CHAPTER 2

2. INTRODUCTION TO MARKETING

2.1 Objectives:

The objectives of this chapter are:

n To learn and experience the important factors influencing the choice of the technology to be used
on the business enterprise

n To experience the interplay of factors influencing the market such as price, product, place and
promotion;

n To experience real life market situation as buyer or seller;

n To realize the difficulties new entrepreneurs face in the marketplace and learn how to overcome
them.

2.2 Technology Assessment (TA) and Choice

Technology assessment is reported to be of three kinds: reactive, corrective, and anticipatory.

Reactive assessment is a reaction to currently recognized problems. The objective is to alter the
technology, if possible, to prevent further damage. Corrective assessment involves tracing problems
to their causes, and initiating research and development before it becomes severe. Anticipatory
assessment (Technology Forecasting - TF) is concerned with anticipating the future problems which
would be posed by proposed technology. All the three aspects of technology assessment are
important. Basically, technology choice is a problem of choosing from among a set of feasible
technological alternatives. whereas, technology assessment provides the feasible alternatives where a
choice can be made.

From a historical perspective, technology assessment studies were typically undertaken to examine
the social, economic and political implications of a new or emerging technology. For instance one of
the earliest accepted definition states that “Technology Assessment (TA) is the process of taking a
purposeful look at the consequences of technological change. It includes the primary cost/benefit
balance of short-term localized market-place economics, but particularly goes beyond these to
identify affected parties and unanticipated impacts in as broad and long-range fashion as is possible.
It is neutral and objective, seeking to enrich the information for management decisions. Both “good”
side-effects are investigated since a missed opportunity for benefit may be detrimental to society just
as is an unexpected hazard”.

The technology assessment can commence due to either a business problem-initiated perspective or a
technology-initiated perspective. In the case of a problem-initiated perspective, the main concern
may be with respect to specific aspects of the business, the consideration of which leads to the quest
for technology-based solutions. On the other hand, the technology-initiated perspective would reflect
a primary concern with a specific technology and its interplay with the business. This is important
because the interplay between business and technology is the fertile ground on which technology-
based competition is born. The interplay may produce nothing. But it may produce an understanding
that existing products or services and current methods of doing business are becoming obsolete. It
may help the company to develop insight into potential new products and services, different ways of
doing business, and new economic forces.

The primary purpose of technology assessment in business would therefore be to provide

management with these insights. However, once these insights are obtained, several key questions
would surface. For instance:

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How will the technology affect competition within the industry?
What would be the impact on the firm and the industry?
Should the company take an offensive or defensive posture with technology?

The technology assessment process should also be able to provide information on such critical issues.
The six steps outlined above provides a possible framework which organizations can suitably adapt to
meet their needs.

Due to the existence of very complex interactions between technology and its surroundings, one
needs to consider many factors in technology assessment. A number of lists of factors are available
in the literature for use in technology assessment. In addition, most lists presents several subfactors
for each main factor. The following is a synthesized listing of technology evaluation factors:

(a) Technological Factors

1.1 Technical Utility (Capability; Reliability; Efficiency)

1.2 Options of Technology (Flexibility; Scale)
1.3 Availability of Infrastructure (Support; Services)

(b) Economic Factors

2.1 Economic Feasibility (Cost-Benefit)

2.2 Improvement in productivity (Capital; Resources)
2.3 Market Potentials (Size; Elasticity)

(c) Resource Factors

3.1 Availability of Material and Energy Resources

3.2 Availability of Financial Resources
3.3 Availability of Skilled Manpower

(d) Environmental Factors

4.1 Impact on Physical Environment (Air; Water; Land)

4.2 Impact on Living Conditions (Comfort; Noise)
4.3 Impact on Life (Safety; Health)

(e) Population factors

5.1 Growth of Population (Rate; Life Expectancy)

5.2 Level of Education (Literacy Rate)
5.3 Labour Characteristics (Unemployment; Structure)

(f) Socio-cultural Factors

6.1 Impact on Individual (Life Quality)

6.2 Impact on Society (Values)
6.3 Compatibility with existing Culture

(g) Politico-Legal Factors

7.1 Political Acceptability

7.2 Mass Need Satisfaction
7.3 Compatibility with Institutions and Policies

Technology assessment is a part of creative activities, and should not be approached as a search for
formulas and models but rather as an art which depends on talent, experience as well as tools and
techniques. Moreover, due to the fact that technology assessment problems are very complex,
dynamic and multi-disciplinary in nature, it seems to call for a particularly cautious methodological
approach.

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The following shows the general steps in a typical technology assessment methodology for business:

Step 1: Identification of the Problem

· Defining the purpose of the study

· Determination of time horizon
· Setting boundaries and objectives

Step 2: Examination of Technologies of Relevance

· Describing technologies of relevance

· Technological forecasting

Step 3: Identification of Possible Areas of Impact

· Description of conventional areas likely to be affected like natural resource and physical
environment
· Description of how cost advantage will be affected
· Description of how differentiation will be affected
· Description of how industry structure will be affected

Step 4: Evaluation of Expected Impacts

· Measurement of the impact on the firm/industry

· Measurement of other impacts (environmental, societal, etc.)

