Marketing

 It is a process of identifying customers’ needs and wants, satisfying them.

 the starting point should be market research

Roles of marketing research

 organizing market research

 preparing marketing reports
 developing an appropriate marketing mix, i.e. product, price, place (how to distribute the
product) and promotion

Types of markets

a) Consumer market
 it builds in household goods like televisions, groceries and clothes
 the market is made up of businesses that sell the products to consumers (B2C)
 the products are only sold in many outlets and usually have a low value
b) Industrial market
 it is a market where industrial products like consumable raw materials and components are sold
 Businesses will sell to other businesses
 usually the number of outlets are limited and the products may have a high value
c) monopoly market
 it is a market dominated by one producer, who sell to many customers
 the seller will set prices
d) Competitive market
 it is made up of many sellers and buyers
 the prices of products are established by market forces
 Businesses that invest so as to improve product quality and reduce costs of production are likely
to survive

Approaches to Product Development

1. Marketing concept/marketing oriented approach

 It is when consumers are consulted first to identify their needs and wants and then
make the relevant products
 This means emphasis is on the market rather than the product
 this approach is supported by market research and this increases the chances of product
success and acceptance
 the approach is outward looking and may require capital investment in research
2. Product concept/product oriented approach
 It is when the product is made first and sold to customers without carrying out market
research
  It is inward looking and the business will invest in research and development when
creating new products
 Emphasis is on the product quality and reducing production costs so as to attract
customers

Research and Development (R&D)

 It is a scientific investigation into products and processes so as to discover new ways of doing
things, meaning business will employ scientists and will have labs where research is conducted
 It is more appropriate when developing electrical gadgets, chemicals and medicines

Benefits of the product concept/The approach will help the business to:

i. reduce production cost – meaning goods will be affordable to consumers

ii. improve product quality/get a Unique Selling Point (USP), thus being able to
differentiate products as compared to competitors
iii. It helps in increasing sales/entering new markets as the business may exceed customers
expectations by offering new products

Limitations of R&D

i. The product concept can lead to product failure because customer’s needs and wants maybe
different from the products made by the business

WHY DO BUSINESSES CREATE NEW PRODUCTS?

1. to replace old products

2. to keep in line with changes in customers’ needs and wants which helps the business to
maintain brand loyalty
3. to fight competition by having a Unique Selling Point (USP) or products that are different from
those of competitors
4. to increase market share by appealing to different market segments or providing total solutions
to customers

Market Research

 It is a process of investigating markets and marketing programmes so as to make informed

marketing decisions
 It answers the following questions:
a. who buys the product
b. how often do they use the product
c. what are the incomes of the customers
d. where do they live
e. which age group uses the product
f. how effective were the marketing strategies
 g. who are the competitors

Inserts

Types of market research/data collection

Primary research

 It is a process of collecting data directly from customers through interviews, observations and
consumer panels
 It is called field research

Advantages

 it is cheap, hence profits are not affected significantly

 speed/less time is consumed, so decisions can be made quickly
 a variety of information will be available which can help to increase the quality of decisions

Disadvantages

 information may not be relevant to the problem at hand, so the business may fail to make the
right decisions
 information may be inaccurate because of errors made which can lead to incorrect decisions
 information may be out of date and maybe known to other competitors, so the business may
fail to get a competitive advantage

Evaluation: The choice of method will depend on time available, whether it is a new product or not or
whether the business intends to have a competitive advantage or not.

Methods of market research/primary market research

1. Questionnaire
 it is a list of questions assigned to collect data

Process

Design the questionnaire, taking into consideration the following qualities of a good questionnaire:

 questions must be simple and clear

 use both close and open questions
 questions must not be many
 the questions must not touch on confidential matters
 you must not ask leading questions

Conduct a pilot questionnaire and make adjustments

 collect the data

  analyse the data and write a report

Examples of Questionnaire questions:

 How often do you use the product?

once a week twice a week rarely
 What is your favourite colour for a cell phone handset?
Red Blue Black Silver grey White
 What is your income range?
 Which age group do you belong to?

