CHAPTER ONE:

NATURE AND SCOPE OF MARKETING

Introduction
In today’s competitive environment a lot of emphasis is laid on the marketing since
marketing deals with customers more than any other business function. We find every
organization carrying out a lot of marketing activities. This chapter deals with basic
marketing concepts, its importance and philosophies of marketing.
1.1. Definitions and core concepts of marketing
A. Definitions of Marketing
Many people think of marketing as only selling and advertising. But advertising and selling is
one part of marketing. So, marketing is defined as follows:
 Kotler and Armstrong (2010 defined Marketing as the social process by which
individuals and organizations obtain what they need and want through creating and
exchanging value with others.
 The chartered Institute of Marketing (2012) defines marketing as the management
process that identifies, anticipates and satisfies customer requirements profitably.
 American Marketing Association (2017) defined Marketing as the activity, set of
institutions, and processes for creating, communicating, delivering, and exchanging
offerings that have value for customers, clients, partners, and society at large.
Note that the definition of marketing focuses on the lifetime value of a customer. All the
functional areas have to take an "integrated marketing" approach and work towards the goal
of satisfying and delivering value to customers. If you do not truly care about your customers,
you are not a good marketer. Also, note the importance of all stakeholders and society at
large. A good marketer is not only concerned with making money.
So, the two-fold goal of marketing is to attract new customers by promising superior value,
and keep and grow current customers by delivering satisfaction.
The concept of marketing lies on the idea of satisfying the needs of the customer by means of
the products as a solution to the customer's problem (needs).
What is marketing management?
Marketing Management is:
 A process of planning, organizing, directing and controlling the activities of product
planning, pricing; promotion and distribution of products to create exchange that satisfy
individuals and organizational needs.

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 Philip Kotler and Kevin Lane define marketing management as an art and science of
choosing target markets and building profitable relationships with them, then it involves
getting, keeping and growing customers through creating, delivering and communications
superior customer value.
In general, marketing management is a business discipline focused on the practical
application of marketing techniques and the management of a firm’s marketing resources and
activities. Marketing managers are often responsible for influencing the level, timing, and
composition of customers demand in a manner that will achieve the company’s objective.
B. Core concepts of marketing
To have more clear view about the marketing and to understand the marketing process first
we should discuss the basic concepts of marketing.
1. Needs, Wants, and Demands
i) Needs
The most basic concept underlying marketing is that of human needs. Human needs are a
state of felt deprivation of the basic human requirements such as food, air, water, clothing and
shelter. Humans’ beings have many complex needs such as: -
 Basic physical needs for food, clothing, warmth and safety;
 Social needs for belonging and affection; and
 Individual needs for knowledge and self-expression.
These needs are not invented by marketers; they are a basic part of the human make-up.
Marketers do not create needs but, they influence the demand by making the appropriate,
attractive, affordable and easily available product to target customers. Need is natural, It is
not affected by culture, and marketing has no influence in creating needs.
ii) Wants
Wants are the form human needs take as they are shaped by culture and individual
personality. They are the forms by which people communicate their needs. They are
assortments (bundles) of products that people choose to satisfy their needs. When an Italian
and an Ethiopian feel hungry both have need for food but the (form) they choose to satisfy
their need may be different. The Ethiopian may prefer “KITFO” or “Raw Meat” but the
Italian may prefer “Spaghetti”. Culture and marketing can influence the wants of people. The
closer that a product matches the consumer’s want, the more successful the product will be.
iii) Demands
Demands are wants for specific products that are backed up by an ability and willingness to
buy product. Wants become demands when backed up by purchasing power. Companies must

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therefore, measure not only how many people want their product but, more important, how
many would actually be willing and able to buy it. Two people may have the same need for
example need for food; and may have the same want for example Spaghetti; but one may not
afford the cost of spaghetti because he cannot afford it and therefore shift his demand to a
cheaper food item.
2. Products
A product is anything that can be offered to a market for attention, acquisition, use or
consumption and that might satisfy a need or want. Products are solutions to the problems of
the customer. People buy products in order to solve their problems, because of the benefit
they desire from the product. Marketers market ten main types of entities: goods, services,
events, experiences, persons, places, properties, organizations, information, and ideas.
Goods: Goods are any tangible products that can be touched and seen. Example: table, chair,
refrigerators, televisions, machines, blackboard, chalk, and etc.
Services: Service is any activity or benefit that one party can offer to another which is
essentially intangible and does not result in ownership of anything. As economies advance, a
growing proportion of their activities focus on the production of services. Services include
the work of airlines, hotels, barbers and beauticians, maintenance and repair people, and
accountants, bankers, lawyers, engineers, doctors, software programmers, and management
consultants.
Events: Marketers promote time-based events, such as major trade shows, artistic
performances, and global sporting events such as the Olympics and the World Cup.
Experiences: By coordinating several services and goods, a firm can create stage, and market
experiences.
Persons: Persons are also a product and marketed themselves. Example: artists, musicians,
CEOs, physicians, football players, and other professionals. Some people have done a
masterful job of marketing themselves: Messy, Saladin Seid, Haile Gebreselasie and others.
Places: Cities, states, regions, and whole nations compete to attract tourists, residents, and
factories. Example: the obelisk of Axum, Dire Shekena Hussein, 11 Rock-Hewn Church
Properties: Properties are intangible rights of ownership to either real property (real estate)
or financial property (stocks and bonds). They are bought and sold, and these exchanges
require marketing. Real estate agents work for property owners or sellers, or they buy and sell
residential or commercial real estate. Investment companies and banks market securities to
both institutional and individual investors.