Step 5: Formulation of Responses

· Identifying possible responses

· Analysing alternative response and consequences

Step 6: Choice of Suitable Action

· Communicating the findings

· Choice of most suitable alternative

The specific methodology needed for technology assessment will vary case by case in terms of
objectives and focus, depending upon the stage of development of the technology and the type of
technology. For example, at the introductory phase of a technology, the objective of technology
assessment would be to evaluate the likely consequences of possible impacts (which are the direct
and first-order impacts). However, in the growth phase of the technology, technology assessment
should consider all higher-order impacts and analyze measures to alleviate those. Similarly, the
contents of technology assessment for a process technology will be different from that for a product
(end use technology). All specific objectives of technology assessment are, however, derived from
the national goal of promoting technological development for improving the quality of life.

The frequently used methods for technology assessment may be classified into four categories,
included are the general intuitive methods; important component methods; structural decomposition
methods; and holistic composition methods. A more detailed classification of some of the popular
techniques for technology assessment are presented in Table 2.1.

Table 2.1 Classification of popular technology assessment methods

Classification Methods
1. General Intuitive Methods (i) Delphi Technique
(ii) Cross-Impact Analysis
2. Important Component (i) Checklists
(ii) Cross-Support Matrix

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3. Structural Decomposition Methods
(4) Holistic Composition Methods
(i) Relevance Tree
(ii) Morphological Analysis
(iii) Analytical Hierarchy
(i) Cost Benefit Analysis
(ii) Scenario Generation

2.3 The Role of TA in Developing Countries

There appears to be a general misconception regarding the need and usefulness of TA in developing
countries. This may be due to two commonly held beliefs: (i) TA particularly TF is essentially a
planning tool for the existing R&D organizations of the developed world; and (ii) R&D activities are
very expensive, and hence a luxury resource which poor developing countries cannot afford. Thus, it
is concluded by many that TA particularly TF has no relevance in developing countries. However,
we can say that today it is the developing countries that need TA the most due to the following
reasons:

· We live in man-made, technological world, where technology is the prime-mover for national
development. Thus, until we are in position to produce our own technologies, we have to
import technologies from developed countries. In the absence of TA, it is highly likely that
we will import obsolete and inappropriate technologies.

· Technology is surroundings-specific (socio-cultural, economical, environmental, etc.) Hence, for

“technology transfer” from developed to developing countries to be effective, it needs to be
adapted for local conditions. Proper adaptation, however, requires technology evaluation and
assessment, for which TA is an essential tool.

· Besides adapting imported technologies to make them appropriate for local conditions,
developing countries also engage in producing “appropriate technologies”. Here again TA is
essential for project planning.

· In order to pay for the imported technologies, developing countries have to export something.
Some countries sell their natural resources, as long as they have some! But for long-term
viability, they have to produce some technologies which they can export. TA particularly TF
is essential for the development of exportable technologies.

· The single most important resource for producing new technology is the “human resource”. In
developing countries we have plenty of people. Through proper TF and planned education, they
can be transformed into an enormous human resource for the development of exportable
technologies.

2.4 The Marketing Process

Once a technology has been chosen, a need to investigate the basic principles of marketing the
produced product by the selected technology arises. This calls for the understanding of the necessary
processes in marketing.

The flow processes of marketing will be explained to you on the basis of the schematic representation
in Figure 2.1. During the discussion of the process you will often come across descriptions or
explanations of certain important concepts which will help you to understand the marketing function
better.

2.4.1 Definition

The marketing process involves the transfer of a product or service to the consumer, as well as the
activities which make this transfer possible.

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The transfer of products and services takes place only if there is a need for them. Consumers buy
certain services or products in order to provide for their needs. Unsatisfied needs therefore constitute
the motivating force stimulating or initiating acts of buying. The marketer should always be
sensitive to consumers needs in order to be able to satisfy these needs and also to adjust his or her
marketing message accordingly.

According to A.H. Maslow, needs occur on five different levels. This is known as the hierarchy of
needs. A representation of Maslow’s hierarchy of needs is shown in Figure 2.2.

The consumer has certain needs

Marketer

Analyse the marketing environment

Micro Market Macro

 Strong points  Competitors  Politics

 Weak points  Consumer  Technology
 Socio-cultural, etc.

Intergrated marketing strategy

 Price Distribution
 Product Marketing communication

Market presentation to the consumer in exchange for money

Figure 2.1 A schematic representation of the marketing process

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 Self-fulfilment

Self-esteem:
Self-respect,
status
Social needs:
Love, friendship, acceptance
within a group
Security needs:
Safety, protection
Physiological needs:
Food, clothing, shelter

Figure 2.2 Maslow’s hierarchy of needs

An individual first satisfies the lower level needs before he or she moves higher up the hierarchy.
The marketer must now develop products or services which will satisfy the consumer’s needs.

2.4.2 The marketer

The marketer is a person who makes decisions about an enterprise’s prices, products, distribution
and marketing communication. These decisions are made in collaboration with the other functions of
the enterprise.

Decisions about the product cannot be made in isolation from the operational function. When a
product or service is developed to meet certain needs, the marketer should have sufficient relevant
information to identify opportunities and threats in the marketing environment because these
influence the marketing activities of the enterprise. The following example will illustrate this:

An increase in the price of butter (an economic variable in the macro-environment) will influence the
marketing environment. Because many consumers can no longer afford butter, an opportunity is
created in the marketing environment and butter is replaced by margarine. However, the marketer
should have this information available in order to be able to formulate a marketing strategy.

