PROGRAMME: National Diploma in Agricultural Technology COURSE: AGT-Introduction to Agricultural Marketing DURATION: 30 Hours UNITS: 2.0 GOAL: This course is designed to give the students a good background in basic marketing principles as applicable to Agriculture Abdurrahman Murtala Umar Department of Agricultural Technology School of Agricultural Technology Federal Polytechnic, Bauchi. Email: muabdurrahman.agt@fptb.edu.ng © 2021 1 Characteristic of Agricultural Commodity/Produce in Nigeria 1. Agricultural commodities are produced in small and dispersed land holding 2. Most of agricultural commodities cannot be consumed in the form in which they are produced 3. Variability 4. Seasonality 5. Perishability 6. Bulkiness Utility Utility can be defined as power to satisfy human want, it also means satisfaction Types of utility There are four types of utility 1. Time utility: this is the satisfaction that is derives by a consumer at the time he needed a commodity and can be achieved through storage 2. Place utility: this the satisfaction that is derived by the consumer by having the commodity he needed at the right time, and can be achieved through transportation from one axis to another. 3. Form utility: this is the satisfaction that is derived by a consumer by having commodity in the right form and can be achieved through processing 4. Possession utility: this the satisfaction that is derived by consumer from owning or having access to a commodity he needed and can be achieved through exchange, that is by buying and selling. 2 Definition of Some Terms Customer: A person who purchase or received product from a business man Client: A person who received services or help from professionals Consumer: A final actor in the marketing channel, who consume the end product Farmer: The first person in the marketing channel who produce raw agricultural produce Need: Requirement of something Want: To feel a need or desire of something Value: The quality that renders something desirable or valuable Marketing chain: A series of way by which a product must pass from Farmer/producer to final consumer Satisfaction: A fulfillment of a need or desire Exchange Relation- Ship: These are activities involved in the transfer of ownership of goods, is divided into • Selling: this consist of series of activities called merchandizing. It involves physical arrangement or display of goods, advertisement, and other promotional services in order to influence or create demand. • Buying: this concern with the seeking the source of supply and activities associated with purchase of the product Middleman: An intermediary or agent between Farmer/Producer and consumer Storage: This concern with making goods available at the desired time. It involves holding of agricultural commodities until they are needed. Seasonality is one of the specific characteristic of agricultural commodity while consumption of the product is regular and continuous. This un-matched situation requires the need of storing the commodity in order to make it available throughout the year. The main objectives of storage include Ensuring food security, improvement in the quality of goods and to spread out market supply. Assembly: one of the characteristic of agricultural commodity is that they are produced in small ad dispersed landholding. Produce harvested by farmers from different location must therefore be brought together at convenient point so that consumers have access to the commodity. This act of bringing together the product from various locations is referred to assembling/aggregation. Processing: This involves all activities that change the basic form of a product. It is the conversion of Agricultural commodity from its raw state to a form more acceptable to consumer. This is because most of agricultural produce cannot consumed in the form they are produced. Processing of agricultural commodity can be traditional (such as dry of tomato, 3 processing of peanut oil), intermediate (such as used of shellers, threshers, etc.) or Improved/Advanced (by using sophisticated machines to process agricultural commodity). Transportation: this is concern with making goods available at the right place. Climate and vegetation allows production of commodity in particular area and do not allow the production of the commodity in another area, there is need for movement of this commodity from where it is produced to where it is not produced. For instance kola nut, cowpea, tomato, etc. Sorting: this is physical separation of product of different qualities, for instance, separation of tomato into different sizes, shape or based on ripeness. Grading and standardization: Grading is the sorting the produced into different lots that have the same characteristic with respect to quality specification. These qualities include size, shape, flavor and tastes, etc. Standardization is the establishment and maintenance of uniform measurement of both quality and quantity. Packaging: For agricultural commodity to move from the farm through marketing channel and finally the end user, some kind of packaging is required. These packaging materials includes polythenes bags, basket, creates, cartons, etc. The major objectives of packaging are easily handling of commodity, effective storage, protection of commodities against damage while on transit, ensure cleanliness, provide some means of identification of the commodity, and to make product more attractive to buyer Market A market is defined as a situation in which buyers and sellers can negotiate the exchange of some product, it can also be a group of buyers and sellers with facilities for trading. A market may be located in a specific place such as farmer market but can easily operate without all participant of the product being present. The traders may be spread over a whole city, region, country or world. As long as they are in close communication with each other and can be convey the necessary information to promote exchange. This definition therefore considers a market as a general means which facilitate exchange of goods and services. Agricultural Market The agricultural Marketing is composed of two words, Agriculture and Marketing. Agriculture in a broadest sense measure activities aimed at the used of natural resources for human welfare. Marketing connect a series of activities involves in moving of goods from point of production to the point of consumption. Therefore, Agricultural Marketing in the simplest form involves the buying and selling of agricultural produces. This definition may be accepted in the olden days but not now, in modern marketing, agricultural produce has to undergo a series of transfer or exchange from one hand to another, before it finally reaches the final consumer. Agricultural Marketing can also be defined as commercial function involve in transferring goods from the producer to consumer. It also involves act of buying, supplies, and renting equipment, paying labor, advertising, processing and selling. 4 Objectives of Agricultural Marketing 1. To enable the first producers to get the best possible return 2. To provide facilities for lifting all produce the farmers are willing to sell 3. To reduce price difference between the first producer and the ultimate consumer 4. To make available all product of farm origin to the consumers at reasonable price. Facilities needed for Agricultural Marketing 1. The should be proper facilities for storing of goods 2. The farmer should have holding capacity in order to get good price of his product 3. There should be adequate and cheap transport facilities for the movement of goods 4. Market information should be available to the farmer 5. Market intermediaries should be as small possible Problems/defects/Constrains of Agricultural Market 1. Lack of organization 2. Force sales, whereby a farmer is forced to sell his produce at a very low price 3. Presence of too many middlemen 4. Lack of standard weight and measures 5. Inadequate storage facilities 6. No standardization on prices and quality 7. Lack of marketing finance 8. Exploitative tendencies of middlemen 9. Inconsistent government policies 10. Low level of literacy inadequate/lack of processing facilities 11. Insufficient extension agent Review exercises 1. Define the following terms i. Customer ii. Consumer iii. Utility iv. Market v. Agricultural marketing vi. Middlemen vii. Satisfaction viii. Marketing channel 2. State any three objectives of agricultural marketing 3. Identify any three problems of agricultural marketing 4. Mention any three characteristic of agricultural commodities in Nigeria 5 LECTURE TWO Evolution of Agricultural Marketing Modern marketing has evolved from a series of exchange systems. Initially people were concerned with production for consumption and inter-household exchange. Such pattern of production was primarily subsistence in nature providing little or no room for specialization as each household had to produce practically for its need. The existence of marketing is a direct result of specialization of production in the economy. Initially, most farm families were self- sufficient or produced purely to meet subsistence needs. They produced most of the food crops and livestock products they needed on their small land holdings. For example, they ground their own cereal grains into flour, spun their fiber locally, butchered their meat etc. but with time people discovered that their limited and specific resource endowments and talents allowed them to produce some things better than others. Increased demand for goods and services produced out of the farm made specialization necessary. As the individual farmer specialized, it gave rise to the production of marketable surpluses which could not be exchanged easily for goods and services produced out of the farm. Trade by batter was popular in the early days but due to its obvious disadvantages such as the necessity for double coincidence of wants, lack of unit of measure, difficulty of holding large stocks of commodities in storage for future exchange etc, the use of money as a medium of exchange evolved. This marked the beginning of the development of an efficient marketing system. Thus with the development of an efficient marketing system, it becomes possible for consumers to enjoy what they cannot produce irrespective of the distance between them and the producers. Impact