CHAPTER 1 NOTES

BENEFITS OF CUSTMER SATISFACTION:

 Lower Acquisition Cost: Acquisition cost is the cost of recruiting new
customers, and includes the cost of advertising, sales calls, public relations
and promotional expenditure. Although these costs are the same per loyal
and non-loyal customers, the overall acquisition costs will eventually be
lower helping the organization save money and sustain profitability.
 Base Profit: All customers buy some product or service and pay a price
higher than the firm’s costs. This profit on basic purchases, unaffected by
time, loyalty, efficiency, or other considerations is called base profit. The
longer a firm keeps a customer, the longer it will earn this base profit.
 Revenue Growth: In most businesses customer spending tends to accelerate
over time. In retailing, for example customers who buy clothing eventually
notice that the shop carries other products, such a shoes or jewelry, and
begin to purchase these other products as well, which increases the firm’s
revenue. Therefore the organization is able to enjoy the profit or revenue
growth and loyalty from customers.
 Cost Savings: As customers get to know a business, they learn to be more
efficient as well as rely on themselves for information and advice. For
instance, financial planners spend 5 times as many hours on first- year
clients than they do on repeat customers. Therefore over time collaborative
learning between the customer and the firm creates productivity advantages
that directly translate into lower costs.
 Referrals: Satisfied customers tend to recommend a firm or brand to others
– a behavior referred to as word-of-mouth. Positive word-of-mouth is a very
powerful source of ‘’advertising’’ for any firm and is often regarded as a
more credible source of information than advertising by many consumers.
 Price Premium: Loyal customers who feel they are getting superior value
tend to be less price-sensitive than non-loyal customers. In other words, very
satisfied customers are less likely to respond to a competitor’s lower prices,
discounts, or special offers, and will in many cases be prepared to pay a
price premium to continue enjoying the use of the superiority offered by the
firm. For example, a Mercedes-Benz is not the cheapest motor vehicle on the
market, yet it is a very successful firm.

Five conditions of exchange:

  There must be at least two parties (a buyer and a seller)
 Each party must have something the other party values
 Each party must be able to communicate with the other party and deliver the
goods or services sought by the other trading party
 Each party must be free to accept or reject the other’s offer
 Each party must want to deal with the other party.

Marketing management philosophies:

1. Production Orientation:
This approach emphasizes mass production and efficiency, assuming customers
will prioritize availability and affordability over other factors. Firms focus on
lowering costs and improving production processes but neglect customer
preferences and market dynamics.

2. Product Orientation:
Businesses believe success comes from creating high-quality products with
superior features, assuming customers will naturally prefer them. However, firms
with this focus often fail to research or address customer needs, overlooking what
consumers truly value.

3. Sales Orientation:
Firms prioritize selling their products through aggressive sales techniques, aiming
for high sales volumes. While effective in the short term, this approach often
ignores customer satisfaction, leading to poor retention and long-term decline in
demand.

4. Consumer Orientation:
The foundation of modern marketing, this approach emphasizes understanding and
satisfying customer needs. Firms focus on aligning all activities, from production
to service, toward customer satisfaction, ensuring long-term profitability and
sustainable success.

5. Societal Marketing Orientation:

This philosophy incorporates social responsibility, balancing consumer needs,
business goals, and societal well-being. Firms adopt practices like promoting
environmentally friendly products or supporting community initiatives, ensuring
ethical and sustainable marketing.
6. Relationship Marketing Orientation:
This approach prioritizes building long-term customer relationships rather than
focusing on one-time sales. By delivering consistent value and satisfaction, firms
cultivate loyalty, which reduces costs, boosts repeat business, and strengthens
customer bonds.

The Importance of a Competitive Advantage:

There are many ways in which firms can differentiate themselves to establish a
competitive advantage:

1. Service Quality as Competitive Advantage: Means Consistently delivering

high-quality service is essential. Firms that prioritize service quality ensure
customer satisfaction, increase retention, and create a strong market
reputation.
2. Customer Value as Competitive Advantage: Competitive advantage arises
when a company offers superior customer value — the ratio of benefits to
sacrifices (monetary, time, energy). By either lowering customer costs or
increasing benefits, firms can maximize perceived value, boosting customer
loyalty.
3. Customer Satisfaction as Competitive Advantage: Satisfaction occurs
when a product meets or exceeds expectations. Firms that consistently satisfy
customers build long-term relationships and secure repeat business, which
results in increased profitability and reduced acquisition costs.
4. Customer-Oriented Employees as Competitive Advantage: Employees
who embody a customer-focused attitude are crucial. When staff act with a
strong customer orientation, it enhances the company's reputation, ensuring
customer satisfaction. A poor attitude from one employee can tarnish the
firm's image.
5. Well-Trained Employees as Competitive Advantage: Training employees
effectively ensures they can deliver high-quality service. Companies like
Disney exemplify this by providing detailed training, ensuring staff are
equipped with operational knowledge, fostering customer satisfaction.
6. Employee Empowerment as Competitive Advantage: Allowing employees
to resolve customer issues without managerial approval increases service
efficiency and satisfaction. Empowered staff members contribute to faster
resolutions, greater job satisfaction, and improved customer loyalty, giving
firms a competitive edge.
7. Teamwork as Competitive Advantage: Encouraging collaboration among
employees enhances performance and customer satisfaction. Teams that
support one another contribute to superior product value and service,
improving the overall customer experience.

Criticism of Marketing:
Marketers overcome a number of discrepancies and separations (or gaps) in an
economic system, leading to further value creation. These discrepancies and
gaps are:

 Discrepancy of quantity: Producers make large batches, but consumers

buy in smaller amounts, so wholesalers and retailers bridge this gap.

