and social responsibility.

2.5.1. Importance of corporate social responsibility

(CSR)
Corporate social responsibility (CSR) has become increasingly important for businesses in recent years. Here are some key
reasons why CSR is important for organizations:
✓ Customers, employees, investors, and the community expect businesses to be socially and environmentally responsible.
✓ Engaging in Corporate Social Responsibility can differentiate a company from its competitors and enhance its brand
image. Consumers are more likely to support and purchase from socially responsible companies.
✓ Proactive Corporate Social Responsibility initiatives can help businesses anticipate and mitigate potential social,
environmental, and regulatory risks.
✓ Employees, especially younger generations, are attracted to and motivated by companies with strong CSR commitments.
CSR programs can improve employee satisfaction, morale, and loyalty, leading to better recruitment and retention.
✓ Integrating CSR into the core business strategy can contribute to long-term, sustainable growth. Addressing
environmental and social challenges can open up new market opportunities and innovation.
✓ Studies have shown a positive correlation between CSR and financial performance, as it can lead to cost savings, revenue
growth, and improved access to capital.
✓ Responsible business practices can have a positive impact on the environment, local communities, and society as a
whole.
✓ Businesses can leverage their resources and expertise to address pressing social and environmental issues.
By embracing CSR, organizations can not only fulfill their ethical obligations but also gain a competitive edge, enhance their
reputation, attract and retain talent, and contribute to a more sustainable future. Effective CSR strategies require a long-
term, strategic approach that is integrated into the core business operations and decision-making processes.
Dear students! So far, we discussed ethical marketing practices, corporate social responsibility and importance of
corporate social responsibility briefly. Now it is your turn to answer the following self-check questions.

Self-check 2-4: Choose the correct answer from the given alternatives.

1. Which one of the following is an ethical marketing practice?

A. Harassment B. Stakeholders engagement C. Fair trade product
D. Product development E. A and C

2. _____________ refers to the responsibility that businesses have to society and the environment
A. Legal responsibility B. Corporate social responsibility
C. Societal marketing concept D. Economic responsibility
3. Stakeholders include all, except
A. Price setting B. Government C. Investors D. Suppliers
4. Business organizations are responsible to:
A. Environment B. Society C. Ethical behavior D. All are answers

Unit Summary
Marketing ethics is characterized as the basic principles and values that govern the business that is occupied with
promoting products or services to customers. Ethical marketing refers to the application of marketing ethics into the
marketing process.

Marketing ethics are essential to the overall growth and development of an organization over time. The applied set of
guidelines and rules paves the way for a morally good, organized roadmap for everyone to follow.
Ethical issues functioning marketing and sales management includes truthfulness and transparency, privacy and data use,
exploitative or manipulative tactics, sustainability and environmental impact, representation and inclusivity, responsible
marketing to children and compliance with regulations.

Ethical marketing is a crucial part of any serious business model, setting the standards and principles that guide a
company’s marketing decisions. It requires companies to think beyond profits and consider how their actions affect people
and the planet.

Corporate social responsibility (CSR) refers to the responsibility that businesses have to society and the environment,
beyond their legal and financial obligations. Key aspects of CSR for business organizations include environmental
responsibility, Social responsibility, ethical behavior, stakeholder engagement, reporting and disclosure. Corporate social
responsibility (CSR) has become increasingly important for businesses in recent years.

Unit Review Questions

Part One: Matching Items
Instruction: Match items of column “A” “with column “B”
Column A Column B

_______1. Ethical marketing A. Customer loyalty

_______2. Corporate social responsibility B. Fair trade practice

_______3. Environmental protection C. Corporate social responsibility

_______4. Importance of ethics in marketing D. Privacy and data use

_______5. Stakeholders E. Investors

_______6. Social responsibility F. Promotes fairness

_______7. Ethical marketing practice G. Proper waste disposal

_______8. CSR H. Environmental responsibility

_______9. Resource I. Human

_______10. Ethical issue in marketing J. Promoting diversity and equity

 UNIT 3 ETHICAL MARKETING PRINCIPLES
Key Terms: Ethical marketing

Introduction
Marketing plays a crucial role in connecting businesses with consumers and shaping purchasing decisions. However, the
power of marketing also comes with significant ethical responsibilities. Ethical marketing principles provide a framework for
ensuring marketing practices align with moral values and do not harm or mislead consumers.

At the core of ethical marketing is the fundamental principle of respect for persons. This means recognizing the inherent
dignity, autonomy, and rights of consumers. Marketers have an ethical obligation to treat consumers as ends in themselves,
not merely as means to an end. This requires respecting consumer privacy, avoiding manipulative tactics, and empowering
consumers to make informed choices.

Another essential ethical tenet for marketing is truthfulness and transparency. Marketing claims, information, and
messaging must be accurate, factual, and not deceptive in any way. Consumers have a right to know the true nature,
quality, and limitations of products and services being promoted. Marketers must be committed to providing clear, honest,
and complete information that allows consumers to make decisions aligned with their best interests.

3.1. The Principles of Ethical Marketing

Ethical marketing refers to a type of marketing that puts customers, socially responsible/environmental causes, and the
public good first. But what does this mean? It means being honest, fair, and responsible in all marketing operations as well
as optimizing presence in the target market or niche.

Ethical marketing works to protect consumers by providing accurate information about risk and protecting physical and
mental health. To do this it involves social responsibility which includes following governmental regulations, core ethics
principles and industry standards.
1. Honesty
When it comes to marketing, should we be honest or deceptive? Ethical marketers should focus on making truthful claims
about their products and services, avoiding targeting children with ads, and not unfairly criticizing competitors. Examples of
deceitful promotion practices include intentionally misrepresenting how a product is made or works, failing to disclose
information regarding, false or greatly exaggerated product or service promises, all of which can lead to a lack of trust and
customer loyalty. Making fraudulent statements for more sales also has the consequence of eroding a company’s
reputation and can result in legal action.

2. Transparency
Transparency is an essential building block for trust between businesses and their customers.
Business leaders and marketers must be honest about a company’s products and services, abiding by state laws when
engaging in marketing activities, as well as revealing all details of a product that should be known to customers.
Companies must also make clear the sources of their goods, pricing information, quality assurance, features offered, and
customer satisfaction ratings. Transparency is like a bridge connecting companies with consumers – it helps build strong
relationships based on truthfulness.
3. Respect for the Consumer
In ethical marketing, respecting the consumer is paramount. Marketers must craft messages that appeal to their target
audience’s tastes and interests. To do this, they must carefully screen and test promotional materials, select
communication media, programming, and editorial content that resonate with their target audience. Moreover, marketers
should create a process that builds trust with investors, counterparts, competitors and stakeholders–making potential
customers feel safe when dealing with the company. This not only helps build respect but also encourages customers to
have faith in the brand.
4. Respect for the environment
The concept of environmental sustainability is becoming ever more crucial for ethical marketing. Companies must be aware
of their ecological footprint and take steps to reduce it; from cutting emissions, conserving resources, to recycling
materials. They should also consider the environmental impacts of their supply chains and make sure that their processes
are as eco-friendly as possible. Climate change is one of the most pressing issues today and its effects are terrible if climate
change continues unchecked. To prevent this, businesses need to adopt socially responsible and sustainable practices such
as using sustainable materials or biodegradable packaging. By doing so, they can help protect our planet-a goal we must
strive for!
5. Social responsibility
Corporate Social Responsibility (CSR): CSR requires businesses to commit to ethical principles and practices, as well as their
efforts to promote social, environmental, and economic sustainability. To demonstrate commitment to ethical practices,
companies can engage in fair trade, use sustainable packaging, and responsible advertising – all while ensuring compliance
with applicable laws and regulations. Implementing ethical marketing practices builds trust with consumers and creates a
positive public image. Plus, it can improve overall profitability! So if you’re looking for ways to show your commitment to
social responsibility – look no further than ethical marketing practices.

Self-check 3-1: Instruction: Match column “A” “with column “B”

Column A Column B

_______1. Honesty A. Promote social sustainability

_______2. Respect for consumers
B. Reveal details of the product to
customers
 _______3. Transparency
C. Protect the environment from
pollution

_______4. Respect for the environment D. Being truthful

_______5. Social responsibility E. Avoiding deception in promotion

3.2. Ethical Values in Marketing

There are six ethical values where the marketer should follow:
1. Honesty: to be forthright in dealings with customers and stakeholders. Thus, a marketer should:
• Strive to be truthful in all situations and at all times.
• Offer products of value that do what we claim in our communications.
• Stand behind our products if they fail to deliver their claimed benefits.
• Honor our explicit and implicit commitments and promises.
2. Responsibility: to accept the consequences of our marketing decisions and strategies. Thus, a marketer should:
• Strive to serve the needs of customers.
• Avoid using coercion with all stakeholders.
• Acknowledge the social obligations to stakeholders that come with increased marketing and economic power.
• Recognize our special commitments to vulnerable market segments such as children, seniors, the economically
impoverished, market illiterates and others who may be substantially disadvantaged.
• Consider environmental stewardship in our decision-making.
3. Fairness: to balance justly the needs of the buyer with the interests of the seller. Thus, a marketer should:
• Represent products in a clear way in selling, advertising and other forms of communication; this includes the
avoidance of false, misleading and deceptive promotion. • Reject manipulations and sales tactics that harm
customer trust.
• Refuse to engage in price fixing, predatory pricing, and price gouging or “bait-and-switch” tactics.
• Avoid knowing participation in conflicts of interest.
• Seek to protect the private information of customers, employees and partners.
4. Respect: to acknowledge the basic human dignity of all stakeholders. Thus, a marketer should:
• Value individual differences and avoid stereotyping customers or depicting demographic groups (e.g., gender, race,
sexual orientation) in a negative or dehumanizing way.
• Listen to the needs of customers and make all reasonable efforts to monitor and improve their satisfaction on an
ongoing basis.
• Make every effort to understand and respectfully treat buyers, suppliers, intermediaries and distributors from all
cultures.
• Acknowledge the contributions of others, such as consultants, employees and coworkers, to marketing endeavors.
• Treat everyone, including our competitors, as we would wish to be treated.
5. Transparency: to create a spirit of openness in marketing operations. Thus, a marketer should:
• Strive to communicate clearly with all constituencies.
• Accept constructive criticism from customers and other stakeholders.
• Explain and take appropriate action regarding significant product or service risks, component substitutions or other
foreseeable eventualities that could affect customers or their perception of the purchase decision.
• Disclose list prices and terms of financing as well as available price deals and adjustments.
6. Citizenship: to fulfill the economic, legal, philanthropic and societal responsibilities that serve stakeholders. Thus, a
marketer should:
• Strive to protect the ecological environment in the execution of marketing campaigns.
• Give back to the community through volunteerism and charitable donations.
• Contribute to the overall betterment of marketing and its reputation.
• Urge supply chain members to ensure that trade is fair for all participants.

3.3. Honesty and Transparency in

Advertising
Here are some key points on the ethical principle of honesty and transparency in advertising.

a. Truthful representation: Ensure all claims, statements, and imagery in advertising accurately reflect the true nature,
qualities, and capabilities of products/services. Avoid exaggerations, embellishments, or misleading implications that go
beyond factual reality.

b. Full disclosure of material information: Proactively provide consumers with all relevant details, terms, and
limitations that could impact their purchasing decisions. Do not conceal or obscure important information through fine
print, vague language, or complex legal jargon.

c. Transparency around advertising practices: Clearly identify advertising content as such, without blurring the lines
with editorial or entertainment material. Disclose sponsorships, endorsements, and any other commercial relationships
that may influence the advertising.

d. Clarity of pricing and costs: Present pricing, fees, and other costs in a straightforward, easyto-understand manner.
Avoid tactics that hide or misrepresent the total cost of products/services.
e. Responsible use of data and targeting: Be transparent about data collection and usage practices in advertising.
Obtain informed consent before using consumer data for targeted marketing purposes.

f. Truthful measurement and reporting: Ensure any claims about advertising campaign performance, reach, or
effectiveness are supported by accurate, verifiable data. Do not misrepresent or exaggerate the impact or results of
advertising efforts.

Upholding these principles of honesty and transparency helps build consumer trust, facilitates informed decision-making,
and avoids deception or manipulation in advertising.
3.4. Fair and Respectful Treatment of
Customers
Here are some key points on the ethical principle of fair and respectful treatment of customers in marketing:

❖ Avoid discrimination and bias:

Ensure marketing practices do not unfairly target, exclude, or discriminate against any individuals or groups based on
protected characteristics like race, gender, age, disability, etc.

❖ Respect consumer autonomy:

Empower consumers to make independent, informed choices rather than manipulating or coercing them. Do not use
deceptive or other tactics that undermine consumer decision-making. Provide clear, easy-to-understand information to
support consumer sovereignty.

❖ Ensure fair processes and policies:

Establish fair, transparent, and consistently applied customer service policies and complaint resolution procedures. Treat all
customers equitably regardless of individual characteristics or purchase history.

❖ Demonstrate empathy and respect:

Interact with customers in a courteous, patient, and understanding manner. Avoid condescending or demeaning attitudes or
behaviors. Promptly address customer concerns and grievances.
Principles of fair and respectful treatment helps build long-term customer trust, satisfaction, and loyalty - core goals of
ethical marketing.

Unit Summary
Marketing plays a crucial role in connecting businesses with consumers and shaping purchasing decisions. Ethical marketing
principles provide a framework for ensuring marketing practices align with moral values and do not harm or mislead
consumers. At the core of ethical marketing is the fundamental principle of respect for persons. This means recognizing the
inherent dignity, autonomy, and rights of consumers. Another essential ethical tenet for marketing is truthfulness and
transparency.

Ethical marketing works to protect consumers by providing accurate information about risk and protecting physical and
mental health. To do this it involves social and core ethics principles and industry standards which are honesty,
transparency, respect for the consumer, respect for the environment, social responsibility. There are six ethical values
where the marketer should follow honesty, responsibility, fairness, respect, transparency, citizenship.
Here are some key points on the ethical principle of honesty and transparency in advertising. Truthful representation, full
disclosure of material information, transparency around advertising practices, clarity of pricing and costs, responsible use of
data and targeting, truthful measurement and reporting.

Unit Review
Questions
Part One: Discussion Questions
Instruction: Give short answer for the following questions
1. What are the principles of ethical marketing?
2. Define ethical marketing.
 UNIT 4 ETHICAL DECISION MAKING
Introduction
Ethical decision-making is a critical competency for marketers, as they are constantly faced with choices that have the
potential to impact consumers, businesses, and society as a whole. At the core of ethical marketing is the recognition that
marketing activities do not exist in a moral vacuum they have real-world consequences that must be thoughtfully
considered.
Marketers have a responsibility to weigh the potential harms and benefits of their decisions, and to choose courses of
action that uphold moral principles like respect for persons, justice, and the avoidance of harm. This requires carefully
analyzing situations through an ethical lens, drawing upon moral frameworks and philosophical theories to guide the
decision-making process. It also necessitates a willingness to make difficult choices, even when they may conflict with
short-term business interests. Ultimately, ethical decision-making in marketing is about striking the right balance between
commercial objectives and broader social responsibilities - a challenge that marketers must continually navigate with
diligence and integrity.
4.1. Ethical Decision Making
To effectively enhance ethical and socially responsible practices in marketing, it is important for managers and
policymakers to have a better understanding of the marketers’ ethical/socially responsible decision processes.
Ethical decision-making refers to the process of evaluating and choosing among alternatives in a manner consistent with
the ethical principles. In making ethical decisions, it is necessary to perceive and eliminate unethical options and select the
best ethical alternative.
For marketers and other professionals, ethical dilemmas arise when responsibilities and loyalties conflict and a decision
about the appropriate or ethical course of action must be made. Often a choice is required among alternative actions that
meet the obligations or competing interests. In this respect, an ethical decision-making process can be helpful to guide the
decision makers to address significant issues that should be considered before taking action.
4.2. Factors Influencing Ethical Decision Making
To understand the importance of ethics in marketing decision making is necessary to examine the factors influencing
ethical decision making. These are: personal moral philosophy, organizational relationships and opportunities.
They are basic in determining ethical decisions in marketing.

1. Moral philosophy
It includes principles or rules that individuals use to determine their mode of behavior. These are leadership positions to
resolve conflicts and provide mutual benefits for all members of society. People learn these principles and rules through
contacts with family members, social groups, religion and education. Any moral philosophy has its own concept of equity
and ethics and rules of conduct. Two distinct moral philosophies deserve attention; utilitarianism and ethical
formalism.
Utilitarian moral philosophies: are aimed at maximizing the greatest good for the greatest number of people.
Utilitarian judge an action based on the consequences for all the people affected by this action. In a situation with ethical
component utilitarian compare all options and choose the one that promises the best results. According to them, unethical
would be any action leading to personal gain at the expense of society as a whole.
Ethical formalism: is associated with development of special rules of behavior that focus on the intentions associated with
a particular behavior and the rights of the individual. When it is determined whether a behavior is assessed as a general rule,
not interested in the alternative. Behavior is assessed on the basis of whether the violation of the rights of the individual and
the universal rules. The golden rule of ethical formalism is: “Do to others as you would have them do to you”. In marketing
ethical formalism is consistent with the idea of consumer choice. For example, consumers have a right to know about
possible defects in a product.

2. Organizational relationship
Relationships with employees, colleagues or superiors create ethical problems such as maintaining confidentiality in
personal relationships; meet the obligations, responsibilities and mutual agreements and avoid undue pressure which can
make others not behave ethically. Employees may not engage in activities that they believe that create ethical problems.
For example, the seller may be forced to lie to customers on the phone. Also, an employee who sees another employee to
lie to a customer must decide whether to report the case. Marketing managers should carefully balance their obligations to
owners or shareholders who have hired them to achieve company goals as well as employees who are turning to them to
be guided.
3. The possibilities
These are other pressure that can determine whether a person will behave ethically. The opportunity is favorable set of
conditions that put barriers or provide rewards. Awards may be internal or external. Internal rewards are feelings of
goodness and value that one feels after a noble action. Extrinsic rewards are what people expect to receive from others in
terms of the values generated and provided on a reciprocal basis. They often receive from superiors in the form of praise,
promotions or salary increases.
4.3. Ethical Decision Making Process
Before discussing on ethical decision-making process, it must be clearly explored the difference between ethical issues and
ethical dilemmas.
An ethical issue is a problem, situation, or opportunity that requires an individual, group or organization to choose among
several actions that must be evaluated as right or wrong.
On the contrary, an ethical dilemma is a problem, situation or opportunity that requires an individual, group or
organization to choose among several wrong or unethical actions.

The ethical decision-making process includes several steps that must be pursuing to determine the right course of action or
resolve an ethical dilemma.

Step 1: Assess current situations: Determine the facts of the situation that the decision maker should make.

Step 2: Identifying the ethical issues: The identification of ethical issues involved is the next step in making responsible
decisions.

Step 3: Identify relevant factors: Identifying ethical factors like stakeholders or laws or professional codes and
consider the situation from their point of view ability to recognize a decision that will affected by a decision, policy or
operation of a firm.
Step 4: Identify available alternatives: Once the facts have examined, it is needed to consider the available
alternatives which is also called the moral imagination. It is important not only to consider the obvious options with regard
to particular dilemma, but also much more subtle ones.

Step 5: Evaluating alternatives: The next step in decision making process is to compare and weigh the alternatives
which create a mental spreadsheet that evaluates the impact of each alternative devised on each stakeholder.
Step 6: Selecting courses of action: Once the variables have explored, it is time to make a rational and reasonable
decision or select a course of action among the supported ethical alternatives.

Step 7: Implementation and follow up: The final step of the process is to evaluate the implications of the selected
course of action to monitor and learn from the outcomes and to modify the actions according to face with the similar
challenges in the future.

It is assumed that the ethical decision making process is affected by a variety of individual, situational, and contextual
factors such as personal experiences, opportunity, the organizational environment and the cultural environment.
Sometimes it is difficult to distinguish what is morally acceptable or unacceptable, since the judgment of ethical behavior is
in the eye of the beholder.

Unit Summary
Ethical decision-making refers to the process of evaluating and choosing among alternatives in a manner consistent with
the ethical principles. Factors influencing ethical decision making includes personal moral philosophy, organizational
relationships and opportunities. They are basic in determining ethical decisions in marketing. Steps in ethical decision
making process are assessing current situations, identifying the ethical issues, identify relevant factors, identify available
alternatives, evaluating alternatives, selecting courses of action and implementation and follow up.
Unit Review Questions

Part One: Matching Items

Instruction: Match items of column “A” “with column “B”

Column A Column B

_______1. Factors influencing ethical decision A. Choosing the best alternative making

_______2. Ethical formalism B. Assess current situation

_______3. Ethical decision making C. Relationship with all workers

_______4. The first step in ethical decision making D. Moral philosophy

_______5. Organizational relationship E. Implementation and follow-up

_______6. The last step of ethical decision making F. Development of special rule of behavior Project Work
Project 1: Develop a code of professional ethics for a local small business
Task 1: Select a small business in the local community that the students can work with.
Task 2: Research the characteristics of a profession and the fundamentals of professional ethics.
Task 3: Examine the concept of professionalism and its relevance to the selected small business.
Task 4: Engage and collaborate with the business owner to draft a comprehensive code of professional ethics that aligns with
the business's values and operations.
Task 5: Present the proposed code of ethics to the class.
Task 6: Discuss the potential impact of implementing the code of ethics on the small business's operations and reputation.
Project 2: Investigate unethical behavior in a local workplace.
Task 1: Identify a local workplace (e.g., a retail store, a service provider, a manufacturing unit) where students can conduct
their investigation.
Task 2: Gather information from employees, managers, and other relevant stakeholders to understand the current work
environment and ethical practices.
Task 3: Evaluate the existing Ethiopian ethical service delivery practices and how they are being implemented (or not) in the
selected workplace.
Task 4: Propose solutions to address the identified unethical behavior, including recommendations for improving work ethics
and ethical service delivery.
Task 5: Discuss the role of professional ethics in maintaining a healthy and productive work environment.
Project 3: Navigating ethical dilemmas in promotional campaigns for a local cosmetics brand Objective:
Students will analyze a real-world ethical dilemma faced by a local cosmetics brand and propose a decision-making
framework to guide the brand's ethical marketing practices.
Background:
ABC Cosmetics is a fast-growing local brand in Ethiopia, offering a range of skincare and makeup products. The brand has
gained popularity, especially among young urban consumers, through its innovative product formulations and engaging
social media marketing campaigns.
Recently, the marketing team at ABC Cosmetics has been considering a new promotional campaign that would feature a
popular social media influencer to endorse the brand's latest line of skin-lightening creams. The influencer has a large
following, particularly among the brand's target audience, and the marketing team believes this collaboration could
significantly boost sales.
However, the proposed campaign has raised some ethical concerns within the company. While skin-lightening products are
widely marketed and accepted in the local market, there are ongoing debates about the potential negative societal impacts
of promoting skin-lightening practices, especially among vulnerable consumer segments.
The brand's leadership is now faced with a challenging decision: whether to proceed with the influencer-led campaign for
the skin-lightening products or to explore alternative promotional strategies that align with ethical marketing principles.
Project Tasks:
Task 1: Identify and analyze the key ethical factors and considerations that the brand should take into account in its decision-
making process, such as:
✓ Potential impact on consumer perceptions and self-esteem.
✓ Societal and cultural implications of promoting skin-lightening.
 ✓ Potential legal and regulatory implications.
✓ Alignment with the brand's ethical values and corporate social responsibility.
Task 2: Develop a step-by-step ethical decision-making framework that the brand can use to navigate similar ethical
dilemmas in the future. This framework should include:
✓ Clearly defined ethical principles and values to guide decision-making.
✓ A structured process for identifying, evaluating, and weighing the ethical implications of different courses of
action.
✓ Strategies for proactively addressing ethical concerns and mitigating potential risks. ✓ Mechanisms for
ongoing ethical review and refinement of marketing practices.
Task 3: Apply the proposed ethical decision-making framework to the specific case of the skinlightening product campaign,
and recommend a course of action for the brand's leadership to consider.
Task 4: Outline the potential benefits and drawbacks of the recommended course of action, and discuss how it aligns with
the brand's ethical responsibilities and long-term sustainability.
Task 5: Suggest alternative marketing strategies and campaigns that the brand could explore to promote its products in an
ethical and socially responsible manner.
Task 6: Prepare a comprehensive report or presentation that showcases the student's analysis, the proposed ethical
decision-making framework, and the recommended course of action for the ABC Cosmetics case.

Answer Key for Self-check Questions

Unit One: Answer key to check your progress questions Self-check 1-1:
1. Refer topic 1.1.
2. Refer topic 1.2.
Self-check 1-2:
1. Refer topic 1.3.
2. Refer topic 1.4. Self-check 1-3: Matching
1. F 2. D 3. A 4. C 5. E 6. B
Self-check 1-4:
1. Refer topic 1.7.
2. Refer topic 1.8

Unit Two: Answer key to check your progress questions Self-check 2-1:
1. Refer topic 2.1.
Self-check 2-2:
1. Refer topic 2.2.
Self-check 2-3: True/False
1. TRUE 2. FALSE 3. TRUE 4. FALSE
Self-check 2-4: Multiple Choice
 1. C 2. B 3. A 4. D

Unit Three: Answer key to check your progress questions

Self-check 3-1: Matching
1. D 2. B 3. E 4. C 5. A
Self-check 3-2:
1. Refer topic 3.2.

Self-check 3-3:
1. Refer topic 3.3.
2. Refer topic 3.4.
Unit Four: Answer key to check your progress questions Self-check 4-1:
1. Refer topic 4.1.
2. Refer topic 4.2.
3. Refer topic 4.3.
References
• Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2019). Business ethics: Ethical decision making and cases. Cengage Learning.
• Kotler, P., & Armstrong, G. (2018). Principles of marketing (17th ed.). Pearson.
• Schwepker, C. H., & Ingram, T. N. (2016). Ethical leadership in the salesforce: Effects on salesperson customer
orientation, commitment to customer value and job stress. Journal of Business & Industrial Marketing, 31(7), 914-
927.
• Snyder, H. (2019). Literature review as a research methodology: An overview and guidelines. Journal of Business
Research, 104, 333-339.
• Steckel, J. H., Simonson, I., Tybout, A. M., Bettman, J. R., Corfman, K. P., Gupta, S., ... & Rosen, D. E. (1999). Sourcing
behavior in marketing channels: A behavioral experiment.
Journal of Marketing Research, 36(3), 389-402.
• Treviño, L. K., Hartman, L. P., & Brown, M. (2000). Moral person and moral manager: How executives develop a
reputation for ethical leadership. California Management Review, 42(4), 128-142.
• Weitz, B. A., & Bradford, K. D. (1999). Personal selling and sales management: A relationship marketing perspective.
Journal of the Academy of Marketing Science, 27(2), 241-254.
MODULE III

MARKET RESEARCH

Contents
No Contents Page No
Module Description 109
1 UNIT 1: INTRODUCTION TO MARKET RESEARCH 111
1.1.
Meaning and Purposes of Market Research. 111
1.2.
The Market Research Process. 114
1.3.
Planning the Market Research. 121

Unit Summary 123

Unit Review Questions 124
2 UNIT 2: SAMPLING DESIGN 127
2.1.
Basic Sampling and Statistical Terminology 128
2.2.
Sampling Methods and Techniques 129

Unit Summary 136

Unit Review Questions 137
3 UNIT 3: DATA COLLECTION 140
3.1.
Types and Sources of data for Market Research 141
3.2.
Collecting Data for Market Research 143

Unit Summary 151

Unit Review Questions 153
4 UNIT 4: DATA ANALYSIS AND INTERPRETATIONS 155
4.1.
Data Processing 155

4.2.
Data Analysis: Simple Descriptive Statistics 157
4.3.
Interpretation of Market Research findings 163

Unit Summary 164

Unit Review Questions 166
5 UNIT 5: MARKET RESEARCH REPORT 168
5.1.
Meaning and Objectives of Market Research Report 168
5.2.
General Format for Writing Market Research Report 169

Unit Summary 174

Unit Review Questions 175
References 181
Module Description
Welcome to this module entitled “A Practical Guide to Market Research”. This student module is prepared to help you
to achieve one of the core competencies in “Marketing and Sales Management Level I”. This module covers the
knowledge, skills and attitude required to complete the competency; “Conduct Market Research” using different
market research designs and methodology and to report on findings. This module will also assist you to attain the
following learning outcomes:

▪ Understand basics of market research

▪ Develop market research plan
▪ Recruit and select respondents for market research
▪ Collect market data
▪ Analyze and Interpret market data

▪ Prepare market research report Module Instruction:

Learning Instructions: How To Use This Module

For effective use this module you are expected to follow the following module instructions:
1. Read the learning outcomes of this module.

2. Learn study lessons in the module. Try to understand what are being discussed.

3. Answer the “Self-checks” after completion of each topics. Then you are to get the
answer key at the end of the module to correct your answer only after you have finished
answering the Self-checks.

4. Accomplish unit review questions and practical activities after completion of each unit.
Then ask from your teacher/trainer the key to correction (answers key) or you can
request your teacher/trainer to correct your work.
 5. Complete the ‘Project Work’ sited at the end of the module to demonstrate the basic learning
domains of the competency.

UNIT 1
INTRODUCTION TO MARKET RESEARCH
Key Terms: Market Research, Exploratory Research, Descriptive Research, Causal Research.

Introduction
Research in simple term is the process of searching the relevant information in a systematic manner. Various research
have been carried out in different areas, one of these is a market research. Market research studies the markets,
market competition, market trends, etc. this unit discussed overview of market research.
1.1. Meaning and Purpose of Market
Research
Market research can mean several things. It can be the process by which we gain insight into how markets work, or a
function in an organization. Market research is a bit more than the informal assimilation and interpretation of market
data. Market research is structured and purposeful. It is the systematic and objective collection and interpretation of
data to help reduce risk in marketing decisions.
1.1.1. Defining Market Research

Market Research has two words, viz., Market and Research. 1) Market means the collection of buyers and sellers. 2)
Research means a systematic and complete study of a problem. Thus, we can define a market research as the
systematic gathering, recording and analyzing of data relating to the marketing of goods and services‘.

The world organization for market, consumer and societal research, defines market research as:

The systematic gathering and interpretation of information about individuals or organizations using the
statistical and analytical methods and techniques of the applied social sciences to gain insight or support
decision making.

1.1.2. Market Research and Marketing Research

Generally Market Research and Marketing Research are confused to be the same. But there is a clear distinction
between both.

Market Research: Market Research involves researching a specific industry or market. The market research
consists of analysis of market potentials for existing products and estimating demand for the products and services. It
studies sales forecasting, products, markets and market trends. This area of marketing research deals with market. It
studies characteristics and compositions of the target markets. It covers both current as well as potential markets.

Market research comprises a series of research components. The areas of market research are:

Research focused on the market: this looks into

• Market trends, market share and market potential.

• The dimensions, locations, nature and characteristics of markets, based on the variables such as age, sex,
income, education, occupation, and religion.

• “Who, what, when, where and how” questions about actual and potential buyers.

Research focused on the product: looks into

 • The development of new products, brand images, concepts, quality assurance, and testing of markets for a new
product

• Analyses the strengths and weaknesses of present products

Research focusing on sales: looks into

• Forecasting of sales, quota selling, and sales designing

• Analyses sales performances, and volume of sales.

Advertising and promotion research: focuses on

• Measuring the effectiveness of different methods of advertising and promotion tools.

Marketing Research: is the function that links the consumer, customer, and public to the marketer through
information. Information used to identify and define marketing opportunities and problems; generate, refine, and
evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process.
It is broader than market research.

1.1.3. Purposes of Conducting Market Research

Market research serves a number of useful purposes for management to make marketing decisions and increase their
performance. The main purposes of market research are to do the following:

• Understand the competitive positions of competing products

• Know the consumers’ needs and expectations.

• Evaluate the reactions of consumers and customers

• Understand the advantages and limitations of company’s products.

• Analyze the current and the future market size

• Search for new marketing opportunities.

• Know demand and the customer’s acceptance of the products

• Measure the effectiveness of advertising

• Find solutions to problems relating to marketing of goods and services.

Dear learners! So far, Market Research is defined from different angle, its purposes are outlined and
difference between Market Research and Marketing research is explained. Now it is your turn to answer the
following self-check questions
Dear learners! Have you answered self-check questions? If yes, let us move on to the discussion of the market
research process.

1.2. The Market Research Process

To maintain the control needed to obtain accurate information, marketers approach market research as a process
with logical step, to help acquire valid and reliable information, marketers are likely to use a series of steps referred
to collectively as the market research process.
1.2.1. Stages in Market Research Process

Dear learners! Do you know anything about the market research process? How about the stages involved
in it? If not, do not worry the whole of the following topic revolves around these two basic questions? Let
us proceed with the steps of market research process.

The Market Research process involves a number of inter-related activities which have bearing on each other, starting
with identifying and formulating the problem and ending with presenting the findings (see Fig.1.1). Once the need for
Market Research has been established, broadly it involves the following stages:

Identify and formulate the problem

Determine research design

Identify data types and sources

Design data collection forms

Determine sampling design and size

Collect the data

Analyze and interpret the data

Prepare the research report

Figure 1.1: The stages in Market Research Process

Let us now discuss in detail about the various stages involved in the market research process.

Stage 1. Identify and Formulate the Problem

The first step in setting up a market research process involves identifying and formulating the research problem.

Identifying the research problem is valuable, but also difficult. To identify the “right” research problem, we have to
first identify the marketing symptoms or marketing opportunities. The marketing symptom is the problem that an
organization faces.

Examples of a marketing symptom include declining market shares, increasing numbers of complaints, or new
products that consumers do not adopt. In some cases, there is no real existing problem but rather a marketing
opportunity, such as potential benefits offered by new channels and products, or emerging market opportunities that
need to be explored.

Organizations should identify the marketing problem, based on marketing symptoms or opportunities, if they want to
undertake market research. The marketing problem explores what underlies the marketing symptom or opportunity
by asking questions such as:

• Why is our market share declining?

• Why do the number of complaints increase?
• Why are our new products not successful?

Problem formulation also involves translation of the marketing problem into researchable objectives. Because we
must create researchable objectives concordant with problem definition.

Market Research Objectives

Every market research should have a defined and explicit objective which clearly states why the research is being
carried out. Market research objectives represent the aims/goals of the study. It addresses the purpose of the
investigation.

All other aspects of planning and carrying out the research flow from this objective; in other words if they do not
contribute towards achieving this objective they almost certainly should not be undertaken. The objective should
relate to the marketing decision which will have to be made or the problem that needs a solution (and decision).

Turning marketing problem into objectives:

Marketing objectives must be relevant to the specific marketing situation. Consider the following case:

Zoma pharmaceutical manufacturing has a long history, up to five generations of the company founder. The major
product line of the company is a traditional herbal hair food and oil. It is well accepted by a large market of
Ethiopian’s customers, especially those over 50 years of age. As these customers are getting older and fewer, sales
volume and the number of customers have dropped sharply over the past 10 years. There are few new customers, in
particular, from the younger population in the country.

The management has decided to expand the market to attract potential younger customers.
However, initial market research showed that the youth market did not find the brand name “Zoma hair food and oil”
attractive. They felt only grandparents would use this type of oil. They felt ashamed to use or even carry a bottle of
“Zoma hair food and oil” in their bags.

After long discussions, the company’s marketing team intends to launch a new marketing plan to rename “Zoma hair
food and oil” to “Super Herbal hair food and oil”, to project a younger, more energetic image to capture the youth
market.

Problem statement for the above case can be:

• To assess the perception of customers towards the old and new brand name of the company’s product.

Suggested market research objectives may be:

• To understand consumers’ view on the old brand name “Zoma hair food and oil”.
• To compare consumers’ preference on the brand names of “Zoma hair food and oil” and “Super Herbal hair food

and oil”.

Stage 2. Determine Research Design

Research design is a plan or framework for conducting marketing research and collecting data. It is defined as the
specific methods and procedures you use to get the information you need. There are three core types of market
research designs: exploratory, descriptive, and causal research designs.

i. Exploratory Market Research

This is a starting point for research. It’s used to reveal facts and opinions about a particular topic, and gain insight
into the main points of an issue. As its name suggests, the objective of exploratory research is to explore a problem
or situation. Secondary research materials such as trade publications, books, journals and magazines and primary
research tools such as interviews, focus groups and. observational studies are often used to achieve the objective of
exploratory research. ii. Descriptive Market Research
As its name implies, descriptive research is all about describing certain phenomena, characteristics or functions. It
can focus on one variable (e.g., profitability) or on two or more variables at the same time (“What is the relationship
between market share and profitability?” and “How does temperature relate to sales of ice cream?”). Such
 descriptive research often builds upon previous exploratory research. After all, to describe something, include
describing customers, competitors, market segments, and measuring performance.

This helps define the business problem or issue so that companies can make decisions, take action and monitor
progress. Descriptive research is naturally quantitative-it needs to be measured and analyzed statistically, using more
targeted surveys and questionnaires. We can use it to capture demographic information, evaluate a product or
service for market, and monitor a target audience’s opinion and behaviors. Insights from descriptive research can
inform conclusions about the market landscape and the product’s place in it.

iii. Causal Market Research

This is useful to explore the cause and effect relationship between two or more variables. Like descriptive research, it
uses quantitative methods, but it doesn’t merely report findings; it uses experiments to predict and test theories
about a product or market. For example, researchers may change product packaging design or material, and measure
what happens to sales as a result.

Market researchers undertake causal research less frequently than exploratory or descriptive research and it is more
complex at this level. Nevertheless, it is important to understand the delicate concepts that are important to market
research.

Type of market research design Uses

Exploratory Formulate problems precisely
Establish priorities for research
Eliminate impractical ideas
Develop hypotheses
Develop measurement scales
Descriptive Describe customers/competitors
Describe segments
Measure performance
Causal Explore causal
relationships
Table 1.1 Types of research, uses, and examples
Consider Zoma’s hair food and oil case;
For the above case, descriptive market research design is found to be appropriate to the research objectives that is to
evaluate the perception of customers towards the old and new brand name.

Stage 3. Identify Data Types and Sources

The third stage in a research process is to determine the data sources. The researcher decides the sources of
collecting data. The two main sources are secondary data and primary data. Primary data sources are original data on
the specific issue, and provides strongly reliable data. Secondary data sources are pre-existing, and often not so
specific, but tends to cost less and is quickly available. The researcher has to decide whether to go for primary data or
secondary data.
Sometimes a combination of both is used. We will discuss this in further detail in unit 3.

Stage 4. Design data collection forms

Once it has been decided to obtain primary data, the mode of collection needs to be decided. There are four
methods are available for data collection: Observational techniques, Questionnaires, Interview and Focus Group
Discussion.

Stage 5. Determine sampling design and size

A sample design is a definite plan determined for data collection to obtain a sample from a given population. The
market research project will rarely examine an entire population. It’s more practical to use a sample - a smaller but
accurate representation of the greater population.

At this stage of the market research process, the population from which the sample has to be drawn has to be well
defined, a broad choice is to be made between probability sampling and nonprobability sampling, the sample design is
then chosen depending on the suitability and the availability of the sample frame and the sample size is determined.
We will discuss this in further detail in unit 2.

Stage 6. Collect the data

The next step is to collect the data for which the research process has been spelled out. Collecting data is a practical
but sometimes difficult part of the market research process. The interviewing, questionnaire administration,
observation and the supervision of field work should be looked into. Supervision of field work is important to ensure
timely and proper completion of the field survey.

