Principles of Business Topic: Marketing Third Form

MARKETING
Market vs. Marketing

Market
- A situation that brings buyers and sellers
together
- Exchange of goods/services
- Satisfaction of wants/needs
- May be a place where buyers and sellers meet
Marketing
- A management process that identifies and
anticipates customer’s needs
- Goods and services are designed to fulfill a
need
- Satisfaction of human needs/wants

There are six stages of the marketing function. tracked and evaluated
These include:  Stage 6 – after-sales service is provided
 Stage 1 – identifying the product idea
 Stage 2 – designing the product based on Marketing Activities include:
market research 1. Market research
 Stage 3 – tests the product on the market 2. pricing
 Stage 4 – if successful the product is 3. packaging
marketed (commercialized). If unsuccessful 4. branding
the product is redesigned and retested. 5. sales promotion
 Stage 5 – product performance are carefully 6. advertising
7. distribution

MARKETING MIX

Marketing Mix is the blend of different activities undertaken by the marketing department to market a
good or service successfully. These different activities are conveniently referred to as the four P’s of
marketing or the variables of the marketing mix. They are: product, price, place, promotion.

1. Product: refers to the good or service that is needed by the targeted group or the product or service
that the firm wishes the target population to buy, e.g. school books and students; toys and children etc. A
product may also be an idea, person, organization or tourism destination. One of the most important
aspects of the product is the packaging of the product in question, that is, the manner in which the good is
presented to the customer.

2. Pricing – there exist 7 ways by which a business may set up a price. Demand and supply are the
factors that actually affect the pricing of a product. Price can be said to be the amount of money that
people pay for a good, or the monetary value place to each product.

3. Place – Place as a market variable concerns the means through which the product reaches the
targeted market. In other words, the means of distribution and transportation internally and externally
in a country are identified.

4. Promotion – the promoting or the act of attracting the attention and interest of the target market to
the product or service offered for sale.

MARKETING RESEARCH

Marketing research can be defined as the collection, collation and analysis of data relating to the
marketing and consumption of goods and services. For example, a business might gather information
about the likely consumes of a new product and use the data to help in its decision making process. The
data gathered by this research might include:
 Whether or not consumers would want such a product
 What type of promotion will be effective
 The functions or facilities it should have
 What style, shape, color or form it should take
 The price people would be prepared to pay for it
 Where people would wish to purchase it
 Information about consumer themselves – their age, their likes, attitudes, interests and lifestyles
 What consumers buy at present

Reasons for conducting a market research

1
Principles of Business Topic: Marketing Third Form
1. Descriptive reasons – a business may wish to identify what is happening in its market. For example, a
brewery may want to find trends in its sales of various types of beer over a certain period, or to find
out the types of customers who are buying a particular beer.
2. Predictive reasons – a business may wish to predict what is likely to happen in the future. For
example, a travel company will want to discover possible changes in the types of holiday that people
might want to take over the next 2-5 years. This will place them in a better position to design new
holiday packages that will sell.
3. Explanatory reasons – a business may want to explain a variety of matters related to its marketing.
This may include sales in a particular part of the country. A bus company, for example, might wish to
research why there has been a fall in the number of passengers in a specific route.
4. Exploratory reasons – this is concerned with a business investigating new possibilities in a market.
For example, a soft drinks manufacturer could trial a new canned drink in a small geographical area to
test customer reaction before committing itself to marketing the product nationally.

The following procedure is followed to conduct a market research:

1. Identifying the marketing problem, for example, to investigate the consumer reaction to the new
fragrance added to the bath soap
2. Selecting source/methods of gathering data, for example, primary or secondary
3. Methods of collecting the date, for example, questionnaires, interviews, surveys
4. Analyzing the data, for example, looking for relationship or probable cause and effect
5. Presenting the data, for example, use of charts and graphs
6. Stating conclusion
7. Making recommendations

The Benefits of Marketing Research

An aid to decision making – perhaps the main benefit of marketing research is that it allows a business to
make more informed decisions. This is especially important in fast changing markets. Business
operating in such markets constantly need to adjust their marketing activities.

Reducing Risk – whilst the reliability of marketing research information cannot be guaranteed, it does not
reduce risk for a business. Without marketing research, a business might spend large sums developing
and launching a new product which could prove to be unsuccessful. Businesses are less likely to waste
resources on failed activities if careful marketing research is carried out.

