Business Information Handbooks




  Marketing Strategies
   Market segments – Marketing concepts
   Market research – Pro...
GTZ   DANIDA
Business Information Handbooks




                                    Draft

           Marketing Strategies
            ...
GFA Consulting Group, Germany
Table of contents

1.   Market and Marketing Definitions......................................................1
2.   Marke...
•   Market Field Study Plan
•   List of SBS Network Business Information Handbooks
•   List of SBS Consultants
Business Information Handbooks



 1.    Market and Marketing Definitions

Marketing is an important operating arm of a bu...
Business Information Handbooks

We should note three things about this definition.
  1.      A market could be ordinary pe...
Business Information Handbooks

4.      Advertising is the impersonal presentation of goods through
        the mass media...
Business Information Handbooks

Any organisational entity that engages in marketing activities to serve a
customer group w...
Business Information Handbooks

The concept of the marketing mix was popularised by Neil Borden in 1954.
Another author, E...
Business Information Handbooks

means that the product is displayed on shelves in shops. For promotion, it is
now apparent...
Business Information Handbooks

in fact, beer bottles could be used. The emphasis will be to reduce the costs
of productio...
Business Information Handbooks

We have seen that a marketer controls the variables - product, price,
distribution and pro...
Business Information Handbooks

should also be interested to know how the product is used and be concerned
about the satis...
Business Information Handbooks

usually price inelastic, because the need to secure health is essentially
insensitive to p...
Business Information Handbooks

Going beyond personal and group influence, we consider the larger society
or culture. Peop...
Business Information Handbooks



 5.   Market segmentation

Markets consist of buyers who differ in many ways and who may...
Business Information Handbooks


Benefits of research:
Various benefits can be derived by taking marketing research seriou...
Business Information Handbooks

Problem formulation
A clear definition of the research problem is probably the most import...
Business Information Handbooks


Solution
The final step in the research process is data analysis and interpretation of
re...
Business Information Handbooks

          Product Strategy
          Price Strategy
          Place Strategy
         ...
Business Information Handbooks



 7.   Product Development

Product decisions
The product or service is the offer that th...
Business Information Handbooks

stabiliser (for Africa). A product line may be narrow (that is limited) or broad
depending...
Business Information Handbooks


 8.   Pricing decisions - Factors that influence price setting

Setting base price
The ba...
Business Information Handbooks

we mean middlemen such as wholesalers, distributors, retailers and agents.
These middlemen...
Business Information Handbooks

of each distributor's sales performance in relation to previous periods or
other distribut...
Business Information Handbooks

'sales' conducted by retail stores at festival periods such as Christmas, the
giving away ...
Business Information Handbooks

These translate ultimately into sales of the product, but in planning a specific
advertisi...
Business Information Handbooks

There are many marketing channels open to small enterprises, each
presenting a different l...
Business Information Handbooks

Flyers
The use of flyers is catching up with small enterprises in Ghana. This
channel of a...
Business Information Handbooks

Sales Promotions
Sales promotion has been an effective marketing tool over the years. It
i...
Business Information Handbooks




                                    Attachments


            •   Marketing Guide
     ...
Business Information Handbooks

Attachment 1:
                          THE MARKETING GUIDE
                          Part...
Business Information Handbooks

               -        communication facilities (e.g., post office, telephone,
      fax,...
Business Information Handbooks

good to check some statistics, if they are available. If you cannot
avail of any reliable ...
Business Information Handbooks

1)      How many wholesalers are there in your market area? What
        are their names a...
Business Information Handbooks


The objectives of interviewing retailers are:
a)     to cross-check data provided by whol...
Business Information Handbooks


          In particular, if your product is a capital good (e.g., machinery), it is
     ...
Business Information Handbooks


           The following decision guide may help in processing this information
         ...
Business Information Handbooks

  determined by dividing the total product cost by the number of units
  produced. To this...
Business Information Handbooks

           •   billboards,
           •   signboards,
           •   free samples,
       ...
Business Information Handbooks


                PART II – MARKETING PLAN EXAMPLE

1.1   Description of the Product
      ...
Business Information Handbooks

      selected because: (a) Mr Marketing personally knows many of the
      major retailer...
Business Information Handbooks

       retailer, the retailer’s selling price will be cedis 15,400. At this price, it
    ...
Business Information Handbooks

a) product strategy      - it has a superior product.
                         - it has an...
Business Information Handbooks




                      Competitive Analysis of Product

      Features        Proposed  ...
Business Information Handbooks




      <List of Market Areas And Size of Market>

1.5   Main Customers




      <List o...
Business Information Handbooks


      Table 1.6       Table of Projected Demand

Year               Quantity             ...
Business Information Handbooks

Table 1.8     Comparison of Competitors’ Selling Prices
  Project’s   Project’s       Pric...
Business Information Handbooks