Information is now gathered by means of market research so as to make as much data as possible
available within the marketing environment.

2.4.3 Market Research

Market research means a systematic analysis and interpretation of information which is obtained by
means of scientific methods and is used to provide more effective answers to marketing questions.
This means that research is aimed at all the components of the environment in order to obtain an
overall picture of all the variables influencing marketing activities. The marketing environment can
be divided as follows:

· Micro-environment
· Meso-environment
· Macro-environment

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(a) The micro-environment

This is the internal environment of the enterprise. When an opportunity or threat is identified, the
internal strong and weak points of the enterprise must always be kept in mind to ensure that the
enterprise is able to take advantage of the opportunity or to oppose a threat.

(b) The meso-environment

Here we are particularly concerned with the consumer and competitors. Competitors and their
strategies create opportunities and threats for the marketer. Information on competitors is therefore
extremely important to the enterprise.

(c) The macro-environment

This influences both the micro- and meso-environments, for example through technological, political
or social changes.

The consumer does not only refer to individual consumers, but also to groups of consumers.
Consumers are divided into homogeneous groups (for example, they are grouped according to sex,
personality, geographic location, etc.) since they have different tastes and preferences for products
and services. This process is known as market segmentation.

2.4.4 Market segmentation

Market segmentation refers to the way the total market is divided into smaller sections which have
certain things in common. The marketer can choose a target market from these market segments and
can apply a marketing strategy to it. The marketing strategy consists of four marketing instruments,
namely:

· Product
· Price
· Place (Distribution)
· Promotion (Marketing communication)

By combining these marketing instruments into a marketing strategy, the marketer gives the
consumer a market presentation.

Let us see the interplay of the marketing instruments through a simulation game.

2.5 Market Room Simulation Game

2.5.1 Introduction

In this stage, the course participants play a marketing game - the Market Room Simulation, to derive
common experiences on and better understanding of marketing concepts. The discussion of the game
and its results will clarify some of the key marketing concepts required in accomplishing the markets
aspects of a business plan. On the basis of the game factors affecting the nature of supply and
demand and the four P’s of the marketing strategy (price, place, promotion and product) will be
discussed and an idea on how to arrive at sales and sales budget given.

2.5.2 Objectives

The objectives of the Market Room Simulation Game are:

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(1) To experience the interplay of factors influencing the market such as price, product, place and
promotions;

(2) To experience real life market situation as buyer or seller;

(3) To realize the difficulties new entrepreneurs face in the market place and learn how to overcome
them.

2.5.3 Procedure

The course facilitators will provide detailed and complete instructions on how the game will be
played and discussed. However, briefly, the game will take place in a large room, divided into
quadrants by masking take or otherwise. Five the participants will be designated as sellers while the
others will be buyers. The five sellers will be briefed about their respective tasks on the previous
day. Each will be given the sellers’ Briefing notes, the seller’s Order Form and the Seller’s Financial
Form in order to study the forms, familiarize themselves, with the game and plan their strategies in
advance.

The participants designated as buyers will act as “buyers with different purchasing power”. They will
play the game with real money. The “sellers” can therefore make a good profit if their strategy aims
at the right market. In the interests of having an effective game, additional details can only be given
by the Facilitators.

2.5.4 Briefing Notes

2.5.4.1 Buyers

You will act as buyers of products which are being sold by four competing sellers in the market. You
will use your own real money to buy. Each seller will try to convince you to buy his product through
various ways.

As in the real market, you as customers have different purchasing power. Some have more money,
others have less. For purposes of this game, you are divided into:

‘A’ Market - High Income Market

‘B’ Market - Middle Income Market
‘C’ Market - Low Income Market

As in the real market, you are free to choose what to buy and from whom. You are only limited by
the amount of money designated to you by the facilitators according to your Market Class.

In order to process the exercise, we will require you to buy at least ONCE
This is VERY IMPORTANT

2.5.4.2 Sellers

You are in the business of selling chewing gums <or other products as specified by the facilitators>.
You buy your stocks from the facilitator’s store, and sell them to your customers. You buy your
stock at a fixed price on cash basis, and you will in turn be told about your selling price. You will
use your own money to buy the stocks. Use the Order Form provided. You can purchase additional
stocks from the store, if you run out of supply. Remaining stocks after the game cannot be returned to
the store.

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Your customers are your co-participants. They will buy your product with their own real money.

Unfortunately, there are three other sellers in the market. One is selling the same product and brand
as you but with a different price. Two other sellers sell a similar product with a different brand and
other features. Therefore, your objective is to make more profit than your competitors.

As seller, you need an effective marketing strategy to be able to sell your products, that is, to
convince the customers to buy from you, and not from your competitors. For purposes of this game,
you are assigned to act as a seller of chewing gum representing one of the four categories below:

High Quality/High Price (HQ/HP)

High Quality/Low Price (HQ/LP)
Low Quality/High Price (LQ/HP)
Low Quality/Low Price (LQ/LP)

Your specific task will be explained to you by the facilitators!

