Professional Documents
Culture Documents
ASSIGNMENT No. 1
Course: Marketing Management (5565) Semester: Spring 2009
Level: Executive MBA/MPA Marks: 100
MASLOW'S THEORY Abraham Maslow sought to explain why people are driven by
particular needs at particular times. Why does one person spend considerable
time and energy on personal safety and another on pursuing the high opinion of
others? Maslow's answer is that human needs are arranged in a hierarchy, from
the most pressing to the least pressing. In order of importance, they are
physiological needs, safety needs, social needs, esteem needs, and self-
actualization needs (see Figure below). People will try to satisfy their most
important needs first. When a person succeeds in satisfying an important need, he
or she will then try to satisfy the next-most-important need.
Maslow's theory helps marketers understand how various products fit into the
plans, goals, and lives of consumers. [1]
1. Physiological needs
For the most part, physiological needs are obvious - they are the literal
requirements for human survival. If these requirements are not met (with the
exception of clothing and sex), the human body simply cannot continue to
function.
Physiological needs include:
- Breathing
- Homeostasis
- Water
- Sleep
- Food
- Sex
- Clothing
- Shelter
- Safety needs
With their physical needs relatively satisfied, the individual's safety needs take
over and dominate their behavior. These needs have to do with people's yearning
for a predictable, orderly world in which injustice and inconsistency are under
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control, the familiar frequent and the unfamiliar rare. In the world of work, this
safety needs manifest themselves in such things as a preference for job security,
grievance procedures for protecting the individual from unilateral authority,
savings accounts, insurance policies, and the like.
For the most part, physiological and safety needs are reasonably well satisfied in
the "First World." The obvious exceptions, of course, are people outside the
mainstream — the poor and the disadvantaged. They still struggle to satisfy the
basic physiological and safety needs. They are primarily concerned with survival:
obtaining adequate food, clothing, shelter, and seeking justice from the dominant
societal groups.
Safety and Security needs include:
- Personal security
- Financial security
- Health and well-being
- Safety net against accidents/illness and the adverse impacts
2. Social needs
After physiological and safety needs are fulfilled, the third layer of human
needs is social. This psychological aspect of Maslow's hierarchy involves
emotionally-based relationships in general, such as:
- Friendship
- Intimacy
- Having a supportive and communicative family
Humans need to feel a sense of belonging and acceptance, whether it comes from a
large social group, such as clubs, office culture, religious groups, professional
organizations, sports teams, gangs ("Safety in numbers"), or small social
connections (family members, intimate partners, mentors, close colleagues,
confidants). They need to love and be loved (sexually and non-sexually) by others.
In the absence of these elements, many people become susceptible to loneliness,
social anxiety, and clinical depression. This need for belonging can often overcome
the physiological and security needs, depending on the strength of the peer
pressure; an anorexic, for example, may ignore the need to eat and the security of
health for a feeling of control and belonging.
3. Esteem
All humans have a need to be respected, to have self-esteem, self-respect.
Also known as the belonging need, esteem presents the normal human desire to be
accepted and valued by others. People need to engage themselves to gain
recognition and have an activity or activities that give the person a sense of
contribution, to feel accepted and self-valued, be it in a profession or hobby.
Imbalances at this level can result in low self-esteem or an inferiority complex.
People with low self-esteem need respect from others. They may seek fame or
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glory, which again depends on others. It may be noted, however, that many people
with low self-esteem will not be able to improve their view of themselves simply
by receiving fame, respect, and glory externally, but must first accept themselves
internally. Psychological imbalances such as depression can also prevent one from
obtaining self-esteem on both levels.
Most people have a need for a stable self-respect and self-esteem. Maslow noted
two versions of esteem needs, a lower one and a higher one. The lower one is the
need for the respect of others, the need for status, recognition, fame, prestige, and
attention. The higher one is the need for self-esteem, strength, competence,
mastery, self-confidence, independence and freedom. The last one is higher
because it rest more on inner competence won through experience. Deprivation of
these needs can leads to an inferiority complex, weakness and helplessness.
Maslow stresses the dangers associated with self-esteem based on fame and outer
recognition instead of inner competence. Healthy self-respect is based on earned
respect.
