SECTION 6: MARKETING

Market
A market is any situation made up of a group of individuals, organisations/institutions who
interact in the process of buying and selling goods and services. It may also be a place where
buyers and sellers meet.

Marketing
The management process which consists of all the activities of identifying and anticipating
the needs of the consumer with the aim of satisfying those requirements.

Marketing Activities
1. Market Research
2. Pricing
3. Packaging
4. Branding
5. Sales Promotion
6. Advertising
7. Distribution
8. Selling
9. After Sales Services

Marketing Mix
This is a collective term used to describe the major activities of marketing. It consists of the
four Ps:
1. Product:
This is the good or service to be produced.
2. Price
This is the dollar value given to the service or product.

3. Place
This refers to where the product will be sold. It also includes the distribution channels.

4. Promotion
This includes whatever methods a firm chooses to attract its customers e.g. branding,
advertising P.R. etc.

1. PRODUCT
Important aspects of the product are packing[P4AD] and branding. The package or container
of the goods is very important.
 It presents the product.
 It must be durable.
 It protects the product.
 It preserves the life of the product
 It provides information
 It sets it apart from other similar products
The branding of a product is usually accomplished by a symbol, name or design e.g.
MacDonald Arches, Cocoa Cola, NIKE, etc. The product must meet the requirements of the
consumers if it to at least have a chance of succeeding.

2. PRICE [LSP]
The objectives of pricing are
 Survival
 Profit maximisation
 Market share Leadership
  Product quality Leadership
A number of methods can be used to determine the price of a product.[BCLIP3]

1. Break-even Analysis
The price is set to cover expenses, making no profit or loss. Unit cost price equals selling
price.

2. Penetration Pricing
This is mainly used for new products. The initial price is set lower than competitors which
should encourage new consumers to buy and existing consumers to switch to their product.
Eventually the price is raised with the hope that not all consumers will switch to the
competitors’ products.

3. Psychological Pricing
Some products are deliberately priced high to achieve the “snob effect”. It makes the
consumer think that good things are not cheap.

4. Limit Pricing
The price is set low enough to discourage entry into the market by competitors.

5. Predatory Pricing
A pricing method used to get rid of unwanted competition. Prices are lowered by a company
which can afford temporary losses. When the desired effect as been achieved the prices are
increased again.

6. Cost-based Pricing/ Cost-Plus Pricing

The price is set with the following in mind
 Total Cost ( Fixed Cost + Variable cost)
 Mark-up
The final price = TC + Mark-up

3. PLACE/DISTRIBUTION
This refers to where and how the product reaches the market. In order for any product to
reach its final destination it will go through one or more links of the distribution chain.

Distribution Chain
This is the link between the producer and the consumer
1. Manufacturer- The maker of the product
2. Wholesaler- Sells finish product to retailers or general public in bulk usually at a lower
price
3. Retailer- Sells to general public usually at higher prices.
4. Consumer- Final link in the chain where most goods and services are consumed

Methods of Retailing
1. Shops
2. Department stores
3. Mail order
4. Auction
5. Internet
6. Door to door sales persons
7. Vending machines

ASSIGNMENT
1. Describe 3 roles of the wholesaler 3 marks
2. Describe 3 roles of the retailer 3 marks
3. List the three types/forms of transportation 3 marks
4. Give two advantages and two disadvantages of each of the above transport methods
5. List four distributions problems 4 marks
6. Suggest three solutions to the various problems of distribution. 3 marks

4. PROMOTION
This is the act of attracting attention and interest to the product or service.

Method of promotion[ P2AS]

1. Advertising (tv., billboard, newspaper, magazines, radio etc.)
Its function is: LID
 To introduce new products and remind consumers of old ones.
 To increase demand for goods
 To create customer loyalty
The advantages are[MPIC]
 Increase in market share
 Increase in profits to fund research and development
 Provides information to prospective buyers
 Promotes competition among firms
The disadvantages are [ UPIC]
 It may be very costly and can increase production cost
 Billboards can spoil the natural landscape
 Some ads are not t\in the public interest

