University Computing Centre

Marketing ManagementBIT 05209

Marketing Management

• Marketing Management employs various tools from economics and competitive strategy to analyze the industry context in which the firm operates.

• These include Porter's five forces, analysis of strategic groups of competitors, value chain analysis and others.

Marketing Management

• In competitor analysis, marketers build detailed profiles of each competitor in the market, focusing especially on their relative competitive strengths and weaknesses using SWOT analysis

Marketing Management

• Marketing managers will examine each competitor's cost structure, sources of profits, resources and competencies, competitive positioning and product differentiation, degree of vertical combination, historical responses to industry developments, and other factors.

Marketing Management

• Marketing management often finds it necessary to invest in research to collect the data required to perform accurate marketing analysis. As such, they often conduct market research (alternately marketing research) to obtain this information.

Marketing Management

• Marketers employ a variety of techniques to conduct market research, but some of the more common include:

• Qualitative marketing research, such as focus groups and various types of interviews

• Quantitative marketing research, such as statistical surveys

• Experimental techniques such as test markets• Observational techniques such as (on-site)

observation

Qualitative marketing research

• is a set of research techniques, used in marketing and the social sciences, in which data is obtained from a relatively small group of respondents and not analyzed with inferential statistics.

Quantitative marketing research

• is the application of quantitative research techniques to the field of marketing. It has roots in both the positivist view of the world, and the modern marketing viewpoint that marketing is an interactive process in which both the buyer and seller reach a satisfying agreement on the "four Ps" of marketing: Product, Price, Place (location) and Promotion.

Quantitative marketing research

• As a social research method, it typically involves the construction of questionnaires and scales. People who respond (respondents) are asked to complete the survey.

• Marketers use the information so obtained to understand the needs of individuals in the marketplace, and to create strategies and marketing plans.

Experimental Techniques

• In general usage, design of experiments (DOE) or experimental design is the design of any information-gathering exercises where variation is present, whether under the full control of the experimenter or not. However, in statistics, these terms are usually used for controlled experiments. Formal planned experimentation is often used in evaluating physical objects, chemical formulations, structures, components, and materials.

Observation Techniques

• In marketing and the social sciences, observational research (or field research) is a social research technique that involves the direct observation of event in their natural setting. This differentiates it from experimental research in which a quasi-artificial environment is created to control for fake factors, and where at least one of the variables is manipulated as part of the experiment.

Observation Techniques

• Compared with quantitative research and experimental research, observational research tends to be less reliable but often more valid. The main advantage of observational research is flexibility. The researchers can change their approach as needed. Also it measures behavior directly, not reports of behavior or intentions.

Market Environment

• The market environment is a marketing term and refers to factors and forces that affect a firm’s ability to build and maintain successful relationships with customers.

Market Environment

• Two levels of the environment are:

Micro (internal) environment - small forces within the company that affect its ability to serve its customers.

Market Environment

Macro (national) environment - larger societal forces that affect the microenvironment.

Micro - Environment

• The micro environment refers to the forces that are close to the company and affect its ability to serve its customers. It includes the company itself, its suppliers, marketing intermediaries, customer markets and publics.

Micro - Environment

• The company aspect of microenvironment refers to the internal environment of the company.

Micro - Environment

• This includes all departments, such as management, finance, research and development, purchasing, operations and accounting. Each of these departments has an impact on marketing decisions.

Micro - Environment

• For example, research and development have input as to the features a product can perform and accounting approves the financial side of marketing plans and budgets.The suppliers of a company are also an important aspect of the microenvironment because even the slightest delay in receiving supplies can result in customer dissatisfaction.

Micro - Environment

• Marketing managers must watch supply availability and other trends dealing with suppliers to ensure that product will be delivered to customers in the time frame required in order to maintain a strong customer relationship.

Micro - Environment

• Marketing intermediaries refers to resellers, physical distribution firms, marketing services agencies, and financial intermediaries. These are the people that help the company promote, sell, and distribute its products to final buyers.

Micro - Environment

• Resellers are those that hold and sell the company’s product. They match the distribution to the customers.Physical distribution firms are places such as warehouses that store and transport the company’s product from its origin to its destination

Micro - Environment

• Marketing services agencies are companies that offer services such as conducting marketing research, advertising, and consulting.

• Financial intermediaries are institutions such as banks, credit companies and insurance companies.

Micro - Environment

• Another aspect of microenvironment is the customers. There are different types of customer markets including consumer markets, business markets, government markets, international markets, and reseller markets.

Micro - Environment

• The consumer market is made up of individuals who buy goods and services for their own personal use or use in their household.

• Business markets include those that buy goods and services for use in producing their own products to sell.

Micro - Environment

• This is different from the reseller market which includes businesses that purchase goods to resell as is for a profit.

• The government market consists of government agencies that buy goods to produce public services or transfer goods to others who need them.

Micro - Environment

• International markets include buyers in other countries and includes customers from the previous categories.

• Competitors are also a factor in the microenvironment and include companies with similar offerings for goods and services.