Merits of using questionnaires

 detailed responses can be made, especially if open questions are used. This will help to improve
quality of decisions.
 It is cheap, especially if the questionnaires are posted online, so the profits of the business will
not be reduced significantly
 information obtained is up-to-date as compared to the use of secondary research

Demerits of questionnaires

 if the questionnaire is poorly designed, respondents may fail to answer the questions, so the
business may fail to make sound decisions
 the response rate may be low, especially in the case of postal questionnaires. This can affect the
sample size and quality of decisions
 Qualitative information will be difficult to use, especially if open ended questions are used, so it
will consume time.

2. Face – to – face interviews

 It is when questions are asked by the researcher and responses are recorded
Advantages
 this method enables the researcher to ask follow – up questions or to verify information
provided
 unclear terms can also be clarified, thus increasing the chances of obtaining correct
information
Disadvantages
 there can be interviewer bias, so information obtained may be inaccurate
3. Focus groups/consumer panels
 It refers to selection of people who have similar characteristics to target market who give their
opinions on the product or service
 The researcher will facilitate the discussion and record the responses
Advantages
 the method allows the business to obtain first hand information which will be detailed.
Disadvantages
  it is time consuming
 participants may discuss other issues other issues irrelevant, so decision making may be
delayed
4. Observations
 it is when the researcher counts objects or items of inventory periodically or observes
customers as they make decisions
Advantages
 the method is inexpensive
 produces quantitative data which is easy to analyse, so decisions can be made quickly
Disadvantages
 the business may fail to explain the behavior of customers
 the customers may change their behavior if they notice that they are being observed, so the
data may become inaccurate
Test Marketing
 It is when customers are given an opportunity to try the product on the a limited scale nd give
their opinions
Advantages
 First hand information is obtained which allows the business to make relevant market decisions
Disadvantages
 some participants may lie to please the researcher
Sampling
 It is a process of choosing a small group of people or items to participate in a research.

population sampling
900
13 million people
people out of 13
million
people

 a sample is therefore, a represantion of the whole population from which conclusions about
the population can be made
 sampling is done because it can be impractical to invite the whole population for research
 generally, it must not be too large or too small because it can affect the conclusions, time
required to undertake the research and the cost of carrying out the research
Methods of sampling
Random sampling
 it is when people are picked from population without any order or reference to a particular
characteristic
 M, F, F, F,
Male,
M, Random sampling
Male
F,F,M,M,F,
M,M,M,M
,F
Benefits
 everyone will have an equal chance of being picked
Drawbacks
 the method ignores the fact that the population is made up of different characteristics, so the
sample may not be a true representative of the population
Quota Sampling
 It is when people are selected from the population basing on certain characteristics and the
people chosen must represent the contribution of the quota
 Characteristics may include gender and age
Process
1. Divide the population into groups
2. Establish the number of people in each category
3. select an appropriate number from each strata. For example, if the population is made up of
40% males and 60% females and the business intends to interview 200 people
40
Males will be: × 200 = 80
100
60
Females will be: × 200 = 120
100
The method therefore helps to ensure that each group is represented accordingly as compared to
random sampling.

Data Analysis and Presentation

 After collecting data, it can be presented using tables, bar graphs, pie charts and line graphs
Insert
Importance of market research
 It helps to answer questions at hand
 generally, the business might be able to know the market size or the likely demands, so the
marketing manager can assess whether it is worthwhile to produce the product
 Information may also help to determine the inventory levels to be held each time
 Competitor activities will also be identified. This can help the business to differentiate its
strategies
 It helps to identify new marketing opportunities, so there will be an increase in sales since
more customers are served
  It will help to identify customers’ needs and wants such that there will be a close match
between goods made by the business and customers’ requirements, leading to customers’
satisfaction and brand loyalty
Limitations
 It is expensive hence profits may be reduced
 inaccurate research methodologies may lead to costly decisions because data may be
misleading
 capital is diverted from other areas of need, so the business may fail to satisfy other objectives
Evaluation:
Generally, market research should be cost effective thus revenue must increase at a faster rate as
compared to the increase in expenses
A business that is product oriented or driven by research and development may also find market to be
of less importance in creating new products