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Organizations: Organizations work to build a strong, favorable, and unique image in the
minds of their target publics. Universities, museums, performing arts organizations,
corporations, and non-profits all use marketing to boost their public images and compete for
audiences and funds. Information: The production, packaging, and distribution of
information are a major industry in a given society. Marketers of information may include
school, and universities, publishers of encyclopaedias, nonfiction books, and specialized
magazines, makers of CDs, and internet web sites.
Ideas: Every market offering has a basic idea at its core concept. Products and services are
platforms for delivering some idea or benefit to satisfy a core need. Marketers marketed their
business idea to different organizations.
3. Customer value and satisfaction
Customer perceived value: - is the customer’s evaluation of the difference between all the
benefits and all the costs of a market offering relative to those of competing offers. It is the
satisfaction of customer’s requirements at the lowest possible cost of acquisition, ownership,
and use. It is the difference between the values that the customer gains from owning and
using a product and the costs of obtaining the product. It can also be defined as a ratio
between what the customer gets and what he gives.
Value=Benefit = Functional Benefit + Emotional Benefit
Cost Monetary + Time + Energy + Psychic Cost
The marketer can increase the value of the customer offering in several ways:
 Raise benefits
 Reduce costs
 Raise benefits and reduce costs
 Raise benefits by more than the raise in costs
In general, since customers prefer products that offer high value, therefore businesses need to
provide a high value product.
Customer satisfaction: - is the extent to which a product’s perceived performance matches a
buyer’s expectations. It depends on the product’s perceived performance relative to a buyer’s
expectations. If the product’s performance falls short of expectations, the customer is
dissatisfied. If performance matches expectations, the customer is satisfied. If performance
exceeds expectations, the customer is highly satisfied or delighted.
Why is it important to satisfy a customer? It is more costly to attract new customers than to
retain current customers. Therefore, customer retention is more critical than customer
attraction.

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A satisfied customer is: -
 Stays loyal longer
 Buys more as the company introduces new products and upgrades
 Talks favorably about the company and its products
 Pays less attention to competing brands and is less sensitive to price
 Offers product /service ideas to the company
 Cost less to serve than new customers because transactions are taking place on routine
bases
4. Exchange and Transaction
a) Exchange
Exchange is the act of obtaining a desired product from someone by offering something of
value in return. Marketing occurs when people decide to satisfy needs and wants through
exchange. It is the core concept of marketing.
For an exchange to take place, several conditions must be satisfied:
a. There are at least two parties must participate
b. Each party must have something of value to the other party
c. Each party is capable of communication and delivery
d. Each party is free to accept or reject the exchange offer
e. Each party believes it is appropriate or desirable to deal with the other party
If these conditions exist there is potential for exchange, whether exchange actually takes
place depends on whether the two parties can agree on terms of the exchange that will leave
them better off before the exchange. This is the sense in which exchange is described as a
value creating process that is; exchange normally leaves both parties better than before the
exchange.
b) Transaction
Exchange must be seen as a process than an event whereas a transaction is marketing’s unit
of measurement. The transactions are the basic unit of exchange. Transaction is a trade of
value between two parties. One party gives X to another party and gets Y in return. A
transaction involves at least two things of value, conditions that are agreed upon, a time of
agreement and a place of agreement.
5. Relationship marketing
Relationship marketing involves creating, maintaining and enhancing strong relationships
with customers and other stakeholders. Increasingly, marketing is moving away from a focus
on individual transactions and towards a focus on building value-laden relationships and

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marketing networks. It is a marketing strategy to establish, maintain, and enhance long term
relationships with customers and other partners at a profit in the way that the objectives of the
parties involved are achieved through mutual exchange and fulfilment of promises. It
concerned with the long-term and not merely to sell a product or service to a customer one
time. The goal is to have a satisfied customer and establish an ongoing and long-term
relationship with them.
6. Market
A market is the set of actual and potential buyers of a product. These buyers share a particular
need or want that can be satisfied through exchanges and relationships. The size of the market
depends on the number of people (1) who have the need, (2) have resources (money) for the
exchange and (3) want to spend these resources in the exchange.
1.2. Evolution and Philosophies of Marketing Management
There are six competing concepts under which organizations can choose to conduct their
marketing activities.
1. The production concept
Production concept holds that customers will favor products that are highly available and
highly affordable. Managers of production-oriented businesses concentrate on achieving high
production efficiency, and mass distribution.
The production concept is still a useful philosophy in some situations. However, although
useful in some situations, the production concept can lead to marketing myopia. Companies
adopting this orientation run a major risk of focusing too narrowly on their own operations
and losing sight of the real objective that is satisfying customer needs and building customer
relationships. The production concept is a useful philosophy in two types of situations:
 When demand for a product is greater than supply
 When the product cost is too high and improved productivity is needed to lower the
cost
2. The product concept
The product concept holds that consumers will favor products that offer the most quality,
performance and innovative (new) features. Under this concept, marketing strategy focuses
on making continuous product improvements. Product quality and improvement are
important parts of most marketing strategies. However, focusing only on the company’s
products can also lead to marketing myopia. A new or improved product will not necessarily
be successful unless it’s priced, distributed, advertised, and sold properly. They can end up
focusing just on the product and not seeing wider market trends that may affect demand.

