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MOI UNIVERSITY

SCHOOL OF TOURISM, HOSPITALITY AND EVENTS MANAGEMENT

NAME : ELIZABETH NJOGA

MTH 809 : MARKETING MANAGEMENT MSC. EXECUTIVE

ASSIGNMENT: MARKETING MIX

LECTURER : MRS. FLORENCE MmBWAGA

DATE : MARCH 2014

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TABLE OF CONTENTS PageTHE ELEMENTS OF MARKETING MIX 4

1.0 INTRODUCITON 4

DEFINITION 5

1.1 THE PRODUCT CONCEPT 6

1.2 CLASSIFICATION OF PRODUCTS 7

1.3 CONVENIENCE GOODS 7

1.4 SHOPPING GOODS 7

1.5 SPECIALITY PRODUCTS 8

1.6 DURABILITY 8

1.7 PERISHABILITY OF PRODUCTS 8

1.8 EXTENT OF MASS PRODUCTION 8

2.0 TOTAL PRODUCT CONCEPT 9

2.1 CORE PRODUCT 9

2.2 EXPECTED PRODUCT 9

2.3 aaUGMENTED PRODUCT 10

3.0 PRODUCT LIFE CYCLE CONCEPT 10

3.1 INTRODUCTION STAGE 11

3.2 GROWTH STAGE 12

3.3 MATURITY STAGE 12

3.4 DECLINE STAGE 12

4.0 IDENTIFYING A PRODUCT LIFE CYCLE STAGE 13

4.1 CRITICISMS OF THE PLC CONCEPT 13

4.2 MANGING EXISTING PRODUCTS 14

4.3 BCG product / Business Management Matrix 14

4.3.1 STARS.......................................................................................................................15

4.3.2 CASH COWS..............................................................................................................15

4.3.3 DOGS........................................................................................................................15

4.3.4 QUESITON MARKS / PROBLEM CHILD......................................................................15

5.0 THE SELLING CONCEPT 15

5.1 Meaning and Value of Price 16

5.2 ECONOMIC THEORY OF PRICING 16

5.2.1 PURE MONOPOLY 16

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5.2.2 OLIGOPOLY16

5.2.3 MONOPOLISTIC COMPETITION 16

5.3 KEY ISSUES THAT DETERMINE MARKETING PRICING 17

5.3.1 PRODUCTION COSTS 17

5.3.2 COMPETITION 17

5.3.3 DEMAND 17

5.3.4 INTERMEDIARIES MARGINS 17

5.3.5 SUPPLIER ADJUSTMENT 17

5.3.6 PRODUCT POSITIONING 17

5.3.7 INCOME LEVELS 18

5.4 PRICE SETTING STRATEGIES (High Relative Price) 18

5.5 MARKET PENETRATION STRATEGY (Low Relative Price) 18

5.6 PSYCHOLOGICAL PRICING 18

5.7 DIFFERNETIAL PRICING 18

5.8 GOING RATE PRICING 18

5.9 COST – PLUS PRIVACY 19

5.10 ON COIN PURCHASING PRICING 19

5.11 QUANTUM PRICING 19

5.12 PREDATORY PRICING 19

5.13 PROMOTIONAL PRICING 19

6.0 MARKETING PROMOTION MIX 19

THE PROMOTIONAL TOOLS:- 20

6.1 ADVERTISING 20

6.2 SALES PROMOTION 21

6.3 PUBLIC RELATIONS AND PUBLICITY 21

6.4 PERSONAL SELLING 21

7.0 PLACE 22

7.1 PHYSICAL DISTRIBUTION 22

7.2 DISTIRBUTION 23

7.3 SIGNIFICANCE OF MAREKTING CHANNELS 23

7.4 UTILITY 23

7.5 TYPES OF MARKETING CHANNELS 26

7.6 INDUSTRIAL DISTRIBUTOR 27

7.7 SELECTING MARKET CHANNELS 28

8.0 REFERENCES 30

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THE ELEMENTS OF MARKETING MIX

1.0 INTRODUCITONThe term marketing mix was coined by Borden (1964), a Harvard university professor who drew on a Colleague’s description of a marketing executive as a “mixer of ingredients.” He viewed executives as people who are constantly engaged in creative fashioning a mix of marketing procedures and policies in their effort to produce a profitable enterprise. Borden suggested that if marketing executives were mixers of ingredients, then what they produced would be described as a marketing mix. The word was thus born.

