Marketing Personal

Strategies







Table of contents

1. Market and Marketing Definitions ....................................................... 1
2. Market Functions .................................................................................. 2
3. The Development of a Marketing Strategy ........................................ 3
4. Marketing Concept ............................................................................... 7
External Constraints ......................................................................... 7
Understanding and influencing Buyer Behaviour ............................. 8
Forces that influence buying Decisions ............................................ 8
Economic Determinants of Demand ................................................. 9
Internal psychological Variables ....................................................... 9
Social and cultural Influences ......................................................... 10
5. Market Segmentation ......................................................................... 11
6. Marketing Research ........................................................................... 11
Marketing Plan Format ................................................................... 14
Marketing Plan Questions .............................................................. 15
7. Product Development ........................................................................ 16
Product Decisions ........................................................................... 16
Branding and Packaging ................................................................ 16
Building the Product Mix ................................................................. 16
Product Innovation .......................................................................... 17
8. Pricing Decisions ............................................................................... 18
Setting Base Price .......................................................................... 18
Pricing in the Distribution Channel ................................................. 18
9. Channels for Distribution and Logistics .......................................... 18
Selecting Distribution Channels ..................................................... 19
Selecting and motivating Distributors ............................................. 19
Physical Distribution or Logistics .................................................... 20
10. The Promotional Programme ............................................................ 20
11. Advertising .......................................................................................... 21
Importance of Advertising ............................................................... 21
Advertising Channels...................................................................... 22

Attachments
Marketing Guide
Market Field Study Plan
List of SBS Network Business Information Handbooks
List of SBS Consultants

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1. Market and Marketing Definitions
Marketing is an important operating arm of a business enterprise. Its activities begin even
before the product or service is produced and continue after the sale is made. This paper will
provide an overview of the marketing function. Starting with basic definitions of marketing and
market and discussing marketing functions and the role of marketing in the economy, the paper
proceeds to cover the development of marketing strategy, consumer behaviour and marketing
research, and concludes with a treatment of the marketing decision areas - product, price,
distribution and promotion.

Marketing is as old as history itself. It embraces the activities we engage in to satisfy our
economic needs and wants.
The central idea in marketing is the transaction, which is the exchange of desired objects by two
parties. Such exchange could be product for product (as in trade by barter), or product for
money in its various forms. For marketing or exchange to take place, it is necessary that there
be:
1. two or more parties who have unsatisfied wants;
2. some products or services and money to exchange; and
3. some means of communication between the parties involved.

We now give a definition of marketing.
Marketing is the set of activities that facilitates exchange transactions involving economic goods
and services for the ultimate purpose of satisfying human needs. What activities are implied in
the above definition? They are many, but will be discussed under 'marketing functions'.

Market as product buyers
To the African the word 'market' almost invariably means the marketplace which not only fulfils
its economic role as a place for buying and selling, but also serves as an important social,
political and religious meeting place especially in the rural areas. A second meaning of market,
which is to be emphasised by us, is market as consisting of buyers of a product or service. Our
formal definition of market is:

A market for a product or service consists of individuals or organisations that have purchasing
power and that are current or potential buyers of the product or service.


We should note three things about this definition.
1. A market could be ordinary people purchasing according to their needs or it could be
organisations such as business firms, non-profit institutions such as schools and
hospitals, or the government - federal, state or local.
2. To be included in the market for a product an entity must have purchasing power, that
is money in its various forms - cash, cheque, credit.
3. Current buyers and potential buyers are included in the definition of a market. Thus,
for a product being newly introduced in an area, the market consists entirely of
potential buyers. A major challenge to marketing is to convert potential buyers to
actual buyers; in short to create a customer.

A fourth meaning of market is the verb sense, that is 'to market a product'. It suggests the
performance of activities needed to bring an existing product to buyers, a meaning clearly
related to the meaning of marketing. We now take up a discussion of these activities or
marketing functions.




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2. Marketing functions

Within any business organisation, the marketing arm of the company fulfils some important
functions which are activities that must be performed to move products from producers to
consumers. From the literature ten such activities may be identified as follows.
1. Product Development Marketing advises on what to produce; the quality, style,
design, brand name and packaging - all based on consumer and market research.
2. Pricing Marketing plays a large role in setting prices, whether at, above or below the
competitor's prices, and in determining a system of discounts for the middlemen who
handle the product.
3. Buying This involves selecting from an assortment of goods, determining quantity and
quality, selecting sources of supply and negotiating the terms of purchase. (This is
sometimes called purchasing or procurement.)
4. Advertising is the impersonal presentation of goods through the mass media - radio,
television, newspapers, etc. Advertising agencies may assist marketing in performing
this function.
5. Personal selling. This is selling done through person-to-person contact. A large
number of salesmen are engaged in outside sales work or in retail sales in shops and
market-places. The sales force must be properly selected, trained and motivated to
perform.
6. Sales Promotion and Merchandising This involves the development of such tools as
point-of-purchase displays, window displays, free samples of the product, exhibitions
at trade fairs, news releases, price reductions during special 'sales' and so forth.
7. Physical Distribution Marketing arranges for the physical handling of goods: storage,
transportation and proper inventory management and delivering the products/services
to customers.
8. Market research Marketing must gather and analyse information about demand,
consumer wants, competition, government policies, new products and general
changes in our social structure. This function underscores the fact that marketing
begins even before the product is produced.
9. Credit Management and Financing. Credit is often used in serious business
transactions where firms buy and sell on credit. In addition, various types of financing
provide permanent as well as temporary capital for the marketing process.
10. Post-sale Transactions. Marketing must arrange to handle customer complaints after
the sale, and provide for after-sales service, especially for machines, equipment and
consumer durable goods. This shows that marketing does not end with the ringing of
the cash register.