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3. The selling concept
The selling concept holds that consumers will not buy enough of the organization’s products
unless the organization undertakes a large-scale selling and promotional efforts. Firms that
follow this philosophy focus on "pushing" the product using advertising and promotion. The
concept is largely practiced with unsold goods i.e. goods that consumers do not normally
think of buying such as insurance, or encyclopedia; and also practiced in the non-profit area
like political party that tries to get votes to support candidates.
Companies practice the selling concept when they have overcapacity/excessive amount of
products. Their aim is to sell what they make rather than make what the market wants. Thus
marketing based on hard selling carries high risks. It focuses on short-term results: creating
sales transactions rather than on building long-term, profitable relationships with customers.
4. The marketing concept
The marketing concept holds that achieving organizational goals depends on determining the
needs and wants of target markets and delivering the desired satisfaction more effectively
than competitors. It is based on the satisfaction of customer’s needs and wants. So, the
company should be more effective than its competitors in creating, delivering, and
communicating customer value to its chosen markets.
Slogans used in the marketing concept include:
 The customer is the ‘King, Boss”
 We are not satisfied until our customers are satisfied
What is the difference between selling concept and marketing concept?
The selling concept takes an in-out perspective. It starts with the factory, focuses on the
company’s existing products, and calls for heavy selling and promotion to obtain profitable
sales. It focuses primarily on getting short-term sales with little concern about who buys or
why. In contrast, the marketing concept takes an outside-in perspective. The marketing
concept starts with a well-defined market, focuses on customer needs, and integrates all the
marketing activities that affect customers. In turn, it yields profits by creating long lasting
relationships with the right customers based on customer value and satisfaction.
5. The societal marketing concept
Societal marketing concept holds that the organization should determine the needs, wants,
and interests of target markets and deliver the desired satisfactions more effectively than
competitors in a way that maintains or improves the customer’s and society’s well-being. It
calls for sustainable marketing, socially and environmentally responsible marketing that
meets the present needs of consumers and businesses while also preserving or enhancing the

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ability of future generations to meet their needs. According to societal marketing philosophy,
the marketing concept is not sufficient enough to cure the ills of the society. It only takes into
account the short-term benefits of the customers. So, there is a strong need for a new concept
that should tackle the major societal problems.
The company follows the societal concept for maintaining the equilibrium between the three
aspects, which are as follows:
 Profits of company
 Satisfaction of the customers
 Overall benefit of the society
6. Holistic Marketing Concept
Holistic marketing is a new addition to the business marketing management philosophies
which considers business and all its parts as one single entity and gives a shared purpose to
every activity and person related to that business. A business, like a human body, has
different parts, but it’s only able to function properly when all those parts work together
towards the same objective.
The starting point of holistic marketing is the target market, the focus is on consumers &
society, through internal, integrated, relationship, & performance marketing, and the last
profit is through social welfare. Holistic marketing concept enforces this interrelatedness and
believes that a broad and integrated perspective is essential to attain the best results.
1.3. Importance of marketing
Marketing has several importance for producers (sellers), for customers, for employees and
for the society as a whole.
As Producers or sellers marketing helps us to understand:
• Who are our customers
• What are their needs
• What are their behavior
• What products to offer
• What price to charge
• What promotion to use
• What distribution to select
• How to keep customers Satisfied
• Improve relationships and become profitable
As customers, marketing will help us:
• Satisfy our needs

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• Solve our problems
• What products to buy
• What price to pay
• What supplier to deal with
• Improve relationship and lead quality life
As employees, marketing:
• Provide us employment • Provide rewarding jobs
• Provides variety of jobs
• Provides career opportunities (growth, development)
• Lead quality life
As a member of society, marketing:
• Provide employment to members of the society
• Improves product efficiency and reduces resource depletion
• Improves quality of life
• Participates in societies economic and social development
1.4. Marketing Management Tasks
The set of tasks necessary for successful marketing management includes
- Developing marketing strategies and plans,
- Capturing marketing insights,
- Connecting with customers,
- Building strong brands,
- Shaping the market offerings,
- Delivering and communicating value,
- Creating long-term growth
In addition to this marketer also perform the task of managing the demand of their offerings
and building profitable customer relationships.
1.4.1. Building Profitable Customer Relationship
Managing demand means managing customers. A company's demand comes from two
groups: new customers and current customers. Traditional marketing theory and practice have
focused on attracting new customers and making the sale. Today, however, the emphasis is
shifting. Beyond designing strategies to attract new customers and create transactions with
them, companies are now going all out to retain current customers and build lasting customer
relationships. Attracting new customers remains an important marketing management task.
However, the focus today is shifting towards retaining current customers and building

