PRINCIPLES OF BUSINESS

SECTION 6 - MARKETING

NAME__________________________________________________________

GRADE_________________________________________________________

OBJECTIVES

(i) explain the concepts of market and marketing;

(ii) explain marketing activities

(iii) describe the “marketing mix”;

(iv)describe the factors that influence consumer behaviour

(v) identify factors affecting packaging and presentation of goods

(vi)describe methods of promoting sales;

(vii)identify the techniques of selling

(viii) explain the various terms of sales

(ix)list the functions of consumer organisations

(x) outline the role of customer service;

(xi) describe forms of customer service; and,

(xii)explain the concept of intellectual property rights

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 MARKETING
6.1 THE CONCEPTS OF MARKET AND MARKETING

(a) (i) Market

 A market is any situation that brings buyers and sellers together for the purpose of
exchange.

(ii) Types of Markets

 A consumer market is a market for products and services that are bought by
individuals.
 An Industrial market involves the sale of goods between businesses not the general
public.

(b) (i) Marketing

 Marketing is all the activities that enables trade to take place in a profitable and
efficient way.

(ii) New Trends in marketing

 Social media marketing- is a form of internet marketing that gains attention through
social media sites such as Twitter, You tube, Facebook and many others

 Integrated marketing – this is a method that creates a unified strategy that promotes a
brand across multiples media (television, radio, and social media) so that the message
is similar in all approaches.

6.2 MARKETING ACTIVITIES

 Marketing activities include market research, pricing, packaging, branding, sales promotion,
advertising, and distribution. Each of these activities will be discussed below:

a) MARKET RESEARCH

 A market research is the collection and analysis of data about the consumer’s
preference and competitors. It is important to research any new market you are moving
into to avoid wasting time and money on failed projects.

(i) Consumer Taste

 A consumer’s taste refers to the products and services that consumer’s chooses over others. 

 Market research helps to rank individual choices and assist the firm in making better
decisions about the products/services offered.

(ii) Competitor
 Market research helps a firm to obtain information about their competitor in order to make
better designs, offer competitive prices, and become more effective.

(iii) Consumer Behaviour

 Consumer behaviour is a study of the public reactions towards a product.
 Market research helps a firm to understand what prompts a consumer to purchase a particular
product and what stops him from buying it.

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(b) PRICING

 Pricing is the monetary value of a good/service or the amount asked for the product/service
 Pricing strategy is a way of finding a competitive price of a product or a service. Strategies
include:

Pricing Strategies

(i) Pricing at a Premium

 This is where a business sets its cost higher than their competitors. This
strategy is most effective in the early days of a product’s life

(ii) Pricing for Market Penetration

 This penetration strategy is used to attract buyers by lowering the prices on
goods and services. This is used by big companies to pull customers away
from their competitors.

(iii) Cost Plus Pricing

 This is the simplest method, it involves using the cost of producing a single
item and then adding overheads cost and a profit margin to it arrive at a
selling price.

(iv) Price Skimming

 This strategy involves setting prices high at the introductory stage of the
product. It helps the business to maximise on sales at the introductory phase of
the product.

(v) Bundle Pricing

 A small business may sell multiple products for a lower rate than consumers
would face if they bought each item individually. It is an effective strategy
for unsold items that is taking up space.

c) PACKAGING

 Packaging is the way in which a saleable product is wrapped/ displayed or presented to

the customer.
 Labelling is an important part of packaging this may be a small tag attached to the
product.

Forms of Packaging

 Form of packaging include boxes, glass containers, plastic bags, paper, metal cans, cloth
[crocus bag]

Presentation/Benefits of Packaging

 It enhances the appearance of the product - e.g. it should look bright, attractive and
different from its competitor
 It protects and preserves the products – e.g. wrapped to protect the product
 It provides information - e.g. ingredients, description of the content, location of the
business etc.
 It makes it more convenient for the consumer to handle – e.g. easy to carry and transport
 It promotes the product – e.g. it carries the firm’s logo and brand name to allow
customers to identify the product

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 d) BRANDING

Use of Brand Names

 A brand name is a symbol, colour, name or trade mark that distinguishes a product from its
competitors.