3. The Development of a Marketing Strategy

Any organisational entity that engages in marketing activities to serve a customer group with a
product or service is a marketer. We now consider how a marketer plans his marketing
programme. This is part of the overall job of marketing management, which is concerned with
the tasks of setting marketing goals, analysis of market conditions, planning the marketing
effort, setting up suitable organisation, execution of plans and control of operations.

Marketing mix: variables controlled by the marketer
A key input into the development of marketing strategy is market analysis, which is a detailed
inquiry into market conditions - buyers (size, location, quantities purchased, attitudes and
preferences, etc.), competitors and middlemen carrying the product. The marketer then chooses
a target market to cultivate and develops his marketing strategy by making decisions regarding
the product, the price, the distribution and the promotion in order to satisfy the needs of the
target market and provide the best chances of achieving the stated marketing goals.

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The combination of controllable variables - product, price, distribution and promotion - which
spells out the marketer's strategy is called the marketing mix. The kinds of decisions to be made
for each component of the mix are as follows.
1. Product assortment: design, quality, branding and packaging; product additions,
modifications and deletions.
2. Price Setting base price; middlemen's margins, allowances, discounts; freight
payments and geographic considerations, product-line pricing; charging established
prices.
3. Distribution Selecting channels of distribution; selecting and managing distributors
or middlemen to carry the product; establishing a logistics system for storing, handling
and transporting the product.
4. Promotion to stimulate market interest in the product by determining the relative
contributions to be made by advertising, personal selling and sales promotion (for
instance, free samples); choosing advertising message; creating advertising copy,
choosing suitable media; managing the sales force.

The concept of the marketing mix was popularised by Neil Borden in 1954. Another author,
Eugene McCarthy in his book Basic Marketing: A Managerial Approach uses a useful
mnemonic - 'the Four P's' - to denote the four elements of the marketing mix - Product, Price,
Place and Promotion - where 'Place' stands for distribution.

The key notion suggested by the word 'mix' is that the plan of action is an integrated one in
which the decisions on the four variables make sense in relation to one another. Thus, a high
quality product would ordinarily carry a high price, be distributed through retail outlets having a
quality image and the advertising would be in appropriate media that could display the superior
features of the product.

Another point to be noted is that when a marketing mix is developed, an alternative mix that
differs on all or some of the four decision variables might conceivably be used to meet the
needs of the market and the goals of the marketer. This means that there are different ways to
reach a target, but none is guaranteed success ab initio. To illustrate, we consider alternative
marketing mixes for the marketing of bottled palm wine.

Problem
Suppose that market analysis indicates promising opportunities for the marketing of bottled
palm wine, where it is assumed that the technology for the preservation of palm wine has been
perfected. Sketch two alternative marketing strategies that could be implemented.

General observations
Palm wine is an alcoholic drink which is in direct competition with beer. Because the wine tapers
are getting older and young men in the rural areas are not available, or if available not
interested in learning the skill of wine tapping, the product is getting more and more scarce and
its price is virtually exceeding that of beer. The bottler of palm wine, under the present
conditions of scarcity of supply of the raw material, will therefore have the major problem of how
to make the price of the finished product competitive with the price of beer.

Marketing mix 1
One strategy is to make the product of very high quality, and package it in a distinctive bottle
that does not look like the beer bottle. For pricing, the price is set higher than beer but not as
high as imported foreign wines. For distribution, the kind of high volume distribution channels
utilised for beer is not used; instead the channels for hot drinks and foreign wines is used; this
means that the product is displayed on shelves in shops. For promotion, it is now apparent that,
given the decisions made already on the other components of the marketing mix, the
promotional job is to present the bottled palm wine as a prestige drink that is surrounded by
tradition and certainly superior to beer; a product that one should use in traditional and other
important ceremonies as well as for quiet enjoyment. Advertising copy that will properly portray
this image could include traditional ceremonial settings, and drinking with cow horns and

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calabash cups instead of glasses. Actually, the product is positioned to compete with foreign
table wine and not with beer.

It is apparent that the above strategy will not lead to very high volume sales, but with a
moderately high price the level of sales could lead to profitable operations.