of marketing strategies on successful business • It leads to sales enablement • Increase chance to have market shares • It increase the generation of revenue from the business • Customer retention • Leads to market awareness Use of marketing to achieve successful profitability Marketing has become an important subject in the modern business that ensures propensity and profitability of firms. Although sometime it is hard to establish the contribution of marketing in the realization of profits or benefits attained by the firm, yet the contribution of each practice, including marketing, in management of the firms can be scientifically projected. However, businesses organization can use the following businesses strategies to achieve profitability. • Advertisement: This means creating awareness via media such as radio, TV, Facebook, twitter, instergram, whatsapp, etc. 6 • Promotion: This includes offering discount or incentive to customer or client. this will encourage customers to tell the others about product or services. • Customer services: This includes awareness, association, attitude and experience • Quality: This means meeting and exceeding consumer satisfaction Marketing Strategy, Planning And Control Corporate strategy An organisation's corporate strategy is reflected in the statement of its overall objectives and the means by which these are to be met. Corporate strategy is usually stated in such a way as to convey the reason for its existence, i.e. its mission and the business it is in or wishes to be in. Business policy Policies are bodies of rules established to guide managers in their decision making. In essence, a policy prescribes the boundaries of the alternative courses of action which the organisation leaves open to him/her within a defined set of circumstances. Marketing planning Basically planning involves setting objectives, designing and implementing a programme to achieve the organisation's objectives and having a monitoring and control mechanism to ascertain whether the planned programme is on track or has achieved its desired objectives. Types of Marketing planning A whole variety of plan types can be identified including: An overall master plan for the organisation and its divisions setting Corporate plans out what business(es) it intends to be in over a given time horizon. Plans for each division of an organisation showing how it intends Divisional plans to carry out the corporate plan and make its contribution to it. Plans for a series of products within a product range, for example Product line plans plans to increase a range of canned fruits. Plans for individual products within a range. The decision may be Product plans to delete, expand or develop the product. Plans for an individual brand, for example market repositioning, Brand plans repackage or deletion of brand. Product/market Plans which spell out what the organisation plans do in each plans product/market it services. Plans for advertising, selling and market research departments. It Functional plans involves decisions on budgets, resources and functions. 7 Contents of the marketing plan The following describes the contents of the marketing plan which includes the executive summary, corporate purpose, situation analysis (SWOT), objectives, strategies, action plan, monitoring evaluation and control and the marketing intelligence system. Executive summary The planning document should start with a short summary of the main goals and recommendations to be found in the main body of the plan. A summary permits management to quickly grasp the major directions of the plan. Corporate purpose There are two elements to the corporate purpose, one is to prepare the organisation's basic mission statement, the other specifies the basic management goals. The strategic marketing audit By constantly monitoring and reviewing the organisation's strengths, weaknesses, threats and opportunities (SWOT). This is an extremely important part of the Marketing Plan. The purpose of a situation analysis is to investigate the company's own strengths and weaknesses (internal analysis) and discover the threats and opportunities in the environment (external analysis) so it can avoid the threats and take advantage of the opportunities. Threats have to be analysed to see if they are “negative” or “neutral” threats. Threats may be insignificant. The situation analysis helps identify the answer to four basic questions: where is the organisation now? How did it get there? What conditions is it heading into? What strategy should it adopt for the future? SWOT analysis 8 Objectives This are set goals in which a person or organization want to achieved.. Objectives should be quantifiable, measurable, achievable, communicable and consistent. Objectives may be stated in economic or subjective terms. Monitoring, evaluating and controlling the marketing planning It is the task of management to ensure that the marketing plan is carefully monitored, evaluated and controlled. Typical controls involve setting standards of performance, evaluating actual performance against standards and, if the deviations are intolerable, taking corrective action. Marketing planning can be seen as a cycle, which begins with clear objectives that set out what the marketer intends to achieve, and ending with a feedback mechanism in order that the objectives can be evaluated, a course of corrective action can be taken (if there are deviations from plans) and the organisation can monitor its usage of resources. Review exercises 1. Mention any three impact of marketing strategies on successful business 2. List any three types of marketing plan 9 LECTURE FOUR Importance of Agricultural Marketing Agricultural marketing plays an important role not only in stimulating production and consumption, but in accelerating the pace of economic development. Its dynamic functions are of primary importance in promoting economic development. For this reason, it has been described as the most important multiplier of agricultural development. The importance of agricultural marketing in economic development has been indicated in as follow. 1) Optimization of Resource use and Output Management: An efficient agricultural marketing system leads to the optimization of resource use and output management. An efficient marketing system can also contribute to an increase in the marketable surplus by scaling down the losses arising out of inefficient processing, storage and transportation. A well-designed system of marketing can effectively distribute the available stock of modern inputs, and thereby sustain a faster rate of growth in the agricultural sector. 2) Increase in Farm Income: An efficient marketing system ensures higher levels of income for the farmers by reducing the number of middlemen or by restricting the commission on marketing services and the malpractices adopted by them in the marketing of farm products. An efficient system guarantees the farmers better prices for farm products and induces them to invest their surpluses in the purchase of modern inputs so that productivity and production may increase. This again results in an increase in the marketed surplus and income of the farmers. If the producer does not have an easily accessible market-outlet where he can sell his surplus produce, he has little incentive to produce more. The need for providing adequate incentives for increased production is, therefore, very important, and this can be made possible only by streamlining the marketing system. 3) Widening of Markets: A well-knit marketing system widens the market for the products by taking them to remote corners both within and outside the country, i.e., to areas far away from the production points. The widening of the market helps in increasing the demand on a continuous basis, and thereby guarantees a higher income to the producer. 4) Growth of Agro-based Industries: An improved and efficient system of agricultural marketing helps in the growth of agrobased industries and stimulates the overall development process of the economy. Many industries depend on agriculture for the supply of raw materials. 5) Price Signals: An efficient marketing system helps the farmers in planning their production in accordance with the needs of the economy. This work is carried out through price signals. 6) Adoption and Spread of New Technology: The marketing system helps the farmers in the adoption of new scientific and technical knowledge. New technology requires higher investment and farmers would invest only if they are assured of market clearance. 7) Employment: The marketing system provides employment to millions of persons engaged in various activities, such as packaging, transportation, storage and processing. Persons like commission agents, brokers, traders, retailers, weigh-men, packagers and regulating staff are directly employed in the marketing system. This apart, several others find employment in supplying goods and services required by the marketing system. 10 8) Addition to National Income: Marketing activities add value to the product thereby increasing the nation’s gross national product and net national product. 9) Better Living: The marketing system is essential for the success of the development programmes which are designed to uplift the population as a whole. Any plan of economic development that aims at diminishing the poverty of the agricultural population, reducing consumer food prices, earning more foreign exchange or eliminating economic waste has, therefore, to pay special attention to the development of an efficient marketing for food and agricultural products. 10) Creation of Utility: Marketing is productive, and is as necessary as the farm production. It is, in fact, a part of production itself, for production is complete only when the product reaches a place in the form and at the time required by the consumers. Marketing adds cost to the product; but, at the same time, it adds utilities to the product. The following four types of utilities of the product are created by marketing: 11) Form Utility: The processing function adds form utility to the product by changing the raw material into a finished form. With this change, the product becomes more useful than it is in the form in which it is produced by the farmer. For example, through processing, oilseeds are converted into oil, sugarcane into sugar, cotton into cloth and wheat into flour and bread. The processed forms are more useful than the original raw materials. 