Market segmentation
 Refers to the process of breaking up a total market into subgroups/markets made up of
customers with the same characteristics
A market segment is part of a total market, comprising of consumers with the same characteristics

TOTAL
A
MARKET Market Segmentation consumer s with
B
the same
C
characteristics

Ways of segmenting markets

1. Gender
 markets can be divided into males and female market.
 this is because products preferred by men are different from those preferred by women e.g.
market for dress
2. Age
 markets can be divided into 0-19, 20-35; 36-50 etc
 this is because the types of products consumed may vary from one age group to the other
3. Income
 the income earned by consumers usually affects their spending
 therefore, markets can be segmented into low, medium and high income
4. Region
  location of consumers may affect type of products used due to differences in culture, climate
etc
 the market can therefore be segmented into cold and hot regions
Merits
 it makes advertising/promotion to be effective
 a suitable price can be charged
 allows business to identify markets to target and those to avoid e.g. a low income segment
 it makes research easy, thus making the business know people to include e.g. school children
Niche Market
 is a highly specialized small sub part of the large market made up of consumers with similar
characteristics
Mass Markets
 a large number of potential customers
 the product is standardized so as to appeal to a large number of potential customers
 BUT, advertising costs can be high

Marketing Mix

 These are the elements and strategies that make up a successful product.
 They are known as 4 Ps
Price
 it is the monetary value consumers put on a product
Factors considered when setting a price
1. Cost of production
 usually a business can calculate the cost producing or buying a product and then adds a mark-
up to arrive at the price
 the price must cover costs of production
2. Level of competition or prices charged by competitors
 a business can charge a price that is equal to or less than the prices charged by rivals or
competitors
 if a business over – price its products as compared to competitors, it may lose customers to
such rivals
3. Quality of the product
 usually high quality products will attract a high price and a low quality product will
attract a low price
4. Stage in the product life cycle
 usually products in the introductory stage attract a high price compared to products in
the decline phase/stage
5. The objectives of the business
 if a business wishes to capture a large market, it may charge a low price
 if a business intends to establish a brand image, it may charge a high price
6. Level and nature of demand
  generally, if demand is high and inelastic, a business may charge high prices because
customers will continue to buy at a high prices
 HOWEVER, if demand is low and elastic, the business may charge low prices so as to
attract customers
Pricing Strategies
1. Cost plus pricing
 it is when average cost per unit is established and a mark-up is added to arrive at the
price
 e.g. if the cost of production per unit is $30 and a mark-up of 20% is applied, the price
per unit will be
20
𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 = × 30 + 30
100

= $6 + $30

= $36

 e.g. a business manufactures chocolates. In 2012, 10 000bars were produced at a total

cost of $40 000. The business maintains a mark-up of 25%. Calculate the selling price per
bar
 Process
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡
 calculate cost per unit =𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠
25
 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 = × $4 + $4
100

= $5

Advantages

 This method is easy to apply, so the managers can quickly calculate the selling price and serve
the customers
 The method also enables a business to cover its costs of production
Disadvantages
 the use of the method can lead to cover or under-pricing because it ignores the prices charged
by the competitors. This means it may fail to sell many goods if they are over-priced.
Penetration Pricing
It is when a business enters a market at a low price. The price will gradually increased

Price
$
 Time

 The strategy is used to attract customers and to create brand loyalty, especially in a
competitive market
 It is appropriate if the business produces a lot of products which will enable it to reduce the
cost per unit. This means it can sell at a lower price and still gain more profits by selling high
volumes
 BUT, some customers may associate low prices with poor quality, which can lead to low sales

Price skimming
 it is when a business charges a high initial price that will be reduced as time progresses

Price $

Time

 The strategy is appropriate if the business has a temporary monopoly or if the products are
unique
 The main object is to target high earners first and then reduce the price to target other
segments or when competition intensifies
 BENEFITS: - The method helps the business to recover the R ‘n’D costs quickly
 the business can also establish a brand image as customers may associate a high price with
quality. This may lead to brand loyalty
 HOWEVER: - the business may fail to sell many products as they will be unaffordable in other
market segments