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profitable, long-term relationships with them since the costs of attracting new customers’
costs are five times the costs of keep a current customer.
Customer relationship management is the overall process of building and maintaining
profitable customer relationships by delivering superior customer value and satisfaction.
It deals with all aspects of acquiring, keeping, and growing customers. The key to building
lasting customer relationships is to create superior customer value and satisfaction. Satisfied
customers are more likely to be loyal customers and give the company a larger share of their
business.
Customer Development Stages
i) Suspect: is everyone who might buy the product or who think or imagine in his mind.
ii) Prospect: Are people who have a strong potential interest in the product and the ability to
pay for it.
iii) First time customers: -are qualified prospects who are converted into trying the product
for the first time.
iv) Repeat customers: – are satisfied first time customers converted into repeat purchase
v) Client-are people whom the company treats very specially and which goods or services are
provided and sold.
vi) Members: – are clients who join the membership program that offer a whole set of
benefits or somebody belonging to a particular group.
vii)Advocates: - are customers who recommend the company and its products and services to
others or customers, and who support or speaks in favor of about the company’s product.
viii) Partners: – are customers who work closely with company and who owns part of a
company or who share the asset, risk, profit etc.
1.4.2. Demand Management
The organization has a desired level of demand for its products. At any point in time, there
may be no demand, adequate demand, irregular demand or too much demand, and marketing
management must find ways to deal with these different demand states. So, marketers are
responsible for demand management. They seek to influence the level, timing, and
composition of demand to meet the organization’s objectives.
There are eight states of demand and the corresponding tasks facing managers: -
1. Negative demand
A market is in a state of negative demand if a major part of the market dislikes the product
and may even pay a price to avoid it. The marketing task is to analyze why the market
dislikes the

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product and whether a marketing program consisting of product redesign, lower prices, and
more positive promotion can change beliefs and attitudes.
2. No demand
No demand occurs when target markets unaware or uninterested in the product. For example:
farmers may not be interested in a new farming method, and college students may not be
interested in foreign-language courses. The marketing task is to find ways to connect the
benefits of the product with the person's natural needs and interests.
3. Latent demand
Latent demand occurs when market share a strong need that cannot be satisfied by any
existing product. For example: there is a strong latent demand for harmless cigarettes, safer
neighbourhoods, and more fuel-efficient cars. The marketing tasks are to measure the size of
the potential market and develop goods and services to satisfy the demand.
4. Declining demand
Declining demand implies a substantial drop in the demand for products. It is when
consumers begin to buy the product less frequently or not at all. The marketer must analyze
the causes of the decline demand and determine whether the demand can be re- stimulated by
new target markets, by changing product features, or by effective communications. Then, the
marketing task must be reverse declining demand through creative remarketing.
5. Irregular demand
Irregular demand occurred when organizations face demand that varies on a seasonal,
monthly, daily, or even hourly. For example, museums are under visited on weekdays and
overcrowded on weekends. The marketing task, called “Synchro marketing”, is to find ways
to adjust the pattern of demand through flexible pricing, promotion, and other incentives.
6. Full demand
Organizations face full demand when they are pleased with their volume of business. The
marketing task is to maintain the current level of demand in the face of changing consumer
preferences and increasing competition. The organization must maintain or improve its
quality and continually measure consumer satisfaction.
7. Overfull demand
Some organization faces a demand level that is higher than they can handle. The marketing
task, called “de-marketing”, requires finding ways to reduce demand temporarily or
permanently. Demarketing seeks to discourage overall demand by the use of raising prices,
and reduce promotion and service. Selective de-marketing consists of trying to reduce
demand from those parts of the market that are less profitable.

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8. Unwholesome demand
When production, distribution, and consumption of the product are not desirable for
customers or society at large, demand of such products can be said as unwholesome demand.
It is the state of the unhealthy demand. Here, there is demand, but product is, for any of the
ways, harmful for consumers and society. Unwholesome products will attract organized
efforts to discourage their consumption. The use of products has adverse effect on welfare of
consumers. There are some products, which have unwholesome demand such as, cigarettes,
alcohol, hard drugs, and handguns, etc. leading to provocation of communal sentiments, and
many other such products.
Marketing management tasks relevant to this demand situation can be called as Counter
Marketing. Counter marketing consists of curbing or restricting production, distribution, and
consumption of such products. Counter marketing tries to eliminate production and use of
products. It includes getting people who like something to give it up, using such tools as fear
messages, price hikes, and reduced availability.
In general, marketers must identify the underlying cause(s) of the demand state and determine
a plan of action to shift demand to a more desired state.