1.11   Marketing Strategy




       <Table of competitors’ Marketing Strategy>

1.12  ...
Business Information Handbooks


Table : Marketing Budget
Chose what applies to your product and marketing strategy:
     ...
Business Information Handbooks

Attachment 2:

           Market Field Study: Sequence of Events
A. Development of a quest...
Business Information Handbooks




              Business Information Handbooks

    List of Publications for Business Dev...
Business Information Handbooks



List of SBS Network Consultants
    Name /                Address                       ...
Ethiopian Business Development Services Network (EBDSN)
Ethiopian Business Development Services Network (EBDSN)
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Ethiopian Business Development Services Network (EBDSN)

  1. 1. Business Information Handbooks Marketing Strategies Market segments – Marketing concepts Market research – Product development Pricing – Distribution channels Promotion and Advertising Accra 5/2006 __________________________________
  2. 2. GTZ DANIDA
  3. 3. Business Information Handbooks Draft Marketing Strategies Market segments - Marketing concepts Market research – Product development Pricing – Distribution channels Promotion and Advertising Accra, Ghana May 2006 Published by: - GTZ, German Technical Cooperation and - DANIDA, Danish International Development Assistance In collaboration with: Small Business Services (SBS) Network Project Implementation:
  4. 4. GFA Consulting Group, Germany
  5. 5. Table of contents 1. Market and Marketing Definitions......................................................1 2. Market Functions.................................................................................2 3. The Development of a Marketing Strategy........................................3 4. Marketing Concept..............................................................................7 • External Constraints......................................................................7 • Understanding and influencing Buyer Behaviour...........................8 • Forces that influence buying Decisions.........................................8 • Economic Determinants of Demand..............................................9 • Internal psychological Variables....................................................9 • Social and cultural Influences......................................................10 5. Market Segmentation........................................................................11 6. Marketing Research...........................................................................11 • Marketing Plan Format................................................................14 • Marketing Plan Questions............................................................15 7. Product Development........................................................................16 • Product Decisions........................................................................16 • Branding and Packaging..............................................................16 • Building the Product Mix..............................................................16 • Product Innovation.......................................................................17 8. Pricing Decisions...............................................................................18 • Setting Base Price.......................................................................18 • Pricing in the Distribution Channel...............................................18 9. Channels for Distribution and Logistics..........................................18 • Selecting Distribution Channels...................................................19 • Selecting and motivating Distributors...........................................19 • Physical Distribution or Logistics.................................................20 10. The Promotional Programme............................................................20 11. Advertising.........................................................................................21 • Importance of Advertising............................................................21 • Advertising Channels...................................................................22 Attachments • Marketing Guide
  6. 6. • Market Field Study Plan • List of SBS Network Business Information Handbooks • List of SBS Consultants
  7. 7. Business Information Handbooks 1. Market and Marketing Definitions Marketing is an important operating arm of a business enterprise. Its activities begin even before the product or service is produced and continue after the sale is made. This paper will provide an overview of the marketing function. Starting with basic definitions of marketing and market and discussing marketing functions and the role of marketing in the economy, the paper proceeds to cover the development of marketing strategy, consumer behaviour and marketing research, and concludes with a treatment of the marketing decision areas - product, price, distribution and promotion. Marketing is as old as history itself. It embraces the activities we engage in to satisfy our economic needs and wants. The central idea in marketing is the transaction, which is the exchange of desired objects by two parties. Such exchange could be product for product (as in trade by barter), or product for money in its various forms. For marketing or exchange to take place, it is necessary that there be: 1. two or more parties who have unsatisfied wants; 2. some products or services and money to exchange; and 3. some means of communication between the parties involved. We now give a definition of marketing. Marketing is the set of activities that facilitates exchange transactions involving economic goods and services for the ultimate purpose of satisfying human needs. What activities are implied in the above definition? They are many, but will be discussed under 'marketing functions'. Market as product buyers To the African the word 'market' almost invariably means the marketplace which not only fulfils its economic role as a place for buying and selling, but also serves as an important social, political and religious meeting place especially in the rural areas. A second meaning of market, which is to be emphasised by us, is market as consisting of buyers of a product or service. Our formal definition of market is: A market for a product or service consists of individuals or organisations that have purchasing power and that are current or potential buyers of the product or service. 1