Types of Market Research

1. Consumer Research
2. Product Research
3. Packaging Research
4. Sales Research
5. Advertising Research
6. Economic Research
7. Distribution Research

CONSUMER BEHAVIOR

Let us turn our attention to the factors below that affect the behavior of the consumer.

1. Choice: In certain industries, for example, toothpaste or bath soaps, consumers have a wide selection
from which to choose. Producers must, therefore, devise strategies to keep their clients.
2. Taste: People’s taste differs and, therefore, the marketers must be aware of the various preferences.
For example, a firm may be producing different brands of detergents to cater for the need of its
clientele. One brand may contain a fragrance and the other may contain additional granular
components to ‘make the white’ whiter.
3. Tradition: The customs and culture of the people also influence the buying patterns of the
population. For example, in Jamaica there exists a longstanding tradition to cook rice with peas and
thus an international chain store was forced to include rice and peas in their offerings to the public in
order to enter the market.
4. Income: One’s income affect’s ones ability to purchase. For example, the highly priced Sport Utility
Vehicle (SUV’s) and certain type of motor vehicle can only be purchased by highly paid salaried

2
Principles of Business Topic: Marketing Third Form
workers and entrepreneurs while persons with smaller incomes would have to be content with more
affordable and lower priced vehicles.
5. Brand loyalty: Marketers try to build loyalty to their products because once customers have tried and
are satisfied with a particular preference brand, it is difficult to persuade them to switch to another
brand. For example, one may have a particular preference of a certain brand of motor vehicle, let’s
say Toyota, the one would continue to purchase this maker of vehicle throughout one’s lifetime.
6. Belief System: People’s religious beliefs influence their choice of spending. For example, it is the
practice of some Christians not to eat pork.
7. Price: Where the quality, quantity and the specification or ingredients are the same for a product and
the price varies, the cheaper brand would be selected over the more expensive brand.

PRICING

This is the monetary value that the customer is willing and capable of paying for the product and the
firm’s willingness to sell in order to make a reasonable profit on the investment. Arriving at the exact
value can be challenging but there are various methods that can be used to set the price.

Pricing Methods

Cost Based Pricing

Cost based pricing or cost plus pricing is based on the cost of producing a product. This would involve:
(a) fixed costs, and (b) variable cost. Fixed costs of production are the costs a company incurs whether
there is production or not, e.g. rent or interest on bank loans. They are also called overhead costs.
Variable costs are those costs associated with the production itself, e.g. raw materials and salaries.
Fixed cost (FC) + Variable (VC) = Total Cost (TC)

TC = Average Cost
Quantity
Produced
Example: So if the total cost of 10 dresses is $500.00, then the average cost of 1 dress = 500/10=50.00.
The firm then adds a mark-up to the average cost, e.g. 20%. (20% of 50.00 = 10.00) so cost based pricing
is (AC + Mark-up i.e. 50.00 + 10.00 = $60.00).

Pricing Based on Market Condition

The different prices determined by the various types of markets.

Break Even Analysis and Target Profit Pricing

Here the firm tries to determine the price that will produce the profits it is seeking. Target pricing uses
the concept of a break-even chart that shows the total cost and total revenue expected at different sales-
volume levels.

Penetrating Pricing
This is a popular pricing method for a new product. The initial introductory price is lower than
competing products, in the hope that consumers may respond to the low price. Eventually when the
price is gradually raised, not all consumers may switch away to another competing product.

Psychological Pricing
Some products are highly priced in the hope that they may gain snob value, e.g. perfumes and works of
art. The objective is to get costumers to thin that ‘good things are not cheap’ while ‘cheap things are not
good’. Another example is pricing the product in an unusual manner such as $7.99 instead of $8.00

Predatory Pricing
This pricing technique is designed to get rid of unwanted competition. Prices are lowered by one
company (A) who can afford to make temporary loss. A competitor (B) trying to match this low price
may not be able to afford this loss and may have to leave the market. Company A now has the total
market and quickly recovers lost profits.

Limit Pricing
This pricing technique sets prices low enough to discourage the entry of competitors into the market.

Pricing Objectives:

3
Principles of Business Topic: Marketing Third Form
For every product the company has to decide what the objective are for that particular product. The
following are some common objectives.

 Survival: some companies set survival as their main objective if the market has too many producers,
intense competition and changing consumer wants. To keep their plants going and their products
selling, companies must set a low price, hoping that consumers will react to it.
 Current-profit maximization: The aim here is to set a price that will maximize current profits.
Companies estimate the demand and costs associated with alternative prices and choose the price
that will produce the maximum current profit, cash flow or rate of return on investment.
 Market-share Leadership: some companies want to be the leaders in market share. The belief is that
the company with the largest market share will enjoy the lowest costs and greatest long-run profit.
To achieve market-share leadership they set prices as low as possible.
 Product-quality Leadership: The aim of some companies is to have the highest-quality product on the
market. The company will charge a high price to cover the high product quality and high cost of
research and development.