According to Borden (1964) the success of marketing management depends on the development of a suitable blend of elements given, the forces confronting firms, consumers’ buying behavior, intermediaries’ behavior, competitors position and behavior, government control over marketing activities. He suggested a list of 12 important elements of ingredients that make up a marketing programs and which call for management decision. They are namely, product planning, pricing brandy, channel; of distribution, personal selling, advertising, promotions, packing, displaying, servicing, physical handling, fact finding and analysis. With marketing being researched on, it was scaled down to the 12 elements of marketing mix then down to 7. Then Booms and Bitner( 1981), on the other hand of the 7 added (People, process, and physical evidence) as the element of marketing mix to encompass the extra elements present in service industries, which after all represent the bulk of product in a modern society. This model has been widely adapted because it is easy to remember and understand, in that it briefly states on the seven models which are:-

Product: being a bundle of benefits Price: Is the exchange that customer makes in order to obtain a

product Place: the location where the exchange takes place Promotion – the marketing communication People: the individuals involved in providing customer

satisfaction. Process: the set of activities which together produce customer

satisfaction Physical evidence: The tangible proof that a service has taken

place.

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First: the mix has been criticized on the ground that it implies a set of sharp boundaries between its elements which impinges on each other.

Secondly: it has been criticized because it does not cover everything that marketers do- it has no internal marketing and has nothing about competition with customer.

Third: The marketing concept implies that marketing is something which is done to customers, rather than something which seeks cooperation and interaction between customers and the organization.

Fourth: The mix is almost* focused on customers, whereas in fact the bulk of marketing activity is carried out between business to business. Marketing is perhaps less researched in this section and attracts less attention because it operates at a low profile.

Success does not come from manipulation of the marketing mix components but from establishing long term relationships between the firms concerned. If these relationships are strong enough they act as a barrier to entry for other supplies (Ford, Hankinson and Johnson 1986). The model does not mean it is of no use, all models are an abstract of reality, so do not give the whole picture. The model does help in considering issue or planning ways of managing the business, but it should not be treated as it provides all the answers.

Over the years the 7 and 12 marketing mix elements have been condensed and categorized under four main elements, referred as 4PS namely:-

Product - consumer solution Price – convenience Price – customer cost Promotion – communication

They are commonly referred to as 4ps. The 4ps are essential tool kit of any marketing strategy; consequently, Dracker (1973) has defined them as getting the right product at the right place at the right time, at right price, with the right promotion to attract people who will buy it. Effective marketing decisions revolve t around the 4ps.

According to Ennew (1993), marketing mix as a concept has both strategic and tactic/ dimensions mainly involved with precise details for each element.

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DEFINITIONMarketing mix can be defined as a set of marketing tools that a firm uses to pursue its marketing objectives in the target market. It can also be defined as the activities, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

McCarthy classified these tools into four broad groups that he called the four ps of marketing as shown in Figure 1.1

Marketing Mix

The production concept is one of the oldest concepts in business. The production concept holds that consumers will prefer products that are widely available and in expensive.Managers of production oriented businesses concentrate on achieving high production efficiency low costs, and mass distribution; assuming that consumers are primarily interested in product availability and low prices.

1.1 THE PRODUCT CONCEPTThe product concept holds that consumers will favour those products that offer the most quality, performance or innovative features. A product is the sum of the physical and psychological satisfaction buyers

Product

PRODUCT Product variety Quality DesignfeaturesBrand namesPackagingSizesServicesWarrantiesReturns

PricePRICEPrice setting strategiespenetration strategy Psychological pricingDifferential pricingGoing rate pricingCost – plus privacyOn- coin purchasing pricingQuantum pricingPredatory pricingPromotional pricing

PromotionPROMOTION

AdversitySales forcePublic relationsDirect marketing

PlacePLACE

CoverageAssortmentsLocationsInventoryTransparent

The four components of marketing mix

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receive when they make a purchase. It may be said to satisfy needs. If it possesses the Tangible and Intangible services.

Tangibles IntangiblesAvailability and delivery BrandDesign and package Perceived valuesPerformancePrice TasteWeight

A product can be viewed as a “bundle of attributes.” Some of these attributes are real such as color, taste, weight. Other product attributes are implied or perceived by customers, they use branding, distribution, packaging to produce the desired brand image in their minds. A brand is a name, term, sign, symbol design in the signature or color intended to identify these sales products.