Competitor Based pricing

  It is when a business charges prices that are at the same level or that are below those of
competitors
 BENEFITS: -The method helps the business to increase sales because prices will be the same or
lower
 BUT, the costs of production are not considered, which can lead to under-pricing. This is
because the cost of production may vary from one organization to another
 it requires some time to research on the price of the competitors

Loss leader pricing

 It is when a product is sold at a price below its production costs
 BENEFITS: - the sales of the business may increase, assuming that customers will buy the loss
leader and the other products
 a loss leader is therefore a product that is sold at a price below its cost of production or cost of
purchase
 BUT: - use of this method can damage the image of the brand because customers may question
its quality
 The business will also forgo a lot of profits by selling a product below the cost of production
Psychological pricing
 it is pricing meant to create an impression in the mind of customers that the goods are of high
quality of affordable e.g. $1.99;$999
 BENEFITS: it can help to attract high income earners who associate high prices with high quality
 if prices are not rounded up, sales volume may increase because customers may think products
are cheap
 HOWEVER, high prices may discourage customers who are price sensitive, which means sales
may be low
 The method also ignores the existence of a competition, meaning the goods may be overpriced
Promotional Pricing
 It is when prices are reduced for a set period of time
 BENEFITS:- the method helps the business to clear inventory/to increase sales during off peak
period
 BUT: - the business will sacrifice profits and some customers would just target the promotions
which can affect normal sales

W16 p11
 3(c) Identify and explain two possible pricing methods that Amelia might use.
 Knowledge [2] – award 1 mark for each role identified
 Application [2] – award 1 mark for each relevant reference to this business
 Relevant points might include:
 penetration pricing [k] as need to get people to try her sweets [app]
 price skimming [k] as it’s a niche market [app]
 cost plus pricing [k] as likely to have large set up costs [app]
 promotional pricing [k]
 competitive pricing [k]
  psychological pricing [k]
 4 Application: sweets / candy, new
 business, business plan, money spent on
 packaging, secondary data, people like
 sweets, niche market, adult.

Theory of demand and supply

Demand
 is the quantity of a product consumes are willing and able to buy at a given price and time
 The level of demand varies from time to time due to the following:
a) Consumers’ disposable income
 a rise in disposable income can lead to and increase in demand
b) changes in population size and structure
 generally, an increase in population can lead to more goods being demanded
 a change in the structure of population can also lead to changes in demand
 if the population is made up of the elderly, it means an increase in the demand
for products related to the aged, e.g. medical care
c) Availability of close substitutes
 a substitute is a product that can be replaced by the other
 if the number of substitutes increase, demand for the related good decrease
d) Price of complementary goods
 a complementary product is consumed or used together with other products
 a rise in the price of one product leads to a fall in demand for the related goods
 e.g. if the price of flour increases, it can lead to a decrease in demand for
baking powder and milk
e) Advertising
 usually, an increase in advertising expenditure can lead to high demand,
especially during the introduction and growth stage
 this is because consumers will be aware of the product
f) Price of the product
 generally, if price is reduced, more products will be demanded
 an increase in the price will lead to low demand

Price $
 Quantity demanded

Price Elasticity of Demand (PED)

 It is a measure of the responsiveness of quantity demanded to a change in price

 Price elasticity can be less than one or more than one
 If it is less than 1, demand is said to be inelastic.
 If it is more than 1, demand is said to be elastic
a) Inelastic demand
 It means customer are less sensitive to price changes, that is the change in
price will be more than the change in quantity demanded
 e.g. in 2004 Knowstics Academy charged $1 980 and 350 students were
enrolled
 In 2015 the fees were increased to $2 500 and 345 students were enrolled
 Calculate the price elasticity of demand:
% 𝑜𝑓 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑
𝑝𝑒𝑑 =
% 𝑜𝑓𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑝𝑟𝑖𝑐𝑒