 Discrepancy of assortment: Producers offer limited product types, while

consumers need variety. So retailers combine products for convenience.

 Spatial separation: Goods are produced far from consumers (producers

produce where it is the lowest and cheapest and that can sometimes be far
from the consumers). So wholesalers and retailers distribute products
closer to buyers creating place utility.

 Separation in time: Consumers are not always ready to consume

products when they have been produced, and production may exceed
demand. This is where storage facilities help marketers or intermediaries
create time utility for consumers. Ensuring availability all year-round.

 Separation of information: Consumers are often not aware that they are
products that may satisfy their needs, due to lack of information.
Therefore marketers attempt to overcome the information gap by
providing consumers with information on need-satisfying products by
using, among others advertising (information utility).

 Separation in ownership: Most consumers do not own all the products

to satisfy all their needs. In other words there is a gap in what they want
and what they have. So marketers bridge this gap by selling need-
satisfying products to consumers and therefore create possession utility.
  Separation in value: The buyer and the seller may disagree about the
value of the product. So marketers balance pricing to match perceived
value or establish an equilibrium between manufacturers and buyers.

CHAPTER 2 ( NOTES)

Methods of environmental scanning:

• Study current events by attending seminars and conferences
• Analyse speeches of political leaders
• Read the analyses of management consulting firms and financial institutions
• Collect demographic data from government departments
• Analyse trade figures
• Collect information on economic indicators.

External Environmental Management Factors(Macro-

Environment Factors):
 Social factors refer to the societal influences that affect consumer behavior
and decision-making. These factors reflect the values, attitudes, lifestyles,
and cultural norms within a society. Marketing managers must understand
these changes to effectively target and connect with their audience.

Here are the factors that influence or impact these Social Factors:

1. Consumer values: These are the beliefs and preferences that guide
purchasing decisions, such as sustainability, health consciousness, and
ethical considerations.
2. The changing role of families and working women: The evolving family
structures and increasing number of women in the workforce influence
buying behaviors and product demand.
3. Trend or fad?: Trends represent long-term shifts in behavior, while fads are
short-lived phenomena. Recognizing the difference helps marketers predict
the longevity of consumer interest.
4. Pre-teens: The younger generation, often influenced by parents, peers, and
media, represents an emerging market for products aimed at their specific
needs.
5. Teenagers: This group is highly brand-conscious and influenced by peer
pressure, media, and social trends.
6. Generation Y (Millennials): Known for their tech-savviness and desire for
experiences, Millennials value convenience, personalization, and social
causes.
7. Generation X: Often seen as skeptical and independent, Generation X
values quality and authenticity in products and services.
8. Baby boomers: Typically more conservative and brand loyal, this group
tends to prioritize stability, comfort, and practicality in their purchases.
9. Older consumers: As the population ages, older consumers, with their
unique needs and preferences, represent a growing market for healthcare,
leisure, and technology products.
10.Black diamonds: A term for affluent black consumers in South Africa, this
demographic is a rising market with significant purchasing power and
unique cultural preferences

 Demographic factors focus on the vital statistics of a population, such as

age, race, ethnicity, and geographic location. These factors help marketers
understand the structure and composition of a market, allowing them to
better tailor products and services.

Here are the factors that influence or impact these Demographic Factors:

1. Monthly household income: This refers to the average or typical income of

a household on a monthly basis. It directly impacts consumer spending
power and purchasing behavior, influencing the affordability of goods and
services.
2. Shopping patterns: These are the behaviors and preferences consumers
exhibit when making purchases, such as frequency, types of products, and
preferred shopping channels (e.g., in-store vs. online). Changes in shopping
patterns can indicate shifts in market trends or the need for new marketing
strategies.
3. Consumer needs: These are the desires or requirements that drive consumer
purchasing decisions. Understanding consumer needs helps marketers
identify what products or services will appeal to different demographic
groups, whether it's affordability, convenience, or luxury.
4. Education and literacy: The level of education and literacy within a
population influences the type of products or services they seek. Higher
education often correlates with higher income and more specialized needs,
while lower literacy levels might affect the kinds of marketing materials and
communication strategies that are most effective.
5. Language: Language is a key demographic factor that affects
communication and marketing strategies. Marketers must consider the
languages spoken by their target audience to ensure the effectiveness of
advertising, packaging, and customer service. Language preferences may
also reflect cultural values and regional differences.

 Economic factors influence consumer purchasing power and business

strategies. They determine market conditions and affect demand, pricing,
and overall economic activity. Key economic factors include:
1. Inflation = a general rise in prices without a corresponding increase in
wages
2. Recession = a period of economic activity when income, production, and
employment tend to fall
3. Interest rates – Higher interest rates make borrowing expensive, reducing
consumer and business spending.

 Technological factors refer to advancements and innovations that impact

businesses, consumer behavior, and market dynamics. These factors can
create both opportunities and threats for businesses.
Here are the factors that influence or affect Technological Factors:

1. Pervasive influence – Technology affects all industries, from production

and distribution to marketing and customer service, shaping how businesses
operate.
2. Accelerating rate of change – Technology is evolving rapidly, requiring
businesses to adapt quickly to new trends like automation, AI, and digital
platforms to stay competitive.
3. Impact of the Internet – The Internet has transformed communication, e-
commerce, social media marketing, and access to information, changing
consumer expectations and business models.
4. Opportunity or threat? – Technology can be an opportunity for growth,
efficiency, and innovation, but it can also be a threat if businesses fail to
keep up with technological advancements and competitors.