4. Self-Actualization
The motivation to realize one's own maximum potential and possibilities is
considered to be the master motive or the only real motive, all other motives being
its various forms. In Maslow's hierarchy of needs, the need for self-actualization is
the final need that manifests when lower level needs have been satisfied. Classical
Adlerian psychotherapy promotes this level of psychological development,
utilizing the foundation of a 12-stage therapeutic model to realistically satisfy the
basic needs, leading to an advanced stage of "meta-therapy," creative living, and
self/other/task-actualization. Maslow's writings are used as inspirational
resources.
5. Self-transcendence
Near the end of his life Maslow revealed that there was a level on the
hierarchy that was above self-actualization: self-transcendence. "[Transcenders]
may be said to be much more often aware of the realm of Being (B-realm and B-
cognition), to be living at the level of Being… to have unitive consciousness and
“plateau experience” (serene and contemplative B-cognitions rather than climactic
ones) … and to have or to have had peak experience (mystic, sacral, ecstatic) with
illuminations or insights. Analysis of reality or cognitions which changed their
view of the world and of themselves, perhaps occasionally, perhaps as a usual
thing." Maslow later did a study on 12 people he believed possessed the qualities
of Self-transcendence. Many of the qualities were guilt for the misfortune of
someone closes creativity, humility, intelligence, and divergent thinking. They
were mainly loners, had deep relationships, and were very normal on the outside.
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Maslow estimated that only 2% of the population will ever achieve this level of the
hierarchy in their lifetime, and that it was absolutely impossible for a child to
possess these traits.
Following are the stages in that are involved in the developing economy of a country.
1. Subsistence
2. Transition
3. Mass Production
4. Commercialization
Now we discuss these all stages one by one in detail and with the reference of
Pakistan.
1. Subsistence
It is very old method of transaction used in the old ages. It is somehow quite
tradition methods based upon the concept of give and take. Barter system in the
famous example of such sort of transactions. Barter System is that system in which
goods are exchanged for goods. In ancient times when money was not invented trade
as a whole was on barter system. This was possible only in a simple economy but
after the development of economy, direct exchange of goods without the use of
money, was not without defects. There were various defects in this system e.g. if a
person is making shoes and the other one is making clothes, they both exchange these
products with each other because there was no concept of money at that time that
why people use to exchange goods.
At this stage of economy there is no central market or any markets at city level also.
The goods produced are not the specialized good or it can be said that there was no
concept of industries for making specific goods. This method was even very well
known at country levels e.g. a country may exchange rice with the other one in place
of wheat or some thing else that they don’t have according to the needs.
2. Transition
It is the next stage of development in which a country has small scale
industries of specialized goods. These things are sold only at national level and are
very limited to meet the demands of the country. These industries require a large
amount of labor to produce its goods or services. The degree of labor intensity is
typically measured in proportion to the amount of capital required to produce the
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goods/services; the higher the proportion of labor costs required, the more labor
intensive the business.
Labor intensive industries include restaurants, hotels, agriculture and mining. In the
Pakistan we also have allot of hotels, agricultural lands that are all labor intensive.
3. Mass Production
It the 3rd stage in the development of a country or more precisely it is the first
stage in the development of a progressive country. Mass production began during the
Industrial Revolution, but took a great leap forward with the innovation of the
assembly line, a conveyor that moved the product from one workman to another,
with each individual adding their specialty part to the growing whole. On an assembly
line, each worker only had to know how to affix or adjust one specific part, and
therefore could keep only those tools and parts necessary for his particular task on
hand.
Assembly lines brought a great decrease in time to a finished product, yet were
attended by a number of less pleasant consequences. Over-specialization meant that
individual workers had less marketable skills, which effectively enslaved them to a
particular line. Mass production also led to increased incidence of repetitive stress
syndrome; the repeated motions of doing the same task hundreds of times a day led
to many workers living in pain much of the time. Increasingly, mass production
assembly work is being taken over by special-purpose robotics, freeing many workers
from the often backbreaking labor, yet resulting in less manufacturing jobs for the
workers to compete for.