1.2 CLASSIFICATION OF PRODUCTSConsumer products can be classified into three major categories depending on consumer’s shopping habits, namely:-

Convenience goods Shopping goods Specialty goods

1.3 CONVENIENCE GOODSThese are relatively inexpensive, frequently purchased items for which buyers exert only minimum purchasing effort. They are easily purchased from accessible stores. Consumers are familiar with these items. The product becomes defined in their minds. The unit price for these type of items is too small to justify them going far away in order to buy a special brand. Convenience goods can further be classified into stale goods, goods purchased on a regular basis such as bread and milk, impulse goods for example sweets, ice cream placed near supermarket check in counter those purchased when a need is urgent for example an Umbrella on a rainy day.

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1.4 SHOPPING GOODSShopping goods are products that consumers search plan out and compare before a purchase decision; the customer compares available alternative of goods on basic. Criteria such as quality price suitability and style. Buyers spend more time comparing stores and brands with respect to price, product features, qualities; services and perhaps warranties. Examples include items such as refrigerators, televisions, and radios. Evaluation, comparison, consumer’s window shop to different retail outlets in order to obtain the best deal. Ordinarily, a special trip is made to the Shopping Centre for buying such merchandise.

1.5 SPECIALITY PRODUCTSSpecialty products possess one or more unique characteristics and generally buyers are milling to expand considerable effort to obtain them searching in the items are done because these products have unique features or brand identification for which customers make a special purchasing effect. This induces them to visit a retail store and purchase the products within the need for window shopping.According to Kibera and Waruingi (1988) customer do not spend a lot of time on window shopping because they already know what they want. Examples of specialty goods are high quality cameras, some brands of men suits and antique furniture. Orders can be made on these goods and consumers can wait because they have a special need for them, because they do not accept a substitute for a specialty good. They sometimes undertake extraordinary effort to purchase such as item.

Other common ways of classifying consumer goods include:-

1.6 DURABILITYDurable goods such as motor vehicles, which are consumed repeatedly. On the other hand non durable goods such as bread, soap, their consumption only * few days or uses.

1.7 PERISHABILITY OF PRODUCTS

Here we have goods such as agricultural products which do decay in quality after a short stay. Non perishability includes clothes, furniture. The term perishability is relative since all goods eventually wear out.

1.8 EXTENT OF MASS PRODUCTIONProducts that are the same or uniformly produced for all in the market are referred to as standard products, on the other hand, a product that

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is unique and especially produced to suit the requirements of a specific consumers is referred to as customized products of medical services, automobile repairs.

2.0 TOTAL PRODUCT CONCEPT

The total product concept entails surrounding the core benefits of a product with additional layers of values to differentiate it and enhance its market competitiveness. A typical total product with various levels of value is depicted in figure 2.1.

2.1 CORE PRODUCT

It is also referred to as generic product. This consists of basic ingredient and the actual benefits of the product. The core product addresses the question. “What is the customer really buying” Does it benefit the customer basic needs, which actually trigger the purchase process. The core product addresses the basic problem solving or functional capacity that the consumer seeks when purchasing the item.

Augmented Product

Expected Product

Core

Product

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2.2 EXPECTED PRODUCTThe expected product is also called the basic or tangible product that is built around the core product. Its main characteristics include the quality level, design features, style, brand name, and packaging. All these characteristics must be combined carefully in order to deliver the core benefits of the product. At this level, it still becomes difficult to differentiate the product because competitors can still match these products.

2.3 AUGMENTED PRODUCTAugmented product build around the core and the expected products, it is achieved by offering additional goods and services that produce extra value to the customer’s purchase. Marketers shall study the market and evolved supplementary value elements not currently offered by the competition. Added values may include enhanced image, credit, customer service, complementary products, warranties, and after sales-support. This then differentiates the product and helps the firm attain competitive advantage.

3.0 PRODUCT LIFE CYCLE CONCEPT

Another important element of the product theory is the Product Life Cycle (PLC) concept. (PLC) attempts to describe the life stages of a product upon its commercialization or launch into the market. It suggests that products are introduced into the market, grow to maturity, enter old age, and decline (die). The profitability and sales position of a product is expected to cover the stages. Despite criticism the (PLC) has proved to be a useful control device for monitoring and managing products dividing their life time in the market. In particular it guides marketing managers in the right use of marketing mix strategies, since one stage of the (PLC) requires a different emphasis on the 4Ps. Figure 3.1 depicts a PLC curve.

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PRODUCT LIFE CYCLE

3.1 INTRODUCTION STAGEThis stage is the commercialization stage of the new product or innovation. It is a period of slow growth, with sales primarily to the more innovative customers. The profits are low or negative due to heavy expenses incurred for product introduction. The priority is to raise

Introduction Growth Maturity DeclineIntroduction Growth Maturity Decline

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awareness and appreciation of the product, so that the marketing mix emphasizes on in farming potential customers, including product trials and securing distribution in retail outlets. The product range is relatively narrow; distribution is probably limited to a selected number of outlets.