 Political factors refer to the factors influencing the political situation in a

country. Marketers, like most businesspeople, prefer a situation of relative
political stability.
The International Charter of Consumer Rights, endorsed by the Department of
Trade and Industry, has expanded these basic consumer rights to eight
(consumerism):

1. The right to basic needs-the right to the basic goods and services that
guarantee survival, including adequate food, clothing, shelter, healthcare,
education and sanitation

2. The right to safety-the right to be protected against products,

production processes and services that are hazardous to health or life.

3. The right to be informed-the right to be given the facts needed to make

an informed choice or decision. This right implies protection from
misleading or inaccurate publicity material, whether included in
advertising, labelling, packaging or by any other means.

4. The right to choose-the right to have access to a variety of products and

services at competitive prices and, in the case of monopolies, to have an
assurance of satisfactory quality and service at a fair price.

5. The right to be heard-the right to advocate consumers’ interests with a

view to receiving full and sympathetic consideration in formulating and
executing economic and other policies.

6. The right to redress-the right to fair settlement of just claims due to

misrepresentation.

7. The right to consumer education-the right to acquire the knowledge

and skills to be informed consumers throughout life.

8. The right to a healthy environment-the right to a physical environment

that will enhance the quality of life.
 Pressure from consumer groups often leads to industries setting up self-
regulatory agencies:
 Self-regulatory agencies: Some industries regulate themselves rather than
wait to be subjected to governmental laws and regulations. One of the best
examples is the Advertising Standards Authority of South Africa (ASA),
which self-regulates the South African advertising industry.
 Advantages of self-regulation: It’s faster, less expensive than government
legislation, more flexible and ensures the speedy resolution of disputes.
Self-regulation also generates greater moral adherence than a law would.
 Code of Advertising Practice: ASA members support, and are obliged to
adhere to, a code of conduct. It’s basic principles may be summarised as
follows:
1. Stay within the law
2. Claim only what you can prove
3. Do not mislead
4. Do not disparage
5. Compete fairly
6. Act with responsibility
7. Do not offend Do not steal
8. Do not exploit the vulnerable
9. Consider your neighbour.
 Fair adjudication: The ASA directorate investigates complaints that the
code has been breached, giving both parties a fair and equal opportunity to
state their point of view before the ASA adjudicates on the matter.

 Legal Factors entails that the legal system of a country can exert a profound
influence on how business in general and marketing in particular are
conducted. Legislation affecting marketing activities can be divided into
three main categories:
1. Laws promoting competition – such as the Competition Act.
2. Laws limiting competition – such as the laws providing Telkom and the
Post Office (Postal Services Act [No 124 of 1998]) with legal protection
against competition
3. Laws protecting consumer rights – such as the Consumer Protection
Act

Examples of New Central Government Legislation:

 • Privacy and data protection
• Tobacco Products Control Act
• The Competition Act
• The Electronic Communications and Transactions Act
• The National Credit Act

Provincial government legislation:

In South Africa, a provincial legislature is the legislative branch of the

government of a province, as provided for in the Constitution of South Africa.

International agreements:

• GATT (World Trade Organisation (General Agreement on Trade and Tariffs)

• SACU (Southern African Customs Union)
• SADC (Southern African Development Community)
• Competitive factors refer to the market conditions that influence how
businesses compete with each other. These factors affect pricing, product
development, and overall business strategy.

1. Increasing international competition – Globalization has led to

more foreign companies entering local markets, increasing
competition and pushing businesses to improve quality, pricing, and
innovation.

2. Rising costs – Higher costs of production, labor, and raw materials

force businesses to either increase prices or find cost-cutting
measures, affecting competitiveness.

3. Shortages of resources → heightened domestic competition –

Limited availability of key resources (e.g., skilled labor, raw
materials) increases competition among local businesses, driving up
costs and making efficiency critical for survival.

• Physical forces refer to environmental factors that impact businesses, consumer

behavior, and sustainability practices. Companies must adapt to these
challenges to remain competitive and socially responsible.

1. Climate change – Rising temperatures, extreme weather, and natural

disasters affect supply chains, production, and resource availability.
 2. Pollution – Air, water, and land pollution create health concerns and
regulatory pressures, pushing businesses to adopt cleaner production
methods.

3. Scarce resources – Limited availability of raw materials (e.g., water,

fossil fuels) increases costs and forces companies to find sustainable
alternatives.

4. Recycling and non-wasteful packaging – Businesses are adopting

eco-friendly packaging and recycling initiatives to reduce waste and
meet consumer demand for sustainability.

5. Environmentally friendly ingredients – There is a growing shift

toward using natural, biodegradable, and non-toxic ingredients in
products to minimize environmental impact.