Stage 7. Analyze and interpret the data

The Analyze and interpret the results is to look for a wider meaning to the obtained data. The researcher can then
analyze the collected data by using various statistical measures. For this level, the analysis uses simple descriptive
statistics such as percentage, mode, mean, median etc. The results can be presented narratively and through graphs,
figures and tables. We will discuss this in further detail in unit 4.
Stage 8. Prepare market research report
This is the concluding step of research, where the researcher has to prepare a report of what has been done by him.
Generally, the report should be designed in accordance to the following layout:

• The preliminary pages: Here the title, date, acknowledgements and foreword with the table of contents,
should be mentioned.
• The main text: This should be divided into introduction, summary, main report and conclusion.
• End matter: This should contain appendices, bibliography and index.
A report should be written in a precise and objective style in simple language. We will discuss this in further detail in
unit 5.

Dear learners! Are you very clear about the market research process and the various steps involved in it? Well
and good! Let you attempt the following questions as a check for your understanding.

Self-check 1-2:

1. List out the various stages involved in the market research process?

Dear learners! So far, Market Research process is discussed, let us move on to the discussion of the planning
aspects of a market research.

1.3. Planning the Market Research

Dear learners! What is a market research proposal? Why it is prepared? Do you know the components of
a market research proposal? If not, do not worry the whole of the following discussions help you to
answer these questions

Research always begins with a purpose. This clear statement of purpose guides the research process; however, for a
study to qualify as research, it must be planned and systematic. Thus, the researcher needs to formalize this plan of
pursuing the study. This framework or plan is termed as the research proposal. A research proposal is a formal
document that presents the research objectives, design of achieving these objectives and the expected outcomes of
the study.

1.3.1. Contents of a Research Proposal

The requirements and the origin of the research would direct the sequential formulation of the research proposal.
However, there is a broad framework that most proposals adhere too. In this section we will briefly discuss these
components.
 i. Executive Summary
This is a broad overview or abstract that spells out the purpose and objective of the study. In a short paragraph, the
author gives a summary about the research problem, which is the focus of the study. The probable research
questions which might need to be answered in order to arrive at any conclusive results are further listed.

ii. Background of the Problem

This is the detailed background of the research problem. It requires a sequential and systematic build- up to the
research questions and also a compelling reason for pursuing the study. This section has to be explicit, objective and
written in simple language. It should be able to convince the reader of the need for the study.

iii. Problem Statement and Research Objectives

This part shows a clear definition of the problem and the specific objectives of the study.

iv. Research Design

This is the working section of the proposal as it needs to indicate the logical and systematic approach intended to be
followed in order to achieve the listed objectives. This would include statement of the sampling and data collection
plan, and it requires a clear and logical justification of using the techniques over a wide range of methods available
for research.

v. Scheduling the Research

The time-bound dissemination of the study with the major phases of the research has to be presented. This can be
done using the GANTT charts. This gives a clear mechanism for monitoring and managing the research task.

vi. Costing and Budgeting the Research

A budget table for an estimated cost of the study is presented in this section.

In addition, the last section of the proposal is to state the complete details of the references used in the formulation of
the research proposal.

Dear learners! So far, Market Research proposal is discussed, now it is your turn to answer the following self-
check questions

Self-check 1-3:

1. List the basic components of a formal market research proposal?

2. What is an executive summary in the market research proposal?
 Dear learners! Have you answered the self-check questions? If yes, let us move on to reading the unit
summary and to perform the unit review questions.

Unit Summary
Market research is a systematic and objective study of problems pertaining to the marketing of goods and services. It
is applicable to any area of marketing.

The Market Research Process involves a number of inter-related activities which have bearing on each other. Each and
every step plays an important role in the research process.

A Research Design is the specification of methods and procedures for acquiring the information needed. It is the
blueprint for a research process. An exploratory research is often conducted because a problem has not been clearly
defined as yet, or its real scope is as yet unclear. Descriptive research on the other hand is meant to describe the
characteristics of the study population. It provides information that is useful in reaching conclusions or decision-
making. It is mostly quantitative in nature. A Causal research is undertaken to see if there is a cause and effect
relationship between variables.

Through the research proposal, a reader is able to assess the rigor and validity of the study and whether or not it will
result in an objective and accurate answer to the research problem.

Unit Review Questions

Part One: Multiple choice Questions:

Instruction: Choose the best answer from the given alternatives?

1. Which one of the following type of market research aimed to answer who, what, when, where and how questions
about actual and potential buyers?
A. Sales Research D. Promotion Research
B. Market Research E. All of the above
C. Product research
2. The first and foremost step in market research process is _____________.
A. Data collection
B. Determination of market research design
C. Identification and Formulation of market research problem
D. Selection of sample respondents
E. None of the above
3. _________________ represent a statement of the reasons why the research is being carried out.
A. Research objective D. Research design
B. Research problem E. Research methodology
C. Research question
4. ____________ is a plan or framework for conducting marketing research and collecting data
A. Research Problem D. Causal research
B. Research design E. Exploratory research
C. Descriptive research
5. Which one of the following market research design useful for describing the demographic characteristics of
customers?
A. Exploratory research D. E and C only
B. Descriptive research E. A and B only
C. Causal research

Part Two: Discussion Questions:

Instruction: Give brief answer for the following review questions:

1. Is there any difference between Market Research and Marketing Research? Explain

2. Why should you conduct Market Research? Explain the reasons?

3. Explain the various steps involved in the market research process?

4. It is very important to define the research problem. Explain why it is important?

5. Discuss the possible situations in which exploratory, descriptive and causal market research designs are applied?

6. On the topic about the purposes of market research, some people argue that “Common sense of an experienced
businessman is as good as, if not better than, findings from market research.” Discuss why you ‘agree’ or ‘disagree’
with the statement and state your reasons.

Part Three: Practical Activity:

Instruction: Consider the following case and you are required to perform the following tasks:

Assume that you are the marketing officer of a pharmaceutical company, which has developed a new hair growing
formulation. Meanwhile, the marketing manager of the company wants to test whether to package the liquid in a
spray type or capped dispenser. Consequently, the marketing manager assigned you the responsibility to conduct a
market research to test the acceptability of a spray or capped bottle dispenser for a new hair growing formulation. As
a market researcher, you are expected to perform the following tasks:

Task 1: Formulate the research problem or problem statement for conducting market research based on the market
situation described on the above case?

Task 2: Develop 2-4 specific market research objectives for the case?

Task 3: Develop a market research proposal for the research problem you have formulated in task 1.
Assume that you are going to conduct a market research for the pharmaceutical company, which has developed a
new hair growing formulation. Your proposal should contains all components of the formal research proposal that
you have discussed in this unit.
 UNIT 2
SAMPLING
DESIGN
Unit Coverage
This unit is designed to provide you with the necessary knowledge, skills and attitude regarding
the following content:

2.1. Basic Sampling and Statistical Terminology

2.2. Sampling Methods and Techniques

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the
completion of this unit, you will be able to:

✓ Explain basic sampling and statistical terms

✓ Apply sampling methods and techniques in market research

Key Terms: Survey study, Population, Element, Sample, Sampling Frame, Sample Size, Probability Sampling,
Non-probability Sampling.

Introduction
Sampling is an important concept that we practice in our everyday life. Sampling involves selecting a relatively small
number of elements from a larger defined group of elements and expecting that the information gathered from the
small group will allow judgments to be made about the larger group. Sampling is often used when conducting a
census is impossible or unreasonable. When using a census, the researcher is interested in collecting primary data
about or from every member of the defined target population.

2.1. Basic Sampling and Statistical

Terminology
The most common concepts and terminologies in sampling are the following:
Census: is study of the whole population/ it involves complete enumeration of the whole population. It is appropriate
if the population size itself is quite small.

Survey: is a research design in which information is gathered from a sample of respondents. Sampling may be
useful if the population size is large and if both the cost and time associated with obtaining information from the
population is high.

Population: is an identifiable total group or aggregation of elements that are of interest to the researcher and
pertinent to the specified problem.

Element: is a person or object from which data and information are sought. In research, the element is a particular
product or group of individuals include a particular consumer product, specific group of people or specific
organizations.

Variable: is a set of mutually exclusive characteristics such as sex, age, income, etc.

Sample: is a small proportion of a population selected for observation and analysis from a population in accordance
with specified procedures.

Sampling frame: is the list of all eligible population from which the sample will be drawn.

Sample size: Sample size is the number of sampling units selected for observation and analysis.

Sample size determination

Determining sample size means we need to decide “how many elements of the target population are to be chosen?”
The sample size depends upon the type of study that is being conducted. For example: If it is an exploratory research,
the sample size will be generally small. For descriptive research, the sample size will be large. The sample size also
depends upon the resources available with the researcher.

Consider Zoma’s hair food and oil case;

The researcher develop a list of 1,000 population as a sample frame from which sample will be drawn.
The researcher also decided to take 10% of the target population l.e 100 individuals as size of the sample. The
researcher believe that sample size of 100 is fairly represents the target population.

Dear learners! Now it is your turn to answer the following self-check questions

Self-check 2-1:
 1. Define sampling? Explain the importance of sampling?
2. Differentiate between census and survey studie

Dear learners! Have you done self-checks? If yes, let us move on to the discussion of sampling methods and
techniques.

2.2. Sampling Methods and Techniques

Dear learners! Let’s begin by posing important questions. How the researcher select sample from study population?
What does it meant by probability sampling and non-probability sampling?

There are two basic sampling designs: Probability and non-probability sampling methods. In a probability sampling,
every unit in the population has equal chances for being selected as a sample unit. In the non- probability sampling,
the units in the population have unequal or negligible, almost no chances for being selected as a sample unit.
 Types of Sampling Methods

Samplin g Meth ods

P r obabilit y Non-probability
Sampling m eth ods Sampling Methods

Simple Random sampling Con ven ien ce sampling

Systematic Random samplin g Judgment sampling

Stratifiedd Random samplin g Quota sampl ing

Cluster sampl ng Snowball sampling

i
Figure 2.1. Sampling Methods and Techniques

2.2.1. Probability Sampling

In probability sampling, each unit in the defined target population has a known, non-zero probability of being selected
for the sample, the actual probability of selection for each sampling unit may or may not be equal depending on the
type of probability sampling design used.

The various probability sampling techniques are discussed below:

1. Simple Random Sampling:

Simple Random Sampling is a probability sampling procedure which ensures that every sampling unit making up the
defined target population has a known, equal, non-zero chance. It is more suitable in more homogeneous and
comparatively large groups. The sample is chosen by some method like flipping a coin (head or tail selection), lottery,
or table of random number.

Consider Zoma’s hair food and oil case;

For example, the researcher decided to draw a sample of 100 individuals (n=100), from among the target population
that consisted of 1000 individuals (N=1000). The researcher could write each
individual‘s name on a separate, identical piece of paper and place all of the names in a jar. Each individual would have an
equal, known probability of selection for a sample of a given size that could be expressed by the formula:

Size of sample
Probability of selection = -------------------------
Size of population
Here, each individual would have a 100/1000 (or 0.1) chance of being randomly selected in the drawn sample.

2. Systematic Random Sampling

Systematic Random Sampling (SYMRS) is similar to simple random sampling but requires that the defined target population
be ordered in some way, usually in the form of a customer list.

To employ SYMRS, the researcher must be able to secure a complete listing of the potential sampling units that make up
the defined target population. Individual sampling units are selected according to their position using a skip interval. The
skip interval is determined by dividing the number of potential sampling units in the defined target population by the
number of units desired in the sample. The required skip interval is calculated using the formula:

Skip interval = Defined target population list size

Desired sample size
Steps in drawing a systematic random sample

Step 1: Obtain a list of population or sampling frame

Step 2: Determine sample size

Step 3: Determine sample interval or skip interval

Step 4: Randomly determine starting point to sample list of names

Step 5: Apply the skip interval to determine the remaining items to be included in the sample.

Consider Zoma’s hair food and oil case;

For instance, if the researcher wants a sample of 100 to be drawn from a defined target population of 1,000, the skip
interval would be 10 (ie. 1,000/100). Once the skip interval is determined, the researcher would then randomly select a
starting point and take every 10th unit until the researcher proceeded through the entire target population list.

3. Stratified Random Sampling

Stratified random sampling (STRS) requires the separation of the defined target population into different groups, called
strata, and the selecting of samples from each stratum. The goal in stratifying is to minimize the variability within each
stratum and maximize the differences between strata. In some ways, STRS can be compared to segmentation of the
defined target population into smaller, more homogeneous sets of elements.

To ensure that the sample maintains the required precision of the total population, representative samples must be drawn
from each of the smaller population groups. Drawing a stratified random sample involves three basic steps:

i. Dividing the target population into homogeneous sub-groups or strata.

ii. Drawing random samples from each stratum.

iii. Combining the samples from each stratum into a single sample of the target population.

Consider Zoma’s hair food and oil case;

For example: the researcher has a total of 1000 people as target population for the study. Among the 1000 people, 400
are brand-loyal and 600 are variety-seeking. Past research indicates that consumers’ brand preference is related to
consumers’ characteristics, such as being either brandloyal or variety-seeking. Therefore, it should be beneficial to divide
the total population of 1000 consumers into two groups 400 and 600 each and randomly sample from within each of the
two groups. If a sample size of 100 is desired, then a 10 percent directly proportional stratified sampling is employed.

Table 2.1: A stratified sampling

10 Percent Directly
Consumer Type Group Size Proportional Stratified
Sample Size
Brand-loyal 400 40

Variety-seeking 600 60

Total 1000 100

4. Cluster Sampling

While cluster sampling is similar to stratified random sampling, it is different in that the sampling units are divided into
mutually exclusive and collectively exhaustive sub-populations, called clusters. Each cluster is assumed to be representative
of the heterogeneity of the target population. Examples of possible divisions for cluster sampling include the customers
who patronize a store on a given day, the audience for a movie shown at a particular time (e.g., the matinee), or the
invoices processed during a specific week. Once the cluster has been identified, the prospective sampling units are drawn
into the sample by either using a simple random sampling method or canvassing all the elements within the defined
cluster.

The researcher may execute a two-step cluster sampling approach. First, the researcher would randomly sample a set of
cluster and then would decide on the most appropriate probability method to sample individuals within each of the
selected clusters.

A comparison between the stratified sampling process and the cluster sampling process is given in the following table:

Table 2.2: A comparison of stratified sampling and cluster sampling

Stratified Sampling Cluster Sampling

Homogeneity within group Homogeneity between groups

Homogeneity between groups Homogeneity within group

All groups are included Random selection of groups

Consider Zoma’s hair food and oil case;

For example: the researcher has a total of 1000 people as target population for the study. Among the 1000 consumers,
200, 350, 250 and 200 consumers are located in Northern, Eastern, Western and Southern regions respectively. Therefore,
the researcher divide the total population of 1000 consumers into four groups 200, 350, 250 and 200 consumers each and
randomly sample from within each of the four groups. If a sample size of 100 is desired, then a 10 percent directly
proportional cluster sampling is employed.

Table 2.2: A cluster sampling

10 Percent Directly
Proportional Cluster
Regions Cluster’s Size
Northern region 200 20
Eastern region 350 35

Western region 250 25

Southern region 200
20
Total 1000 100

2.2.2. Non-Probability Sampling

In non-probability sampling, the probability of selection of each sample unit is not known. Therefore, potential sampling
error cannot be accurately known either. The selection of sampling units is based on some type of intuitive judgments,
desire or knowledge of the researcher. The degree to which the sample may or may not be representative of the defined
target population.

The various probability sampling techniques are discussed below:

1. Convenience Sampling

Convenience sampling (or accidental sampling) is a method in which samples are drawn at the convenience of the
researcher or interviewer. The assumptions are that the target population is homogeneous and the individuals interviewed
are similar to the overall defined target population with regard to the characteristics being studied.
2. Judgment Sampling

In judgment sampling, (also referred to as purposive sampling), participants are selected according to an experienced
individual‘s belief that they will meet the requirements of the study. Judgmental sampling is associated with a variety of
biases. For example, shopping center intercept interviewing can over-sample those who shop frequently, who appear
friendly, and who have uncertainty, because the sampling frame is unknown and the sampling procedure is not well
specified.

3. Quota Sampling

The quota sampling method involves the selection of prospective participants according to prespecified quota regarding
either demographic characteristics (e.g., age, race, gender, income), specific attitudes (e.g. Satisfied/dissatisfied,
liking/disliking, great/marginal/no quality), or specific behaviors (e.g., regular/occasional/rare customer, product user/non
user).

4. Snowball Sampling

Snowball Sampling involves the practice of identifying and qualifying a set of initial prospective respondents who can, in
turn, help the researcher identify additional people to be included in the study. This method of sampling is also called
referral sampling, because one respondent refers other potential respondents. Snowball sampling is typically used in
research situations where:

i. The defined target population is very small and unique

ii. Compiling a complete list of elements is a nearly impossible task.

Dear learners! So far, the two types of sampling methods and their merits and demerits are discussed, the various
sampling techniques are outlined and explained. Now it is your turn to answer the following self-check questions

Self-check 2-2:
 1. Differentiate between probability and non-probability sampling methods?
2. Explain each of the sampling techniques listed under probability sampling?
3. Explain each sampling techniques outlined under non-probability sampling?

Dear learners! Have you answered the self-check questions? If yes, let us move on to the unit summary and unit review
questions.

Unit Summary
Sampling involves selecting a relatively small number of elements from a larger defined group of elements and expecting
that the information gathered from the small group will allow judgments to be made about the larger group.

There are two basic sampling designs: Probability and non-probability sampling methods. In probability sampling, each unit
in the defined target population has a known, non-zero probability of being selected for the sample. In non-probability
sampling, the probability of selection of each sample unit is not known.

Various probability sampling methods are: Simple random sampling, Systematic Random Sampling, Stratified Random
Sampling and Cluster Sampling. Non-probability sampling methods can be classified as: Convenience Sampling, Judgment
Sampling, Quota Sampling and Snowball Sampling.

Unit Review Questions

Part One: Multiple Choice Questions

Instruction: choose the best answer from the given alternatives

1. ________ refers to a small portion of the total population selected for observation.
A. Population C. Sample
B. Universe D. Elements
2. Which one of the following statement is true about simple random sampling technique? A. It gives equal chance for
selection.
B. It is more suitable for homogeneous population
C. The sample members are selected by chance
D. All of the above
3. Which one of the following sampling technique is suitable for population having heterogeneous characteristics?
A. Simple random sampling C. Stratified sampling
B. Systematic random sampling D. Cluster sampling
4. In which technique selection of sample is left entirely to the researcher?

A. Convenience sampling C. Simple random sampling

B. Stratified sampling D. Systematic sampling

5. Which one of the following sampling technique is NOT included under probability sampling?

A. Stratified sampling C. Convenience sampling

B. Cluster sampling D. Systematic random sampling

Part Two: Practical Activity -1-

Instruction: Perform the following practical tasks

Task 1: Develop a population list or sampling frame for market research, when the target population is the students of
your school.

Task 2: Determine sample size for the population lists you have developed?

Task 3: Select sample members by using simple random sampling technique from the sampling frame you have
developed and sample size you have determined on task 1 and 2.

Task 4: Based on the sampling frame you have developed and sample size you have determined on task 1 and 2, you are
required to arrange the target population in alphabetic order, determine sample/skip interval and select sample members
by using systematic random sampling technique. Task 5: Based on task 1 and 2, sampling frame is developed and sample
size is determined, now it is your turn to divide the target population in to strata by using one of the population’s variables,
proportionally draw samples from each stratum, and combining the samples from each stratum in to sample of the target
population.

Task 6: Based on sampling frame developed on task 1 and sample size determined on task 2, now it is your turn to form
clusters by the grade level or sections of the target population that is students of your school. Then by executing a two-
step cluster sampling approach, first, you would randomly sample a set of cluster and then select sample individuals within
each of the selected clusters by using simple random sampling method.

Task 7: Based on the sampling frame you have developed and sample size you have determined on task 1 and 2, you are
required to select one or more non-probability sampling techniques to select your sample and give your justification for
the selection of that technique.

Practical Activity -2-

Instruction: Recall the pharmaceutical company case that you have undertaken in unit one and you are required to
perform the following tasks:
In the practical activity part of unit one, you were formulate a market research problem and develop 2-4 market research
objectives for the case given by the pharmaceutical company. Now you are required to develop a sampling design to
achieve the market research objectives:

Task 1: Identify the target population of the study?

Task 2: Prepare a sampling frame or population list from which sample can be selected?

Task 3: Determine sample size for the study?

Task 4: Select one or more sampling technique(s) by which sample members would be selected?
 UNIT 3 DATA
COLLECTION
Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude regarding
the following content:

3.1. Types and Sources of data for Market Research

3.2. Collecting Data for Market Research

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the
completion of this unit, you will be able to:

✓ Determine the types and sources of data to conduct market research

✓ Collect data for market research by using variety of data collection instruments.
Key Terms: Primary data, Secondary data, Qualitative data, Quantitative data, Questionnaires, Focus groups,
Interviews, Observational techniques.

Introduction

Data lie at the heart of conducting market research. By data we mean a collection of facts that can be used as a basis for
analysis, reasoning, or discussions. For example, of the answers people give to questionnaire, existing company records, or
observations of shoppers’ behaviours.

In practice, “good” data are very important because they are the basis for good market research findings. In this unit, we
will discuss some of the different types of data. This will help you describe what data you use and why. Subsequently, we
discuss strategies to collect data for market research.

3.1. Types and Sources of data

Dear learners! Can you try to recall the types of data for market research and collection methods from the previous
lesson in unit one? Hoping that you have remembered them.

Data are present in the form of values for quantitative data and in the form of words and pictures for qualitative data.
Data can be classified as primary and secondary data, qualitative and quantitative data.

3.1.1. Primary and Secondary Data

Generally, on the basis of their sources, there are two types of data: primary and secondary data. Primary data refers to
raw data collected by the researchers directly through observation, questionnaires or experiments, etc. for specific
purpose.

A market research conducted by an organization using primary data for its own purpose which addresses its requirements
is called- Primary Market Research. It is generally expensive but is specific and objective to the organization’s
requirement.

Secondary data refers to information that already exists somewhere, having been collected for another purpose and
have already passes the statistical process. For example; a research report done by another company on another product.

The type of market research conducted based on information obtained from secondary sources is called- Secondary
Market Research. It is also known as Desk research.

Secondary and primary data have their own specific advantages and disadvantages. These are summed up in table 3.1.
Table 3.1 The advantages and disadvantages of secondary and primary data

Secondary data Primary data

Advantages Tend to be cheaper Are recent

Sample sizes tend to be greater Are specific for the purpose
Are usually quick to access Are proprietary Are
sometimes more accurate

Disadvantages May be outdated Are usually more expensive

May not completely fit the problem Take longer to collect
There may be errors in the data
Difficult to assess data quality
May not be available
No control over data collection

3.1.2. Quantitative and Qualitative Data

Data can be quantitative or qualitative. Quantitative data are presented in values, whereas qualitative data are not.
Qualitative data can therefore take many forms such as words, stories, observations, pictures, or audio. In addition, when
the data are “raw,” we often label them qualitative data, although researchers can code attributes of the data, thereby
turning it into quantitative data. Both qualitative and quantitative data can be used in market research.
 Qualitative market research: This is generally used for exploratory purposes. The data collected is qualitative and focuses
on people‘s opinions and attitudes towards a product or service. The respondents are generally few in number and the
findings cannot be generalized to the whole population. Observational technique, Focus groups and In-depth interviews are
appropriate tools for gathering qualitative data. No statistical methods are generally applied.

Quantitative market research: This is generally used to draw conclusions for a specific problem. It tests a specific
hypothesis and uses random sampling techniques so as to infer from the sample to the population. It involves a large number
of respondents and analysis is carried out using statistical techniques. Questionnaires is suitable for obtaining quantitative
data.

Dear learners! So far, the primary and secondary data and their advantages and disadvantages are discussed. And the
qualitative and quantitative data are explained. Now it is your turn to answer the following self-check questions.

Self-check 3-1:

1. Distinguish between Primary and Secondary data?

2. Distinguish between the qualitative and quantitative data?

Dear learners! Have you answered self-check questions? If yes, let us move on to the discussion about the data
collection instruments for market research.

3.2. Collecting Data for Market Research

Dear learners! Let’s begin by posing important questions. How researchers obtain primary and secondary data
for market research? What are the tools available for obtaining primary data for market research?

3.2.1. Accessing Secondary Data

Secondary data are data that have already been gathered, often for a different research purpose. Secondary data can either be
internal or external (or a mix of both). Internal secondary data are data that an organization or individual already has
collected, but wants to use for (other) research purposes. For example, we can use sales data to investigate the success of new
products. External secondary data are data that other companies, organizations, or individuals have available, sometimes at a
cost. In Fig. 3.1, we show an overview of different types of secondary data.
 Secondary Data Government

Internal External

Company Records

Sales Reports Trade Associations

Market Research Firms

Existing Research
Studies Consulting Firms

Literature (Database)

Social Networking Sites

Figure. 3.1 Sources of secondary data
I. Internal Secondary Data in Market Research

Internal secondary data are contained within the company and are mostly tailored towards specific needs. In general
terms, internal secondary data comprise internal company records, sales reports, and existing research studies.

• Company records are a firm’s repository of information. Internal company records may contain data from different
business functions.

• Sales reports are created when products and services are sold to clients. Many of these reports contain details of the
discussions held with clients and the products/services sold. Consequently, they can provide insights into customers’
needs.

• Existing research studies are a good source of secondary data, even if they were conducted for a (slightly) different
purpose.

II. External Secondary Data

• Governments often provide general data that can be used for market research purposes.

• Trade associations are organizations representing different companies and are aimed at promoting their common
interests.
• Market research firms are another source of secondary information. Particularly large market research firms
provide syndicated data used for many different clients.

• Consulting firms are a rich source of secondary data. Most firms publish full reports or summaries of reports on
their website.

• Literature (databases) contain professional and academic journals, newspapers, and books.

• Social networking sites, such as LinkedIn, Twitter, Facebook, etc. can provide valuable information.

Many of the sources of secondary data we have just discussed can be very easily accessed by means of search engines.
Search engines provide access to many sources of secondary information.
3.2.2. Collecting Primary Data for Market Research

Primary data are gathered for a specific research project at hand. This distinguishes primary data from secondary data
gathered previously for another purpose. Primary data can be quantitative or qualitative data. Quantitative primary data
are mostly gathered through questionnaires. Most qualitative primary data are collected in the form of interviews, focus
groups, observational techniques. Figure 3.2 shows an overview of different types of qualitative and quantitative research.

Primary Data

Quantitative Data Qualitative Data

Questionnaire s Interviews

Focus Group Discussion

Observations

Figure 3.2 Quantitative and Qualitative primary data I. Collecting

Quantitative Data: Designing Questionnaires

Questionnaire:

A Questionnaire is a research technique used for obtaining useful statistical information by asking questions to
respondents. Before asking questions, a series of questions is prepared as per the objective and purpose of the survey. It is
one of the most cost-effective methods of collecting primary data, which can be used with considerable ease by most
researchers.
Questionnaire development involves at least five steps. Figure 3.3 shows these steps in designing questionnaires:

Determine type of questionnaire and method of

administration

Design the questions

Design the questionnaire

Pilot the questionnaire

Execution

Figure. 3.3. Steps in designing questionnaires

Step 1: Determine the type of questionnaire and method of administration:

There are four different ways to administer questionnaire: face-to-face interviews, telephone interviews, Web surveys,
and mail surveys. In some cases, researchers combine different ways of administering questionnaires. This is called a mixed
mode.

a) Face-to-face interviews (or personal interviews): It helps to obtain high response rates, supports open-ended
responses and it is possible to collect answers to a reasonably lengthy set of questions. Consequently, face-to-face
interviews seem highly preferable but they are also the most costly per respondent.

b) Telephone interviewing: It allows one to collect data quickly. It also supports open-ended responses. Telephone
interviewing can be a good compromise between the low cost of mail and the richness of face-to-face survey
research.

c) Web surveys: are often the least expensive to administer and can be fast in terms of data collection, particularly
since they can be set up very quickly. We can administer Web surveys to very large populations, even internationally.
 d) Mail surveys: are paper-based surveys sent out to respondents. They are a more expensive type of survey research
and are best used for sensitive items. As no interviewer is present, there is no interviewer bias.

Step 2: Design the Questions

In this step, the researcher decide on each items/questions. There are two kinds of question-response options available for
the researcher:

1. Open-ended questions
They are referred to as unstructured questions or free-response or free-answer questions. In openended questions, the
answers are not fixed, Respondents are free to express their views and give suggestions freely.

Example: Consider Zoma’s hair food and oil case;

Assume that the objective of the market research is “to rebrand its name from Zoma hair food and oil to Super Herbal hair
food and oil, with a view to rejuvenate its image and to explore the youth market.”

Suggested open-ended questions may be:

• Suggest a new name for the brand: _______________

• Why do you like this new brand name? ___________
2. Closed-ended questions
In closed-ended questions, both the question and response formats are structured and defined. Closed-ended questions,
are commonly used because the answers are chosen from a fixed (closed) list. It helps respondents quickly complete the
questionnaire. Also researchers can limit the choice to a fixed number to make the analysis easier and more meaningful.
Closed-ended questions have the following forms:

a) Dichotomous questions: These are restrictive alternatives and provide the respondents only with two answers. These
could be ‘yes’ or ‘no’, like or dislike, similar or different, married or unmarried, etc.

Example: Consider Zoma’s hair food and oil case; Suggested question:

• Have you heard of this brand of product before? Yes No

• Have you used Zoma’s hair food and oil before? Yes No

b) Opinion Rating Questions: are used to allow respondents to express their opinion by simply circling a rate within a
given range, say from 1 to 5 on a particular issue. This type of question often asking for opinion and expecting an answer
showing the degree of agreement or disagreement.

Example: Consider Zoma’s hair food and oil case; Suggested questions:
 ▪“Brand name of the product” is a factor affecting your purchase. Do you agree?

1-Strongly Disagree, 4-Agree

2-Disagree,
5-Strongly Agree 3-Neutral
▪The brand name gives you a feeling of being young. Do you agree?
1-Strongly Disagree, 4-Agree
2-Disagree, 5-Strongly Agree
3-Neutral

c) Questions with more than one possible responses: this type of question differs from a simple single choice
question in that respondents can select more than one choice.

Example: Consider Zoma’s hair food and oil case; Suggested questions:

▪ Which of the following 3 factors do you consider most important for this brand? (select a maximum of 3 choices)

a) Packaging d) Name
b) Logo e) Association with product c) Color
d) Questions with only One Possible Response: this type of question has only one option from the given choices.

Example: Consider Zoma’s hair food and oil case; Suggested question:

▪ Which of the following new brand names is better than the old name ‘Zoma hair food and oil’? a) Super Herbal hair
food and oil
b) Super Fine hair food and oil
c) Super Cool hair food and oil
d) Super Natural hair food and oil

Step 3: Design the Questionnaire

After determining the individual questions, the market researcher has to integrate these, together with other elements, to
create the questionnaire. This involves including an explanation, choosing the order of the questions, and designing the
layout and format.

Step 4: Pilot testing the Questionnaire

Pilot testing refers to testing and administering the designed instrument on a small group of people from the population
under study. Every aspect of the questionnaire has to be tested. Thus these aspects need to be corrected.
Step 5: Administering the Questionnaire

Once all the above steps have been completed, the final instrument is ready for conduction and the questionnaire needs to
be administered according to the sampling plan

Principles for Designing Questionnaires

Designing questions (items) for a survey, whether it is for an interview, the Web, or mail, requires to follow these
principles:

• Avoid complexity use simple conversational language.

• Avoid leading and loaded questions

• Avoid ambiguity, confusion and vagueness.

• Avoid double barreled items: these are questions covering several issues at once

• Avoid asking questions that are beyond the respondents capabilities

• Questionnaires should be as short as possible

• The questions should be relevant to the research problem.

II. Collecting Qualitative Data:

One can collect qualitative data by explicitly informing the participants that you are doing research or you can simple
observe the participants’ behavior without the participants being explicitly aware of the research goals. The collection tools
for qualitative data are interviews, focus groups and observational studies.

a) Interviews: are qualitative conversations with participants about a specific issue. Interviews vary in their level of
structure. In their simplest form, interviews are unstructured when all interview questions are not decided in
advance and the participants talk about a topic in general. This works well if you want to obtain insight into an issue or
as an initial step in a research process. Interviews can also be fully structured, meaning all questions and possible
answer categories are decided in advance. This leads to the collecting of quantitative data.

b) Focus Group Discussion: are interviews conducted among a number of respondents at the same time and led by a
moderator. This moderator leads the interview, structures it, and often plays a central role in later transcribing the
interview. Focus groups are usually semi or highly structured. The group usually comprises between 4 and 6 people to
allow for interaction between the participants and to ensure that all the participants can have a say.
 c) Observation: is relatively rare but can provide important insights that are unavailable through other market
research techniques. Observation involves the process of physically or mechanically recording some specific aspect of
a consumer‘s activity or behavior.
Observational techniques are not used to understand why people behave in a certain way but rather aim to
understand what they are doing. Observational techniques work well when people find it difficult to put what they are
doing in words, such as when people from different ethnic backgrounds shop for food.

Example: Consider Zoma’s hair food and oil case;

The researcher can also use observational techniques for gathering qualitative data to achieve the market research

objective of “rebranding the product to explore the youth market.”

In this case, the researcher observes how consumers react towards the two brands l,e for the product with an old name
and for the product with a new name.

Dear learners! So far, the various methods for collecting primary data are discussed. Now it is your turn to
answer the following self-check questions

Self-check 3-2:

1. Explain the methods for collecting quantitative primary data?

2. Explain the methods for collecting qualitative primary data?

3. How questionnaire is designed, enumerate the steps involved?

4. How questionnaires is administered for market research?

Dear learners! Have you answered the self-check questions? If yes, let us move on to reading the unit summary
and to answer the unit review questions.

Unit Summary
Data are present in the form of values for quantitative data and in the form of words and pictures for qualitative data. Data
can be classified as primary and secondary data, qualitative and quantitative data.

While primary data are data that a researcher has collected for a specific purpose, secondary data have already been
collected by another researcher for another purpose. Secondary data can either be internal or external (or a mix of both).
Primary market research involves collection of data specifically for the problem or project in hand. Secondary market
research is based on data previously collected for purposes other than the research in hand.

Primary qualitative data can be collected through interview, focus group and observation techniques, whereas,
quantitative data for market research can be obtained through surveys questionnaire via personal interview, telephone
interview, mail and web.
Unit Review Questions
Part One: Multiple Choice questions
Instruction: Choose the best answer from the given alternatives
1. Which one of the following is the advantage of primary data over secondary data?
A. Low cost to obtain C. Are usually quick to access
B. Specific for the purpose D. Are sometimes more accurate
2. Secondary data could be obtained from the following, EXCEPT:

A. Research studies C. Research firms

B. Company documents D. Survey respondents

3. Which one of the following methods most appropriate to collect quantitative primary data?

A. Questionnaires C. Observation
B. Interview D. All of the above
4. Which of the following methods can be used in administering survey questionnaires?
A. Personal interview C. Telephone interview
B. Mail survey D. All of the above

5. __________ is an interview conducted by one or more interviewers with small group of individuals.
C. Interview
A. Focus group discussions
B. Questionnaires D. Observation

Part Two: Discussion Questions

Instruction: Give your brief answer for the following review questions:

1. Differentiate between primary data and secondary data?

2. Explain the methods available for collecting primary data?
3. List out some of the sources of secondary data known to you?
4. Distinguish between qualitative and quantitative market research?
5. Discuss the four ways of administering questionnaires for market research?
6. Explain the differences between open-ended and closed-ended questions?
7. Differentiate between structured and unstructured interview?
 8. What are the steps in designing questionnaire? Explain.

Part Three: Practical Activity:

Instruction: Recall the pharmaceutical company case that you were undertaken in unit one and two. Now you are
required to perform the following tasks:

In the practical activity part of unit one and two, you were formulate a market research problem, develop 2-4 market
research objectives and sampling design were developed. Now you are required to design research instruments and
techniques to gather the required data to study the market research problem of the pharmaceutical company:

Task 1: Identify the data sources and type to study the given market research problem?

Task 2: Assume that questionnaire survey is an appropriate research instrument for the market research problem at
hand. Therefore, design questionnaire which consists of different types of questions and these questions should be
relevant to the market research objectives.
UNIT 4 DATA ANALYSIS AND
INTERPRETATIONS
Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude
regarding the following content:

4.1. Data Processing

4.2. Data Analysis
4.3. Interpretation of Findings

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the
completion of this unit, you will be able to:

✓ Process data in market research.

✓ Analyze data by using simple descriptive statistics
✓ Interpret market research findings

Key Terms: Descriptive Statistics, Measure of central tendency, Frequency, Percentage, Mean, Mode, Median.

Introduction
The data, after collection, has to be processed and analyzed so that meaningful conclusions may be drawn. Analyzing
the collected data with basics tools is a fundamental aspect to draw inference about populations. The data gathered
has to be analyzed by using a number of statistical techniques. This unit aimed to provide an overview of simple
descriptive statistical techniques commonly used in market research.

4.1. Processing Data

Dear learners! Let’s begin by posing important questions. What do you mean by data processing?
What are the tasks involved in processing raw data?

Data processing includes the collection and manipulation of data in order to produce useful and meaningful
information. Technically speaking, processing implies editing, coding, classification, and tabulation of collected data.
The processing operations explained as follows:

1. Editing of data
Editing is the first stage in data processing. It is the process of examining the collected raw data to defect errors and
omissions and to correct these when possible. Editing is done to assure that the data are accurate, consistent with
other facts gathered, uniformly entered as completed as possible and have been well arranged to facilitate coding and
tabulation.

2. Coding of data
Coding refers to the process of assigning numerals or other symbols to answers so that responses can be put into a
limited number of categories or classes. In general, coding reduces the huge amount of information collected into a
form that is amenable to analysis.

3. Classification
Classification is the process of arranging data in groups or classes on the basis of common characteristics. In this way the
entire data get divided into a number of groups or classes.

4. Tabulation:
When a mass of data has been assembled, it becomes necessary for the researcher to arrange the same in some kind of
concise and logical order. This procedure is referred to as tabulation. Thus, tabulation is the process of summarizing raw
data and displaying the same in compact form (i.e., in the form of statistical tables) for further analysis. In a broader
sense, tabulation is an orderly arrangement of data in columns and rows.

Dear learners! Now it is your turn to answer the following self-check questions

Self-check 4-1:

1. Explain data processing and its importance?

2. Discuss the four operations involved in data processing?

Dear learners! Have you answered the self-check questions? If yes, let us move on to the discussion of analysis
of market data.

4.2. Data Analysis

Dear learners! Let’s begin by posing important questions. What do you mean by data analysis? What are the
descriptive statistical tools used for data analysis?

Data Analysis is a process of evaluating and describing collected data through the means of statistical or logical
techniques. Data analysis is the computation of certain indices or measures along with searching for patterns of
relationship that exist among the data groups.
The data analysis stage in a market research is the stage when qualitative data, quantitative data or a mixture of both,
is brought together and analyzed in order to draw conclusions based on the data. These conclusions then provide the
key insights for the research project and any associated reports or presentations.

The aim of data analysis in research is to discover useful information from a set of data, and conclusions that can be
used to form insights. Large quantities of data must be summarised and presented in a way that clearly communicates
the most important features and conclusions.

Data analysis plays a crucial role in market research as it helps businesses make sense of the vast amount of data
available to them. By analyzing data, businesses can uncover valuable insights and patterns that can guide their
marketing efforts. For example, by analyzing customer feedback and survey responses, a company can identify areas for
improvement in their products or services. Additionally, data analysis can help identify emerging market trends, allowing
businesses to stay ahead of their competitors.

Data analyses could be of two types descriptive or inferential. Descriptive analysis is a technique that aims to transform
raw data into meaningful and easy to understand information. In this section, descriptive analysis; Percentage and
Measures of central tendency are discussed.