12) Place Utility: The transportation function adds place utility to products by shifting them to a place of need from the place of plenty. Products command higher prices at the place of need than at the place of production because of the increased utility of the product. 13) Time Utility: The storage function adds time utility to the products by making them available at the time when they are needed 14) Possession Utility: The marketing function of buying and selling helps in the transfer of ownership from one person to another. Products are transferred through marketing to persons having a higher utility from persons having a low utility. Cost of Marketing Marketing cost refers to the charge incurred and they consist of taxes, levies, excessive duties etc. paid by the producer, or seller involved in the sale and purchase of the commodity from the time the produce reaches the market till it is finally sold to the ultimate consumer. It includes the total cost of transportation and handling, marketing charges, cost of packaging, preservation and storage cost. Customer Satisfaction Customer satisfaction is defined as a measurement that determines how happy customers are with a company’s products, services, and capabilities. Customer satisfaction information, including surveys and ratings, can help a company determine how to best improve or changes its products and services. An organization’s main focus must be to satisfy its customers. This applies to industrial firms, retail and wholesale businesses, government bodies, service companies, nonprofit organizations, and every subgroup within an organization. 11 Model of Customer Satisfaction There are two important questions to ask when establishing customer satisfaction: • Who are the customers? • What does it take to satisfy them? Organizations should not assume they know what the customer wants. Instead, it is important to understand the voice of the customer, using tools such as customer surveys, focus groups, and polling. Using these tools, organizations can gain detailed insights as to what their customers want and better tailor their services or products to meet or exceed customer expectations. The customer satisfaction process improvement includes the following: 1) Issue Reported 2) Investigate issues 3) Correction action 4) Customer follow up 5) Root cause analyses 6) Preventive action 7) Customer follow up 8) Verification of effectiveness 9) Customer survey Customer care Customer care is the process of building an emotional connection with your customers, whereas customer service is simply the advice or assistance your business provides them. Customer care is less quantifiable than customer service and is more concerned with one-to-one customer interactions. While both functions increase customer satisfaction, customer service does this by answering questions and providing support. Customer care, on the other hand, focuses on active listening and understanding the customer's emotional needs as much as the physical or business ones. By doing so, your company creates a long-term, mutually-beneficial relationship with your customers. Customer retention This is refers to the ability of a company or product to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defect to another product or business, or to non-use entirely. Selling organizations generally attempt to reduce customer defections. Customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship and successful retention efforts take this entire lifecycle into account. Customer profitability (CP) Customer profitability is the difference between the revenues earned from and the costs associated with the customer relationship during a specified period. Profitability can be calculated via the following methods. 12 1. Marketing Margin Analysis Marketing margin represents the differences between price paid and received by a given market intermediary in the marketing of a commodity such as wholesaler or retailer, etc. Marketing Margin = Selling Price (N) - Purchasing Price (N) Percentage Marketing Margin = x 100 Marketing margin is influenced by the market forces of demand and supply. 2. Net Marketing Margin Net Marketing Margin is used to determine the profitability of any given enterprises in the marketing channel. It is defined as the total revenue derived from an enterprise less the total marketing cost (TMC) incurred. It is given by the formula: NMM = TR-TMC Where, NMM= Net Marketing Margin (₦) TR= Total revenue (amount realized from the sale of pepper) (₦) TMC= Total marketing cost (₦). TMC= Cost of Transportation + Cost of Labor + Cost of Packaging + Cost of Sorting + Cost of tax + Cost of Handling + Cost of Storage + Cost of marketing due. 3. Benefit-Cost Ratio A benefit cost ratio is the ratio of the benefits of project or proposal, expressed in monetary term, relative to its cost, also expressed in monetary term. Benefit Cost Ratio takes into account the amount of monetary gain realized by performing a project versus the amount the amount it costs to execute the project. The higher the benefit cost ratio the better the investment. General rule of thumb is that if the benefit is higher than the cost the project is a good investment. B BCR = C Where BCR = Benefit Cost Ratio, B = Benefits (Total Revenue). C = Costs (Total Marketing Cost). Accept any project if BCR is greater than one. 4. Marketing efficiency Marketing efficiency is the maximization of ratio of output to input. Marketing efficiency is most frequently used measured of market performance. Improved marketing efficiency is common objective of farmers, marketers, consumers and society at large. (Olukosi et al, 1989). Value added by marketing x 100 M. E = Cost of marketing 13 Where: M.E = Marketing efficiency Value added by marketing = Price (in Naira) received by the market participant less than the price received by preceding participant in the marketing chain. Or selling price minus purchasing price. Cost of marketing = Cost (in Naira) of transportation, payments to commission agent and local government area, loading and offloading. Review exercise 1. State any six importance of agricultural marketing 2. Define the following terms; i. Cost ii. Marketing margin iii. Net marketing margin iv. Marketing efficiency v. Benefit cost ratio 3. Differentiate between the following terms i. Cost of marketing and customer satisfaction ii. Customer care and customer services iii. Consumer profitability and customer retention 14 LECTURE FIVE Environment Factors that Influence Agricultural Marketing Decision These factors are divided into: - Micro-environment The micro-environment is basically the environment that has a direct impact on your business. It is related to the particular area where your company operates and can directly affect all of your business processes. In other words, it consists of all the factors that affect particularly your business. They have the ability to influence your daily proceedings and general performance of the company. Still, the effect that they have is not a long-lasting one. The micro- environment includes customers, suppliers, resellers, competitors, and the general public. Macro-environment The macro-environment is more general - it is the environment in the economy itself. It has an effect on how all business groups operate, perform, make decisions, and form strategies simultaneously. It is quite dynamic, which means that a business has to constantly track its changes. It consists of external factors that the company itself doesn’t control but is certainly affected by. The factors that make up the macro-environment are economic factors, demographic forces, technological factors, natural and physical forces, political and legal forces, and social and cultural forces. Micro Environment Factors • Suppliers: Suppliers can control the success of the business when they hold power. The supplier holds the power when they are the only or the largest supplier of their goods; the buyer is not vital to the supplier’s business; the supplier’s product is a core part of the buyer’s finished product and/or business. • Resellers: If the product the organisation produces is taken to market by 3rd party resellers or market intermediaries such as retailers, wholesalers, etc. then the marketing success is impacted by those 3rd party resellers. For example, if a retail seller is a reputable name then this reputation can be leveraged in the marketing of the product. • Customers: Who the customers are (B2B or B2C, local or international, etc.) and their reasons for buying the product will play a large role in how you approach the marketing of your products and services to them. • The competition: Those who sell the same or similar products and services as your organisation is your market competition, and the way they sell needs to be taken into account. How do their prices and product differentiation impact you? How can you leverage this to reap better results and get ahead of them? 15 • The general public: Your organisation has a duty to satisfy the public. Any actions of your company must be considered from the angle of the general public and how they are affected. The public has the power to help you reach your goals; just as they can also prevent you from achieving them. Macro Environment Factors • Demographic forces: Different market segments are typically impacted by common demographic forces, including country/region; age; ethnicity; education level; household lifestyle; cultural characteristics and movements. • Economic factors: The economic environment can impact both the organisation’s production and the consumer’s decision-making process. • Natural/physical forces: The Earth’s renewal of its natural resources such as forests, agricultural products, marine products, etc must be taken into account. There are also natural non-renewable resources such as oil, coal, minerals, etc that may also impact the organisation’s production. • Technological factors: The skills and knowledge applied to the production, and the technology and materials needed for the production of products and services can also impact the smooth running of the business and must be considered. • Political and legal forces: Sound marketing decisions should always take into account political and/or legal developments relating to the organization and its markets. • Social and cultural forces: The impact the products and services your organizations bring to market have on society must be considered. Any elements of the production process or any products/services that are harmful to society should be eliminated to show your organization is taking social responsibility. A recent example of this is the environment and how many sectors are being forced to review their products and services in order to become more environmentally friendly. Review exercises 1. Mention and explain any three macro-environmental factor that influence agricultural marketing decision. 