2. Sales Promotions [ FREC2]

These are short term methods or incentives used along with ads to encourage purchases
 Rebates
 Coupons
 Free samples
 Exhibitions
 Contests
The advantages are
 Trial of products before purchase
 Reduced cost of products to customers

3. Public Relations[S2BED]
 Sponsorship of community activities
 Special awards or scholarships
 Donations to charity
 Business entertainment dinners
The aim is:
 To create goodwill or a pleasant image of the business and its products through the
media

4. Personal Selling
Sales persons are sent out into the market to sell the product
The advantages are
 Consumers do not have to leave their homes
 Personal contact allows producers to gather valuable info on use of product, its quality,
pricing etc.

Additional Required Reading

Describe the following types/forms of advertising
1. Informative Advertising
2. Persuasive Advertising
3. Competitive Advertising
4. Defensive Advertising
5. Reminder Advertising
 MARKETING EXERCISE
1. For a market situation to have occurred there must be:
 A transaction
 A commodity/service provided
 The commodity must have value
 A buyer and a seller

Read the following scenario. A) Identify if a market situation exists.

B) Give reasons for your answer
John James stopped the bus, bought a ticket for $2.00 and went for a drive to the
countryside.

2. Complete the following sentences with the words listed below

Product, price, value, promotion, sell, known, quantity, specifications, advertising,
unwanted, place, commodity, sales promotion, predatory pricing, personal selling

i) The _____________________ is the item to be manufactured. At this stage, one considers

the __________ to be made and the _____________________ required for the product.

ii) The __________________ is the monetary _____________ customers are willing to pay

for the item. The firm must also be willing to _________ at that ______________ so that a

profit can be made.

iii) ________________ is the method of making a product ________________ to the public.

iv) This is done through __________________________, ____________________________

and __________________________.
v) ____________________________ is the strategy aimed to get rid of _________________

competition.

vi) ________________ is the pattern of distribution to get the _____________________ to

the consumer.

3. The total cost of 100 dresses is $1,500.00. The mark-up is estimated at 20% of the unit
cost, the price of a single dress using the cost-plus method will be:
 MERCHANDISING

This is a promotional tool used to present products in a way that will attract and draw
customers to buy. It involves
 Packaging
 Branding of goods- This can be done with a name or symbol e.g. Coca Cola, NIKE,
 Physical layout of goods such as:
o Putting can goods in a pyramid rather than straight line
o Putting new products next to popular goods or next to ones, which are used by
many people.
o Placing goods at eye level rather than on the top or bottom shelves
 Decorating the business or a particular section to attract attention
 Offering goods in different sizes for convenience
 Having transparent packaging to allow customers to closely look at products

Forms of Merchandising
 Contests
 Coupons
 Multi-buys i.e. buy one get one free
 Loss leaders i.e. reduce the price of a good to attract the customers into the store
to expose them to other products.
 Trade fairs, exhibitions
 Free samples
 MARKET RESEARCH
PRINCIPLES OFR BUSINESS
CONSUMER BEHAVIOUR
Factors Influencing Consumer Behaviour
1. Price of product:
Usually, as the price of a product increases, the demand for that product is reduced
as persons are no longer able to buy or switch to a cheaper brand/product.

2. Price of substitutes:
As the price of these are reduced the demand for them will rise.

3. Quality:
Consumers may still purchase a high priced product if they perceive that it is of a
high quality

4. Taste:
An individual with expensive tastes may only shop in certain areas or buy
certain products e.g. Ralph Lauren, Kenneth Col, Land etc.

5. Tradition:
Manu people will buy a product even if the price increases because it is what they
are accustomed to.

6. Income:
The greater the disposable income, the greater the spending power. This may cause
 individuals to purchase more luxury items.

7. Brand loyalty:
Some consumers will only buy a particular brand of a product even if its price rises
e.g. car tyres, shoes, clothing etc.