4.2.1. Data Analysis using Descriptive Statistics

Descriptive statistics help describe and understand the features of a specific data set by giving short summaries about

the sample and measures of the data. Descriptive analysis is the most basic type of data analysis technique used in

market research. It involves summarizing and describing the main features of a dataset, such as the mean, median,

mode, and standard deviation. This technique helps researchers gain a better understanding of the data and its

characteristics. For example, in a market research study, descriptive analysis can be used to analyze customer

demographic data, such as age, gender, and income level, to identify the target audience for a specific product or

service.

Descriptive statistics are broken down into frequencies and measures of central tendency. Frequency statistics simply

count the number of times that each variable occurs, such as the number of males and females within the sample.

Measures of central tendency give one number that represents the entire set of scores, such as the mean. Central

tendency measures the central values of the data.

Dear learners! However, descriptive statistics includes frequencies, measures of central tendency and
measures of variability, for this grade level only percentages and measures of central tendency are discussed.
 I. Percentages

A commonly used statistical tool, the percentage expresses information as a proportion of a whole. Percentage in
market research refers to the use of numbers expressed as a proportion of a whole to present findings and compare
results. Percentages are also a good way to show relationships and comparisons either between categories of
respondents or between categories of responses.

A frequency is simply the number of participants who indicated that category (Eg: "Male"). However, it is oftentimes
difficult to interpret frequency distributions because the frequency by itself is meaningless unless there is a reference
point to interpret the number. Percentages are easier to understand than frequencies because percentage can be
interpreted.

Percentage is calculated by taking the frequency in the category divided by the total number of participants and
multiplying by 100%.

Example: Consider Zoma’s hair food and oil case;

For the Yes/No questions of the earlier case, the responses can be analyzed using percentage as follows:

Hint: Out of 1000 respondents, 700 of them said “Yes” and 300 respondents said “No” for the question that ‘have you
used Zoma’s hair food and oil before?’

Table 4.1: Response for the use of Zoma’s product before

Response Frequency Percent

Yes 700 70%

No 300 30%

Total 1,000 100%

The table be interpreted as;

Table 4.1 shows that, of the total of 1000 respondents, 700 (70%) of respondents have been used

Zoma’s hair food and oil products before.

Percentages tend to be easy to visualize because they show part of a whole. They can easily be transferred into bar
graphs, pie charts, and other images and help readers understand the importance of a value. The following example
shows how percentage is presented in pie chart.
Example:

For the question that “Brand Name of the product” is a factor affecting your purchase. Do you agree?

Hint: Frequency of responses: 70 (1-Strongly disagree); 130 (2-Disagree); 200 (3-Neutral); 270 (4-
Agree); 330 (5-Strongly agree)

Name of the 1Product is a Factor

2 7%
13% 5
33%

3
20%

4
27%

Figure 4.1: Name of the product is a factor

The pie chart is interpreted as:

Figure 4.1 shows that, more respondents (60%) tend to agree or strongly agree with the statement that Brand name of
the product is a factor affecting their purchase. From the overall respondents, (20%) of respondents are neutral with
the statement; and (20%) of respondents tend to disagree or strongly disagree with the statement that brand name of
the product is a factor affecting their purchase.

II. Measures of Central Tendency

Measures of central tendency are used to characterize what is typical for the group. These are measures which allow
us to visualize or identify the central characteristic or the representative unit. The mean, median, and mode are the
three most common measures of central tendency. Each one calculates the central point using a different method.
Choosing the best measure of central tendency depends on the type of data you have.

The purpose of the central tendency is to provide an exact representation of the entire collected data. It is often
defined as the single value that is representative of the data. The most common measures of central tendency are
discussed as follows:

a. Mean

The mean, or average, is commonly used in reporting data. It is obtained by summing all the answers or scores and
dividing by the total number. In other words, mean is the sum of the values divided by the number of values.
Example: The mean of 5, 10, 22, 25, 17 is (5 + 10 + 22 + 25 + 17) / 5 = 15.8.

Mean scores can also be used to summarize findings from rating scales, such as questions about attitudes or opinions.
Categories such as “not very important,’’ “somewhat important,’’ and “very important,’’ can be assigned numbers such
as 1, 2, and 3. They could be reported in this way:

Example: Consider Zoma’s hair food and oil case;

A calculation of the mean in a rating of respondents’ view towards the new brand name might look as follows:

(1-4 Scale where 1= Poor, 2=Good, 3=Very Good and 4= Excellent)

Table 4.2: Response to customers’ view towards the new name

Items Poor Fair Good Excellent N
View of responders towards the new 1 2 3 4
brand name (no (100 (600 (300
answers) answers) answers) answers) 1000

The mean rating for the item is calculated by multiplying the number of answers in a category by its rating value (1, 2,
3, and 4), obtaining a sum and dividing by the total number of answers for that item. To calculate the mean for item in
the example above, follow these steps:

1. Multiply answers by value.

Poor = 0 (0 x 1)

Fair = 200 (100 x 2)

Good = 1800 (600 x 3)

Excellent = 1200 (300 x 4)

2. Sum. 0 + 200 + 180 0+1200 = 3200

3. Divide by N: 3200 ÷ 1000 = 3.2 (mean rating)

b. Mode

The Mode is the most commonly occurring answer of value in your data. The advantage of the mode as a measure of
central tendency is that its meaning is obvious. Further, it is the only measure of central tendency that can be used
with nominal data. Mode denotes the most frequently occurring value (or values). The mode is the value (or values)
with the highest frequency.

Example: For men having the following Ages -19, 18, 21, 23, 23, 23, 24 and 21, the mode is 23.

The mode is important only when there is a large number of values. It is not as affected by extreme values as the mean.

c. Median

The median is the middle value. It is the midpoint where half of the cases fall below and half fall above the value.
Sometimes we may want to know the midpoint value in our findings, or we may want to divide a group of participants
into upper and lower groupings.

To calculate the median, arrange the data from one extreme to the other. Proceed to count halfway through the list of
numbers to find the median value. When two numbers tie for the halfway point, take the two middle numbers, add
them and divide by 2 to get the median. Like the mode, an advantage of the median is that it is not affected by extreme
values or a range in data.

Example:

The following example shows the three measures of central tendency. In this example, we are analyzing the number of
customers visiting the stores.

Store Number of
Number visitors

1 3
Mean = 7.2 (number of visitors divided by number of stores)
2 3
Mode = 3 (most often occurring response)
3 3
4 5 Median = 6 (mid-point)

5 6

6 6

7 8

8 9

9 10

10 19

Total 72
Dear learners! Now it is your turn to answer the following self-check questions.

Self-check 4-2:
 1. Explain the importance of data analysis in market research?
2. Explain descriptive analysis method?
3. Discuss the three most commonly used measures of central tendency?

Dear learners! Have you answered the self-check questions? If yes, let us move on to the discussion of
interpreting market data.

4.3. Interpretation of findings

Dear learners! May a pose a question? What does it meant by data interpretation in market research? Do you
know the methods for drawing conclusions?

In essence, the researcher’s work goes well beyond the collection and analysis of data. These tasks extends to
concluding the findings of his investigation. It is through interpretation that the researcher can understand the real
significance and know the real purpose of findings.

Interpretation of research (statistical) results means explaining the figures and facts in the context of theory on which
the investigation is done. Thus, interpretation serves a dual purpose. First, it gives an understanding of the general
factors that seem to explain what has been observed and second, it provides theoretical conception which can serve as
a guide for further research.

Interpretation means bringing out the meaning of data. Interpretation involves the conversion of data into
information. The essence of any research is to do interpretation about the study. This requires a high degree of skill.
There are two approaches for drawing conclusions:
a) Induction approach: In the induction method, one starts from observed data and then generalization is done
which explains the relationship between objects observed. This is the process by which we draw a general conclusion
from individual instances or observations. Inductive reasoning involves starting from specific premises and forming a
general conclusion.

Example of Induction: All products manufactured by Sony are excellent. DVD player model 2602 MX is made by
Sony. Therefore, it must be excellent.

b) Deduction approach: On the other hand, deductive reasoning starts from some general law and is then applied to
a particular instance i.e., deduction comes from the general to a particular situation. The deductive method seeks to
draw valid conclusions from initial premises.
 Example of Deduction: All products have to reach decline stage one day and become obsolete. Radio is in decline
mode. Therefore, it will become obsolete.

Dear learners! So far, data processing, analysis and interpretation of data have been discussed earlier. Now it
is your turn to answer the following self-check questions

Self-check 4-3:

1. Explain the concept of interpretation of results in market research?

2. Explain the two methods of drawing conclusions?

Dear learners! Have you answered the self-check questions? If yes, let us move on to reading the unit summary
and to perform the unit review questions.

Unit Summary
The data, after collection, has to be processed and analyzed so that meaningful conclusions may be drawn.

Data processing includes the collection and manipulation of data in order to produce useful and meaningful
information. Technically speaking, processing implies editing, coding, classification, and tabulation of collected data.

Data analysis is the computation of certain indices or measures along with searching for patterns of relationship that
exist among the data groups.

Descriptive statistics help describe and understand the features of a specific data set by giving short summaries about
the sample and measures of the data. It includes frequencies, measures of central tendency, and measures of
variability.

Measures of central tendency are measures which allow us to visualize or identify the central characteristic or the
representative unit. The measures to be used are the mean, the mode, and the median.

Interpretation of results involves drawing conclusions in inductive or deductive approaches.

 Unit Review Questions
Part One: Multiple Choice Question

Instruction: Choose the best answer from the given alternatives.

1. __________ is the main task in data processing which involves assigning symbols to answers so that responses
can be put into a limited number of categories or classes.
A. Editing data C. Tabulation of data
B. Coding data D. Classification of data
2. ______________ refer to the number of times that each variable or response occurs.
A. Percentage C. Frequency B. Mean D. None of the above

3. Identify the correct order?

A. Data collection Data processing Data interpretation Data analysis
B. Data collection Data analysis Data interpretation Data processing
C. Data collection Data processing Data analysis Data interpretation
D. Data collection Data analysis Data processing Data interpretation
4. __________ is obtained by dividing the sum of the values to the number of values.
A. Mean C. Median
B. Mode D. Percentage
5. ___________ denotes the most frequently occurring value or values.
A. Frequency C. Median
B. Mean D. Mode

Part Two: Discussion Questions

Instruction: Give your brief answer for the following review questions:

1. What is data processing? Explain the various functions involved in processing data?

2. What is data analysis? Explain the purpose of data analysis in market research?

3. Differentiate between percentage and measure of central tendency?

4. Explain what is mean, mode and median?

 5. Differentiate between inductive and deductive methods of drawing conclusion?

Part Three: Practical Activities

Instruction: Perform the following activities:

1. The total number of respondents are 820, and out of them 345 respondents are female. Based on this information,
calculate percentage of male and female and show in frequency percentage table?

2. Assume that the following responses are obtained from questionnaire you have distributed to and collected from sample
respondents. The research question and respondents responses are stated as follows:
The research question asked to measure the level of agreement of respondents is that, “the company’s product is best in

quality than existing competitors”.

Respondents’ response are summarized as; 52 respondents are strongly agree, 34 respondents are agree, 23
respondents are undecided, 3 respondents are disagree and no respondents are said strongly disagree.
Based on the above information, calculate the percentage of alternative responses in frequency table?

3. Find the mean, median and mode for the following data:
190, 153, 168, 179, 194, 153, 165, 187, 190, 170, 165, 189, 185, 153, 147, 161, 127, 180.

4. Find the Median of a given data 25, 12, 5, 24, 15, 22, 23, 25.

5. Find the mode of given data 15, 65, 42, 65, 95, 42, 65.

UNIT 5
MARKET RESEARCH REPORT
Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude regarding
the following content:

5.1. Meaning and Objectives of Market Research Report

5.2. General Format for Writing Market Research Report

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the
completion of this unit, you will be able to:

✓ Understand the meaning and functions of market research report

✓ Prepare market research report by applying its standard format

Key Terms: Research Report, Oral Report, Written Report

Introduction

The effectiveness of the research depends upon the methods of communication and presentation of the research report. A
very useful research, if not presented in a suitable manner for the users of the research findings, may not serve its purpose.
The report of research, thus, is a statement of the contents in brief, the procedure adopted and findings arrived at by the
researcher. Thus, this unit discussed how to write a market research report.

5.1. Meaning and Objectives of Market Research Report

Dear learners! Can you try to explain the concept of research report? What are the objectives of writing and
presentation of a report in research works?

5.1.1. Defining Market Research Report

A market research report is an oral or written presentation to management detailing a research project's objectives,
methodology, findings, and recommendations. Typically, written reports are more detailed and formal than an oral report.
Oral reporting is required, when the researchers are asked to make an oral presentation.

5.1.2. Objectives of Writing Market Research Report

The objective of a market research report is to provide a clear, accurate and complete report of the research project. It
should help clarify the research issues so management can use the findings as an aid to decision-making. Writing market
research report usually aimed to:

• To communicate the marketing research result

• To help the executives in selection of right action
• To verify the conclusions of other reports
• To serve as an essential reference for future research
Dear learners! Now it is your turn to answer the following self-check questions

Self-check 5-1:

1. Discuss the objectives of writing market research report?

Dear learners! Have you answered the self-check questions? If yes, let us move on to the discussion of the basic
elements and structure of written format of market research report.

5.2. General Format for Written Report

While the elements of actual reports may vary slightly, a basic research report has three sections:

Section I: Introduction

Section II: Body of the Report

Section III: Appendices

Here is an outline of a standard written research report. Actual reports may vary somewhat from this outline:

I. Introduction

A. Title page
B. Table of contents
C. Executive summary
II. Body of the report

A. Introduction
B. Background
C. Methodology
D. Findings
E. Limitations
F. Conclusions and recommendations

III.Appendices

A. Questionnaire (data collection form)

B. Bibliography

Section I of the Research Report: Introduction

1. Title Page

The first page of the research report is the title page. This page should include the following elements:

• Title of the research project

• Names, titles, firm, and contact information of the person who authorized and directed the project for the client
 • Names, titles, firm, and contact information of the people who prepared the report
• Release date of the report

2. Table of Contents

The table of contents is based on the final outline of the report. It includes a list of the report's sections and sub-sections,
and their respective page numbers.

3. Executive Summary

The executive summary is a short synopsis of the research report. Some might even call it the minireport. It is typically no
more than one pages long. It is intended to provide busy senior executives with the highlights of the study.
The structure of an executive summary for a research paper can vary slightly depending on the specific requirements and
nature of the research. However, a commonly used structure includes the following key elements:

Introduction

Provide a brief introduction that sets the context for the research. Clearly state the purpose, objectives, and significance of
the study. Research Methodology

Summarize the research methodology used in the study. Briefly explain the data collection methods, sample size, research
design, and any statistical analyses employed. This helps establish the credibility and reliability of the research.

Key Findings

Present the most significant findings of the research. Summarize the main results, trends, or patterns that emerged from the
data analysis. Focus on the key outcomes that directly address the research objectives.

Conclusion

Conclude the executive summary by summarizing the main points and emphasizing the overall significance of the research.
Restate the main findings and their implications in a concise manner.

Section II of the Research Report: Body of the Report

The body of the market research report includes the following sections:

1. Introduction

This section of the report reviews the objectives of the research. It summarizes the research proposal and highlights any
changes to the research design that were agreed to after the client approved the proposal.
2. Background

This section covers a review of the literature and secondary research. And, if relevant, this section cites primary research
sponsored by the client on similar issues.

3. Methodology

This is the most technical section of the research report. It includes the following sections:

A. Research Design:

This includes a statement of the type of research conducted: Exploratory, Descriptive or Causal. Secondary research sources
are mentioned along with a description of how primary data were collected. And, the authors should include a rationale for
why the research design is appropriate for achieving the research objectives and answering the research questions. In an
appendix, the authors of the report include any discussion guides, questionnaires or observation forms.

B. Sample Design:

This section includes:

• A statement defining the population of interest and the sampling frame

• Sampling units included in the study

• The sampling method used

• The size of the selected sample

• The response rate achieved

C. Data Collection and Fieldwork:

This section reviews how the fieldwork was conducted. It states the number and types of fieldworkers, how they were
trained and supervised, and how the accuracy of their work was verified.

D. Statistical Analysis:

A review of the statistical methods employed in the analysis. This section provides a rationale for these methods, but the
actual analysis is not presented.

E. Glossary:
A glossary may be included to define any technical terms that might be unknown to experienced managers.

4. Findings

The findings section is the longest part of the research report. It is where the results of the study are reported in detail. This
section should include supporting tables and graphs. Tables and graphs make the report easier to read and more
memorable. To avoid overwhelming the reader, the findings should refer the reader to the detailed data, which should be in
an appendix.

5. Limitations of the Study

No research design is perfect; they all have their limitations. Good researchers always state the limitations of their research.

6. Conclusions and Recommendations

After the findings are presented, the researchers present their conclusions and recommendations, including conducting
further research.

Section III of the Research Report:

1. Appendices

The appendices of the market research report include all technical materials and data related to specific parts of the study.
The appendices include questionnaires and other data collection forms

2. Bibliography, if appropriate

Dear learners! Are you very clear about the standard formats research report? Well and good!
Let you attempt the following questions as a check for your understanding.
Self-check 5-2:

1. Explain Executive summary and its purpose in research report?

2. What are included under methodology part of the research report?

Dear learners! Have you answered the self-check questions? If yes, let us move on to reading the unit summary and
to perform the unit review questions.
 Unit Summary
A market research report is a very formal document that is written for a variety of purposes. The objective of a market
research report is to provide a clear, accurate and complete report of the research project so that assist management in
making decisions.

Presenting the results of a market research study to management generally involves a formal written report as well as an
oral presentation.

Report should be able to draw the interest of the readers. Therefore, report should be centric. Written report should contain
title page, contents, executive summary. Body, conclusions and appendix.

Unit Review
Questions
Part One: Discussion Questions

Instruction: Give your brief answer for the following questions:

1. Discuss the objectives of writing market research report?

2. Distinguish between an oral and a written research report?

3. Explain the purpose of an Executive Summary?

4. Outline the elements of a methodology part of a market research report?

5. Outline the main elements of a clear, accurate, and complete research report?
 Project Work

Project Name: Conducting a Market Research

Project Description: The aim of this project work is for students to demonstrate both their understanding of and ability to
formulate, administer and report on a suitable marketing research project. The research project is intended to give practical
application to research theory, giving each student the opportunity to conduct a piece of marketing research and provide
insight into the marketing research process.

Objectives of the Project Work: In the completion of this project work, students will be able to

• Identify and formulate a market research problem.

• Apply theoretical marketing research knowledge to practical situations.
• Demonstrate basic marketing knowledge to practical situations in solving marketing problems and assessing
marketing opportunities.
• Besides, this project work help students to demonstrate sound analytical, problem-solving, team work and
communication skills.

General Instructions:

• Your project work will be a group task.

• Group size must be no larger than 3-5 persons per group.
• This project is in 2 parts:
o Part 1: As a group, you are required to prepare a detailed Market Research Proposal that clearly outlines the
marketing problem and research objectives and details a recommended research approach to meet these
objectives.
o Part 2: Prepare and submit the market research report using the standard format for writing market research
report.

Procedures for conducting your market research project

As a student researcher tasked with a market research project, it's essential to approach the task systematically to produce a
well-researched and insightful document. Here's a detailed guide on how to conduct a comprehensive market research and
you are required to follow these procedures while conducting your market research.
1. Select a market, an industry or a business

In this project, you are required to select a market, an industry or a business in which to base your research.

2. Choose a Relevant Market Research Topic

Select a topic that aligns with your interests, the course content, and current industry trends. Ensure the topic is specific
enough to allow for in-depth research but broad enough to find sufficient information. The topic you are going to select for
studying must be under the scope of market research.

Important considerations:

Think about a market opportunity in your community or town that could benefit you through conducting market research.
Write down the broad aims of the research, the research objectives that must be achieved to meet the aim and some key
questions that should be answered by the research. This thematic area of study will help you for future studying of the
lessons in the consecutive modules.

3. Conduct Preliminary Market Research

Start with preliminary research to familiarize yourself with the topic. Use reputable sources such as academic journals,
industry reports, government publications, and credible websites. Take notes and compile a list of potential sources for
deeper analysis.

4. Define Marketing Objectives and Research Questions

Based on your preliminary research, define clear objectives for your market research. What do you aim to achieve? What
questions do you need to answer? Formulate research questions that guide your investigation and provide focus.

5. Choose Market Research Methods

Select appropriate research methods and techniques. The methodology part includes; select market research design and
describe why you have chosen the particular research design; select data type and collection methods, this may include
questionnaire surveys, interviews, focus groups, observation, and secondary data analysis and describe the each technique
that you are going to use; And description of the target population, sample size and sampling technique that you are going to
use in the study are outlined.

6. Develop a Market Research Plan (Market Research Proposal)

Create a detailed market research plan outlining the background of the study, statement of the problem, market research
objective (both general and specific), research methodology include-the market research design, sampling design, data
collection plan, data analysis and also research steps, timeline and budget plan are included. Ensure ethical considerations,
such as obtaining consent and maintaining confidentiality, are addressed.

Note That: The market research proposal will be submitted at this stage of the project.

7. Collect Data

Execute your research plan by collecting data through chosen methods. Maintain accuracy, reliability, and validity in data
collection processes. Keep detailed records and organize data systematically for analysis.
8. Analyze Data

Once data collection is complete, analyze the data using appropriate techniques. For quantitative data, use simple statistical
analysis tools. Interpret the findings in relation to your research questions and objectives.

9. Prepare a Market Research Report

Structure your market research as a formal report, following academic standards. Include an executive summary,
introduction, methodology, findings, analysis, conclusions, recommendations, and references. Use clear headings and
subheadings for easy navigation.

In your report, provide actionable recommendations based on your research findings. Consider the practical implications for
businesses, policymakers, or stakeholders. Discuss potential future trends or developments relevant to the topic.

Answer Key for Self-check Questions

Unit One: Answer key to check your progress questions

Self-check 1-1:
1. Refer sub-topic 1.1.1.
2. Refer sub-topic 1.1.2.
3. Refer sub-topic 1.1.3.
4. Refer sub-topic 1.1.2.
Self-check 1-2:
1. Refer sub-topic 1.2.1.
Self-check 1-3:
1. Refer sub-topic 1.3.1.
2. Refer sub-topic 1.3.1.

Unit Two: Answer key to check your progress questions

Self-check 2-1:
1. Refer topic 2.1.
2. Refer topic 2.1.
Self-check 2-2:
1. Refer topic 2.2.1 and 2.2.2.
2. Refer sub-topic 2.2.1.
3. Refer sub-topic 2.2.2.

Unit Three: Answer key to check your progress questions

Self-check 3-1:
1. Refer sub-topic 3.1.1.
2. Refer sub-topic 3.1.2.
Self-check 3-2:
1. Refer sub-topic 3.2.2. (I)
2. Refer sub-topic 3.2.2. (II)
3. Refer sub-topic 3.2.2. (I)
4. Refer sub-topic 3.2.2. (I)
Unit Four: Answer key to check your progress questions

Self-check 4-1:
1. Refer topic 4.1.
2. Refer topic 4.1.
Self-check 4-2:
1. Refer topic 4.2.
2. Refer sub-topic 4.2.1.
3. Refer sub-topic 4.2.1. (II) Self-check 4-3:
1. Refer topic 4.3.
2. Refer topic 4.3.

Unit Five: Answer key to check your progress questions

Self-check 5-1:
1. Refer sub-topic 5.1.2.
2. Refer topic 4.1.
Self-check 5-2:
1. Refer topic 5.2.
2. Refer topic 5.2.

References
Gates, Roger et al, John Wiley & sons, Marketing Research: The impact of internet, Great Britain, 2012

G. C. Beri, Marketing Research, McGraw Hill, New Delhi, 2010.

John Boyce Marketing Research, Tata McGraw Hill Publishing Co. Ltd., Maharashtra, 2011

M.K. Gawande, Fundamentals of Marketing Research, Chandralok Prakashan, Kanpur, 2012.

Rajendra Nargundkar, Marketing Research, Text and Cases, McGraw Hill, 2nd edition, 2015.

S.D. Singh, Encyclopedia of Marketing Research Series, Anmol Publications Pvt. Ltd., New Delhi, 2012.

Suja Nair, Marketing Research (Text with Cases), Himalaya Publishing House, Maharashtra, 2014.

V. Kumar, Marketing Research: A Global Outlook, Sage Publications, New Delhi, 2015
MODULE IV
MARKET SEGMENTATION, TARGETING AND
POSITIONING

Contents
No Contents Page No
Module Description 182
1 UNIT 1: MARKET SEGMENTATION 184
1.1. Meaning of Market Segmentation 185
1.2. Levels of Market Segmentation 187
1.3. Requirements for Effective Segmentation 189
 1.4. Market Segmentation Procedure 190
1.5. Consumer Market Segmentation 191
Unit Summary 196
Unit Review Questions 198
2 UNIT 2: MARKET TARGETING 201
2.1. Meaning of Market Targeting 202
2.2. Market Targeting Process 202
2.3. Market Targeting Strategies 206
Unit Summary 209
Unit Review Questions 210
3 UNIT 3: MARKET POSITIONING 212
3.1. Meaning of Market positioning 213
3.2. Tools for competitive differentiation 213
3.3. Market positioning strategy 219
Unit Summary 223
Unit Review Questions 224
References 230

Module Description
Welcome to the module in titled “Market Segmentation, Targeting and Positioning”. This student module is prepared to
help you to achieve the required competency in “Marketing and Sales Management Level I”. This module describes the
knowledge, skills and attitude required to profile a target market and develop market positioning strategies to better
meet customer requirements. This module principally focuses on marketing strategies such as market segmentation,
market targeting and market positioning (STP). This module will also assist you to attain the following learning outcomes:

At the end of the module you will be able to:

• Segment the market

• Target suitable market segment
• Profile the target market
• Develop market positioning strategy

Module Instruction:
Learning Instructions: How to use this Module

For effective use this module, you are expected to follow the following module instructions:
1. Read the learning outcomes of this module.

2. Learn study lessons in the module. Try to understand what are being discussed.

3. Accomplish the “Self-checks” which are placed following each topics. Then you are to get the
answer key at the end of the module to correct your answer only after you have finished
answering the Self-checks.
4. Accomplish unit review questions and practical activities which are placed at the end of each unit. Then ask from
your teacher/trainer the key to correction (answers key) or you can request your teacher/trainer to correct your
work.

5. Complete the ‘Project Work’ sited at the end of the module.

UNIT 1
MARKET SEGMENTATION
Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude regarding
the following contents:

1.1. Meaning and benefits of Market Segmentation

1.2. Levels of Market Segmentation
1.3. Requirements for Effective Segmentation
1.4. Market Segmentation Procedure
1.5. Consumer Market Segmentation

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the
completion of this unit, you will be able to:

✓ Understand the meaning and importance of market segmentation

✓ Apply market segmentation process
✓ Identify levels of market segmentation
✓ Identify the requirements for effective segmentation
✓ Apply procedures for segmenting a market
✓ Segment consumer market
Key Terms: Market Segmentation, Consumer Market, geographic Segmentation, Demographic
Segmentation, Behavioral Segmentation, Psychographic Segmentation, Business Market

Introduction

A company that decides to operate in a broad market recognizes that it normally cannot serve all customers in that
market. The customers are too numerous and diverse in their buying requirements. Instead of competing everywhere, the
company needs to identify the market segments that it can serve most effectively.
Market segmentation involves dividing the entire market in to distinct groups of buyers who might require separate
market offerings. To choose its markets and serve them well, many companies are embracing target market. In target
marketing, sellers distinguish major market segments, target one or more of those segments, and develop products and
marketing programs tailored to each segment. Instead of scattering their marketing effort they can focus on the buyers
whom they have the greatest chance of satisfying.
Therefore, in order to achieve their objective marketers are required to take three major steps (see figure 1.1)

Identify segmentation Evaluate the 5. Identify possible

variables and segment attractiveness of each positioning concepts for
the market. segment. each target segment.

2. Develop profile of 4. Select the target 6. Select, develop and

resulting segments. segment(s) communicate the chosen
positioning concept.

Figure 1.1 Steps in market segmentation, targeting and positioning

1.1. Meaning
and Benefits of Market
Segmentation
1.1.1. Meaning of Market Segmentation
As it was defined earlier, a market consist of actual and potential buyers, and buyers differ in one or more ways; in their
wants, resources, locations, buying attitudes and buying practices. Through market segmentation companies divide large
heterogeneous markets into smaller segments that can be reached more efficiently with products and services that match
their unique needs.

Market segmentation can be defined as the process of dividing a market in to distinct groups of buyers with different
needs, characteristics or behavior who might require separate products or marketing mixes.

1.1.2. Benefits of Market Segmentation

Market segmentation, while demanding in terms of effort and resources, brings several advantages that
contribute to a company’s long-term success:

▪ Increased Resource Efficiency: Market segmentation allows for a focused and precise approach by targeting
specific demographics or customer groups. This efficient strategy helps save costs and resources compared to broad-
reaching marketing campaigns.
▪ Stronger Brand Image: Segmentation in marketing management compels businesses to carefully consider how
they want to be perceived by specific audiences. This intentional approach to branding and messaging enhances
company’s overall brand image.
▪ Greater Potential for Brand Loyalty: Market segmentation, by tailoring efforts to specific segments, provides
opportunities to build long-term relationships with customers. This personalized marketing fosters a sense of
inclusion, community, and belonging, increasing the potential for brand loyalty.
▪ Stronger Market Differentiation: Marketing segmentation allows companies to convey precise messages to target
audiences, helping them stand out from competitors. This targeted approach aids in creating product differentiation,
making company’s image more memorable and specific.
▪ Better Targeted Advertising and Promotion: Marketing segmentation enables more effective digital
advertising strategies in marketing management. By directing efforts towards specific age groups, locations, or habits
on platforms like social media, businesses ensure that their marketing messages reach the right audience, maximizing
the impact of digital advertising campaign

Self-check 1-1
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.

1. Define market segmentation?

2. Explain the benefits of market segmentation?

1.2. Levels of Market Segmentation

Market segmentation is an effort to increase a company’s precision marketing. The starting point of any segmentation
discussion is mass marketing. Market segmentation has four major levels which can be depicted as follows

No segmentation Complete segmentation

Figure 1.2: Levels in the market segmentation

i. Mass Marketing

In mass marketing the seller engages in the mass production, mass distribution and mass promotion of one product for all
buyers. The traditional argument for mass marketing is that it creates the largest potential market, which leads to the
lowest costs, which in turn can translate in to either lower prices or higher margins. However, many factors now make

mass marketing more difficult. ii. Segment Marketing

A market segment consists of a large identifiable group with in a market with similar wants, purchasing power,
geographical location, buying attitudes, or buying habits. For example, an auto company may identify four broad
segments: car buyers who are primarily seeking basic transportation or high performance or luxury or safety.

Segmentation is an approach midway between mass marketing and micro marketing. Each segment’s buyers are assumed
to be quite similar in wants and needs, yet no buyers are really alike. Segment marketing offers several benefits over mass
marketing. The company can create a more fine-tuned product or service offering and price it appropriately for the target
audience. The choice of distribution channels and communications channels becomes much easier. The company also may
face fewer competitors in the particular segment.

iii. Niche Marketing

In the niche marketing the marketers focuses on very specific market segment for which very high quality of services and
also requires high attention.

A niche is a more narrowly defined group, usually identified by dividing a segment into sub segments or by defining a
group with a distinctive set of traits who may seek a special combination of benefits.

While segments are fairly large and thus normally attract several competitors, niches are fairly small and normally attract
only one or a few competitors. Niches typically attract smaller companies.

An attractive niche is characterized as follows.

a) Customers have a distinct and complete set of needs.

b) The ‘nicher’ has the required skills to serve the niche in a superior fashion.

c) The ‘nicher’ gain certain economics through specialization.

d) The niche is not likely to attract other competitors.

e) The ‘nicher’ can depend on itself.

f) The niche has sufficient size, profit, and growth potential

iv. Micro Marketing

It is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Micro
marketing includes local marketing and individual marketing.

a) Local marketing: - It involves tailoring brands and promotions to the needs and wants of local customer groups:
cities, neighborhoods and even specific stores. Local marketing derives certain drawbacks such as: increasing
manufacturing and marketing costs, reduces economics of scale, creates logistical problems and diluted the overall image
of brands. However, the advantages of local marketing overweigh the drawbacks as it is supported by new developed
technologies.
b) Individual marketing: - also known as customized marketing or one-to-one marketing. It involves tailoring
products and marketing programs to the needs and preferences of individual customers. For countries, consumers were
served as individuals: The tailor made the suit and the cobbler designed shoes for the individual

Self-check 1.2
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.

1. Discuss the levels of market segmentation?

2. Explain niche marketing ?.

3. Distinguish Micro marketing and Individual marketing?.

1.3. Requirements for Effective Market

Segmentation
To be useful market segments must be:

a) Measurable: The size, needs, purchasing power, and characteristics of the customers in the segment should be
measurable. Quantification should be possible.
b) Divisible: The segments should be differentiable. There must be clear-cut basis for dividing customers into
meaningful homogeneous groups. They should respond differently to different marketing mixes. There should be
differences in buyer's needs, characteristics and behavior for dividing in groups.
c) Accessible: The segment should be reachable and serviceable. It should be accessible through existing marketing
institutions, such as distribution channels, advertising media and sales force. There should be middlemen to
distribute the products.
d) Substantial: The segment should be substantial. It should be large enough in terms of customers and profit
potential. It should justify the costs of developing a separate marketing mix.
e) Actionable: It should be actionable for marketing purposes. Organizations should be able to design and
implement the marketing mix to serve the chosen segment

Self-check 1.3
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.

1. Discuss the requirements for effective market segmentation?

1.4. Market Segmentation Procedure
The three steps for identifying market segments are survey. Analysis, and profiling.

Step One: - Survey Stage

The researcher conducts exploratory interviews and focus groups to gain insight into consumer motivations, attitudes, and
behavior. Then the researcher prepares a questionnaire and collects data on attributes and their importance ratings;
brand awareness and brand ratings; product usage patterns, attitudes toward the product category; and demographics,
geographic, psychographics, and media graphics of the respondents.

Step Two: - Analysis Stage

The researches applies factor analysis to the data to remove highly correlated variables, then applies cluster analysis to
create a specified number of maximally different segments.

Step Three: - Profiling Stage

Each cluster profiled in terms of its distinguishing attitudes, behavior, demographics, psychographics, and media patterns.
Each segment is given a name based on its dominant characteristics.

Self-check 1.4
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.

1. What are the steps in market segmentation process?

2. What activities to be done in the survey stage of market segmentation process?

3. What activities to be done in the analysis stage of market segmentation process?

4. What activities to be done in the profiling stage of market segmentation process?

1.5. Consumer Market Segmentation

Consumer market is a market consists of buyers who buy products for personal consumption or final use. There is no
single way to segment a market. A marketer has to try different segmentation variables, alone and in combination, to find
the best way to view the market structure. Major variables used in segmenting consumer markets are: geographic,
demographic, psychographics and behavioral.
1.5.1. Geographic Segmentation

Geographic segmentation calls for dividing the market in to different geographical units such as nations, states, regions,
counties, cities or neighborhoods. The company can decide to operate in one or a few geographical areas or operate in all
but pay attention to geographical variations in wants and preferences.

Geographic segmentation helps companies to pay attention to geographical differences in needs and wants and to localize
the company’s products, advertising, promotion and sales efforts to fit the needs of individuals in the region.

1.5.2. Demographic Segmentation

In demographic segmentation, the market is divided into groups on the basis of variable such as age, family size, family
lifecycle, gender, income, occupation, education, religion, race, generation, nationality, social class.
Demographic variables are the most popular bases for distinguishing customer groups. One reason is that consumer wants,
preferences and usage rates are often associated with demographic variables. Another is that demographic variables are
easier to measure.

Even when the target market is described in non-demographic term (say, a personality types), the link lack to demographic
characteristic is needed in order to estimate the size of the target market and the media that should be used to reach it
efficiently. Here is how certain demographic variables have been used to segment markets.

1. Age and lifecycle stage

Consumer’s wants and abilities change with age. Photo companies are now applying age and lifecycle segmentation to the
film market. With film sales down, photo companies are working hard to exploit promising niche markets: moms, kids, and
older people. Nevertheless, age and lifecycle can be tricky variables. For example, the ford motor company designed its
mustang automobile to appeal to young people who wanted an inexpensive sport car. But ford found that the car was
being purchased by all age groups, it then realized that its target market was not chronologically young but the
psychologically young.

2. Gender

Gender segmentation has long been applied in clothing, hairstyling, cosmetics, and magazines. Occasionally other
marketers notice an opportunity for gender segmentation.

The automobile industry is beginning to recognize gender segmentation. With more women car owners, some
manufacturers are designing certain futures to appeal to women, although stopping shat of advertising the cars as
women’s cars.

3. Income
Income segmentation is a long-standing practice in such product and service categories as automobiles, boats, clothing,
cosmetics, and travel. However, income does not always predict the best customs for a given product.

4. Social Class

Social class has a strong influence on preference in case, clothing, house furnishing, leisure activities, reading habits, and
retailers. Many companies design products and services for specific social classes.

1.5.3. Behavioral Segmentation

In behavioral segmentation, buyers are divided into groups on the basis of their knowledge, attitude, use or response to a
product. Many marketers believe that behavioral variables: occasions, benefits, user status, usage rate, loyalty status,
buyer readiness stage, and attitude are the best starting point for constructing market segments.

1. Occasion segmentation

Buyers can be divided into groups according to occasions when buyers get the idea to buy, actually make their purchase,
or use the purchased item. Occasions may include: vacations, marriage, separation, divorce, acquisition of a home, injury
or illness, change is employment or career, retirement, death of a family member. Occasions may also be special occasions
or regular occasions.

2. Benefit segmentation

This is dividing the market into groups according to the different benefits that consumers seek from the product. It
requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit and
the major brands that deliver each benefit. For example, while traveling with all airplane, the traveler either of the three
major benefits; comfort, safety and economy or buy any of the three class tickets; first class, business class and economic
class.

3. User status

Markets can be segmented into groups of nonusers, ex users, potential users, first-line users and regular users of a
product. For example, the blood banks must not rely only on regular donors to supply blood. They must recruit new first
time donors and contact donors and each will require a different marketing strategy. The company’s position in the
market will also influence its focus.
Market share leaders will focus on attracting potential users, while smaller firms will often focus on attracting current users
away from the market leader.
4. Usage Rate

Markets can be segmented into light, medium and heavy users, Heavy users are often a small percentage of the market
but account for a high percentage of total consumption. Marketers usually prefer to attract one heavy user to their
product or service rather than several light users.

5. Loyalty status

A market can be segmented by consumer loyalty patterns. Consumers can be loyal to brands, stores (sellers). Companies
(producers). Buyers can be divided in to groups according to their degree of loyalty status.

• Hard-core loyal: - consumers who buy one brand all the time. It indicates the strength of the company’s products.

• Split loyal: - Consumers who are loyal to two or more brands. This helps the company to identify which brands are
most competitive with its own.

• Shifting loyal: - Consumers who shift from one brand to another. Here, the company can learn about its marketing
weaknesses and attempt to correct them. The marketer can attract switchers by running frequent sales.

• Switchers: - Consumers who show no loyalty to any brand. They either want something different each time they
buy or they buy whatever is on sale.

Note: - What appear to be brand loyal purchase patterns may reflect habit, indifference, a low price, a high switching
cost, or the non-availability of other brands. Thus, a company must carefully interpret what is behind the observed
purchase patterns. It must determine whether users are loyal, switcher or emergent, and it must create its marketing
campaigns accordingly.

6. Buyer readiness stage

A market consists of people in different stages of readiness to buy a product. Some are unaware of the product, some are
aware, some are informed, some are interested, some desire the product and some intend to buy.