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 CHAPTER TWO
MARKETING ENVIRONMENT
Introduction
Marketing does not occur in a vacuum; rather marketing operates in a complex and changing
environment. The environment of marketing affects its growth, development, existence and
success. So, companies to succeed as long as they have to match their products to today's
marketing environment. This chapter addresses the key forces in the firm's marketing
environment and how they affect its ability to maintain satisfying relationships with target
customers.
What is marketing environment?
Marketing environment consists of the actors and forces outside marketing that affect
marketing management’s ability to build and maintain successful relationships with target
customers. Changes in the marketing environment are often quick and unpredictable which
offers both opportunities and threats to the company. A company uses environmental
scanning to monitor what is going on and to determine environmental changes and predicts
future changes in the environment. By conducting systematic environmental scanning,
marketers are able to revise and adapt marketing strategies to meet new challenges and
opportunities in the marketplace. Marketers have two methods (marketing research and
marketing intelligence system) for collecting information about the marketing environment.
 Marketing research is the systematic design, collection, analysis, and reporting of data
relevant to a specific marketing situation facing an organization.
 Marketing intelligence system is the way in which marketing managers obtain
everyday information about developments in the external marketing environment
from books, newspapers, trade publication, suppliers etc.
The marketing environment consists: -
 Micro-environment  Macro-environment
2.1. Micro-environment
The micro environment consists of the forces close to the company that affect its ability to
serve its customers. Marketing management's job is to attract and build relationships with
customers by creating customer value and satisfaction. However, marketing managers cannot
accomplish this task alone. Their success will depend on other actors in the company's
microenvironment which combine to make up the company's value delivery system. The

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micro environment consists of six actors: the company, suppliers, marketing intermediaries,
customer markets, competitors, and publics.
1. The company
In designing marketing plans, marketing management should take other company groups,
such as top management, finance, research and development, purchasing, manufacturing and
accounting, into consideration. All these interrelated groups form the internal environment.
Top management sets the company's mission, objectives, brand strategies, and policies.
Marketing managers make decisions within the plans made by top management, and
marketing plans must be approved by top management before they can be implemented.
Finance is concerned with finding and using funds to carry out the marketing plan. The R&D
department focuses on designing safe and attractive products. Purchasing worries about
getting supplies and materials whereas, manufacturing is responsible for producing the
desired quality and quantity of products. Accounting has to measure revenues and costs to
help marketing know how well it is achieving its objectives. Since all of these departments
have an impact on the marketing department's plans and actions, marketers must work in
harmony with other company departments to create customer value and relationships.
2. Suppliers
Suppliers are organizations that provide resources needed by the organizations to produce
goods and services. Supplier problems can seriously affect marketing. Marketing managers
must watch supply availability and costs. Supply shortages or delays, labor strikes, and other
events can cost sales in the short run and damage customer satisfaction in the long run. They
also monitor the price trends of their key inputs since rising supply costs may force price
increases that can harm the company’s sales volume. Most marketers today treat their
suppliers as partners in creating and delivering customer value. One of the skills required in
managing suppliers is supply chain management. Supply chain management refers to
managing upstream and downstream value-added flows of materials, final goods, and related
information among suppliers, the company, resellers, and final consumers.
3. Marketing intermediaries
Marketing intermediaries are firms that help the company to promote, sell, and distribute its
products to final buyers. They include resellers, physical distribution firms, marketing service
agencies, and financial intermediaries.
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.

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Physical distribution firms: - are firms that help the company to stock and move goods
from their points of origin to their destinations. By working with warehouse and
transportation firms, a company must determine the best way to store and ship goods, and
balancing factors such as cost, deliver, speed, and safety.
Marketing services agencies: - are the marketing research firms, advertising agencies,
media firms and marketing consultancies that help the company target and promote its
products to the right markets. When the company decides to use one of these agencies, it
must choose carefully because the firms vary in creativity, quality, service and price. The
company has to review the performance of these firms regularly and consider replacing those
that no longer perform well. Financial intermediaries: - are banks, credit companies,
insurance companies, and other businesses that help finance transactions or insure against the
risks associated with the buying and selling of goods.
Marketing intermediaries form an important component of the company’s overall value
delivery network, so the company must do more than just optimize its own performance.
Thus, today’s marketers recognize the importance of working with their intermediaries as
partners rather than simply as channels through which they sell their products.
4. Customer markets
Customers are the most important actors in the company’s microenvironment. The aim of the
entire value delivery system is to serve target customers and create strong relationships with
them. Customer markets are markets that pay money to acquire an organization’s products.
The company might target any or all five types of customer markets.
Consumer markets: - are markets that consist of individuals and households that buy goods
and services for personal consumption.
Business markets: -are markets that buy goods and services for further processing or use in
their production processes.
Reseller markets: - are markets that buy goods and services to resell at a profit.
Government markets: - are markets that consist of government agencies that buy goods and
services to produce public services or transfer the goods and services to others who need
them. International markets: - are markets that consist of those buyers in other countries,
including consumers, producers, resellers, and governments. Each market type has special
characteristics that call for careful study by the seller.
5. Competitors
Competitors are a wide range of organizations that compete with other organizations through
adding greater customer value. The marketing concept states that, to be successful, a

