Fundamentals of Business Entrepreneurship and Management
OCIwuamdi
4.1
Product Marketing
Today’s consumers have access to more information and choices than ever before. Grabbing their attention with
an effective marketing plan can make all the difference between a successful small business and a failed one.
Marketing is therefore the practice of creating interest in a product or service and convincing potential customers
to buy it. It is the process of exploring, creating, and delivering value to meet the needs of a target market in terms
of goods and services; potentially including selection of a target audience; selection of certain attributes or themes
to emphasize in advertising; operation of advertising campaigns; attendance at trade shows and public
events; design of products and packaging attractive to buyers; defining the terms of sale, such
as price, discounts, warranty, and return policy; product placement in media or with people believed to influence
the buying habits of others; agreements with retailers, wholesale distributors, or resellers; and attempts to
create awareness of, loyalty to, and positive feelings about a brand. Marketing is typically done by the seller,
typically a retailer or manufacturer. Sometimes tasks are contracted to a dedicated marketing firm or advertising
agency.
The term “marketing” encompasses a broad range of strategies designed to identify, reach, and convince
prospective buyers. These marketing strategies include:
 Market research. Whether you’re in business-to-consumer or business-to-business marketing, conducting
market research can help you better understand your target audience.
 Advertising and promotion. Connect with consumers by advertising a product or service yourself, or hiring
an advertising agency that will create a campaign that aligns with your goals.
 Social media strategy. Reach potential buyers where they spend their time by creating conversations about
your product or service on social media.
 Public relations. Reach out to media outlets to broaden the reach of your brand.
 Customer acquisition and retention. Build relationships with consumers and the media to expand the
reach of the message.
 Print marketing. Connect with prospective customers via signage, newspapers, magazine ads, and other
traditional distribution channels.
 Digital marketing. Reach consumers via internet marketing on social media, video platforms, search
engines, blogs, and other digital marketing channels.
While the end goal of marketing practice is to sell products or services, a great marketing plan is about much more
than that final click or swipe to buy. It’s about positioning a product in the public consciousness and creating brand
loyalty built on lasting relationships with customers.
The term marketing, what is commonly known as attracting customers, incorporates knowledge gained by studying
the management of exchange relationships and is the business process of identifying, anticipating and satisfying
customers' needs and wants.
4.2
Marketing mix
A marketing mix is a foundational tool used to guide decision making in marketing. The marketing mix represents
the basic tools that marketers can use to bring their products or services to the market. They are the foundation of
managerial marketing and the marketing plan typically devotes a section to the marketing mix.
Marketing professionals refer to the components of their marketing mix as the 4 Ps. Achieving the right
combination of these elements is the key to marketing success.
1. Product
A product is the thing a company offers to its customers. That can include an idea, a service, or an actual physical
item. The product aspects of marketing deal with the specifications of the actual goods or services, and how it
relates to the end-user's needs and wants. The product element consists of product design, new product
innovation, branding, packaging, labeling. The scope of a product generally includes supporting elements such as
warranties, guarantees, and support. Branding, a key aspect of the product management, refers to the various
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Fundamentals of Business Entrepreneurship and Management
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methods of communicating a brand identity for the product, brand, or company. Marketers take the product and
assess its unique selling proposition, or USP, which is how the product can fulfill a need in the market or the needs
of your customers. Essentially, your USP is the secret sauce that makes a product stand out from its competitors.
2. Price
This refers to the process of setting a price for a product, including discounts. The price need not be monetary; it
can simply be what is exchanged for the product or services, e.g. time, energy, or attention or any sacrifices
consumers make in order to acquire a product or service. Marketing and a product’s price go hand in hand. No
matter how talented your marketing department is, it’s difficult to sell a N5000 banana (it’s too expensive
compared to the rest of the market) or a N700,000 car (customers might wonder why it’s so cheap).
The price is the cost that a consumer pays for a product—monetary or not. Determining price isn’t quite as simple
as slapping a price tag on a product. Successful marketers research competitors’ prices and understand how they
can justify a higher product price—or ensure that a lower price won’t convey that their product is inferior to similar
products in the market.
For example, cosmetics pioneer MaryKay raised prices of products that weren’t selling well to make women
perceive them as more desirable.
3. Place
This refers to where and how the product gets to the customer; the distribution channels and intermediaries such
as wholesalers and retailers who enable customers to access products or services in a convenient manner. This
third P refers to the channel by which a product or service is sold (e.g. online vs. retail), which geographic region or
industry, to which segment (young adults, families, business people), etc. also referring to how the environment in
which the product is sold in can affect sales.
Marketers then drill down to figure out how that product will be positioned in its place. For instance, a company
marketing potato chips will consider how high on the grocery shelf the product will be placed, and in the company
of which other potato chips.
Retailers often charge promotional, advertising, and stocking fees to feature products in a more prominent place
in their stores. Grocery stores, for example, charge “slotting fees” to place products at eye level (or a bit lower, at
a child’s eye level) so shoppers can easily see and grab products as they go through the aisles.