Unaware – aware – informed – interested – desire –intend to buy

7. Attitude
Five attitude groups can be found in a market: enthusiastic, positive, indifferent, negative, and hostile. To the extent that
attitudes are correlated with demographic descriptors.

1.5.4. Psychographics Segmentation

In psychographics segmentation, buyers are divided into different groups on the basis of lifestyle, value and personality
characteristics. People within the same demographic group can exhibit very different psychographics profiles.

1. Lifestyle Segmentation

It involves dividing the market into group’s based on lifestyles they exhibit, based on three major dimensions called AIO,
stands for Activity, Interest and Opinion.

• Activities: includes work, hobbies, shopping, sports, and social events

• Interests: includes food, fashion, family, recreation, etc.

• Opinions: includes opinions about themselves, social issues, business and products.

Life style captures something more than the person’s social class or personality. It profiles a person’s whole pattern of
acting and interacting in the world like actualizes, achievers, strivers and strugglers. People’s product interests are
influenced by their lifestyles. In fact, the goods they consume express their lifestyle.

2. Personality segmentation

Personality is a person’s distinguishing psychological characteristics that lead to relatively consistent and lasting responses
to his or her own environment. It can be described in terms of traits such as: self-confidence, dominance, sociability,
autonomy, defensiveness, and adaptability and aggressiveness. Marketers have used personality variables to segment
markets. They endow their products with brand personalities that correspond to consumer personalities.

3. Values

Some marketers segment by core values, the belief system that underlie consumer attitudes and behavior. Core values go
much deeper than behavior or attitude, and determine at a basic level, people’s choices and desires over the long term.
Marketers that segment by values behave that by appealing to people’s inner selves it is possible to influence their
purchase behavior.

Marketers rarely limit their segmentation analysis to only one or a few variables. Rather, they are increasingly using
multiple segmentation bases in an effort to identify smaller, better-defined target groups.

Self-check 1.5
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.
 1. List the geographic segmentation variables for consumer market?

2. List the demographic segmentation variables for consumer market?

3. List the behavioral segmentation variables for consumer market?

4. List the psychographic segmentation variables for consumer market?

Unit Summary
A market consists of people or organization with wants, money to spend and the willingness to spend it. However, with in
the markets the buyers’ needs are not identical. Therefore, a single marketing program for the entire market is unlikely to
be successful.

A sound marketing program starts with identifying the deference that exist with in a market, a process called market
segmentation.
Market segmentation is dividing the total market based on homogeneity, which need a separate or unique marketing mix.
Market segmentation enables a company to make more efficient use of its marketing resources.

The four major bases that may be used for further segmenting the consumer market are: Geographic segmentation,
Demographic segmentation, Psychographics segmentation, and Behavioral segmentation.
 Unit Review Questions
Part One: True/False Questions

Instruction: Say True or False

1. Culture could be segmented on the bases of demographic variables. _______

2. The broad bases for segmenting consumer market is based on demographic variables. ______

3. In demographic segmentation, buyers are divided into groups on the basis of this knowledge, altitude towards use of or
response to a product. _______

4. Geographic segmentation calls per dividing the market on such basis as nations, states, regions, countries, cities etc.
_______

5. Market segmentation identify groups of buyers who might not require separate product or marketing mix. _______

Part Two: Multiple choice questions

Instruction: Choose the best answer from given alternatives.

1. Your new employer asked you, as a new marketing graduate, to develop a group of potential customers who might
respond in a similar way to a given set of marketing mixes. You have been asked to develop ___________________

A. Target market C. Market strategy

B. Market segment D. Market

2.If TOYOTA Company produces different types of automobiles to suit for cold and hot climate areas, the basis for
segmentation that a company applied was:
A. Geographic segmentation C. Behavioral segmentation

B. Demographic segmentation D. Psychographic segmentation

3. Age and Family Lifecycle stage are segmentation variables categorized under:

A. Geographic segmentation C. Behavioral segmentation

D. Psychographic segmentation B.
Demographic segmentation
4. If Coca Cola Company categorize its customers as nonusers, light users, medium users, and heavy users. The variables
used for segmentation is:

A. User status C. Usage rate

D. Loyalty status
B. Occasions

5. Lifestyle, personality and values are segmentation variables included under ____?
A. Geographic segmentation C. Behavioral segmentation

B. Demographic segmentation D. Psychographic segmentation

Part Three: Discussion questions

Instructions:- Give your short answer for the following questions.

1. Define market segmentation? Explain the reasons for segmenting a market?

2. Describe the four levels of market segmentation?

3. To be useful, market segments must fulfill certain conditions. What are the criteria/conditions that a market
segment should fulfill?

4. Discuss the major basis for consumer market segmentation?

Part Four: Practical Activity

Instructions: read the case and give your response accordingly.

Assume that you are the marketing officer for a cosmetics company that has just developed a new line of male cosmetics.
The new cosmetics are invisible on the skin, reduce skin irritations, and provide some protection from the sun. The
company is charging high price to the new cosmetics and planning to offer for Ethiopian market. As a marketing officer of
the company, conduct market segmentation for the company.
Required:

▪ Define the total market (what the entire market looks like)
✓ Size of the entire market, location, other demographic characteristics of the total market, etc…
▪ Select the most appropriate base of segmentation and specific variable for segmenting the market and conduct
segmentation? ▪ Profile each segment
✓ Each segment profiled in terms of its distinguishing attitudes, behavior, demographics, psychographics, and
media patterns.
✓ Each segment is given a name based on its dominant characteristics.
▪ Prepare a report on:
✓ The procedure you have followed to conduct the market segmentation
✓ The segmentation strategies you have used
 UNIT 2

MARKET TARGETING
Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude
regarding the following contents:

2.1. Meaning of Market Targeting.

2.2. Market Targeting Process

2.3. Market Targeting Strategies.

it Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the
completion of this unit, you will be able to:

✓ Evaluate Market Segment Attractiveness.

✓ Select the Target Market to Serve.

✓ Apply Market Targeting Strategies.

Key Terms: Market Targeting, aggregation Strategy, Multiple Segment Strategy, Single Segment
Strategy

Introduction

Targeting is the next step in the sequential process and involves a business making choices about segment(s) on which
resources are to be focused. Targeting is the actual selection of the segment. "A set of buyers sharing common needs or
characteristics that the company decides to serve." Companies use target marketing to tailor for specific markets. There
are three major targeting strategies: undifferentiated, concentrated, and differentiated. During this process the Business
must balance its resources and capabilities against the attractiveness of different segments

2.1. Meaning of Market Targeting

After markets are divided into groups, their respective feasibility should be evaluated. The process of evaluating the size and
attractiveness of market segments in order to choose one or the other to enter is known as market targeting. That particular
chosen segment is known as market target.
Market Targeting can be defined as the process of evaluating each market segment’s attractiveness and selecting one or
more segments to enter.

A target market is a specific group of potential customers who a business aims to reach with its products or services. This
group may share common characteristics such as age, gender, income level, education, interests, or geographic location that
make them more likely to be interested in and purchase from a business.

Self-check 2-1
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.

1. Define market targeting?

2. Define target market?

2.2. Market Targeting Process

The process of market targeting involves the following steps.

Step 1: Evaluating the market segments

In evaluating different market segments, a firm must look at three factors: the size and growth of the segment, the structural

attractiveness of the segment, and company’s objectives and resources. i. Segment size and growth:-

The firm must ask whether a potential segment has the characteristics that make it generally attractive, such as size, growth,
profitability, scale economics, low risk and so on.

ii. Segment structural attractiveness:

Structural attractiveness of a segment may be affected by the existence of many strong and aggressive competitors, the
existence of many actual or potential substitute products, the relative power of buyers and the powerful suppliers who limit
cost and quality of ordered goods and services.

iii. Company objectives and resources:-

The firm must consider whether investing in the segment makes sense given the firm’s objectives and resources. The
segment should fits the company’s objectives and also the company must consider whether it possesses the skills and
resources it needs to succeed in that segment.

Step 2: Selecting the Market Segments

After evaluating different segments, the company must now decide which and how many segments to serve. This is the
problem of target market selection. In other words, the company must decide which segments to target. The company can
consider the five patterns of target market selection.
They are presented as follows:

i. Single – Segment Concentration/Concentrated Marketing

This is a market coverage strategy in which a firm goes after a large share of one or a few sub markets. Instead of going after
a small share of a large market, the firm goes after a large share of one or a few sub markets. This provides an excellent way
for small new businesses to get a foothold against larger, more resourceful competitors.

ii. Selective Specialization

Here the firm selects a number of segments, each objectively attractive and appropriate, given the firm’s objectives and
resources. There may be little or no synergy among the segments, but each segment promises to be a money maker. This
multi-segment coverage strategy has the advantage of diversifying the firm’s risk. Even if one segment becomes unattractive,
the firm can continue to earn money in other segments.

iii.Product Specialization

Here the firm concentrates on making a certain product that it sells to several segments. The firm builds a strong reputation
in the specific product area. An example, would be a microscope manufacturer that sells microscopes to university
laboratories, government laboratories and commercial laboratories. The firm makes different microscopes for these different
customer groups, but does not manufacture other instruments that laboratories might use. The downside risk is that the
product may be supplanted by an entirely new technology.

iv. Market Specialization

Here the firm concentrates on serving many needs of a particular customer group. An example would be a firm that sells an
assortment of products for university laboratories, including microscopes, oscilloscopes, Bunsen burners, and chemical
flasks. The firm gains a strong reputation for specializing in serving this customer group and becomes a channel for all new
products that the customer group could feasibly use.

v. Full Market Coverage

Here the firm attempts to serve all customer groups with all the products that they might need. Only large firms can
undertake a full market coverage strategy. Large firms can cover a whole market in two broad ways: through
undifferentiated marketing or differentiated marketing.
 a) Undifferentiated marketing: -

In undifferentiated marketing the firm ignores market segment differences and goes after the whole market with one market
offer. It focuses on buyer’s needs rather than differences among buyers. It designs a product and a marketing program that
will appeal to the broadest number of buyers. It relies on mass distribution and mass advertising.

b) Differentiated Marketing.
In differentiated marketing, the firm operates in several market segments and designs different programs for each segment.
Differentiated marketing typically creates more total sales than undifferentiated marketing. However, it also increases the
costs of doing business.

Table 2.1. Comparison of Differentiated and undifferentiated Marketing

Differentiated Marketing Undifferentiated Marketing

Purpose Achieve audience diversification Reach as large an audience as possible.

Strategy Use one marketing mix-product, price,

Use various messages for a sign place, promotion-for all marketing
Campaign. campaigns

Employ different channels and

Strategies.

Benefit Reach many people with a more

Resonate with different customer
groups standardized process

Characteristics Focus on quality and key features of the

Keep improving and adding new product
features to match customer
expectations

Examples Products that serve the same need for

Products with diverse needs among everyone-toothpaste, shampoo, shower
the audience-food, beverages, etc. gel, etc.
Step 3. Choosing a Market-Coverage Strategy

Many factors need to be considered when choosing a market coverage strategy. Which strategy is best depends on:

i. Company resources:-when the firm’s resources are limited, concentrated marketing makes the most sense.

ii. The degree of product variability:-If the company produces similar/uniform products, undifferentiated marketing
is appropriate, whereas, as the company produces different products, differentiated or concentration marketing is
appropriate.
 iii. The products life-cycle stage:-The market coverage strategy for a product varies at the different stages of a
product life cycle. In the introduction and growth stage, undifferentiated or concentrated marketing makes the most
sense. Whereas, at maturity and decline stage, differentiated marketing begins to make more sense.
iv. Market variability:-if most buyers have the same tastes, buy the same amounts, and react the same way to
marketing efforts, undifferentiated marketing is appropriate.

v. Competitor’s marketing strategies:-company’s should see competitors’ market coverage strategy and develop a
counteractive market coverage strategy. For example, when competitors use segmentation, the company uses
differentiation marketing and when competitors use undifferentiated marketing, the company uses differentiated or
concentrated marketing.

Self-check 2-2
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.

1. Discuss the steps in the market targeting process?

2. In evaluating different market segments, a firm must look at critical factors: briefly discuss those factors needs to be
considered while evaluating segments?.

3. Discuss the five patterns of target market selection?

4. Discuss the factors need to be considered when choosing a market coverage strategy?

2.3. Market Targeting Strategies

Let’s assume that a company has segmented the total market for its product. Now management is in a position to select one
or more segments as its target markets. The company can follow one of three strategies –market aggregation, single-
segment concentration, or multiple segment targeting.
The alternative strategies for market targeting discussed as follows:

1. Aggregation Strategy

By adopting a market aggregation strategy also known as a mass-market or un-differentiated market strategy –a seller treats
its total market as a single segment.

Single Marketing mix One mass undifferentiated market

An aggregated market numbers are considered to be alike with respect to demand for the product. Therefore management
can develop a single marketing mix and reach most of the customers in the entire market. That is the company develop a
single product for this mass audience. It develops one pricing structure and one distribution system of its product. And it
uses a single promotional program aimed at the entire market.
This strategy would be appropriate for firms that are marketing an in differentiated, staple product such as salt or sugar. In
the eyes of many people, sugar is sugar. Regardless of the brand, and all brands of table salt are pretty much alike.

The strength of a market aggregation is in its cost minimization. It enables a company to produce, distribute, and promote its
product very efficiently. Producing and marketing one product for the entire market means longer production runs at lower
unit costs. Inventory costs are minimized when there is no (or very limited) variety of colors and size of products.
Warehousing and transportation are most efficient when one product is going to one market. Promotion costs are minimized
when the same message is transmitted to all customers.

2. Single Segment Strategy

A single-segment (or concentration) strategy involves selecting one segment from within the total market as the target
market. One marketing mix is developed to reach this single segment. A company may want to concentrate on a single
market segment rather than to take on the competitors in the broader market.

A single-segment strategy enables a seller to penetrate one market in depth to acquire a repetition as a specialist or an
expert in this limited market. A company can imitate a single-segment strategy with limited resources. And as long as the
single segment remains a small market, large competitors are likely to leave it alone. However, if the small market should
show signs of becoming a large market, big boys jump in.

→ Market Segment A Single Marketing Mix →

Market Segment B

→ Market Segment C

The resale and limitation of a simple-segment strategy is that the seller has all its eggs in one basket. If the market potential
of that single segment declines, the seller cars sinter considerably.
Also a seven with a strong name and reputation in one segment may find it very different to expand in to another segment.

3. Multiple-Segment strategy

Under a multiple-segment strategy two or more difficult groups of potential customer are identified as target markets. A
separate marketing mix is developed to reach segment.

Marketing mix A → Market segment A

Marketing mix B → Market segment B

Marketing mix C → Market segment C

In a multiple-segment strategy, a seller frequently will develop a different version of the basic product for each segment.
However, market segmentation can also be accomplished with no change in the product, but rather with separate
distribution channels or promotional appeals, each tailored to a given market segment.

A multiple segment strategy normally results in a greater sales volume than a single segment strategy. It also is useful for a
company facing seasonal demand. A firm with excess production capacity may well seek additional market segment to
absorb this capacity.

Multiple segments can provide benefits to an organization, but the strategy has some drawbacks with respect to costs and
market coverage. In the first place, marketing to multiple segments can be expensive in both the production and marketing
of products.

Self-check 2-3
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.

1. Discuss the alternative strategies for market targeting?

Unit Summary
Market targeting is the other strategic marketing element which involves evaluating each market segment attractiveness and
select one or more segments to serve. Normally, in either of the consumer or business market, a seller will use a
combination of two or more segmentation bases.

The three alternative strategies for selecting a target market are: market aggregation, single segment, and multiple segment.
Market aggregation involves using one marketing mix to reach a mass, undifferentiated market.

With a single segment strategy, a company still uses only one marketing mix, but it is directed at only one segment of the
total market. A multiple segment strategy entails selecting two or more segments and developing a separate marketing mix
to reach each segment.
 Unit Review Questions
Part One: Multiple Choice Questions

Instructions:- Choose the best answer from given alternatives.

1. What are the factors to be considered while evaluating segment attractiveness and selecting target market to serve?

A. Segment size and growth C. Company objectives and resources

B. Segment structural attractiveness D. All of the above

2. Which of the following statement is FALSE about Aggregation Strategy?

A. Dividing a heterogeneous market in to different homogeneous groups of customers

B. A strategy that considered the total market as a single segment.

C. A strategy to develop a single marketing mix to reach the entire market.

D. Appropriate for such products as: salt or sugar, coca cola, cement.

3. ____________ is a targeting strategy in which two or more groups of potential customer are identified as target markets
and develop separate marketing mixes for each segment.

A. Single segment strategy C. A multiple-segment strategy

D. None of the above B. Aggregation
strategy

4. In ______________ the firm operates in several market segments and designs different programs for each segment.

A. Differentiated marketing C. Multi-segment marketing

D. A and C only
B. Undifferentiated marketing

5. _________ involves developing a single marketing mix and reach most of the customers in the entire market.

A. Single-segment concentration C. Market aggregation

B. Multiple –segment targeting D. None of the above

Part Two: True/False

Instruction: Say True or False

1. Market targeting calls for selecting distinct customer groups that require separate marketing mix. _____

2. A niche is a large market whose needs are not well served. _______

3. A multiple segment strategy normally results in a greater sales volume than a single segment strategy. __________

4. Differentiated marketing calls for designs single program for entire market_________

5. In market specialization a firm concentrates on serving many needs of a particular customer group.

Part Three: Discussion Questions

Instructions:- Give your short answer for the following questions.

1. Define target marketing?

2. Discuss the three target market strategies?

3. Discuss the pattern of target market selections?

4. What are the factors to be considered when evaluating segment attractiveness?

5. Distinguish between undifferentiated marketing and differentiated marketing?

6. Discuss the factors need to be considered when choosing a market coverage strategy?

UNIT 3

MARKET POSITIONING
Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude regarding
the following contents:

3.1. Meaning of Market Positioning

3.2. Tools for Competitive Differentiation

3.3. Market Positioning Strategy

 Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the
completion of this unit, you will be able to:

✓ Understand the meaning and concepts of market positioning

✓ Develop market positioning sttrategies

✓ Apply procedures for market positioning

Key Terms: Market Positioning, differentiation strategy, Competitiveness

Introduction

After selecting one or more segments to target, the marketer should design a strategy that meets the expectation of the
target market and develop a competitive advantage over the competitors in the market. Positioning is the use of marketing
to enable people to form a mental image of your product in their minds (relative to other products). Positioning is how the
product or service is to be perceived by a target market compared to the competition. Therefore, market positioning is the
act of designing the company’s offering and image so that they occupy a meaningful and distinct competitive position in the
target customer’s mind.

3.1. Meaning of Market Positioning

After a target market has been selected a company will naturally find others competing in that segment. The next task is to
develop a marketing plan that will enable your product to compete effectively against them. It is unlikely that success will
be achieved with a marketing program that is virtually identical to competitors for that already have attained a place in the
minds of individuals in the target market and have developed brand loyalty. Since people have a variety of needs and tastes,
market acceptance is more easily achieved by positioning.

Market Positioning is the act of designing the company’s offering and image so that they occupy a meaningful and
distinct competitive position in the target customer’s mind.

For example, one auto company might choose to differentiate its cars on durability, while its competitors may choose to
emphasize fuel economy, comfort or smoothness of ride. The end result of positioning is the successful creation of a market
– focused value proposition, a simple clear statement of why the target market should buy the product.

Self-check 3-1
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.

1. Define market positioning?

2. Discuss the reasons for market positioning?

3.2. Tools for Competitive Differentiation
A company must try to identify the specific way it can differentiate its products to obtain a competitive advantage.
Differentiation is the act of designing a set of meaningful differences to distinguish the company’s offering from competitors
offering.

How exactly can a company differentiate its market offering from competitors? Here we will examine how a market offering
can be differentiated along time dimensions: - product, services, personnel, channel or image.
3.2.1. Product Differentiation

Differentiation of physical products takes place along a continuous. At one extreme we find highly standards products that
allow little variation. At the other extreme are products capable of high differentiation, such as automobiles, commercial
holdings, and furniture. Here the seller faces an abundance of design parameters. The main product differentiations are
features, performance, conformance, durability, reliability, reparability, style and design.

1. Features: -

Features are characteristics that supplement the products basic function. The starting point of feature differentiation is a
stripped down, or “bare bones”, version of the product. The company can create additional version by adding extra
features. Thus automobile manufacturers can offer optional features, such as electric windows, air bags, automatic
transmission, and air conditioning.

How can a company identify and select appropriate features? One answer is for the company to contact recent buyers and
ask them a series of questions. How do you like the product? Any bad features? Good features? Are there any features that
could be added that would improve your satisfaction? What are they? How much would you pay for each feature? How do
you feel about each of several features that other customers suggested? This research will provide the company with a long
list of potential features. The next task is to decide which features one worth adding.

2. Performance Quality

Most products are established initially at one of four performance levels, low, average, high and superior. Performance
quality refers to the level at which the products primary characteristics operate. The important question here is: Does higher
product performance produce higher profitability?

Quality’s link to profitability does not mean that the firms should always design the highest performance level possible.
There are diminishing returns to level increasing performance, in that fewer buyers are willing to pay for it. The
manufacturer must design a performance level appropriate to the target market and competitor’s performance levels.
A company must also decide how to manage performance quality through time. Three strategies are available here. The
first, where the manufacture continuously improves the product, often produces the highest return and market share.
The second strategy is to maintain product quality at a given level. The third strategy is to reduce product quality through
time. Some companies cut quality to offset rising costs, hoping the buyers will not notice any difference. Others reduce the
quality deliberated by in order to increase this current profits, although this course of action often hurt this long run
profitability.

3. Conformance Quality

Buyers expect products to have a high conformance quality. Conformance quality is the degree to which all the produced
units are identical and meet the promised target specifications. The problem with low conformance is that the product will
felt to deliver on its promises to many buyers.

4. Durability: -

Durability is a very important product attribute to most buyers. Durability is a measure of the product’s expected operating
life under natural and/or stressful conditions. Buyers will generally pay more for products that have more durability.
However, this rule is subject to some qualifications. The extra price must not be exclusive. Furthermore, the product must

not be subject to technological obsolescence, in which case the buyer may not pay more for longer-lined products. 5.

Reliability

Buyers normally will pay a premium for product with more reliability. Reliability is a measure of the probability that a
product will not manufacture or fail within a specified time period. Buyers want to avoid the high costs of product
breakdowns and repair time.

6. Reparability: -

Buyers prefer products that are easy to repair. Reparability is a measure of the ease of fixing a product that manufactures
or fails. Thus an automobile made with standard parts that are easily replaced has high reparability. Ideal reparability would
exist if users could fix the product themselves with little or no cost or time lost. The buyer might simply remove the
defective part and insert a replacement part.
7. Style: -

Buyers are normally willing to pay a premium for products that are attractively styled. Style describes the product’s looks
and feel to the buyer. Many car buyers pay a premium for jaguar automobiles because of this extraordinary look, even
though Jaguar had in the past a poor record of reliability.

Style has the advantage of creating product distinctiveness that is difficult to copy. Under style differentiation, we must
include packaging as a styling weapon, especially in food products, cosmetics, toiletries, and small-consumer appliances.
The package provides the buyer’s first encounter with the product and is capable of turning the buyer on or off.

8. Design
As competitions intensify, designs will offer one of the most patent ways to differentiate and position a company’s products
and services. Design is the totality of features that affect how a products look and functions in terms of customer
requirements.

Design is particularity important in making and marketing desirable equipment, apparel, retail services and packaged goods.
All of the qualities we’ve discussed under the meaning “Product differentiation are design parameters. The design has to
figure out how much to invest in feature development, performance, conformance, reliability, reparability, style and so
forth.

3.2.2. Service Differentiation

In addition to differentiating its physical products, a firm can also differentiate its services. When the physical product
cannot easily be differentiated the key to competitive success and improving their quality. The main service differentiations
are ordering ease, delivery, installation, customer training, customers consulting, maintenance and repair, and a few others.

1. Ordering Ease: -

Ordering ease refers to how easy it is for the customer to place an order with the company. For example, some company’s
has eased the ordering process by supplying customers with computer terminals through which they sell orders directly to
the seller. Many banks are now providing home banking software to help customers get information and transact with the
bank more efficiently.
2. Delivery: -

Delivery refers to how well the product or service is delivered to the customers. It includes the speed, accuracy, and care
attending the delivery process. Buyers will often choose the supplier with a better reputation for on-time delivery.

3. Installation: -

Installation refers to the work done to make a product operational in its planned location. Buyers of heavy equipment
expect good installation service from the vendor. For examples, some companies deliver all the purchased equipment to
the site at the same time rather than sending in different components at different times.

4. Customer Training: -

Customer training refers to training the customer’s employees to use the vendor’s equipment properly and efficiently.
Some companies are not only selling and installs this expensive equipment but also takes on the responsibility for training
the uses of this equipment.

5. Customer consulting: -
Customers consulting refer to data, information systems, and advising services that the seller offers free or for a price to
buyers. Some sellers consult their buyers in setting up accounting and inventory systems, computer ordering systems and so
forth.

6. Maintenance and repair

Maintenance and repair describes the company’s service program for helping customers keep this purchased product in
good working order. Automobile buyers are especially concerned with the quality of repair service that they can expect
from this dealer.

7. Miscellaneous services

Companies can find many other ways to add value by differentiating their customer services. They can offer a better product
warranty or maintenance contract than their competitors. They can establish patronage awards, as the airlines have done
with their frequent-flyer programs.

3.2.3. Personnel Differentiation

Companies can gain a strong competitive advantage through hiring and training better people than their competitions do.
Better-trained personnel exhibit six characteristics:

• Competence –The employees possess the required skill and knowledge.

• Courtesy –The employees are friendly, respectful and considerate.

• Credibility –The employees are trust worthy.

• Reliability –The employees perform the service consistently and accurately.

•
Responsiveness –The employees respond quickly to customer’s requests and problems.

Communication –The employees make an effort to understand the customer and communicate clearly.

3.2.4. Image Differentiation:

A company or brand image should convey the product’s distinctive benefits and positioning. Image is the way the public
perceives the company or its products. An effective image does three things for a product.
It conveys a singular message that establishes the products character and value proposition. It conveys this message in a
distinctive way so that it is not confused with similar message from competitors. It delivers emotional power so that it stirs
the hearts as well as the minds of buyers.

Image can be implanted in the public’s mind through: symbols (a strong image consists of one or more symbols that trigger
company or brand recognition), written and audiovisual media. The chosen symbol must be worked into advertisement that
convey the company or brand personality, atmosphere (The physical space in which the organization produces or delivers
its products and services), events (a company can build an identity through the type of events it sponsors.

3.2.5. Channel Differentiation:

Companies can achieve differentiation through the way they shape their distribution channels, particularly those channels’

coverage, expertise and performance.

Self-check 3-2
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.

1. Discuss how a marketer use product differentiation?

2. Describe the tools for service differentiation?

3. Discuss the specific tools for personnel differentiation?

3.3. Market Positioning Strategy

3.3.1. Choosing and implementing positioning strategy

Marketers can follow several positioning strategies. They can position their products on specific product attributes such as
low price, performance, benefits, usage occasions, against a competitor and combination of many attribute.

Each firm must differentiated its offer by building a unique bundle of competitive advantages that appeals to a substantial
group within the segment. The positioning task consists of three steps.

1. Identifying a set of possible competitive advantages on which to build a position.

2. Selecting the right competitive advantages (choosing differentiation strategy)

3. Effectively communicating and delivering the chosen position to the market.

Step 1: Identifying Possible Competitive Advantages (determining tools for differentiation)

It involves identifying a set of possible differentiation tools up on which to build position. Marketers must understand needs
and deliver value and gain competitive advantage. Competitive advantage is an advantage over competitors gained by
offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices.

Consumers typically choose products and services that give them the greatest value. Thus the key to winning and keeping
customers is to understand their needs and buying processes rather than competitors do and to deliver more value.

Positioning begins with actually differentiating the company’s marketing offer so that it will give consumers more value than
competitors’ offers do. A company or market offer can be differentiated alone the lines of Product (features, performance,
style, consistency, durability, reliability or reparability and design), Services (speedy, convenient, careful delivery), People
(hiring and training better to make people happy), Channels (coverage, expertise, performance) or image (conveying
distinctive benefits and positioning).

Step 2: Selecting the Right Competitive Advantages (choosing a differentiation Strategy)

This step entails deciding how many differences to promote and which ones.

How many differences to promote? One opinion is that company should develop a unique selling proposition and focus
on one difference and become number one brand in it. The other is that companies should use more than one differentiator
to avoid situations where more than one firm claims to be the best in the attribute.

Many marketers advocate promoting only one benefit to the target market. The most commonly promoted number one
positioning are: “Best quality”, “Best service”, “Lowest price”,” Best value” and “Most advanced technology”. If a company
hammers away at one of these positioning and convincingly delivers on it, it will probably be best known and recalled for
this strength.

Other marketers think that companies should position themselves on more than one differentiating factor. (Not everyone
agrees that single–benefit positioning is always best). Double–benefit positioning may be necessary if two or more firms are
claiming to be best on the same attribute. The intention is to find a special niche within the target segment. There are even
cases of successful triple–benefit positioning: aqua-fresh (anti-cavity protection, better breath, and whiter teeth). Clearly
many people want all the three benefits, and the challenge is to convince them that the brand delivers all three. The
company’s solution was to create a toothpaste that squeezed out of the tube in three colors, thus visually confirming the
three benefits. In doing this, the company “counter segmented”; that is, it attracted three segments instead of one.

However, as companies increase the number of claims for their brands, they risk disbelief and a loss of clear positioning.

Which differences to promote? Not all differences are meaningful. That is, not every difference makes a good
differentiator. Each difference has the potential to create company costs as well as customer benefits. Therefore, the
company must carefully select the ways in which it will distinguish itself from competitors. A worthwhile difference should
fit a number of criteria.

Differentiation and positioning strategies are worth establishing to the extent that it satisfies the following criteria:

•
Important: - The difference delivers a highly valued benefit to a sufficient number of buyers.

• Distinctive: - The difference either isn’t offered by others or is offered in a more distinctive way by the company.

• Superior: - The difference is superior to other ways of obtaining the same benefit.

• Communicable:- The difference is communicable and visible to buyers

• Preemptive: -The difference cannot be easily copied by competitors

• Affordable: - The buyer can offered to pay for the difference.

•
Profitable: - The Company will find it profitable to introduce the difference.
Step 3: Effectively Communicating and Delivering the Chosen Position to the Market

When communicating and delivering the chosen position- the company’s marketing mix should support the positioning
strategy. Company needs to deliver the position it describes and design marketing mix accordingly. The marketing mix-
product, price, place, and promotion-is essentially the working out of the tactical details of the positioning strategy. Thus a
firm that sizes upon the
“high quality” position knows that it must produce high – quality products, charge a high price, distribute through high class
dealers, and advertise in high – quality magazines. This is the primary way to project a consistent and believable high-
quality image. Once the company has developed a clear positioning strategy, it must communicate that positioning
effectively.

The pitfall is that it is easier to come up with a good strategy than implement and maintain it. The position needs to be
monitored closely and adapted to the changing market environment to remain sustainable. Positioning is arranging for a
market offering to occupy a clear, distinctive and desirable place relative to competing products in the minds of target
consumers. A position of a product consists of a sophisticated set of perceptions, impressions and feelings of consumers for
the products compared to a competing one. The company’s marketing mix should support the positing strategy.

3.3.2. Market Positioning Strategies

A company must carefully select the ways in which it will distinguish itself from competitors. A company can differentiating
and positioning its market offerings by using the following positioning strategies:
 a) Attribute positioning: - When company’s positions itself on attributes.

b) Benefit positioning: - Here the product is positioned as the leader on a certain benefits.

c) Use/Application positioning: - Positioning the product as best for some use or application.

d) User Positioning: - Positioning the product as best for some user group.

e) Competitor positioning: - Product positions itself as better in some way than a named or implied competitor.

f) Product category positioning: - Product positioned as the leader in a certain product category

g) Quality/Price positioning: - Product positioned as offering the best value.

3.3.3. Major Positioning Errors

In general, a company must avoid the following major positioning errors.

1. Under positioning: - means failing over to really position the company at all. Some companies discover that buyers
have only a vague idea of the company or that they do not really know anything special about it.

2. Over positioning: - means giving buyers too narrow a picture of the company. For example, a consumer might think
that a company produces only products that are expensive while, in fact, the company makes affordable products as well
that are cheap.
3. Confused positioning: - gives distorted image to consumers. Buyers might have a confused image of the brand
resetting from the company’s making too many claims or changing the brand’s positioning too frequently.

4. Doubtful positioning: - buyers may find it hard to believe the brand claims in view of the product’s features, price or
manufacturer.

The advantage of solving the positioning problem is that it enables the marketer to solve the marketing mix problem.

Self-check 3-3
Directions: Answer all the questions listed below. If you have to need some clarifications feel- free to ask your instructor.

1. Discuss the steps in market positioning?

2. Explain alternative market positioning strategies?

3. What are the major positioning errors made by the company?

Unit Summary
In a competitive industry, the key to competitive advantage is product differentiation. A market offering can be
differentiated long five dimensions: product (features, performance, quality, conformance, quality, durability, reliability,
reparability, style, design, services (ordering ease, delivery, installation, customer training, customer consulting,
maintenance, and repair, miscellaneous services), personnel, channel or image (symbols, written and audiovisual media,
atmosphere, and events). Deference is worth establishing to the extent that it is important, distinctive, superior,
communicable, preemptive, affordable, and profitable.

Many marketers advocate promoting only one product benefit, thus creating a unique selling preposition as they position
their product. People tend to remember “number ever”. But double benefit positions and triple positioning can also be
successful as long as marketers take steps to ensure that they do not under position, over positions or create confused or
doubtful positioning.

Once the company has developing a clean positioning strategy, it must communicate that positioning effectively via
marketing mix.

Unit Review Questions

Part One: Multiple Questions

Instructions: - Instruction: Choose the best answer from given alternatives.

1. ____ calls for establishing and communicating the products key distinctive benefits in the market?

A. Market positioning C. Market targeting

B. Market segmentation D. Market selection

2. If Samsung cell phone manufacturer creates additional versions of cell phone by adding extra features to its product,
the product differentiation lies on:

A. Features C. Style

B. Durability D. Reliability

3. If Ethiopian Air Lines gain a strong competitive advantage through hiring and training better people than their
competitors do in the aviation industry. The positioning strategy is:

A. Product differentiation C. Personnel differentiation

B. Service differentiation D. Image differentiation

4. Commercial Bank of Ethiopia’s success in the banking industry is based partly on large number of branches that are
found in more locations than competing banks. The differentiation/positioning strategy adopted by CBE is:
 A. Product differentiation C. Image differentiation D.
Channel differentiation
B. Service differentiation
5. _________ involves positioning the product as best for some use or application.

A. Attribute positioning C. Benefit positioning

B. Application positioning D. User Positioning

Part Two: Discussion Qiestions

Instructions:- Give your short answer for the following questions.

1. Write the tools/strategies for differentiation?

2. Discuss the alternative positioning strategies?

3. What are the major positioning errors made by the company?

Part Three: Practical Activity (Case study)

Instruction: Read the case and perform the requirements.

Assume you are working at Marketing Consultant Company as a marketing officer. Your company work with big
organizations including Ethiopian Airlines. The Ethiopian Airlines is now planning to reposition itself to attain competitive
advantage in the airlines industry. Your manager assign a responsibility to develop differentiation strategies to Ethiopian
Airline’s services by using personnel differentiation and service differentiation.

Required:

1. What personnel differentiation tools would you use? How would you differentiate the airline’s services using these
tools?

2. What service differentiation tools would you use? How would you differentiate the airline’s services using these tools?
3. What procedures would you follow to reposition Ethiopian Airline’s services?
4. What positioning strategy/strategies would you choose?
5. How to communicate and deliver the chosen positioning strategy to airlines market?
Project work

This ‘project work’ is designed for the competency “Develop Strategic Marketing Elements” to help you to demonstrate the
requisite knowledge, skills and attitudes described in the module.

Instruction: Develop market segmentation, targeting and positioning for the case company.
Assume yourself as a marketing manager for the newly established athletic shoe manufacturing PLC. Major competitors have
several segmented markets. One segment is based on gender and another segment is based on the type of sport or activity.
They have different marketing mixes for each segmented market. So that as a marketing manager for the newly established
athletic shoe manufacturing PLC, perform market segmentation, targeting and positioning.

Task 1: Demonstrate how to segment the entire market for the athletic shoe manufacturing PLC?

Task 2: Decide which segmentation criteria/variable will be most helpful to you in segmenting your market?
You can use one or combinations of segmentation basis/variables.

Task 3: Demonstrate how to target the market for the athletic shoe manufacturing PLC?

Task 4: Apply criteria to evaluate each segment attractiveness and select target market to serve?

Task 5: Demonstrate how to profile the target market for the athletic shoe manufacturing PLC?

Task 6: Identify the demographic, behavioral and psychographic characteristics regarding your target market.?

Demographic Characteristics for Consumer Market (template)

Age

Income

Gender

Profession

Education

Family Size

Homeowner

Marital Status

Psychographic Characterize for Consumer Market (template)

Lifestyle

Fun-Seeking

Family Stage

Trendy

Hobbies

Status Seeking

Sports Enthusiasts

Conservative
 Forms of Entertainment

Socially Responsible

Behavioral Characterize for Consumer Market (template)

Reason/Occasion for Purchase?

Number of times they’ll purchase?

Timetable of purchase

Amount of product/service purchased?

How long to make decision to Purchase?

Where does customer purchase?

Task 7: Demonstrate how to position product to target market for the athletic shoe manufacturing PLC?

Task 8: Decide which differentiation tools you are using to create competitive advantage for athletic shoe manufacturing
PLC?

Task 9: Select and develop market positioning strategy for athletic shoe manufacturing PLC?

Answer Key for Self-check Questions

Unit One: Answer key to check your progress questions Self-check 1-1:
1. Refer sub-topic 1.1.1.
2. Refer sub-topic 1.1.2.
Self-check 1-2:
1. Refer topic 1.2.
2. Refer topic 1.2.
3. Refer topic 1.2.
Self-check 1-3:
1. Refer topic 1.3.
Self-check 1-4:
1. Refer topic 1.4.
2. Refer topic 1.4.
3. Refer topic 1.4.
Self-check 1-5:
1. Refer sub-topic 1.5.1.
2. Refer sub-topic 1.5.2.
3. Refer sub-topic 1.5.3.
4. Refer sub-topic 1.5.4.
Unit Two: Answer key to check your progress questions Self-check 2-1:
1. Refer topic 2.1.
2. Refer topic 2.1.
Self-check 2-2:
1. Refer topic 2.2.
2. Refer topic 2.2.
3. Refer topic 2.2.
4. Refer topic 2.2.

Self-check 2-3:
1. Refer topic 2.3.
Unit Three: Answer key to check your progress questions Self-check 3-1:
1. Refer topic 3.1.
2. Refer topic 3.1.
Self-check 3-2:
1. Refer sub-topic 3.2.1.
2. Refer sub-topic 3.2.2.
3. Refer sub-topic 3.2.3.
Self-check 3-3:
1. Refer sub-topic 3.3.1.
2. Refer sub-topic 3.3.2.
3. Refer sub-topic 3.3.3
 Grade 11 Marketing and Sales Management Student Module

References:
Ac-ac, Maria Victoria M. Principles of Marketing, Revised Ed., Pasig: Anvil Publishing, Inc., 2014

th
Armstrong, Gary. Marketing: An introduction 11 , Global ed. Harlow, England: Pearson, 2013.

Glencoe Marketing Essentials, McGraw-Hill- 2012-

Kotler, P., & Armstrong, G. (2021). Principles of marketing (18th ed.). Pearson.