The unit cost of purchasing the HIGH QUALITY chewing gum is Tshs __________, whereas the unit
cost of purchasing the LOW QUALITY chewing gum is fixed at Tshs. __________!
(
For purposes of the game, the selling price of the four sellers are as follows:

HQ/HP) Tshs. _______

(HQ/LP) Tshs. _________
(LQ/HP) Tshs. _________
(LQ/LP) LC _________

With the exception of the product and the selling price (which are already set for you), you are fee to
formulate your own marketing strategy, such as promotional measures and investment in fixed
assets, etc., according to your desire and perception.

As in the real market, the customers have different purchasing power. Some have more money,
others have less. Some want to spend all their money, others not so. Some are easily convinced,
others not so. For purposes of this game, they are categorized into:

‘A’ Market - High income Market

“B’ Market - Middle Income Market
‘C’ Market - Low Income Market

Decide on your own strategy, and then use the Order Form to place your orders. Before every
round is going to be played, fill in the Seller’s Form to calculate your estimated profit/loss. The
same Seller’s Form will be filled in again after each round in order to calculate your actual
performance. We will also provide you with a Sellers’ Strategies Review Chart to compare your
estimated and actual results.

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Sellers’ Marketing Market (A, Market SALES PURCHASES Other Total Cost Profit/
Name Strategy B, C) Share (%) Costs Loss
Unit Price Quantity Total Unit Cost Quantity Total
HQ/HP
TARGET
ACTUAL
LQ/HP
TARGET
ACTUAL
LQ/HP
TARGET
ACTUAL
LQ/LP
TARGET
ACTUAL

TARGET
ACTUAL

MARKET ROOM SIMULATION GAME

Sellers’ Strategies Review Chart

 MARKET ROOM SIMULATION GAME

Seller’s Financial Form

Seller: _____________________________________________ Round: _________

Please tick appropriate box: Forecast [ ] Actual [ ]

1. Marketing Strategy

Unit Unit Selling Quantity

Purchase Cost Price (for sale/sold)
- HQ/HP (High Quality/High Price) ____________ __________ ____________
- HQ/LP (High Quality/Low Price) ____________ __________ ____________
- HQ/HP (Low Quality/High Price) ____________ __________ ____________
- HQ/LP (Low Quality/High Price) ____________ __________ ____________

2. Target Market

- High Income (Market A)

- Middle Income (Market B)
- Low Income (Market C)

3. Market Share

_________ % (Total market share is 100%)

4. Marketing Performance

Sales (Selling Price x Quantity for sale/sold) __________

Less: Purchase Cost x Quantity for sale/sold __________

Promotional Costs (see Note 1) ________

Supplies (see Note 2) ________ __________

Cost of Goods Sold __________

Profit (Loss) =========

Note 1: Examples of promotional costs include cost of lottery, gifts, coupons, sales commission, etc.

Note 2: Cost of supplies: A-4 paper (______), ZOPP cards (_______), kraft paper (________)
marker pen (_____), masking tape (_______)
 MARKET ROOM SIMULATION GAME

Seller’s Order Form

Seller: _____________________________________________ Round: __________

Please tick appropriate box: Forecast [ ] Actual [ ]

1. PRODUCT ____________________________________________

Quantity ( ) x Unit Purchase Cost ( ) = ________________

2. SUPPLIES

Number Price/Unit Total cost

small ZOPP cards __________ ___________ __________
big ZOPP cards __________ ___________ __________
marker pen __________ ___________ __________
masking tape __________ ___________ __________
kraft paper __________ ___________ __________
A-4 size paper __________ ___________ __________
others (specify) __________ ___________ __________
Sub-total

3. ASSETS (Rental per round)

premises __________ ___________ __________
table __________ ___________ __________
chair __________ ___________ __________
sign board __________ ___________ __________
calculator __________ ___________ __________
radio __________ ___________ __________
microphone __________ ___________ __________
Sub-total

4. PROMOTIONAL MEASURES
raffle prizes __________ ___________ __________
give aways __________ ___________ __________
kraft paper __________ ___________ __________
others (specify) __________ ___________ __________
Sub-total

5. OTHER MARKETING TECHNIQUES

_________________ __________ ___________ __________
_________________ __________ ___________ __________
_________________ __________ ___________ __________
TOTAL
========= ======== =========
2.6 Marketing Plan Exercise

This module requires the students to conduct market field study focusing on one of the ideas adopted.
The information contained herein therefore provide guidance on the exercise.

2.6.1 What is the product?

Give a short description of the product, its size, colour, shape and the range of products to be offered.
Describe product features, uses and benefits, whether it is a new or an existing product.

2.6.2 How does it compare in quality and price with its competitors?

In answering this question, determine what will make the product unique in the market. Will it be of
a better quality than what is currently available, or will the price be significantly different to make it
easier to sell? What other features will make it different from competitors’ products?

2.6.3 Where will the business be located?

Location of the business is essential to either reduce costs, or increase the chances of customers
stopping at the business to look at your products or at least make inquiries. If the business is retail or
service oriented, it must be near the market. If it is production oriented, it may be better to be closer
to its raw material sources or near infrastructure facilities (e.g. port), transport and utilities (e.g.
power ) centres.

The important factors to consider in location are:

· proximity to essential raw materials

· proximity to markets and distribution channels
· availability of transport facilities
· availability of efficient and cheap skilled labour
· existence of related industries (forward/backward linkages)
· infrastructure facilities (e.g. road, power, port etc.)
· communication facilities (e.g. post office, telephone, fax, telex, etc.)