3.2 GROWTH STAGEThis is the period of rapid market acceptance and substantial profit improvement. Sales volume increase steadily product is accepted across much under range of customers and begins to make a significant contribution to profitability. Sale increase can be maintained improvement on product factors, extension of the preference advertising distribution network, targeting of more segment, or increased competitiveness of price. Promotion strategies shift for product awareness advertising the product.

3.3 MATURITY STAGEWhen a product reaches maturity, the rate of sales growth begins to stabilize and slow down because it has achieved acceptance by most potential customers. The sales slowdown creates overcapacity in the industry, which leads to intensified competition. The market then is mature. The marketing campaign (promotion) and product as well established pricing policies are likely to be comparable to those of competitors. Distribution is most extensive and promotion tends towards attracting consumers from competing brands. There are, therefore, frequent price markdowns, increased advertising expenditure, and high trade and consumer promotion. Profits peak in this period and begin to decline because of increased market expenditure for sustaining product position against the competition.

3.4 DECLINE STAGEThis decline stage is when sales begin to drop away noticeably for a number of reasons including technological advances, shifts in consumer preferences and increased domestic and foreign competition. Managers are left with a number of option.

The product would be retained and the cash flow maximized by price cutting and reduces marketing support.

If the product is seen as one with the potential long term future, then the appropriate strategy may be one of the

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rejuvenation (relaunching, repositioning) by redesigning the product alternating features or changing quality.

If the above two of these strategies is deemed appropriate, then the product would be withdrawn entirely from the portfolio, i.e. divested.

4.0 IDENTIFYING A PRODUCT LIFE CYCLE STAGEWhere a particular product is in its life cycle depends on a number of factors:-

Rate of change in industry sales growth The industry profits Information about competitors

To identify the life cycle of a product following general guidelines should be followed:-

There ought to be a regular review of the current market performance of existing products.

The future of each product should be estimated in terms of both sales revenues and costs in order to obtain future profitability

Future life and profitability should be discussed with experts are available to give advice, research and development staff about the expected product life, management accountant, cost projection, marketing soft, consumer preferences projection and competitors trend.

Havaldar (2002) proposes the following four steps to help locate the actual location of a product within the life cycle stages:-

Develop a trend analysis for the past three to five years on information to be collected for a product on quantity and value of sale, profits as a percentage of sales, market share, number of competitors and prices.

Analyze competitors’ market share, product performance new product introduction or expansion plans.

Estimate and project product sales and profits over the next three to five years.

From the above analysis, fix the product the product’s position on its life cycle curve.

4.1 CRITICISMS OF THE PLC CONCEPT

PLC cannot be easily stated or defined as the task is not accurate and is very involving.

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A single life cycle does not exist nor does a single life cycle strategy. Some products have no life maturity and so straight from growth to decline. Others have:

Strategic decisions can change a product of life cycle. Competition varies in different industries and in their Nature of

Products. Elements such as market innovation, economic cycles, and supply

constraints affect the structure of the life cycle. The PLC concept is unclear about the kind of product aggregation

it deals with is it a product class (television set) product from (black and white Tv versus color TV) Brand (Sony, LG, Sanyo, or Samsung) definitely each product level would certainly possess a different life cycle.

Despite the entire PLC curve still provides an important frame worth that helps management make appropriate marketing mixed decisions.

4.2 MANAGING EXISTING PRODUCTS

The marketing game plans strategies a company can employ to manage its existing product range effectively although the task is quite overwhelming especially when a company has a number of products in its portfolio or basket in to have this model depicts here in figure 4.1.

The BCG growth share matrix was developed by Boston consulting group a leading global management consultancy in reviewing existing or established product or businesses. It evaluates their market share and prospects that evaluate from their market growth rate, which enables the formulation of appropriate decision.

4.3 BCG product / Business Management Matrix

STARS

FULLY SUPPORT

QUESTION MARK

SELECT A FEW

DOGS

HIGH

LOW

REMAINDER

DIRECT

(NET FUND PROVIDERS)

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4.3.1 STARSThese are products with high market share in high growth rate market. Stars are market lenders in rapidly growing markets. Although these products are highly profitable, they require a large cash investment in order to maintain growth in the face of competition. Market need to retain the products in the portfolio but support them through extensive promotion, appropriate market channels relation; product enhancement and competitive pricing.