2. Promotion
The fourth P is the way all these components are integrated into a comprehensive marketing strategy through
promotion. This includes all aspects of marketing communications: advertising, sales promotion,
including promotional education, public relations, personal selling, product placement, branded entertainment,
event marketing, trade shows, and exhibitions. This fourth P is focused on providing a message to get a response
from consumers. The message is designed to persuade or tell a story to create awareness. This can take many
forms, including these popular strategies:
 Free trials or a free gift with purchase. Incentivize customers to try or buy a product.
 Sponsorship of a sports team or event. Attach your brand to an activity or pastime that your target
customers follow, thereby building brand awareness.
 Traditional billboards or television advertising. Hitting an audience with a hard sell or memorable story
that keeps a product or company in consumers’ mind.
 Guerilla marketing. Use the element of surprise or unconventional marketing methods for attracting
attention to a product (e.g., projecting the number 30 on landmarks worldwide to promote an album
titled 30).
 Viral marketing. Create a hook or angle so catchy that word spreads on its own, without needing to spend
money to fuel it.
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4.3
How success is measured in marketing
A company doesn’t need to reset society’s ideals to be successful, but it does need to drive consumer interest that
advances the business’s bottom line. Some metrics a company can use to gauge the success of its marketing efforts
include:
 Total revenue. This is the total amount of money coming into the business. The more people receiving and
receptive to your marketing, the more revenue you’re likely to generate.
 Sales growth. Sales growth measures the ability of a company to increase revenue over a fixed period of
time. This is calculated by comparing sales revenue from different periods in time (such as from one year
to the next, or even one quarter to another).
 Customer loyalty. Companies have multiple metrics to measure customer retention, including customer
lifetime value (abbreviated CLV or LTV), which measures the profit margin a company can expect to earn
from an entire relationship with an average customer; repeat purchase rate (RPR); and a customer loyalty
index (CLI).
 Return on marketing investment. This is total revenue generated divided by the amount of money you’ve
invested in your marketing campaigns.
 Conversion rates from online marketing. These rates show the percentage of users that click on an ad, fill
out a form, and eventually make a purchase.
4.4
Marketing Plan
A marketing plan is a strategic plan at the functional level that provides a firm’s marketing group with direction. It
is a road map that improves the firm’s understanding of its competitive situation. The marketing plan also helps
the firm allocate resources and divvy up the tasks that employees need to do for the company to meet its
objectives. The different components of marketing plans will be discussed throughout the book and then discussed
together at the end of the book. Next, let’s take a look at the different types of basic market strategies firms pursue
before they develop their marketing plans.
4.5
Market Segmentation
Market segmentation is a marketing term that refers to aggregating prospective buyers into groups or segments
with common needs and who respond similarly to a marketing action. Market segmentation enables companies to
target different categories of consumers who perceive the full value of certain products and services differently
from one another.
Businesses or Companies can generally use three criteria to identify different market segments:
1. Homogeneity, or common needs within a segment
2. Distinction, or being unique from other groups
3. Reaction, or a similar response to the market
For example, an athletic footwear company might have market segments for basketball players and long-distance
runners. As distinct groups, basketball players and long-distance runners respond to very different advertisements.
Understanding these different market segments enables the athletic footwear company to market its branding
appropriately.
Market segmentation is an extension of market research that seeks to identify targeted groups of consumers to
tailor products and branding in a way that is attractive to the group. The objective of market segmentation is to
minimize risk by determining which products have the best chances of gaining a share of a target market and
determining the best way to deliver the products to the market. This allows the company to increase its overall
efficiency by focusing limited resources on efforts that produce the best return on investment (ROI).
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Fundamentals of Business Entrepreneurship and Management
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4.6
Types of Market Segmentation
Segmentation involves the initial splitting up of consumers into persons of like needs/wants/tastes. There are four
primary types of market segmentation. However, one type can usually be split into an individual segment and an
organization segment. Therefore, below are five common types of market segmentation.
I.
Demographic Segmentation
Demographic segmentation is one of the simple, common methods of market segmentation. It involves
breaking the market into customer demographics as age, income, gender, race, education, or occupation. This
market segmentation strategy assumes that individuals with similar demographics will have similar needs.
Example: The market segmentation strategy for a new video game console may reveal that most users are
young males with disposable income.
II.
Firmographic Segmentation
Firmographic segmentation is the same concept as demographic segmentation. However, instead of analyzing
individuals, this strategy looks at organizations and looks at a company's number of employees, number of
customers, number of offices, or annual revenue.
Example: A corporate software provider may approach a multinational firm with a more diverse, customizable
suite while approaching smaller companies with a fixed fee, simpler product.
III.
Geographic Segmentation
Geographic segmentation is technically a subset of demographic segmentation. This approach groups
customers by physical location, assuming that people within a given geographical area may have similar
needs. This strategy is more useful for larger companies seeking to expand into different branches, offices,
or locations.