  8. 8. Business Information Handbooks We should note three things about this definition. 1. A market could be ordinary people purchasing according to their needs or it could be organisations such as business firms, non-profit institutions such as schools and hospitals, or the government - federal, state or local. 2. To be included in the market for a product an entity must have purchasing power, that is money in its various forms - cash, cheque, credit. 3. Current buyers and potential buyers are included in the definition of a market. Thus, for a product being newly introduced in an area, the market consists entirely of potential buyers. A major challenge to marketing is to convert potential buyers to actual buyers; in short to create a customer. A fourth meaning of market is the verb sense, that is 'to market a product'. It suggests the performance of activities needed to bring an existing product to buyers, a meaning clearly related to the meaning of marketing. We now take up a discussion of these activities or marketing functions. 2. Marketing functions Within any business organisation, the marketing arm of the company fulfils some important functions which are activities that must be performed to move products from producers to consumers. From the literature ten such activities may be identified as follows. 1. Product Development Marketing advises on what to produce; the quality, style, design, brand name and packaging - all based on consumer and market research. 2. Pricing Marketing plays a large role in setting prices, whether at, above or below the competitor's prices, and in determining a system of discounts for the middlemen who handle the product. 3. Buying This involves selecting from an assortment of goods, determining quantity and quality, selecting sources of supply and negotiating the terms of purchase. (This is sometimes called purchasing or procurement.) 2
  9. 9. Business Information Handbooks 4. Advertising is the impersonal presentation of goods through the mass media - radio, television, newspapers, etc. Advertising agencies may assist marketing in performing this function. 5. Personal selling. This is selling done through person-to-person contact. A large number of salesmen are engaged in outside sales work or in retail sales in shops and market-places. The sales force must be properly selected, trained and motivated to perform. 6. Sales Promotion and Merchandising This involves the development of such tools as point-of-purchase displays, window displays, free samples of the product, exhibitions at trade fairs, news releases, price reductions during special 'sales' and so forth. 7. Physical Distribution Marketing arranges for the physical handling of goods: storage, transportation and proper inventory management and delivering the products/services to customers. 8. Market research Marketing must gather and analyse information about demand, consumer wants, competition, government policies, new products and general changes in our social structure. This function underscores the fact that marketing begins even before the product is produced. 9. Credit Management and Financing. Credit is often used in serious business transactions where firms buy and sell on credit. In addition, various types of financing provide permanent as well as temporary capital for the marketing process. 10. Post-sale Transactions. Marketing must arrange to handle customer complaints after the sale, and provide for after-sales service, especially for machines, equipment and consumer durable goods. This shows that marketing does not end with the ringing of the cash register. 3. The Development of a Marketing Strategy 3
  10. 10. Business Information Handbooks Any organisational entity that engages in marketing activities to serve a customer group with a product or service is a marketer. We now consider how a marketer plans his marketing programme. This is part of the overall job of marketing management, which is concerned with the tasks of setting marketing goals, analysis of market conditions, planning the marketing effort, setting up suitable organisation, execution of plans and control of operations. Marketing mix: variables controlled by the marketer A key input into the development of marketing strategy is market analysis, which is a detailed inquiry into market conditions - buyers (size, location, quantities purchased, attitudes and preferences, etc.), competitors and middlemen carrying the product. The marketer then chooses a target market to cultivate and develops his marketing strategy by making decisions regarding the product, the price, the distribution and the promotion in order to satisfy the needs of the target market and provide the best chances of achieving the stated marketing goals. The combination of controllable variables - product, price, distribution and promotion - which spells out the marketer's strategy is called the marketing mix. The kinds of decisions to be made for each component of the mix are as follows. 1. Product assortment: design, quality, branding and packaging; product additions, modifications and deletions. 2. Price Setting base price; middlemen's margins, allowances, discounts; freight payments and geographic considerations, product-line pricing; charging established prices. 3. Distribution Selecting channels of distribution; selecting and managing distributors or middlemen to carry the product; establishing a logistics system for storing, handling and transporting the product. 4. Promotion to stimulate market interest in the product by determining the relative contributions to be made by advertising, personal selling and sales promotion (for instance, free samples); choosing advertising message; creating advertising copy, choosing suitable media; managing the sales force. 4