PRODUCT

Packaging and Presentation of Goods

Packaging is ‘the way in which a saleable product is wrapped, displayed and presented to the customer’.
Packaging can be a wrapping, a bottle, a can or a box. It includes the display, the description, safety
precautions and the instructions on the use of the product.

Functions of Packaging:

1. The distribution function

The packaging of a product serves as a distribution feature. In other words, a company may distribute its
products in various weights and sizes to serve the needs of its wide target market that is, packaging in
quantities what serves the needs of the individual, the small, medium or large families and even the needs
of institutions.
2. The Transportation Function
The packaging must be durable to withstand the storage and transportation of the product.
Pasteurization and the introduction of Tetra pack (an insulated container) have revolutionized packaging
and allow for longer shelf life of milk. Pasteurized milk packaged in Tetra packs no longer have to be
refrigerated while not in use.
3. The Identification Function
Packaging serves to identify the product. It gives a description of content and gives pertinent information
such as color, weight, contents and instructions for use in a language that the customers can understand.
4. The Protection Function
Packaging should be such that it provides a measure of safety for the user, for example, blades or razors
are wrapped to protect the consumers. Most medications have a protective device making it difficult for
children to open them.
5. The attraction function
It serves to attract the customers, for example, snacks for children are usually brightly colored or contain
drawings of their favorite cartoon characters.
6. The Environmental Friendly Function
Today, packaging is designed to be ecologically friendly, for example, the use of biodegradable materials
that will not damage the ozone layer. Also, more firms are also using recyclable material such as bottles
and paper.
7. The Promotional Role
Packaging also serves to promote the company’s image.
8. Convenience Role
The packaging must be convenient and easy to use, for example, the attachment of straws to packaged
drinks or the use of pull tabs on some drink cartoons.

Branding

Branding is the name, term, sign, symbol or design that differentiates the product of a company from that
of its competitors.
A brand name is permanent. Products that are packaged and branded obtain an identity. For example,
Grace, Pepsodent or Pepsi

4
Principles of Business Topic: Marketing Third Form
Reasons for Branding

1. It helps in creating customer loyalty. For example, General Electric signifies high quality and,
therefore, new lines of electronic product with the trademark would also convey the idea of high
quality.
2. Legal protection for ownership rights are given to companies because the brand name must be
registered by the Registry of Trade Practice.
3. Firms are able to promote the product more easily since by advertising the brand name. A whole
range of products can be advertised.
4. Firms can gain greater control over different products through branding. For example, Johnson and
Johnson Ltd. produce a range of soaps, baby products and cosmetics. Branding makes it easier to
track down the sales patterns of these products.
5. Branding helps to increase sales since people buy ‘brand names’. This helps the shoppers to make a
decision in a shorter possible time frame. People stick to what they know and seldom venture into
the unknown. However, through advertising new bands can be discovered.
6. Branding allows the marketers to segment (divide) the market on the basis of targeted groups or
special characteristics such as age, sex, income, education, religious or social standing.

Labeling

An important part of packaging is labeling. This may be a small tag attacked to the product or a complete
design within the package. The product the label must state:

 The registered office or country of origin

 The expiry date if it is a food item
 The ingredients in the product
 The instructions for its use
 A grading for the product, for example Grade 1, 2, or 3 or an indication of size or quantity such as
small, medium or large, and the quantitative amount. E.g. 8 ozs.

The Concept of Copyright and Patent

Copyright – is the legal protection against copying the work of authors, composer and artists
Patent – offers the inventor or creator of a new product the legal right to be the sole producer or user of a
new product or process. A patent must be registered with the Patent Office if legal rights are to be
available to the inventor. Registration is obtained by providing:
a. Full drawing and details of the invention
b. A statement and details of the original features of the invention
c. A written promise that the new ideas are the inventor’s own.

METHODS FOR PROMOTING SALES

Sales promotion can be defined as short-term incentives to encourage purchase of a good or service.
These are usually given to middlemen (wholesalers or retailers) and customers. It is an expensive
exercise and, therefore, runs for a limited period. It is usually used to support an advertising campaign or
for special events like Christmas, Easter or carnival. For example, free samples can take the form of mini
replica of the product or small taste of the product. This may be done at trade fairs and exhibitions,
supermarkets and hypermarkets.