The Marketing Mix
PRODUCT PRICE
- Scope of product mix
- Depth of product mix
- Quality
- Design
- Packaging
- Maintenance
- Service
- Warranty service
- Possibility of returning a
purchase
- Price positioning
- Rebates and conditions of
payment
- Financing conditions
PROMOTION PLACE
- Advertising
- Public relations
- Personal sale
- Sales Promotion
- Brand Policy

- Channels of distribution
- Distribution density
- Lead time
- Stock
- Transport

Marketing mix 2
An alternative strategy, especially if the wine supply problem could be solved, for example
through palm plantation development and improved tapping methods, is to position bottled palm
wine as a direct substitute for beer. The product will be of good quality but will not be fancifully
packaged; in fact, beer bottles could be used. The emphasis will be to reduce the costs of
production as much as possible. The price will be competitive with beer, that is, it will not
exceed the price of beer.

Distribution channels will be similar to those used for beer distribution, that is there will be
appointment of major distributors and attaches as well as direct supply to major customers such
as hotels and clubs. Promotion will portray the product as more satisfying and nourishing than
beer, a product that fits into any occasion - whether traditional or modern. Provided the price is
low enough, the wine can be presented as the common man's drink, whether in the village or in
the city.

We have so far given only the bare outlines of two alternative marketing mixes. Many details
remain to be filled in for actual implementation. It cannot be determined ahead of time which
strategy will be more successful than the other, especially as the effects of uncontrollable
variables such as competitive reactions are not known.


4. Marketing concept

If a business conducts its affairs in such a way that the needs of its customers are always kept
in view, and every effort is made to give value and satisfaction to the customers while pursuing
its own goals such as profit, it is said to be guided by the philosophy of the marketing concept.
Such expressions as 'the customer is king' or that 'marketing should begin and end with the
consumer' or being 'customer oriented' are all statements expressive of the marketing concept.

The marketing concept is quite an idealistic philosophy, especially in Africa where various basic
products and services are in scarce supply, and the sellers have little interest or motivation in
pleasing customers. Further, government monopolies exist and seem unconcerned about

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customer needs or complaints. The marketing concept is likely to be applied more seriously
when there is a strong competition in the market; the marketer who creatively caters to
customer needs is likely to win a differential advantage over less imaginative competitors and
thereby realises more sales and profits.
External constraints: variables not controlled by the marketer
We have seen that a marketer controls the variables - product, price, distribution and promotion
- to determine his marketing mix, and that he should execute his plans with the philosophy of
the marketing concept. In addition, he has to contend with a number of external variables that
affect the marketing effort. These variables are not ordinarily controllable by the marketer and
are therefore classified as environmental constraints. They include competitors, the state of the
economy such as growth or recession, consumers and their unpredictable behaviour, suppliers
and middlemen, business-related laws and regulations, technology, the physical environment
such as natural resources and climate and the larger society with its culture. These complicate
the marketer's tasks enormously and lead to a situation where strategies that were effective
yesterday may not work at all today.

It should be noted that while the environmental variables affect marketing, the environment in
turn is affected by marketing. For example, consumers' needs, values and preferences
determine what is produced and how it is presented, and the larger society with its culture -
customs, languages, religions and so on - casts a pervasive influence on the marketing effort.
Marketers' actions in turn influence society by exposing people to new products, services and
ideas, thereby for better or for worse breaking down the traditional modes of behaviour and
fostering new attitudes and habits.
Understanding and influencing buyer behaviour:
Knowing your consumer
It cannot be over-emphasised that marketing should begin with a thorough understanding of the
consumer himself - his needs, location, preferences, attitudes, perceptions and socio-economic
characteristics (age, sex, income, etc.). The marketer then tries to build the information
gathered into the design and execution of his marketing strategy and tries, through promotional
methods such as advertising, to influence consumer attitudes and behaviour in favour of his
product or service.

When a marketer launches his product or service and fails to secure sufficient consumer
patronage, it is often a signal that he has not done his homework with regard to consumers'
needs, though occasionally it might be due to the inept planning and execution of his marketing
programme.

It is sometimes necessary to make a slight distinction between 'buyer' and 'consumer' because
the person who makes the buying decision is not always the ultimate consumer or user of the
product. The marketer is immediately interested in understanding the behaviour of the product
buyer, but he should also be interested to know how the product is used and be concerned
about the satisfaction (or lack of it) of the consumer.

Buyers may be conveniently divided into household buyers and non-household buyers. The
latter group includes industrial, commercial, institutional (schools, hospitals, etc.) and
government buyers.
Forces that influence buying decisions
The forces that determine what, when, where and why consumers buy and the prices they are
willing to pay are varied and interrelated in a complex manner. These may be conveniently
organised into three groups.
1. Economic determinants of demand.
2. Internal psychological variables.
3. Social and cultural influences.

Economic determinants of demand
The key economic factors that influence buyer behaviour are income, availability of credit,
expenditure patterns, prices of the product and prices of complementary and substitute goods

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and elasticity of demand. Total household income minus all taxes is called disposable income.
The portion of disposable income that is left over after expenditures on food, housing, clothing
and other necessities is called discretionary income, which is available for expenditure on
luxuries and other non- essentials.