Example: A clothing retailer may display more raingear in their Pacific Northwest locations compared to
their Southwest locations.
IV.
Behavioral Segmentation
Behavioral segmentation relies heavily on market data, consumer actions, and decision-making patterns
of customers. This approach groups consumers based on how they have previously interacted with markets
and products. This approach assumes that consumers prior spending habits are an indicator of what they
may buy in the future, though spending habits may change over time or in response to global events.
Example: Millennial consumers traditionally buy more craft beer, while older generations are traditionally
more likely to buy national brands.1
V.
Psychographic Segmentation
Often the most difficult market segmentation approach, psychographic segmentation strives to classify
consumers based on their lifestyle, personality, opinions, and interests. This may be more difficult to
achieve, as these traits (1) may change easily and (2) may not have readily available objective data.
However, this approach may yield strongest market segment results as it groups individuals based on
intrinsic motivators as opposed to external data points.
Example: A fitness apparel company may target individuals based on their interest in playing or watching
a variety of sports.
4.7
Value
Value is at the center of everything marketing does. When we use the term value, we mean the benefits buyers
receive that meet their needs. In other words, value is what the customer gets by purchasing and consuming a
company’s offering. So, although the offering is created by the company, the value is determined by the customer.
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Furthermore, our goal as marketers is to create a profitable exchange for consumers. By profitable, we mean that
the consumer’s personal value equation is positive. The personal value equation is
Value = benefits received – [price + hassle]
Hassle is the time and effort the consumer puts into the shopping process. The equation is a personal one because
how each consumer judges the benefits of a product will vary, as will the time and effort he or she puts into
shopping. Value, then, varies for each consumer.
Value varies from customer to customer based on each customer’s needs. The marketing concept, a philosophy
underlying all that marketers do, requires that marketers seek to satisfy customer wants and needs. Firms
operating with that philosophy are said to be market oriented. At the same time, market-oriented firms recognize
that exchange must be profitable for the company to be successful. A marketing orientation is not an excuse to fail
to make profit.
One way to think of value is to think of a meal in a restaurant. If you and three friends go to a restaurant and order
the same dish, each of you will like it more or less depending on your own personal tastes. Yet the dish was exactly
the same, priced the same, and served exactly the same way. Because your tastes varied, the benefits you received
varied. Therefore the value varied for each of you. That’s why we call it a personal value equation.
4.7.1 Creation of Value
Marketing creates those goods and services that the company offers at a price to its customers or clients. That
entire bundle consisting of the tangible good, the intangible service, and the price is the company’s offering. When
you compare one car to another, for example, you can evaluate each of these dimensions—the tangible, the
intangible, and the price—separately. However, you can’t buy one manufacturer’s car, another manufacturer’s
service, and a third manufacturer’s price when you actually make a choice. Together, the three make up a single
firm’s offer. Marketing, however, has the biggest responsibility because it is marketing’s responsibility to ensure
that the new product delivers value.
Communication value
Communication is a broad term in marketing that means describing conveying information and its value to your
potential and current customers, as well as learning from customers what it is they want and like. Sometimes
communicating means educating potential customers about the value of an offering, and sometimes it means
simply making customers aware of where they can find a product. Communicating also means that customers get
a chance to tell the company what they think. Today companies are finding that to be successful, they need a more
interactive dialogue with their customers.
Delivering value
Marketing can’t just promise value, it also has to deliver value. Delivering a product that has value is much more
than simply getting the product into the hands of the user; it is also making sure that the user understands how to
get the most out of the product and is taken care of if he or she requires service later. Value is delivered in part
through a company’s supply chain. The supply chain includes a number of organizations and functions that mine,
make, assemble, or deliver materials and products from a manufacturer to consumers. The actual group of
organizations can vary greatly from industry to industry, and include wholesalers, transportation companies, and
retailers. Logistics, or the actual transportation and storage of materials and products, is the primary component
of supply chain management, but there are other aspects of supply chain management that we will discuss later.
Exchange value
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Fundamentals of Business Entrepreneurship and Management
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In addition to creating an offering, communicating its benefits to consumers, and delivering the offering, there is
the actual transaction, or exchange, that has to occur. In most instances, we consider the exchange to be cash for
products and services. Other exchanges, such as information about your preferences gathered through surveys,
might not involve cash.
When consumers acquire, consume (use), and dispose of products and services, exchange occurs, including during
the consumption phase. For example, via Apple’s “One-to-One” program, you can pay a yearly fee in exchange for
additional periodic product training sessions with an Apple professional. So each time a training session occurs,
another transaction takes place. A transaction also occurs when you are finished with a product. For example, you
might sell your old iPhone to a friend, trade in a car, or ask the Salvation Army to pick up your old refrigerator.
Disposing of products has become an important ecological issue. Batteries and other components of cell phones,
computers, and high-tech appliances can be very harmful to the environment, and many consumers don’t know
how to dispose of these products properly. Some companies, such as Office Depot, have created recycling centers
to which customers can take their old electronics.
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