1. Coupons – are detachable tickets or part of a document that entices the holder through the probability
of receiving something, for example, cash or gifts that can be used as an application form. These coupons
are redeemable at special places, for example, at supermarkets and hypermarkets.

2. Price discount and cash refund – are given away as a form of promotion. Price discount of money are
taken off the price of an item while cash refunds are repayments given to customers on return of
damaged items or empties. Price discounts are especially used for special sales, for example, Boxing Day
or Easter sales when the prices are reduced; cash refunds are given for the return of empties such as
bottles.

3. Cash discounts – are given for prompt payment of invoices, for example, if a client pays within the
credited period the client may receive a percentage off the total price.

5
Principles of Business Topic: Marketing Third Form
Buy one get one free is a form of cash discount. This involves getting an extra item for the price of one.
This method of sales is generally used to promote the product or to attract customers to the store or
encourage sales on a product that is not selling well.

4. Competitors – the customers are enticed to enter competitions for which large sums of money or
expensive items such as trips abroad or luxur4ious motor vehicles are the prizes.

5. Trade shows and Exhibitions – items are displayed at trade fairs for all potential customers to
examine the quality of the product.
 Loss leader – this is an item with a huge discount used to attract customers to the store. For
example, the sale on special Nike sneakers may woo young men to the store. Once in the store,
they may purchase other items. Store windows and showrooms are attractively displayed in
order to draw the attention of the public.

6. Personal Selling – involves sales person moving from village to village selling his or her wares. In this
practice, the sales person has direct contact with customers and thus receives immediate feedback. He or
she usually arranges his or her won credit to clients who cannot obtain credit from the usual sources
because they may not have a permanent job or are seasonal workers.

7. Telemarketing – banks use this approach to sell their services. Clients are able to arrange a loan over
the telephone within a few days, and in some cases, hours. Customers are encouraged to purchase goods
and services from reputable firms and, therefore, the imaging is a crucial factor for all organizations.

Advantages of Sales promotion

 Customers are able to examine quality of the product
 Through sampling new products a psychological bond is created since the customer is given an
opportunity to be part of the product-making process.
 Increases customers awareness
 Increases loyalty

Disadvantages of Sales promotion

 Very expensive exercise that increases the cost of the product
 May not realize the type of profits anticipated.

Public Relations – is the efforts to regulate its communications with its public so as to project a
favorable image in order to increase sales, attract investment and achieve support for its business
objectives.

Functions:
1. Media Relations – supply of information to the press and broadcast media through press releases,
press conferences and formal and informal contacts (including entertainment and the provision of
sample, demonstration or trial products)
2. Customer Relations – Settling of complaints and even making a point of staying in touch with their
customers, by giving them special privileges and offers for being a ‘loyal’ or ‘valued’ customer, by
offering free company newsletters and magazines, etc.
3. Community Relations – sponsoring worthy causes and making well-publicize donations to charities.

TECHNIQUES FOR SELLING

Salesman uses a number of techniques to obtain a sale. Some techniques include:

1. Direct selling – goods are sold directly from the producer to the consumer without the need for any
middlemen or intermediaries. Orders are made directly to the producer through mail order houses,
telesales or online shopping.
2. Display of product – firms may choose to entice clients by displaying their product attractively. For
example, shop window fronts are constantly redesigned in order to attract the attention of onlookers.
3. Jingle, Statement or rhyme – a company may use a jingle, statement or rhyme that identifies or
introduces the firm and thus consumers can associate the promotion with the statement or jingle. For
example, the use of encouraging words to entice the public or a unique selling tactic.
4. Samples – samples are given to patrons to be tested at shops and malls. Feedback is usually given and
this may be used by the firm to enhance their products
5. Pricing policy and Discounts – the price of a product must be competitive in order to attract clients.
Sellers may offer discounts to clients and these discounts may take the form of cash discounts,
6
Principles of Business Topic: Marketing Third Form
discount when purchasing in bulk or trade discounts. Since the price is reduced, clients may want to
make use of this opportunity to buy.
6. Establishing a pattern of selling – one may establish a pattern of selling, especially if the salesperson is
a roving salesperson or use the same location form which to trade. This action encourages repeat
sales
7. After sales service – is provided by sellers to customers who have bought something and have
returned it because something is wrong or faulty with the item: the buyer may want it changed, or to
get his money back. Such services may include fixing or repairing an item bought in the past,
installing an aerial for a television bought, fine-tuning and minor repairs to a new car, etc.