Reasons for Branding

 It helps to create customer loyalty, that is the faithfulness of a customer to buy a particular
brand regularly
 It is easier for the firm to promote the product resulting in an increase in sales
 Branding leads to returning customers, if a firm delivers what their brand promises, the
customer will return
 Having a strong brand helps the firm to charge a high price especially if the product is of a
high quality.

e) Sales Promotion
 Sales promotion is a process used to persuade the consumer to buy a product and make
repeat purchases which will increase sales.

 Examples of Sales Promotion

Free Samples - are mini replicas of the product, usually take place at trade fairs,
exhibitions and supermarket.

Coupons - are detachable tickets that entices the holder through the probability of
receiving something.

f) ADVERTISING
 Advertisements are messages paid for by those who send them and are intended to inform or
influence people who receive them.

Advertising Functions

 Build a firm’s image which will attract more customers

 Highlight special events such as sales, or features of the product
 It provides factual information such as the benefits and where product can be found.
 It is persuasive, it tries to entice the consumer to purchase the product by using emotional and
psychological appeals. E.g. use of sexual appeal adds

Forms of Advertisements
 Informative - gives detail information about the good or service
 Persuasive- uses a variety of techniques to persuade people to buy a product or service
regardless of whether they need it.

g) The Distribution Chain

 The distribution chain refers to the route used in getting the product from the producer to the
consumer in a convenient way.

 (i) Producer-----Wholesaler---------- Retailer-------Consumer

 (ii) Producer ------ Wholesaler----- Consumer
 (iii) Producer------- Retailer ------ Consumer
 (iv) Producer ---- Consumer

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(i) The Producer/Manufacturer
 The producer is the person who converts raw material or semi-finished goods into finished
products or services.

(ii) Wholesaler
 Is the middleman who buys goods from the producer in large quantities and sells in smaller
quantities to the retailer.

Functions of a Wholesaler

 Risk bearing- wholesalers take the risk of storing goods that may not be wanted by customers or
may become obsolete or out of fashion, or the prices may fall forcing them to sell at a loss.

 Warehousing- wholesalers store goods and keep them until they are required by the retailers
ensuring them a ready supply of goods when needed.

 Breaking bulk- wholesalers buy goods in large quantities and repackage them in smaller
quantities and sell them to retailers.

 Transport- wholesalers pick up goods from the manufacturer and at times deliver goods to the
retailer’s premises in their own vehicles.

(iii) Retailer
 The retailer is a business that buys from the producer or the wholesaler and sells directly to the
consumer.

Functions of a Retailer

 Breaking bulk - retailers buy goods in bulk from the manufacturer and sells them in smaller
quantities to the consumers.

 Providing useful information – information gained from customers about the products will
provide feedback to the wholesalers and manufacturers.

 Providing presales and aftersales services - presales is checking the appliances that they are
working before they are sold. After buying the goods, some retailers offer repair and
maintenance services which is known as aftersales services.

Factors that Influences the Method of Distribution

 The type of goods, the value of the goods, who is the product for, and the location.

6.3 MARKETING MIX

 Marketing mix is a collective term that refers to a range of marketing techniques and strategies a
firm uses to reach its target market.

 It consists of 4 elements - Product, Pricing, Place, Promotion [4P’s]

(i) Product
 Product is an item that is produced to meet the needs of the customer in terms of quality,
durability, performance and appearance.
 There is no need to market a product that is not needed by the customer

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 (ii) Pricing
 Pricing is the monetary value of a good/service or the amount asked for the product
 If the price is too high the customer may not buy the product, if it is too low they also may not
purchase it because they may think the quality is inferior.
 Firms may use various pricing strategies to enter the market as discussed above. (6.2)

(iii) Place [Distribution]

 This is concerned with getting the product to right place using the appropriate distribution
channel.
 If the product is to be successful in must be distributed in a place that is accessible to potential
customers.
 E.g. Producer- Retailer- Consumer

(iv) Promotion
 Promotion is a method that a firm uses to make the consumer aware of the product.
 It helps to inform the customer about a product, create an image about the product or encourage
existing customers.

6.4 FACTORS THAT INFLUENCE CONSUMER BEHAVIOUR

 What makes consumers behave in the way they do when they make their purchase
decision? There are several factors that influence consumer behaviour as seen below:

 Price –generally the higher the price of a good, the consumer will buy less of that product,
however, if the price of the product is reduced, the customer would purchase more.

 Price of substitutes – a substitute is one that can be bought instead of another one. When the price
of a product’s substitute increases then the demand for the first product will increase.