CHAPTER 3 ( NOTES)
Consumer decision-making process:
• Step 1: Problem Recognition- Problem recognition is when a consumer
realizes he/she has an unfulfilled need/want. As well as it occurs when
consumers are faced with a discrepancy between an actual state and desired
state. Problem recognition is triggered when a consumer is exposed to either
an internal or external stimulus. Moreover consumers recognize unfulfilled
wants in various ways such as, when a current product is not performing
properly or when the consumer is about to run out of something that is
generally kept on hand, and when they hear or see a product whose features
make it seem superior to the one currently used.
• Step 2: Information Search- After recognizing a discrepancy, need, or
want, consumers search for information about the various alternatives to
satisfy their wants. An information search can either be internal or external,
or both. An internal information search is the process of recalling
information stored in the consumer’s memory. This stored information stems
largely from previous experiences with a product. Whilst an external
information search collects information from the outside environment. There
are two types which are: marketing-controlled and non-marketing-controlled
information source. The extent to which individuals conduct an external
 search depends on their perceived risk, knowledge, prior experience and
level of interest in the product or service.
• Step 3: Evaluation of Alternatives- After collecting information and
compiling an evoked set (those brands that the consumer is seriously
considering before making a purchase) of alternative products, the consumer
is ready to make a decision. They will use the information stored in their
memories and information obtained from outside sources to develop a set of
decision-making criteria. These criteria or standards help consumers
evaluate and compare alternatives. One way to begin narrowing the number
of choices in the evoked set is to pick an important product attribute and
then to exclude all products in the set that do not have that attribute.
• Step 4: Purchase- Following the evaluation of alternatives, the consumer
decides which product to buy now, buy later or not to buy at all. If he or she
decides to make a purchase, the next step in the process is an evaluation of
the product after the purchase.
• Step 5: Post-Purchase Behaviour- When buying products, consumers
expect certain outcomes or benefits to accrue from the purchase. How well
these expectations are met determines whether the consumer is satisfied or
dissatisfied with the purchase. As well as when people recognize
inconsistency between their values and their behaviour, they tend to feel an
inner tension or anxiety called cognitive dissonance. Typically consumers
who experience this dissonance or anxiety try to reduce this unpleasant
feeling by justifying their decision, through seeking new information that
reinforces positive ideas about the, or avoid information that contradicts
their decision, or revoke the original decision by returning the product.

Factors determining the level of consumer involvement

 Previous experience – Familiarity with a product reduces involvement, as
consumers make quicker choices based on past satisfaction (e.g., regularly
buying the same sinus medicine).

 Interest – Consumers are more involved in purchases related to their
personal interests (e.g., car enthusiasts vs. those who see cars as just
transport).

 Perceived risk – The higher the perceived risk, the higher the level of
involvement in the purchasing decision. The types of risks that concern
 consumers include financial risk (e.g.; buying a house), social risks (e.g.;
driving an old car or old fashioned clothes), and psychological risk (e.g.; a
parent choosing childcare).

 Situation – Specific circumstances can increase involvement temporarily,
such as buying premium liquor when hosting an important guest.

 Social visibility – Items that reflect social status (e.g., designer clothes,
luxury cars) lead to higher involvement to avoid social risk.

Family Roles and Family Lifecycle:

1. Initiators – Initiators are the ones who initiate, suggest or plant the seed for
the purchase process. The initiator can be any family member, for example,
sister might initiate the product search by asking for a new bicycle as a
birthday present.
2. Influencer – Influencers are those members of the family whose opinions
are valued, for example mum might function as a price-range watchdog, an
influencer whose main role is to veto or approve price ranges.
3. Decision-maker – The decision-maker is the member of the family who
actually makes the decision to buy or not to buy, for example dad may
choose the final brand and model of the bicycle to buy after collecting
further information from sister about cosmetic features.
4. Purchaser – The purchaser ( probably mum or dad ) is the family member
who actually exchanges money for the product.
5. User – Finally, the consumer is the actual user, in the case of the bicycle, the
sister.

Buying New Products: The Adoption Process Steps:

1. Awareness – the consumer becomes aware of the new product, but does not
have any details.
2. Interest – if interested, the consumer will start collecting general
information on an informal basis.
3. Evaluation – a mental trial follows to assess its possible need-satisfaction
properties.
 4. Trial – experimental use, such as a test drive follows.
5. Decision – the consumer adopts or rejects the product.
6. Confirmation – the adopter continues to rethink the decision. Was it the
right decision?

CHAPTER 4 (NOTES)
Identifying Competitors:
It is against this background that a firm should view competition operating at four
levels, ranging from narrow to broad:

 Level 1: Competition consists only of those firms that offer a similar product
or service to the same target market. These firms are known as direct
competitors. For example, Beacon competes directly against Nestlé and
Cadbury in the market for chocolate sweets.

 Level 2: Competition can emanate from all firms operating in the same
product or service category. These firms are known as indirect competitors.
For example, Beacon also competes against manufacturers of non-chocolate
sweets, such as Cadbury’s Endearmints, Chappies or Halls.

 Level 3: This level of competition consists of all firms that manufacture or
supply products and services that satisfy the same need. Chocolate
manufacturers also compete against, for example, manufacturers of snacks
(Simba), ice cream (Ola) and dried fruit (Safari).

 Level 4: Competition is made up of all firms competing for the same
spending power (e.g. sweets vs soft drinks, tea, coffee or takeaways).

Four Industry Structures:

 1. Monopoly - At one extreme of economic competition is a monopoly, in
which one firm controls the output and price of a product for which there
are no close substitutes.
2. Pure Competition - A purely competitive market is characterised by a
large number of sellers marketing a fairly standardised product (difficult
to differentiate, such as commodity markets) to a group of buyers who
are well informed about the market.
3. Monopolistic Competition - Monopolistic competition refers to a
situation in which a relatively large number of suppliers offer similar, but
not identical, products.
4. Oligopoly - When a relatively small number of firms dominate the
market for goods or a service, the industry is an oligopoly.

Michael Porter’s Model of 5 Competitive Forces:

 Threat of New Entrants

The threat of new entrants refers to the risk that new competitors will enter the
market and disrupt existing businesses. If entry barriers are low, new firms can
enter easily, increasing competition and reducing profitability for established firms.
However, strong barriers make it difficult for new competitors to succeed.

Entry Barriers:

1. Factor Cost Advantages

o Established firms may have access to lower costs for raw materials,
labor, or technology, making it difficult for new entrants to compete
on price.
2. Economies of Scale
o Larger firms benefit from lower costs per unit due to bulk production
and efficient processes, making it harder for smaller, new firms to
compete.
3. Effective Differentiation and High Switching Costs
o Strong brand loyalty, unique products, or expensive switching costs
discourage customers from trying new entrants.
4. Channel Crowding
 o Existing companies may have exclusive agreements with suppliers
and distributors, making it difficult for new entrants to access the
same channels.