TERMS OF SALES

Terms Advantages Disadvantages

Cash Sales
1. Bank notes and coins
2. Cheques
3. Credit and Debit Cards
Credit
- Payment for purchases made -
at a later date, for example, the
purchase of raw material on
the 1st day of the month for -
which payment is due on the
30th day
Hire Purchase
- Short term credit used for the
purchase of equipment,
household appliances, motor
vehicle. The company hires the
commodity to an intended
purchaser, who usually pays an
initial payment followed by a
series of installment until the
total hire purchase price is
paid
Lay-a-way
- The purchaser makes an
agreement to pay for the goods
on installments. The goods
remain with the seller until all
payments are made
Cash Discounts
- An amount given to the buyer
for prompt payment. If a large
purchase is made, the seller
may give a certain percentage
off the cash price.
- Instant payment - Unsafe to move around with large
- The buyer is able to sums
obtain cash discount
- Easy to carry around
- Can be used locally - Need to be certified by a bank
and internationally - Not always accepted
- Attract high interest if amount
not paid in specified time period
For the seller a - For seller no immediate use of
method of moving cash
stock - For the buyer this method
The buyer enjoys the attracts interest, therefore, cost of
use of goods and item increased
services while - The method cannot receive
payment is still being discount
made. - For the seller in time of inflation
the delay in payments means that
the currency is depreciated and
seller may incur bad debt.
- The hirer has the use - Very expensive form of credit
of the item - goods do not become the
- An easy way to property of the buyer until the
acquire ownership last installment is paid
- For the seller - for the seller a lot of bad debt can
movement of stock is be incurred
facilitated - too much capital may be tied up
in HP
- The purchaser is able - The goods remain with the seller
to pay for the goods in until all payments are due
small increments
The difference between cash discount and trade discounts:
- The major difference between cash discount and trade
discount is that cash discount is given for prompt payment
while trade discount is given among merchants and traders.
Trade discount is an allowance given to a trader or merchants
- Adv – allows the merchant to make profit and keeps
production flowing since the wholesaler and merchants are
encouraged to purchase stock.

CONSUMER ORGANIZATION

Consumerism
7
Principles of Business Topic: Marketing Third Form

Is defined as all activities relating to rights and responsibilities of consumers These activities include acts
to ensure that products are at an acceptable standard and are safe, that the consumer gets redress for
injustices and are properly informed. Listed below are the rights of the consumers.
 To be heard
 To be informed
 To choose
 To safety
 To redress
 To a healthy environment
 To consumer education

Responsibilities of Consumer Organizations

Most consumer organizations were formed to protect the rights of consumers. Consumer organizations
seek information about the goods or services that consumers which to purchase a motor vehicle, one
should enquire not only about the price, but also about after sale services, the availability of spare parts,
viability and reputation of the dealer.
Consumer organizations also communicate needs to producers and government and inform the public
about unfair business practices involving unfair pricing, unsafe products, misleading advertisements and
unhealthy business practices that may impact negatively on the environment. The table that follows
gives details of the major functions of some consumers’ organizations.

Organizations Roles and Functions

Private (not for profits)
Consumers’ association, for example, Trinidad and - resisting unfair price increases
Tobago Housewives Association and community - resisting unfair trading practices of sellers, for
groups that seek to protect its members. example, short weight and lengths, substandard
goods and personal abuse
- lobby governments to initiate consumer
protection law
- to voice the concerns of the consumer
Private (not for business) International
Greenpeace International - to resist degradation of the environment
Transparency International - To ensure that governments operate fairly in the
reward of tenders and the overall spending of
state funds.
Government
Parliament and Judicial Arm - Make laws relating to the environment, road
safety and health of the population, for example,
the road safety Act; the environment protection
acts.
- also laws relating to the sale of goods, the sale of
goods act and the food and drug act
Bureau of Standards - setting minimum standard to which producers of
goods must abide. For example, proper labeling,
description and safety requirements

- verification and testing of products to ensure that

the standards are maintained, for example, goods
are take off the shelf to be tested to ensure that
they meet the standards

- ensuring that measurement apparatus are

properly calibrated
- educating the public about standards and any
unsuitable items on the market. For example,
giving the pubic information about unsafe
Christmas lights

- issuing warnings to producers who are not

adhering to standards
8
Principles of Business Topic: Marketing Third Form
The Ombudsman - investigate and adjudicated on complaints of
- a government appointed person who investigates loss/damages from the public
malpractices, maladministration or injustices - make recommendations to correct wrong doing
suffered by individuals and the population at large of state agencies to members of the public
in their dealings with public officials, and
government owned or controlled companies

The Ministry of Health - ensure that laws to protect the consumer are
followed.