 Quality- a consumer may ignore price and pay high amounts for a product if they are getting good
quality.

 Taste- people’s taste differ, therefore marketers must be aware of the various preferences.

 Tradition- some people will purchase a particular brand/product due to family tradition such as
buying Grace Foods products only.

 Income (affordability) – when a consumer’s income rises, expensive goods will become more
affordable. In contrast when consumer’s income fall, they tend to purchase cheaper goods.

 Spending patterns- marketers need to identify patterns so they influence consumers e.g. some
customer always shop at a favourite store.

 Brand loyalty – marketers try to build brand loyalty to prevent consumers from switching to
another brand.

6.5 FACTORS AFFECTING PACKAGING

i. Presentation – the package presents an important role in marketing the good, it’s presentation
should be eye catching and informative .

ii. Branding – gives the product a symbol or design that helps the product to be easily recognized.

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6.6 METHODS OF PROMOTING SALES

 Methods of promoting sales are strategies businesses use to tell customers about the product and
get them to buy the product through advertising, public relations, sales promotion and personal
selling.

(a) Advertising
(i) Functions and forms of advertising (see above)

(ii) Sales promotions such as:

 Trading stamps and coupons- a stamp/coupons is given by some stores to a

customer according to the amount spent and can be exchanged for various articles.

 Loyalty points - loyalty program rewards customers who buy from a business on a
regular basis, this encourages the customer to return frequently.

 Rebate - is an amount paid by way of reduction, return, or refund on what has already
been paid or contributed.

 Bundling – is offering multiple products for sale as one combined product .E.g.
Flow offering extra services to the basic phone line such as internet access

(iii) Loss leaders - are items with huge discounts used to attract customers to the store

(iv) Social media – can be used to promote a firm’s brand or products through social media
such as Face-book, Instagram, Linked-in, and Twitter.

(b) Public Relations

 This is gaining free publicity by inviting members of the press and other media to the
business and special functions.

Examples of Public Relations

 Press release to draw public’s attention to company’s product

 Offering special awards such as scholarships for children
 Offering expense paid trips to long service members or employees
 Sponsoring sporting and cultural activities

c) Sales Promotion (see above)

d) Personal Selling

 Involves the sales person moving from place to place with their products
 It facilitates direct contact and immediate feedback
 It allows the customer to buy on credit from the seller
 Telemarketing can be considered as personal selling, as banks use this facility to make
arrangement for loans with customers

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6.7 TECHNIQUES IN SELLING
(a) Sales Men and their Approaches

 Selling techniques refers to the methods that sellers use to make potential customers
aware of their product.

 Various selling techniques include:

 Cold calling or telemarketing – selling to an unknown persons

 Warm calling – contacting someone you know
 Hard selling – selling a product that may not be needed
 Soft selling – using gentle persuasion to convince a buyer
 Solution selling – helping people to choose the right product
 Customer selling- technique that focuses on different types of customers
.

(b) Merchandising and Adjusting of Pricing Policies

 Merchandizing is the presentation of goods in a shop, examples include:

 a well laid out shop that encourages customers to walk around

 colourful dramatic window displays
 well stocked shelves with banners and labels indicating price
 foods that can be taken out of the package to allow customers to see and touch them

(c ) Methods of Retailing/Distribution Outlets

 Shops – these are small retail outlets which sells a variety of goods referred to as sole
traders, corner shops and convenience shops

 Department stores – are retail outlets that are divided into different departments that
sells a variety of product lines e.g. e.g. Woolworth

 Mail order- potential customers are asked to buy goods through the post, telephone or
online. E.g. goods displayed in a catalogue can be ordered and delivered by post to the
consumer’s home.

 E-commerce – buying and selling goods and services via the internet and distributing
them by post, pay-pack or some other courier service.

 Telemarketing – buying and selling goods or services over the phone to make contact
with potential customers.

 Vending machines – self- service machine that use coins to purchase a drinks or snacks
located at convenient places 24 hours a day.

 Supermarket- these are large self -service stores selling mainly food and small household
items. They attract customers by offering specials and cutting prices on certain items.

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 6. 8 TERMS OF SALES
 This involves the methods of payment you expect the customers to pay for purchases
e.g. cash, cheques, credit card or debit cards.