There are two kinds of elasticity of demand: income elasticity of demand and price elasticity of
demand. Income elasticity of demand is defined as the percentage change in the quantity of a
commodity consumed divided by the percentage change in income. Elastcity indicates
sensitivity of demand when either the price of the product changes or the income of the buyer
changes. To take demand for food as an example, it turns out that income elasticity of demand
for food is lower for rich families than for poor families. This is so because if incomes are
already high, further increases will not influence food consumption substantially, but if incomes
are low, a large share of additional incomes will be spent on food.

Price elasticity of demand is defined as the percentage change in quantity demanded divided by
the percentage change in price. When this quantity is greater than unity demand is said to be
elastic, and if less than unity demand is inelastic. The marketer is interested in the effect of price
changes on total revenues. When demand is inelastic, price changes will result in less than
proportional changes in quantity sold, thus revenues may not be eroded if price goes up. As an
example, the demand for drugs and medicines is usually price inelastic, because the need to
secure health is essentially insensitive to price or cost.

Internal psychological variables
An important factor in the buying decision is the buyer himself. Why does she/he want to buy
the item? Is the type of person related to the desire to buy the item? How does she/he receive
and organise information about the item? How does s/he feel about the item in terms of likes
and dislikes? What does s/he know and remember about the item? These questions are
probing the effects of the internal psychological forces of motivation, personality, perception,
attitudes and learning, respectively. For any given buying situation, one force may be dominant
or multiple forces may be at work.

We should particularly emphasise the role of attitudes and preferences in purchase decisions.
An attitude is a learned predisposition to react to an object in a certain way - positively or
negatively. It describes one's feelings in terms of liking or disliking the object. A preference is
the condition of liking one object better than another. A positive attitude will lead to the purchase
of an item, but a negative (or neutral) attitude will not. A major task of advertising is to induce
positive buyer attitudes towards the product. Behaviour itself may affect attitude even as attitude
affects behaviour. A person may not have been interested in a particular product and may have
had no attitude towards it, but after trying it she/he develops an attitude - positive or negative.
Or a person may have had a negative attitude before trying a product and then modifies the
attitude to positive after trial. This is the main reason why the giving out of free samples of a
product is a key sales promotion tool.

Social and cultural influences
Man is a social being whose behaviour is influenced by other persons and by the groups he
belongs to or aspires to belong to (called reference groups). Family members, friends,
neighbours and work associates are familiar examples of people who influence us. Social
conformity is strong in buying decisions. It is sometimes surprising how many things we own
that are also owned by people we associate with. Purchase decisions for certain product
categories, especially those that are 'conspicuously consumed', are particularly prone to social
influence. Examples can be found in clothes and fashions for young people on whom peer
group pressure is strong, cars for men, clothes and jewellery for women and home furnishings
and durable goods for households on which friends, relatives and neighbours exert
considerable influence.

Going beyond personal and group influence, we consider the larger society or culture. People
live in a cultural milieu that embraces their history, values, morals, customs, art and language.
Culture exerts a broad influence on buying behaviour and determines the kinds of products that
may be used by the people. For example, Muslims would not buy pork products or alcoholic

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drinks. More importantly for marketing, culture and tradition determine the openness of a people
to new ideas and their willingness to try new products and services.


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5. Market segmentation

Markets consist of buyers who differ in many ways and who may therefore be classified into
sub-markets or market segments on the basis of a suitable characteristic or variable. Variables
such as geographic location, age, sex, income, social class, benefits sought from use of product
or problems faced have been used to segment or subdivide markets. Assuming that a market
can be subdivided, the marketer then decides whether to ignore the existence of market
segments and make one product offer to the entire market, or to recognise the existence of sub-
markets and design into the product those features that meet the unique needs of one, some or
all of the identified segments. In the latter case, all other aspects of the marketing mix - price,
distribution and promotion - will be geared to the demands of the segment(s).

Obviously, any market segment isolated should represent substantial demand before it would
be worth giving it special attention. It is apparent that a marketer who wishes to enter a market
already crowded with competition should proceed by first doing market segmentation (if
feasible) to determine if there exists a segment ignored by the other competitors. Of course, if
the marketer feels that he has a superior product, he might decide to challenge the competition
in their entrenched segments.


6. Information for Decisions: Marketing Research

Adequate information is the life-blood of decision-making and management. Companies
normally develop their own regular system of gathering marketing information. In Africa, there
appears to be a heavy dependence on field reports filed by sales representatives concerning
market conditions, competitors' actions, middlemen and consumer reactions to companies'
products and marketing policies. In many cases a separate research department does not exist,
little or no research budget is provided and work is rarely sourced out to outside research
organisations. Such outside research firms are few today because the demand for their services
is low.





Benefits of research:
Various benefits can be derived by taking marketing research seriously even if it is done on a
modest budget. Marketing research is the primary tool for conducting market analysis where as
much information as possible is gathered about consumers (e.g. their needs, attitudes and
preferences, socio-economic characteristics), competitors (their products, prices, etc.) and
middlemen (their types, discounts or margins enjoyed, etc.).
The marketer exploits the information gathered from market analysis to plan his marketing mix -
product, price, distribution, and promotion. Research can tell what products are needed, which
product features are popular, which price ranges are acceptable to buyers, which retail outlets
are favoured by buyers, through which mass media the buyers are likely to be reached and so
forth.
When the marketing plan is launched, research is needed to monitor results and investigate
various kinds of problems relating to the marketing effort. For example, research is needed to
measure the effectiveness of advertising or to determine the reactions of middlemen to a new
product.