LINKS IN THE CHAIN OF DISTRIBUTION

Distribution is the link between producers and consumers. More formally distribution is the process
through which the firm or producer reaches the target market. There are four main distribution chains.
A distribution chain may either be direct or indirect. If there is an intermediary such as a wholesaler and
a retailer, the chain is indirect. If there is no intermediary then the chain is direct. The function so a
distribution chain is to move goods form producers to consumers; to overcome major time, place and
possession gaps that separate goods and services from those who would use them.

Chain 1: producer – wholesaler – retailer – consumer

Chain 2: producer – wholesaler – consumer
Chain 3: producer – retailer – consumer
Chain 4: producer – consumer

Chain 1
This shows the traditional method of distribution in home trade. A producer will benefit from selling
goods in large quantities to wholesalers who usually operate in large warehouses. The producer benefits
because it allows him to mass produce and so use division of labor and low costs. The wholesaler breaks
down the large quantities for redistribution to retailers who further break it down for sale to consumers.

Chain 2
In this chain the retailer is left out and consumers can buy directly from manufacturers. The wholesaler
assumes the function of the retailer. Advantages of this chain of distribution are:
- There is no need for expensive outlets and rent
- The wholesaler enjoys more profits because the retailer’s profit is kept
- Transport costs are lowered.

Chain 3
Here the wholesaler is omitted and a retailer presumably with a large warehouse may assume the
functions of the wholesaler. The retailer enjoys discounts from bulk purchase.

Chain 4
Here both the wholesaler and the retailer are left out completely as the manufacturer assumes the
function of both wholesaler and retailer and keeps all profits as a result.

The Role of the Wholesaler

 Breaking bulk: this is buying in large quantities and sub-dividing for further distribution
 Holding stocks: most retailers do not have the storage capacity for large quantities
 Bearing risk: the wholesaler takes a risk by buying in large quantities because prices could fall while
goods are in his possession or fashion or taste may change suddenly
 The wholesaler acts as a ‘go between’ connecting manufacturer to retailer and consumer
 The wholesaler reduces transport cost to manufacturers
 The wholesaler provides information on market trends to producers
 The wholesaler pre-packs, labels and grades product for retailers
 The wholesaler perform an advertising or promoting role for the manufacturer
 The wholesaler assists retailers with regards to price stability because goods are released gradually
over a period of time and not in an flood which may serve to create falling prices
 The wholesaler offers credit by providing credit facilities to the retailer

The Role of the Retailer

9
Principles of Business Topic: Marketing Third Form

 Retailers break bulk

 The retailer provides a convenient outlet near to targeted markets
 The retailer provides credit to customers
 The retailer provides delivery to customers
 The retailer gives advice to customers
 The retailer provides after-sales service
 The retailer provides a wide variety of goods to consumers
 The retailer provides feedback from customer to manufacturers

Factors that influence Choice of Channel of Distribution

1. Type of Product – the size, shape, weight, make and fragility of the product must be considered.
Expensive and fragile items require the shortest or most direct route from the manufacturer to the
consumer to avoid handling and security problems
2. Consumers – the target market the manufacturer aims to reach will influence the channel of
distribution. If the market is specialist in a particular industry then it is best to deal directly with the
client since immediate feedback may be extremely important.
3. Quantity to be delivered – if customers request only few items it may be cost-effective to use a
wholesaler or retailer because these middlemen would repackage goods in smaller quantities.
4. Frequency of delivery – frequent deliveries would necessitate a longer channel because it may be
costly and inconvenient for the manufacturer
5. Location – distribution to remote areas would be economical for the manufacturer
6. Budget – this is a significant factor especially if specialized tools are required to handle the shipment.
The middleman may be best suited
7. Speed – perishable items such as flowers and fruits require fast means of transportation. Air
transportation will be the quickest form if the items are to be exported, but it can be costly. For
shorter local distances road transport is best.