  11. 11. Business Information Handbooks The concept of the marketing mix was popularised by Neil Borden in 1954. Another author, Eugene McCarthy in his book Basic Marketing: A Managerial Approach uses a useful mnemonic - 'the Four P's' - to denote the four elements of the marketing mix - Product, Price, Place and Promotion - where 'Place' stands for distribution. The key notion suggested by the word 'mix' is that the plan of action is an integrated one in which the decisions on the four variables make sense in relation to one another. Thus, a high quality product would ordinarily carry a high price, be distributed through retail outlets having a quality image and the advertising would be in appropriate media that could display the superior features of the product. Another point to be noted is that when a marketing mix is developed, an alternative mix that differs on all or some of the four decision variables might conceivably be used to meet the needs of the market and the goals of the marketer. This means that there are different ways to reach a target, but none is guaranteed success ab initio. To illustrate, we consider alternative marketing mixes for the marketing of bottled palm wine. Problem Suppose that market analysis indicates promising opportunities for the marketing of bottled palm wine, where it is assumed that the technology for the preservation of palm wine has been perfected. Sketch two alternative marketing strategies that could be implemented. General observations Palm wine is an alcoholic drink which is in direct competition with beer. Because the wine tapers are getting older and young men in the rural areas are not available, or if available not interested in learning the skill of wine tapping, the product is getting more and more scarce and its price is virtually exceeding that of beer. The bottler of palm wine, under the present conditions of scarcity of supply of the raw material, will therefore have the major problem of how to make the price of the finished product competitive with the price of beer. Marketing mix 1 One strategy is to make the product of very high quality, and package it in a distinctive bottle that does not look like the beer bottle. For pricing, the price is set higher than beer but not as high as imported foreign wines. For distribution, the kind of high volume distribution channels utilised for beer is not used; instead the channels for hot drinks and foreign wines is used; this 5
  12. 12. Business Information Handbooks means that the product is displayed on shelves in shops. For promotion, it is now apparent that, given the decisions made already on the other components of the marketing mix, the promotional job is to present the bottled palm wine as a prestige drink that is surrounded by tradition and certainly superior to beer; a product that one should use in traditional and other important ceremonies as well as for quiet enjoyment. Advertising copy that will properly portray this image could include traditional ceremonial settings, and drinking with cow horns and calabash cups instead of glasses. Actually, the product is positioned to compete with foreign table wine and not with beer. It is apparent that the above strategy will not lead to very high volume sales, but with a moderately high price the level of sales could lead to profitable operations. The Marketing Mix PRODUCT PRICE - Scope of product mix - Price positioning - Depth of product mix - Rebates and conditions of - Quality payment - Design - Financing conditions - Packaging - Maintenance - Service - Warranty service - Possibility of returning a purchase PROMOTION PLACE - Advertising - Channels of distribution - Public relations - Distribution density - Personal sale - Lead time - Sales Promotion - Stock - Brand Policy - Transport Marketing mix 2 An alternative strategy, especially if the wine supply problem could be solved, for example through palm plantation development and improved tapping methods, is to position bottled palm wine as a direct substitute for beer. The product will be of good quality but will not be fancifully packaged; 6
  13. 13. Business Information Handbooks in fact, beer bottles could be used. The emphasis will be to reduce the costs of production as much as possible. The price will be competitive with beer, that is, it will not exceed the price of beer. Distribution channels will be similar to those used for beer distribution, that is there will be appointment of major distributors and attaches as well as direct supply to major customers such as hotels and clubs. Promotion will portray the product as more satisfying and nourishing than beer, a product that fits into any occasion - whether traditional or modern. Provided the price is low enough, the wine can be presented as the common man's drink, whether in the village or in the city. We have so far given only the bare outlines of two alternative marketing mixes. Many details remain to be filled in for actual implementation. It cannot be determined ahead of time which strategy will be more successful than the other, especially as the effects of uncontrollable variables such as competitive reactions are not known. 4. Marketing concept If a business conducts its affairs in such a way that the needs of its customers are always kept in view, and every effort is made to give value and satisfaction to the customers while pursuing its own goals such as profit, it is said to be guided by the philosophy of the marketing concept. Such expressions as 'the customer is king' or that 'marketing should begin and end with the consumer' or being 'customer oriented' are all statements expressive of the marketing concept. The marketing concept is quite an idealistic philosophy, especially in Africa where various basic products and services are in scarce supply, and the sellers have little interest or motivation in pleasing customers. Further, government monopolies exist and seem unconcerned about customer needs or complaints. The marketing concept is likely to be applied more seriously when there is a strong competition in the market; the marketer who creatively caters to customer needs is likely to win a differential advantage over less imaginative competitors and thereby realises more sales and profits. External constraints: variables not controlled by the marketer 7
  14. 14. Business Information Handbooks We have seen that a marketer controls the variables - product, price, distribution and promotion - to determine his marketing mix, and that he should execute his plans with the philosophy of the marketing concept. In addition, he has to contend with a number of external variables that affect the marketing effort. These variables are not ordinarily controllable by the marketer and are therefore classified as environmental constraints. They include competitors, the state of the economy such as growth or recession, consumers and their unpredictable behaviour, suppliers and middlemen, business-related laws and regulations, technology, the physical environment such as natural resources and climate and the larger society with its culture. These complicate the marketer's tasks enormously and lead to a situation where strategies that were effective yesterday may not work at all today. It should be noted that while the environmental variables affect marketing, the environment in turn is affected by marketing. For example, consumers' needs, values and preferences determine what is produced and how it is presented, and the larger