350 − 345 2 500 − 1980

= × 100 ÷ × 100
350 1 980

1.43
=
26.26

= 0.05, therefore, demand is inelastic

 If demand is inelastic prices should be increased, to increase sales revenue and profits
 if prices are reduced, the business may reduce sales revenue as customers will not buy more of
the product
 usually, demand is inelastic if:
i. product is a basic commodity or habit forming
ii. if customers are loyal to the product
iii. if there are no close substitutes
Elastic Demand
 It means customers are price sensitive such that they respond more to a price change
 e.g. a business sales holiday facilities, the business increased the prices by 10% and demand
increased by 15%. Calculate the price elasticity of demand and comment.
 15%
10%

= 1.5 , therefore demand is elastic

Supply

 it is the quantity of a product producers are willing and able to offer at a given price and time
supplies are influenced by the following.
a) Price
 producers are willing to supply more if prices are high and less is supplied at
low prices.

Price $

supply curve

Quantity

Cost of production

 If the cost of production is high, producers will be less willing to offer goods to the market
 This is because high cost of production will reduce the profits earned by the business
 The cost of production can increase due to depreciation of a currency, increase in wages and in
taxes
Climatic conditions
 The bad weather conditions can lead to lower harvest such that less will be supplied by the
producers

PRODUCT
 This refers to the product feature and range of the product
 The features include, brand name, packaging and the colours used
Branding
 It is a process of naming products or using distinguishing features on a product
Brand name
  It is a unique name given to a product e.g. Foschini, Samsung, etc.
 The names can be a family name or
 Individual brand name.
 A family brand name covers a number of products that may have different uses e.g. Samsung
uses a family name on smart phones, televisions, smart watches etc.
 Individual Brand name just covers one product e.g. geisha

Benefits of branding
1. It distinguishes a product from those of competitors. This means customers can easily identify
it, leading to more sales
2. It helps when launching new products especially if the brand name is extended to cover the
new product. This product will be quickly accepted by customers as they will be guaranteed of
quality
3. Advertising will be easy and cheap, especially if the business uses the family brand name when
advertising
4. It allows a business to charge a premium or high prices on its products. This will help it to
increase sales revenue and profits because customers will be loyal to the brand name.
5. It helps a business to create a brand loyalty and image. This means customers will continue
buying the products and the business will have s steady cash flow.
NB: When choosing a brand name, the following factors must be considered.
a) The name must be easy to remember and to pronounce so that it sticks in the mind of
consumers e.g. Papa Chinos
b) The brand name must be unique and copyrighted so as to prevent other people from
using the same name e.g. Wing Wah
c) The name must be related to the products e.g. chicken slice
d) The name must not be offensive
Packaging
 When packaging products, the business should consider:
a) Government laws on use of certain packaging materials. Generally, the packaging
should be bio-degradable
b) The cost of packaging in relation to the product. The cost of packaging must be lower
than the cost of the products inside.
Benefits/importance/use of packaging
 It protects the product inside, so customers will be more willing to buy and consume the
products. This is because they will be confident that the product is not a health threat
 It makes the product easy to transport, so the business can easily distribute the product to
many geographical locations. This can lead to high sales.
 It reduces advertising expenditure, especially if the packaging is colorful. A good pack is a silent
salesman. Consumers will be tempted to buy the product inside if the packaging is attractive
enough. This will lead to high sales
 It distinguishes the product from those of competitors which helps the business to attract more
customers.
  Some packs can be reused, which can help to increase sales. This is because customers can use
the pack for other purposes e.g. storing ingredients in the kitchen
 Information about the product can be written on it e.g. ingredients in a product or hoe to use
the product. This will also increase sales because customers will be informed.