Costs of research
Marketing research may be a costly undertaking if properly done. The value of information
obtained should always be balanced against the cost of acquiring it. Cost elements include
personnel and materials for field work and data processing and report preparation costs.


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The option of not doing research should always be considered, especially when the decision
that may benefit from it must be made quickly. Indeed, the problem of time availability is a
serious one, because many marketing decisions must be made quickly and yet good research
requires ample time for proper design and execution.

The marketing research process
Marketing research may be defined simply as the gathering and analysis of information to guide
marketing managers in marketing planning and problem solving. It is a systematic process that
involves some recognisable steps. Four basic steps of marketing research are:
1 Problem formulation.
2 Situational analysis and exploratory research.
3 Formal research.
4 Solution.


Problem formulation
A clear definition of the research problem is probably the most important research task. But it is
not an easy matter. Frequently, the symptoms of a problem - for instance declining sales - are
obvious to all, but the cause or causes are less obvious. The researcher holds discussions with
the sponsor of the research in order to understand the latter's problems and marketing
objectives. The context or environment in which the problem is embedded is examined to gain a
better insight into the problem. This involves asking about internal (company) and external
factors that may bear on the problem.

Situational analysis and exploratory research
The key characteristic of the second stage of the research process is consultation of secondary
sources of information. We should now distinguish between secondary data which are data that
existed prior to the need to solve the problem, and primary data which are fresh data collected
specifically to solve the problem. Secondary data sources include internal company records on
the product's sales, costs, customers and other marketing variables; outside sources include
publications by government agencies (in Africa, especially the Federal Office of Statistics) and
private bodies; relevant research both inside and outside the company; informal interviews with
informed people both inside and outside the company.

If the problem was properly identified in the first step, the analysis in step 2 may be sufficient to
solve it, in which case further formal research would be unnecessary. Usually, the analysis of
the second stage leads to a better definition of the problem and very likely suggests the need
for formal research.

Formal research
Formal research entails the collection of primary or fresh data to solve the problem or meet the
information need. The most frequently used formal research method is the marketing survey.
Major activities in survey design and execution involve questionnaire construction, the actual
data collection (through mail survey, telephone survey or personal interviews) and the editing
and coding of returned questionnaires. The population of respondents from whom information is
to be obtained could consist of individual consumers, households or organisations. Although a
selection of a representative sample from the relevant population is made, sometimes it will be
wise to do a census, that is to include every member of the population, if the numbers are small.
This is often the case when organisations are surveyed; consumer surveys, on the other hand,
usually involve use of samples because of the large numbers of consumers.

Solution
The final step in the research process is data analysis and interpretation of results. The simplest
analytical method, especially for surveys, is ordinary tabulation and frequency counts, followed
by calculation of percentages. For example, if respondents were asked if they would purchase a
product at a stated price, research might find something like 'forty per cent of respondents said
they would definitely buy, while only twenty .per cent said they would definitely not buy.'

When the researcher completes his data analysis and interpretation of results, he prepares his
recommendations for the company. A written report embodying the recommendations should,

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as far as possible, be free of technical jargon, be in clear style and use charts and tables where
necessary. It should be reasonably brief and above all include specific action implications for
the sponsor. Examples of concrete recommendations are: 'The company should seriously
consider increasing the price of the brand by twenty per cent.' or 'The current budget for
advertising should, at a minimum, be doubled.'

Marketing decisions areas
The key areas in which marketing managers have to make decisions correspond to the four
components of the marketing mix: product, price, distribution and promotion. Sales force
operations may be isolated from promotion as a separate area of decision making; if
international marketing is undertaken by a company, then all the above decision areas will be
relevant in the context of serving markets outside national boundaries. Having earlier outlined
the kinds of decisions made while discussing the marketing mix, we shall now elaborate on the
key decisions only.

Marketing plan format
1. Description of Product(s)
2. Target Market Segments
3. Target Market Area
4. Demand Analysis
5. Supply Analysis
6. Competitors Marketing Strategies
Product Strategy
Price Strategy
Place Strategy
Promotion Strategy
7. Project Marketing Strategies
Product Strategy
Price Strategy
Place Strategy
Promotion Strategy
8. Sales Forecast
9. Fixed Assets for Marketing
10. Total Marketing Expenditure Budget


Marketing plan guiding questions
1. What is/are the product(s)?
2. Which target market segment does each of the product
aim at? or: To whom will the business sell its products?
3. Which geographical areas will be the chosen
segments?
4. What will be the demand for the product, similar
products and substitutes within the target market
segments in the target market areas?
5. What will be the supply of similar products and
substitutes within the target market segments from the
target market areas?
6. What are the strategies of the competitors who supply
to your chosen target market segments and target
market areas in terms of product, price, place and
promotion?
7. What will be your strategies to supply to your chosen
target market segments and target market areas in
terms of product, price, place and promotion?
8. What will be the selling price and how much will be
sold?
9. What fixed assets will be required for marketing and

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how much will they cost? What will be the life of the
assets and how will they be depreciated?