Tanner, J. F., & Raymond, M. A. (2019). Principles of marketing. Flat World Knowledge.

Ministry of Education 230

 MODULE V
MARKETING MIX
ELEMENTS

Contents
No Contents Page No Unit Description 231

232
1 UNIT 1: INTRODUCTION TO MARKETING MIX
1.1. 233
Meaning of Marketing Mix
1.2. 234
Importance of marketing mix. 1.3. The Marketing Mix Elements 235

Unit Summary 238

Unit Review Questions 240

242
2 UNIT 2: PRODUCT MIX DECISIONS
 2.1.
Meaning of Product 243

2.2. 244
Product Classification
2.3. 247
New Product Development Process
2.4. 251
The Product Life Cycle 2.5. Individual Product Decisions 255

Unit Summary 259

Unit Review Questions 260

265
3 UNIT 3: PRICE MIX DECISIONS
3.1.
Meaning of Price 265

3.2. 266
Factors Influencing Pricing Decisions
3.3. 267
General Pricing Approaches
3.4.
Pricing Strategies 270

3.5.
A Pricing Decision Model 274
Unit Summary 275
Unit Review Questions 276

278
4 UNIT 4: PLACE MIX DECISIONS
4.1. 279
Meaning of Place ( or Distribution)
4.2. 279
Distribution Strategy
4.3. 280
Nature of Marketing Channel
4.4.
Types of Channels 281

4.5.
Factors Influencing the Choice of Distribution 285 Channels
Unit Summary 288 Unit Review Questions 289

291
5 UNIT 5: PROMOTION MIX DECISIONS
5.1. 292
Meaning of Promotion
5.2. 292
Functions of promotion
5.3. 293
Promotional Strategies
5.4. 295
Developing promotion plan
 5.5. 301
The Promotional Mix Elements (Marketing Communication)

Unit Summary 316

Unit Review Questions 317

320
6 UNIT 6: MARKETING MIX FOR SERVICES
6.1.
Meaning of Service 321

6.2. 321
Characteristics of Services
6.3.
The Extended Marketing Mix for Services (7P’s) 325

Unit Summary 333

Unit Review Questions 334
References 342
Module Description
Welcome to the module entitled “Marketing Mix Elements”. This student module is prepared to help you to achieve
one of the core competencies in “Marketing and Sales Management Level I”. This module covers the knowledge, skills
and attitude required to complete the competency; “Develop Marketing Mix Elements” for products and services. The
competency mainly focuses on the strategic decisions related to product, price, place and promotion. This module will
also assist you to attain the following learning outcomes:
▪ Gain Insights in to the Marketing Mix Elements.
▪ Develop Marketing Mix Elements for Products (4P’s)
▪ Develop Marketing Mix Elements for Services (7P’s) Module Instruction:
Learning Instructions: How To Use This Module

For effective use this module you are expected to follow the following module instructions:
1. Read the learning outcomes of this module.
2. Learn study lessons in the module. Try to understand what are being discussed.
3. Answer the “Self-checks” after completion of each topics. Then you are to get the answer key
at the end of the module to correct your answer only after you have finished answering the
Self-checks.
4. Accomplish unit review questions and practical activities after completion of each unit. Then
ask from your teacher/trainer the key to correction (answers key) or you can request your
teacher/trainer to correct your work.

5. Complete the ‘Project Work’ sited at the end of the module to demonstrate the basic learning
domains of the competency.

UNIT 1 INTRODUCTION TO MARKETING MIX

Unit Coverage
This unit is designed to provide you with the necessary knowledge, skills and attitude regarding the
following content:

1.1 Meaning of Marketing Mix

1.2 Importance of marketing mix.

1.3 Models of Marketing Mix

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the completion of
this unit, you will be able to:

✓ Understand the meaning of marketing mix

✓ Explain the importance of marketing mix

✓ Identify the marketing mix elements for products and services

Key Terms: Marketing Mix, Product mix, Price Mix, Place Mix, Promotion Mix, People, Process,
Physical Evidence Introduction

The 4Ps marketing mix which represents Product, Pricing, place and Promotion are widely employed as a model for
marketing of products and services. It shows the company preparing an offer mix of the product and price, with an
integrated promotion mix to reach the target consumers through the selected distribution channels. The 4Ps of marketing
mix are the key areas where marketing managers allocate scarce corporate resources to achieve the business objectives.
Now a day’s three more Ps have been added to the marketing mix namely People, Process and Physical Evidence. This
marketing mix is known as extended marketing mix.

1.1. Meaning of Marketing Mix

Dear learners! What is Marketing mix? Can you try to name the elements in the marketing mix?
Let’s see together the definition of Marketing mix.

We can define marketing mix as:-

Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. In
other words, Marketing Mix is a set of marketing tool or tactics, used to promote a product or services in the market and sell
it. It is about positioning a product and deciding it to sell in the right place, at the right price and right time. The product will
then be sold, according to marketing and promotional strategy. The four-factor classification of the marketing mix consist of
4Ps - Product, Price, Place, and Promotion. In the business sector, the marketing managers plan a marketing strategy taking
into consideration all the 4Ps. However, nowadays, the marketing mix increasingly includes several other Ps for vital
development.

Dear learners! So far, marketing mix is defined and its elements are named, now it is your turn to answer the following
self-check question

Self-check 1-1:

1. Define what is marketing mix?

Dear learners! Have you done self-checks? If yes, let us move on to the discussion of importance of the marketing mix.

1.2. Importance of Marketing Mix

Dear learners! Do you think that marketing mix provides importance to companies? Would you mention some of the
importance of marketing mix? If not, do not worry the whole of the following discussions help you to answer these
questions

The marketing mix is crucial because it provides a strategic framework to approach the market effectively and meet the
needs of the target audience. It helps businesses to craft offers that have competitive advantage by carefully considering
each aspect of the product or service, how it is priced, where it is available, and how it is promoted. A good marketing mix
not only aligns with the company's overall objectives but also resonates with the target market, driving sales and building
customer loyalty. By adjusting the marketing mix elements in response to market feedback or changes in the business
environment, companies can maintain relevance and continue to achieve their marketing goals.

Besides, the marketing mix is important for the business in the following ways:

1. It helps in understanding what kind of value the product or services offers to the customers.

2. Helps in planning a successful product launch.

3. Helps in formulation, development and execution of effective marketing strategies.

4. Helps in the effective use of resources and avoids unnecessary costs.

Dear learners! So far, importance of marketing mix are discussed, now it is your turn to answer the following self-check
question

Self-check 1-2:

1. Discuss why is marketing mix important?

Dear learners! Have you done self-checks? If yes, let us move on to the discussion of marketing mix.

1.3. Models of Marketing Mix

Dear learners! Can you try to identify the specific components/elements of the marketing mix?
Let’s see together the elements of Marketing mix.

There are different classifications of marketing mix models depending on the number of key elements Alternative marketing
mix models are discussed as follows.

1.3.1. The 4Ps Model of Marketing Mix

The marketing mix is the set of marketing tools the firm uses to pursue its marketing objectives in the target market.
McCarthy classified these tools into four broad groups that he called the four P’s of marketing: product, price, place and
promotion.
 Figure 1.1: The 4Ps of Marketing Mix

1. Product Mix

The most basic marketing mix tool is product. The firm’s offering to the market which includes the product’s quality, design,
features, brand, and package. As a part of product offering, some companies provide various services, such as leasing,
delivery, repair, and training. Such support services can provide a competitive advantage in the competitive market place.

The product element of the marketing mix refers to the tangible or intangible item that a business is offering to its
customers. This includes the product's features, benefits, quality, design, packaging, and branding

2. Price Mix

A Critical marketing mix tool is price. Price is the amount of money that customers pay for the product. Company’s has to
decide on wholesale, and retail prices, discounts, allowances, and credit terms. If its price is not competitive, the buyers will
turn to competitors’ products.

Price mix concerns how companies price their product or service. Pricing decisions are influenced by factors such as
production costs, market competition, and customer demand. A well-balanced price allows the company to remain
competitive while still creating a good level of profit.

3. Place Mix

Another key marketing tools is place, which includes the various activities the company undertakes to make the product
accessible and available to target customers. Company’s must identify, recruit, and link various marketing facilitators to
supply its products and services efficiently to the target market. It must understand the various types of retailers,
wholesalers and physical distribution firms and how they make their decisions.

Place mix highlighting where companies sells its products or services and how it gets those products or services to their
customers. It's also known as distribution.

4. Promotion Mix

Promotion is the fourth marketing- mix tool. Includes all the activities the company undertakes to communicate and
promote its products to the target market. The promotion element of the marketing mix refers to the strategies and tactics
that a business uses to communicate with its target audience and create awareness about its products or services. This
includes advertising, personal selling, public relations, sales promotion, and direct marketing.
1.3.2. The 7 Ps Model of Marketing Mix
The 7Ps model is a marketing model that modifies the 4Ps model. As Marketing mix 4P is becoming an old trend, and
nowadays, marketing business needs deep understanding of the rise in new technology and concept. The 7Ps of the
marketing mix are an extension of the original 4Ps concept, designed to provide a more comprehensive framework for
marketing strategy. They include Product, Price, Place, Promotion, People, Process, and Physical Evidence. Thus marketing
mix is known as extended marketing mix.

This extended marketing mix allows businesses to delve deeper into the management of their marketing efforts, ensuring
they meet the needs of their target audience more effectively. By considering these additional elements, companies can
enhance customer experience, streamline service delivery, and adapt their strategies to the digital marketing landscape,
ensuring a successful marketing mix. The Extended Marketing Mix (3 Ps) are discussed as follows:

5. People

The "people" in this category aren't customers, but workers, management, etc. The people element of the marketing mix
refers to the employees and other personnel who interact with customers and deliver the service. The quality of the service
experience is often determined by the competence, attitude, and helpfulness of the people involved.

6. Process

The process element of the marketing mix refers to the systems and procedures that are used to deliver the service. The
efficiency and effectiveness of the process can have a significant impact on the customer's experience.

7. Physical Evidence

Physical evidence in the marketing mix refers to the environment in which the service or product is delivered. The physical
evidence element of the marketing mix refers to the tangible elements of the service that customers can see, touch, or
experience. This includes the service environment, equipment, and other physical facilities

The seller’s 4Ps and the customer’s 4Cs

Four P’s represent the sellers view of the marketing tools available for influencing buyers. From a buyer’s point of view, each
marketing tool is designed to deliver a customer benefit. Robert Lauterbom suggested that the seller’s four P’s corresponded
to the customer’s four C’s.

Four P’s Four C’s

Product__________ Customer solution

Price ____________ Customer cost

Place ____________ Convenience

 Promotion ________ Communication

Dear learners! So far, elements of marketing mix are discussed, now it is your turn to answer the following self-check
question

Self-check 1-3:

1. Identify the 4Ps of marketing mix?

2. Identify the 7Ps of marketing mix?

Dear learners! Have you answered the self-check questions? If yes, let us move on to the unit summary and unit review
questions.

Unit Summary
Marketing mix has been defined as the set of controllable marketing tools that a firm uses to pursue its marketing objectives
in the target market. There are different classifications of marketing mix models depending on the number of key elements.
Thus the 4Ps of marketing mix refers to four broad levels of marketing decisions, namely: product, price, promotion and
place. The 7Ps of Marketing Mix added three more Ps to the marketing mix namely People, Process and Physical Evidence.
This marketing mix is known as extended marketing mix. The seller’s 4P’s also viewed as customers’ 4C’s l.e. customer
solution, customer cost, convenience and communication.

Unit Review Questions

Part One: Multiple Choice Questions
Instruction: Choose the best answer from the given alternatives.

1. Which one of the following is the first element in the company’s marketing mix is?

A. Product C. Place

B. Price D. Promotion

2. ___________ is the amount of money that customers pay for the product.

A. Product C. Place

B. Price D. Promotion

3. _________ includes the various activities the company undertakes to make the product accessible and available to
target customers.
 A. Product C. Place

B. Price D. Promotion

4. Which of the following marketing mix element includes advertising, sales promotion, public relations, and direct
marketing?

A. Product C. Place

B. Price D. Promotion

5. The following elements are considered as an extended marketing mix, EXCEPT:

A. Product C. Physical evidence

B. People D. Process
Part Two: Discussion Questions
Instruction: Give your brief answer for the following review questions:

1. What is a marketing mix?

2. Explain the importance of a firm’s marketing mix?

3. Explain the elements of 7Ps of marketing mix?

4. Which of the 4Ps is most important? Explain.

5. Identify the specific components of product mix, price mix, place mix and promotion mix?
UNIT 2 PRODUCT MIX DECISIONS
Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude regarding the
following content:

2.1. Meaning of Product

2.2. Product Classification

2.3. New Product Development Process

2.4. The Product Life Cycle

2.5. Individual Product Decisions

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the completion of
this unit, you will be able to:

✓ Understand the meaning of product

✓ Categorize the various products and services in to their classifications

✓ Perform the different stages in new product development process

✓ Explain the product’s characteristics exhibited at the various stages of product life cycle.

✓ Conduct individual product decisions

Key Terms: Product, Brand, Packaging, Labeling, Product life cycle,

Introduction:

Product related decisions are the critical elements of marketing and business strategy, since it is through the sale of
products and services that companies survive and grow. It also involves a systematic decision-making pertaining to all
aspects of the development and management of a firm’s product. Product is the first and most important element of the
marketing mix. Product strategy calls for making coordinated decisions on product mixes, product lines, brands, packaging
and labeling.
 2.1. Meaning of Product

Dear learners! Can you try to define what product is? Could you tell some of examples of product? Now, let’s see
together the definition of a product with examples

A product is anything that can be offered to a market for attention, acquisition, use or consumption and that might satisfy a
want or a need. Products may include physical goods, services, persons, organizations and ideas. For example: A tennis
racquet, advice from attorney, cellphone and accountancy services are all products.

Three levels of products (each add more value for customer)

i. Core product (customer value): defining problem solving service (core benefits) those consumers seek. It is also the
reason why consumers paid.

ii. Actual product: what the core value is turned to, developing features, design, brand, packaging, etc.

iii. Augmented product: additional service and benefits, creating most value and brand experience (e.g. aftersales service,
warranty, product support, etc.). At this time, most competition takes place at the product augmentation level.
Successfully companies add benefit to their offers that is not only will satisfy, but also will delight the consumer.

Dear learners! Now it is your turn to answer the following self-check question

Self-check 2-1:

1. Define the term product in your words? Give examples of a product?

2. Explain the three levels of products?

Dear learners! Have you done self-checks? If yes, let us move on to the discussion on how products are categorized in to
classifications.

2.2. Product Classification

Dear learners! How products can be classified? Can you try to categorize different products in to their classifications? If
not, do not worry the whole of the following sub contents revolves around these two questions. Now, let’s see together the
classifications of products with examples

On the basis of their uses, Products can be classified in to consumer goods and industrial goods.
These classifications are discussed as follows:

2.2.1. Consumer Goods Classifications:

 Consumers buy a vast array of goods. These goods can be classified on the basis of consumer shopping habits. They can be
classified as convenience, shopping, specialty and unsought goods.

1. Convenience goods: These are goods that the consumer usually purchases with a minimum of effort, where the buyer
has knowledge of the product characteristics prior to shopping. Convenience goods are generally low in price and
frequently purchased by the customers. The customer does not want additional information because the item has been
bought before and will accept a substitute.

a) Staples – are goods that consumers purchase on a regular basis. For example, one buyer might routinely purchase
bread, soap. etc.

b) Impulse goods – are goods purchased without any planning or search effort. These goods are usually displayed
widely. Examples are chewing gum & magazines.

c) Emergency goods – are goods purchased when a need is urgent. Example: Umbrella during a rain storm

2. Shopping goods: They are also known as comparison product. In the process of selection and purchase the
customer characteristically compares the product of one business with its competitors on such basis as quality. Style, price
and suitability. Shopping goods are purchased less frequently than convince goods. Examples: furniture, clothing and major
appliances.

3. Specialty goods: are goods with unique characteristics and/or brand identification for which a significant group of
buyers is habitually willing to make a special purchasing effort. These are particular good or brands in which customers are
loyal. Consumers know the attribute of the product prior to their purchase decision. They are prepared to make effort, pay
a high price and do not accept a substitute. These can be specific brands and types of fancy goods, cars stereo components,
photographic equipment etc.

4. Unsought goods: are goods that the consumer does not know about or knows about but does not normally think
of buying. New products, such as smoke detectors, food processors, are unsought goods until the consumer is made aware
of them through advertising. The classic examples of known but unsought goods are life insurance, cemetery plots,
gravestones, and encyclopedias etc.

2.2.2. Industrial goods classification:

Organizations buy a vast array of goods and services. Industrial goods can be classified in terms of how they enter the
production process and their relative costliness. They are classified as: material & parts, capital items, and supplies and
business services.

1. Materials and parts: are goods that enter the manufacture’s product completely. They fall in to two classes; raw
materials & manufactured materials and parts.
a) Raw materials are further fall in to two major classes; Farm product (wheat, cotton, frits) and Natural products fish,
lumber, crude oil). Each is marketed some whet differently. Raw materials are basic materials that actually become part
of the physical product. They are processed when the industrial consumer buys them.

b) Manufactured materials & parts are divided it to two: Component materials and component parts. Component
materials are usually fabricated further, for example yarn is woven in to cloth while Component parts enter the finish
product completely without further change in form as tires are put on automobiles. Most manufactured materials and
parts are sold directly to industrial users with orders often placed a year or more in advance.

2. Capital Item: They are long lasting items that do not go completely in to the production of the product but they
facilitate developing and/or managing the finished product. They include installations and equipment.
a) Installations consist of building (i.e. factories & offices) and equipment (i.e. generators, drill presses, computers,
elevators). Installations are major purchases. They are usually brought directly from the producer, with the typical sale
preceded by a long negotiation period.

b) Equipment comprises portable factory equipment and tools (hand tools, life trucks) and office equipment (e.g.
personal computers, desks). These types of equipment do not become part of the finished product.

3. Supplies and Business Services: are short lasting goods and services that facilitate developing and/or managing the
finished product. They are not go in to the production of materials.

a) Supplies are of two kinds: Operating supplies (e.g. lubricants, coal, writing paper, pencils) and Maintenance and Repair
items (paint, nails, brooms): supplies are the equivalent of convenience goods in the industrial field; they are usually
purchased with a minimum effort on a straight re-buy basis.

b) Business services include Maintenance and Repair services (e.g. window cleaning, typewriter repair etc.).
Maintenance services are often provided by small producers, and repair services are often available from the
manufacturers of the original equipment. And Business advisory service (e.g. legal, management, consulting, and
advertising). Business advisory services are usually purchased in new task-buying situations, and the industrial buyer
will choose the supplier on the basis of the supplier's reputation and people.

Dear learners! Now it is your turn to answer the following self-check question

Self-check 2-2:

1. Differentiate between consumer products and industrial products?

2. Discuss the major classifications of consumer products?

3. Discuss the major classifications of industrial products?

Dear learners! Have you done self-checks? If yes, let us move on to the discussion of how new products are developed by
companies.

2.3. New Product Development Process

Dear learners! How products are developed and introduced to the market? Can you try to tell the possible stages by which
a new product is passes through? Now, let’s address these questions through discussions on the following topic.

A new product involves an innovation or the modification of an existing product that the consumer perceives as
substantive. For a new product to succeed it must have desirable attribute, be unique and able to have its features
communicate to consumers. New product may be developed by the company itself or purchased from another firms.

There are various reasons for companies to develop new products. This because there are consistent threats from
competitors, innovative development, saturated market for existing product and changes in customer taste and need call
for new product development.

2.3.1. Stages in New Product Development Process

Companies must set up a clear customer driven new-product development process consisting of the following eight stages.
At each stage, management must decide whether to proceed to the next stage, abandon the product or seek additional
information. The stages are:

Stage 1: Idea generations

This stage involves the continuous and systematic search for new product opportunities. It involves delineating the sources
of new ideas and methods for generating them.

Some of the major sources of new product idea are:

• Customer need: product idea can be originated form unfulfilled need and wants of customers through conducting
market research.

• Competitors: competitors’ products and services are also sources for idea generation by analyzing the strength and
weakness and studying the liking and disliking of customers associated with competitors’ product.

• Sales representative and intermediaries: since they are closer to customers they can provide new idea for the
organization.
• Other sources: This includes inventors, investors, Universities (Colleges), consultants and advertising agencies.

Idea generating techniques

• Forced relationship: here two different products are considered and possible relationships between them are sought
and a single product that satisfies both needs is developed. For example, Photocopier-printer-scanner and fax, watch
and calculator, Photo camera and Video camera

• Attribute listing: refers to the listing of different attributes of a product such as size, color, design and then trying to
modify the attributes as per the customers’ need.

• Brainstorming discussion: people from different stakeholders (customers, experts, suppliers, agents or distributors)
are invited to attend forums where free discussions are held. The discussion may be recorded and then replayed latter
by the new product development committee to identify new ideas proposed.

Stage 2: Idea screening

At this stage, new product ideas are evaluated to determine which ones warrant further study; or screening new product
ideas to spot good ideas and drop poor ones as soon as possible reducing the number of ideas from previous stage and
going forward with only the profitable ones. In idea screening poor, unsuitable or unattractive ideas are weeded out form
further considerations. In ideas screening, the process should be handled with great care so as to avoid both the drop error
(a condition where the screening committee drops profitable ideas that can be transferred to profitable products) and the
go error (a condition where non profitable ideas are transferred to products and commercialized in to the market). A very
tight or strict screening may result in a drop error and the reverse may end up in a go error. The R-W-W framework can
be used to screen ideas where three questions are asked:

▪ Is it real?
▪ Can we win? and
▪ Is it worth doing?
Moreover, screening requests for developing a checklist for requirements that the idea must fulfills and product ideas that
do not fulfill the criteria will be rejected.

Stage 3: Concept testing

This is occurred when attractive ideas are developed into a product concept i.e. a detailed version of the new product idea
stated in meaningful consumer terms. A firm needs to acquire consumer feedback about its product idea so the screened
ideas must be tested with appropriate group of target consumers. Marketers tend to develop a variety of concepts for a
new product to identify the one that appeals to customers most. For this, consumers are asked about the product idea and
express their own opinion and enthusiasm about the product.

This stage involves asking potential consumers to react to the picture, written statement, or oral description of the product,
thus enabling the firm to determine initial attitude of consumer prior to expensive and time consuming prototype
development.
Stage 4: Marketing strategy development

It is designing an initial marketing strategy (4p’s) for a new product based on the product concept which includes market
size measurements, structure and behavior etc. Marketing strategy statement has three parts. These are:

i. Description of target market, planned value proposition and sales, market share, and profit growth for next years; ii.

Outline of planned price, distribution, and marketing budget for year one; and iii. Description of long-run sales, profit

goals and marketing mix.

Stage 5: Business analysis

In this stage, the management and new product committee reviews of the sales, costs and profit projections for a new
product (by looking at history of similar ones and conducting surveys) to find out whether these and other related factors
satisfy the company’s overall objectives and assess the risks.

A surviving idea is expanded in to a concrete business proposal. This means management (a) identifies product features (b)
estimates a market demand, competition, and the products profitability (c) establishes a program to develop the product,
and (d) assigns responsibility for further study of the products feasibility.

Stage 6: Product development

It is developing the product concept into a physical product to ensure that the product idea can be turned into a workable
market offering and is usually done by the R&D department and includes testing with actual consumers to ensure presence
of required functional and psychological characteristics. A prototype or trial model production of the new item should be
undertaken so as to satisfy:

▪ The attributes mentioned in the concept development stage

▪ The costs estimated

▪ The psychological aspects

A producer should not only consider the functional features of a new product but also psychological aspects of the outputs.
Accordingly, the following two types of tests can be done after the initial prototype (sample) production.

i. Functional test: is a laboratory or field test made to evaluate the financial features such as durability, cost comfort,
safety, etc.

ii. Consumer test: refers to the testing of consumers’ reactions to the new product’s psychological aspects. Example:
free sample tests, laboratory visits, etc.

Stage 7: Market testing

It is the stage of new-product development in which the product and its proposed marketing program are tested in realistic
market settings to give the marketer experience and test marketing program before spending on full introduction. Test
marketing can be expensive because it may often run for months, or even years and often companies do not perform it for
simple line extensions of low production costs. However, when required investment or risks are high, a lot of test marketing
can be done. As an alternative, companies may use controlled or simulated test markets, where products are either tested
on a controlled panel of shoppers in stores or on shopper in laboratory stores or simulated online environments. Market
test findings, including sales and repeat purchases, are monitored and evaluated by the company that developed the
product. And the product’s design and production plans may have to be adjusted as a result of the test findings. Stage 8:
Commercialization
After testing is completed, the firm will be ready to introduce the product to its full target market. In this stage, full-scale
production and marketing programs are planned and implemented. This stage requires considerable expenditure and

commitment on promotion and distribution. Dear learners! Now it is your turn to answer the following self-check

questions

Self-check 2-3:

1. Write the basic steps/stages in new product development process?

2. Explain the purpose of market testing in the development of new products. ?

3. Distinguish between market testing and commercialization stages in new product development?

Dear learners! Have you done self-checks? If yes, let us move on to the discussion on product life cycle stages.

2.4.The Product Life Cycle

Dear learners! Do you agree that a product has a life, they are created, grow-up and then die in the market? How the
marketing mix element affected at each stages of the product life cycle?
How do sales and profits vary at each stages of the product life cycle stages? Now, let’s proceed to the discussions on the
product lifecycle stages.

Product like any living things undergo life cycle; Products are created, they live and then they die. This link is called product
life cycle. The concept of product life cycle (PLC) suggests that any product or service move through identifiable stages
including introduction, growth, maturity and decline. The length of duration in the PLC is not the same for all products.
Factors which affect the length of product life cycle include customer preferences, seasons, technological changes,
competition, and the rate of acceptance of consumers for new product. However, any product moves though identifiable
stages, each of which is related to the passage of time and each of which has different characteristics.

Product life cycle (PLC) portray the history of a product’s sale and profits over its lifetime and is used to ensure consistent
profit earning from the product. Marketers should consider public policy issues and regulations regarding acquiring or
dropping products.

The discussion on product life cycle describe the sales history of a typical product as follows:

Figure 2.2. Product life cycle

2.4.1. Stages in Product Life Cycle

We now look at the characteristics and strategies for each of the stages of the product life cycle.
1. Introduction stage

The introduction stage starts when the new product is first distributed and made available for purchase. It takes time to a
product to get acceptance in several markets, so sales growth is tends to be slow. In this stage profits are negative or low
because of the low sales volume and heavy distribution and promotion expenses. Promotional expenses are at their highest
ration to sales because of need for a high level of promotional effort to inform the potential consumers of the new product
and to induce trial of the new product.

At this stage of the product life cycle, marketers can adapt the following strategies:

• Set high (skim) pricing is used for making high profits with intention to cover initial cost in a short period and low
pricing is used to penetrate and gain the market share. Company choice of pricing strategy depends on their goals.

• Obtain Branding, Quality level and intellectual property and protections to stimulate consumers for the entire product
category. Product is under more consideration, as first impression is the last impression.
 • Maintain selective and scattered distribution of the product

• Promotion is done with intention to build brand awareness.

2. Growth stage

The growth stage is marked by a rapid climb in sales. When early adopters like the product, the middle majority consumer
starts following their lead. New competitors enter in to the market attracted by the opportunities for large-scale production
and profit. Price remains where it is or rise slightly as demand is increasing quite rapidly. Profit also increase during this
stage as promotion costs are spread over large volume of units.

Some of the strategies adapted by a firm so as to keep market growth are:

• The firm improves product quality and adding new product features.

• It enters new market segment

• It enters new distribution channels.

• It shifts its promotion from building awareness to persuading customers.

• It can also lower its price at the right time to attract the next layer of price sensitive buyers. 3. Maturity

stage

At some point the products rate of sales growth will slow down and the producer will enter a stage of relative maturity. This
normally lasts longer than the previous stages, and it poses formidable challenges to marketers.
The maturity stage can be divided in to three phases. In the first phase, growth maturity the sales growth rate starts to
decline. There are no new distribution channels to fill, although some laggard buyers (last people to purchase a product)
still enter the market. In the second phase, stable maturity, sales volume becomes level because of market saturation. In
the third phase, declining maturity, the absolute level of sales now starts to decline, and customers start moving towards
other products and substitutes.

Some companies give up on matured products, feeling there is little they can do. However, marketer can apply any one or
combination of the following strategies in the stage of maturity

• The marketer can expand the number of brand users in the following ways.

a) Convert the non-users in to users of the product

b) The Company can enter a new market segment

c) The Company can work to attract the customers of its competitor.

• Volume can also be increased by getting current brand users to increase their annual usage of the brand.
 • Marketers also try to turn sales around by modifying the product’s characteristics in a way that will attract new users.

4. Decline stage

The product’s sales declines as substitutes enter the market or customers become dissatisfied or shift to other products. As
sales and profit decline, some firms withdraw from the market. Those remaining may reduce the number of product
offerings. They may drop smaller market segments and weaker trade channels. They may also cut promotion budget and
reduce their price further.

In this stage there are five strategies available to the firm:

• Maintain the product, Reduce cost and finding new uses of product.

• Harvest the product by reducing marketing cost and continue offering the product to loyal niche until zero profit.
• Discontinue the product when there’s no profit or a successor is available. Selling out to competitors who want to
keep the product.

Dear learners! The product lifecycle stages and associated marketing strategies have been discussed earlier, now it is
your turn to answer the following self-check questions

Self-check 2-4:

1. Discuss the characteristics of a product at each stages of the PLC?

2. Discuss the marketing strategies at each stages in the PLC?

Dear learners! Have you done self-checks? If yes, let us move on to individual product decisions, specifically, branding,
packaging and labeling decisions.

2.5. Individual Product Decisions

Dear learners! Let’s begin by posing important questions. What do you mean by branding, packaging and labeling in the
product mix decision? What do you think that the benefits of branding, packaging and labeling offered to the company?
The following discussion focused on these issues

In developing a marketing strategy for individual product, the marketer has to confront the branding, packaging and
labeling decisions. Obviously there is a close relationship among labeling, packaging, and branding.

2.5.1. Brand Decisions

Meaning of a Brand
A brand is a name, term, sign, symbol, design or a combination of these that identifies the products or services of one
seller or group of sellers and differentiates them from those of competitors; customers add meaning to brands and develop
relationships with them. Brands can help buyers to identify products and their benefits, providing legal protection to sellers
and helping them to segment the markets.
• A brand name is the part of brand consisting of words, letters, and/or numbers that can be pronounced and
vocalized.

• Brand Mark is the part of the brand that appears in the form of a symbol, design or distinctive coloring or lettering
that can be seen but not voiced.

• A trademark is defined as a brand that is given legal protection. Therefore, trademark is a legal term meaning the
words, names, or symbols that the law designates as trademarks. When it used a registered trade mark is followed by
letter ‘R’

Example: Coca–cola R

Brand Name Selection

Branding involves the selection and development of brand name and image for a product. A good name can add greatly to a
products' success. However, finding the best brand name is a difficult task. It begins with a careful review of the product
and its benefits, the target market and proposed marketing strategies. Therefore, the marketer should consider the
following desirable qualities for a brand name:

• It should suggest something about the product's benefits and qualities

• It should be easy to pronounce, recognize and remember.

• The brand name should be distinctive.

• Be extendable to additional product line.

• It should be capable of registration and legal protection

Reasons for branding

• Brands enable consumers to easily identify goods or services.

• Brands also help assure consumers that they will get consistent quality when they reorder.

• Reputation of a brand also influences customer loyalty among buyers.

• Branding reduces price comparisons and the likelihood of purchase decision being made solely based on price.
 2.5.2. Packaging Decisions

Even after a product is developed and branded, strategies must still be developed for other product related aspects of the
marketing mix is packaging. Thus packaging is a business function and a package is an item.

Meaning of Packaging

Packaging is the process of designing and producing the container or wrapper for a product. The container or wrapper is
called the package. The package might include up to three levels of material. Thus a perfume is in a bottle (primary
package), that is in carton box (secondary package) that is in a corrugated box (shipping package) containing dozens of
perfume.

In recent times, packaging has become a potent marketing tool. A well-developed package can create convenience value for
the consumer and promotional value for the producer. A product must be packaged to meet the needs of wholesaling and
retailing middlemen. For instance, a packages size and shape must be suitable for displaying and stacking the product in the
store.

Purpose of Packaging

In general, packaging serves the following purposes:

1. It physically protect the products from damage, and spoilage.

2. It helps in identifying the products

3. It encourages impulse buying

4. It is used as an advertising media

5. It serves as an information tool

2.5.3. Labeling Decisions

Labeling which is closely related to packaging, it is another product related decision that requires managerial attention.

Meaning of Labeling
A label is any written or printed information on the product or its package. Labeling, which is a set of package, is another
product feature or attribute that requires managerial attention. This also includes tags attached to products as part of
packaging; they identify products, describe its contents, and promote the brand; labels can become the essential element of
brand-customer connection, as well as cause legal concerns since sellers need to ensure to include all the required
information (it carries information about the product and the manufacturer or the seller). The right label can play an

important role in attracting consumer’s attention and encouraging purchases. Types of Labels
Labels fall into three primary kinds:

i. A brand label
It is simply the brand name applied to the product or package. Brand labeling is an acceptable form of labeling, but it does
not supply sufficient information to a buyer.

ii. A descriptive label

It gives objectives information about the products' use construction, care, performance, and/or other pertinent features
ingredients and nutritional contents. Descriptive labels provide more product information but not necessarily all that is
needed or desired by a consumer in making a purchase decision.

iii. A grade label

It identifies the products judged quality with a letter, number, or word. Canned peaches are grade labeled A, B, C, corn and
wheat are grade labeled 1 and 2.

Dear learners! So far, meaning and concepts of product, product classifications, product life cycle, new product
development process and branding packaging and labelling have been discussed in this unit. Now it is your turn to answer
the following self-check questions

Self-check 2-5:

1. Define what is branding? Explain its importance?

2. Define what is packaging? Discuss its benefits?
3. What is labeling decisions? Discuss the types of labels and their purposes?

Dear learners! Have you answered the self-check questions? If yes, let us move on to reading the unit summary and to
answer the unit review questions and perform practical activity.

Unit Summary
A product is anything that can be offered to a market for attention, acquisition, use or consumption and that might satisfy a
want or a need. Products may include physical goods, services, persons, organizations and ideas. Products are broadly
classifies as consumer and industrial products. Consumer products are goods and services for the final consumer. They can
be classified as convenience, shopping, specialty and unsought goods. These are products that are differentiated on the
basis of consumer awareness of alternatives and their chrematistics prior to shopping trip. Whereas industrial products are
goods/services used in the production of other good & services, in the operation of the business or for resale. The product
life cycle is a concept that seeks to describe the product’s sales, profit, customer competitor and marketing emphasis from
its inception until its removal from the market and this life cycle goes through four stages: introduction, growth, maturity
and decline. Individual product decisions involves branding, labeling and packaging decisions. A Brand is a name, term, sign,
symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and
to differentiate them from those of competitors. Packaging is the process of designing and producing the container or
wrapper for a product. Labeling which is closely related to packaging, it is another product related decision that requires
managerial attention.

Unit Review Questions

Part One: True/ False Questions
Instruction: Say true for the correct statement and say false for the incorrect statements

______ 1. A grade label provides a detailed description about the product.

______ 2. Shopping goods are these goods that the customer in the process of selection compares on such
basis as suitability, quality, price, etc.

______ 3. Anything offered to market and capable of satisfying a need can be a product.

______ 4. Product package encourages impulse buying.

______ 5. Market testing involves large scale production and sale of the new product.

Part Two: Multiple Choice Questions

Instruction: Choose the best answer from the given alternatives.

1. Which of the following statement is/are true:

A. Based on its purpose, product is broadly classified as tangibility and intangibility.

B. Unsought products require more personal selling than advertising.

C. Consumer goods are these goods purchased for ultimate consumption.

D. All of the above

2. Which of the following products need more time for comparison during purchasing?
 A. Shopping products C. Convenience products

B. Specialty products D. Unsought product

3. Identify the incorrect statement (s)

A.  or  denote registered trade mark

B. The label promotes the product through attractive graphics.

C. Packaging is the process of developing a wrapper or a container

D. None of the above

 Grade 11 Marketing and Sales Management Student Module

4. During which stages of a new product development does the firm studies?
A. Idea generation C. Business analysis B. Testing D. Marketing strategy
5. The final stage in the new-product development process is:
A. Product testing C. Commercialization
B. Market testing D. Product prototyping
6. The stage of the product lifecycle characterized by price reductions, promotion cutbacks, and competition dropout
is:
A. Introduction stage C. Maturity stage

B. Growth stage D. Decline stage

7. At which stage of the product life cycle the company’s sales is increasing at increasing rate?
A. Introduction C. Maturity

B. Growth D. Decline

8. Which one of the following is not a type of business product?

A. Raw materials C. Major equipment
B. Convenience goods D. Component parts

9. __________ refers to any printed, written or tagged information on the product or its package.
A. Product C. Label
B. Brand D. Package
10. The following are product decisions. EXCEPT:
A. Branding C. Labelling
B. Packaging D. None of the above

MINISTRY OF EDUCATION 262

Grade 11 Marketing and Sales Management Student Module

Part Three: Discussion Questions:

Instruction: Give brief answer for the following review questions:

1. Define what is product? Explain the levels of product?

2. Give examples for the various classifications of consumer products?

3. Discuss how new product is developed?

4. Explain the various stages in Product Life Cycle?

5. Discuss the major individual product decisions?

Part Four: Practical Activity:

1. Visit a business/company located in your city or operates in your community, then conduct an interview or observation or
any other means to collect information regarding the company’s product policy decisions. You are required to write your
reflection based on the data collected and by using any reference materials to support your observation.

Your reflection/report must cover all of the following issues:

✓ General description/background of the business organization you have visited

✓ The company’s Product Policy Decisions: it includes

• Type of product(s) produced and offered by the business, its feature and benefits,

• Brand name, brand mark and trademark of the company

• Company’s packaging decisions such as packaging materials, colour and design of the package,
convenience and attractiveness of the package

• The company’s labelling practice

• Additional or after sales services provided by the company

MINISTRY OF EDUCATION 264

UNIT 3
 PRICE MIX
DECISIONS
Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude regarding the
following content:

3.1. Meaning of Price

3.2. Pricing Objectives

3.3. Factors Influencing Pricing Decisions

3.4. General Pricing Approaches

3.5. Pricing Strategies

3.6. A Pricing Decision Model

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the completion of
this unit, you will be able to:

✓ Gain insight in to the meaning of price

✓ Understand pricing objectives

✓ Identify factors influencing pricing decisions

✓ Apply general pricing approaches

✓ Apply pricing strategies

✓ Set price for products using a general pricing decision model

Key Terms: Price, Market skimming, Market penetration, Discount, Allowance

Introduction:
All profit organizations and many non-profit organizations set prices on their products. Price is the only element in the
marketing mix that produces revenue. The other elements produce costs. Price is also the most flexible elements of the
marketing mix, is that it can be changed quickly, unlike product features and channel commitments. At the same time,
pricing and price competition are the number-one problem facing many marketing executives.

A marketer should make a sound decision related to the price of its product or service because the consumer’s
perception of price will affect the business. For instance if buyers perceive a price to be high, they may purchase
competitors brand, leading to a loss of sales. If price is too low, sales might increase, but profit may suffer.

3.1. Meaning of Price

Dear learners! What is Price? Can you try to define the term ‘price’ based on the lesson on unit one? Hoping that
you have defined it, what about the objectives of pricing, can you try to mention some of them? Let’s see together the
definition and pricing objectives.