W16 p11

List ingredients [k] as it’s a food product [app] must state what it
contains to avoid legal action [an]
Promotion / to attract customers [k] to buy[an] from the new business
[app]
Inform [k] customers about its flavours [app] so people know what is
in its products [an]
Protection / keep item fresh [k] so the sweets are not damaged [app]
otherwise products might be wasted [an]
Boost brand image / impression of high quality [k] as it is a niche
market [app] which can help increase sales / revenue [an]
Easier to store / transport [k]
Drawback of packaging
 can increase cost of the product, especially if expensive materials are used, so the goods may
become unaffordable
 Packaging may also damage the environment, so the business may face legal expenses and bad
reputation

Product range
PLACE
 It refers to giving a product place utility using channels of distribution
 A channel is a path or route taken by a product from producer to consumer.
 Channels of distribution can be direct or indirect
Channel of distribution

PRODUCER/MANUFACTURER

1
WHOLESALERS
2 3

RETAILERS

CONSUMERS

PRODUCER
a) Indirect Channels
 It is when a manufacturer uses middlemen/intermediaries to facilitate the distribution of
goods to consumers
 The middlemen include:
1. wholesalers
2. agents
3. retailers
Wholesalers
 buys in bulk from the producer and resells them in bulk to retailers
 Importance of wholesalers include:
 provide storage facilities
 provide transport
 give credit facilities to customers
 These services will help to increase sales
 Examples of wholesalers include: Mohammad Mussa, Metro Peach etc.

Advantages to the producer/manufacturer of using a wholesaler in the distribution channel [CIE W15
12 Q1d]
 Access to many retailers/markets as wholesaler might have links in many
places/countries leading to more sales
 Hold less inventory, so improve the firm’s working capital as it does not need to store
many products
 Wholesaler provides distribution/transportation, so lower costs for the business which
in achieving high profit margins
 Able to focus on other tasks/no need to deal with lots of retailers, saving time for the
business
 Wholesalers buy in bulk
 Help advertising, so more people become aware of the product
 Lower administration costs/no additional employees as there will be fewer invoices to
send/chase
 Wholesaler gives feedback from customers/identify trends
 May receive cash more quickly, improving cash flow

Retailers
 Buy in bulk and sell in small quantities to consumers.
 Their main functions include:
 breaking bulk
 gathering market information or consumer complains
 providing credit to well known customers
 promoting products on behalf of producers e.g. OK Grand Challenge
 Examples of retailers include: OK, Spar, TM, Bon Mache

Problems of an indirect channel

  Price of the product will increase from one stage to another, making it unaffordable to
consumers

Direct channel
 It is when goods are sold by the producer to the consumer, so no middlemen is used
 BENEFITS of using a direct channel include:
 producer will have control over the product
 producer can offer after sales services
 producer can collect data from consumers which will help in improving products
 BUT:
 the producer may fail to sell many goods if outlets are limited
 the producer will deprive himself from middlemen services like storage, delivery and
advertising
Factors considered when choosing a channel of distribution
 Complexity of the product:
 if the product is complex and require back-up services, a direct channel can be used.
 This will enable the producer to give technical support to the consumer periodically
 E.g. a manufacturer of industrial generators may need to sell, deliver, install and
maintain the generator
 Perishability
 perishable products are usually sold using a direct channel so that the product reaches
the final consumer quickly
 BUT, in some instances, the product can be refrigerated. HOWEVER, the product cost
will increase.
 Location of consumers
 If consumers are dispersed an indirect channel can be used to ensure that all
customers get the products
 Methods used by competitors
 a business can use a different method from those used by competitors to distinguish
the product or increase sales
 e.g. if a competitor is using a direct channel, the business can use an indirect channel
so as to sell more products
 Cost of the product
 usually, high value products are sold using a direct channel so as to control the price
 if an indirect channel is used, the good may be unaffordable to consumers
PROMOTION
 Includes all business activities aimed at:
 creating customer awareness about the product
 persuading customers
 remind customers to buy the product
 create a good brand image
 This can be achieved by:
 1. Sales Promotion
2. Personal selling
3. Publicity/public relations
4. Advertising

Sales Promotion

 It is the use of short-term incentives to increase sales

 These can be in the form of:
 competitions
 discounts
 gifts
 buy –one get – one free (BOGOF)
 IMPORTANCE/BENEFITS of sales promotion:
 draw the attention of customers
 clear inventory as customers may prefer cheap products
 BUT:
 the business will sacrifice profits by selling goods at lower prices and giving free gifts
 some customers may wait for promotion time only, so normal sales can be reduced

Personal Selling

 It is when the use of sales people who will encourage customers to buy by explaining to
customers how a products is used or informing them about the products that are available
 IMPORTANCE of personal selling:
 customers will have a clear understanding of the product, so sales may increase
 BUT,
 sales people require salaries, which will reduce profits
 the impact will also depend on the communication skills of the sales person.