2. Identify and explain any three micro-environmental factors that influence agricultural marketing decision. 16 LECTURE SIX Buyer Behavior Buyer behavior may be defined as the activities and decision processes involved in choosing between alternatives, procuring and using products or services. The influences on buyer behavior The behavior of buyers is the product of two broad categories of influence; these are endogenous factors (i.e. those internal to the individual) and exogenous factors (i.e. those external to the individual). Exogenous influences on buyer behavior Factors which are external to the individual but have a substantial impact upon his/her behavior are social and cultural in nature. These include culture, social class or status, reference groups and family membership. 1. Culture Culture is perhaps the most fundamental and most pervasive external influence on an individual's behavior, including his/her buying behavior. Culture has been defined as: “…the complex of values, ideas, attitudes and other meaningful symbols created by people to shape human behavior and the artifacts of that behavior as they are transmitted from one generation to the next. Without knowledge of the culture into which a product is being marketed mistakes can be made and opportunities missed. Creative marketers who do have knowledge of cultural norms and values can profit by aligning product benefits and characteristics with these social standards. 17 2. Social status Social class or social status is a powerful tool for segmenting markets. Empirical research suggests that people from the same social group tend to have similar opportunities, live in similar types of housing, in the same areas, by similar products from the same types of outlets and generally conform to similar styles of living. At the same time, whilst people within the same social category exhibit close similarities to one another, there are usually considerable differences in consumption behavior between social groups. The variables used to stratify a population into social classes or groups normally include income, occupation, education and lifestyle. 3. Reference groups People are social animals who tend to live in groups. The group(s) to which a person belongs exerts an influence upon the behavior, beliefs and attitudes of its members by communicating norms and expectations about the roles they are to assume. Thus, an individual will refer to others with respect to: ‘correct’ modes of dress and speech; the legitimacy of values, beliefs and attitudes; the appropriateness of certain forms of behavior, and also on the social acceptability of the consumption of given products and services. These “others' constitute reference groups. 4. Families as reference groups The family is another group which influences the behavior of individuals including buying behavior. Two types of family may be distinguished from one another, the nuclear family and the extended family. The nuclear family is the basic family unit and describes the parents and immediate off-spring and/or their adopted children. The extended family includes all living relatives in addition to the parents and their children - grandparents, aunts, uncles, cousins, step- relatives and in-laws (i.e. relatives through marriage). Endogenous influences on buyer behavior Endogenous influences are those which are internal to the individual. These are psychological in nature and include needs and motives, perceptions, learning processes, attitudes, personality type and self-image. 1. Needs and motives The terms need and motivations are often viewed to be interchangeable. However, there is a difference between them. When an individual recognizes that he/she has a need, this acts to trigger a motivated state. Need recognition occurs when the individual becomes aware of a discrepancy between his/her actual state and some perceived desired state. The housewife who buys polished rice, or roller milled maize meal (actual state), who is made aware of the vitamin deficiencies in these products and is anxious to be, and to be seen to be, a wife and/or mother who looks after the health of her family (desired state) could be motivated to purchase less highly refined rice or maize meal. More formally, a need is a perceived difference between an 18 ideal state and some desired state which is sufficiently large and important to stimulate a behavioral reaction. 2. Perceptions Whereas motivation is a stimulus to action, how an individual perceives situations, products, promotional messages, and even the source of such messages, largely determines how an individual acts. Perception is the process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world. 3. Learning Much of human behavior is learned. The evidence of learning is a change in a person's behavior as a result of experience. 4. Attitudes Attitudes are enduring, that may change over time but they tend to be reasonably stable in the short to medium term. Attitudes are learned from the individual's own experience and/or from what they read or hear from others. Attitudes precede and impact upon behavior. Attitudes reflect an individual's predispositions towards another person, an event, product or other object. 5. Personality and self-concept Individuals tend to perceive other human beings as ‘types of persons’. There are, for example, people perceived to be nervous types, ambitious types, self-confident types, introverts, extroverts, the timid, the bold, the self-deprecating, and so on. These are personality traits. Like attitudes, personality traits serve to bring about a consistency in the behavior of an individual with respect to his/her environment. Thus, for example, a personality characterized by a high degree of self-confidence will consistently be outspoken with respect to his/her views on new ideas, products, processes and practices. The consumer buying decision process Buying decisions may be made by individuals or a group such as a family or a committee within a commercial or industrial organization. Where a group is involved, the term Decision- Making Unit (DMU) is commonly used. Marketers are interested in identifying all of the parties involved in the decision making process and are careful to distinguish between buyers and users. The farmer may make the final decision as to whether a given piece of agricultural equipment is purchased but his/her decision could well be influenced by the views, attitudes and aptitudes of the farm worker who will operate the machine. Behaviorists have used empirical evidence to develop models of the buying process. The marketer is encouraged to think about influencing a buying process rather than a buying decision. Typically, comprised five stages: problem recognition, information search, evaluation of alternatives, purchase decision and post-purchase behaviour. 19 Problem recognition: The buying process begins with a recognition on the part of an individual or organisation that they have a problem or need. The farmer recognises that he/she is approaching a new cultivation season and requires seed; a grain trading company realises that stocks are depleted but demand is rising and therefore wheat, rice and maize must be procured; a rural family is expecting an important guest who must be honoured by the slaughter and preparation of a goat for a feast. Information search: Information gathering may be passive or active. Passive information gathering occurs when an individual or group simply becomes more attentive to a recognized solution to a given need. That is, he/she exhibits heightened attention. The potential buyer becomes more aware of advertisements or other messages concerning the product in question. In other circumstances the individual is proactive rather than reactive with respect to information. A trader who sees potential in a new vegetable which is being imported into the country will actively search out information about the product, sources of supply, prices and import regulations. He/she is likely to converse with other traders, request literature from potential suppliers, etc. Evaluation of alternatives: The process of evaluating alternatives not only differs from customer to customer prospective customer but the individual will also adopt different processes in accordance with the situation. It is likely that when making judgments customers will focus on those product attributes and features that are most relevant to their needs at a given point in time. Here, the marketer can differentiate between those characteristics which a product must have before it is allowed to enter the customer's evoked set. Purchase decision: At the evaluation stage the prospective customer will have arrived at a judgment about his/her preference among the evoked set and have formed a purchase intention. Post-purchase behavior: The process of marketing is not concluded when a sale is made. Marketing continues into the post-purchase period. The aim of marketing is not to make a sale but to create a long term relationship with a customer. Organizations maintain profitability and growth through repeat purchases of their products and services by loyal customers. 