society with its culture - customs, languages, religions and so on - casts a pervasive influence on the marketing effort. Marketers' actions in turn influence society by exposing people to new products, services and ideas, thereby for better or for worse breaking down the traditional modes of behaviour and fostering new attitudes and habits. Understanding and influencing buyer behaviour: Knowing your consumer It cannot be over-emphasised that marketing should begin with a thorough understanding of the consumer himself - his needs, location, preferences, attitudes, perceptions and socio-economic characteristics (age, sex, income, etc.). The marketer then tries to build the information gathered into the design and execution of his marketing strategy and tries, through promotional methods such as advertising, to influence consumer attitudes and behaviour in favour of his product or service. When a marketer launches his product or service and fails to secure sufficient consumer patronage, it is often a signal that he has not done his homework with regard to consumers' needs, though occasionally it might be due to the inept planning and execution of his marketing programme. It is sometimes necessary to make a slight distinction between 'buyer' and 'consumer' because the person who makes the buying decision is not always the ultimate consumer or user of the product. The marketer is immediately interested in understanding the behaviour of the product buyer, but he 8
  15. 15. Business Information Handbooks should also be interested to know how the product is used and be concerned about the satisfaction (or lack of it) of the consumer. Buyers may be conveniently divided into household buyers and non-- household buyers. The latter group includes industrial, commercial, institutional (schools, hospitals, etc.) and government buyers. Forces that influence buying decisions The forces that determine what, when, where and why consumers buy and the prices they are willing to pay are varied and interrelated in a complex manner. These may be conveniently organised into three groups. 1. Economic determinants of demand. 2. Internal psychological variables. 3. Social and cultural influences. Economic determinants of demand The key economic factors that influence buyer behaviour are income, availability of credit, expenditure patterns, prices of the product and prices of complementary and substitute goods and elasticity of demand. Total household income minus all taxes is called disposable income. The portion of disposable income that is left over after expenditures on food, housing, clothing and other necessities is called discretionary income, which is available for expenditure on luxuries and other non- essentials. There are two kinds of elasticity of demand: income elasticity of demand and price elasticity of demand. Income elasticity of demand is defined as the percentage change in the quantity of a commodity consumed divided by the percentage change in income. Elastcity indicates sensitivity of demand when either the price of the product changes or the income of the buyer changes. To take demand for food as an example, it turns out that income elasticity of demand for food is lower for rich families than for poor families. This is so because if incomes are already high, further increases will not influence food consumption substantially, but if incomes are low, a large share of additional incomes will be spent on food. Price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. When this quantity is greater than unity demand is said to be elastic, and if less than unity demand is inelastic. The marketer is interested in the effect of price changes on total revenues. When demand is inelastic, price changes will result in less than proportional changes in quantity sold, thus revenues may not be eroded if price goes up. As an example, the demand for drugs and medicines is 9
  16. 16. Business Information Handbooks usually price inelastic, because the need to secure health is essentially insensitive to price or cost. Internal psychological variables An important factor in the buying decision is the buyer himself. Why does she/he want to buy the item? Is the type of person related to the desire to buy the item? How does she/he receive and organise information about the item? How does s/he feel about the item in terms of likes and dislikes? What does s/he know and remember about the item? These questions are probing the effects of the internal psychological forces of motivation, personality, perception, attitudes and learning, respectively. For any given buying situation, one force may be dominant or multiple forces may be at work. We should particularly emphasise the role of attitudes and preferences in purchase decisions. An attitude is a learned predisposition to react to an object in a certain way - positively or negatively. It describes one's feelings in terms of liking or disliking the object. A preference is the condition of liking one object better than another. A positive attitude will lead to the purchase of an item, but a negative (or neutral) attitude will not. A major task of advertising is to induce positive buyer attitudes towards the product. Behaviour itself may affect attitude even as attitude affects behaviour. A person may not have been interested in a particular product and may have had no attitude towards it, but after trying it she/he develops an attitude - positive or negative. Or a person may have had a negative attitude before trying a product and then modifies the attitude to positive after trial. This is the main reason why the giving out of free samples of a product is a key sales promotion tool. Social and cultural influences Man is a social being whose behaviour is influenced by other persons and by the groups he belongs to or aspires to belong to (called reference groups). Family members, friends, neighbours and work associates are familiar examples of people who influence us. Social conformity is strong in buying decisions. It is sometimes surprising how many things we own that are also owned by people we associate with. Purchase decisions for certain product categories, especially those that are 'conspicuously consumed', are particularly prone to social influence. Examples can be found in clothes and fashions for young people on whom peer group pressure is strong, cars for men, clothes and jewellery for women and home furnishings and durable goods for households on which friends, relatives and neighbours exert considerable influence. 10