Pakistan is also on the way of development. In here there are a number of modern
industries that are producing specialized goods like fertilizers, cement, chemicals,
textile etc. Some of these are labor intensive while some are capital intensive. Most of
the textile industry in labor intensive but as the time is passing and Pakistan is gaining
access to modern equipments for the production of textile also.
4. Commercialization
Next step in the development of a country in of commercialization, at this stage
the rate of mass production in very high and allot of modern mills are installed in
order to meet the national as well as the international markets. In this stage a very
large network in involved for the production of good, their marketing and selling in
the international markets. A number of standards are to be met for the competition at
international level market and to compete with the other countries. It is concerned
with the imports of a country and shows that how much a country in contributing in
the international markets and what does the economy of that country stand.
Pakistan is also meeting the international standards of goods and is taking part in the
international markets and exports a number of goods to other countries ad other
countries and also taking part in the markets of Pakistan and investing in the Pakistan
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and the country economy is being strengthen day by day. Pakistan in also exporting a
number of products like rubber goods, meat goods, optical, sports good, surgical etc.
Marketing Mix
The marketing mix is the set of marketing tools – often summarized as the
‘four Ps’: the product, its price,
promotion and place – that the
firm uses to achieve its
objectives in its target market
(McCarthy, 2001). The key
elements in the marketing mix
are shown in figure shown. The
design of the marketing mix
normally forms the core of all
marketing courses and the
textbooks that support them.
The central assumption is that
if marketing professionals
make and implement the right
decisions about the features of
the product, its price, and how
it will be promoted and distributed, then the business will be successful.
Unfortunately, marketers have ignored the tautological nature of this view. What
is the ‘right’ decision when it comes to making these choices concerning the
marketing mix? Most marketing professionals would answer that the right
marketing mix is the one that maximizes customer satisfaction and results in the
highest sales or market share. But a moment’s reflection reveals the fallacy of this
approach. Customer satisfaction and sales can always be increased by offering
more product features, lower prices than competition, higher promotional budgets
and the immediate availability of the product, of outstanding customer service and
support.
The traditional approach to the marketing mix
Marketing professionals have normally been taught a four-step approach to
marketing mix decisions. Step one is to define the product’s (or service’s) strategic
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objective. This emerges from an analysis of its strengths, weaknesses,
opportunities and threats. Marketers have found the strategic matrices developed
by consultants such as the Boston Consulting Group and McKinsey to be useful.
Typically, a strategic matrix has market growth or market attractiveness as one
dimension and competitive advantage as the other. A product in a highly attractive
market with a strong competitive advantage would normally have as its strategic
objective rapid sales growth. A product in a poor market with no competitive
advantage would be targeted for divesting. Step two is a detailed analysis of the
target market to assess the nature of the opportunity.
What is its size and potential?
How strong is the competition and how is it likely to evolve in the future. Step
three is research into the needs of prospective customers.
What is it that customers actually want?
Today, this goes beyond merely asking customers what they are looking for, but
creatively seeking to discover needs that customers cannot articulate because they
are unaware of the possibilities offered by new technologies and the changing
environment. To most marketing professionals the marketing mix is designed to
meet these customer needs and wants. Each element of the mix is designed to
meet a customer need. Lauterborn (1990) articulated this with the concept of the
four Cs. Consumers have certain needs, which can be grouped into four Cs – a
customer solution, cost, convenience and communication. According to this
popular view, the function of the four Ps is to match each of these Cs.
Four Cs in 7Cs COMPASS MODEL
A formal approach to this customer-focused marketing mix is known as 4C
(Commodity, Cost, Channel, Communication) in 7Cs COMPASS MODEL. This
system is basically the four Ps renamed and reworded to provide a customer
focus. The 4Cs Model provides a demand/customer centric version alternative to
the well-known 4Ps supply side model (product, price, place, promotion) of
marketing management.