 Threat of Substitute Products

The threat of substitute products refers to the risk that consumers will switch to
alternative products that offer similar or better benefits. Substitutes can come from
different industries or technological advancements that fulfill the same need in a
more efficient, affordable, or convenient way. If substitutes provide significant
advantages, they can reduce demand for existing products and force companies to
innovate or lower prices.

Additional Benefits of Substitute Products:

1. Performance Benefits
o Substitutes may improve efficiency, save time, or offer new
functionalities.
o Example: Electronic cash registers replace mechanical ones by
enabling online transactions, inventory management, and better
procurement processes.
2. Security Benefits
o Some substitutes provide better safety, lower risk of theft, or
protection against damage.
o Example: Biometric authentication (fingerprint scanning) replacing
passwords reduces the risk of unauthorized access.
3. Availability Benefits
o Reliable and immediate access to a product can make a substitute
more attractive.
o Example: Online music streaming (Spotify) replacing CDs due to
instant access to millions of songs.
4. Flexibility Benefits
o Products that can be used in multiple ways or locations are preferred.
o Example: Cellphones replacing landlines due to their mobility and
multi-functionality.

 Threat of Buyers’ Growing Bargaining Power

The threat of buyers’ growing bargaining power refers to the ability of
customers to influence prices, demand better quality or services, and negotiate
more favorable terms from suppliers. When buyers have strong bargaining power,
they can pressure companies to lower prices or improve product offerings, which
can reduce profitability for businesses.

The ability of large suppliers to withstand bargaining efforts by their customers

(and potential new buyers) depends on:

1. Their Size In Relation To That Of The Customers

o Large suppliers are less likely to succumb to pressure from
smaller buyers, especially in a fragmented market.
2. The Reliance Of The Customer On The Supplier’s Product
o Either because the customer cannot get the equivalent quality
elsewhere, or is contracted to the supplier to the extent that the
cost of switching is much greater than any benefits a new
supplier can promise.
3. The Credibility Of Their Threats To Integrate Forward
o In their value chain and sell directly to the end customer. An
example would be if SAB threatened to open its own bars.
This threat will blunt aggressive attempts by buyers to get
better prices from manufacturers or suppliers.

 Threat of Suppliers’ Growing Bargaining Power

The threat of suppliers’ growing bargaining power refers to the ability of

suppliers to influence the price, quality, and availability of goods or raw materials.
When suppliers have significant power, they can demand higher prices or set
unfavorable terms, which can reduce profitability for businesses relying on their
inputs.

Factors Affecting Supplier Bargaining Power Depends On:

1. When suppliers tend to be powerful when they are concentrated or well

organized.
2. When there are few substitutes,
3. When the supplied product is an important input to their production
process.
 4. When the costs of switching suppliers are high.
5. When the suppliers can integrate downstream.

 Threat of Intense Segment Rivalry

A market segment is unattractive if it has many strong competitors, slow or

declining growth, high fixed costs, and significant exit barriers. These conditions
lead to intense competition, including price wars, aggressive advertising, and
frequent new product launches.

Rivalry is influenced by:

1. Number And Strength Of Competitors

o More and stronger competitors increase rivalry.
2. Industry Growth Rate
o Slow or no growth intensifies rivalry as firms fight for market
share.
3. Cost Structures And Exit Barriers
o High fixed costs or difficulty leaving the industry force firms
to compete harder.
4. Level Of Product Differentiation
o Low differentiation increases rivalry since customers can
easily switch between similar offerings.
5. Buyer Price Sensitivity And Switching Ease
o If buyers are sensitive to price and can switch easily, rivalry
increases.
6. Bargaining Leverage And Control In The Value Chain
o Rivalry is affected by how much control firms and
buyers/suppliers have in the supply and distribution process.

Understanding Current Competitors:

It is important to have an understanding of current competitors. Aspects to consider
include size, growth and profitability; image and positioning strategy; competitor
objectives and commitment; current and past strategies of competitors; competitive
culture; cost structures; and exit barriers. An understanding of current competitors
should start with a thorough analysis and an understanding of their broad-based
business strategy.

1. Size, Growth & Profitability – This refers to how big a company is, how
fast it's growing, and whether it is making a profit. A competitor that is
large and growing fast usually has a strong business strategy and more
resources to expand or improve. For example: Pick n Pay is a large and
profitable retailer in South Africa. Because it is making good profits, it can
afford to open more stores or lower prices to compete with smaller shops
like Choppies, which may not grow as fast due to limited funds.
2. Image & Positioning Strategy – A business’s strategy is often built around
a mental association that consumers have with a brand, such as
affordability, durability, or effectiveness. For example, Mr Price is
positioned as a value-for-money brand. To develop positioning, firms must
analyze competitors through research, advertising, packaging, and pricing.
3. Competitor’s Objectives & Commitment – Understanding competitors'
objectives—such as profitability, market share, technological leadership, or
service excellence—helps firms anticipate their moves and reactions. For
example, a low-cost competitor will respond more aggressively to cost-
cutting innovations than to increased advertising. Firms must also track
which market segments competitors are targeting for opportunities or
threats.
4. Current & Past Strategies – Analyzing a competitor’s present and
historical strategies can reveal patterns in their market approach and help
predict future behavior. For example, Mercedes-Benz usually focuses on
luxury vehicles. Even though they once tried selling cheaper models like
the Honda Ballade, they stopped and went back to luxury cars. This tells us
that Mercedes is likely to stay in the premium market, and not compete in
the low-cost car space.
5. Competitor’s Culture – Understanding a competitor’s organizational
culture helps predict their behavior. For example, Nando’s is known for its
bold, humorous, and fearless advertising strategy.
6. Cost Structure – Each industry has a certain or unique cost burden that
shapes much of its strategic conduct. For example, steelmaking requires
heavy manufacturing and raw-material expenditure, whereas toy
manufacturing relies heavily on expensive distribution, and other marketing
costs are considerable. As well as companies reduce costs as a method to
 gain advantage, for instance Nampak invested in local nappy production to
compete with Huggies and Pampers.
7. Exit Barriers – Exit barriers are things that make it difficult for a company
to leave the market — even when it is not making a profit. These can
include emotional ties, legal contracts, or high costs to shut down. For
example: A company with a big factory and many employees may find it
hard to close, even if it is losing money, because shutting down would mean
paying workers, selling equipment, or breaking contracts. So, it may stay in
the market and keep competing, making it harder for others to succeed.