Price is the amount of money charged for a product or service or it is the sum of the values that consumers exchange for
the benefit of using the product/service. Therefore pricing represents the value of a good or service for both the seller
and buyers. From business point of view pricing is important because it is the only revenue generating elements of a
marketing mix, others consume resource. Base price, or list price, refers to the price of one unit of the product at its
point of production or resale.

3.2. Objectives of Pricing

Establishing pricing objectives are pre conditions to the formulation of effective pricing strategies and policies. In order to
fix a price that is most beneficial to the firm, its management should consciously decide what it is seeking to achieve
through the instruments of pricing.

a) Survival or status quo goals: a firm opts for survival pricing objectives when there is a high competition or changing
consumer tastes and also helps:
▪ To stabilize price

▪ Meet or prevent competition

Survival is achieved in most cases by setting lower prices and aggressively competition in other marketing mix elements.

b) Profit oriented pricing objectives: a firm may price its product

▪ to achieve a specified return on investment (net sales)

 ▪ to maximize profit in the short run and determine price levels that maximize current profit c) Sales oriented

objectives:

▪ To increase the sales volume

▪ To increase and maintain market share by setting price levels below competition Dear learners! Now it is

your turn to answer the following self-check questions

Self-check 3-1:

1. Define the term price in your words?

2. What are the objectives of pricing?

Dear learners! Have you done self-checks? If yes, let us move on to the discussion on factors influencing pricing decisions.

3.3. Factors Influencing Pricing Decisions

Dear learners! Let’s begin by posing important questions. While setting price for the products, a marketer should
consider certain factors influencing his/her decisions. Can you try to mention some of the factors influencing pricing
decisions?

A company’s pricing decision is affected by both internal company factors and external environmental factors. These factors
will be discussed in detail:

3.3.1. Internal Factors Affecting Pricing Decision

a) Marketing Objectives: The Company’s marketing objective has a great influence on the pricing
decision of the firm. These objectives might include; ensuring survival, maximize current profit, maximize
market share, etc.

b) Marketing Mix Strategy: Price decision must be coordinated with product design, distribution and
promotion decision to form a consistent and effective marketing program. Decision made for other marketing
mix elements may affect pricing decision. Thus, the marketer must consider the total marketing mix when
setting prices.

c) Cost of a Product: Pricing of a product should consider its cost. A product's unit cost is made up of
several types of costs, each reacting different to changes in the quantity produced.
3.3.2. External Factors Affecting Pricing Decisions
The external environmental factors, which affect pricing decision, are;

a) Demand: The relationship between price and consumer purchase decision can be explained by the economists’
law of demand which state that consumer usually buy more units at lower price and less units at higher prices.

b) Competition: The level of competition also affects pricing. Therefore in order to set or change prices, the firm
must consider its competition and how competition will react to the price of the product.

c) Government Regulations: Prices of certain goods and services are regulated by state and federal governments.
Public utilities such as gasoline, taxi-fare are examples of state regulations of prices.

Dear learners! Now it is your turn to answer the following self-check questions

Self-check 3-2:

1. Discuss the internal and external factors affecting pricing decisions?

Dear learners! Have you done self-checks? If yes, let us move on to the discussion regarding the methods by which
marketers determine price for the product.

3.4. General Pricing Approaches

Dear learners! Let’s begin by posing important questions. Do you know the general approaches most companies use to
establish their prices? If not, do not worry, the following topic discusses about the general approach for setting price.

Pricing decisions are subject to complex environment and competitive forces. To determine their selling price, most
companies establish their prices using one of the following methods:

I. Perceived Value-Based Pricing

Setting price based on buyers’ perceptions of value rather than on the seller’s cost. Value-based pricing occurs when the
marketer sets the price before setting marketing program. The price is set according to target customers’ needs and
perceptions of value. However, it can be hard to measure the value perceived by customers as it is variable and
subjective. Manufactures use the non-price variables in the marketing mix to build up the perceived value in the buyers
mind.

II. Cost-Based Pricing Approach

Setting prices based on the costs for producing, distributing and selling the product plus a fair rate of return for effort and
risk. Companies with lower costs can set lower prices, and although their margins are low, sales and profits are high.
Other companies pay higher costs claiming higher prices due to more value and have higher margins. When using this
approach, the following cost elements are required:

• Fixed costs (overhead) - costs that do not vary with production or sales level.

• Variable costs - costs that vary directly with the level of production

• Total costs - the sum of the fixed and variable costs for any given level of production.
There are two cost based pricing methods:
1. Cost-plus pricing (mark-up pricing): is the simplest method and entails adding a standard mark-up
to the cost of a product. Mark-up does not produce the best price as it does not take into consideration
demand and competitor pricing. But it is popular; because sellers are surer of costs, than of demand; if all firms
in an industry use such pricing, price competition is minimized; it may be perceived as fairer to buyers and
sellers.

Formula:

When mark up is based on selling price, the formula used is:

Markup Price = Unit Cost

(1 - Desired return on sales)
OR

Cost plus pricing when it is based on cost, the formula used is:

Markup Price =Unit Cost + % Unit Cost

Unit Cost = Unit Variable Cost + Fixed Cost

Total unit sales
Example: Suppose a company has 6% marginal profit on sales, 4 Birr unit variable cost, 2000 Birr fixed cost and 200
expected unit sales.

Required: Calculate

a. Unit cost

b. Unit price

Solution:
a. Unit cost = unit variable cost + Fixed cost
Total unit sales
 = 4 + 2000 =14 birr
200
b. Unit price = unit cost + % unit cost
= 14 + 14* 6%

= 14.84 birr

2. Break-even pricing (target return pricing) - setting price to break even on the costs of making and
marketing a product or setting price to make a target return. Different prices should be considered to estimate
volumes, demands and profits.

Target return pricing = unit cost + desired return * invested capital

Total unit sales
Example: Suppose “x” manufactures produces shoes and has the following costs, unit sales expectation and invested 2
million birr in the business and wants to set a price that earns 20%,

Required:

a. Calculate breakeven price for “x” manufactures Solution:

Where:

Variable cost per unit = 20 birr

Fixed cost = 800,000 birr

Expected unit sales = 40,000 units

Target return pricing = unit cost + desired return * invested capital

Total unit sales
= 40 birr + 0.2*2million
40,000
= 50 Birr

III. Competition-Based Pricing

Setting prices based on competitors’ strategies, prices, costs and market offerings. No matter what price is charged in this
case, the company needs to make sure it provides customers with superior value. The two methods are:

1. Going rate pricing- under this approach, the manufacturers sets its prices largely on the competitors’
price with less attention paid to its own costs and demand. This approach is applicable usually when:
• It is not easy to determine the exact cost of the product.
 • The competitors’ response is uncertain.

2. Sealed bid pricing- is used when companies, to win a contract, use their expectations of how the
competitors price their bid as a base for pricing.

Dear learners! Now it is your turn to answer the following self-check questions Self-check 3-3:

1. Distinguish between the three general methods for setting prices?

Dear learners! Have you done self-checks? If yes, let us move on to the discussion on pricing strategies.

3.5. Pricing Strategies

Dear learners! Do you know the different strategies available for companies to set price for their products? The following
topic revolve around these pricing strategies

Pricing strategies refers to the basic strategies that are used to set a particular product. Setting a price for a particular
product is too challenging and too important for a manufacturers and the price that a manufacturer charges will be
somewhere between the one that is too high to produce profit and one that is too low to produce and attract demand.
The pricing strategies are discussed as follows:

3.5.1. New product pricing strategies

Pricing strategies usually alter as a product passes through its life. Companies bringing out a new product face challenge of
setting price for the first time. And they can adopt one of the following techniques.

a) Market Penetration Pricing

Market-penetration pricing is setting a low price for a new product to attract a large number of buyers and a large market
share. Companies following such strategy set a low initial price in order to penetrate the market quickly and deeply to
attract a large number of buyers and win a large market share. This strategy can be achieved if the company can raise its
price as consumer acceptance grows.
 b) Market Skimming Pricing
Market-skimming pricing (price skimming) is setting a high price for a new product to skim maximum revenues layer by
layer from the segments willing to pay the high price; the company makes fewer but more profitable sales. It should
provide healthy profit margins and it is intended primarily to recover research and development costs.

3.5.2. Product mix pricing strategies

The strategy for setting a product’s price is often influenced when the product is part of a product mix. Product mix
pricing strategies should help a firm in setting prices that maximize profits on total product mix. The following are the
major product mix pricing strategies:

a) Product line pricing (price lining)

The pricing authority or department must decide on the price steps to set between various products in a product line
based on cost differences between the products, customer evaluations of different features and competitors’ prices. A
company can use a well-established price points for the products in their line. For example, products in a given line can be
charged Br.3000, Br.5000, and Br.7500 etc. The main task is to establish perceived quality differences that support the
price differences.

b) Optional product pricing

Many companies offer optional products or features with the main product. They must decide which items to include in
the base price and which to offer as an option. If buyers can’t afford for the main product with optional, they can avoid
and hence get the price of the main product low.
Example: Automobiles CD/VCD players

c) Captive product pricing

Companies often price the main product low to attract customers and place high markup on the captive products. For
example; setting low price for blades and high markup on a razor, setting low price for camera and high markup on a film.
Companies that use this strategy must be cautious in finding the right balance between product and captives. Customers
forced to buy expensive captive may begin resenting the brand.

d) By-product pricing
It is about setting a price for by-products to make the main product price more competitive. The price of by-product
should cover at least cost of delivery and storing. Examples include meat processing, petroleum manufacturers (e.g. the
skin, as by product, supports the price of meat - the main product).
 e) Product bundle pricing
Is combining several of the products and offering the bundle at a reduced price. Price bundling can promote the sales of
products consumers might not otherwise buy, but the combined price must be low enough to get them to buy the
bundle. For example, internet service providers sell packages that include web access, web hosting, email, and an
internet search program

3.5.3. Price-adjustment strategies

Price-adjustment strategies are used to adjust basic prices to various customer differences and situations. These strategies
are:

a) Discount:
It is a straight reduction in price on purchases during a stated period of time or of larger quantities. b) Allowance:
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in
some way. Promotional allowances are price reduction to reward dealers for participating in advertising and sales support.
Trades in allowances are price reductions granted for returning an old item when buying new one i.e. to reward loyal
customers.

c) Discriminatory pricing:
Price discrimination occurs when a company sells a product or service at two or more prices based on certain variables such
as location, time, customer type, etc.

d) Psychological pricing (Odd pricing):

Setting price at uneven amounts, such as 9.99 birr instead of 10.00 birr, 99.99 birr rather than birr 100.00and the like.
Odd pricing, another psychological strategy is commonly used in retailing. The rationale for odd pricing is that it suggests
lower prices and as a result yields greater sales than even pricing.

e) Promotional pricing:
Involves temporary pricing products below the list price and sometimes even below cost, to increase short-run sales. It
can be in form of discounts, special-event prices, and limited-time offers. Manufacturers may offer cash rebates, low
interest financing or free maintenance.

Dear learners! Are you very clear about the different strategies used by companies to set price?
Well and good! Let you attempt the following questions as a check for your learning progress.

Self-check 3-4:
 1. What are the available pricing strategies at introduction stage of the new product?

2. Explain the major product mix pricing strategies?

Dear learners!
So far, the general pricing approaches are discussed, let us move on to the discussion of the steps in the general pricing
decision model.

3.6. A General Pricing Decision Model

Dear learners! If the marketing manager assigned you to set price for the company’s product, what steps would you
follow to determine price for the product?

It is clear that effective pricing decision involves the consideration of many factors and depending on the situation any of
these factors can be the primary considerations in setting price. In addition, it is difficult to formulate an exact sequencing
of when each factor should be considered. However, the following pricing decision model views pricing decision as a step
sequence.

Step 1: Define target markets: Any marketing decision making activity should begin with a definition of segmentation
strategy and identification of potential customers.

Step 2: Estimate market potential: The maximum size of the available market determines what is possible.

Step 3: Develop product positioning: The firms brand image in the market place provide important constraints on
the pricing decision as the firm attempts to obtain a unique competitive advantage by differentiating its product
offering from that of competitors.

Step 4: Designing marketing mix: Developing marketing mix element defines the role to be played by pricing in relation
to and in support of other marketing variables.

Step 5: Estimate all relevant costs: while straight cost plus pricing is to be avoided because it is insensitive to
demand, pricing decisions must take in to account necessary plant investment, investment in R&D, and investment in
market development, as well as variable costs of production and marketing.
Step 6: Analyze environmental factors and set pricing objectives: pricing decisions are constrained by industry
practices and legal requirements so the pricing decision must be clear statements of objectives that recognize
environmental factors and define the role of pricing in the marketing strategy of the firm.

Step 7: Develop the price of the product: At this step the price of the product can be determined and will define selling
prices of the product.
Dear learners! Are you very clear about the steps to be followed to determine price. Well and good! Let you attempt the
following questions as a check for your understanding.

Self-check 3-5:
1. List out the
various steps involved in the general pricing decision model to determine product’s price?

Dear learners! So far, critical issues in price mix have been discussed and the self-check questions are addressed, let us
move on to reading the unit summary, answer the unit review questions and perform practical activity.

Unit Summary
Price is the amount of money and/or other items with utility needed to acquire a product. When setting price, a company
should establish pricing objectives pertinent to survival, sales and profit. Besides the firms pricing objectives, other key
factors that influence price setting are (1) demand for the product, (2) competitive reactions (3) strategies planned for
other marketing mix elements, and (4) cost of the product. Three major methods used to determine the base prices are
cost-based, perceived value-based and competition based pricing. For cost plus pricing to be effective, a seller must
consider several types of costs and their reactions to changes in the quantity produced. After deciding a pricing goals and
setting the base price, marketers must establish pricing strategies that are compatible with the rest of the marketing mix.
When a firm is launching a new product, it must chase a market skimming or a market-penetration pricing strategy.
Market skimming uses a relatively high initial price, market penetration is low. Strategies must be devised for discounts
and allowances–deductions from the list price. In order to attract its customers, management is setting different prices–
optional product pricing, odd pricing, by-product pricing, bundle pricing, product line pricing, captive product pricing etc.

Unit Review Questions

Part One: True/ False Questions
Instruction: Say true for the correct statement and say false for the incorrect statements

______ 1. The alternative name for cost plus pricing is mark-up pricing.
______ 2. Quantity discount offer to buyers to encourage bulk purchase which is in the form of quantity only.

______ 3. Going rate pricing is a method that takes into consideration the competitors price.

______ 4. Profit is earned when the selling price of a product equals to its cost.

______ 5. Market skimming pricing calls charging initially high price for existing product

Part Two: Fill in the blank questions

Instruction: write the appropriate answer for the following questions on the space given.

1. ________ is setting relatively initially high price for a new product.

2. ________is setting relatively lower price for a new product.

3. ________ involves temporary pricing products below the list price to increase short-run sales.

4. ________ a pricing method says that the price should represent a high value offer to consumers.

5. ________ is about setting a price for by-products to make the main product price more competitive.

Part Three: Discussion Questions:

Instruction: Give brief answer for the following review questions:

1. Discuss the various factors influencing pricing decisions?

2. Explain the three general pricing approaches for setting price?

3. Explain the pricing strategies for new product?

4. Explain the various product mix pricing strategies?

5. Discuss the various price adjustment strategies?

6. Outline the steps to set price using the general pricing decision model? Part Four: Practical

Activity
Instruction: Understand the questions clearly and perform the following activities.

1. A retailer pays a supplier Br.10 for a product and marks it up to sell at Br.15. based on the information given, you are
required to:

Task 1: Calculate the percentage of markup?

Task 2: Calculate the retailer’s gross margin

Task 3: If the operating costs of the store are Br. 4 per unit, calculate the retailer's profit margin in Birr amount ?

2. Suppose a manufacturer, whose unit cost of the product is Br.16, wants to earn a 20 percent markup on sale.

Task 1: Calculate the mark up price?

 UNIT 4

PLACE MIX DECISIONS

Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude regarding the
following content:

4.1. Meaning of Place ( or Distribution)

4.2. Distribution Strategy

4.3. Nature of Marketing Channel

4.4. Types of Channels

4.5. Factors Influencing the Choice of Distribution Channels

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the completion of
this unit, you will be able to:

✓ Understand the meaning of place/distribution

✓ Gain insight in to the firm’s distribution strategies

✓ Explain the nature and functions of marketing channel

✓ Choose appropriate channels for distributing a product

✓ Examine factors influencing the choice of distribution channels

Key Terms: Place, Marketing channels, Middlemen, Direct channel, Indirect channel. Wholesaler, Retailer.

Introduction:
Distribution role within a marketing mix is getting the product to its target market. The most important activity in getting a
product to market is arranging of its sale and transfer of title from producer to final customer. Other common activities (or
functions) are promoting the product, storing it, and assuming some to the financial risk during the distribution process. A
producer can carry out these functions; however, firms called middlemen perform some of these activities on behalf of the
consumer or the producer. A middleman is a business firm that renders services related directly to the sale/or purchase of a
product as it flows form producer to consumer.

4.1. Meaning of Distribution

Dear learners! Can you try to define the term ‘Place’ which is one of the marketing mix element? How manufacturers
make their products available to end users? Hoping that you have defined and explain it. Now let’s see the definition.

Distribution (or Place) in a marketing mix refers to the various activities the company undertakes to make the product
accessible to target customers. Distribution is fundamentally concerned with ensuring that products reach target customers
in the most direct and cost efficient manner. In the case of services, distribution is principally concerned with access.

4.2. Distribution Strategy

Prior to designing a distribution system, the planner needs to determine what the distribution channel is to achieve in broad
terms. The overall approach to distributing products or services depends on a number of factors including the type of
product, especially perishability; the market served; the geographic scope of operations and the firm's overall mission and
vision. The process of setting out a broad statement of the aims and objectives of a distribution channel is a strategic level
decision. In an intensive distribution approach, the marketer relies on chain stores to reach broad markets in a cost efficient
manner. Strategically, there are three approaches to distribution:

a) Mass distribution: also known as intensive distribution. When products are destined for a mass market, the marketer
will seek out intermediaries that appeal to a broad market base. In
it is the approach to sale products via wide variety of outlets including supermarkets, convenience stores, vending
machines, cafeterias and others.

b) Selective distribution: A manufacturer may choose to restrict the number of outlets handling a product. For example,
a manufacturer may choose to deal with department stores and independent outlets that can provide added value
service level required to support the product.

c) Exclusive distribution: In an exclusive distribution approach, a manufacturer chooses to deal with one intermediary
or one type of intermediary. The advantage of an exclusive approach is that the manufacturer retains greater control
over the distribution process. Another definition of exclusive arrangement is an agreement between a supplier and a
retailer granting the retailer exclusive rights within a specific geographic area to carry the supplier's product.

Dear learners! So far, Place (or Distribution) is defined and distribution strategies are discussed, now it is your turn to
answer the following self-check questions

Self-check 4-1:
 1. Define Place or distribution by your own words?
2. Differentiate among the three distribution strategies?
Dear learners! Have
you answered self-check questions? If yes, let us move on to the discussion of the marketing channels.

4.3. Nature of Marketing Channel

Dear learners! Do you know anything about marketing channel? Can you try to differentiate between wholesaler and
retailer? What functions these marketing intermediaries can perform in the distribution system? If not, do not worry the
whole of the following topic revolves around these basic issues?

Distribution of products takes place by means of a marketing channel, also known as a distribution channel. A marketing
channel is the people, organizations, and activities necessary to transfer the ownership of goods from the point of
production to the point of consumption. It is the way products get to the end-user, the consumer. This is mostly
accomplished through merchant retailers or wholesalers or, in the international context, by importers. In certain specialist
markets, agents or brokers may become involved in the marketing channel.

Typical intermediaries involved in distribution include:

Wholesaler: they are one of the important middlemen in the channel of distribution who deals with the goods in bulk
quantity. They buy goods in bulk from the producers and sell them in relatively smaller quantities to the retailers. In some
cases they also sell goods directly to the consumers if the quantity to be purchased is more. They usually deal with a limited
variety of items and also in a specific line of product, like iron and steel, textiles, paper, electrical appliances, etc.

Retailer: they are the traders who buy goods from wholesalers or sometimes directly from producers and sell them to the
consumers. They usually operate through a retail shop and sell goods in small quantities. They keep a variety of items of daily
use.

Agent: An intermediary who is authorized to act for a principal in order to facilitate exchange. Unlike merchant wholesalers
and retailers, agents do not take title to goods, but simply put buyers and sellers together. Agents are typically paid via
commissions by the principal. For example, travel agents are paid a commission of around 15% for each booking made with
an airline or hotel operator.

Jobber: A special type of wholesaler, typically one who operates on a small scale and sells only to retailers or institutions.
For example, rack jobbers are small independent wholesalers who operate from a truck, supplying convenience stores with
snack foods and drinks on a regular basis.
Using intermediaries enables producers to deliver goods to end customers more efficiently. Economically, marketing
intermediaries are there to transform the assortments of products of manufacturers into those wanted by customers. They
buy larger quantities from producers, and offer consumers to buy smaller ones. Channel intermediaries add value (utility) by
closing the gap in time, place and possession between goods and consumers.

Marketing channel members, in addition to the above major benefits, also perform the following basic functions.
• Information function: gathering and distributing marketing research and intelligence information about people and
forces in the marketing environment, this aids marketing planning

• Promotion function: a distributor also helps in developing and spreading a persuasive communication about a
product or service.

• Contact: finding and communicating with prospective buyers

• Matching: shaping and fitting the offer to the buyer’s needs, including grading, assembling and packaging

• Negotiation: reaching an agreement on price and other terms of the offer so that ownership or possession can be
transferred.

• Physical distribution: transporting and storing goods

• Financing: acquiring and using funds to cover the costs of the channel work

• Risk taking: assuming the risks of carrying out the channel work.

• Sorting is transforming the assortments of products made by producers into the assortments of products wanted by
the buyers. That is, intermediaries may buy large quantities from many producers and break them down to smaller
quantities and broader assortments wanted by consumers.

Dear learners! Now it is your turn to answer the following self-check questions.

Self-check 4-2:

1. Distinguish between wholesaler and retailer?

2. Discuss the basic functions of marketing channel members?

Dear learners! Have you answered self-check questions? If yes, let us move on to the discussion about the types of
channels?
4.4. Types of Channels

Dear learners! Let’s begin by posing questions. How companies distribute their products in a direct channel or in an indirect
channels?

Normally goods and services pass through several hands before they come to the hands of the consumer for use. But in
some cases producers sell goods and services directly to the consumers without involving any middlemen in between them,
which can be called as direct channel. So there are two types of channels, one direct channel and the other, indirect channel.
The following discussion emphasizes how direct and indirect channels looks like for distributing consumer goods and
industrial goods.

4.4.1. Channels for Consumer Goods

The conventional channel of distribution pattern for consumer goods market is shown below:

Manufacturer Consumers

Manufacture Retailer Consumers

Manufacturer Wholesaler Retailers Consumer

Manufacturer v Agent Retailer Consumer

Manufacture r Agent Wholesaler Retailer Consumer

Figure 4.1: Conventional Channels for Distribution of Consumer Goods

Some manufacturers use a direct channel, selling directly to a market. Using a direct channel, called direct marketing
increased in popularity as marketers found that products could be sold directly using a variety of media. These media include
direct mail, telemarketing, direct-action advertising, on-line selling and direct selling through demonstrations at home or
work place.

In other cases, one or more intermediaries may be used in the distribution process. A common channel for consumer goods
is one in which the manufacturer sells through wholesalers and retailers. Small manufacturers may also use agents, since
they don’t have sufficient capital for their own sales forces. The final channel in the above figure is used primarily when small
wholesalers and retailers are involved.
4.4.2. Channels for Business Goods
In contrast to consumer products, industrial goods have a conventional channel of distribution. The conventional distribution
channels of industrial goods are shown below:

Manufacturer Organizational user

Manufacturer Industrial Distributors Organizational user

Manufacturer Agent Organizational users

Manufacturer Agent Industrial Distributor Organizational user

Figure 4.2: Conventional distribution channel for industrial products.

A variety of channels are available to reach organizations that incorporate the products into their manufacturing process or
use them in their operations. In the distribution of business goods, the term industrial distributor and merchant wholesaler
are synonymous

The direct channel is often used in the distribution of Industrial goods. The reason for this steams from the structure of most
business markets, which often have relatively few but extremely large customers. Also, many industrial products such as
computers, need a great deal of presale and post-sale service. Distributions are used in business markets when the number
of buyers is large and the size of the buying firm is small. As in the consumer good, agents are used in business markets in
case where manufactures don’t wish to have their own sales force. Such arrangement can be used by small manufacturers or
when the market is geographically dispersed.

Dear learners! Now it is your turn to answer the following self-check question

Self-check 4-4:

1. Explain a direct and an indirect channels of distribution?

Dear learners!
Have you answered the self-check questions? If yes, let us move on to the discussion about the determinants for the choice
of channels.
4.5. Factors Influencing the choice of
Channels

Dear learners! Let’s begin by posing questions. If you are assigned responsibilities to select channels for distribution, what
considerations would you take in to account while choosing channels?

If a firm is customer oriented, its channel is determined by consumer buying patterns. The nature of the market should be
the key factor in choice of channels. Other considerations are the product, the middlemen, and the company itself.

1. Market considerations:

A logical starting point is to consider the target market its needs, structure and buying behavior.

a) Type of market: because ultimate consumers behave differently than business users, they are reached through
different distribution channels. And retailers, by definition, serve ultimate consumers, so they are not in channels for
business goods.

b) Number of potential customers: manufacturers with few potential customers may use its own sales force to sell
directly to ultimate consumers.

c) Geographic concentration of the market: when most of a firm’s prospective customers are concentrated in
few geographic areas, direct marketing is practical. Sellers may establish sales branches in densely populated
markets and use intermediaries in less concentrated markets.
d) Order size: when either order size or total volume of business is large, direct distribution is economical.

2. Product considerations:

The following product related factors are mainly considered in channel decisions.

a) Unit value: products with low unit price are distributed through one or more intermediaries. High unit price items
can be affordably sold through company’s sales persons by making calls to prospective buyers.

b) Perishability: perishable products require direct or very short channels.

c) Technical nature of products: a business product that is highly technical is often distributed directly to business
users and provision of presale and post-sale services is compulsory.

3. Intermediary consideration:

a) Services provided by an intermediary: a producer should select a channel offering those marketing services
that the producer either is unable to provide or can’t economically perform.
 b) Availability of desired channels: the intermediary preferred by a producer may not be available. They may carry
competing products, and, as a result not want to add another line.

c) Producer’s and intermediary’s policies: when an intermediary is unwilling to join a channel because they
consider a producer’s policies are unacceptable, the producer has fewer channel options. Some retailers or
wholesalers, for example, will carry a producer’s item only if they receive assurance that no competing channel
members will carry a producer’s item only if they receive assurance that that no competing channel members will
carry the item in the same territory.

4. Company consideration:

Before choosing a distribution channel for a product, a company should consider its own situations.

a) Desire for channel control: some producers establish direct channels because they want to control their
product’s distribution, even though a direct channel may be more costly than an indirect channel.

b) Services provided by the seller: some producers make decisions about their channels based on the distribution
functions desired by intermediaries. For example, several retail chains will not stock a product unless it is presold
through heavy advertising by the producer.

c) Ability of management: many companies lacking marketing know how turn the distribution job to the
intermediaries.

d) Financial resources: a business with adequate finance establishes its own sales force, grant credits, warehouses
its products. A financially weak firm uses intermediary’s to provide those services.

Dear learners! Now it is your turn to answer the following self-check question

Self-check 4-4:

1. Write the factors to be considered in choice of channels?

Dear learners! So far, marketing channels, intermediaries and their functions in distribution system, types of channels and
factors in choice of channels are discussed in this unit, let us move on to reading the unit summary, answer the unit review
questions and perform practical activity.
 Unit Summary
Distribution or place is one of the four elements of the marketing mix. Distribution is the process of making a product or
service available for the consumer or business user who needs it. This can be done directly by the producer or service
provider, or using indirect channels with distributors or intermediaries.
Marketing channel members perform basic functions like promotion, negotiation, risk taking, sorting, physical distribution,
financing, etc.

Developing a coherent distribution plan is a central component of strategic planning. At the strategic level, there are three
broad approaches to distribution, namely mass, selective and exclusive distribution. In an intensive distribution approach,
the marketer relies on chain stores to reach broad markets in a cost efficient manner.

Channels of distribution is a set of peoples and firms involved in the flow of title to the product as it moves from point of
production to ultimate consumption. A channel includes producers, final customers and any middlemen that participate in
the process.

The number and type of intermediaries selected largely depends on the strategic approach. The overall distribution channel
should add value to the consumer.

The overall approach to distributing products or services depends on a number of factors including the type of product,
especially perishability; the market served; the geographic scope of operations and the firm's overall mission and vision.

Unit Review Questions

Part One: Multiple Choice Questions
Instruction: Choose the best answer from the given alternatives.
1. Which of the following statement is/are true?
A. Wholesaler are usually sale directly to consumers.
B. Distribution provides a place and time utility
C. Agents take title to goods
D. Intermediaries are involved in a direct channel.
2. In _____________ approach, a manufacturer chooses to deal with one intermediary or one type of intermediary.
A. Mass distribution C. Selective distribution

B. Exclusive distribution D. Direct distribution

3. Which of the following factors influence manufacturers to choose direct channel of distribution?
A. When a product is highly technical
B. When customers are geographically dispersed.
C. Large volume order
D. All except B
4. ____________ is a merchant middlemen that buy products from producer and sale these products to consumers in a
large quantity?
A. Wholesaler C. Agent B. Retailer D. Jobber

5. Company intermediaries represent:

A. those parties consult and suggest management
B. those parties who might receive financial assistance from the company

C. those parties concerned with promoting the company’s product D. A and C

 Grade 11 Marketing and Sales Management Student Module

Part Two: Discussion Questions:

Instruction: Give brief answer for the following review questions:

1. What is a distribution channel? Discuss the factors determining the choice of channel?

2. Discuss the basic functions performed by marketing channel members?

3. Identify and discuss the various types of channel used to distribute consumer goods?

4. Identify and discuss the various types of channel used to distribute industrial goods?

5. Distinguish among the typical intermediaries involved in distribution?

Part Three: Practical Activity:

1. Visit a business/company located in your city or operates in your community, then conduct an interview or observation or
any other means to collect information regarding the company’s Distribution decisions. You are required to write your
reflection based on the data collected and by using any reference materials to support your output.

Your reflection must cover all of the following issues:

✓ General description/background of the business organization you have visited

✓ The company’s place (or distribution) decisions: it includes

• The company’s distribution strategy?

• The company’s distribution coverage?

• What types of channels the company used to reach consumers?

• What kind of intermediaries are participated in the company’s distribution system?

• Additional or after sales services provided by the company

MINISTRY OF EDUCATION 2

UNIT 5
 PROMOTION MIX DECISIONS
Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude regarding the
following content:

5.1. Meaning of Promotion

5.2. Functions of Promotion

5.3. Promotional Strategies

5.4. Planning Promotion

5.5. The Promotional Mix Elements

5.6. Concept of Integrated Marketing Communications (IMC)

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the completion of
this unit, you will be able to:

✓ Understand the meaning of promotion

✓ Explain functions of promotion

✓ Describe promotional strategies

✓ Develop promotion plan

✓ Gain insight in to the promotional mix elements

✓ Explain Integrated Marketing Communications (IMC)

Key Terms: Promotion, Pull Strategy, Push Strategy, Advertising, Personal Selling, Sales Promotion, Publicity, Direct
Marketing, Integrated Marketing Communication.

Introduction:
Promotion is a critical ingredient of the marketing Mix-with promotion activities the firm directly communicates with
customers, unlike the other elements of marketing mix. A good promotional activity also compliments the product,
distribution and price. Modern marketing calls for more than developing a good product, pricing it attractively, and making it
accessible to target customers. Companies must also communicate with their present and potential customers, retailers,
supplies and other stakeholders and the general public.
Promotion serves to inform, persuade, and remind the market of a product and/or the organization selling it, with the hope
of influencing the recipients’ feelings, beliefs, or behavior. Promotion includes all those activities which are aimed at creating
or stimulating demand.

5.1. Meaning of Promotion

Dear learners! Can you try to recall the term promotion as one of the element of marketing mix from the previous lesson
on unit one? Hoping that you have remembered them.

Promotion can be defined as the “coordination of all seller initiated efforts to setup channel of information and persuasion
to facilitate the sale of goods or services, or acceptance of an idea”. Thus, promotion is a marketing activity which is aimed at
informing, persuading, and inducing the consumer to buy goods or services. So to be successful a marketer must not offer a
good product at a reasonable price but also communicate with potential customers about the product and where they can
buy it.

5.2. Functions of Promotion

Some of the major functions accomplished by promotion are:

• Promotion establishes an image such as prestige for the company.

• Communicate features of goods and services.

• It creates awareness for new good and service.

• Keeps existing goods and service popular.

• Explains where goods and service can be purchased.

• Justify the prices of goods and services.

• Places the company and its good and services in a favorable light relative to competitors. Dear learners!

Now it is your turn to answer the following self-check questions

Self-check 5-1:

1. Define what is promotion?

2. Write the major functions of promotion?

Dear learners! Have you answered the self-check questions? If yes, let us move on to the discussion about promotional
strategies.
5.3. Promotional Strategies
Producers aim their promotional mix at both middlemen and end users. A promotional program aimed primarily at
middlemen is called a push strategy, and a promotion program directed primarily at end users is called a pull strategy.

5.3.1. Push Strategy

Using a push strategy means a channel member directs its promotion primarily at the middlemen that are the next link
forward in the distribution channel. A producer promotes a particular product to channel members, who in turn promote it
to final consumers. The product is "pushed" through the channel.

Manufactu
Retailer
rers Wholesaler
promotes
promotes promotes to Consumer
to
to retailer promotes to
consumer
wholesalers retailers

Orders to manufacturer
Figure 5.1: A push strategy

5.3.2. Pull Strategy

With a pull strategy, promotion is directed at end users usually ultimate consumers. The intention is to motivate them to ask
retailers for the product. The retailers, in return will request the product from the wholesalers, and the wholesalers will order it
from the producer. In effect, promotion to consumers is designed to "pull" the product through the channel. This strategy relies
on heavy advertising and various forms of sales promotion such as premiums, samples, or in-store demonstration.
 Consumer Retailer Wholesaler
Manufacturer demands demands demands
s promotes to product product product
consumers from from from
retailers wholesaler manufactur
ers

Orders to manufacturer

Figure 5.2: A pull strategy

Dear learners! Now it is your turn to answer the following self-check question

Self-check 5-2:

1. Differentiate between pull and push promotional strategies?

Dear learners!
Have you answered the self-check questions? If yes, let us move on to the discussion about designing promotional plan.

5.4. Developing Promotional Plan

There are eight steps in developing an effective total communication and promotion program.

Step 1: Identify the Target Audience

A marketing communicator must start with a clear target audience in mind. The audience could be potential buyer of the
company’s product, current users, deciders or influencers. The audience could be individuals, groups, special public or the
general public. The target audience will critically influence the communicator’s decision on what to say, how to say it, when
to say it, where to say and who to say it.

Step 2: Determining the Communication Objective

Once the target market has been defined, the marketing communicator must decide on the desired audience response. The
desired ultimate responses are purchase, but purchase behavior is the end result of a long process of consumer decision-
making. The marketing communicator needs to know how to move the target audience to higher states of readiness to buy.

The target consumer may be in any of the six buyers-readiness state, the state consumer normally pass through on their way
to making a purchase. These states include;

1. Awareness – If most of the target market is unaware of the object the marketer task is to build awareness, perhaps
just name recognition. This task can be accomplished with simple messages repeating the product name.
 2. Knowledge – The target market might have company or product awareness but not know much more. At this stage,
the objective is to build product knowledge.

3. Liking – If target market knows about the product, how do they feel about it? If the target market looks unfavorably
on the company’s product, the marketer has to find out why and then develop a communication campaign to shore up
favorable feelings,

4. Preference – The target market might like the product but not prefer it to others. In this stage, the marketer must try
to build consumer preference.

5. Conviction – A target market might prefer a particular product but not developed a conviction about buying it. The
marketer job is to build conviction among interested customers.

6. Purchase – Finally, Some members of the target market might have convictions but not quite get around making the
purchase. They may wait for more information to plan or act later. The marketer must lead these consumers to take the
final step. Action might include offering the product at a low price, offering a premium, or letting consumers try in on a
limited basis.

Step 3: Designing the Message

Having defined the desired audience response, the communicator moves to developing an effective message. Ideally, the
message should gain attention, hold interest, arouse desire and elicit action. In practice, few messages take the consumer all
the way from awareness through purchase.

In putting the message together, the marketing communicator must solve four problems; what to say (message content),
how to say it logically (message structure), how to say it symbolically (message format) and who should say it (message
source).

i.Determining message content: in determining the best message content, management searches for an appeal or
theme. There are there types of appeals: rational, emotional and moral.
a) Rational appeals- relates to the audience self-interest. They show that the product will produce the desired benefit.
Examples are messages demonstrating a product’s quality, economy value or performance. It is widely believed that
industrial buyers are most responsive to rational appeals.
b) Emotional appeals–attempts to strip up negative or positive emotions that will motivate purchase. The product may
be similar to the competitors offering but has unique association for consumers so communication should appeal to
these associations. In addition, communicators have worked with negative appeals such as fear, guilt, and shame to
get peoples to do things they should (eg. Brush their teeth) or stop doing things they should not (e.g. Stop smoking).
Communicators also use positive emotional appeals such as humor, love, pride and joy.

c) Moral appeal–are directed to the audience’s sense of what is right and wrong. They are often used to urge people to
support social cause, such as a cleaner environment and fighting Corona Virus.
 ii.Determining message structure: There are three issues in determining message structure:
a) Deciding on whether to draw conclusion or leave it to the audience

b) Whether to present one-sided argument (only the product’s strengths) or a two-sided argument (telling the
product’s strengths and shortcomings). One sided argument is commonly used.

c) Whether to present the strongest argument first or last: presenting them first gets strong attention but may lead to
an anticlimactic ending.

iii. Determining message format: Strong format is also needed for effective promotion. Examples are:
a) Print advertisements: this involves deciding on headline, copy, illustration, colors, eye catching and pictures etc.

b) Communication on radio: choice of words, voices, and sounds etc.

c) Television promotion: all the above elements plus body languages like facial expressions, gestures, dress,
posture, and hairstyle etc.

iv.Decide the message source:

The effect depends on how target audience views the communicators. Message delivered by attractive or popular sources
achieve higher attention and recall. Advertisers often use celebrities as spokespeople. Celebrities are likely to be effective
when they personify a key attribute. But what is equally important in the spokesperson is credibility. Message delivered by
highly credible sources are more persuasive.

Step 4: Selecting the Communication Channels

The communicator must select efficient channel of communication to carry the message. There are two broad types of
communication channels; personal and non-personal.

a) Personal communication channels–This involves two or more persons communicating directly with each other. They
might communicate face–to–face, over the telephone or through mail.

b) Non-personal communication channels–This carry message without personal contact or interaction. They include
media, atmosphere and events.

• Media consists of print media (newspaper, magazine, and direct mail), broadcast media (radio, television),
electronic media (audio tape, videotape) and display media (billboards, posters).

• Atmospheres are “packaged environments” that create and reinforce the buyer’s learning towards product
purchase.

• Events are occurrences designed to communicate particular messages to target audiences. New conferences, grand
openings and sport sponsorships are events designed to achieve specific communication effect to target audiences.