20 Review Exercise 1. Define the term buyer behavior 2. List three endogenous and three exogenous factors that influence buyer behavior 3. Identify five stages of the buying decision models 21 LECTURE SEVEN Market Segmentation This is the process of identifying and then separating a total market into parts so that different marketing strategies can be used for each part. This involves collecting information about the different segments that the company has identified. The variables used to segment markets may be demographic (e.g. age, sex, geographic location, occupation, education, race), psychographic (e.g. activities, interests, opinions, personality, lifestyle) or behavioral (e.g. product usage rate, degree of brand loyalty, occasions of product usage). Objective of market segmentation is to identify groups within the broader market that are sufficiently similar in characteristics and responses to warrant separate treatment Each market segment might require a quite different marketing mix. This would include having a quite distinct marketing mix for each market segment. Once the market has been segmented the enterprise must decide which of these segments it can profitably serve. Target marketing Market targeting is a process of selecting the target market from the entire market. Target market consists of group/groups of buyers to whom the company wants to satisfy or for whom product is manufactured, price is set, promotion efforts are made, and distribution network is prepared. It involves basically two actions – evaluation of segments and selection of the appropriate market segments. In this relation, market targeting can be defined as: Market targeting is an act of evaluating and selecting market segments. Market targeting consists of dividing the total market into segments, evaluating these segments, and selecting the appropriate segments as the target market. Targeting Strategies When selecting their target markets, companies have to make a choice of whether they are going to be focused on one or few segments or they are going to cater to the mass market. The choice that companies make at this stage will determine their marketing mix and positioning plank. There are four generic target marketing strategies. 1. Undifferentiated marketing: There may be no strong differences in customer characteristics. Under these circumstances a company will decide to develop a single marketing mix for the whole market. There is absence of segmentation. This strategy can occur by default. Companies which lack a marketing orientation may practice this strategy because of lack of customer knowledge. It is convenient since a single product has to be developed. It views the market as one big market with no individual segments. The company uses one marketing mix for the entire market. The company assumes that individual customers have similar needs that can be met with a common marketing mix. The first company in an industry normally uses an undifferentiated targeting strategy. There is no competition at this stage and the company does not feel the need to tailor marketing 22 mixes to the needs of market segments. Companies following undifferentiated targeting strategies save on production and marketing costs. Since only one product is produced, the company achieves economies of mass production. Marketing costs are also lower as only one product has to be promoted and there is a single channel of distribution. 2. Differentiated marketing or multi-segment targeting: When market segmentation reveals several potential target segments that the company can serve profitably, specific marketing mixes can be developed to appeal to all or some of the segments. A differentiated marketing strategy exploits the differences between marketing segments by designing a specific marketing mix for each segment. A company following multi-segment targeting strategy serves two or more well- defined segments and develops a distinct marketing mix for each one of them. Separate brands are developed to serve each of the segments. It is the most sought after target market strategy because it has the potential to generate sales volume, higher profits, larger market share and economies of scale in manufacturing and marketing. But the strategy involves greater product design, production, promotion, inventory, marketing research and management costs. The car market is most clearly segmented. There are segments for small cars, luxury cars, sports utility vehicles, etc. Most car makers like General Motors, Ford, Toyota, Honda and others offer cars for all the segments. 3. Focus or concentrated targeting: Several segments may be identified but a company may not serve all of them. Some may be unattractive or out of line with the company’s business strengths. A company may target just one segment with a single marketing mix. It understands the needs, and motives of the segment’s customers and designs a specialized marketing mix. Companies have discovered that concentrating resources and meeting the needs of a narrowly defined market segment is more profitable than spreading resources over several different segments. Starbucks became successful by focusing exclusively on customers who wanted gourmet coffee products. The strategy is suited for companies with limited resources as these resources may be too stretched if it competes in many segments. Large organizations may not be interested in serving the needs of this one segment or their energies may be so dissipated across the whole market that they pay insufficient attention to the requirements of this small segment. One danger that such niche marketers face is attracting competition from larger organizations in the industry if they are very successful. Companies following concentrated targeting strategies are obviously putting all their eggs in one basket. If their chosen segments were to become unprofitable or shrink in size, the companies will be in problem. Such companies also face problems when they want to move to some other segments, especially when they have been serving a segment for a long time. 23 They become so strongly associated with serving a segment with a particular type of product or service, that the customers of other segments find it very difficult to associate with them. They believe that the company can serve only that particular segment. 4. Customized marketing: In some markets, the requirements of individual customers are unique and their purchasing power is sufficient to make designing a separate marketing mix for each customer a viable option. Many service providers such as advertising, marketing research firms, architects and solicitors vary their offerings on a customer to customer basis. They will discuss face to face with each customer their requirements and tailor their services accordingly. Customized marketing is also found within organizational markets because of high value of orders and special needs of customers. Customized marketing is associated with close relationships between the supplier and customer because the high value of an order justifies large marketing and sales efforts being focused on each buyer. Positioning Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the target market’s mind. The position of a product is the sum of those attributes normally ascribed to it by the consumers-its standing, its quality, the type of people who use it, its strengths, its weaknesses, any other unusual or memorable characteristics it may possess, its price and the value it represents. It is nothing but creating an image in the consumers’ mind. Consumers generally tend to use images while making a purchase; they buy brand images rather than actual products. There are many brands that have a powerful influence on the consumer’s mind. Just think of Pepsi or Coca Cola in the soft drink market, Maruti or Santro in the passenger car market, BPL or Onida in the television market and so on. Product Differentiation: A company’s offer has to be distinct from those of its competitors and should fulfill the requirements of the customers of its target markets. Product differentiation results from added features which give customers benefits that rivals cannot match. Before adding features, a company should thoroughly research the need for the particular Feature among customers in the intended target market. Companies keep on adding new features just because their competitors are offering them. Sometimes, deletion of features and benefits from a product may be a very effective differentiation because customers never really wanted these benefits. Review exercise 1. Differentiate between Market segmentation and positioning 2. Define the term product differentiation 24 LECTURE EIGHT Marketing Mix Definition: The marketing mix definition is simple. It is about putting the right product or a combination thereof in the place, at the right time, and at the right price. A brief description of the four elements of marketing mix (Four Ps) is: Marketing Mix – Product A product is an item that is built or produced to satisfy the needs of a certain group of people. The product can be intangible or tangible as it can be in the form of services or goods. You must ensure to have the right type of product that is in demand for your market. So during the product development phase, the marketer must do an extensive research on the life cycle of the product that they are creating. Marketers must also create the right product mix. It may be wise to expand your current product mix by diversifying and increasing the depth of your product line. Marketing Mix – Price The price of the product is basically the amount that a customer pays for to enjoy it. Price is a very important component of the marketing mix definition. It is also a very important component of a marketing plan as it determines your firm’s profit and survival. Adjusting the price of the product has a big impact on the entire marketing strategy as well as greatly affecting the sales and demand of the product. Pricing always help shape the perception of your product in consumers eyes. Consequently, prices too high will make the costs outweigh the benefits in customers eyes, and they will therefore value their money over your product. Be sure to examine competitors pricing and price accordingly. When setting the product price, marketers should consider the perceived value that the product offers. There are three major pricing strategies, and these are: • Market penetration pricing • Market skimming pricing • Neutral pricing Here are some of the important questions that you should ask yourself when you are setting the product price: • How much did it cost you to produce the product? • What is the customers’ perceived product value? • Do you think that the slight price decrease could significantly increase your