PRINCIPLES OFR BUSINESS

MARKET STRUCTURES

In a world of buying and selling of goods and services, all activities can fall into any one of
the following market structures:
 Perfect Competition
 Monopolistic Competition
 Oligopoly
 Monopoly
At the two extremes are perfect competition and monopoly with monopolistic competition
and oligopoly represented along the continuum.

All market structures can be defined by FOUR main characteristics

1. The number of sellers
2. The nature of the product i.e. is it identical
3. The number of buyers
4. The conditions of entry

PERFECT COMPETITION
Characteristics
1. There are numerous sellers in the market place.
2. All products are identical and are considered to be substitutes for each other.
3. Everyone has perfect knowledge of the market. This is where all buyers and sellers
know the price at which transactions are taking place and what the substitutes are.
4. There are many buyers
5. No one seller (or buyer) can influence the price of the good by increasing or decreasing
supply of goods. The price is set by the market forces of demand and supply. It is
therefore stated that each firm is a price taker
6. There are no barriers to entry or exit of the market.
In the real world, it is difficult for perfect competition to really exist. Some of the closest
examples could be the selling of the same vegetables or flying fish at a local market.

MONOPOLISTIC COMPETITION
Characteristics
1. Several sellers but usually not as many as with perfect competition
2. The product is similar but not identical. It may be differentiated by branding, with each
product claiming to be different in some way
3. The are many buyers
4. There are no barriers to entry or exit of the market.
5. There is a lot of non-price competition such as advertising, sales promotion etc.
Examples include the selling of can soup, toothpaste, sneakers, manufacturing furniture etc.

OLIGOPOLY
Characteristics
1. There are only a few firms which dominate the market and who may compete with
each other. If they come together and agree not to compete it is called a CARTEL
2. The product is basically the same such as oil. This occurs in a pure oligopoly. In a
differentiated oligopoly, the product is somewhat different e.g. cars.
3. There is virtually no price competition. Firms rely heavily on advertising, promotions,
quality of goods or services offered etc.
4. There may be some barriers to entry to sellers
Examples include banks ( RBTT, Scotia, Royal Bank etc.), insurance companies ( CLICO,
Trident, Co-operators General, Barbados Life Insurance etc.) Car dealerships (Toyota,
Honda, Simpson Motors etc.)

MONOPOLY
Characteristics
1. There is only one producer of the product. The firm and the industry are one and the
same.
2. There are many buyers
3. The price is set by the supplier to maximise profits where possible. There are barriers to
entry
5. There is no substitute for the product.
6. The firm can also fix the amount of the good/service to be supplied.
Examples include Cable & Wireless, BWA, BL&P, Cement Plant

SUPPLY & DEMAND

SUPPLY
This is the amount of any commodity which a producer is willing to supply at a given price.
On a supply diagram, the curve slopes upward from left to right. This implies that as price
increases, so does production/supply of goods.
Diagram of Supply Curve
DEMAND
This is the amount of any commodity which a consumer is willing to purchase at a particular
price at a given time period. On a demand diagram, the curve slopes downward from left to
right. This implies that as price increases, the demand for goods decreases.

Diagram of Demand Curve

COST PRICE
The price at which the cost of production would be covered.

SELLING PRICE
The cost price plus any profit which is then determined by the seller.

DETERMINANT OF SELLING PRICE

The selling price is determined when the market is in equilibrium. In other words, the point at
which the demand and supply are equal. At this point, the market is said to be cleared.
E.g.
Price Demand Supply
$5 3,000 1,000
$10 2,500 1,500
$15 2,000 2,000
$20 1,500 2,500
$25 1,000 3,000

The price at which the market is in equilibrium is $15. Both demand and supply are
equal and this is where the market is said to be cleared. This is also known as the
optimum/optimal price.

As the price falls, the demand for the commodity rises and vice versa. The opposite is true for
supply. As the price increases, do does the demand for the good

FACTORS AFFECTING DEMAND

1. The price of the commodity

As price increases, the demand of the product usually decreases.

2. The price of substitutes

Substitutes are goods which can be used to replace other goods. As the price of these
decrease, demand will increase since buyers may be switching from the purchase of
other goods.