  17. 17. Business Information Handbooks Going beyond personal and group influence, we consider the larger society or culture. People live in a cultural milieu that embraces their history, values, morals, customs, art and language. Culture exerts a broad influence on buying behaviour and determines the kinds of products that may be used by the people. For example, Muslims would not buy pork products or alcoholic drinks. More importantly for marketing, culture and tradition determine the openness of a people to new ideas and their willingness to try new products and services. 11
  18. 18. Business Information Handbooks 5. Market segmentation Markets consist of buyers who differ in many ways and who may therefore be classified into sub-markets or market segments on the basis of a suitable characteristic or variable. Variables such as geographic location, age, sex, income, social class, benefits sought from use of product or problems faced have been used to segment or subdivide markets. Assuming that a market can be subdivided, the marketer then decides whether to ignore the existence of market segments and make one product offer to the entire market, or to recognise the existence of sub-markets and design into the product those features that meet the unique needs of one, some or all of the identified segments. In the latter case, all other aspects of the marketing mix - price, distribution and promotion - will be geared to the demands of the segment(s). Obviously, any market segment isolated should represent substantial demand before it would be worth giving it special attention. It is apparent that a marketer who wishes to enter a market already crowded with competition should proceed by first doing market segmentation (if feasible) to determine if there exists a segment ignored by the other competitors. Of course, if the marketer feels that he has a superior product, he might decide to challenge the competition in their entrenched segments. 6. Information for Decisions: Marketing Research Adequate information is the life-blood of decision-making and management. Companies normally develop their own regular system of gathering marketing information. In Africa, there appears to be a heavy dependence on field reports filed by sales representatives concerning market conditions, competitors' actions, middlemen and consumer reactions to companies' products and marketing policies. In many cases a separate research department does not exist, little or no research budget is provided and work is rarely sourced out to outside research organisations. Such outside research firms are few today because the demand for their services is low. 12
  19. 19. Business Information Handbooks Benefits of research: Various benefits can be derived by taking marketing research seriously even if it is done on a modest budget. Marketing research is the primary tool for conducting market analysis where as much information as possible is gathered about consumers (e.g. their needs, attitudes and preferences, socio-economic characteristics), competitors (their products, prices, etc.) and middlemen (their types, discounts or margins enjoyed, etc.). The marketer exploits the information gathered from market analysis to plan his marketing mix - product, price, distribution, and promotion. Research can tell what products are needed, which product features are popular, which price ranges are acceptable to buyers, which retail outlets are favoured by buyers, through which mass media the buyers are likely to be reached and so forth. When the marketing plan is launched, research is needed to monitor results and investigate various kinds of problems relating to the marketing effort. For example, research is needed to measure the effectiveness of advertising or to determine the reactions of middlemen to a new product. Costs of research Marketing research may be a costly undertaking if properly done. The value of information obtained should always be balanced against the cost of acquiring it. Cost elements include personnel and materials for field work and data processing and report preparation costs. The option of not doing research should always be considered, especially when the decision that may benefit from it must be made quickly. Indeed, the problem of time availability is a serious one, because many marketing decisions must be made quickly and yet good research requires ample time for proper design and execution. The marketing research process Marketing research may be defined simply as the gathering and analysis of information to guide marketing managers in marketing planning and problem solving. It is a systematic process that involves some recognisable steps. Four basic steps of marketing research are: 1 Problem formulation. 2 Situational analysis and exploratory research. 3 Formal research. 4 Solution. 13
  20. 20. Business Information Handbooks Problem formulation A clear definition of the research problem is probably the most important research task. But it is not an easy matter. Frequently, the symptoms of a problem - for instance declining sales - are obvious to all, but the cause or causes are less obvious. The researcher holds discussions with the sponsor of the research in order to understand the latter's problems and marketing objectives. The context or environment in which the problem is embedded is examined to gain a better insight into the problem. This involves asking about internal (company) and external factors that may bear on the problem. Situational analysis and exploratory research The key characteristic of the second stage of the research process is consultation of secondary sources of information. We should now distinguish between secondary data which are data that existed prior to the need to solve the problem, and primary data which are fresh data collected specifically to solve the problem. Secondary data sources include internal company records on the product's sales, costs, customers and other marketing variables; outside sources include publications by government agencies (in Africa, especially the Federal Office of Statistics) and private bodies; relevant research both inside and outside the company; informal interviews with informed people both inside and outside the company. If the problem was properly identified in the first step, the analysis in step 2 may be sufficient to solve it, in which case further formal research would be unnecessary. Usually, the analysis of the second stage leads to a better definition of the problem and very likely suggests the need for formal research. Formal research Formal research entails the collection of primary or fresh data to solve the problem or meet the information need. The most frequently used formal research method is the marketing survey. Major activities in survey design and execution involve questionnaire construction, the actual data collection (through mail survey, telephone survey or personal interviews) and the editing and coding of returned questionnaires. The population of respondents from whom information is to be obtained could consist of individual consumers, households or organisations. Although a selection of a representative sample from the relevant population is made, sometimes it will be wise to do a census, that is to include every member of the population, if the numbers are small. This is often the case when organisations are surveyed; consumer surveys, on the other hand, usually involve use of samples because of the large numbers of consumers. 14