4.3.2 CASH COWSThese are products with a large market share in a slow growth market. They are typically former stars in a sluggish market but still generate cash because of their high market share in previous years. Cash cows enjoy economics of scale and high profit margin, since they are well established products in the maturity stage of the product of life cycle. Marketers should milk then and use the excess funds to support stars and promising problem child producing. They should avoid milking them excessively, which might cause them to loose market presence and share.

4.3.3 DOGSThese have low market share in low growth market. They tend to generate either losses or relatively low profits. They take up more management time and organizational funds than warranted. Dogs should be candidate for pruning, they are loss making products. Funds that arise from their sale off or saved from their discontinued operation can be used to support stars and promising question mark.

4.3.4 QUESITON MARKS / PROBLEM CHILDProducts with low market share area rapidly growing market is called question marks or problem children. Management has to decide whether to support them or not. It must choose between further speculation investment and withdrawal. Management should divert those Question marks whose capacity to capture the growing market are low. They can

(NET FUND PROVIDERS) LIQUIDATE / DIRECT

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then generate funds to support stars and the rest of the more promising question marks.

5.0 THE SELLING CONCEPT.

This concept assumes that consumers typically show buying inertia or resistance and must be coaxed into buying. The selling concept is practiced most aggressively with unsought goods, such as insurance encyclopedias and funeral plots. These industries have perfected various sale techniques to locate prospects and hard-sell them on their products benefits. Selling concept is practices in the non-profit are by fund-raisers, college admission office and parties. Like a political party vigorously sell its candidate as candidate move through voting precinct from early morning to late evening, shaking hands, kissing babies, meeting donors and making speeches countless money is spent on radio, and television advertising, posters, and mailings. The aim is to make sale not worry about post purchase satisfaction. Most firms practice the selling concept when they have over capacity. Their aim is to sell what they make rather than what the market wants. In modern industrial economies, productive capacity has built up to point where most market are buyer markets (the buyers are dominant) and sellers have to scramble for customers. Prospects are bombarded with TV commercial, Newspapers, direct mail and sales girls. The public often identifies marketing with herd selling which carries high risk like if the customers don’t like the product they will bad-mouth because they were coaxed into buying a product, but soon forget the disappointment and buy it again. Note bad news travels fast.

5.1 Meaning and Value of PricePrice can be defined as a measure of the value of exchange, for benefits received by customers and value of compensation given to sellers for their product pricing is the only market mix element which generates revenues not costs. It is an important role as a competitive tool. It helps differentiate a product and an organization.

Price must always be consistent with other elements of marketing mix as in the overall product offer. Pricing aids organization to produce the required level of sales, and to achieve its objectives. Another objective is to achieve target profitability, increase market share, create preferred market image and meet social goals.

5.2 ECONOMIC THEORY OF PRICING

Economists suggest that in a free market economy the price of any good is set by the market forces of demand and supply. An equilibrium exists

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there is neither surplus nor shortage of foods in question. The following models are used to describe markets where a supplier or group suppliers have market prices.

5.2.1 PURE MONOPOLYThis is a single supplier in a market and is able to prevent entry of other supplies. Monopolies take advantage of customers with exorbitant prices. Example is the Kenya Power.

5.2.2 OLIGOPOLYOligopolists are members of a small groups among themselves they control the supply in the market oligopoly is characterized by price “stickiness” e.g. cement and oil industry.

5.2.3 MONOPOLISTIC COMPETITIONSuppliers try to gain some of the monopoly’s market power by supplying a differentiated product. Its success depends on customers viewing the product differently. Examples are telecommunication industry which has Safaricom, Airtel and orange, and the detergent industry which has Omo and Toss.

5.3 KEY ISSUES THAT DETERMINE MARKETING PRICING

The key factors that directly affect product price setting decisions in firms are:-

Production costs Competition Demand Intermediaries margins Supplier Adjustments Inflation Product positioning Income levels

5.3.1 PRODUCTION COSTSGenerally, all production and operational costs should be estimated and allocated to each item unit produced, a profit margin should be added to set the price of product some products costs are estimated using cost accounting techniques.

5.3.2 COMPETITIONIn some industries price competition results in a going rate for example market price. Some form of average level of price becomes the norm especially where level of branding differentiation among competitors in more or less the same.

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5.3.3 DEMANDLeavitt (1954) question the validity of the price volume inverse relationships (product declines as its price increases, it increases as it price declines) held by economists.

5.3.4 INTERMEDIARIES MARGINSIf organizations distribute products or services to the market through independent intermediaries conditions and demands of these intermediaries have an effect on the pricing decision. The aim concern is their profits and not the firm’s customers; so the firm gives them better margin in order to sustain support.