Step 5: Establishing the Total Promotional Budget

Budget setting is also one phase in developing effective promotional campaign. Setting budget for promotion is a challenging
task. To make this task easy four alternative techniques are sited. These are:

a) All you can afford method: In this technique fund will be allocated for every element of marketing mix except for
promotion. Whatever fund left over is placed in promotion budget.
This method holds least potential for making sound promotional decision. There is also high risk of having no promotion
budget, if no funds are left over.

b) Percentage of sales method: Using this method the company ties the promotion budget to sales revenue. In this
case sales volume determines promotional budget rather than planning the promotional budget to achieve some
desired sales objectives. The limitations of this method are; there is no relationship to objectives, promotion is used as a
sales follower not as a leader and it also provides too large budget during high sales period and too small budget during
low sales period.

c) Competitive parity method: Some company’s set their promotion budget to achieve share– voice parity with their
competitor. That is, the company’s promotion budget is raised or lowered according to the action of competitors. The
method is a market–oriented approach. However, it is a following not a leading approach.

d) Objective and task method: This method calls up on marketers to develop their promotion budget by defining their
specific objective, determining the task that must be performed to achieve these objectives and estimating the cost of
performing these task. The sum of these costs is the proposed promotion budget.

Consequently, managers must always be aware that there is no universally accepted method of setting budget. It is unlikely
for a firm to employ a certain method as a sole means of establishing the promotional budget.

Step 6: Deciding on the Promotional Mix

Promotion mix is the specific mix of advertising, personal selling, sales promotion, publicity and direct marketing, that a
company uses to pursue its marketing objectives. It is possible to achieve a given sales level with varying promotion mixes.
Each of the promotional tool elements has unique characteristics and plays a distinctive role in an integrated promotion.

The promotion mix (also called the marketing communications mix) consists of five major modes of communication: The five
promotional tools are;
a) Advertising: Any Paid form of non-personal presentation and promotion of ideas, goods, or services by an identified
sponsor

b) Sales promotion: A variety of short-term incentives to encourage trial or purchase of a product or service

c) Public relation & Publicity: A variety of programs designed to promote and/or protect a company's image or its
individual products.

d) Personal selling: Face-to-Face interaction with one or more prospective purchasers for the purpose of making
presentation, answering questions, and processing orders.
 e) Direct Marketing: Use of mail, telephone, fax, e-mail, and other non-personal contact tools to communicate
directly with or solicit a direct response from specific customers and prospects

Step 7: Implement the promotion plan

This step is about changing the promotional plan in to action.

Step 8: Measuring the Promotion’s Results

After implementing the promotional plan, the communicator must measure its impact on the target audience. This involves
asking the target audience whether they recognize or recall the message, how many times they saw it, what points they
recall, how they feel about the message, and their previous and current attitude towards the product and company.

Dear learners! Now it is your turn to answer the following self-check question

Self-check 5-3:

1. Demonstrate steps in developing promotional plan?

2. List the objectives of promotion?
3. Give example of the emotional and rational appeal of promotional messages?
4. Discuss the techniques for establishing promotional budget?

Dear learners! Have you answered the self-check questions? If yes, let us move on to the discussion about promotional
tools.

5.5. The Promotional Mix Elements

(Marketing Communication)

Dear learners! Can you try to recall the promotional mix elements that we were discussed on unit one? Hoping that you
have remembered them. The following discussion emphasis on the promotional mix elements.

The promotion mix elements refer to those basic forms of promotion that a company uses for reaching target market and to
stimulate and create demand for its products. It consists of five tools that have unique characteristics and costs that
determine in which situations it will be most effective. For each category specific promotional tools can be used to
communicate with consumers. But marketing goes beyond the promotional tools, as all features of the product
communicate something to consumers. The five promotions mix elements are:

5.5.1. Advertising
Advertising is one of the most common tools companies use to direct persuasive communication to target buyers and
publics. Advertising can be defined as follows:-
"Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified
sponsor."

Advertising can reach masses of geographically dispersed buyers at a low cost, says something positive about seller’s size,
popularity and success, but it cannot be as persuasive as people and lacks personal touch. It can be used to build up long-
term image and can trigger quick sales. It includes not only business organizations, but also museums, charitable
organizations, governmental agencies that direct messages to target publics.

Advertising, sales promotion, and public relations are the mass communication tools available to customers. As its name
suggests, mass communication uses the same message for everyone in an audience.

Generally, all advertisements have four features. • A verbal and/or visual

message

• A sponsor who is identified.

• Delivery through one or more media

• Payments by the sponsor to the media carrying the message.

Advertising then, consists of the activities involved in presenting to an audience a non-personal, sponsor identified, paid for

message about a producer or organization. Objectives of Advertising

All in all, advertising objectives can be classified according to whether their aim is to inform, persuade and remained.

o Informative advertising: an aim to create awareness and knowledge of new products or new features of existing
product; or it is often used when introducing a new product when the objective is to build primary demand.

o Persuasive adverting: an aim to create liking, preferences, conviction and purchase of a product or service; or it is
more used when competition is increasing and helps for building selective demand. It can become comparative
advertising in which the company directly or indirectly compares the brand to competition. It should be used with
caution, as it can result in advertising war.

o Reminder advertising: an aim to stimulate repeat purchase of a product or service; or it is relevant for mature
products and is used to maintain customer relationships. Its major goal is to help customers to move through the buying
process, for instance moving them to immediate action or changing the way they think.
Types of Advertising
a. Brand advertising: an advertising that promotes specific brand-name of products.

b. Institutional advertising: an advertising that promotes a firm’s long term image, not a specific product.

c. Retail advertising: advertising by retailers designed to reach end users of a consumer product.

d. Cooperative advertising: an advertising in which a manufacturer together with a retailer or wholesaler advertise
in order to reach customer.

e. Industrial advertising: advertising by manufactures designed to reach other manufactures’ professional

purchasing agents and managers of firms buying raw materials and /or components.

f. Trade advertising: advertising by manufacturers designed to reach potential wholesalers and retailers.

Types of Advertising Media

Advertisers must choose media that can effectively and efficiently transmit message to target customers. Media is a vehicle
through which an advertiser communicates their message to likely customers or prospects with a view to influencing them in
terms of the advertising objectives. The advertising media can be classified on the following basis.

a) Indoor Advertising or Broadcast media

Indoor advertising includes, television, radio, in slides and cinema as a media to disseminate advertising messages.

b) Press Advertising
Press advertising includes advertising in newspaper, magazines, trade journals, and business directory. The newspaper is the
most popular form of advertising.

c) Direct Mail
Direct mail, also known as direct marketing, is the most personal and selective of all media. Direct mail goes only to the
people the advertiser wishes to contact; there is almost no wasted coverage.

d) Outdoor Advertising
Advertising which are noticed by persons when he is outdoors. This media includes bill boards, posters, vehicular
advertisement, sky advertising, and electrical signs. But because it is seen by people "on the go" outdoor advertising is
appropriate only for brief messages.

5.5.2. Personal Selling

As personal selling is a personal communication, it involves salespersons. A salesperson is an individual representing a
company to customers by performing one or more of the following activities: prospecting, communicating, selling, services,
information gathering and relationship building.

Personal selling can be defined as follows:-

“Personal selling is the personal communication of information to persuade somebody to buy something"

“Personal selling is a promotional element that involves personal (face to face) presentations to one or more prospects by
the firm’s sales force for the purpose of making sales and building customer relationships.”

The personal selling process is logical sequence of steps that a sales person takes in dealing with prospective buyer for some
desired customer action. The desired action usually is to get the customer to buy a good or a service. Personal selling allows
a variety of customers and forces the buyer to listen and respond. However, it is most costly out of all tools.

Distinctive Qualities of Personal Selling:

• Personal interaction: involves an immediate and interactive relationship between two or more persons. Each party is
able to absorb the others reaction.
• Cultivation: permits all kinds of relationship to spring up, ranging from a matter of fact selling relationship to deep
personal friendship.

• Response: makes the buyer feel under some obligation for having listened to the sales talk.

The Personal Selling Process

The selling process consists of steps that salespeople follow when selling, which include the following seven steps:

Step 1: Prospecting and Qualifying

Prospecting refers to the identification and listing of potential buyers. Qualifying is the evaluation of prospects on the bases
of financial capacity, volume of businesses, location and possibilities for growth and categorizing them as good or poor
prospects.

Step 2: Pre-approaching

It involves research and preparation. A salesperson learns as much as possible about a prospective customer before making
a sales call. This may be their specialty needs, buying styles, the time convenient for them. The salesperson needs to set call
objectives, determine best approach and overall sales strategy.

Step 3: Approaching

During this step, the salesperson meets the customer for the first time. This step involves the sales person’s appearance,
opening lines and the follow-up remarks. Good appearance, positive opening lines, and a very need tailored questions that
are carefully monitored are effective approaching techniques.
Step 4: Presentation and demonstration

A salesperson tells the product “value story” to the buyers, showing how the company’s offer solves the customer’s
problems. Customer-solution approach is fitting for relationship marketing. The approach calls for listening and applying
problem-solving skills to develop solutions to present. Lastly, salespeople need to plan their presentation methods,
employing advanced presentation technologies.
Step 5: Handling objections

A salesperson needs to use positive approach to seek out, clarify and overcome customers’ objections to buying and turning
them into reasons for buying. A sales person should encourage buyers to state their objections. Then the sales person has an
opportunity to meet the objections and to bring at additional product benefits or reemphasis previously stated points.

Step 6: Final Close

Salespeople need to know how to recognize closing signals from the buyer and can use several closing techniques such as
asking for the order, review points of agreement, offer help to write up the order, ask which model the buyer wants, or note
the buyer will lose out if the order is not placed immediately.

Step 7: Post Sale Services

An effective selling job does not end when the order is written up. The final stage of a selling process is a series of post-sale
activities. That can build customer good will and lay the groundwork for future business.

This step also involves salesperson follows up after the sale to ensure customer satisfaction and repeat business. For
example, to avoid dissatisfaction due to wrong installation, repair etc.

5.5.3. Sales Promotion

Sales promotion is a key ingredient in marketing campaign.

It can be defined as follows:

‘Sales promotion is short-term incentives to encourage the purchase or sales of product or service’.

"Sales promotion consists of a diverse collection of incentives tools mostly short term designed to stimulate quicker and/or
greater purchase of particular products by consumer or the trade."

In other words sales promotion is a demand stimulating devices designed to supplement advertising and facilitate personal
selling. Whereas advertising and personal selling offer reasons to buy a product or service, sales promotion offers reasons to
buy now.
Sales promotion should be included in a company's promotion plans, along with advertising and personal selling.

Objectives of Sales Promotion

The basic objectives of sales promotions are:

 • To introduce new products

- To induce buyers to purchase a new product, free samples may be distributed or money and merchandise allowance
may be offered to business to stock and sell the product.

• To attract new customers

- New customers may be attracted through issue of free samples, premiums, and contests and similar

• To induce present customers to buy more

- Present customers may be induced to buy more by knowing more about a product, its ingredients and uses.

• To help firm remain competitive

- Sales promotions may be undertaken to meet competition from a firm.

• To increase sales in off season

- Buyers may be encouraged to use the product in off seasons by showing them the variety of uses of the product.

• To increase the inventories of business buyers

- Retailers may be induced to keep in stock more units of a product so that more sales can be effected devices.

Major Sales Promotion Tools

Developing sales promotion plan involves selection of appropriate sales promotion techniques. Common sales promotion
techniques/tools used by a company based on the target market are as follows.

1. Consumer promotion tools

Consumer promotions are sales promotion tools used to boost short-term customer buying and involvement or enhance
long-term customer relationships or build long term market share. They include:

o Samples: are the most effective, but also most expensive as a way to introduce new products or boost popularity of
existing one. Samples are offers of a free or a small amount or trial of a product to consumers. The sample might be
delivered door to door, sent in the mail, picked up in a store, found attached to another product or featured in an
advertising offer.

o Coupons: (a saving certificate that obtains buyers when they specified products at lowest price) are loved by
consumers and can help to promote new brand or stimulate sales of existing one, but lead to coupon clutter.
 o Cash refunds (rebate): are similar to coupons but price reduction occurs after purchase. It offers purchase to refund
part of the purchase price of a product to consumers who send a
“proof of purchase” to the manufacturers. Cash refunds have been used for major products such as automobiles as
well as for packaged goods.

o Price packs (money-off deals/ cents off deal): offer consumers reduced prices directly on the package or label
and are most effective in stimulating short term sales. These are offers to consumers of savings off the regular price of
a product, flagged on the label or package. They may take the form or a reduced-price pack which is single packages
sold at a reduced price (such as two for the price of one) or a banded pack, which is two related products banded
together (such as a tooth brush and tooth paste). Price packs are very effective in stimulating short term sales, even
more than coupons.

o Premiums: (goods offered either free or at low cost) are incentives to buy a product.
o Promotional products: are items imprinted with brand name, logo or message and given for free to consumers.

o Point-of-sales (POS) promotions: (displays and demonstrations that takes place at the point of sale) offered by
manufacturers to retailers

o Patronage reward: cash or other award for the regular use of a certain company’s products or services.

o Contests, sweepstakes and games: promotional events that give consumers the chances to win something – such
as cash, trips, or goods-by luck or through extra effort.

o Event marketing (event sponsorship): means creating a brand-marketing event or serving as a sole or
participating sponsor of events created by others. This is considered the fastest growing area in promotion linking
events and sponsorship to brand value proposition.

2. Trade promotions
Trade promotions (i.e. promotion for channel members) are sales promotion tools used to persuade retailers to carry a
brand, give it shelf space, promote it in advertising and push it to consumers. Due to scarce shelf space manufacturers often
offer price-offs, allowances, buy-back guarantees, or free goods. Several promotion tools can be used such as discounts (a
straight reduction in prices on purchases during a stated period of time), allowances (promotional money paid by
manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way), free goods; push
money or free specialty advertising items.

3. Sales force promotion

There is overlap between the devices directed at middlemen and those designed for the producer's own sales force. Sales
contests are probably the most significant of these. The most common incentive is cash, used in over half of all contests
5.5.4. Publicity
Publicity is any communication about an organization, its products, or policies, through the media that is not paid for by the
organization. Publicity usually takes the form of a news story appearing in the media or an endorsement provided by an
individual either informally or in a speech or interview. Publicity is the disseminating of information by personal or non-
personal means and is not directly paid by the organization and the organization is not the source.

Publicity has high credibility, news stores and features are more authentic and credible to readers than advertising. And also
publicity can reach prospects that prefer to avoid sales person and advertising.

Major public relations tools

a) Publicity can be conducted through the following techniques:

b) Press relation: Presenting news and information about organization in the most positive light

c) Product publicity: Sponsoring various efforts to publicize specific products

d) Corporate Communication: Promoting understanding of the organization with internal and external
communications

e) Lobbying: Dealing with legislators and government officials to promote or defeat legislation and regulation

f) Counseling: Advising management about public issue and company positions and image. This includes advising in
the event of a product mishap when the public confidence in a product is shaken.

Advantages of publicity

• It can help to accomplish any communication objectives that can be used to announce new products, new policies,
describe research breakthroughs.

• It has much credibility than advertising

• It has lower costs than advertising or personal selling. Publicity usually costs less because there are no media or tame
costs for conveying the message and no sales people to support it.
• It increases readership; Publicity is presented as editorial materials or news, so it gets greater readership.

• It contains more information; because it is presented as editorial material, it can contain greater details than advertising.
More information and persuasive communication is included in the message.

5.5.5. Direct Marketing

Direct marketing is defined as connecting directly with carefully targeted segments of individual consumers, often on a one-
to-one, interactive basis. For most companies, direct marketing is a supplemental channel, but for others it is a complete
model for doing business. There are several major forms of direct marketing.
Benefits of Direct Marketing
Benefits to buyers: direct marketing is convenient, easy and private. Customers can shop anything anywhere and anytime.
Direct marketing gives access to a huge variety of products as well as comparative information. It also is immediate and
interactive giving consumers more control.

Benefits to sellers: direct marketing is a helpful tool for building customer relationships giving companies an opportunity
to interact with customers. It is a low-cost, fast and efficient way of reaching target markets, handling of channel and logistic
functions. It also provides an opportunity for greater flexibility in making adjustments to price and programs. Digital
environment provides tools for building close personalized interactive customer relationships, giving access to buyers that

would otherwise not be reached. Forms of direct marketing

There are several major forms of direct marketing. These are:

o Direct-mail marketing: direct marketing by sending an offer, announcement, reminder or other item to a person at a
particular physical or virtual address. It is to be used well for direct one-to-one communication as it is flexible, can be
personalized and allows for high target market selectivity and easy measurement of results.
o Catalogue marketing: direct marketing through print, video or digital catalogues that are mailed to select customers,
made available in stores, or presented online. Digital catalogues are gaining popularity and eliminate printing and
mailing costs as well as can offer unlimited merchandise. They also offer more presentation formats and allow real-time
merchandising. However, printed catalogues are still thriving as they create an emotional connection and drive online
sales.

o Telemarketing: it entails using the telephone to sell directly to customers and to business customers. Companies use
outbound telemarketing to sell directly and inbound to receive orders. The benefits of telemarketing include purchasing
convenience, increased product and service information. However, consumers have been annoyed by telemarketing and
the government introduced do-not-call law which has been hurting the telemarketing industry. Dear learners! Now it
is your turn to answer the following self-check question

Self-check 5-4:

1. Define advertising? And discuss the objectives of advertisements?

2. Define personal selling? And explain the steps involved in selling process?
3. What is sales promotion? Discuss the various tools of sales promotion?
4. Discuss the meaning and purposes of publicity?
5. What is direct marketing? Discuss the forms of direct marketing?
5.5.6. Integrated Marketing Communications (IMC)

Dear learners! We have discussed in detail about the concept of marketing communication in this unit. Based up on the
discussion, can you try to explain what Integrated Marketing Communication mean? Hoping that you have tried your level
best. The following discussion emphasis on Integrated Marketing Communication.

Several factors are changing today’s marketing communication. First, consumers are changing: they are better informed and
more empowered. Also, marketing strategies are shifting away from traditional mass marketing. Communications technology
is changing the way companies and customers communicate with each other. The changes come together in a need for
integrated marketing communications (IMC).

Integrated marketing communications (IMC) which involves carefully integrating and coordinating the company’s many
communication channels to deliver a clear, consistent and compelling message about an organization and its products.

Integrated marketing communications (IMC): is the process of unifying a brand’s messaging to make it consistent across all
media that the brand uses to reach its target audience.

Integrated marketing communication (IMC): is a strategic approach that integrates various marketing channels to create a
consistent brand message.

5.5.7. Importance of Integrated Marketing Communication (IMC)

▪ Constant Brand Communication: IMC makes ensuring that a single brand message is communicated over all
channels of communication, supporting the maintenance of the brand’s identity and core values at different touch
points.

▪ Improved Consumer Participation: IMC helps businesses engage consumers more successfully by combining
marketing initiatives, which builds stronger bonds and relationships.

▪ Efficient Resource Allocation: By coordinating marketing initiatives, reducing effort duplication, and
optimizing the impact of each campaign, IMC makes it possible to allocate resources efficiently.

▪ Enhanced Brand Loyalty: IMC’s consistent and well-coordinated communication fosters consumer trust and
loyalty, which promotes advocacy and repeat business.

▪ Competitive Advantage: Organizations that successfully integrate IMC stand out from the competition by
offering a smooth and engaging brand experience that appeals to customers.
5.5.8. Components of the Integrated Marketing Communications (IMC)
1. Advertising: Advertising is the paid marketing of goods, services, or brand messaging across a range of media, including
print, radio, television, internet platforms, and outdoor billboards.
2. Public Relations (PR): Its main goals are to manage and shape the public’s opinion of a brand through effective
relationship-building and communication strategies. To improve a brand’s credibility and reputation, this includes
influencer relationships, events, and sponsorships, press releases, and media relations.

3. Direct Marketing: Using media like email, direct mail, telemarketing, and SMS, direct marketing is communicating
directly with specific customers or target populations. With this individualized strategy, marketers may reach out to
customers directly with customized offers, promotions, or messaging, encouraging a more prompt and personalized
reaction.

4. Sales Promotion: Using temporary incentives like discounts, coupons, competitions, samples, or loyalty programs,
sales promotion strategies aim to boost sales right away or foster customer involvement.

5. Virtual Marketing: Virtual/Digital marketing reaches and interacts with customers through online platforms and
channels including social media, websites, mobile applications, and search engines. This include techniques to improve
brand awareness, create leads, and drive traffic online, including as pay-per-click (PPC) advertising, social media
marketing, content marketing, and search engine optimization (SEO).

6. Content Advertising: To draw in and hold on to a well-defined audience, content marketers create and disseminate
valuable, pertinent, and consistent information. This material is intended to inform, entertain, or inspire customers while
discreetly advertising the business. It can come in a variety of formats, including articles, blogs, videos, info-graphics, and
podcasts.

7. Social Media Marketing: Social media marketing is connecting and interacting with customers via the use of social
media platforms like YouTube, LinkedIn, Instagram, Facebook, and Twitter. Social media is a tool that brands utilize to
distribute content, engage with followers, create communities, and show off their personalities and beliefs in order to
humanize their business.

8. Partnerships and Sponsorships: In order to broaden their audience, increase brand awareness, and establish their
reputation, brands frequently work with other brands, companies, or individuals through partnerships and sponsorships.
This might be contributing to co-branded campaigns, supporting events as a sponsor, or teaming up with influencers to
promote goods or services.

Dear learners! Now it is your turn to answer the following self-check question

Self-check 5-5:
1. What is
integrated marketing communication? What factors contribute for the increasing use of IMC?

2. What are the benefits IMC provides for companies?

Dear learners! So far, promotion planning, promotional mix elements and integrated marketing communication are
discussed in this unit, let us move on to reading the unit summary, answer the unit review questions and perform practical
activity.

Unit Summary
Promotion is one of the four major elements of the company’s marketing mix. The main promotional tools – advertising,
personal selling, sales promotion, publicity and direct marketing work together to achieve the company’s communication
objectives.

In preparing marketing communications, the communicator first task is to identify the target audience and its characteristics.
Next the communicator has to define the response sought: whether it is awareness, knowledge, liking, preference or
purchase. Then a message should be constructed with an effective content, structure and format. Media must be selected,
both for personal and nonpersonal communication. Next, the communicator must collect feedback by watching how much
of the market become aware, tries the product and is satisfied in the product.

The company has to decide how much to spend on promotion. The most popular approaches are to spend what the
company can afford, to use the percentage of sales method, to base promotion on competitors spending, or to base it on the
communication objective or task. However, these techniques have their own advantage or limitation. In order to offset the
limitation of one method by the advantage of the other, the techniques must be used in combination.

Technological development force marketers to change their ways to communicate their products to target audience.
Therefore, marketers use integrated marketing communications (IMC) which involves carefully integrating and coordinating
the company’s many communication channels to deliver a clear, consistent and compelling message about an organization
and its products.
 Grade 11 Marketing and Sales Management Student Module

Unit Review Questions

Part One: Choose the best answer from the given alternatives.

Instruction: Answer for the following review questions:

1. Which of the following is the main promotion tool used by business market?

A. Personal selling C. Public relation

B. Sales promotion D. Advertising

2. If the marketer is concerned with buyer conviction and action, his/her best choice of promotional tool would be:

A. Advertising C. Publicity

B. Sales promotion D. Personal selling

3. In a "pull" promotional strategy

A. Advertising and sales promotion will be used more heavily than the sales force.

B. The target of promotion is the trade channel

C. The purpose is to get intermediaries

D. All of the above

4. Which of the following denotes the objective of advertising

A. The main objective is to inform customers about the existing of the product

B. The main objective is to persuade customers

C. The main objective is to remind customers

D. All of the above

MINISTRY OF EDUCATION 1
5. Prospecting and qualifying of the personal selling technique involves:

A. Efficiently selling the existing customers

B. Identify and select potential buyers for the company’s products

C. Making sales call and persuading the existing customer to buy more

D. Making effective communication Part Two: Discussion Questions

Instruction: Give your brief answer for the following questions

1. What are the major functions of promotion?

2. Distinguish among advertising, publicity, personal selling, and sales promotion..

3. Write the objectives of sales promotion?

4. Define what is integrated marketing communication (IMC)? Write its importance? And also mention some of the
elements of IMC?

5. A consumer views an advertisement but does not make a purchase. Has the advertisement failed? Explain your
answer.

Part Three: Practical Activity -1-

1. Visit a business/company located in your city or operates in your community, then conduct an interview or observation or
any other means to collect information regarding the company’s promotional decisions. You are required to write your
reflection based on the data collected and by using any reference materials to support your output.

Your reflection must cover all of the following issues:

✓ General description/background of the business organization you have visited

✓ Focus on the most recent experience of the company regarding promotion, and ask for how the company make the
promotional decisions: it includes, but not limited to:

• Who are the target audience of the company?

MINISTRY OF EDUCATION 2
• The communication/promotional objectives of the company?

• The communication channels and media used by the company?

• What technique the company uses to establish promotional budget?

• What promotional mix element that a company uses to promote its products/services.

• How the company measures promotion result or effectiveness?

Part Three: Practical Activity -2-
2. Assume that your school planned to introduce and promote its educational services to the public using advertising.
Because you are a marketing and sales management student, the school appointed you to plan and execute advertising
program. So that you are required to design advertisement for your school.

Your advertising plan must include the following requirements:

a) Determining the target audience

b) Determining the objectives of advertising

c) Designing the message

▪ It includes message content, message structure, message format, and message source.

▪ At this stage you are required to produce a sample of advertising copy for print ads, illustration and graphics for
outdoor ads, audio records for radio ads, and video pictures for TV ads.

d) Selecting advertising media

▪ Choosing among major media types and then choose specific media vehicles. This part also include deciding on
the media timing/schedule.

e) Setting the advertising budget

▪ By using one of the methods for setting promotional budget

f) Setting standards for evaluating advertising effectiveness

▪ Decide on the criteria or benchmarks for measuring advertising effectiveness.

MINISTRY OF EDUCATION 3
 UNIT 6

MARKETING MIX FOR SERVICES

Unit Coverage

This unit is designed to provide you with the necessary knowledge, skills and attitude regarding the
following content:

6.1. Meaning of Service

6.2. Characteristics of Services

6.3. Service Marketing Mix – 7Ps of Marketing

Unit Learning Outcomes

This unit will assist you to attain the following learning outcomes. Specifically, upon the completion of
this unit, you will be able to:

✓ Understand the Meaning of Service

✓ Device Marketing Tasks to the Unique Characteristics of Services.

✓ Develop Marketing Mix Elements for Services (7P’s of Marketing)

Key Terms: Services, Intangibility, Heterogeneity, Inseparability, Perishability, Process, Physical evidence, People

Introduction

The 4Ps of marketing have been the key to achieve the business objectives. Service marketing mix consists of 4Ps and three
additional elements then it is called 7Ps of marketing. Service are organized activities designed to provide complete
satisfaction for the target group of customers for a consideration known as fee or charge. Services have unique
characteristics: intangibility, heterogeneity, inseparability and perishability. Because service is different from physical
products, the 4Ps framework should be extended to include three additional factors: People, Physical evidence and Process
as marketing mix variables for services marketing.

6.1. Meaning of Services

Dear learners! Can you try to define what service is? Give some examples of service providers in your community?
In most simple terms service is the action of doing something for someone or something. It is largely intangible. A service
tends to be an experience that is consumed at the point where it is purchased, and cannot be owned since is quickly
perishes.

Service can be defined as:

According to the American marketing association, Services refers to “Activates, benefits and satisfactions which are offered

for sale or are provided in connection with the sale of goods”.

“A service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the
ownership of anything.”

Examples of services: • Health care services, such as-hospital, medical, dentistry, nursing, gymnasium, etc. •
Professional services, such as-accounting, auditing, legal, architectural, etc. • Financial services, such as-banking,
insurance, investment, stock broking, merchant banking etc. • Hospitality services, such as-hotel, lodging, restaurant,
breakfast catering etc. • Travel services, such as-airlines, travel agency, tour operating etc. • Others-barber, beauty
salon, repair and maintenance, etc.

6.2. Characteristics of Services

Dear learners! What are the unique characteristics of services? Can you try to distinguish services from physical goods by
using these characteristics?

There are different modes of services provided to the customers. Services have a number of distinctive characteristics which
differentiate them from goods and have a number of important marketing implications which necessitate different
marketing strategies. The four characteristics of services are: intangibility, inseparability, heterogeneity, and perishability:

1. Intangibility

The most basic distinguishing characteristic of services is intangibility. Because services are performances or actions rather
than objects, they cannot be seen, felt, tasted, heard or touched in the same manner that you can sense tangible goods. For
instance, airline passengers have nothing but a ticket and a promise that they will arrive at a certain time at a certain
destination. But there is nothing that can be touched.

2. Heterogeneity

Because services are performances, frequently produced, consumed, and often co-created by humans, no two services will
be precisely alike. The service quality varies greatly based on who provide the service, when and where it is provided. The
employees delivering the service frequently are the service in the customer’s eyes, and people may differ in their
performance from day to day or even hour to hour. Because of the labor-intensive nature of services, there is a great deal of
difference in the quality of service provided by various providers, or even by the same providers at different times.

3. Inseparability

Whereas most goods are produced first, then sold and consumed, many services are sold first and then produced and
consumed simultaneously. In other words, services are produced and consumed at the same time. This also entails that
services cannot be separated from their providers. Contrary to services, physical goods are produced, then stored, later sold,
and even later consumed. Services are first sold, then produced and consumed at exactly the same time. A product can, after
production, be taken away from the producer. However, a service is produced at or near the point of purchase. For example,
an automobile can be manufactured in Japan, shipped to Ethiopia to sell two months later, and consumed over a period of
years. But restaurant services cannot be provided until they have been sold, and the dining experience is essentially
produced and consumed at the same time.

4. Perishability

Perishability refers to the fact that services cannot be saved, stored, resold, or returned. For example: A seat on an airplane
or in a restaurant, an hour of a lawyer’s time, or space in a shipping container not used or purchased cannot be reclaimed
and used or resold at a later time. As services cannot be inventoried, service firms face difficult problems. For this reason,
transport companies own much more equipment than they would if demand were even throughout the day: the demand
during rush-hours needs to be served at that specific time, it cannot be served later or earlier. Perishability is in contrast to
goods that can be stored in inventory or resold another day, or even returned if the consumer is unhappy.

6.2.1. Services Characteristics and Their Marketing Implications

The following table shows the marketing problems and possible solutions for minimizing the challenges that occur because
of services characteristics.

Table 6.1: Services Characteristics, Associated Marketing Problems and Possible Solutions
Characteristic Marketing problems Possible solutions
Intangibility a. Use of tangible clues
1. Lack of service inventories
b. Use of personal sources of
2. Lack of patent protection
information
3. Difficulty in displaying or

Heterogeneity communicating services c. Creation of a strong

1. Difficult to standardize service and a. Customization
control quality
b. Standardization
 Inseparability 1. Physical connection of the service provider to a. Selecting and training public
the service contact personnel

2. Involvement of the customer on the b. Consumer management

production process

Perishability 1. Higher demand than maximum available a. Demand strategy: ▪

supply
Creative Pricing
2. Higher demand than optimal supply level ▪ Reservation Systems
3. Lower demand than optimal supply level ▪ Development of
Complementary services

▪ Development of Non-Peak
Demand

b. Supply strategy:

▪ Part-Time Employee
Utilization

▪ Capacity Sharing

▪ Utilization of Third Parties

▪ Increase in Customer
Participation

Source: K. Douglas Hoffman, Jhon E. G. Bateson, Greg Elliott and Dawn Birch, 2010.
Dear learners! Now it is your turn to answer the following self-check question

Self-check 6-1:

1. Define the term service?

2. Discuss the characteristics of services?

Dear learners!
Have you answered the self-check questions? If yes, let us move on to the discussion about the extended marketing mix
elements
 6.3. Service Marketing Mix – 7Ps of Marketing

Dear learners! Can you try to recall the extended marketing mix elements from the lesson learned on unit one? Hoping
that you have remembered them. The following discussion emphasis on the extended mix elements for service.

The services marketing mix is an extension of product marketing mix and also known as an extended marketing mix. The
service marketing mix consists of 7 P’s as compared to the 4 P’s of a product marketing mix. Simply said, the service
marketing mix assumes the service as a product itself. However it adds 3 more P’s which are required for optimum service
delivery. The product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and Placement. These are
discussed on the previous units. The extended service marketing mix places 3 further P’s which include People, Process and
Physical evidence. All of these factors are necessary for optimum service delivery. Let us discuss the same in further detail.

Figure 6.1: the 7Ps of service Marketing Mix

1. Product

The product in service marketing mix is intangible in nature. Like physical products such as a soap or a detergent, service
products cannot be measured. Tourism industry or the education industry can be an excellent example. At the same time
service products are heterogeneous, perishable and cannot be owned.

Major product decisions in service marketing include:

 ▪ Quality of the service

▪ Range of service

▪ Level of service

▪ Service branding

▪ Product description, etc.

2. Pricing

Pricing in case of services is rather more difficult than in case of products. If you were a restaurant owner, you can price
people only for the food you are serving. But then who will pay for the nice ambiance you have built up for your customers?
Who will pay for the band you have for music? Thus these elements have to be taken into consideration while costing.
Generally service pricing involves taking into consideration labor, material cost and overhead costs. By adding a profit
markup you get your final service pricing.

Major Service pricing decisions may include:

▪ Pricing Levels

▪ Discount Allowed

▪ Terms and Conditions

▪ Credit

▪ New Product Pricing

3. Place

Place in case of services determine where is the service product going to be located. The best place to open up a petrol
station is on the highway or in the city. A place where there is minimum traffic is a wrong location to start a petrol station.
Similarly, a software company will be better placed in a business hub with a lot of companies nearby rather than being
placed in a town or rural area.

Major place decisions in service marketing may include:

▪ Location of the service

▪ Distribution channel of the service

▪ Service accessibility

▪ Service provider
 4. Promotion

Promotions have become a critical factor in the service marketing mix. Services are easy to be duplicated and hence it is
generally the brand which sets a service apart from its counterpart. You will find a lot of banks and telecom companies
promoting themselves rigorously. Why is that? It is because competition in this service sector is generally high and
promotions is necessary to survive.

While designing a promotional campaign for services, one must focus on the following components:

▪ Direct Selling

▪ Advertising

▪ Sales promotion

▪ Word of mouth

▪ Publicity

▪ Understandable and tangible clues about the service

5. People

All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s
personnel, the customer, and other customers in the service environment. All of the human actors participating in the
delivery of a service provide cues to the customer regarding the nature of the service itself. How these people are dressed,
their personal appearance their attitudes and behaviors all influence the costumers perceptions of the service.

People are a very important factor in the 7P’s because services tend to be produced and consumed at the same time.
Because of this, the behavior of these people is very important in determining the experience of the customer using your
service.

Hence, in service marketing, people can make or break an organization. Furthermore, customers also represent the company
through word of mouth by talking to their friends on their colleagues.

Therefore, all services business should ensure that the staff is well trained and motivated. Specifically, many companies train
their staff in interpersonal skills and customer service with a focus towards customer satisfaction.

6. Process

The element ‘Process’ of the service marketing mix represents the flow of activities, procedures, mechanism, protocols and
more by which the service in question is eventually delivered to the customer. As services are results of actions for or with
customers, a process involves a sequence of steps and activities to get there.
The actual delivery steps the customer experiences, or the operational flow of the service, will provide customers with
evidence on which to judge the service.

The notable characteristics in the process are flow of activities, number of steps and the customer involvement. The flow of
activities includes standardization and customization whereas the number of steps decides whether the process is simple or
complex. For example, a customer books a hotel room, a process is triggered when the customer then checks into the hotel.
Another process is triggered on, obviously, then, when they check out, yet another process is triggered.
All of these processes need to be tightly controlled to ensure a consistent customer experience.
They’re usually defined in written standard operating procedure documents. It is also a critical component in the service
blueprint, wherein before establishing the service, the company defines exactly what should be the process of the service
product reaching the end customer.

Service Delivery Blueprint

Creating a service blueprint can be a great way to not only maintain consistency but also discover potential opportunities to
improve your processes and therefore the experience that you offer. A service blueprint draws out each step in your
processes, including actions that are visible to the customers, and ones that happen behind the scenes. Being able to view
the big picture can make it easier to spot opportunities that would have otherwise gone unnoticed

Figure 6.2 shows a flowchart for delivery of a service-stay at a motel. It involves several steps such as parking a car, checking-
in, spending night in a room, having breakfast, and checking-out. Flowcharting helps to distinguish service elements like the
core product and supplementary services and enables to assess the level of customer involvement in the service delivery
process.
Figure 6.2: A flowchart for delivery of a service-stay at a motel
7. Physical Evidence

The physical evidence within the service marketing mix refers to an environment in which a service comes about from an
interaction between an employee and a customer which is combined with a tangible commodity.

The physical evidence includes a representation of a service for instance brochures, company stationery, business cards,
reports, company website, etc. A good example is a hotel. The design, furnishing, lighting and decoration of a hotel as well as
the appearance and the attitudes of the employees have a certain influence on the quality of the service and customer
experience.

The physical environment affects customers’ experience during the service encounter enhancing or undermining customer
satisfaction. In some services such as theme parks, restaurants, cafes, and hotels service environment might even be a key to
customer satisfaction, making great impression and leaving long-lasting memories. Thus, physical evidence is an important
component of a service company marketing-mix strategy and overall value proposition. Due to the intangibility of services,
customers rely on physical evidence when assessing the expected quality level, so careful design of all tangible elements can
increase perceived value of the market offering.

Physical evidence can fall into three main categories: facility exterior, facility interior and other tangibles.

▪ The facility exterior: it includes the surrounding environment, parking facilities, the firm’s entrance, and signage.
When deciding about a location of the service company, especially with regard to high-contact services, it is important
to consider the accessibility, safety, visibility and compatibility of the service site and market offering with the
surrounding environment.

▪ The facility interior: is composed of such elements as interior design, signage, equipment and other devices
necessary for service performance which are complemented by ambient conditions like music, scents, temperature, and
colors. Some of these elements are visible to customers and play an important role in the service delivery process, but
other ones are much more subtle and they are essential in creating certain mood and atmosphere of the service outlet.
▪ Other tangible elements: it include stationery, business cards, billing statements; personnel uniforms and
promotional material are a part of visual identity of a company. Since customers perceive all service elements
holistically, it is important to ensure that they are carefully designed to create a consistent image and a unique brand
experience.

The company’s physical evidence may serve different purposes. It differentiates the firm from its competitors, communicates
its image through tangible clues, facilitate the performance of the service, and socialize customers and employees.

The three expanded marketing-mix elements (people, physical evidence, and process) are included in the marketing mix as
separate elements because they are within the control of the firm and any or all of them may influence the customer’s initial
decision to purchase a service, as well as the customer’s level of satisfaction and repurchase decisions.
Example of Service Marketing Mix

Now, we will explain the service marketing mix by taking an example of a school. A school is an institution that provides
educational services.

Let us assume we are a marketer of a school. And see what all decisions are taken when designing a marketing strategy. We
have listed some relevant decisions under elements of the service marketing mix.

1. Product Decisions

▪ Name of the school

▪ A brochure containing the USP of the school (Unique Selling Proposition)

▪ The language used at the time of teaching

2. Pricing Decisions

▪ Fees collected from the students

3. Place Decision

▪ Building of school where delivery of the service will take place.

4. Promotion Decisions

▪ Newspaper Advertisement

▪ Pamphlets distribution in the nearby areas

▪ Billboards

5. Physical Evidence

▪ Brochure of the school

▪ Fees receipts

▪ Class Schedules

▪ Computer lab facilities

▪ Regular updates to Parents

▪ Doubt clearing sessions

6. Process

▪ Interactive lectures by the teachers

 ▪ Fee payment on 30th of every month

▪ Monthly parents-teacher meets

7. People

▪ Subject Teachers

▪ School Principal

▪ Counsellors

Dear learners! Now it is your turn to answer the following self-check question

Self-check 6-2:

1. Discuss the extended marketing mix (3 Ps)? And their importance in service marketing?
2. Think of the service you have received recently and draw a service blueprint that shows how the provider deliver the
service.