Publicity/Public Relations

 It is when a business engages in newsworthy activities to create a good image.

 These activities include:
 donating to the less privileged
 sponsoring sporting activities e.g. Banc ABC sponsoring Dynamos Soccer team
 inviting media houses when launching new products e.g. Telecel go or when the
organization excels
 IMPORTANCE:
 sales will increase because customers will like to be associated with the brand
 BUT,
 the business may be donating/sponsoring, so profits of the business can also be
reduced
Advertising

 it is any paid form of promotion using advertising media.

Advertising Process
 set the advertising objective
e.g. to increase sales or to
inform customers

 set an advertising budget

 develop the advertising

campaign

 choose advertising medium

 evaluate the effectiveness of

the advertising campaign

 Generally, businesses must ensure that advertising is cost effective, meaning they must get
more sales from every dollar invested in advertising
 HOWEVER, advertising is usually cost effective in the early days because it increases awareness
and sales, BUT, as time progresses the market can become saturated such that customers will
not respond to advertisements.

Sales
 Advertising expenditure

Other issues in marketing

Product Life Cycle

 It refers to the changes in the level of sales of a product over time.

 The cycle is broken down into:
 introduction
 growth
 maturity
 decline as follows:

Diagram

Sales ($)

Growth Decline

Introduction Maturity

Time

 The knowledge of the product life cycle is important because it helps when developing
appropriate marketing strategies
 This is because the demand of a product will change overtime.

INTRODUCTION
 PRICE- may be high compared to competitors (skimming) or low (penetration)
 PROMOTION – high levels of informative advertising to make consumers aware of the
product’s arrival on the market
  PLACE (distribution outlets) – restricted outlets – possibly high – class outlets if a skimming
strategy is adopted
 PRODUCT – basic model
GROWTH
 PRICE - if successful, and initial penetration pricing strategy could now lead to rising prices
 PROMOTION – consumers need to be convinced to make repeated purchases – brand
identification will help to establish customer loyalty
 PLACE (distribution outlets) – growing numbers of outlets in areas indicated by strength of
consumer demand
 PRODUCT – planning of the product improvements and developments to maintain sales
MATURITY
 PRICE – competitors likely to be entering market – there will be need to keep prices at
competitive levels
 PROMOTION – brand imaging continues – growing need to stress the positive difference with
competitors’ products
 PLACE (distribution outlets) – new models, colors, accessories etc. as part of extension
strategies
DECLINE
 PRICE – lower prices to sell off stock – or if the product has a small ‘cult’ following, prices could
even rise
 PROMOTION – advertising likely to very limited – may just be used to inform of lower prices
 PLACE (distribution outlets) – eliminate unprofitable outlets for the product
 PRODUCT – prepare to replace with other products –slowly withdraw from certain markets

Product Life cycle variation

 The length of the product life cycle will vary from one product to the other
 some products will experience a rapid increase in sales that will be followed by a quick decline,
for example, fashionable products.
 Other products will experience a steady increase in sales that will be followed a gradual decline
after a long time, for example, coke.
Illustrations

Sales ($) Sales ($)

Long life

Short life
 Time Time

 The length of the product life cycle will affect the ability of the business to break-even or make a
profit, to generate more cash, the expenditure in new products and the level of unsold
inventory
 If the life cycle is short, it means:
a) The business must quickly invest in new products which increases expenses
b) The product will fail to break-even or generate adequate profits
c) the business will experience cash flow problems because products will not be generating
adequate cash
d) The business may have a lot of inventory because customers will now be buying latest
products
Product life cycle extension or rejuvenation
 These are strategies aimed at prolonging the life of a product such that the sales will increase
again