10. How much of expenditure will be incurred in terms of
marketing, including cost of marketing personnel?




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7. Product Development
Product decisions
The product or service is the offer that the marketer makes to buyers and it is of central
importance in the marketing effort. A product may be defined as a bundle of physical and
psychological satisfactions that a buyer receives from a purchase. It includes not only the
tangible object, but also such supportive elements as packaging, convenience of purchase,
post-sale services and others that buyers value.

Branding and packaging
A product should be given a unique brand name to distinguish it from other goods offered to
buyers. The name should be distinctive and easy to pronounce, and it should capture the
essential product idea. The name should be registered as a legal trade mark, thus protecting it
from use by competitors. It is a fact that many African manufacturers do not bother to put any
brand names on their products, and some unscrupulous ones assign names that sound almost
identical to the names of well-known successful products. These suggest lack of confidence in
the product's quality by the producer. In any case, a producer who is marketing a successful but
nameless product is making a grave error that should quickly be corrected.

Packaging has the basic function of protecting the product, hence the package must be durable
enough to survive handling during distribution. It should be aesthetically pleasing and be distinct
enough to stand out when placed side by side with competitors' brands on the retail shelf. It
should also be convenient to handle by consumers (consider the convenience of the aerosol
spray can that revolutionised the packaging of certain liquid products). The package label, apart
from providing certain kinds of information that may be required by law such as net weight,
volume and ingredients, may be used by the producer to promote the product if a well-designed
promotional message is inscribed on it.

Building the product mix
The product mix is the composition of products being marketed at any point in time by a
company. When products are closely related, especially with regard to end use, they constitute
a product line. An example of a product line is a phonograph turntable, a stereo amplifier,
speakers and a voltage stabiliser (for Africa). A product line may be narrow (that is limited) or
broad depending on whether the associated products are few or many. Two of the common
ways to build up a product line are:
by adding differentiated features to a basic product design in order to appeal to
different market segments (market segmentation strategy); and
by adding products that are complementary, meaning used together. Sometimes a
manufacturer will market brands of a product that are virtually identical except for
brand name and packaging, although advertising will claim unique differences.
This strategy is called multi-branding and is commonly observed in consumer
packaged goods industries such as toilet soap and detergents.

The manufacturer's objective is to improve his competitive position by securing larger shelf
space in retail stores and thereby taking sales away from other producers' brands.

Proper management of an existing product mix includes knowing when to modify products or
delete those faring badly in the market-place. Sales figures and consumer research provide the
necessary information for the decisions.

Product innovation
A 'new' product is one that is new to a company, but not necessarily new to the market where
the generic product may already exist. The management of a true product innovation (that is, a
product new to the market) follows six main stages which we simply outline here.
Idea generation: product ideas may come from many sources - company,
salesmen, customers, competitors.

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Idea screening: selecting the most viable ideas to exploit.
Business analysis: analysis of sales, costs and profit projections.
Product development: building and testing prototypes, etc.
Test marketing: placing product samples in actual retail stores to test consumer
acceptance.
Commercialisation: full-scale marketing on a national basis.




8. Pricing decisions - Factors that influence price setting

Setting base price
The base price is the price that the producer receives at the factory gate; it does not include any
mark-ups or allowances to compensate middlemen for distributing the product. The most
important method of setting a base price is the full cost method. The rationale for full-cost
pricing is that all products should bear their full share of costs. Any product's price, therefore,
must cover all allocated costs plus a 'reasonable' profit mark-up or margin. The formula for full-
cost pricing is: Price = ATC(1 + M) where ATC is average total cost per unit of the product, and
M is the profit mark-up percentage.
Pricing in the distribution channel
We must now consider how the 'ex factory' price is translated down the distribution channel (i.e.
through wholesalers and retailers) to the consumer. Suppose the producer has not suggested
what the retail price should be and merely asks the distributors or wholesalers to pay his
producer price per item. To cover their costs and provide for profit, the distributors will add their
profit mark-up percentage or margin to their cost before selling to retailers; and the retailers in
turn will add their own mark-up before selling to the final buyer. Thus, a chain of mark-ups exists
in the channel of distribution. Each middleman uses a pricing formula identical to the mentioned
equation, where ATC represents his unit cost of the product. In some cases the producer may
recommend a retail price for his product and then allow middlemen discounts based on that
retail price. This type of discount is called a trade or functional discount; it covers the
middleman's operating costs and profits and represents his inducement or rebate for performing
important functions in the distribution channel. For example, suppose the recommended price
for a standard- sized can of paint is 1 110 $ per unit, granting a discount of twenty-five per cent
means that the manufacturer bills the distributor for 1 110 $ (1 - 0.25) or 117.50 $. Thus, if the
distributor gets a shipment of 100 cans, the invoice is for 11 750 $.