Understanding Potential Competitors:

In addition to current competitors, it is important to consider potential market
entrants, such as firms that might engage in the following: Also identifying
potential competitors:

1. Market Expansion: perhaps the most obvious source of potential

competitors is firms operating in other geographic regions or other countries
entering the firm’s market. Examples are Tata (Indian), Renault and Peugeot
(both French) entering the South African motor vehicle market.
2. Product Expansion occurs when firms add new products to their existing
product line. Examples are Oros, an orange-squash drink served usually in
large bottles where the syrup has to be taken home and then pour water to
drink to, also now being in ready-to-drink versions of it.
3. Integration can consist of vertical, forward, and backward integration
strategies – all sources of potential competition. General Motors bought
dozens of manufacturers of components during its formative years
(backward integration).
4. The Export of Assets or Competencies can occur when a current small
competitor with critical strategic weaknesses can turn into a major entrant if
it is purchased by another firm that can reduce or eliminate those
weaknesses. Clicks entered the pharmaceutical market by opening
pharmacies in its current retail outlets in the hope that its retail competencies
and current health-and-beauty product ranges’ synergy with pharmaceutical
products.
5. Retaliatory or Defensive Strategies can be used by firms that are
threatened by a potential or actual move into their market. For example,
 Microsoft has made several moves (including into the Internet space) in part
to protect its dominant software position.

Entry Barriers:

Entry barriers are an important consideration when analysing potential

competitors. Industries differ greatly in respect of ease of entry. It is easy to open a
new restaurant, but difficult to enter the aircraft industry. Major entry barriers
include:

1. High capital requirements

2. High economies of scale requirements,
3. Patents and Licensing requirements,
4. Scarce Locations,
5. Raw Materials,
6. Difficulty in getting access to Intermediaries and Reputational
Requirements.

Anticipating Competitors’ Actions:

Likely competitor reaction patterns:

• Laid-back competitor – Is one that does not react quickly or strongly

to a rival’s move
• Selective competitor – Is one that reacts only to certain types of
attacks. Selective competitors may, for instance, respond only to price
cuts, but not to promotions.
• Tiger competitor – Is one that reacts swiftly and strongly to any
competitive threat.
• Stochastic competitor – Is one that does not exhibit a predictable
reaction pattern. There is no way of predicting the competitor’s action
on the basis of its economic situation, history – or anything else.
Many small businesses are stochastic competitors, competing on
various fronts when they can afford it.
CHAPTER 5 (NOTES)
Characteristics of a DSS:
 Interactivity. For a DSS system to be effective, managers must be able to
give simple instructions and see immediate results.
 Flexibility. A DSS should be able to sort, regroup, total, average and
manipulate the data in various ways. It will shift gears as the user changes
topics, matching information to the problem at hand.
 It is discovery-orientated. Managers must be able to probe for trends,
isolate problems and ask ‘what if’ questions. An example would be: what
will happen to sales if we reduce the size of our sales force?
 Accessibility. A DSS must be easy to learn and use by managers who are
not skilled computer users. Novice users should be able to choose a standard
– or default – method of using the system.

The Importance of Database Marketing:

 Database marketing allows a business to send individual messages
simultaneously to thousands of customers, making communication more relevant
and time-efficient.

 With customer data, marketing messages can be customised to individual

needs, ensuring each person receives content that matches their preferences and
behavior.

 It enables the use of direct mail / email / SMS to reach customers directly with
personalised messages, improving engagement and response rates.

 Database marketing transforms traditional mass marketing into mass

customisation, allowing businesses to reach large audiences while still tailoring
messages to each customer's profile.

Management Uses of Marketing Research:

Marketing research information contributes to:
  Improving the quality of decision-making
− Managers can improve their decision-making by using
marketing research to explore the desirability of various
marketing alternatives.
 Identifying problems
− Another use of marketing research is to find out why a product
has experienced a drop in sales or why a plan did not work.
Was the initial decision incorrect? Did an unforeseen change in
the external environment cause the plan to fail? How can the
same mistake be avoided in the future?
 Understanding the market
− Managers also use marketing research to understand the
dynamics of the market they are targeting.
 Fostering customer value and quality
− Marketing research is often used to identify the reasons for
customer dissatisfaction and is the vehicle for measuring
perceived satisfaction.