Advantages Disadvantages

Cash -Quick and convenient -Risk of money being stolen

payment
-Fake notes may be used
-No risk of none payment

Trade credit - Giving customers time to pay -the customer may not pay so
for goods, this encourages them cash is not collected
to buy more immediately, this slows down
cash flows for the business
-Interest is charged on the
amount owed this increases the
profits of the business

Hire Purchase
The customer is offered credit
and agrees to pay for the goods
in regular instalments
- Goods are paid for by -Interest payment increases the
instalments cost of the item
- The buyer enjoys the use of -The goods do not belong to the
the goods while paying for it buyer until last instalment is paid

-The seller can repossess the item

if the buyer defaults

Layaway -The customer makes a deposit -The customer receives the goods
and is protected against price only after full payment is made
Goods are reserved for fluctuations
customer until they can pay for
it

Consignment
Where goods are placed in the
possession of another person to
sell
-The person is known as the -The dealer has the right to return
consignee gets a portion of the the good to the supplier if it
revenue does not sell without any
obligation

Cash discounts -Cash discounts encourage the -The full selling price is not
customers to pay on time, received so the business makes
resulting in an increase in sales less profit

Trade Discounts -Trade discounts encourage the -Trade customers may resell the
customers to buy in bulk, product thus taking the sales
resulting in an increase in sales from the business
and profits

6.9 FUNCTIONS OF CONSUMER ORGANIZATION

Consumers

 Refers to any individual or group that derives satisfaction from goods and services through
the process of exchange.

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 Functions of Consumer Organizations

 Consumer organizations are advocacy groups that seek to protect people from corporate
abuse like unsafe products or false advertising. Consumer organization consist of private and
government organizations.

 Examples of consumer organizations are private organizations and government agencies

which are discussed below.

(a) Private organization - are institutions which educate and lobby for legislation to be put in
place to protect consumers. E.g. Consumer Affairs Commission addresses the concerns of
the consumer and organise consumer fairs and prepare publication.

(b) Government agencies- such as the Bureau of Standards and the Ombudsman.

(i) The Bureau of Standards

 It ensures that the goods produced are sold in good condition and are properly packed
and labelled.

 It sets high standards for which the producer must abide if the goods are to be accepted
in the market.

.(ii) The Ombudsman

 An independent person appointed by the government to investigate any injustice

suffered by individuals dealing with government departments who makes
recommendations to correct wrong doings.

6. 10 ROLES OF CUSTOMER SERVICE

 Customer service is the assistance provided by a business to those people who buy or
use its products or services.
 It provides an opportunity for the business to provide customer loyalty and customer
satisfaction

Roles

 Provides information so the customer is well-informed about the choices available to

them
 Practice adherence to copyright laws to avoid being sued or prosecuted
 Communicate effectively with customers with courtesy calls by contacting customers
to find out what they think about the product.
 Providing credit facility, delivery services discounts to customers when necessary.
 Refund or replace a product if a customer is dissatisfied with a product they have
purchased

6.11 FORMS OF CUSTOMER SERVICE

 Warranty – is a promise issued by the manufacturer to repair or exchange the product
within a specified period in the event that the product does not function as intended.

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  Aftersales Sales - refers to all the help and information that a business provides to a
customer after they have bought a particular product. E.g. repair services, information
follow-up.

 Feed-back - information/reactions to a product/service which is used as a basis for

improvement.

 Toll free number/Call Centres - this allows callers to reach the business without
paying for the call.

 On Line Chat – allows the customer to talk with someone about the difficulties they
are experiencing with the product they have purchased.

 Suggestion Box -used for collecting information from customers about how the
business can be improved and it shows that the customer’s views are important.

 Surveys - used to find out how satisfied customers are and how the business can be
improved.

6.12 CONCEPT OF INTELLECTUAL PROPERTY RIGHTS

(i) Trade Marks

 A trade mark is a registered brand or trade name, it may include a combination of a

name, slogan, logo or colours that identifies a company’s product or services.

(ii) Copy- Right

 Copy right is the ownership by persons of certain types of design, written work or
music. E.g. the following symbol indicates when a copyright exists ©.

 Copy right products cannot be reproduced for commercial use without permission
from the owners.

(iii) Patents

 Patent is the right granted to an inventor of a machine, formula, technique.

 A business that wishes to use the invention must seek permission from the inventor.
 A person must receive a special licence to reproduce the product and must pay a fee.

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