9. Channels of Distribution and Logistics

The task of distribution is to make the goods physically available to buyers. A distribution
channel is defined as the combination of institutions through which a producer markets his
products to the ultimate buyer. By institutions we mean middlemen such as wholesalers, distri-
butors, retailers and agents. These middlemen perform important functions such as contacting
current and potential buyers of the product, inventory ownership and risk bearing (that is, taking
title to goods before they are sold), various kinds of sorting and handling of the product, storage
and transportation, extending credit or financing (of their customers) and providing the producer
with information about their local market.
Selecting distribution channels
A producer can distribute his product through a variety of channels. If the producer decides to
sell directly to consumers, he uses a direct channel. This may take the form of having sales
people going from door to door to peddle the product, or it may mean that the producer
establishes a network of wholly-owned retail outlets.

Five sets of factors affect channel selection:

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1. The market coverage desired by the producer, e.g. to cover an extensive market
area will need the use of indirect channels for intensive distribution.
2. The degree of channel control desired, e.g. to ensure proper presentation of the
product to consumers, the producer uses direct channels by eliminating all
middlemen.
3. Product characteristics, e.g. a bulky product like coal may use direct channels to
minimise handling.
4. Market characteristics, e.g. frequent and/or impulse purchase by buyers would
suggest the use of intensive distribution, every available channel is used.
5. Manufacturer characteristics, e.g. only a manufacturer with adequate financing
can own its retail outlets, if such direct distribution is called for.
Selecting and motivating distributors
Having selected the types of channels to employ, the producer has to pick particular middlemen
or distributors. He uses such selection criteria as the credit-worthiness of the distributor, his
selling ability, inventory and storage space and his personal qualities. The producer may adopt
a variety of measures to build enthusiasm and excitement among the revellers, such as
providing sales training for distributor personnel, providing useful tips on purchasing and stock
control and supplying sales promotion aids such as printed material on the products and point of
purchase and showroom displays. Proper management of distributors includes a periodic
evaluation of each distributor's sales performance in relation to previous periods or other
distributors, and ensuring that he moves adequate volume of inventory on the full product line
offered by the producer.
Physical distribution or logistics
Physical distribution or logistics is concerned with the efficient movement of raw materials from
suppliers to the production line, and of finished goods from the end of the production line to the
customers. A number of associated activities must be performed and these may be grouped
under the four main categories of:
1. transport;
2. inventory;
3. warehousing (including materials handling); and
4. communication.

A wide variety of transportation modes is available to move goods - rail, highway, water,
pipeline and air, each with different cost and service (speed) characteristics. Decisions must be
made regarding the mode of transportation to use for each type of shipment. Inventory is of
central importance in distribution system design. Since the cost of carrying inventory is high,
procedures for proper management of inventory must be installed. Warehouses (or depots)
store inventories. Decisions must be made as to how many warehouses are required, where
they should be located and what products should be stocked in what quantities. Materials
handling involves the movement of goods within the plants and warehouses. Suitable
equipment (such as fork-lift trucks, conveyors, pallets) must be available to permit economic
handling of goods. Finally, there must be good communication flow in order to co-ordinate all
the logistics activities effectively. For example, a good communications system should be able
to make available on demand the present stock position of each item at each stock location.


10. The Promotional Programme

Advertising is defined as any form of non-personal communication through the mass media that
is paid for by an identified sponsor. Along with sales promotion, personal selling, publicity and
public relations it forms the promotional or communications programme of the marketer. Sales
promotion is any activity that is used to stimulate sales of a product or service usually occurring
once or over a limited period of time. Examples are 'sales' conducted by retail stores at festival
periods such as Christmas, the giving away of free samples of the product, and price reductions
on goods.


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Personal selling refers to the use of salesmen to push the product or service. The sales force
must be selected, trained, motivated (especially through a good compensation plan) and
controlled for effective performance.

Publicity is information about a company and its products that is conveyed to the public by the
mass media because such information is newsworthy and the company pays nothing for it.
Public relations efforts of the marketer are concerned with building and maintaining good
relations with special publics such as customers and the public at large. And such image-
building may use advertising as a tool.

The various components of the promotional programme are not used in isolation. For example,
although advertising may be most suitable for one purpose and personal selling for another, the
two are often employed simultaneously, the relative emphasis depending upon circumstances.
Further, advertising may be used to announce a sales promotion activity.


11. Advertising

Importance of Advertising
Advertising is a young industry in Africa. Since many products are relatively scarce in the
country, the typical producer is able to dispose of his output without much promotional effort.
With the exception of consumer products companies - especially cosmetics and toiletries
manufacturers - African marketers do not spend much on advertising and some do not advertise
at all. Yet the trend is changing as more and more companies are realising that advertising can
be a positive force in their marketing as competition increases. An indicator of the growing
importance of advertising is the rapid growth in Africa of the number of advertising agencies.

There are two basic objectives of advertising, namely:
to inform the target audience about the product or service;
to create or stimulate demand for the product or service through persuasion.

These translate ultimately into sales of the product, but in planning a specific advertising
campaign the marketer may choose a more concrete goal such as 'to increase consumer
awareness of the product by thirty per cent'.

The key advertising decisions are:
setting the advertising budget;
creating advertising copy; and
selecting media and vehicles and allocating from the budget to them.