Micro - Environment

• To remain competitive a company must consider who their biggest competitors are while considering its own size and position in the industry. The company should develop a strategic advantage over their competitors.

Micro - Environment

• The final aspect of the microenvironment is publics, which is any group that has an interest in or impact on the organization’s ability to meet its goals. For example, financial publics can hinder a company’s ability to obtain funds affecting the level of credit a company has.

Micro - Environment

• Media publics include newspapers and magazines that can publish articles of interest regarding the company and editorials that may influence customers’ opinions.

Macro-Environment

• The macro environment refers to all forces that are part of the larger society and affect the microenvironment. It includes concepts such as demography, economy, natural forces, technology, politics, and culture.

Macro-Environment

• Factors affecting organization in Macro environment are known as PESTEL, that is: Political, Economical, Social, Technological, Environmental and Legal.

Macro-Environment

• Demography refers to studying human populations in terms of size, density, location, age, gender, race, and occupation. This is a very important factor to study for marketers and helps to divide the population into market segments and target markets.

Macro-Environment

• An example of demography is classifying groups of people according to the year they were born. These classifications can be referred to as baby boomers, who are born between 1946 and 1964, generation X, who are born between 1965 and 1976, and generation Y, who are born between 1977 and 1994. Each classification has different characteristics and causes they find important.

Macro-Environment

• This can be beneficial to a marketer as they can decide who their product would benefit most and tailor their marketing plan to attract that division. Demography covers many aspects that are important to marketers including family self-motivated, geographic shifts, work force changes, and levels of variety in any given area.

Macro-Environment

• Another aspect of the macro environment is the economic environment. This refers to the purchasing power of potential customers and the ways in which people spend their money.

Macro-Environment

• Within this area are two different economies, subsistence and industrialized. Subsistence economies are based more in agriculture and consume their own industrial output. Industrial economies have markets that are diverse and carry many different types of goods. Each is important to the marketer because each has a highly different spending pattern as well as different distribution of wealth.

Macro-Environment

• The natural environment is another important factor of the macro environment. This includes the natural resources that a company uses as inputs that affects their marketing activities. The concern in this area is the increased pollution, shortages of raw materials and increased governmental interference.

Macro-Environment

• As raw materials become increasingly scarcer, the ability to create a company’s product gets much harder. Also, pollution can go as far as negatively affecting a company’s reputation if they are known for damaging the environment

Macro-Environment

• The last concern, government intervention can make it increasingly harder for a company to fulfill their goals as requirements get more strict.

Macro-Environment

• The political environment includes all laws, government agencies, and groups that influence or limit other organizations and individuals within a society. It is important for marketers to be aware of these restrictions as they can be complex.

Macro-Environment

• The aspect of the macro environment is the cultural environment, which consists of institutions and basic values and beliefs of a group of people. The values can also be further categorized into core beliefs, which passed on from generation to generation and very difficult to change, and secondary beliefs, which tend to be easier to influence.

Macro-Environment

• As a marketer, it is important to know the difference between the two and to focus your marketing campaign to reflect the values of a target audience.

Macro-Environment

• When dealing with the marketing environment it is important for a company to become proactive. By doing so, they can create the kind of environment that they will prosper in and can become more efficient by marketing in areas with the greatest customer potential.

Macro-Environment

• It is important to place equal emphasis on both the macro and micro environment and to react accordingly to changes within them.

Consumer markets

• A consumer is a person (or group) who pays to consume the goods and/or services produced by a seller (i.e., company, organization).

• Consumer markets are the markets for products and services bought by individuals for their own or family use.

Characteristics of Consumer Markets

• The consumer market pertains to buyers who purchase goods and services for consumption rather than resale. However, not all consumers are alike in their tastes, preferences and buying habits due to different characteristics that can distinguish certain consumers from others.

Characteristics of Consumer Markets

• These particular consumer characteristics include various demographic, psychographic, behaviorialistic and geographic traits.

• Marketers usually define these consumer characteristics through market segmentation, the process of separating and identifying key customer groups.

Demographic Characteristics

• Characteristics of consumer markets based on demographics include differences in gender, age, ethnic background, income, occupation, education, household size, religion, generation, nationality and even social class.

Demographic Characteristics

• Most of these demographic categories are further defined by a certain range. For example, companies may identify the age of their consumers in the 18 to 24, 25 to 34, 35 to 54, 55 to 65, and 65+ age groups.

Demographic Characteristics

• For example, a new cell phone may be targeted toward 18 to 24-year-olds with incomes between Tshs 25,000 and Tshs 850,000.

Behavioralistic Characteristics

• Behavioralistic characteristics can also be garnered through marketing research. Behavioralistic characteristics of consumer markets include product usage rates, brand loyalty, user status or how long they have been a customer, and even benefits that consumers seek.

Behavioralistic Characteristics

• Companies like to know how often their consumers visit their restaurants, stores or use their products.