market share? • Can the current price of the product keep up with the price of the product’s competitors? Marketing Mix – Place Placement or distribution is a very important part of the product mix definition. You have to position and distribute the product in a place that is accessible to potential buyers. Understand 25 them inside out and you will discover the most efficient positioning and distribution channels that directly speak with your market. Marketing Mix – Promotion Promotion is a very important component of marketing as it can boost brand recognition and sales. Promotion is comprised of various elements like: • Sales Organization • Public Relations • Advertising • Sales Promotion Word of mouth is also a type of product promotion. Word of mouth is an informal communication about the benefits of the product by satisfied customers and ordinary individuals. The sales staff plays a very important role in public relations and word of mouth. It is important to not take this literally. Word of mouth can also circulate on the internet. Harnessed effectively and it has the potential to be one of the most valuable assets you have in boosting your profits online. Additional three elements of marketing mix (7 Ps) is: Marketing Mix – People Both target market and people directly related to the business. Thorough research is important to discover whether there are enough people in your target market that is in demand for certain types of products and services. It is important to hire and train the right people to deliver superior service to the clients, whether they run a support desk, customer service, copywriters, programmers…etc. When a business finds people who genuinely believe in the products or services that the particular business creates, it's is highly likely that the employees will perform the best they can. Additionally, they'll be more open to honest feedback about the business and input their own thoughts and passions which can scale and grow the business. Marketing Mix – Process The systems and processes of the organization affect the execution of the service. It could be your entire sales funnel, a pay system, distribution system and other systematic procedures and steps to ensure a working business that is running effectively. Marketing Mix – Physical Evidence In the service industries, there should be physical evidence that the service was delivered. Additionally, physical evidence pertains also to how a business and it's products are perceived in the marketplace. It is the physical evidence of a business' presence and establishment. When you think of sports, the names Nike and Adidas come to mind. You immediately know exactly what their presence is in the marketplace. They are generally market leaders and have established a physical evidence as well as psychological evidence in their marketing. The Product Mix 26 Single product organizations are, in practice, fairly rare. We have already encountered the product life cycle concept and this alone should warn of the dangers of relying upon a single product. One reason for the rarity of single product firms is the inherent seasonality of agricultural products. Another major reason for offering a complementary range of products is to gain entry to the channels of distribution. Most distributors will want to handle a product range rather than a single item. This is because the distributor's customers expect to be able to satisfy a number of their needs on the occasion of a single visit to the sales outlet. A product mix is an assortment of types of products and product lines. A product line is a series of related products. For example, a dairy company might offer a product line of full fat milk, semi-skimmed milk and skimmed milk. The same dairy company might have a second, and distinct product line of yoghurts, plain yoghurt, vanilla flavoured yoghurt and yoghurt with nuts The width of a product mix refers to how many different product lines an organisation carries (in this illustration there are three product lines). Product line depth indicates the number of product variations within a particular product line (here we have three product lines and three product variations within each). Product life cycle (PLC) This is the cycle through which every product goes through from introduction to withdrawal or eventual demise. It includes the following stages;- Introduction: When the product is brought into the market. In this stage, there's heavy marketing activity, product promotion and the product is put into limited outlets in a few channels for distribution. Sales take off slowly in this stage. The need is to create awareness, not profits. The second stage is growth. In this stage, sales take off, the market knows of the product; other companies are attracted, profits begin to come in and market shares stabilize. The third stage is maturity, where sales grow at slowing rates and finally stabilize. In this stage, products get differentiated, price wars and sales promotion become common and a few weaker players exit. The fourth stage is decline. Here, sales drop, as consumers may have changed, the product is no longer relevant or useful. Price wars continue, several products are withdrawn and cost control becomes the way out for most products in this stage. 27 Product Development Product development typically refers to all of the stages involved in bringing a product from concept or idea through market release and beyond. In other words, product development incorporates a product’s entire journey. There are many steps to this process, and it’s not the same path for every organization, but these are the most common stages through which products typically progress: • Identifying a market need—Products solve problems. Identifying a problem that needs solving (or a better way of being solved) is where this journey should begin. Conversations with potential customers, surveys, and other user research activities can inform this step. • Quantifying the opportunity—Not every problem is problematic enough to warrant a product-based solution. The pain it causes and the number of people or organizations it impacts can determine whether it’s a worthy problem to solve and if people are willing to pay for a solution (be it with money or their data). • Conceptualizing the product—Some solutions may be obvious, while others may be less intuitive. Here’s where the team puts in the effort and applies their creativity to devising how a product might serve its needs. • Validating the solution—Before too much time is spent prototyping and design, whether the proposed solution is viable should be tested. This can still happen at the conceptual level. Still, it is an early test to see whether the particular product idea is worth pursuing further or if it will be rejected or only lightly adopted by the target user. • Building the product roadmap—With a legitimate product concept in hand, product management can build out the product roadmap, identifying which themes and goals are central to develop first to solve the most significant pain points and spark adoption. • Developing a minimum viable product (MVP)—This initial version of the product needs just enough functionality to be used by customers. • Releasing the MVP to users—Experiments can be conducted to gauge interest, prioritize marketing channels and message, and begin testing the waters around price sensitivity and packaging. It also kicks off the feedback loop to bring ideas, complaints, and suggestions into the prioritization process and populate the product backlog. • Ongoing iteration based on user feedback and strategic goals—With a product in the market, enhancements, expansions, and changes will be driven by the user feedback being collected via various channels. Over time the product roadmap will evolve based on this learning and the objectives the company sets for this product. This work never ends until it’s finally time to sunset a product at the end of its lifecycle. Review exercise 1. State four elements of marketing mix 2. Highlight the term product life cycle and its stages 28 Lecture Nine Class Assignment (Group) Write a short note on the following • Concept of place in Marketing Mix • Consumer convenience • Consumer availability • Distribution system • Management and logistic Lecture Ten Class Assignment (Individual) • How to set price for goods by considering perceived value, demand elasticity, completion, cost of production, psychology of purchase and social responsibility 29 Lecture Eleven Market Communication/How to promote your Product Marketing communications are intended to both inform and persuade a target audience, with a view to influencing the behavior of that group. In fact, without effective marketing communications the consumer remain unaware of products and services they need, who might supply them and the benefits which both product and suppliers can offer. Marketing communications serve five key objectives: • the provision of information • the stimulation of demand • differentiating the product or service • underlining the product's value, • regulating sales. Marketing communications takes four forms - advertising, sales promotion, personal selling and publicity. 