RETAIL OUTLETS (OUTLETS OF DISTRIBUTION)

Distribution Description Advantages Disadvantages

Outlets
Convenience - Small retail outlets with a - conveniently located - producers have little
Shops variety of goods, for example, - may give credit control over packaging
Haberdashers Corner Shop, - break bulk according
Florists, News - Stands to customer’s needs
Hypermarkets - Large shops selling - convenient for the - usually not suitable to
specialized items under one consumer purchasing small amounts
roof, for example, Price Smart - may grant own credit
or Super Plus cards
- maintain quality and
brand name
Distribution Description Advantages Disadvantages
Outlets
Supermarkets - retail outlets for food and - conveniently located in - large overhead cost
household items shopping centers and, passed on to consumer
- offer self-service therefore, pleasant thus the prices of goods
shopping are higher

Door-to Door - salespersons travel around - direct methods of sales - additional sales staff
selling and the community from house to thus the firm receives required
retailing house selling their wares, immediate cash
example, haberdashers - obtain feedback from
customers

10
Principles of Business Topic: Marketing Third Form
Consumer - owned and operated by its - profits shared among - not always properly
cooperatives members members managed
- specialized in a particular - prices are relatively - members may lack the
line of products, for example, lower because of low expertise to expand the
food and consumer items overheads since business
- agricultural cooperative members operate and
which specialize in manage this type of
agriculture items business
Department - retail outlets that sell - offer a variety of - prices are higher because
stores several product lines different brands of high overhead and
- example, Woolworth, - usually offer quality administrative cost
Excellent Stores items - may not stock the
- items are pre-packaged quantities that are
convenient to the
consumers, for example,
one or two items only are
offered
Catalogue and - a listing of the range of - discounted prices are - most people do not
showrooms products and their prices usually offered because examine the items
- distributed free of charge the method eliminated physically before making a
- sample can be viewed the middlemen and purchase
absorbs the overhead
cost
Mail order - Use of mail to request - low cost products since - the consumer may not
houses purchase middlemen and have the opportunity to
overhead costs are examine the quality
reduced product
Telemarketin - Use of the telephone to - listing of potential - the service only available
g and internet entice people to purchase customers available to to subscribers of
shopping items. This is popular among producers telephones
hotels in the Caribbean - purchases are direct - Consumers do not have
- a toll free number is given to suing the Internet the opportunity to
customers for them to place physically view the items
their orders purchased via the Internet.

Vending - self-service machine that - offers 24 hours service - easy targets for vandals
machines and uses coins, for example, soft
automatic drinks and snack machines
teller
machines
Shopping - A group of separate - convenient since many - items are more expensive
centers commercial enterprises stores are under one since rent is extremely
located in one facility roof high
- parking provided
- no congested streets,
thus, shopping is easier

TRANSPORT

Transport is the movement of goods and people from one place to another. This may be internal or
within one country. The common modes of transport are Air, Sea and Land. Transport is very important
for the following reasons:
 It brings the goods from producers to final consumers
 It carries raw materials from where they are found and food from where it is grown to the factory
 It helps manufacturing firms to minimize its inventory holdings and thus keep costs down
 It minimizes factory shutdown time if raw material and personnel are not available for production
 It helps reduce expenses and thus makes the goods and services more competitive on the
international market
 It is a means of linking communities and is vital to industrialization, as workers need adequate
transport to get to work
11
Principles of Business Topic: Marketing Third Form
 It widens the market and also demand for the product, resulting in specialization and economies
of scale
 It increases employment
 It makes available a variety of goods to consumers

The Table below outlines the advantages and disadvantages of each type of transport.

Forms of Advantages Disadvantages

Transport
Land - can reach all destinations within a country - weight limitations
- flexible and direct - congestion can cause delays
- Road - reliable because control is under the lorry - air pollution
driver - expensive for long distances
- Rail and - cheaper for bulky goods - slower for short distances
Tram - fairly reliable schedule - expensive to maintain
- cheaper for consumers - inflexible timetables
- Pipelines - convenient for consumers - inconvenient to transfer cargo form one
- best to transport water, oil or gas train to another
- broken lines can lead to leakages
- high installation costs
- inflexible – products cannot be easily
changed
Sea - cheap, especially suited for bulky and heavy - slow form of transport
goods, for example, newspapers, lumber, - may require special containers
- Rivers minerals - purchaser must carry additional stock,
and Lakes - cheap method for transporting lumber which adds to cost of the product

Air - quickest form of transport - expensive, especially for bulky goods

- suitable for light and perishable goods, for - weather conditions and technical
example, orchids and other horticultural difficulties can interfere with schedule
products - relies on other form of transport to take
- allows buyers to carry a minimum inventory goods to final destinations
or stock
- sellers can reduce or eliminate warehouse
costs

Problems of Distribution

Problems are encountered in the distribution of goods are given below.