5.3.5 SUPPLIER ADJUSTMENTWhen the firms’ products are rising and business is high, they may seek arise in the price of their inputs, but if the firm business is low, the supplier adjusts downwards, because they want to maintain their business relationship with it.

5.3.6 PRODUCT POSITIONINGIn the absence of other information, customers tend to judge quality by price (placebo effect). This helps attain desired market positioning of the product.

5.3.7 INCOME LEVELSWhen income levels fall on unemployment level rise, price becomes a much more important market variable. Marketers should adjust product prices with changing income levels in the market.

5.4 PRICE SETTING STRATEGIES (High Relative Price)For the strategy to be successful, the following conditions should prevail.

There must be enough customers who are not price sensitive. Customers should perceive high price as equivalent to high quality There should be insufficient industry production capacity so

competitors can introduce similar products at least in short run.

5.5 MARKET PENETRATION STRATEGY (Low Relative Price)This strategy is only successful if:-

The market demand is price-sensitive relatively low prices attract more sales

Economies of scale can be achieves (unit cost of production and distribution fall with increased output) and

Low prices discourage new competitive.

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5.6 PSYCHOLOGICAL PRICINGPsychologists assert that customers perceive odd numbers positively as opposed to even numbers Bata shoe use the odd number pricing, KES 499, because customers do not respond favorably if prices were even number e.g. KES 500. Some customers even forget to collect their one shilling change.

5.7 DIFFERNETIAL PRICINGThis is referred to as price discrimination. It involves setting different prices for separate location or customer classes, for the exact same product. This may be addressed by:-

Splitting buyers in clearly defines segments have versus overseas buyers, upmarket versus low end customers.

Positioning location or selling sites, suburban versus downtown location.

5.8 GOING RATE PRICINGThis is also referred to as market pricing and involves aligning a firms product prices to those of similar products in the market.

5.9 COST – PLUS PRIVACYThis is a pricing approach which uses product costs as the starting point. After unit costs have been determined a certain level of profit margin is added to obtain the product price.

5.10 ON- COIN PURCHASING PRICINGRather than change prices to reflect change in raw material lost as in times of inflation in Kenya bakers were allowed by the government to change the standard weight of bread from 500gm to 400gms in order to maintain the same price level.

5.11 QUANTUM PRICINGWhen the price of an item is increased form Kenya shillings. 65 to 95 sales may not be affected because consumers can accommodate the change, but an increase from Kenya shillings. 95 to Kenya shillings. 105 a major fall on sales may occur. Kenya shillings. 100 act as the quantum point (tolerance limit) which can be approached but not passed.

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5.12 PREDATORY PRICINGPredatory pricing are used to hurt competitors and drive them out of business. They are set at very low level until competitors are driven out of business.

5.13 PROMOTIONAL PRICINGThey are referred to as “special” or “sale” prices sold at lower than the current prices. In order to attract customers and have low profit margin the low priced items are called loss readers or price leaders and strategy is called leader pricing.

Retailer use this strategy to build traffic thus to their outlet in anticipation of customers buying other normal items promotional technique is used at retail level is psychological discounting. It is referred to as “was-is” pricing. The seller puts artificially high price on a product and offers at just savings example Kenya shillings. 2,500 is now Kenya shillings. 1,500..

6.0 MARKETING PROMOTION MIX

Promotion is communication that builds and maintains favorable relationships by informing and persuading one or more audiences to view and organization more positively and to accept its products. The overall role of promotion is to stimulate product demand.

THE PROMOTIONAL TOOLS:- Advertising Sales promotion Public Relations and Publicity Personal selling Direct marketing

Figure 6.1 shows the promotional tools.

Advertising Advertising

Public Relation

Sales Promotion

Personal selling

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THE FOUR POSSIBLE ELEMENTS OF A PROMOTIONAL MIX

6.1 ADVERTISING

Advertising is a paid non personal communication about an organization and its products transmitted to a target audience through mass media, including television, radio, internet, newspapers, magazines, direct mail, outdoor display signs on mass – transit vehicles. Individuals and organizations use advertising to promote goods, services, ideas, issues and people. Advertising can reach an extremely large target audience or focus on a small precisely defined segment.

THE FOLLOWING QUALITIES ARE NOTED.

Public presentation – confers a kind of legitimacy on product and suggests a standardized offering.

Pervasiveness – permits the seller to repeat a message many times, it also allows a buyer to receive and compare the message of various competitors.