The Steps in a Marketing Research Project:

1. Define the Marketing Problem
o The first step in the marketing research process must be to
develop a problem statement on which the decision-maker
(e.g. the marketing director) and the researcher (the marketing
research manager) can both agree.
2. Exploratory Research by Collecting Secondary Data
o Exploratory research is especially important to any researcher
dealing with a particular type of problem for the first time. It
permits the researcher to become immersed in the problem –
to learn about the firm, its products, markets, marketing
history, competition, and so forth.
o As well as secondary data are those data previously collected
for any purpose other than the current problem at hand.
3. Formulate the Research Objectives
o During this stage, it is important for the researcher to
formulate a series of objectives. These objectives, if realised
during the research process, will ensure that the problem
 statement is addressed. The objectives will also serve as
criteria against which to assess the relevance of the
questionnaire, or other measuring instrument that will be
used, and to assess the empirical results emanating from the
data-analysis phase.
4. Plan the Research Design
o The research design specifies which research questions must
be answered, how and when the data will be collected and
how the data will be analysed.
o As well as primary data is information collected for the first
time for a specific problem at hand and can be used for
solving the particular problem under investigation.
5. Collecting the Data
o Marketing research often utilises fieldworkers or
interviewers to collect primary data. A marketing research
manager must ensure that detailed field instructions are
developed for every research project in which fieldworkers
are used.
o And sometimes the services of outside market research firms
are used to do the fieldwork.
6. Analyse and Interpret the Data
o After collecting the data, the marketing researcher proceeds
to the next step in the research process: data analysis. The
purpose of this analysis is to interpret and draw conclusions
from the mass of collected data.
o As well as the marketing researcher tries to organise and
analyse the data by using one or more techniques common
to marketing research, which are: one-way frequency counts,
cross-tabulations and more sophisticated statistical analysis.
7. Prepare and Present the Report
o After data analysis and interpretation have been completed,
the researcher must prepare the report and communicate the
conclusions and recommendations to management.
o As well as researchers are usually required to present both
written and verbal reports on the project. These reports
should be tailored to the audience, begin with a clear,
concise statement of the research objectives, followed by a
complete, but brief and simple explanation of the research
design or methodology used, a summary of the major
 findings and the conclusion of the report should also present
recommendations to management.

The Characteristics of Good Research:

Several criteria can be used to judge the value and quality of research projects:

 Scientific Method – Effective marketing research implements scientific

principles, including proper problem formulation; the careful formulation of
objectives and hypotheses; correct data-collection techniques; proper
sampling methods; appropriate data analysis; and the correct interpretation
of the empirical results, leading to meaningful, factually-based
recommendations.
 Creativity and Originality – Some of the traditional methods of research
are no longer of much value, and alternative data-collection techniques need
to be considered.
 Multiple Methods – Often yield better results than an overreliance on one
method. Example, Lloyds TSB Bank combined surveys with data analytics
to measure customer commitment.
 The Value of Research – Must always be seen in relation to the cost of
generating the information.
 Healthy Scepticism – Marketing research is only an aid to decision-making
and marketing managers must not ignore their own experience and
judgement.
 Market Research (ethical considerations) – Must always be conducted in
an ethical manner.

CHAPTER 6 (NOTES):
The Criteria for Successful Segmentation:
  Substantiality: The segment must be large enough to justify a specialized
marketing mix and be commercially viable.

 Identifiability and Measurability: Segments must be clearly identifiable,

and their size must be measurable using demographic or geographic data.

 Accessibility: The firm must be able to effectively reach and serve the
segment with tailored marketing efforts.

 Responsiveness: Each segment should respond uniquely to the marketing

mix; otherwise, separate treatment is unnecessary. In other words, a market
segment must be homogeneous within (more or less similar and with similar
needs) but heterogeneous between (significantly different from other market
segments).

Bases for Segmenting Consumer Markets:

 Behavioural segmentation
Behavioural segmentation = segmentation based on knowledge of, attitude
towards, use of, or response to a product. And it includes:

 Usage-rate Segmentation – Segments consumers based on how frequently

they use a product (e.g., light, medium, or heavy users).
 Occasions – Divides consumers based on when they buy or use a product,
such as holidays, special events, or everyday usage.
 Brand Familiarity – Segments consumers based on their awareness and
loyalty to a brand, from first-time buyers to regular or brand-loyal
customers.

 Geographic Segmentation
Geographic segmentation = segmentation based on national region, world region,
market size, market density or climate
 Market density = the number of people within a unit of land

Importance of Geographic Segmentation:

 Helps firms find new sales opportunities in competitive markets.

 Allows businesses to analyze regional sales trends using data from
computerized checkouts.
 Enables brands to create products that align with local preferences.
 Helps companies respond quickly to competition in different areas.

 Demographic Segmentation
Demographic segmentation = segmentation based on demographic information.
This includes:

 Age Segmentation – Consumers are grouped based on age categories,

influencing product preferences (e.g., toys for children, retirement plans for
seniors).
 Gender Segmentation – Products and marketing strategies differ for males
and females (e.g., cosmetics for women, shaving products for men).
 Income Segmentation – Segmentation based on earning levels to target
different economic groups (e.g., luxury cars for high-income earners, budget
brands for low-income consumers).
 Ethnic Segmentation – is based on the premise that consumers who belong
to different ethnic groups behave and consume differently.
 Family Life-cycle Segmentation – Consumers are segmented based on
marital status, presence of children, and life stage (e.g., marketing baby
products to new parents).
 Generational Segmentation – Segments based on generational cohorts
[e.g., The Silent Generation (born before 1946), Baby Boomers (born
between 1946 and 1964), Generation X (born between 1965 and 1980),
Generation Y (often referred to as Millennials – born between 1981 and
2000), Gen Z (today’s tweens and teenagers)] with their distinct habits and
preferences.