1. Inadequate facilities for temporary storage, for example, warehouse space.

2. Inadequate and dysfunctional tools and equipment for the movement of goods and people, for
example, not enough cranes.
3. Transport system or networks that do not connect the port with the various receiving points and
distribution of road routes.
4. Delayed shipment in ports (perhaps due to bad weather, or unprocessed documents).
5. Misdirection of goods because of improper labeling of goods.
6. Lack of understanding of custom authority regulations on importing and exporting goods.
7. Poor communication within the distribution network.
8. Industrial unrest.

Possible Solutions to the problems are given below.

1. Members of the public should be educated about the laws governing the distribution of goods.
Misdirection of goods because of improper labeling and lack of knowledge or customs regulations can
be solved by educating the population or users of the service. Leaflets and brochures outlining
procedures and laws should be made available. This education process must be continuous since new
importers and exporters may be engaged in this activity.
2. Proper planning and implementation of plans can solve the problem of inadequate facilities and lack
of tools and equipment. Budgets on the operation of an efficient port system should be prepared and
submitted to government agencies or necessary authority for adequate funding.

12
Principles of Business Topic: Marketing Third Form
3. The communication networks among all the parties should be implemented. The use of Internet can
be a good starting point.
4. Government Intervention – in the Caribbean it may be necessary that the Government provide the
adequate funding for port facilities and improve the road works between the ports and other
destination points because cost of goods to the final consumer may depend on the cost of these
facilities.
5. Implementation of good industrial practices may solve the industrial problem.

Factors Governing the Choice of Transportation

1. The distance should be of utmost importance. The destination of the goods would determine whether
sea, air or land transportation should be used. For example, if one has to send letter abroad, air
transportation would be best. However, for bulky mail such as magazines or newspapers one would
choose sea transport, and the delivery of mail to your home would be done via land.
2. The cost of transportation by the various means of transport should be considered. The most reliable
and cheaper means are usually taken under normal conditions.
3. Warehousing cost is included in the final price to the consumers. In a very competitive environment
the producer will always be examining ways of cutting this cost.
4. Insurance costs and handling charges vary from firm to firm and, therefore, firms must be aware of
the options available.
5. The nature of the goods. Perishable goods will need to reach their destination in the shortest possible
time and therefore the fastest mode of transport should be used. Also this mode must have the
facilities to preserve the products. For example, refrigeration facilities for foodstuff and horticultural
products.
6. The urgency factor. When handling rush orders from abroad one should use air transport since it is
the fastest method to send goods abroad. This method, however, is very expensive
7. The reputation of the carrier. One would choose a carrier that is known for quick, safe and efficient
service.

Forms of Advertising
Advertising can be informative, persuasive, and comparative or be a reminder that a product is available
on the market.

1. Informative: This type of advertising gives factual information about the product. It informs potential
customers about the benefits and where the product can be found. E.g. medications

2. Persuasive: This type of advertising tries to entice the consumer to purchase the product by using
emotional and psychological appeals. E.g. the sexual undertones and messages of alcohol and perfumes
ads

3. Comparative: compares one product to another

4. Reminder: Serves to inform customers that the product is still available. This type of advertising is
usually used in areas where there are lots of competitions or when the product has reached maturity
stage and new strategies are needed to improve the popularity of the product. E.g. toothpaste
manufacturers are always advertising their product to keep the customers informed about availability
and new product development.

Functions of Advertising:

1. Highlight unique features of a product

2. Build a firm’s image around its product
3. Highlight special events such as concessions, sales and late openings
4. Increase market share by stimulating demand
5. Educate consumers about the product
6. Inform potential buyers of the availability of goods and services

Adverting Media
Medium/Form Advantages Disadvantages

13
Principles of Business Topic: Marketing Third Form
Electronic (radio, television, - builds and maintains public & - very expensive, legal
telephone and consumer awareness restrictions
- a powerful means of - effectiveness depends on the
persuading people because they time shown
are lively, conveys feelings,
colorful and attractive

Printed Media – daily and - the printed word is more long - limited use of color in news
weekly newspapers, magazines, lasting print
etc. - becomes more credible when - very cold and static
printed in professional journals presentation
- permanent record and - cannot be certain that it is read
facilitates easy reference

Other Media – posters, buses, - Creates a strong impact - must be constantly updated
trains electric and neon signs, - neon signs have visual impact and therefore expensive to
postcards after dark and can be seen from maintain
a distance - can spoil the landscape
- source of distraction

14