Amplified expressiveness – it provides opportunities for dramatizing the company and its products through the artful use of print sound and color.

Impersonality- Advertising is a monologue in front of, not a dialogue with this audience.

6.2 SALES PROMOTION

Sales promotion is an activity that acts as a direct inducement, offering added value or incentive for the product to resellers, sales people or consumers. Examples include free samples, fames, rebates, sweepstakes, contests, premiums and coupons- some websites help consumers manage access to coupons. Marketers spend time more on sales than advertising and it is an area which is first growing.These are three distinctive benefits of sales promotion.

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Communication – Attention and information leads consumer to the product

Incentives- they incorporate some concession inducement of contribution that give value to the consumer.

Invitation – They include a distinct invitation to engage in the transaction now.

6.3 PUBLIC RELATIONS AND PUBLICITYPublic relations are a broad set of communication efforts used to create and maintain favorable relationship between an organization and its-stakeholders. Public relationship issue various tools including annual reports, brochures, event sponsorship and sponsorship of socially responsible programs aimed and protecting the environment or helping disadvantaged individuals.

Public relationship has three distinct qualities. High credibility- new stories and feeling are more authentic and

credible to reader their advertising. Ability to can to catch buyers off-guard- public relation can reach

prospects who prefer to avoid sales people and advertisements. Dramatization – public relations has the potential for dramatizing a

company or product e.g harpic as seen on TV from house to house..

6.4 PERSONAL SELLINGPersonal selling is a paid personnel communication that seeks to inform customers and persuade them to purchase products in an exchange situation. It has three distinctive qualities.

Personal confrontation – each party is responsible for each others reaction.

Cultivation – All kind of relationships spring up ranging from another of fact selling to a deep personal friendship. Sales will have personal customers interest at heart.

Response- Makes the buyer feel under some obligation for having listened to the sales talk.

7.0 PLACEPlace is the location where the exchange takes place or this may be a retail store, a catalogue, a restaurant or website. One decides whether is to more goods round although physical distribution is one aspect of the process.

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The decision revolve around making it possible for customers to find the goods and make the purchase, and so use channels which give appropriate image of the product. They are two key issues to distribution from a marketing point of view.

Physical distribution Channel management

7.1 PHYSICAL DISTRIBUTIONPhysical distribution is concerned with physical moving a product from where it is produced to where it is sold or consumed. There are channels of distribution. A channel is defines as a chain of market intermediaries or middlemen used by producers and marketers to make products available when consumers want them.

PHYSICAL DISTRIBUTION TASKS OR CHANNELFunctions are:

Transportation Inventory storage and control Local knowledge Promotion Display Customer service

7.2 DISTIRBUTION/CHANNEL MANAGEMENT

Distribution is a group of individuals and organization that direct the flow of products from producers to customers within the supply chain. The major role of marketing channels is concerned with operations management, logistics management, and supply management; its main concern is to make products available at the right time at the right place in the right quantities.

Some marketing channels are direct, meaning that a product goes directly from producer to customer. Other marketing channels have one or more marketing intermediaries that link producers to other intermediaries that link producers to other intermediaries or the

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ultimate consumers through contractual arrangements, or through the purchase and resale of products.

Wholesalers and retailers are examples of intermediaries. Wholesalers buy and resell products to other wholesalers, to retailers and to industrial customers. Retailers purchase products and resale them to the end customers.

Supply chain start with the customer and require the corporation of channel members to satisfy customer requirements. All members should focus on cooperation to reduce costs and improve profits.

Each supply chain requires information from channel members, for example suppliers need order and forecast information from the manufacturer. They also need availability information from their own suppliers. Managing relationships with supply chain partners is crucial to satisfy customers.

7.3 SIGNIFICANCE OF MAREKTING CHANNELSThey are a powerful influence on the rest of the marketing mix (product, promotion, and pricing).

They determine a product’s presence and buyer’s accessibility to the product.

They entail long term commitments among a variety of firms (e.g. suppliers, logistics providers, and operations firms).

They create utility and facilitate exchange efficiencies7.4 UTILITY

Means the customer has access to the products to use or to store for future use. Channel member sometimes create form utility by assembling, preparing or otherwise refining the product to suit individual customer needs.Marketing intermediaries can reduce costs of exchanges by performing contain services or function efficiently. As in Figure 7.1 shows when four buyers seek products from four producers 16 transactions are possible.

Nevertheless, the press, customers, public officials and even other marketers freely criticize intermediaries especially wholesalers of being inefficient and parasitic buyers want short distribution channels; assuming that the fewer the channels the lower the price will be .Wholesales must be careful to perform only those marketing activities that are truly desired.