Product→ Commodity
Price → Cost
Place → Channel
Promotion→ Communication
The four elements of the “7Cs COMPASS MODEL” model are:
1. Commodity: the product for the consumers or citizens.
2. Cost: total marketing cost.
3. Channel: marketing channels.
4. Communication: not promotion, marketing communication.
This model was proposed by Koichi Shimizu in Japan. [2]
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Effective Marketing Mix
Four Cs Four Ps
Customer solution Product
Customer cost Price
Communication Promotion
Convenience Place
An effective marketing mix is then one which offers a product that solves the
customer’s problem that is of low cost to the customer, that effectively
communicates the benefits, and that can be purchased with the utmost
convenience. The problem with this ‘marketing’ view of the marketing mix is that
it ignores whether the mix makes economic sense for the company. While it
maximizes value for customers it can easily minimize value for shareholders. For
example, the product that gives the best customer solution is likely to be one
individually tailored to a specific customer, incorporating all the features of value
to that customer. But for the company, this would require a very broad product
line with high manufacturing costs and substantial investment requirements.
Unfortunately, what customers also want is low cost, which in most situations will
mean offering them low prices. Similarly, the unconstrained pursuit of
convenience and communication of the brand’s benefits also involves higher costs
and investment. The formula of low prices, high operating costs and high
investment in promotion and distribution is not one that builds successful
businesses.
The accounting approach to the marketing mix
Faced with poor returns, some companies, especially in the UK, adopted an
accounting approach to marketing. The marketing mix was seen not as an
instrument for gaining and retaining customers, but rather as a tool for directly
increasing the return on investment. Return on investment can be increased in
four ways – increasing sales, raising prices, reducing costs or cutting investment.
The marketing mix is the central determinant of each of these levers.
For example, cutting back on the number of product variants offered to customers
will reduce costs and investment. Raising prices will usually increase profitability
in the short term because higher margins will offset the volume loss. Cutting
advertising and promotional budgets will also boost short-term profits. Finally,
savings on distribution and service will normally have positive effects on
profitability, even though customers may suffer some inconvenience.
The accounting approach leads to a completely opposite marketing mix to the
marketing approach.
While the marketing focus, which puts the customer first, normally leads to
broader product ranges, lower prices and more spending on promotion and
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distribution, the accounting one leads to the opposite pressures. The cost of the
marketing approach is lower profitability and cash flow, the cost of the accounting
approach is the longer-term loss of market share resulting from the lack of
customer focus. Marketers need to be aware that there are other important
problems in considering profits as the objective of the business.
- Short- or long-term profits. Most managers are conscious of the dangers of
focusing on short-term profits. Cutting projects to boost this year’s results
can lead to permanent erosion of the firm’s ability to compete. But
emphasizing long-term profits does not help much because they are so ill-
defined. Are long-term profits defined over 3, 5 or 20 years? How does one
deal with the time value of money?
- Maximum or acceptable profits. Should managers be seeking to maximize
(short- or long-term) profits or achieving an acceptable level, e.g. the
average return in the industry? Each would give quite different
recommendations when it comes to the marketing mix. How would
shareholders respond to managers consciously accepting sub-optimal
returns?
- Ambiguity of profit measurement. Unlike cash flow, profits are a matter of
judgment. Different, but equally legally acceptable treatments of
depreciation, stocks and the costs of restructuring lead to vastly different
reported profits. Profits also fail to incorporate the cost of capital. So a
company can be growing profits, but declining in value because it is not
achieving a return above its cost of capital on new investment. Finally,
profits exclude the added investments in working and fixed capital needed
to support the company’s growth. So a company can be profitable but
rapidly running out of cash.
- Alternative measures of profitability. Most companies set objectives not
in terms of absolute profits, but express them as a ratio such as return on
assets, return on investment, and return on equity or earnings per share.
All these measures, because they have profits in the numerator, suffer the
same problems as outlined above. There are even added problems since
measures of assets; investment and equity are equally ambiguous. For
example, should assets be valued at cost or replacement value? Should R&D
spending be treated as investment or as a cost? [3]
Q. 4 Discuss different stages of product life cycle? What are the marketing strategies
that are effective at various stages of product life cycle and why?