Dear learners! So far, meaning and characteristics of service and service marketing mix elements (7Ps) are discussed in this
unit, now let us move on to reading the unit summary, answer the unit review questions and perform practical activity.

Unit Summary
The Services Marketing Mix consists of a set of tactics that a company can use to promote and encourage potential
customers to buy their service. The Services Marketing Mix is also known as the 7 P’s of Marketing.

The Services Marketing Mix is unique to services. The model is an extension of Product Marketing Mix (also known as the 4
P’s of Marketing). All four tactics of the Product Marketing Mix used to market products remain, but three new tactics are
added. The additional 3 P’s (or tactics) are needed to adequately capture the options available to market and promote
services.

The key characteristics of services that underlie the need for distinct strategies and concepts for managing service
businesses. These basic characteristics are that services are intangible, heterogeneous, produced and consumed
simultaneously (inseparable), and perishable. Because of these characteristics, service managers face a number of challenges
in marketing, including the complex problem of how to deliver quality services consistently.

Unit Review Questions

Part One: True/False
Instruction: Say True for correct statement or False for incorrect statement.
______ 1. The quality of service is greatly varied.

______ 2. A service is any act or performance that one party offer to another that is essentially tangible.

______ 3. Physical evidence is one strategy that service renders use to depict their quality service through
presentation.

______ 4. It is possible for service providers to inventories/store services.

______ 5. The production and consumption of service is simultaneous.

Part Two: Multiple Choice Questions

Instruction: Choose the best answer from the given alternatives:

1. How does services differ from physical goods? A. They are done by people.

B. They belong to operations of marketing.

C. They are more difficult than producing physical goods.

D. They are variable, intangible inseparable and perishable.

2. Service are characterized by all of the following characteristics except for ___________.

A. Intangibility C. Perishability

B. Homogeneity D. Inseparability

3. The tangible cues which helps consumers to evaluate the service before its purchase is:

A. Physical evidence C. Process

B. People D. Product
 4. The key components of the service marketing mix are broadly:

A. People, Product, Place C. Price Physical Evidence, Promotion

B. Physical Evidence, Process, People D. Product, Process, Physical Environment

5. ___________ represents the activities, procedures and protocols by which the service is eventually delivered to the
customer.

A. Product C. Process

B. People D. Physical evidence

Part Three-Discussion Questions

Instruction: Give brief answer for the following review questions

1. Discuss the unique characteristics of service along with their marketing problems and possible solutions?

2. What is physical evidence and what is its importance in service marketing?

3. Explain the term “Process” in service marketing mix?

4. Explain the role of people in service marketing?

Part Three: Practical Activity

1. Visit a service company located in your city or operate in your community such as an airlines, banks, hotels,
etc, then assess how a company implement the extended marketing mix elements (3Ps) - People, Process and
Physical evidence so as to achieving the marketing objectives. You are required to reflect your visit.

2. Taking the barber shop as the example, the following statements outline the activities and steps that a typical
customer passes through from arrival at the barber’s shop to his departure.

▪ When the customer arrives, he is greeted by the barber, who directs him to a seated waiting area unless there are no
other customers. In such a case the customer will be directed to the barber’s chair.

Ministry of Education 17

▪ Once in the barber’s chair, the customer is asked his requirements.

▪ The customer’s hair is then cut in a way which (hopefully) meets his requirements.

▪ The barber, on finishing, will ask if the customer requires anything else (e.g. hair-care products).

▪ The customer will then pay and depart.

 ▪ The barber thanks the customer for payment (and possibly a tip), and in his goodbye statement infers a repeat visit.

Based on the above sequence of basic steps, you are required to draw a service blueprint that it is possible to represent the
process visually.
Project Work

Dear learners! CONGRATULATION! You have successfully completed the lessons of this competency, Now you are
required to demonstrate the knowledge, skills and attitudes that you are acquired by performing the following project work.

Project Title: Developing marketing mix elements for product or service

Project Description: The aim of this project work is for students to demonstrate both their understanding of and ability to
design own marketing mix. Thus it gives the opportunity for students to convert theories learned in this competency in to
practical application.

Objectives of the Project Work: In the completion of this project work, students will be able to • Design and develop
marketing mix elements

• Demonstrate basic marketing knowledge to practical situations in assessing marketing opportunities, select target
market and develop marketing mix elements.

• Besides, this project work help students to demonstrate sound analytical, problem-solving, team work and
communication skills.

General Instructions:

You are required to develop marketing plan (marketing mix elements) by using the following procedures:

1. Understand your market

Before you can design your marketing mix, you need to understand your market. This involves researching your target
customers, competitors, and industry trends. You want to find out what are the needs, preferences, and behaviors of your
potential buyers, how do they perceive your product and brand, and what are the gaps and opportunities in the market. You
can use various methods to gather market insights, such as surveys, interviews, focus groups, online analytics, and secondary
sources.

2. Define your product

Your product is the core of your marketing mix. It is what you offer to your customers to solve their problems or satisfy their
desires. You need to define your product in terms of its features, benefits, quality, design, packaging, branding, and
positioning. You want to create a product that meets the expectations and needs of your target market, differentiates you
from your competitors, and communicates your value proposition.

3. Set your price

Your price is the amount of money that you charge for your product. It affects your revenue, profit, and market share. You
need to set your price based on your product value, costs, demand, competition, and pricing objectives. You want to choose
a price that reflects the value of your product to your customers, covers your costs and expenses, matches the market
conditions and customer willingness to pay, and supports your marketing and business goals.

4. Choose your place

Your place is the distribution channel that you use to deliver your product to your customers. It includes the physical
locations, online platforms, intermediaries, and logistics involved in making your product available and accessible. You need
to choose your place based on your product characteristics, customer preferences, distribution costs, and channel partners.
You want to select a place that reaches your target market effectively, efficiently, and conveniently, and enhances your
customer experience and satisfaction.

5. Plan your promotion

Your promotion is the communication strategy that you use to inform, persuade, and remind your customers about your
product. It includes the tools, channels, messages, and activities that you employ to create awareness, interest, desire, and
action. You need to plan your promotion based on your product value, target market, marketing objectives, and budget. You
want to design a promotion that attracts attention, builds trust, conveys benefits, and motivates action.

Note that: if your business idea is a service providing business, add the extended marketing mix

6. People

7. Process

8. Physical evidences

Answer Key for Self-check Questions

Unit One: Answer key to check your progress questions Self-check 1-1:
1. Refer topic 1.1.
Self-check 1-2:
1. Refer topic 1.2.
Self-check 1-3:
1. Refer sub-topic 1.3.1
2. Refer sub-topics 1.3.1 and 1.3.2.

Unit Two: Answer key to check your progress questions Self-check 2-1:
1. Refer topic 2.1.
2. Refer topic 2.1.
Self-check 2-2:
1. Refer topic 2.2.
2. Refer sub-topic 2.2.1.
 3. Refer sub-topic 2.2.2.
Self-check 2-3:
1. Refer sub-topic 2.3.1.
2. Refer sub-topic 2.3.1.
3. Refer sub-topic 2.3.1.
Self-check 2-4:
1. Refer sub-topic 2.4.1.
2. Refer sub-topic 2.4.1.

Self-check 2-5:
1. Refer sub-topic 2.5.1.
2. Refer sub-topic 2.5.2.
3. Refer sub-topic 2.5.3.

Unit Three: Answer key to check your progress questions Self-check 3-1:
1. Refer topic 3.1.
2. Refer topic 3.2.
Self-check 3-2:
1. Refer sub-topics 3.3.1 and 3.3.2.
Self-check 3-3:
1. Refer topic 3.4.
Self-check 3-4:
1. Refer sub-topic 3.5.1.
2. Refer sub-topic 3.5.2.
Self-check 3-5:
1. Refer topics 3.6.

Unit Four: Answer key to check your progress questions Self-check 4-1:
1. Refer topic 4.1.
2. Refer topic 4.2.
Self-check 4-2:
1. Refer topic 4.3.
2. Refer topic 4.3.
Self-check 4-3:
1. Refer topic 4.4. .
Self-check 4-4:
1. Refer topic 4.5.
Unit Five: Answer key to check your progress questions Self-check 5-1:
1. Refer topic 5.1.
2. Refer topic 5.2.
Self-check 5-2:
1. Refer topics 5.3.1 and 5.3.2.
Self-check 5-3:
1. Refer topic 5.4.
2. Refer topic 5.4.
3. Refer topic 5.4.
4. Refer topic 5.4.
Self-check 5-4:
1. Refer sub-topic 5.5.1.
2. Refer sub-topic 5.5.2.
3. Refer sub-topic 5.5.3.
4. Refer sub-topic 5.5.4.
5. Refer sub-topic 5.5.5.
Self-check 5-5:
1. Refer topic 5.6.
2. Refer topic 5.6.1.

Unit Six: Answer key to check your progress questions Self-check 6-1:
1. Refer topic 6.1.
2. Refer topic 6.2.
Self-check 6-2:
1. Refer topic 6.3.
2. Refer topic 6.3.

References
Ac-ac, Maria Victoria M. Principles of Marketing, Revised Ed., Pasig: Anvil Publishing, Inc., 2014

Armstrong, Gary. Marketing: An introduction 11th, Global ed. Harlow, England: Pearson, 2013.

Kotler, P., & Armstrong, G. (2021). Principles of marketing (18th ed.). Pearson.

Tanner, J. F., & Raymond, M. A. (2019). Principles of marketing. Flat World Knowledge
Glencoe Marketing Essentials, McGraw-Hill- 2012-
.
 Module VI
Basic Kaizen

Contents
No Contents Page No
Module Description 343
1 Unit 1: Basic Kaizen Concepts 344

1.1. Principles of Kaizen philosophy 345

1.2. Key Concepts of Continuous Improvement 346

1.3. Benefits of Implementing Kaizen in Marketing and Sales 349

Unit Summary 350

Unit Review Questions 351

2 Unit 2: Identify and Eliminate Waste 352

2.1. Introduction to Waste 352

2.2. Types of Waste 353

Unit Summary 356

Unit Review Questions 358

3 Unit 3: Perform 5S procedure 360

3.1. Meaning and objectives of 5S 360

3.2. The 5S Phases 362

3.3. Creating a Culture of Continuous Improvement 366

Unit Summary 367

Unit Review Questions 367

References 371

Module Description
This module equips students with the necessary skills, knowledge, and mindset to understand and apply Kaizen principles
effectively. It covers basic principles and importance of Kaizen, waste elimination, and the 5S methodology for workplace
efficiency. Through practical exercises, students learn to identify and eradicate waste, ultimately preparing them to drive
continuous improvement in future endeavors.
 Unit 1 Basic Kaizen Concepts
Introduction
Kaizen, originating from Japan, embodies the philosophy of continuous improvement. It emphasizes the relentless pursuit of
small, incremental changes in processes, systems, and behaviors to achieve greater efficiency, quality, and effectiveness. The
term "Kaizen" itself translates to "change" (kai) for the better (zen), reflecting its core principle of ongoing improvement.

Kaizen originated in post-World War II Japan, with Toyota's production system as a notable example. It is a philosophy of
continuous improvement that can be applied effectively in marketing and sales management. It emphasizes making small,
incremental changes over time to enhance efficiency, quality, and customer satisfaction. By integrating Kaizen into marketing
and sales practices, organizations can stay agile and competitive in dynamic markets. Kaizen in marketing and sales involves
continuously improving processes, strategies, and customer interactions to achieve better results. It encourages marketers
and sales professionals to constantly seek opportunities for optimization, leading to improved performance and increased
customer loyalty.

The principles of Kaizen, such as continuous improvement and waste reduction, are highly relevant in marketing and sales
management. Kaizen philosophy in marketing and sales management includes principles such as continuous improvement,
respect for customers and team members, elimination of waste in processes, standardization of best practices, ensuring
quality at every touch point, and utilizing visual management techniques for better performance tracking. By adopting Kaizen
practices, marketing and sales teams can streamline their operations, improve customer experiences, and drive business
growth.
1.1 Principles of Kaizen philosophy

Figure 1key principles of kaizen

The principles of Kaizen philosophy encompass a set of fundamental beliefs and values that guide organizations in their
pursuit of continuous improvement and excellence. These principles form the cornerstone of Kaizen implementation and are
essential for fostering a culture of innovation, collaboration, and sustained growth. Here are the key principles of Kaizen:
1. Continuous Improvement: Continuous improvement in marketing and sales involves making incremental changes to
strategies, campaigns, customer interactions, and sales processes. While Kaizen focuses on gradual enhancements for
long-term success, innovation in marketing and sales management aims for breakthrough improvements to achieve
short-term goals.
2. Respect for People: Central to Kaizen is the belief that every individual within the organization possesses valuable
insights, knowledge, and expertise. Therefore, Kaizen promotes a culture of mutual respect, trust, and empowerment,
where employees are actively engaged, encouraged to voice their ideas, and given the autonomy to implement
improvements.
3. Elimination of Waste: Kaizen advocates for the identification and elimination of waste in all forms, including
overproduction, waiting times, unnecessary motion, defects, and excess inventory. By reducing waste, organizations can
streamline processes, optimize resource utilization, and enhance overall efficiency and productivity.
4. Standardization: Standardization is essential for ensuring consistency, reliability, and repeatability in processes and
operations. Kaizen encourages the establishment of standardized work procedures, protocols, and guidelines to maintain
quality, reduce variability, and facilitate continuous improvement efforts.
 5. Quality at the Source: Kaizen promotes the principle of "quality at the source," which means identifying and
addressing quality issues at their origin rather than detecting and correcting defects downstream. By instilling a culture
of accountability and responsibility for quality among all employees, organizations can prevent errors, defects, and
rework, thereby improving product and service quality.
6. Visual Management: Visual management techniques, such as visual controls, signage, and displays, play a crucial role
in Kaizen implementation by making information, processes, and performance indicators easily accessible and
understandable to employees. Visual management tools help create transparency, facilitate communication, and
support continuous monitoring and improvement efforts.
By embracing these principles, organizations can foster a culture of continuous improvement, drive operational excellence,
and achieve long-term success in today's dynamic and competitive business landscape.

1.2 Key Concepts of Continuous

Improvement
Continuous Improvement (CI) is an ongoing effort to improve products, services, or processes incrementally over time. It is a
fundamental principle in various management philosophies, such as Total Quality Management (TQM) and Lean
Management. Key concepts of continuous improvement include:

Incremental changes vs. radical improvements

Incremental Changes: These are small, gradual adjustments made to existing processes, products, or services. They are
often easier to implement and less disruptive to the organization.
Radical Improvements: Also known as breakthrough improvements, these involve significant and transformative changes
to processes or products. They can lead to substantial gains in efficiency, quality, or innovation but may require more
resources and time to implement.

1. Employee involvement and empowerment Continuous

improvement relies on the active
participation and engagement of employees at all levels of
the organization. Marketing and sales management students
are encouraged to involve their team members in
identifying problems, suggesting solutions, and actively
participating in improvement initiatives.
Empowerment involves giving employees the authority,
autonomy, and resources to make decisions and
implement changes in their respective areas, fostering a
 Figure 2: Team work
culture of ownership and accountability for improvement.

2. The PDCA Cycle: A Blueprint For Continuous Improvement

The Plan-Do-Check-Act Cycle (PDCA Cycle) is a four-step model for systematic problem solving and continuous improvement.
It offers a simple and structured way for resolving business-related issues and creating positive change.

The Plan-Do-Check-Act (PDCA) Cycle provides marketing and sales professionals with a structured approach to
problemsolving and continuous improvement. By planning, executing, evaluating, and adjusting marketing and sales
strategies based on customer feedback and market dynamics, organizations can optimize their efforts and achieve better
results in customer acquisition and retention.

The Four Phases of the PDCA Cycle

The PDCA cycle begins with the planning phase which involves the identification of the problem and objectives. During this
phase, a collaborative effort is made to agrees on the problem to be solved or the process to be improved.

Figure 3: The PDCA Cycle Model

In the Do phase, the selected solution is put into action on a limited scale. This phase also involves ongoing progress
measurement, data collection, and feedback gathering to facilitate subsequent analyses.

The Check phase involves analyzing the collected data and feedback and comparing the outcome against pre-established
objectives. This phase allows to evaluate how well the solution has worked and where further enhancement may be needed.

The Act phase is the point at which the chosen solution is fully integrated. This phase requires taking actions based on the
insights acquired from the Check phase. A plan for full-scale implementation is carried out, taking into account the
associated costs and benefits. The Act phase also concerned with standardizing, documenting, sustaining the improved
process, as well as integrating it into the organization’s system.

3.Quality circles and teamwork

Quality circles, comprised of marketing and sales professionals, provide a forum
for identifying, analyzing, and solving workrelated problems within their
areas of expertise. These circles promote teamwork, collaboration, and shared
responsibility for quality and improvement. Marketing and sales
management students can learn from quality circle practices to enhance
Figure 4: Quality
teamwork, exchange ideas, and contribute to organizational goals.

Circle

1.3 Benefits of Implementing Kaizen in

Marketing and Sales
• Increased productivity and efficiency: Streamlined processes, standardized work, and just-in-time production
methods lead to improved productivity and resource utilization.
• Cost reduction and waste Elimination: Identifying and eliminating waste in marketing and sales processes
results in cost savings and improved efficiency.
• Improved quality and customer satisfaction: Root cause analysis, error-proofing techniques, and customer
feedback integration contribute to enhanced product quality and customer satisfaction.
• Employee morale and satisfaction: Empowering employees, recognizing their contributions, and providing
opportunities for skill development lead to increased morale and job satisfaction.

Examples of Successful Kaizen Practices:

• Toyota Production System (TPS): Toyota's implementation of Kaizen principles in production processes, such as
just-in-time production, serves as a successful example for marketing and sales management students.
• Retail integration: Retail giants like Walmart have integrated Kaizen into their operations to optimize inventory
management and enhance customer service, providing valuable insights for marketing and sales strategies.
• Small businesses: Even small businesses can benefit from Kaizen practices by improving processes, reducing
waste, and enhancing product quality, as demonstrated by a local bakery's success story.
Self- checks 1-1:

1. Describe the significance of continuous improvement in the context of Kaizen philosophy. How does it contribute to
organizational success?
2. Identify and discuss three key principles of Kaizen philosophy outlined in the text. How do these principles contribute to
fostering a culture of continuous improvement within organizations?
3. Discuss the benefits of implementing Kaizen in marketing and sales operations?
Unit Summary
Kaizen is a Japanese philosophy that emphasizes continuous improvement, focusing on small, incremental changes to
achieve greater efficiency, quality, and effectiveness. The term "Kaizen" translates to "change for the better" and is not just
about small changes, but also about everyone involved in making improvements. The Kaizen philosophy is built on several
key principles. Continuous improvement is at the heart of Kaizen, emphasizing the need for ongoing improvement in all
aspects of operations. Respect for people is also a key principle, promoting a culture of mutual respect, trust, and
empowerment where employees are actively engaged and encouraged to voice their ideas. Elimination of waste is another
important principle, as is standardization, which ensures consistency, reliability, and repeatability in processes and
operations.

The PDCA cycle is a four-step model for systematic problem-solving and continuous improvement. The cycle consists of
Planning, Doing, Checking, and Acting. It is used to enhance the quality of processes, products, and services by following a
logical sequence of four steps.
 Unit Review Questions
Choose the best answer
1. Which one of the following is true about kaizen?
a. Change for better c. Continuous improvement
b. Reduce productivity d. A& C
2. The origin of kaizen is______________
a. England c. Japan
b. Korea d. Ethiopia
3. Which one of the following is the benefit of kaizen?
a. To make work place more pleasant c. To develop members’ capability
b. To improve customer satisfaction d. All
4. Kaizen refers to _________
a) Continuous improvement c) Discontinuous improvement
b) Intermittent improvement d) radical improvement
5. In the process of Kaizen, improvements are accomplished gradually in small increments.
a) True b) False
 Unit 2
Identify and Eliminate Waste

2.1. Introduction to Waste

In Japanese, "muda" translates to "waste." In the context of Kaizen, muda refers to any activity or process that does not add
value to the final product or service from the customer's perspective. Identifying and eliminating muda is crucial for
improving efficiency, reducing costs, and enhancing overall quality.

Within a kaizen culture, waste is anything that doesn’t add value from the customer’s perspective. It includes activities that
consume resources, increase the cost of products or services but contribute zero value to the customer, and therefore
should be eliminated.

Waste takes many forms and can be found at any time and in any place. Additionally, the application of waste analysis is
universally relevant across manufacturing, service, and office environments. Waste in marketing and sales can manifest in
various forms, impacting efficiency and effectiveness.
In marketing and sales management, waste, or muda, refers to any activity or process that does not directly contribute to
generating leads, converting sales, or enhancing customer satisfaction. It's essential for marketing and sales professionals to
identify and eliminate waste to optimize resources, improve efficiency, and drive business growth. By applying the principles
of waste elimination, marketing and sales management students can streamline processes, reduce costs, and deliver greater
value to customers, ultimately leading to improved business performance

The Eight Wastes model can be adapted to the marketing and sales context, including:
1. Overproduction: Creating more marketing materials or sales collateral than necessary, leading to excess inventory or
waste.
2. Waiting: Delays in the sales cycle, such as waiting for customer responses or approvals, leading to inefficiencies.
3. Transportation: Unnecessary movement of marketing materials or sales resources, increasing costs and time.
4. Inappropriate Processing: Spending resources on marketing channels or sales strategies that do not yield desired
results, wasting time and effort.
5. Excess Inventory: Stockpiling of marketing materials or sales inventory beyond immediate needs, tying up resources
and capital.
6. Unnecessary Motion: Excessive movement or actions in sales processes or marketing campaigns that do not contribute
to value creation.
7. Defects: Errors or mistakes in marketing materials or sales presentations that lead to customer dissatisfaction or lost
opportunities.
8. Underutilized Talent: Not leveraging the skills and expertise of marketing and sales team members effectively, leading
to missed opportunities for innovation and improvement

overproduction

wasted talent inventory

overprocessing
the 8 Transportation

wastes

defect/rework motion

waiting

Figure 5: The 8 wastes/muda

2.2. Types of Waste
1. Overproduction: Over-production is producing greater quantities or making more of something than what is
actually demanded or required by the customer. It is thought to be the worst of the eight wastes as it contributes
in creating the other types of waste. Over-production consumes more materials, promotes a batch and queue
system, increases lead times, hides quality problems, and may prevent other activities from taking place.

2. Excess inventory: Excess inventory involves having more materials or information than what is actually
needed. Inventory takes up valuable space, creates the need for more manpower and equipment, ties up money
that can be used elsewhere, and has a significant impact on working capital and operational costs. While some
inventory is necessary, most processes can be managed more efficiently to minimize excess inventory.

3. Transportation Waste: While transportation is a necessary element of any production process, excessive
or inefficient transportation is considered a form of waste, known as Transportation Waste. Transportation waste
can involve movement from one jobsite to another or from a material laydown area to the work area.
Excessive transportation often results from poor layout of the production facility, inadequate storage planning, or
suboptimal supply chain management. Transportation waste not only increases the time it takes for a product to move
through the production process, but can also lead to damage or loss of materials, increased costs, and heightened risk of
accidents or injuries.
Generally, transportation waste is the unnecessary movement of manufacturing resources outside of the area where
production occurs. Not all transportation is waste, but unnecessary movement adds expense and risk without adding value.
Because customers won’t pay for things that don’t add value, manufacturing waste can hurt your company’s competitiveness
and profitability.

4. Motion Waste: It is unnecessary motion/movement, or wasted motion, refers to the movement

performed by individuals that is not required and will not add value to the product or service. Not only does this
consume time and energy, but it can also increase health and safety issues, impacting operational reliability.
Unnecessary movement often results from inadequate workplace layout design or poor ergonomic considerations
or inefficient work processes, leading to fatigue, injuries, and reduced productivity

5. Waiting-Time Waste: Waiting refers to the idle time resulting from unnecessary delays within a process.
It occurs when a product is not being processed or in transport, or when an individual is waiting for a work or
service to get completed, and that costs time and money. Any time a product or an individual is waiting, there is no
value being added, lead times are increased, and wasted time is transferred to the customer in the form of
increased costs.

When two interdependent processes are not synchronized, idle time is produced, and we have waiting waste.

Figure 6: waiting Time waste

6. Over processing waste: Over processing means putting more into a product than is valued by the
customer. The goal is to do only the level of processing that matches usefulness and necessity.
Similar to motion, this type of waste is very hard to notice and eliminate in business.
Over-processing will increase machining time, material handling time and add more process steps. Due to over processing
the cost of the product is increased that will pay by the customer. For reducing over processing on products, consider
standard job specifications for manufacturing.

An example of over processing in production is painting unseen areas. Machines that are over processing because the whole
process flow is directed through them are also an example of this kind of waste. Over processing can also be a result of
unnecessary production steps, using older, outdated methods, or not having standard work plans. It can also be caused by
slow approval process.

7. Defects Waste: Defects and errors occur when a product or service fails to fulfill its intended purpose, or
when the production process does not complete perfectly right the first time. This waste is the most obvious type
of waste and the easiest to relate. Whenever a defect occurs during a production process, extra costs are incurred
as a result of scrapping or reworking the defective products. Moreover, if it conveyed to the customer, additional
costs are incurred as a result of customer returns and negative reputation.

8. Unused Human Skills; Not using the potential and creativity of employees and failing to involve them
is a waste. Organizations employ individuals for the specific skills they possess, and it is wasteful not to
leverage their many other skills and capabilities. Many companies recognize that their most valuable assets
are their employees. It is only by exploiting the ideas and skills of employees that companies can reduce
the other types of waste and enhance their overall performance.

Continuous Improvement Mindset in Waste Reduction:

Adopting a continuous improvement mindset is essential for sustaining waste reduction efforts over time. The concept of a
continuous improvement mindset in waste reduction emphasizes the ongoing effort to identify, address, and eliminate
waste within an organization. It involves fostering a culture of innovation, learning, and proactive problem-solving where
employees at all levels are engaged in seeking opportunities for improvement.

Self-checks 2-1:

1. Define waste according to the context of Kaizen philosophy?

2. Discuss the different types of wastes?

Unit Summary
The concept of "muda" or waste is a fundamental principle in the philosophy of Kaizen, a continuous improvement
approach. Muda refers to any activity or process that does not add value to the final product or service from the customer's
perspective. This can include unnecessary steps, redundant processes, and inefficient use of resources. Identifying and
eliminating waste is crucial for improving efficiency, reducing costs, and enhancing overall quality.

There are eight types of waste that can be identified in the workplace, including overproduction, excess inventory,
transportation waste, motion waste, waiting-time waste, over processing, defects, and unused human skills.

By identifying and eliminating these types of waste, organizations can achieve significant improvements in efficiency and
productivity. For example, eliminating overproduction can reduce inventory costs and improve cash flow, while reducing
motion waste can improve employee safety and reduce ergonomic hazards. By adopting a culture of continuous
improvement and eliminating waste, organizations can achieve sustainable growth and competitiveness, and deliver high-
quality products and services to their customers.
 Unit Review questions
Part I: Answer the following questions

------1. Unnecessary Motion is any movement of people that does not add ________to the product.

A. Cycle Time B. Value C. Defects D. Muda

----- 2. Reaching or straining to reach a tool is an example of what type of waste?

A. Motion B. Processing C. Transportation D. Inventory

------ 3. The primary difference between the wastes of motion and transportation is that with transportation we are moving
goods or inventory and with motion people are moving without goods or inventory.
A. True B. False

----- 4. Defects are caused by -----------------

A. inadequate training B. skill shortage C. operator error D. all

------ 5. Waste of correction includes additional work performed on product or service

A. true B. false

------ 6. Which one is over processing waste?

A. idle equipment B. painting unseen areas C. excessive movement

of worker D. poor lay out

Part II: Matching

A B
------1. Producing ahead of what’s actually needed a. Motion

------2. More materials or information than is required b. inventory

------3. Unnecessary movement of people and equipment c. Defect

------4. Idle time wait d. over production

------5. Unnecessary steps in the production process e. transportation

------6. Rework and scrap due to poor quality f. waiting

------7. Moving things; shipping, conveyors g. processing

(Materials, equipment, people)

Project Work
Look around your school, among the seven type of waste which types of wastes are noticeable in your school compound.
What do you think the causes of waste? What do you suggest to control these waste?
 Unit 3
Perform 5s procedure
3.1 Meaning and objectives of 5S
The 5S methodology is an improvement tool for organizing and maintaining a disciplined and productive workplace. It
facilitates the creation of a better working environment by reducing waste while improving efficiency, safety and quality. 5S
represents five fundamental practices that starts with the letter ‘S’. It is commonly applied by manufacturing facilities in
production lines, storage areas, maintenance areas, and offices. It is now being increasingly applied across diverse industries
including health care, logistics, hospitality and construction.
Rooted in Japanese management principles, 5S was originally developed by Toyota as an integral component of their Lean
production system. It is considered an important component of Lean Thinking and a prerequisite for driving other Lean
techniques such as TPM and flow optimization. Many companies start their Lean transformation journey with 5S because it is
one of the easiest Lean techniques and exposes some of the most visible examples of waste. Many experts believe that you
need to be successful with 5S so you don’t struggle with the other techniques during Lean implementation. Details of 5S
approach
5S: Sort-Set-Shine-Standardize-Sustain

Figure 7: 5S

The 5Ss are: listed by Japanese, English and Amharic language

Japanese English Amharic
Seiri Sort ማጣራት The first step in 5S is to eliminate all the things in the workspace
that are not being used and store them away. If a tool are material
is not used on a daily basis, eliminate it from the workstation.

Seiton Set in Order ማስቀመጥ The second step is to arrange the items used on a daily basis so
that they can be easily accessed and quickly stored. Your goal is
to make eliminate any unnecessary movements and actions by
the worker to make his process as efficient as possible.

Seiso Shine ማፅዳት Next is to get everything cleaned and functioning properly. The
goal is to remove all the dirt and the grime and to keep it that
way on daily basis. You want to get it clean and keep it clean.

Seiketsu Standardize ማላመድ The fourth step is to develop a routine for sorting, setting and
shining. Standardize creates a system of tasks and procedures
that will ensure that the principles of 5S are performed on a
daily basis
Shitsuke Sustain ማስቀጠል In the last step, you want to create a culture that will follow the
steps on a daily basis. The chief objective of sustain is to give
your staff the commitment and motivation to follow each step,
day in and day out.

Importance of Implementing 5s
• Improves safety and ergonomics • Eliminates distractions
• Promotes flow • Reduces inventory and space
• Reduces searching • Instills the discipline to follow
• Reduces unplanned downtime standard work

• Improve quality • Encourages visual control

• Enhances teamwork • Exposes problems
• Tackles waste • Enhances self -management

• Improves productivity
3.2 The 5S Phases
The term 5S is an abbreviation for five Japanese words: seiri, seiton,
seisou, seiketsu, and shitsuke. These five words are often translated
into English as: sorting, setting in order, shining, standardizing, and
sustaining.
]
Figure 8: the 5s phases

Sort/seiri
This phase refers to the practice of going through all the items within the workplace and keeping only what is
actually needed. Items which are excess to requirements should either be stored offsite, sold, scraped, or discarded.
The main idea behind this phase is to clear the area from distractions to concentrate on what remains in the
workplace. This leads to less clutter and wasted time, frees up valuable space, and creates a more streamlined
workplace.

Identifying necessary vs. unnecessary items:

Necessary items are those that directly support daily tasks, promote safety, or align with organizational objectives.

Unnecessary items include obsolete tools, expired materials, excess inventory, and items that have accumulated over time
but are no longer needed for day-to-day operations.
The goal is to streamline the work area by removing unnecessary items, reducing clutter, and creating a more organized and
efficient workspace.

Figure 9: Identifying necessary vs necessary items

Some of the strategies used: Inspect all items in the workplace then define what is necessary to perform the work.
Keep only what is needed and remove everything else. Remove items which are unusable, broken, outdated,
redundant and occasionally used. Do not allow secret warehousing of parts or tools. Remember to sort out
unnecessary documents in files. Don’t forget computer files and emails. Archive or delete files that are no longer
needed. Define standards for eliminating unnecessary items and for waste disposal.

Figure 10: Items to be

sorted example

Set in Order/seiton:
To effectively implement the 5S methodology, the Set in Order phase follows the completion of the Sort phase,
ensuring that unnecessary clutter is eliminated before organization begins. Set in Order aims to establish a
standardized and consistent system for storing and retrieving tools and materials. This involves arranging items in a
manner that optimizes accessibility and efficiency. The user must devise this system based on the frequency of use
and the associated processes. Setting in order involves organizing items in a logical manner, ensuring they are easily
found and identifiable. Once unnecessary items are removed, the remaining ones are arranged to facilitate easy
access and immediate recognition of their proper place.
This strategic organization minimizes wasted time and motion, streamlines workflow processes, and enhances
overall efficiency within the workspace.

Shine/ Seiso
The shine step of 5S is a crucial part of the 5S methodology that focuses on cleanliness and organization. The objective of
the shine step is to thoroughly clean and remove any dirt, dust, or debris from the work area, equipment, and tools. By
maintaining a clean and organized workspace, it helps to improve safety, efficiency, and productivity.
The shine step involves tasks such as sweeping, mopping, dusting, and wiping down surfaces. It also includes regular
maintenance and inspection of equipment to ensure they are in good working condition. Regular cleaning helps to
prevent equipment breakdowns, reduce errors, and improve overall work quality.
 Overall, the shine step of 5S helps to create a clean and organized work environment that promotes employee morale
and productivity.
Standardize
Keeping the workplace clean and tidy is a real challenge and can only be achieved if standards are established and
adhered to. The standardize phase involves implementing clear guidelines for maintaining cleanliness and
orderliness. Over time, these standards should be updated to streamline 5S practices, ensuring continued simplicity
and ease of implementation.
Developing and Documenting Standardized Work Procedures:
Initial Assessment: Begin by assessing the current state of the workplace to identify areas for improvement and establish
baseline standards.
Define Procedures: Develop clear, step-by-step procedures for each stage of the 5S methodology (Sort, Set in order,
Shine, Standardize, Sustain).
Documentation: Document these procedures in a comprehensive manual or guidebook accessible to all employees.
Include visual aids, such as diagrams or photos, to enhance understanding. Standardization Criteria: Establish criteria for
what constitutes successful implementation of each 5S stage, ensuring consistency across departments or teams.
Continuous Improvement: Encourage ongoing refinement of procedures based on feedback from employees and
observations of effectiveness in practice.

Step 5: Sustain
Once the first four phases have been implemented, attention must shift to sustaining what has been accomplished.
Sustaining is the disciplined application of the first four ‘S’ practices to ensure the effectiveness and longevity of
the 5S program. This phase proves to be one of the most challenging parts of implementation, as many companies
have found themselves with cluttered and dirty workplaces again after their initial attempt to implement 5S.
5S has a tendency to fail when there is a lack of ownership from the top and when leadership does not place
continuous focus on it. Leadership must buy-in and be personally committed to ensure the success of the 5S
program. They must establish a culture where 5S excellence is expected and nothing less is tolerated. Adequate
planning, training, monitoring, and a formal system of accountability must exist in order for the 5S program to
ensure its successful continuation.

3.3 Creating a Culture of Continuous Improvement

• Employee Involvement: Foster a sense of ownership and involvement among employees by encouraging their
active participation in identifying areas for improvement.
• Feedback Mechanisms: Establish channels for employees to provide feedback on current processes and suggest
ideas for enhancement.
• Kaizen Events: Organize periodic Kaizen (continuous improvement) events focused on specific areas or processes,
bringing together cross-functional teams to brainstorm and implement improvements.
 • Training and Education: Offer training sessions and workshops on continuous improvement methodologies,
empowering employees with the skills and mindset necessary to drive positive change.
• Leadership Support: Ensure that organizational leaders actively champion the importance of continuous
improvement, allocating resources and providing guidance to support ongoing initiatives.

Self-checks 3-1:
1. What is Muda, and why is it crucial in both manufacturing and service sectors?
2. Discuss the elements of 5S?
3. Discuss how to create a culture of continuous improvement?
Unit Summary
5S is a process and method for creating and maintaining an organized, clean, and high performance workplace. IT enables
anyone to distinguish between normal and abnormal conditions at a glance. It is the foundation for continuous
improvement, zero defects, cost reduction, and a safe work area. 5S is a systematic way to improve the workplace, our
processes, and our products through production line employee involvement.

Unit Review Questions

Part I. Answer the following questions correctly

-------1. One of the following is used to implement the third pillar of 5s- shine?
A. Brush C. Hack saw

B. Hammer D. chipping hammer

--------2. All necessary and unnecessary items are categorized in the sorting activities
A. True B. False

3. Which one is an example of shine activities?

A. Daily sweeping and mopping of floor, bath room, corridor etc.

B. Regular cleaning and maintenance of equipment and tools
C. Periodical check for changes in equipment and the service area
D. All
4. Red tag tool is used for sort activity when the items are necessary

A. True B. False

5. Which one is NOT a benefit of Shine?

A. Customer satisfaction B. Happier employees

B. Improved quality D. inventory reduction

6. 5S should be implemented by only one person per department to save time and avoid confusion.

A. True B. False

7. Which of the following is not an advantage of implementing 5S technique?

A. To improve work efficiency C. To improve work discipline

B. To standardize work practices D. To create a dirty workplace

8. Which of the following from the 5S technique means ‘to separate out all unnecessary things and eliminate them’?

A. Sort C. Sustain
B. Standardize D. Shine
9. Which of the following is the correct order of 5s implementation

A. Sort , sustain , shine , standardize, set in order

B. Sort , standardize , shine, set in order , sustain
C. Sort , shine, set in order, standardize , sustain
D. Sort, set in order, Shine, standardize, sustain
Part II. Matching

A B
-------1. Sort a. Clean to inspect.

-------2. Straighten b. Create standards so abnormalities are easily recognized.

------ 3. Shine c. Apply positive tension to ensure gains are maintained.

------- 4. Standardize d. Get rid of the things you no longer need.

------- 5. Sustain e. Get a place for everything and put everything in its place.

Project Work
From your school compound select one from the following work place and apply 5s

A. Office B. Department C. Library D. Laboratory Store

Follow the following procedure for implementing 5s

1. Take a picture of the current status of your workplace.

2. Sort to separate anything that is needed and necessary from what is not needed.
3. Organize the things you need so that there is a place for everything and everything has a place. You should be able to
find anything in just a few seconds.
 4. Clean the workplace and get rid of things that make it difficult to maintain cleanliness, such as boxes on the floor that
prevent you from being able to clean the entire surface label them and store them in labeled drawers, instead.
5. Take a second picture after the entire day’s work, for review.

Answer Key for Self-check Questions

Unit One: Answer key to check your progress questions Self-check 1-1:
1. Refer topic 1.2.
1. Refer topic 1.2.
2. Refer topic 1.3.

Unit Two: Answer key to check your progress questions Self-check 2-1:
1. Refer topic 2.1.
2. Refer topic 2.2.
Self-check 3-:
1. Refer topic 3.1. .
2. Refer sub-topic 3.2.
3. Refer sub-topic 3.3. .

References
1. MOLS (2014), apply 5s and prevent and eliminate Muda Addis Ababa
2. https://www.quality-assurance-solutions.com/7-wastes.html#ixzz8O9DWOMne
3. https://www.kaufmanglobal.com/glossary/7-types-waste/
4. https://www.ptc.com/en/blogs/iiot/7-wastes-of-lean-production
5. https://www.google.com/search?client=firefox-b-d&q=5s+procedure
6. https://www.jica.go.jp/Resource/activities/issues/health/