Good location is one of the most crucial factors in market development, therefore choice of location
should be carefully considered. Location should also be differentiated in terms of marketing outlets
or factory location. In some small businesses, marketing outlet and factory may refer to one and the
same location.

2.6.4 What geographical areas will be covered by the project?

Determining the geographical coverage (that is, where to market the product) depends very much on
the nature of the product; how well it lends itself to transport and distribution; the size of the market
in different localities; the presence of strong competitors in the areas under consideration, your
willingness to travel and, of course, one existing contacts or channels of distribution with which you
are familiar.

In general, it is easier to deal with a limited market area, since travel time and distribution costs can
be kept to a minimum.
2.6.5 Within the market area, to whom will the business sell its products?

Here we are really talking about specific target groups or market segments among the population,
within the specified market area you have chosen, to whom you will aim to sell your products.
Identify these customers as clearly as possible (e.g. their characteristics and profile in terms of age,
sex, income, buying practices, consumption pattern, etc.) in order to ensure that the product does
indeed suit their taste, needs, wants, lifestyle, etc.

Will you sell to wholesalers and/or retailers, and if so, what are the consequences? If you plan to
have a retail outlet, choice of location is critical.

2.6.6 Is it possible to estimate how much of the product is currently being sold?

This estimate should be possible to do in a number of ways. Basically, the approach is to move from
the general to the particular. For example, you can start by estimating consumption, usage or sales of
the product per head of the population in your market area.

Then, one by one, eliminate certain segments (specific groups categorised by age, income, location,
sex, habits, etc.) of the population who may not be your consumers so that, in the end, a reasonable
figure can be assumed to be correct. If possible, it is good to check some statistics, if they are
available. If you cannot avail yourself of any reliable statistics (secondary data), it may be better to
make a simple and low-cost survey, i.e. gather first-hand or primary data. For example, if you know
how many shops there are which sell your or similar products, and if you question a few of them
regarding their sales, you can estimate the total sales of the product.

2.6.6.1 Market Survey Checklists

The following are a series of checklists which can guide you in your interview with wholesalers,
retailers, and consumers (people who use the product) or customers (people who buy your product).
The questions are intended to be illustrative and you should learn how to begin your interview (by
building a relationship with your interviewees so that they will open up and not feel suspicious or
threatened) and pose your questions diplomatically, politely and clearly to get the desired
information and accurate answers.

If the questions are adequately answered, you can make a preliminary estimate of the total demand in
your market area and the share of the market which you can realistically capture, given an effective
marketing strategy. If similar products are distributed mainly by wholesalers and retailers,
conducting such a survey is really the first step in establishing a relationship with your customers and
finding out their needs.

There are two main reasons for doing the survey:

· accurate collection of information so that a reliable level of sales and production can be forecast;
· establishment of good relations with your own potential customers or buyers.

A. Wholesalers/Importers’ Checklist

Most consumer products such as biscuits, sugar, toothpaste, matches etc. find their way to the
consumers through wholesalers who purchase the goods in bulk from a factory or from distributors
and then sell them in smaller quantities to grocery stores and retail shops (customers).

Since there are usually a few wholesalers and many retailers, it is often best to start your market
survey by seeing the wholesalers. Once you have defined your market area, try and locate all the
wholesalers who supply your area and ask the following questions:

1) How many wholesalers are there in your market area? What are their names and where are their
locations?
2) What market areas does each wholesaler cover?
3) How much of your product does each sell per year? Is it increasing every year? If yes, by how
much?
4) Are there seasonal fluctuations?

For 1 2 3 4 5 6 7 8 9 10 11 12 months
example:
High
Medium
Low

5. What about the extent of competition? Are they large in size, are their product features the same,
what are their quality standards? What are their marketing practices?

6) What about product improvements, i.e. do they think the market needs some new designs, more
varieties, better features, new product specifications?

7) What is their selling price of your product?

8) At what price do they buy it?

9) What is the length of credit extended to them by their suppliers (one week, one month), if any?

10) Assuming your product is of suitable quality and priced competitively, how much of your product
would they take as a sample order?

B. Retailers’ Checklist

Retail shops are the last link between producers and consumers. Ultimately, they make the final sale
to the public. Their proximity to the buyers makes them valuable sources of information on what
people actually want and buy.

For example, if a person buys ink which turns our to be of poor quality, then the customer will
complain to the shop where he bought it, rather than going to the factory. For this reason, retailers
are in a strategic position to identify gaps in the market, particularly between what his customers
demand and what his wholesalers can supply. Some creative retailers may be able to give you new
product ideas that could also be made in your factory.

The objectives of interviewing retailers are:

(a) to cross-check data provided by wholesalers;

(b) to learn about the needs, wants, taste, buying habits, etc. of the consumers;
(c) to look for potential new products;
(d) to learn how to position your product as against your competitors’ products;
(e) to learn how to market your product more effectively;
(f) to help identify promotional measures that will be useful in selling the product (e.g. display
boards, giveaways, samples, etc.)
(g) to help formulate the marketing strategy of the business.

Some questions which may be asked from the retailer:

1) How much of the product does he sell in a year?