1) Advertising: Advertising is the most visible element of the communications mix because it makes use of the mass media, i.e. newspapers, television, radio, magazines, bus hoardings and billboards. Mass consumption and geographically dispersed markets make advertising particularly appropriate for products that rely on sending the same promotional message to large audiences 2) Sales Promotion: Sales promotion employs short-term incentives, such as free gifts, money-off coupons, product samples etc., and its effects also tend to be short-term. Therefore, sales promotion is a tactical marketing instrument. Sales promotions may be targeted either at consumers or members of the channel of distribution, or both. Sales promotion. In contrast to advertising, sales promotion is more tactical than strategic. It is usually applied to create an immediate impact, but one which is unlikely to be sustained in the longer term. Thus, marketers tend to use promotion to address short term problems such as reducing the cash burden of overstocked products, stimulating demand during what is traditionally the low season, selling off stocks which are becoming obsolete or are likely to spoil if they remain in storage. Sales promotions may be targeted at consumers, industrial buyers (e.g. crop processors or food manufacturers), channel intermediaries (e.g. traders, wholesalers or retailers) or the organisation's own sales force. Types of consumer sales promotion Sales Promotions Targetted On Customers Type of promotion Examples Discount coupons or Discounts on the full price encourage product trial, e.g. $5 money-off packs off the regular price that will apply to a new pesticide. Products offered free or at a discount act as an incentive to Premiums buy a related product, e.g. farmers buying 25 litres or more 30 of a new pesticide get a 5 litre pack of herbicide free. Intended to create interest and excitement among customers, Lotteries, games or e.g. farmers may be offered the opportunity to win a competitions knapsack or tractor mounted agrochemical sprayer. Free samples encourage product trial, e.g. farmers could be given a small pack of pesticide and invited to apply it to a Samples small plot and compare results either with a plot to which no pesticide has been applied or against a competing brand. These specially designed display units and literature are intended to create impulse (i.e. unplanned) purchases. They are located close to the place where the customer pays for Point-of-sale the goods or service, e.g. the packs of pesticide could be merchandising arranged on an attractive rack displaying the manufacturer's name and situated, close to the checkout in a farmers service centre. Customers are given stamps in ratio to the value of their purchases. Each stamp has a value attached to it although it cannot be redeemed for cash. These stamps can be Trading stamps accumulated and then traded in as whole or partial payment for goods and services. Trading stamps are mainly used by distributive outlets to encourage customer loyalty. Sales promotions may be targeted on intermediaries as well, or instead of, consumers. Many types of promotion are used in both sectors. Sometimes, however, their objectives are slightly different. Table below describes the main forms of trade promotions and their various purposes. Types of trade sales promotions Sales Promotions Targeted On Trade Channels Type of promotion Examples These temporary price reductions are intended to be passed on, in whole or in part, to the end customer. Trade allowances Thus, intermediaries can elect to have a higher margin per unit or higher volume sales. An agricultural merchant may be offered 24 packs of pesticide for the price of 20. Such bonuses are Bonus purchases not intended to be passed on to customers but are an incentive for the merchant to increase the order size. These are directed at the sales and/or service Competitions personnel of intermediaries and if sponsored by a manufacturer/grower are intended as an incentive to 31 place particular emphasis on selling that supplier's products or services., e.g. a salesman achieving total orders in excess of 1,000 litres of pesticide might win a cash prize. Cash bonuses paid to a middleman's sales personnel Cash incentives can help push the product through the channel of distribution. Suppliers and middlemen sometimes share the cost of an advertising campaign or promotion, e.g. An Cooperative agricultural merchant wishing to run a local advertising/promotions campaign may obtain assistance from one or other of his/her main suppliers. 3) Public relations: Public relations are an organization’s communications with its various publics. These publics include customers, suppliers, stockholders (shareholders, financial institutions and others with money invested in the business), employees, the government and the general public. In the past, organizations thought in terms of publicity rather than public relations. The distinction between advertising and publicity was based on whether or not payment was made to convey information via the mass media. Advertising requires payment by the sponsor of the message or information whilst publicity is information which the media decides to broadcast because it is considered newsworthy and therefore no payment is received by the media from a sponsor. 4) Personal selling: This can be described as an interpersonal influence process involving an agribusiness' promotional presentation conducted on a person-to-person basis with the prospective buyer. It is used in both consumer and industrial marketing and is the dominant form of marketing communication in the case of the latter Choosing between personal selling and mass media Personal Selling Mass Media Market Number of Few Many buyers Geographic Concentrated Dispersed Type of market Industrial Consumer Product Product Custom Standardised 32 complexity Service level High Low required Introductory to early Maturity to early stage of Life cycle stage growth decline Pricing Budget High unit value Low value The main promotional methods Form of Advantages Disadvantages Promotion Costs more than all other Permits flexible presentation forms per contact. Personal selling and gains immediate response. Difficult to attract good sales personnel. Gains attention and has instant Sales promotion Easy for others to imitate effect. Considerable waste. Appropriate for reaching mass Hard to demonstrate audiences. product. Advertising Allows direct appeal and Hard to close sale. control over the message. Difficult to measure results. Not as easily controlled Has a high degree of as other forms. Public relations believability when done well. Difficult to demonstrate or measure results. Trade shows An industry's trade association may organise fairs and exhibitions and exhibitions which offer its members the opportunity to communicate with a well 33 defined target audience. Both manufacturers and intermediaries may participate in these events. Review exercise 1. Defined the term Market communication 2. State any three objectives of Market communication 3. Identify four type of Market communication 34 LECTURE TWELVE Extended models of marketing mix The traditional marketing mix comprised of the 4Ps of product, price, place and promotion has enjoyed tremendous popularity over the years. When it was first articulated by McCarthy in 1960, it consisted of 12 parameters that were to be mixed like ingredients by a marketer. Eventually brought down to the much smaller number of 4, the framework became simpler and easier to understand but there was a lack of depth and several important elements were missed out such as the provision of services to the consumer. Consequently new elements of marketing mix were identified as follows: The New Elements 5. People This is a vitally important element of the service marketing mix. When a service is being delivered, the person delivering it is not unique from the service itself. When dining at a restaurant, if a rude waiter is encountered, the entire experience will be labeled as bad service. This is why many businesses invest in defining the right kind of person to fill their service role and then making efforts to find or train people to fit this definition. 6. Process Since service provision needs to strike a balance between customization and standardization, the processes involved in the activity require special mention and attention. A process needs to be clearly defined for the service provider. This basic process should ensure the same level of service delivery to every customer, at any time of day, on any day. Within this process, there should be defined areas where a customer preference can be accommodated to provide a unique experience. 7. Physical Evidence The location of the service delivery also takes on significance. The level of comfort and attractiveness of a service location may make a lot of difference to the user experience. A calm and soothing environment with thoughtful comfort measures may provide a sense of security to a new customer which will make them return. 35 LECTURE THIRTEEN National Consumer Market Consumer markets The consumer market comprises of those people who are the end-users and they don’t resell the product or service any further. We see products and consumers everywhere in the market. Whenever a person buys a product, then he becomes a part of the consumer market. We can categorize the whole consumer market into four types; retail, transportation, food, and beverages (drinks). Buyers usually make their own decisions whenever they want to buy something in the market. Examples of Consumer Markets Food, drinks, beverages, legal, health and financial services, clothes, electronic stuff, and its accessories and many others, these all are the examples of consumer markets where buyers purchase products or services for the sake of the consumer, instead of buying things to resell it. For instance, when you buy some food or drink form the grocery retail store, then you’re doing an activity of the consumer market. Significance of Consumers The consumer market is comprised of consumers, and when they keep consuming products and services. The businesses flourish because of it; the economy of the country grows as a result. In simple words, when people spend products, then producers and entrepreneurs produce and deliver more products in the market. As a result, the running cycle of production and consumption contributes to the national economy of the whole country. Marketers create different segments of the market based on their tastes and choices. In other words, those segments are the characteristics of the consumer market. Characteristics of Consumer Markets 1) Demographic Consumer Markets Demographic characteristics mean consumers’ age, income, social and economic background, gender, size of their family, ethnicity, religion, culture, education level, job type, social class, and nationality. Marketers collect all of such information through a survey, telephonic interviews, and from the local public office where such information is easily available. The purpose of collecting well-detailed information is to target precisely those segments of the market. For instance, telephonic calls and SMS packages would interest the young market falling in the age from 18 to 25. 