 Psychographic Segmentation
Psychographic segmentation = segmentation based on differences in consumer
lifestyles. This includes:

 Personality – Segments based on individual personality traits, such as

introversion vs. extroversion, or adventurous vs. cautious.
 Motives – Focuses on the reasons behind consumer behavior, like seeking
convenience, status, or security.
 Lifestyle – Segments consumers based on their activities, interests, and daily
behaviors (e.g., health-conscious, tech-savvy).
 Geodemographics – Combines geographic and demographic data to
segment markets based on location and lifestyle (e.g., urban young
professionals).
 AIO (activities, interests, opinions) – Focuses on how consumers spend
their time, what interests them, and their opinions on various topics.

Personality Segments in Consumer Behavior or Psychographic Segmentation:

1. The Belongers: The majority of consumers who seek to conform to their

peer group.
2. The Reclusives: Older, poorer consumers who are less involved in
mainstream activities.
3. The Intellectuals: Sophisticated, rational consumers who value brand
differentiation and rarely buy impulsively.
4. The Macho Braves: Consumers seeking brands that reinforce a manly,
macho image.
5. The Feminists: Independent, confident females who select brands to
express emancipation and often serve as role models.
6. The Cool Egocentrics: Status-conscious consumers willing to pay a
premium for a brand that highlights their distinction.
7. The Home Makers: Family-oriented consumers who prioritize social
responsibility and moderation.

 Benefit Segmentation
Benefit segmentation = customers are grouped into segments according to the
benefits they seek from the product.
Benefit segmentation is different from other segmentation criteria because it
groups potential customers on the basis of their needs or wants rather than on some
other characteristic, such as age or gender.

The snack-food market, for example, can be divided into six benefit segments:

 Nutritional Snackers: Seek healthy, nutritious snacks without artificial

ingredients.
 Weight Watchers: Focus on snacks that help with weight management,
low-calorie or portion-controlled options.
 Guilty Snackers: Enjoy indulgent snacks but may feel some guilt or
concern about unhealthy choices.
 Party Snackers: Look for fun, shareable snacks for social gatherings.
 Indiscriminate Snackers: Purchase snacks without specific preferences,
often choosing whatever is available.
 Economical Snackers: Focus on cost-effective snacks, emphasizing value
for money.

Marketing Strategy: Benefit segmentation allows businesses to tailor the

marketing mix (product, price, promotion, and place) to match the unique needs of
each segment, ensuring the right message and product offerings for each group.

Steps in Segmenting a Market:

1. Select a Product Category/Market for Study: Define the market or
product category to be analyzed, whether new or existing.

2. List Potential Needs: Brainstorm consumer needs and reasons for

purchasing the product, such as savings, health, safety, etc.

3. Choose a Basis/Bases for Segmentation: Select variables (behavioral,

geographic, demographic, psychographic) to segment the market.

4. Select Segmentation Descriptors: Identify specific variables (e.g., age,

income) to create clear segments.
 5. Profile and Analyze Segments: Assess segment size, growth, loyalty,
and profit potential to prioritize opportunities.

6. Identify Determining Dimensions: Pinpoint key factors that influence

purchase decisions and assess the firm's ability to compete.

7. Name and Select Target Markets: Name the segments and choose
which ones to target, shaping the marketing mix accordingly.

Strategies for Selecting Target Markets:

The three types of targeting strategies are as follows:

1. An undifferentiated targeting strategy essentially adopts a mass-market

philosophy, viewing the market as one big market with no individual
segments. The firm then uses one marketing mix for the entire market.

2. A concentrated targeting strategy, a firm selects a market niche (one

segment of a market) for targeting its marketing efforts.

The key to successful concentrated targeting, or niche marketing, is

specialisation. The firm has to specialise along market, customer, product
or marketing-mix lines. The following are several specialist roles open to
a niche marketer:
1. End-Use Specialist – Focuses on serving one type of user or
industry (e.g., Reuters for financial professionals).
2. Vertical-Level Specialist – Specialises in a specific stage of the
supply or production chain (e.g., EVC in PVC manufacturing).
3. Customer-Size Specialist – Targets firms of a specific size
(e.g., Fuji serving small businesses).
4. Specific-Customer Specialist – Serves one or a few major
clients (e.g., Unipart focusing on BMW/Rover).
5. Geographic Specialist – Operates in a specific area or region
(e.g., uBank in rural and mining communities).
6. Product or Feature Specialist – Specialises in one product or
feature (e.g., Rolls-Royce with tilt-thrust jet engines).
 7. Quality-Price Specialist – Targets either the high-end or low-
end of the market (e.g., HP for premium calculators, Tring for
cheap CDs).
8. Service Specialist – Offers unique services not easily found
elsewhere (e.g., NASA's satellite recovery service).

3. Multi-segment targeting strategy, Is a firm that chooses to serve two or

more well-defined market segments and develops a distinct marketing mix
for each uses a multi-segment targeting strategy.

Potential costs:
 Product Design Costs – Creating different products or
packaging for different segments can be costly, especially when
major redesigns are involved.
 Production Costs – Producing various products for different
segments can increase costs due to equipment changes,
downtime, and smaller production runs.
 Communication Costs – Each segment requires its own
advertising and promotional campaigns, often needing different
media and marketing messages.
 Inventory Costs – Serving multiple segments means holding
more product variations in stock, which increases inventory
expenses.
 Marketing Research Costs – Gathering detailed market data for
each segment is time-consuming and expensive but necessary for
accurate targeting.
 Management Costs – Managing multiple segments increases
complexity and requires more time and coordination across
marketing efforts.
 Cannibalization – New products may reduce sales of existing
products instead of attracting new customers, limiting actual
growth.