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FIG 7.1: EFFICIENCY IN EXCHANGE PROVIDED BY INTERMEDIARY

PRODUCERS BUYERS

p c

pc

pc

p c

PRODUCERS BUYERS P

INTERMEDIARY

P

P

P

C

C

C

C

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THE PRODUCERS AND CONSUMERS REQUIRED EFFORT SOURCE LILIEN,KOTLER,AND MOORTHY (1999).

7.5 TYPES OF MARKETING CHANNELSBecause marketing channels appropriate for one product may be less suitable for others, many different distribution paths have been developed. The various marketing channels can be classified generally as channels for consumer products and channels for business products.

Channels for Consumer ProductsFigure 2.2 illustrates several channels used in the distribution of consumer product.

Channel - AChannel- BChannel - CChannel- D

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Channel ADepicts the direct movement of products from producer to consumer. Direct marketing can be done via internet. It is done by other companies in cooked foods hamburger and steak.

Channel BMoves goods from producer to a retailer and then to customer. Like the clothing industry.

Channel CRepresents a long standing distribution channel especially for consumer products. Wriggle up * will find it difficult or impossible to deal directly with each retail that sells it brand of sum. Even manufacturers of Tobacco products. They sell to wholesalers, which they sell to retailers with in turn do business with individual consumers.

Channel DThis is in mass production goods where a food processor hires an agent to sell the wholesalers sell it to supermarkets, which in turn do business with the other retail outlets.

Fig. 7.2 Typical Marketing Channel for Consumer Products

AB C D

Producer Producer Producer Producer

Retailers

Consumer

Wholesales

Retailers

Consumer Consumer

Retailers

Consumer

Wholesales

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7.6 INDUSTRIAL DISTRIBUTORIndustrial distributor is an independent business that takes title to products and carries inventories. They usually sell standardized items such as maintenance supplies, production tools, and small operating equipment. Their advantage is that they offer selling activities in local markets at a relatively low cost to a manufacturer and reduce a producer’s financial burden by providing customers with credit services. They are also aware of customer needs and keep close relationships. There are independent firms which keep inventories and in customer numerous expenses, something they lack technical knowledge necessary to sell and service certain products.

Thirdly they employ agents who sell on behalf of the producers or manufacturers. These agents may not have negotiating skills on prices or sales terms

7.7 SELECTING MARKET CHANNELSIt varies from one organization to the other in channel selection, decisions are usually significantly affected by one or more of the following factors:-

Customer characteristics, Product attributes Types of organization Competition Marketing environmental forces and characteristics of

intermediaries.

See Figure 7.3Selecting Marketing channels

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Customer characteristics – purchasing one product for a carpet for a commercial building is different from purchase of carpet for their home.

Product attributes – perishable products as compared to non-perishable products require larger and short require special handling.

Type of organization – sheer size affect in terms of negotiating because they have more facilities in distribution centers or way it is done.

Completion – Costs have to be kept so as to underpriced its competitor if necessary.

Environmental forces – such as economic condition, new technology for product modification, government regulation as in trade agreements can complicate supply chain.

Characteristics of intermediaries – a company may consider to remove a channel if it is not operating to its satisfaction.

Characteristics intermediaries

Customer Characteristics

Product attributes

Marketing channel selection

Type of organization

Competition

Marketing environmental forces

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8.0 REFERENCES

Booz, Allen and Hamilton. (1982). New Product Development for 1980’s.

Borden, Neil H. (1964). The Concept of the Marketing Mix. Journal of Advertising Research. June: 2-7.

Drucker, Peter. (1973). Management: Tasks, Responsibilities, and Practices.

Druckerpeter. (1973). Management: Tasks Responsibilities, and Practices.

Dr. Justus M. Munyoki, (2011). Marketing Management Theory and Practice.

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Ennew, Christine T. (1993). The Marketing Print.

Havaldar, Krishna K. (2002). Industrial Marketing, New Delhi: Tata McGraw Hill Publishing Company.

Hunt, Shelby D. (1983). Marketing Theory: The Philosophy of Marketing Science.

Jim Blythe,(2009). Principles and Practice of Marketing, 2nd Edition.

Kotler, Phillip, and Kevin Lane Keller. (2006) Marketing Management; 12th Edition.

Mason, William R. (1958). A Theory of Packaging in the Marketing Mix. Business Horizons 29 (1): 18-24.

Opride, Ferrell, (2011). Marketing Foundations, 4th Edition.