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The product life cycle goes through many phases, involves many
professional disciplines, and requires many skills, tools and processes. Product life
cycle (PLC) has to do with the life of a product in the market with respect to
business/commercial costs and sales measures; whereas product life cycle
management (PLM) has more to do with managing descriptions and properties of
a product through its development and useful life, mainly from a
business/engineering point of view. To say that a product has a life cycle is to
assert four things:
(1) That products have a limited life,
(2) Product sales pass through distinct stages, each posing different challenges,
opportunities, and problems to the seller,
(3) Profits rise and fall at different stages of product life cycle, and
(4) Products require different marketing, financial, manufacturing, purchasing,
and human resource strategies in each life cycle stage.
The different stages in a product life cycle are:
1. Market introduction stage
I: Costs are high
II: Slow sales volumes to start
III: Little or no competition - competitive manufacturers watch for
acceptance/segment growth losses
IV: Demand has to be created
V: Customers have to be prompted to try the product
VI: Makes no money at this stage
2. Growth stage
I: Costs reduced due to economies of scale
II: Sales volume increases significantly
III: Profitability begins to rise
IV: Public awareness increases
V: Competition begins to increase with a few new players in establishing market
VI: Increased competition leads to price decreases
3. Mature stage
I: Costs are lowered as a result of production volumes increasing and experience
curve effects
II: Sales volume peaks and market saturation is reached
III: Increase in competitors entering the market
IV: Prices tend to drop due to the proliferation of competing products
V: Brand differentiation and feature diversification is emphasized to maintain or
increase market share
VI: Industrial profits go down
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4. Saturation and decline stage
I: Costs become counter-optimal
II: Sales volume decline or stabilize
III: Prices, profitability diminish
IV: Profit becomes more a challenge of production/distribution efficiency than
increased sales. [4]
The Product Life Cycle Concept
The PLC concept helps marketers interpret product and market dynamics.
It can be used for planning and control, although it is useful as a forecasting tool.
PLC theory has its share of critics. They claim that life-cycle patterns are too
variable in shape and duration. Critics charge that marketers can seldom tell what
stage the product is in. A product may appear to be mature when actually it has
reached a plateau prior to another upsurge. They charge that the PLC pattern is
the result of marketing strategies rather than an inevitable course that sales must
follow:
Suppose a brand is acceptable to consumers but has a few bad years because of
other factors—for instance, poor advertising, delisting by a major chain, or entry
of a "me-too" competitive product backed by massive sampling. Instead of
thinking in terms of corrective measures, management begins to feel that its brand
has entered a declining stage. It therefore withdraws funds from the promotion
budget to finance R&D on new items. The next year the brand does even worse,
panic increases.... Clearly, the PLC is a dependent variable which is determined by
marketing actions; it is not an independent variable to which companies should
adapt their marketing programs.
Table below summarizes the characteristics, marketing objectives, and marketing
strategies of the four stages of the PLC
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Introduction Growth Maturity Decline
Characteristics
Sales Low sales Rapidly rising Peak sales Declining sales
sales
Costs High cost per Average cost per Low cost per Low cost per
customer customer customer customer
Profits Negative Rising profits High profits Declining profits
Customers Innovators Early adopters Middle majority Laggards
Competitors Few Growing number Stable number Declining
beginning to number
decline
Marketing
Objectives
Create product Maximize market Maximize profit Reduce
awareness and share while defending expenditure and
trial market share milk the brand
Strategies
Product Offer a basic Offer product Diversify brands Phase out weak
product extensions, and items models
service, warranty
Price Charge cost plus Price to penetrate Price to match or Cut price
market best competitors'
Distribution Build selective Build intensive Build more Go selective:
distribution distribution intensive phase out
distribution unprofitable
outlets
Advertising Build product Build awareness Stress brand Reduce to level
awareness and interest in differences and needed to retain
among early the mass market benefits hard-core loyals
adopters and
dealers
Sales Promotion Use heavy sales Reduce to take Increase to Reduce to
promotion to advantage of encourage brand minimal level
entice trial heavy consumer switching
demand
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for selecting the market segments as target market. Discuss these bases with
example?