2) How many competitors does he have in his neighborhood?
3) Does he experience any seasonal fluctuation in sales?
4) From what wholesaler or manufacturer does he buy the product?
5) Is he given any credit by his suppliers?
6) If he is given credit for the product, for how long is the credit given?
7) Does he sell wholesale anywhere, if so, where?
8) What is his purchase price for the product?
9) What is his selling price for the product?
10) Does he have any ideas whether his customers would like any changes or improvements in
the product?
11) Does he buy the product with cash or on credit?
12) Does he sell on commission?

C. Customers’ or Consumers” Checklist

Even if you have interviewed wholesalers and retailers, it is important to discuss market acceptance
with customers (who buy the product) and consumers (who use the product). Their feedback is very
useful, either to cross-check previously collected opinions or to stimulate new ideas that neither of
the other two groups of people interviewed have touched on or captured.

In particular, if your product is a capital good (e.g. machinery), it is necessary to talk to consumers as
they normally purchase directly from the factory. Some questions that can be asked of customers and
consumers are:

1) Why did you buy this product?

2) When (which month) did you buy it?
3) How often do you buy this product?
4) Will you be needing more of this product in the future? How many?
5) How much did you pay for it?
6) Are you satisfied with it?
7) Would you like to see any changes or improvements?
8) From where did you buy it (locality), from whom?
9) Why did you buy it from this particular supplier?

You must have a record of the profile of your interviewees (wholesalers, retailers, consumers) such as
age, occupation, income, buying habits, sex, consumption pattern, etc. as this information will be
helpful in analysing and describing your market.

2.6.7 What share or percentage of this market can be captured by the business?

This is always a difficult question to answer precisely. So much depends on your ability as an
entrepreneur to sell your product, your network, the effectiveness of your marketing strategy and
your aggressiveness in pushing the product combined with business common sense. It also depends
on the extent and strength of the competition. However, some guidelines can be given. If you have
done your market survey properly, you will know the following information about your competitors:

· whether there are few or many competitors

· whether they are large or small in size
· whether their product features are similar to each others’
· whether their product features are similar to yours.

The following decision guide may help in processing this information to make an estimate of your
market share.

DECISION GUIDE

Number of Their Size Product Features Market Share

Competitors
Many Large Similar 0 - 2.5
Few Large Similar 0 - 2.5
One Large Similar 0-5
Many Large Not Similar 0-5
Few Large Not Similar 5 - 10
One Small Similar 5 - 10
Many Small Similar 10 - 15
Few Small Not Similar 10 - 15
One Large Not Similar 10 -15
Many Small Not Similar 20 - 30
Few Small Similar 30 - 50
One Small Not Similar 40 - 80
No Competitor 100

It is assumed that your business will be in the “small” category when entering the market.

2.6.8 How much of the product will be sold?

Now that you have estimated the market share that you can realistically capture, you can make an
estimate of your targeted sales (sales forecast), that is, every month for the first year and yearly for
the next five years. The first annual sales forecast is generally a fraction of the estimated market
share and could be anywhere from 6% to 80% of the market share in the beginning. This is to make
allowance for some errors in estimating the market .

2.6.9 What is the selling price of the product?

There are three common ways of determining the selling price of your product. These are:

a. The Cost-Plus Method

This is done by adding a reasonable profit margin (say 20%) to the final total product cost (i.e.
marketing cost, plus production cost, plus administration cost, plus finance cost). The final product
cost per unit is determined by dividing the total product cost by the number of units produced. To
this figure you may add a profit margin.

b. The Comparative Method

This method compares your product with others in the market and then, based on your product’s
quality and other features, you may fix your price lower, higher or the same as your competitors’.

c. What the Market Will Bear Method

This method is based on supply and demand of the product. For instance, if there is a scarcity of the
product in the market (sellers’ market), you can set your selling price high, hence your profit margin
could be higher. Similarly, if there is a surplus of the product in the market (buyers’ market), you
may be forced to lower your price, and consequently your profit margin. (Two alternatives to avoid
reducing profit margin are: 1) to reduce the product cost by identifying which areas under marketing,
production, administration and finance can be reduced, and 2) to identify other market segments who
can afford to buy at the original price.

In practice, all three methods should be used from time to time in any business, but in general, and
especially when starting a business, it is safer to use the “cost-plus Method”. It is also good business
strategy to anticipate your competitors’ reaction to your pricing strategy.

2.6.10 What promotional measures will be used to sell the product?

Promotion is one of the most neglected aspects of marketing a product. Promotion is necessary to
entice and convince buyers to purchase your product and not your competitors’. Promotion is
generally divided into advertising, sales promotion, publicity and personal selling. Some of these
measures are:
n advertisements on radio, newspapers, magazines, trade journals or, if appropriate, television.
n volume discount (reduced prices when selling in bulk)
n handbills distribution
n prompt, regular, courteous and efficient service to your clients
n good merchandising ensuring proper display of your product on the shelves of your market
outlets
n special credit facilities to regular customers
n posters
n billboards
n signboards
n free samples
n free trial press release
n buy one - take one
n raffles
n coupons
n sponsorship of local shows, festivals
n participation in trade fairs and exhibits
n personal selling

One word of caution on promotional measures. These activities cost money, so be sure that for every
promotional measure adopted, there is a foreseeable increase in sales. Without a justifiable increase
in sales, costs will escalate, increasing the unit cost of the product. Make sure to include these costs
in your marketing budget.