Sales ($)

extension effect

Time

Ways of extending the life of a product

1. Targeting new market segments such as exporting. This will increase sales because new
customers will purchase the product
2. Finding new uses for the product. This will increase sales because the product will be used for
many purposes
3. Re-branding, which will give the product a new life (image)
4. Change the design or appearance the product in terms of color, shape and packaging. This will
attract existing customers and new customers which will lead to more sales

PRODUCT RANGE
 it refer to a complete portfolio of products that a company manufacturers and or markets
 a business might have a wide or a narrow product range
Advantages of a wide product range
 it helps to spread risks by not relying on one product. This will give the business continuity even
if one product fails
 help to increase market share because the business will serve many customers with different
needs and wants
 will help to improve the image of the business as customers will view it as a big and organized
organization

Market Share
 It refers to a portion of the total market held by the business

𝑆𝑎𝑙𝑒𝑠 𝑜𝑓 𝐴
𝑀𝑎𝑟𝑘𝑒𝑡 𝑠ℎ𝑎𝑟𝑒 𝑜𝑓 𝐴 = × 100
𝑆𝑎𝑙𝑒𝑠 𝑜𝑓 𝐴 + 𝐵 + 𝐶

 A business that holds the largest percentage / portion of a market is called a market leader.
 A business that supplies a small portion of the market is called a market follower

Change in market share

 The market share of a business can increase or decrease because of a number of factors.
 The following information relates to the mobile markets:

2013

Subcribers of A
Subcribers of B
Subscribers of C
Subcribers of D
Subcribers of E
Subcribers of F
Subcribers of G
Subcribers of H

 Total Market Sales = $100 million.

 2014

Subscribers of A
Subscribers of B
Subscribers of C
Subscribers of D
Subscribers of E
Subscribers of F & G
Subscribers of H

 Total market Sales = $ 105 million

i. Calculate the market for business A in 2013 and 2014
ii. Suggest four possible reasons for change in markets share
1
In 2013 = × 100
8

= 12.5%
2
In 2013 =8 × 100

= 25%

 The market share increased by 25% due to:

a) improvement in quality of product which attracted more customers to the business
b) Takeover of competitors or competitors closing down which means customers moved
to the business
c) Improved customer care which attracted more customers to the business
d) Improved product range which helps in giving customers to the business
e) Price reductions in an elastic market which means customers now prefer the business’
products ahead of competitors
f) Use of effective promotion strategies which help in persuading customers to prefer the
products of the business ahead of the competitors’

The market sales of shoes in 2010 were $200 000. Your shoes managed to sell shoes worth $50 000. In
2012 the total market sales were $250 000 and Your Shoes managed to sell $51 000.
i. Calculate Your shoes market share of he 2 years.
ii. Identify possible reasons for the change
 In 2010
𝑆𝑎𝑙𝑒𝑠 𝑜𝑓 𝑌𝑜𝑢𝑟 𝑆ℎ𝑜𝑒𝑠
Market Share = × 100
𝑆𝑎𝑙𝑒𝑠 𝑜𝑓 𝐴+𝐵+𝐶

= 25%

In 2012

Market Share = 20.4%

Importance of marketing

Reasons why consumer spending patterns change

Ways of increasing customer loyalty

Competition

Benefits of competition to consumers

 Customers will get good customer services, this is because the business will offer after sales
services

Disadvantages

 It can confuse consumers, hence they can find it difficult to decide, because the goods will be
slightly differentiated
 The quality of products can be compromised because the business may be forced to use
inferior (sub – standard) raw materials so as to reduce production costs
 Customers may be forced to buy products because sales people will be using the hard sale
approach

Ways small businesses can use to fight competition

1. Opening for long hours or during public holidays
2. Offering personalized services, that is having time to chat with customers or explaining to them
how to use and maintain products
3. Serving niche market which large businesses are not willing to provide services to. A niche
market is a highly specialized, small sub-part of the market made up of consumers with similar
characteristics
4. Advertising products so as to inform and persuade customers

BUT, small businesses may find it difficult to fight large businesses because they lack economies of
scale and are not able to cover high overheads like rent. Usually small businesses end up charging high
prices which will make them uncompetitive.