2) Psychographic Consumer Markets Psychographic characteristics mean values, interests, opinions, attitudes, and activities of the consumers. They tell us the psychological nature of an individual in terms of his thinking, and it’s very important to know these things because you set your marketing strategies based on their views. 36 For instance, the target consumer market of parental magazines would-be mothers who are bearing babies. They are interested to learn about parenting. Companies conduct focus groups and in-depth interviews with the consumers of their target market. The moderator starts the discussion with an open topic, and then he asks the participant to share their views on the particular. That’s how companies find out the inner psychological nature of their target market. 3) Behavioralism Consumer Markets Behavioristic characteristic requires a lot of marketing research to find out the product and brand loyalty level of consumers. How people react towards certain offers; when company offers them certain benefits and packages. The number of times people visit the market, stores, or the mall for the same product. It tells us the loyalty of the people towards the product and brand. After finding out the loyalty of their consumer market; advertisers and marketers categorize the market into light, medium and heavy users list. Then they target each niche and check how people are responding. Most important, they want to know and expect the repetitive behavior of the consumers. 4) Geographic Consumer Markets Geographic characteristic means the location of the consumers and where they are situated. It includes population density, size of the market, region, rural, urban, and climate of the market because it’s very important to know the size, density and location of the market before jumping into it.For instance, a small-time seller can’t survive in a big competitive market; he should look for the market where big companies have no interest in. There he would have an opportunity to excel. In cold regions, you can’t sell summer clothes, because people won’t buy it. The point of the matter is people living in different parts of the world have different needs, requirements, tastes, and interests. Businesses must conform to the local norms of the society to be liked and survive. Review exercises 1. Define the term consumer market 2. Mention any six example of consumer markets 3. Identify any three characteristics of consumer markets 37 LECTURE FOURTEEN OTHER MARKETS Organizational Markets This are markets in which companies and individuals purchase goods for purposes other than personal consumption. These markets are characterized by having fewer buyers, but large purchase volume, than consumer markets do. Types of Organization Markets 1. Producers Producers buy raw materials and machinery, often from other producers but sometimes from resellers. Marketing to producers requires technical expertise and knowledge of the producer's operations. Typical marketing strategies involve identifying problems in the producer's industry or particular operations and proposing solutions that are cost-effective. 2. Resellers Resellers include wholesale companies and retailers, as well as niche suppliers that specialize in particular areas where they have expertise. The key factor for marketing to resellers is to be aware of their added-value proposition. If the reseller is a wholesale company offering low prices for high volume, marketers must develop proposals that address this characteristic. 3. Institutions The institutional market includes governments and non-profits. Marketing to these organizations is highly specialized, with marketers relying on long-term relationships as well as large, one-time opportunities. The purchasing process for governments tends to be highly bureaucratic, and a familiarity with government procedures is a prerequisite. Non-profit organization are organized for a public or mutual benefit for owners or investors. What Are the Differences Between the Organizational and Consumer Markets? • Why Goods are Purchased Organizations purchase goods to use in their ongoing operations and to resell to consumers, while consumers purchase goods for their personal use. • Buying Products in Bulk Organizations often purchase in bulk, whereas consumers typically purchase in low quantity. • Choices and Use Consumers typically purchase goods for different reasons than organizations, and have more freedom in choosing the items they want. A consumer may purchase a chair so people can sit comfortably in his home. He will be able to choose any chair within his budget that he likes. An organization, on the other hand, may purchase a chair because an administrative assistant needs it to do his job. The organization may be restricted in a chair purchase, not only by the budget set by a purchasing manager, but also by guidelines set by the Occupational Health and Safety Administration, and by company-wide guidelines on office furniture. 38 • Marketing Strategy for Each Reaching organizational clients requires explaining how your products and services will help their organization serve their clients and customers. It is a help them help others approach. However, to reach a consumer market, you have to show how your products enhance a consumer's life in some way. Whether it makes life easier or more enjoyable, or both. Service Marketing: The American Marketing Association, defines services as activities, benefits, or satisfactions that are offered for sale or provided with sale of goods to the customer, that is, pre- sale and after-sales services. Berry states, ‘while a product is an object, devise or physical thing, a service is a deed, performance, or an effort’. Features of Services: 1. Intangibility: A physical product is visible and concrete. Services are intangible. The service cannot be touched or viewed, so it is difficult for clients to tell in advance what they will be get-ting. For example, banks promote the sale of credit cards by emphasizing the conveniences and advantages derived from possessing a credit card. 2. Inseparability: Personal services cannot be separated from the individual. Services are created and consumed simultaneously. The service is being produced at the same time that the client is receiving it; for example, during an online search or a legal consultation. Dentist, musicians, dancers, etc. create and offer services at the same time. 3. Heterogeneity (or variability): Services involve people, and people are all different. There is a strong possibility that the same enquiry would be answered slightly differently by different people (or even by the same person at different times). It is important to minimize the differences in performance (through training, standard setting and quality assurance). The quality of services offered by firms can never be standardized. 4. Perishability: Services have a high degree of perishability. Unused capacity cannot be stored for future use. If services are not used today, it is lost forever. For example, spare seats in an aeroplane cannot be transferred to the next flight. Similarly, empty rooms in five-star hotels and credits not utilized are examples of services leading to economic losses. As services are activities performed for simultaneous consumption, they perish unless consumed. 5. Changing demand: The demand for services has wide fluctuations and may be seasonal. Demand for tourism is seasonal, other services such as demand for public transport, cricket field and golf courses have fluctuations in demand. 6. Pricing of services: 39 Quality of services cannot be standardized. The pricing of services are usu-ally determined on the basis of demand and competition. For example, room rents in tourist spots fluctuate as per demand and season and many of the service providers give off-season discounts. 7. Direct channel: Usually, services are directly provided to the customer. The customer goes directly to the service provider to get services such as bank, hotel, doctor, and so on. A wider market is reached through franchising such as McDonald’s and Monginis. Problems in Marketing Services: 1. A service cannot be demonstrated. 2. Sale, production and consumption of services takes place simultaneously. 3. A service cannot be stored. It cannot be produced in anticipation of demand. 4. Services cannot be protected through patents. 5. Services cannot be separated from the service provider. 6. Services are not standardized and are inconsistent. 7. Service providers appointing franchisees may face problems of quality of services. 8. The customer perception of service quality is more directly linked to the morale, motivation and skill of the frontline staff of any service organization. Service product Service product is when a business offers a service and a product or a good together as its practice. This is also called service-good mix, and it can refer to many different types of businesses in all different industries. What Is the Difference Between a Service and a Product? 1. Businesses can offer both services and products in exchange for payment, but they do have some major differences. A service is a process that is intangible. This means it doesn't have physical dimensions to it; it can't be measured or weighed. Services usually provide some kind of tangible product in the end, but not always. 2. A product or a good is a physical thing. Products are always the result of a process. You have the product of a pizza after you go through the process of making a pizza. 3. Some customers can feel uncomfortable paying for a service because they can't see an end result before purchasing. If you want to buy a good, such as shoes, you can try them on and hold them before purchasing. If you want a foot massage, you can't get the massage first, see if you like it, and then pay. Once the service has been rendered, it must be paid for, whether you are happy with the results or not. The payment terms in service contracts can sometimes allow for a way out of paying if the customer is dissatisfied. 4. Services require a level of interaction with customers or clients, but a product does not. If you're providing a service, you'll need to be able to handle the presence of customers, whether online or in a shop of some sort. Product sellers don't necessarily need to be concerned with handling customer presence. Many online companies sell tons of products without much customer interaction. 40
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