The advertising budget may be based on a percentage of sales or it may be keyed to a level
comparable to what the competitors are spending. Advertising copy is defined as the words and
picture or illustration that make up the advertisement and the way they are laid out to create a
total impression. Through the copy the advertiser says what he wants to say (called the theme
or message) in the way he wants to say it. Various advertising media are available such as
radio, newspapers magazines, television, outdoor advertising and cinema films. Radio is
currently the most popular medium in Africa, but each medium has its advantages in reaching
particular types of target audiences. After selecting the suitable media, the next job is to decide
how much time or space to purchase in each vehicle (e.g. daily advertisements of ten or twelve
lines in the newspaper medium) and how these insertions will be spread over the time period
covered by the advertising campaign. This is called media scheduling.

In planning and executing his advertising programme, the advertiser relies heavily on the
services of his chosen advertising agency. The advertising agency advises clients on
advertising strategy, creates advertising copy, supervises advertising production and buys
media time and space. The larger agencies provide many other services, such as advising on
marketing planning and sales promotion, designing and producing brochures and point-of-sale
displays, advising on publicity and public relations and conducting marketing research.


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Advertising Channels
In the good old days, it was widely believed that supply created its own demand and as a result,
many enterprises did not see marketing (in its various forms) as an important set of activities.
The story is different now. It is indeed so different that without marketing, a business could
hardly stay competitive. It is anticipated that in the near future, enterprises would have to
undertake a lot of marketing activities to maintain their market share.

There are many marketing channels open to small enterprises, each presenting a different level
of opportunity and cost, etc. Many enterprises have used a combination of these channels as
radio advertising slots, flyers, business cards, directional signs, newspaper advertising,
personal selling, sales promotion, after sales service and shop designs.

Each of these options is useful either when used alone or in combination with other options,
depending on the product, target market and the objective of the use of the option. Each of
these options also comes with cost implications which should be weighed against the
enterprises cash flow situation and the expected response from the target market. It is always
advisable to be less optimistic about the expected results from use of any or a combination of
these options.

Radio Advertising is used quite extensively by the large and medium enterprises and to a
limited extent the upper small enterprises. It is a powerful marketing channel that has the
potential of bringing good returns on the investment made. There are however some
precautions that need to be exercised by enterprises wanting to use this channel.

In the first place, it is true that an increasingly large proportion of the population of Ghana do
listen to radio for various purposes such as news, music, information on products, services, etc.
It is also true that there are close to 20 radio stations in Accra/Tema alone and this
phenomenon presents the question of who listens to which radio station at what time. It is only
when this question is accurately answered that advertising via radio could yield potential
benefits. There are testimonies of enterprises that have used radio advertising to grow their
businesses from micro through small to relatively large enterprises. There are others that no
doubt have been impoverished for using the same channel of marketing.

For one thing, it costs quite a bit of money to undertake a sustained marketing campaign on
radio which could achieve the desired impact on the target market. Thus if this investment does
not yield the expected impact, the enterprises cash flow could be unduly encumbered.

The experts advise that a radio campaign that has yielded good results for the typical small
enterprise has taken about six weeks of three slots a week on at least two radio stations. This
has a huge cost implication for the small enterprise.


Flyers
The use of flyers is catching up with small enterprises in Ghana. This channel of advertising is
used mostly when a new product/enterprise is being launched. It is a relatively cheap form of
advertising but its impact is often not assured as the proportion of the reading public is not large
enough. To be successful, it has to be targeted in terms of timing and audience. Some of the
successful flyers have been sent to restaurants and bus stops where the target market
generally has some time to spare. It could also be useful in heavy traffic. This option though is
not recommended.

Directional Signs
Directional signs are widely used by both small and medium enterprises. It is not as costly as
the other channels of marketing and its effects are longer lasting. It is however the case that
most small enterprises do not use enough of these directional signs and therefore do not benefit
fully from the use of this channel of marketing. Thus in a situation where only two directional
signs are placed, potential customers are unable to easily locate the enterprises place of
business.


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The metropolitan authorities have begun imposing taxes on sign/directional posts and in some
cases the size of the post is limited. These have an effect on the impact of the investment
made.

Newspaper Adverts
Newspaper advertising is one of the best ways of getting across information on a product or
service to the marketplace. The product or service gets very wide attention. If it is placed in the
national daily, especially the Daily Graphic, the response is often very encouraging, albeit not
long lasting. Thus is it recommended that to obtain the optimum benefits from newspaper
advertising, such placements should be repeated a number of times.

The cost of advertising in the newspapers has shot up in recent times and small enterprises find
it extremely difficult to advertise the number of times that would normally yield the required
results.

Personal Selling
The use of personal selling is also a potent form of marketing. However, below a certain volume
of business, its use is not recommended. It requires the use of well trained and motivated
salesmen to achieve the desired impact. It could be very expensive but effective as the buyer is
able to clear all concerns about the product/service at the point of purchase.

Sales Promotions
Sales promotion has been an effective marketing tool over the years. It includes the buy-one-
get-one-free strategy to raffles to free samples and the trade fair attendance etc. Sales
promotions have been effectively combined with radio and newspaper advertising.