3. The income of buyers

As disposable income increases, so does the demand for most goods.

4. Advertising
This alerts buyers to the presence of goods on the market, thus increasing demand.

5. Buyers Preference
Buyers’ demand for a good may remain unchanged even though the price of the
product increases. This is because it is the product of choice.
FACTORS AFFECTING SUPPLY

1. The price of the commodity

As this increases, so does supply since the producer is trying to maximise profit.

2. The price of substitutes

As the price of these decrease, supply will decrease since buyers may be switching to
the purchase of other goods.

3. Cost of factors of production

As the cost of land, labour and capital increases, so does the overall cost of
Production. This may have the effect of reducing supply.

4. Weather conditions
Bad weather can have the effect of reducing supply, causing a shortage. AS a result
of this, prices may increase as consumers try to get the product before it is no longer
available.

5. Availability of raw materials

Lack of raw materials will limit supply resulting gin a shortage.

6. Effects of taxes & subsidies

Taxes have the effect of increasing cost of production and can therefore reduce the
level of supply. The opposite is true for subsidies.
7. Levels of Stock
A reduction in stock means a reduction in supply

HOW PRICE IS AFFECTED BU DEMAND & SUPPLY

If supply remains constant

The price of goods will increase as demand increases. This is because a shortage
will occur, causing persons to be more willing to buy at the higher price. However,
if the demand decreases, there will be a surplus of goods. Suppliers will now have to
reduce their prices if they are to get rid of the product, especially if it is perishable.

If demand remains constant

There will be a decrease in price as supply increases because of surplus. If supply
decreases, prices will rise because of shortage.

TERMS OF SALE
Consumers have the access to the following options when purchasing products and
services. However, with each form, there are associated benefits and problems

1. Cash Sale
The benefits:
 There is immediate movement of stock and money earned.
 This is also no added interest.
The disadvantage
  It does not allow the consumer to establish a credit rating for the future when that
individual wants to buy a product on credit/hire purchase.

2. Credit Sale
The benefits
 No money may be needed immediately
 Buyer enjoys the use of the product even before payment is made
 The seller encourages customers to buy therefore increasing sales
The disadvantages
 Bad debt- customer cant pay
 Due to inflation, the money may be worth less when it is finally received

3. Hire Purchase
A company hires the commodity to the purchaser, who pays an initial payment followed by
weekly/monthly instalments.
The benefits
 Use of commodity while still paying
 Company responsible for repairs to product within a certain period
The disadvantages
 Expensive form of credit due to high interest rates
 Goods do not become the buyer’s property until the final payment has been made
 Company can reposes items

4. Cash & Trade Discounts

The benefits
 Encourage buyers to pay before the end of credit period
 Reduction in price for buyer
The disadvantage
  Reduction in income for seller if discount is taken

CONSUMERISM
This involves the efforts made by organized groups to protect people’s interest as buyers of
goods and services. Such organizations provide information on products, consumer
awareness and lobby governments to enact legislation to protect consumers.

Consumer Protection

In today’s society consumers need to be shielded from harmful and unethical practice which
may occur in the market place by suppliers. This is necessary for the following reasons:
1. To prevent overcharging of consumers
2. To prevent businesses from making false claims about products
3. To ensure sanitary conditions of operations
4. To ensure consumers get the amount or what they paid for
5. To ensure that goods are fit for human consumptions

Forms/Arms of Consumer Protection

With the rise in consumer awareness of their rights, various agencies are now playing their
part to increase the level of education and the likelihood of consumers being taken advantage
of.
There are three main arms in the effort to protect consumers:

A. Government
 It monitors the importation of goods to ensure that they meet minimum required
standards
 Drafting of legislation such as antidumping laws. This legislation prevents
companies from sending low priced or low quality products to poorer countries
  Establishing Public Health Division ( through Public Health Act) to set out rules for
selling e.g. acquiring health certificates, medical examinations, dress code, food
preparation and handling etc.
 Weight & Measures Act
 Sale of Goods Act- this stated that there are 3 main obligations of the seller
a) Goods must be of merchantable quality/ fit for their normal purpose
b)Goods must be as described on label
c) Good must be fit for use
 Setting up Price Commissions/ Price Control Departments to set price ceilings on
certain products so that everyone in the country can have access and are not over
priced
 Passing of Acts such as the Food & Drug Act, Hire Purchase Act to supervise credit
facilities
 Establishing of Fair Trading Commissions to hear and address the concerns of
individuals/groups
 The creation of Bureau of Standards to ensure that goods are labelled with correct
information such as contents, size, weight, ingredients, nutritional value, health
risks, manufacturer etc. This is to ensure that consumers know what they are
buying and if they may be at risk from any product they use.
 The appointment of the Ombudsman
A government appointed person to investigate malpractices in injustices brought
to his attention by public.

B. Consumer groups/organizations
 Some co-operatives set up educational programmes for their members to educate
them about their rights, changes in buying patterns and practices of sellers in the
market place
 Within the media, consumers are allowed to report concerns which are then
investigated and findings made public. The mean also provides information on
 consumer rights and responsibilities. There are also journals which carry out tests
on various products, giving reports on their quality, durability, pricing, health risk
etc.

C. The individual
An individual can take action to protect their own right by:
 Contacting the FTC to report unfair actions of sellers or simply to be informed
 Shop around and compare products, prices and their quality
 Check expiry dates, guarantee and warranty
 Weigh goods where possible to see if you are getting what you pay for
 Ask for product information
 Shop with someone who is more knowledgeable about the product you intend to
purchase
 Reduce impulse buying

Rights of Consumers
1. To have truthful information about products
2. To choose between products of different quality and price to satisfy needs
3. To buy goods/services which are safe to consume
4. To complain to retailers/ other bodies about dissatisfaction with products
5. To get a fair settlement for a fair claim
6. The right to safety and protection from hazardous goods

Responsibilities of Consumers
1. Demand the best value for money
2. Report unsafe merchandise to consumer protection bodies
3. To tell other consumers about unfair treatment and unethical business practices
4. To acquire as much information about a product before purchase.
5.Report defects to retailer/manufacturer
 TRANSPORTATION
Form of Transport
1. Land (Railway/road)
2. Air
3. Water (Sea/River)
(Look at the advantages and disadvantages of each form)

Importance of Transport
Transportation is the means by which goods are moved from one place to another. The
sensible handling and transport of goods influences the marketability of the product. It ca
also affect whether or not the product reaches its market (which may be domestic, regional or
international) in a timely manner and in condition for sale. An unreliable transportation
network can lead to a loss in sales and an increase in cost for a firm, thus leading to reduced
profits.

Factors Governing The Choice of Transportation

1. Handling charges
2. Warehousing costs
3. Insurance cost
4. Work of port authorities
E.g. Efficiency of workers, labour unrests etc.
5. The type of goods
This includes the size, weight, perishability and value of the goods
E.g. Bauxite Railway/Ship
Oil & Gas Pipeline & Tanker
Timber River & Barges
 Vehicles Land/Ship
Fresh fruits & Flowers Air

6. How urgently the product is needed

E.g. Air transport is most likely to be used if products are required immediately
from very far away
7. Distance between producer and supplier
8. Availability of airport, harbour and docking facilities
N.B At times more than one of the above factors can affect a single product. The
organization/individual will then have to look at all possibilities and then choose the
option which is best for tem.

Problems of Distribution/Transportation
1. Delayed shipment due to improper labelling, mis-direction of goods etc.
2. Customs authority regulations
3. Spoilage
4. Breakage
5. Lack of security leading to theft
6. Inadequate warehousing facilities( e.g. goods not protected from elements)
7. Industrial unrest e.g. workers and management having problems
8. Bad weather

Solutions to Transportation Problems

1. Insurance
2. Refrigeration
3. Better packaging
4. Proper storage facilities
5. Screen workers and dismiss them for acts of theft
6. Modify or abandon policies that will lead to unrest
7. Clear and legible shipping information/labelling