2.6.11 What marketing strategy is needed to ensure that sales forecasts

Formulating a marketing strategy means proper planning, balancing and integration of the business’s
product strategy, pricing strategy, distribution strategy and promotion strategy. In order to market
effectively, you must identify your market, know your product and study your competitors. You also
have to spend some amount on promotion, price your products correctly and distribute them to your
retailers and/or consumers effectively and efficiently. You should not assume that because your
product is good customers will automatically buy your product.

2.6.12 How much do you need to promote and distribute your product?

You must have a marketing budget that includes your marketing costs, e.g. promotion, distribution
and salaries of your sales force.
2.7 Workbook and Workshop on MARKETING PLAN

Part on

Economic &
Marketing Analysis
2.7.0 The Product

&
Success in business means offering your potential buyers with products that have
better features than what are already available. Check whether you can make the
existing products … easier to use, pleasant , safer, healthful, comfortable, cleaner,
cheaper, attractive and smarter, as well as disposable. Then try:

Substituting existing materials with ones that are cheaper and more locally
available
Combining or adding more functions, uses and features in the existing products.
Maximizing or increasing the size, range, colours, or materials in existing products.
Maximizing or reducing or rearranging product size, range, colours, or materials.
Multiplying purpose or changing the purpose of existing products.

On your right, 2.7.0.1 The Product Description

draw or describe
your product
emphasizing the
characteristics
that make it better
than what is now
sold in your area .

!
Producing the 2.7.0.2. The Target Buyers
product without
the buyer in
mind is a useless
exercise. You
have two types of
buyers—
individuals and
institutional
(groups of
people). Briefly
describe the
behaviour of
your potential
buyers; specify
their needs,
wants, location,
preferences,
income level,
etc. Consult your
market survey
results. In fact,
you can also
annex the
summary of your
market survey
results.

!
&
Your market consists of places where there are large concentration of
your potential buyers who can actually purchase your product. They can
be towns, villages, districts and communities where you can actually sell
your products

Where are the 2.7.0.3. The Market Coverage

potential buyers
that you can
easily reach-out
located (mention
the names of
towns, villages,
communities,
etc.)?.

Why do you think

they are the best
places for your
product?

4
2.7.1 Demand Analysis

&
In estimating the number of buyers, you need to know:
Locations: The towns, villages, communities, etc. that you identified earlier You can
get the figures from the local DC or SIDO offices. Please note where you got the
figures.
Target (in % Population): This is your very conservative estimate of the percent of
the population that can really buy your products and services. To estimate this figure,
check with the results of your market survey.
Potential Buyers: Multiply the Estimated Population with the Target (in %) to get
the estimated number of potential buyers for each market location.

2.7.1.1. Number of Potential Buyers

The number of potential buyers consisting of both individual and institutional for the product is
estimated in the table below:
Table 2.7.1 The Number of Potential Buyers

Calculate the Locations Estimated Target (in % Potential

number of Population Population) Buyers
potential buyers

Total

&
Below are some specific questions that you must have obtained from the Market
Survey. Please consult your market survey results and answer the following
questions.

[Note 1: What is the usage rate of your product or service ( or , How often will
the average buyer per year). _______ ? Will the usage rate increase with time?
Yes or No.
[Note 2: How much are they willing to spend for your product per unit?_____]
2.7.1.2 Estimating Future Demand

&
In estimating future demand figures, you will need the following information:
Years: Five years to the future beginning this year.
Potential Buyers (Persons): Each year into future, the number of potential buyers
will increase with the population.
Usage Rate: This is the frequency that the average buyer will buy your product
within a given period, say a week, a month, or a year )). This figure must have been
identified during your market survey.
Potential Buyers: By multiplying the usage Rate with the Potential Buyers, you get
the future demand estimates.

The future demand of the product within the next five years is calculated in the Table below:

Table 2.7.2 The Next Five-Year Demand Estimates

Estimate the Years Potential Buyers Usage Rate Future Demand

future demand for (Persons) Estimates
the product
Year 1

4 Year 2

Year 3

Year 4

Year 5
Total

Why do you 2.7.1.3. Justifying the Future Demand Estimates

believe that the
future demand for
your product will
be as you have
predicted?

2.7.2 SUPPLY ANALYSIS

&
Your competitors. The following are your competitors because they are already
providing the same products you intend to make to the market that you want to
capture:
Importers: Products come from producers outside the town you are in.
Local Producers: Products come from producers inside the town you are in.
Substitutes Makers: While the product does not exist, substitutes are available.

2.7.2.1 Imports

Presently, the importers of the product are described in the Table below:

Table 2.7.3. The Importers

Are there Company Name Location Imports/Month Total Imports

importers of the
product in the
towns you like to
service?

4
2.7.2.2 Local Producers

The local producers of the product are described in the Table below:

Table 2.7.4. The Local Producers

Are there local Company Name Location Production/ Total

producers in the Month Production
towns you intend
to market?