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company must provide greater customer value and satisfaction than its competitors do. Thus,
marketers must do more than simply adapt to the needs of target consumers. They also must
gain strategic advantage by positioning their offerings strongly against competitors’ offerings
in the minds of consumers.
No single competitive marketing strategy is best for all companies. Each firm should consider
its own size and industry position compared to those of its competitors. Large firms with
dominant positions in an industry can use certain strategies that smaller firms cannot afford.
But being large is not enough. There are winning strategies for large firms, but there are also
losing ones. And small firms can develop strategies that give them better rates of return than
large firms enjoy.
Knowing competitors is critical for marketing planning and operations. Marketing should
know the following about competitors: -
 Who are our competitors?
 What are their strategies?
 What are their objectives?
 What are their strengths and weaknesses?
 What are their reaction patterns?
6. 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. There are seven types of publics in which the company’s
marketing environment includes: -
• Financial publics: - this group influences the company’s ability to obtain funds. Banks,
investment analysts, and stockholders are the major financial publics.
• Media publics: - this group carries news, features, and editorial opinion. It includes
newspapers, magazines, television stations, and blogs and other Internet media.
• Government publics: - management must take government developments into account.
Marketers must often consult the company’s lawyers on issues of product safety, truth in
advertising, and other matters.
• Citizen-action publics: - a company’s marketing decisions may be questioned by consumer
organizations, environmental groups, minority groups, and others. Its public relations
department can help it stay in touch with consumer and citizen groups.
• Local publics: - this group includes neighbourhoods residents and community
organizations. Large companies usually create departments and programs that deal with local
community issues and provide community support.

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• General public: - a company needs to be concerned about the general public’s attitude
toward its products and activities. The public’s image of the company affects its buying.
• Internal publics: - this group includes workers, managers, volunteers, and the board of
directors. Large companies use newsletters and other means to inform and motivate their
internal publics. When employees feel good about the companies they work for, this positive
attitude spills over to the external publics.
2.2. Macro-environment
The macro-environment consists of the larger societal forces that affect the
microenvironment. It includes, demographic, economic, natural, technological, political, and
cultural environment.
1. Demographic environment
Demography is the study of human populations in terms of size, density, location, age,
gender, race, occupation, and other statistics. The demographic environment is of major
interest to marketers because it involves people, and people make up markets.
The most important demographic factors and trends in the largest world markets that
marketers need to consider includes: -
 Changing Age Structure of a Population
 Geographic Shifts in Population
 Rising Number of Educated People
 Increasing Diversity
Thus, marketers keep a close eye on demographic trends and developments in their market.
They need to analyze changing age and family structures, geographic population shifts,
educational characteristics, and population diversity.
2. Economic environment
The economic environment consists of economic factors that affect consumer purchasing
power and spending patterns. The major factors that affect purchasing power include:
Income, saving, and credit facilities. Nations vary greatly in their levels and distribution of
income. Some countries have subsistence economies - they consume most of their own
agricultural and industrial output. These countries offer few market opportunities. Marketers
must pay close attention to major trends and consumer spending patterns both across and
within their world markets.
3. Natural environment

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The natural environment involves the natural resources that are needed as inputs by marketers
or that are affected by marketing activities. Marketers should be aware of several trends in the
natural environment such as:
1. Growing shortages of raw materials.
2. Increased pollution. Industry will almost always damage the quality of the natural
environment. Industrial damage to the environment has become very serious.
3. Government intervention in natural resource management has caused environmental
concerns to be more practical and necessary in business and industry. Instead of opposing
regulation, marketers should help develop solutions to the material and energy problems
facing the world.
4. Technological environment
The technological environment includes forces that create new technologies, creating new
product and market opportunities. The technological environment is perhaps the most
dramatic force now shaping our destiny. The technological environment changes rapidly.
New technologies create new markets and opportunities. However, every new technology
replaces
an older technology. Companies that do not keep up with technological change soon will find
their products outdated. They will miss new product and market opportunities. Thus,
marketers should watch the technological environment closely. The following trends are
worth watching:
 Faster rate of technological change. Products are being technologically outdated at a rapid
pace.
 There seems to be almost unlimited opportunities being developed daily. The challenge is
not only technical but also commercial - to make affordable versions of products.
 Higher research and development budgets.
 Increased regulation. Marketers should be aware of the regulations concerning product
safety, individual privacy, and other areas that affect technological changes.
5. Political environment
Marketing decisions are strongly affected by developments in the political environment. The
political environment consists of laws, government agencies, and pressure groups that
influence and limit various organizations and individuals in a given society. Business is
regulated by various forms of legislation such as:
1. Governments develop public policy to guide commerce - sets of laws and regulations
limiting business for the good of society as a whole.