Behavioralistic Characteristics

• Company marketing departments usually try to distinguish between heavy, medium and light users, whom they can then target with advertising. Marketers like to know which customers are brand loyalists, as those consumers usually only buy the company's brand.

Geographic Characteristics

• Consumer markets also have different geographic characteristics. These geographic characteristics are often based on market size, region, population density and even climate.

Consumer Market and Influence on Demand and Supply

• supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium for price and quantity.

The four basic laws of supply and demand

• If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.

• If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.

The four basic laws of supply and demand

• If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price.

• If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher equilibrium price

Supply schedule

• A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied. A supply curve is a graph that illustrates that relationship between the price of a good and the quantity supplied.

Supply schedule

• Under the assumption of perfect competition, supply is determined by marginal cost. Firms will produce additional output while the cost of producing an extra unit of output is less than the price they would receive

Supply schedule

• By its very nature, conceptualizing a supply curve requires the firm to be a perfect competitor, namely requires the firm to have no influence over the market price. This is true because each point on the supply curve is the answer to the question "If this firm is faced with this potential price, how much output will it be able to and willing to sell?"

Supply schedule

• If a firm has market power, its decision of how much output to provide to the market influences the market price, then the firm is not "faced with" any price, and the question is meaningless

Supply schedule

• The determinants of supply are:• Production costs: how much a good costs to be

produced. Production costs are the cost of the inputs, primarily labor, capital, energy and materials. Production costs depend on the technology used in production, and/or technological advances.

• Firms' expectations about future prices• Number of suppliers

Demand schedule

• A demand schedule, depicted graphically as the demand curve, represents the amount of some good that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of substitute goods, and the price of complementary goods, remain the same

Demand Curve

• The demand curve is the graph describing the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price.

Demand Curve

• It is a graphic representation of a demand schedule.

• The demand curve for all consumers together follows from the demand curve of every individual consumer: the individual demands at each price are added together.

Demand Curve

• Demand curves are used to estimate behaviors in competitive markets, and are often combined with supply curves to estimate the equilibrium price (the price at which sellers together are willing to sell the same amount as buyers together are willing to buy,

Demand Curve

• also known as market clearing price) and the equilibrium quantity (the amount of that good or service that will be produced and bought without surplus/excess supply or shortage/excess demand) of that market.

Characteristics

• According to convention, the demand curve is drawn with price on the vertical (y) axis and quantity on the horizontal (x) axis.

• The demand curve usually slopes downwards from left to right.

Characteristics

• The negative slope is often referred to as the "law of demand", which means people will buy more of a service, product, or resource as its price falls.

Characteristics

• The demand curve is related to the marginal utility curve, since the price one is willing to pay depends on the utility.

Characteristics

• However, the demand directly depends on the income of an individual while the utility does not. Thus it may change indirectly due to change in demand for other commodities.

Shift of Demand Curve

• The shift of a demand curve takes place when there is a change in any non-price determinant of demand, resulting in a new demand curve.

Shift of Demand Curve

• Non-price determinants of demand are those things that will cause demand to change even if prices remain the same

• in other words, the things whose changes might cause a consumer to buy more or less of a good even if the good's own price remained unchanged

Shift of Demand Curve

• Some of the more important factors are the prices of related goods (both substitutes and complements), income, population, and expectations.

Shift of Demand Curve

• When income increases, the demand curve for normal goods shifts outward as more will be demanded at all prices, while the demand curve for inferior goods shifts inward due to the increased attainability of superior substitutes.

Shift of Demand Curve

• With respect to related goods, when the price of a good (e.g. a hamburger) rises, the demand curve for substitute goods (e.g. chicken) shifts out, while the demand curve for complementary goods (e.g. tomato sauce) shifts in

Demand Shifters

• Changes in disposable income

• Changes in tastes and preferences - tastes and preferences are assumed to be fixed in the short-run.

• Changes in expectations

Demand Shifters

• Changes in the prices of related goods (substitutes and complements)

• Population size and composition

Changes that decreases demand

• Decrease in price of a substitute• Increase in price of a complement• Decrease in consumer income if the good is a

normal good• Increase in consumer income if the good is an

inferior good

Factors affecting market demand

• Market or aggregate demand is the summation of individual demand curves. In addition to the factors which can affect individual demand there are three factors that can affect market demand (cause the market demand curve to shift)

Factors affecting market demand

• A change in the number of consumers, • A change in the distribution of tastes among

consumers, • A change in the distribution of income among

consumers with different tastes.

Movement along demand curve

• There is movement Along a demand curve when a change in price causes the quantity demanded to change.

• It is important to distinguish between movement along a demand curve, and a shift in a demand curve

Movement along demand curve

• Movements along a demand curve happen only when the price of the good changes

• When a non-price determinant of demand changes the curve shifts

Equilibrium

• Equilibrium is defined to be the price-quantity pair where the quantity demanded is equal to the quantity supplied, represented by the intersection of the demand and supply curves.

Market Equilibrium

• A situation in a market when the price is such that the quantity that consumers demand is correctly balanced by the quantity that firms wish to supply.