  21. 21. Business Information Handbooks Solution The final step in the research process is data analysis and interpretation of results. The simplest analytical method, especially for surveys, is ordinary tabulation and frequency counts, followed by calculation of percentages. For example, if respondents were asked if they would purchase a product at a stated price, research might find something like 'forty per cent of respondents said they would definitely buy, while only twenty .per cent said they would definitely not buy.' When the researcher completes his data analysis and interpretation of results, he prepares his recommendations for the company. A written report embodying the recommendations should, as far as possible, be free of technical jargon, be in clear style and use charts and tables where necessary. It should be reasonably brief and above all include specific action implications for the sponsor. Examples of concrete recommendations are: 'The company should seriously consider increasing the price of the brand by twenty per cent.' or 'The current budget for advertising should, at a minimum, be doubled.' Marketing decisions areas The key areas in which marketing managers have to make decisions correspond to the four components of the marketing mix: product, price, distribution and promotion. Sales force operations may be isolated from promotion as a separate area of decision making; if international marketing is undertaken by a company, then all the above decision areas will be relevant in the context of serving markets outside national boundaries. Having earlier outlined the kinds of decisions made while discussing the marketing mix, we shall now elaborate on the key decisions only. Marketing plan format 1. Description of Product(s) 2. Target Market Segments 3. Target Market Area 4. Demand Analysis 5. Supply Analysis 6. Competitors’ Marketing Strategies  Product Strategy  Price Strategy  Place Strategy  Promotion Strategy 7. Project Marketing Strategies 15
  22. 22. Business Information Handbooks  Product Strategy  Price Strategy  Place Strategy  Promotion Strategy 8. Sales Forecast 9. Fixed Assets for Marketing 10. Total Marketing Expenditure Budget Marketing plan guiding questions 1. What is/are the product(s)? 2. Which target market segment does each of the product aim at? or: To whom will the business sell its products? 3. Which geographical areas will be the chosen segments? 4. What will be the demand for the product, similar products and substitutes within the target market segments in the target market areas? 5. What will be the supply of similar products and substitutes within the target market segments from the target market areas? 6. What are the strategies of the competitors who supply to your chosen target market segments and target market areas in terms of product, price, place and promotion? 7. What will be your strategies to supply to your chosen target market segments and target market areas in terms of product, price, place and promotion? 8. What will be the selling price and how much will be sold? 9. What fixed assets will be required for marketing and how much will they cost? What will be the life of the assets and how will they be depreciated? 10. How much of expenditure will be incurred in terms of marketing, including cost of marketing personnel? 16
  23. 23. Business Information Handbooks 7. Product Development Product decisions The product or service is the offer that the marketer makes to buyers and it is of central importance in the marketing effort. A product may be defined as a bundle of physical and psychological satisfactions that a buyer receives from a purchase. It includes not only the tangible object, but also such supportive elements as packaging, convenience of purchase, post-sale services and others that buyers value. Branding and packaging A product should be given a unique brand name to distinguish it from other goods offered to buyers. The name should be distinctive and easy to pronounce, and it should capture the essential product idea. The name should be registered as a legal trade mark, thus protecting it from use by competitors. It is a fact that many African manufacturers do not bother to put any brand names on their products, and some unscrupulous ones assign names that sound almost identical to the names of well-known successful products. These suggest lack of confidence in the product's quality by the producer. In any case, a producer who is marketing a successful but nameless product is making a grave error that should quickly be corrected. Packaging has the basic function of protecting the product, hence the package must be durable enough to survive handling during distribution. It should be aesthetically pleasing and be distinct enough to stand out when placed side by side with competitors' brands on the retail shelf. It should also be convenient to handle by consumers (consider the convenience of the aerosol spray can that revolutionised the packaging of certain liquid products). The package label, apart from providing certain kinds of information that may be required by law such as net weight, volume and ingredients, may be used by the producer to promote the product if a well- designed promotional message is inscribed on it. Building the product mix The product mix is the composition of products being marketed at any point in time by a company. When products are closely related, especially with regard to end use, they constitute a product line. An example of a product line is a phonograph turntable, a stereo amplifier, speakers and a voltage 17