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2. Increasing legislation to:
 Protect companies from each other.
 Protect consumers from unfair business practices.
 Protecting interests of society against unrestrained business behavior.
3. Growth of public interest groups. The number and power of public interest groups have
increased during the past two decades.
4. Increased emphasis on ethics and socially responsible actions. Socially responsible firms
actively seek out ways to protect the long-run interests of their consumers and the
environment.
6. Cultural environment
The cultural environment is made up of institutions and other forces that affect society’s basic
values, perceptions, and behaviors. Certain cultural characteristics can affect marketing
decision making. Among the most dynamic cultural characteristics are:
1. Persistence of cultural values. People’s core beliefs and values have a high degree of
persistence. Core beliefs and values are passed on from parents to children and are
reinforced by schools, churches, business, and government. Secondary beliefs and values
are more open to change.
2. Shifts in secondary cultural values. Since secondary cultural values and beliefs are open to
change, marketers want to spot them and be able to capitalize on the change potential.
Society’s major cultural views are expressed in:
1. People’s view of themselves. People vary in their emphasis on serving themselves versus
serving others.
2. People’s views of others. Observers have noted a shift from a “me-society” to a “we
society”. Consumers are spending more on products and services that will improve their
lives rather than their image.
3. Peoples views of organizations. People are willing to work for large organizations but
expect them to become increasingly socially responsible
4. People’s views of society. This orientation influences consumption patterns. “Buy
Ethiopian products” versus buying abroad is an issue that will continue.

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 CHAPTER THREE
Understanding Markets
Technically speaking, a market is any place where two or more parties can meet to engage in
an economic transaction even those that don't involve legal tender. A market transaction may
involve goods, services, information, currency, or any combination of these that pass from
one party to another.
Markets may be represented by physical locations where transactions are made. These
include retail stores and other similar businesses that sell individual items to wholesale
markets selling goods to other distributors. There are two types of market depending upon
usefulness. These are
3.1 Consumer Market
A consumer market is the very system that allows us to purchase products, goods, and
service. These items can be used for personal use or shared with others. In a consumer
market, you make your own decisions about how you will spend money and use the products
you purchase. More people who go out and actively purchase products, the more active the
consumer market.
Consumer markets refer to the markets where people purchase products for consumption and
are not meant for further sale. This market is dominated by the products which consumer use
in their daily life.
Markets dominated by products and services designed for the general consumer. Consumer
markets are typically split into four primary categories: consumer products, food and
beverage products, retail products, and transportation products. Industries in the consumer
markets often have to deal with shifting brand loyalties and uncertainty about the future
popularity of products and services.
Consumer Behaviour: Are the decision processes and acts of people involved in buying and
using products
Consumer buying behaviour: refers to the buying behaviour of the ultimate consumer. A
firm

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needs to analyze buying behaviour for:
 Buyer’s reactions to a firm’s marketing strategy have a great impact on the firm’s
success.
 The marketing concept stresses that a firm should create a marketing mix (MM) that
satisfies (gives utility to) customers, therefore need to analyze the what, where, when
and how consumers buy.
 Marketers can better predict how consumers will respond to marketing strategies.

3.1.1 Consumer Buying Process

The purchase process is initiated when a consumer becomes aware of a need. This awareness
may come from an internal source such as hunger or an external source such as marketing
communications. Awareness of such a need motivates the consumer to search for information
about options with which to fulfil the need. This information can come from personal
sources, commercial sources, public or government sources, or the consumer’s own
experience.
Once alternatives have been identified through these sources, consumers evaluate the options,
paying particular attention to those attributes the consumer considers most important.
Evaluation culminates with a purchase decision, but the buying process does not end here. In
fact, marketers point out that a purchase represents the beginning, not the end, of a
consumer’s relationship with a company.
After a purchase has been made, a satisfied consumer is more likely to purchase another
company product and to say positive things about the company or its product to other
potential purchasers. The opposite is true for those dissatisfied customers. Because of this
fact, many companies continue to communicate with their customers after a purchase in an
effort to influence post-purchase satisfaction and behaviour.
Stages of the Consumer Buying Process
Actual purchasing is only one stage of the process. Not all decision processes lead to a
purchase. All consumer decisions do not always include all 6 stages, determined by the
degree of complexity. Six Stages to the Consumer Buying Decision Process are there.
1. Problem Recognition: - difference between the desired state and the actual condition.
Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat.
Can be stimulated by the marketer through product information--did not know you
were deficient? I.E., see a commercial for a new pair of shoes, stimulates your
recognition that you need a new pair of shoes.

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 2. Information search: - Once a problem is recognized, the customer search process
begins. They know there is an issue and they’re looking for a solution.
As a marketer, the best way to market to this need is to establish your brand or the
brand of your clients as an industry leader or expert in a specific field.
A successful information search leaves a buyer with possible alternatives, the evoked set.
Hungry, want to go out and eat, evoked set is
o cultural food o burger king
o Indian food