Are there already 2.7.2.3. Substitutes

substitute
products that the
buyers are now
using ? What are
they?
!
Briefly describe 2.7.2.4. The Competitive Advantage
how you intend to
“outsell” your
competitors in the
market

!
2.7.2.5 Future Supply Estimates

The future supply of the product in this town is shown in the Table below:

Table 2.7.5. Future Supply Estimates:

Estimate the Years Local Imports Future Supply

future supply for Production
the product
Year 1

4 Year 2

Year 3

Year 4

Year 5

Total
2.7.3. THE SALES FORECASTS
2.7.3.1. The Demand and Supply Gap

The future demand and supply of the product in this town is shown in the Table below:

Table 2.7.6. Future Demand and Supply Gap:

Now, calculate Years Future Future Supply Demand and

the demand and Demand Supply Gap
supply gap (that
is Demand- Year 1
Supply)!
Year 2

4 Year 3

Year 4

Year 5

Total
NOTE 3: Target Market: _______ % of the Gap

2.7.3.2 The Sales Forecasts

The Sales forecast of the proposed enterprise is shown in the Table below:

Table 2.7.7. The Five-Year Sales Forecasts

Your sales Years Demand and

forecasts Supply Gap

4
Year 1

Year 2

Year 3

Year 4

Year 5
NOTE 4: How much of your annual sales will be paid in cash by your potential buyers? _____%
REMEMBER: If you divide the sales forecasts (that are expressed in Tshs ) by the current price
per unit of the product, you will have a rough idea of the production volume per year
2.7.4 THE MARKETING PLAN

&
PRODUCT STRATEGIES. In making your product more saleable in the market,
try to consider the following elements of the product:
Brand: What is the name of your product?
Label: Your product must contain enough instructions, safety considerations, your
address, the contents, etc. in the label
Packaging: This must protect your product from the elements
Guarantee: Your promise to replace the product in case of defective production
Customer Services: Services such as free delivery, credit, and other after sales
services
REMEMBER: All the above cost money. Please estimate how much they will all cost
and check whether your potential buyers are willing to pay.

Now, describe 2.7.4.1. Product Strategies

(draw is even
better!) your
product showing
the details such as
the brand, label,
packaging, and
estimate how
much such
features cost per
product.

!
&
CHANNELS OF DISTRIBUTION. In the channels decision, consider
the intermediaries that will move your products from your factory to the potential
buyers. Here, moving involves costs for transport, storage, inventory carrying, etc.
The following (or their combination) are your choices:
Direct Selling: You (or your salesperson) will actually do the actual selling, delivery,
sales collection, and servicing of sales to the buyers.
Retailers You can rely on several small and independent retailers to actually do the
selling to your potential buyers.
Wholesalers: You can also reply on big wholesalers to sell your products to several
small retailers and then to your buyers.
To select the right channel, you should consider the cheapest way to reach your
buyers.
REMEMBER. Whatever you decide on, the channels will charge (discounts or higher
profit margins) you for their services. You should consider these in pricing your
products.
NOTE 5: Who will do the actual selling of the products?___________
NOTE 6: How much will you pay the salespersons per month? TSHS______________

In the space on 2.7.4.2.1. The Salesperson

your right,
describe your
conditions
(salary, etc.) of
employing this
person?.

Describe your 2.7.4.2.2. The Channels of Distribution

channels of
distribution (if
any) and how
would you reward
them? You can
attach a drawing
of the channels.

!
&
PROMOTION AND ADVERTISING. Advertising is a continuous
process telling your buyers about products. Some examples include having a press
release, sponsoring a civic event or activity, and an ad in the newspaper or radio,
billboards or posters, flyers, etc.

Promotional activities offer added incentive for the buyer to buy your products.
Examples are: 2 for 1 offers, coupons, special sale prices, rebates, lottery, and give
always.

Describe how you 2.7.4.3.1. The Sales Store

intend to make
your sales store
very attractive for
your buyers

Describe how you 2.7.4.3.1 Promotional Strategies

will promote and
advertise your
products and then
estimate the costs
involved.

!
Advertising Strategies
&
PRICING. In this stage, the pricing of your products must consider not only your
marketing costs (for example, cost of labels, packaging, salesmen, promotion,
advertising, etc. but also the prices of your competitor.
Will the prices be higher … or lower ? Why?
Will you offer special discounts … for large orders? How about discounts for cash
payments?
It may be a good idea to include a tentative price list of your products. If you intend
to start a restaurant, why not include a menu.

Describe your 2.7.4.4. Pricing Strategies

pricing strategies

NOTE 8: Convert your annual sales to daily sales by assuming a 200 business day-year. What
would the figure be? Tshs_________________

Do you sincerely 2.7.5. Sales Justification

believe that the
marketing plan
you wrote above
is sufficient
enough to
generate such
sales every day,
why?

.
 Congratulations! You have made it through the marketing plan. Many
entrepreneurs rush to the next stage immediately. Don’t do it! Instead, spend
another hour or so reflecting the implications of the decisions you made earlier.
This is an opportunity for you to go back, review and make some final changes.
This page will help you do that.

On the space 2.7.5. Final Thoughts on Marketing

provided, write
some of your
thoughts on the
following:

n Is your
product
really
better than
those
available ?
n Do your really
know your
buyers and
can you
separate
them from
non
buyers?
n Did you check
the costs of
labels,
packaging,
sales
person’s
salary,
retailers’
margins,
etc.?
n Do you now
have a
sales
contract
from a
buyer?
n Can you really
make the sales
everyday?

NOTE: If your
answers are YES,
then you can now
proceed to the
next step.