Market Segmentation
Market segmentation begins with the following somewhat surprising bits of
due diligence:
• Nobody makes money by segmenting a market (except for marketing research
suppliers). You make money by establishing profitable, long-term, highly
satisfying exchange relationships with brand-loyal customers. Market
segmentation is merely a device created by marketers to more efficiently and
effectively generate such relationships.
• Market segments do not actually exist. Or perhaps it is more accurate to say that
marketers try to impose their approach to structuring a market upon a market
that has no universal, naturally occurring structure to it. Markets are not like the
animal kingdom with its universally understood natural “segments” of genus,
subgenus, and species. If segments exist in a market, they are there because a
marketer has constructed them, hopefully by tapping into marketplace realities.
Methods of Segmenting Markets
Segmentation uses one of three methods:
Research-based segmentation — The Mobil case was an example of this
approach. Consumers are screened to ensure they are members of the market
under study, and then surveyed to determine their attitudes, behaviors, motives,
preferences, etc. Multivariate statistical analysis of the research results is
conducted to then reveal the number and characteristics of market segments.
Existing segmentation services — In this approach, the marketer uses an
existing segmentation service or system to identify market segments that can be
evaluated for making targeting decisions. These systems may either be
commercial systems, such as the geodemographic systems, or governmental, such
as the North American Industry Classification Systems (NAICS).
In either case, the segments are already established before the marketer buys the
information, so this approach lacks the customization of the research-based
method.
Managerial judgment — In this approach, the marketer uses his or her
knowledge of the market and industry to identify segments. The marketer’s
insight and skill at using existing information are key in generating good results
from this approach. Each of these approaches is successfully used by firms in a
variety of industries for segmentation purposes. Although each has its advantages
and disadvantages, no single approach can be said to be best under all
circumstances. [6]
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• Positioning is easy. Market segmentation is difficult. Positioning problems stem
from poor segmentation.
• Select a segment and serve it. Do not straddle segments and sit between them.
1 - Understand how your market works (market structure)
2 - List what is bought (including where, when, how, applications)
3 - List who buys (demographics; psychographics)
4 - List why they buy (needs, benefits sought)
5 - Search for groups with similar needs.
Marketing Segmentation
The basic principle of market segmentation is that markets are not homogeneous
and that it makes commercial sense to differentiate marketing offerings for
different customer groups. The days when customers could buy a car in any color
as long as it was black’ are long gone. Markets have fragmented and technology
provides for greater variation in production. Marketing itself can more easily
identify more and smaller market segments, and indeed it can target selected
segments more effectively. [7]
Segmentation Variables
Under are the variables summarized on which basis market is segmented.
1 - Geographic variables
- Region of the world or country, East, West, South, North, Central, coastal, hilly,
etc.
- Country size/country size: Metropolitan Cities, small cities, towns.
- Density of Area Urban, Semi-urban, Rural.
- Climate Hot, Cold, Humid, Rainy.
2 - Demographic variables
- Age
- Gender Male and Female
- Family size
- Family life cycle
- Education Primary, High School, Secondary, College, Universities.
- Income
- Occupation
- Socioeconomic status
- Religion
- Nationality/race (ethnic marketing)
- Language
3 - Psychographic variables
- Personality
- Life style
- Value
- Attitude
4 - Behavioral variables
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- Benefit sought
- Product usage rate
- Brand loyalty
- Product end use
- Readiness-to-buy stage
- Decision making unit
- Profitability
- Income status
5 - Technographic variables
- Motivations
- Usage patterns
- Attitudes about technology
- Fundamental values
- Lifestyle perspective
- Standard of living
- Profit is there in business from the existing clients [8]
References:
1 - Marketing Management (12th Edition) by Philip Kotler
2 - E.Jerome McCarthy(1975)”Basic Marketing:A Managerial Approach," fifth edition, Richard D. Irwin, Inc.
3 - The Marketing Book (Fifth Edition) by Michael J.Baker
4 - http://en.wikipedia.org/wiki/Product_life_cycle_management
5 - Marketing Management (12th Edition) by Philip Kotler
6 – Marketing Management, Text and Cases by David Loudon
7 - Marketing Management (12th Edition) by Philip Kotler
8 - http://en.wikipedia.org/wiki/Market_segment
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