3. Evaluation of Alternatives: - need to establish criteria for evaluation, features the

buyer wants or does not want. Rank/weight alternatives or resume search. May decide
that you want to eat something spicy, Indian gets highest rank etc.
If not satisfied with your choice, then returns to the search phase. Information from
different sources may be treated differently. Marketers try to influence by "framing"
alternatives.
4. Purchase decision--Choose buying alternative, includes product, package, store,
method of purchase etc.
5. Purchase--May differ from decision, time lapse between 4 & 5, product availability.
6. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive
Dissonance, have you made the right decision. This can be reduced by warranties,
after sales communication etc.
After eating an Indian meal, may think that really you wanted a Chinese meal instead.
4.1.2 Types of Consumers Buying Behaviour
Types of consumers buying behaviour are determined by:
 Level of Involvement in purchase decision. Importance and intensity of interest in a
product in a particular situation.
 Buyer’s level of involvement determines why he/she is motivated to seek information
about a certain products and brands but virtually ignores others.
High involvement purchases--Honda Motorbike, high priced goods, products visible to
others, and the higher the risk the higher the involvement. Types of risk:
 Personal risk
 Social risk
 Economic risk
The four types of consumers buying behaviour are:

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  Routine Response/Programmed Behaviour--buying low involvement frequently
purchased low-cost items; need very little search and decision effort; purchased
almost automatically. Examples include soft drinks, snack foods, milk etc.
 Limited Decision Making--buying product occasionally. When you need to obtain
information about unfamiliar brand in a familiar product category, perhaps. Requires
a moderate amount of time for information gathering. Examples include Clothes--
know product class but not the brand.
 Extensive Decision Making/Complex high involvement, unfamiliar, expensive
and/or infrequently bought products. High degree of
economic/performance/psychological risk. Examples include cars, homes, computers,
education. Spend a lot of time seeking information and deciding.
Information from the companies MM; friends and relatives, store personnel etc. Go
through all six stages of the buying process.
 Impulse buying, no conscious planning.
The purchase of the same product does not always elicit the same Buying behaviour. Product
can shift from one category to the next.
For example: -
Going out for dinner for one person may be extensive decision making (for someone that
does not go out often at all), but limited decision making for someone else. The reason for the
dinner, whether it is an anniversary celebration, or a meal with a couple of friends will also
determine the extent of the decision making.
Categories that Effect the Consumer Buying Decision Process
A consumer, making a purchase decision will be affected by the following three factors:
1. Personal
2. Psychological
3. Social
The marketer must be aware of these factors in order to develop an appropriate MM for its
target market.
Personal
Demographic Factors such as sex, race, age etc.
Who in the family is responsible for the decision making?
Young people purchase things for different reasons than older people.
Psychological factors
Psychological factors include:

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  Motives
A motive is an internal energizing force that orients a person's activities toward
satisfying a need or achieving a goal.
Actions are affected by a set of motives, not just one. If marketers can identify
motives, then they can better develop a marketing mix.
Maslow hierarchy of needs!
o Physiological
o Safety
o Love and Belonging
o Esteem
o Self-Actualization
Need to determine what level of the hierarchy the consumers are at to determine what
motivates their purchases.
Social Factors
Consumer wants, learning, motives etc. are influenced by opinion leaders, person's family,
reference groups, social class and culture.
3.2 Business market
Business marketing, also known as business-to-business marketing, occurs when a business
markets and sells its products or services to another business or organization. The businesses
that purchase these products may use them in manufacturing, to run their businesses or for
resale. In consumer marketing, advertising can be broad and interaction with customers often
takes place through large retailers. Business marketing differs in that it relies on much more
personal, direct relationships between businesses.
Marketplaces where organizations purchase raw materials, natural resources and components
of other products for their resale or for use in manufacturing another product. Business
markets are generally made up of businesses which buy products and raw materials for their
own operation.
A business market is the specific group or industry a company focuses on when trying
to sell products and services. These audiences are often dictated by the kind of materials an
organization deals in and the kinds of competition these businesses experience. A business
market is also called a target market.

Business buyer behaviour is the intent and behaviour shown by companies and employees
into making purchases for the organization. Business buying behaviour is the concept of

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understanding the needs and wants of a business and making appropriate purchases, which
ultimately help a company get profits.
Companies have specific roles allotted to employees, who responsible for making business
purchases. This role is often known as business buyer. Business buyer behaviour can be
understood on the basis of the business buying process, which helps companies to get the best
raw material & goods, which can be processed to get maximum output and returns.

Business markets are split up depending on the overall focus a firm wants to exert over its
marketing and advertising initiatives. These operations are determined based on the kinds of
products and services a company has, as not all consumers are interested in what a firm has to
offer. Companies need to find out who wants what they have to offer, and then drive their
sales initiatives toward these markets.

The above image depicts the buying process which is based on the business buyer behaviour.
Organizational forces- Technical and price related specifications
3. Group forces- preferences of buying centre group
4. Individual forces- individual preferences
5. Factors like supplier of choice, order quantity, delivery, service, payment terms etc
4.2.2 Types of Buying Situations
Broadly there are three types of buying situations in a company
1. New Task- extensive problem-solving stage; focus on product; 2 types- judgemental and
strategic
2. Modified Re-buy- limited problem solving; focus on product & vendor; 2 types-simple
and compel
3. Straight Re-buy- routine problem solving; focus on vendor; 2 types- casual and routine

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Hence, this concludes the definition of Business Buyer Behaviour along with its overview.

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