  24. 24. Business Information Handbooks stabiliser (for Africa). A product line may be narrow (that is limited) or broad depending on whether the associated products are few or many. Two of the common ways to build up a product line are: • by adding differentiated features to a basic product design in order to appeal to different market segments (market segmentation strategy); and • by adding products that are complementary, meaning used together. Sometimes a manufacturer will market brands of a product that are virtually identical except for brand name and packaging, although advertising will claim unique differences. This strategy is called multi-branding and is commonly observed in consumer packaged goods industries such as toilet soap and detergents. The manufacturer's objective is to improve his competitive position by securing larger shelf space in retail stores and thereby taking sales away from other producers' brands. Proper management of an existing product mix includes knowing when to modify products or delete those faring badly in the market-place. Sales figures and consumer research provide the necessary information for the decisions. Product innovation A 'new' product is one that is new to a company, but not necessarily new to the market where the generic product may already exist. The management of a true product innovation (that is, a product new to the market) follows six main stages which we simply outline here. • Idea generation: product ideas may come from many sources - company, salesmen, customers, competitors. • Idea screening: selecting the most viable ideas to exploit. • Business analysis: analysis of sales, costs and profit projections. • Product development: building and testing prototypes, etc. • Test marketing: placing product samples in actual retail stores to test consumer acceptance. • Commercialisation: full-scale marketing on a national basis. 18
  25. 25. Business Information Handbooks 8. Pricing decisions - Factors that influence price setting Setting base price The base price is the price that the producer receives at the factory gate; it does not include any mark-ups or allowances to compensate middlemen for distributing the product. The most important method of setting a base price is the full cost method. The rationale for full-cost pricing is that all products should bear their full share of costs. Any product's price, therefore, must cover all allocated costs plus a 'reasonable' profit mark-up or margin. The formula for full-cost pricing is: Price = ATC(1 + M) where ATC is average total cost per unit of the product, and M is the profit mark-up percentage. Pricing in the distribution channel We must now consider how the 'ex factory' price is translated down the distribution channel (i.e. through wholesalers and retailers) to the consumer. Suppose the producer has not suggested what the retail price should be and merely asks the distributors or wholesalers to pay his producer price per item. To cover their costs and provide for profit, the distributors will add their profit mark-up percentage or margin to their cost before selling to retailers; and the retailers in turn will add their own mark-up before selling to the final buyer. Thus, a chain of mark-ups exists in the channel of distribution. Each middleman uses a pricing formula identical to the mentioned equation, where ATC represents his unit cost of the product. In some cases the producer may recommend a retail price for his product and then allow middlemen discounts based on that retail price. This type of discount is called a trade or functional discount; it covers the middleman's operating costs and profits and represents his inducement or rebate for performing important functions in the distribution channel. For example, suppose the recommended price for a standard- sized can of paint is 1 110 $ per unit, granting a discount of twenty-five per cent means that the manufacturer bills the distributor for 1 110 $ (1 - 0.25) or 117.50 $. Thus, if the distributor gets a shipment of 100 cans, the invoice is for 11 750 $. 9. Channels of Distribution and Logistics The task of distribution is to make the goods physically available to buyers. A distribution channel is defined as the combination of institutions through which a producer markets his products to the ultimate buyer. By institutions 19
  26. 26. Business Information Handbooks we mean middlemen such as wholesalers, distributors, retailers and agents. These middlemen perform important functions such as contacting current and potential buyers of the product, inventory ownership and risk bearing (that is, taking title to goods before they are sold), various kinds of sorting and handling of the product, storage and transportation, extending credit or financing (of their customers) and providing the producer with information about their local market. Selecting distribution channels A producer can distribute his product through a variety of channels. If the producer decides to sell directly to consumers, he uses a direct channel. This may take the form of having sales people going from door to door to peddle the product, or it may mean that the producer establishes a network of wholly-owned retail outlets. Five sets of factors affect channel selection: 1. The market coverage desired by the producer, e.g. to cover an extensive market area will need the use of indirect channels for intensive distribution. 2. The degree of channel control desired, e.g. to ensure proper presentation of the product to consumers, the producer uses direct channels by eliminating all middlemen. 3. Product characteristics, e.g. a bulky product like coal may use direct channels to minimise handling. 4. Market characteristics, e.g. frequent and/or impulse purchase by buyers would suggest the use of intensive distribution, every available channel is used. 5. Manufacturer characteristics, e.g. only a manufacturer with adequate financing can own its retail outlets, if such direct distribution is called for. Selecting and motivating distributors Having selected the types of channels to employ, the producer has to pick particular middlemen or distributors. He uses such selection criteria as the credit-worthiness of the distributor, his selling ability, inventory and storage space and his personal qualities. The producer may adopt a variety of measures to build enthusiasm and excitement among the revellers, such as providing sales training for distributor personnel, providing useful tips on purchasing and stock control and supplying sales promotion aids such as printed material on the products and point of purchase and showroom displays. Proper management of distributors includes a periodic evaluation 20
  27. 27. Business Information Handbooks of each distributor's sales performance in relation to previous periods or other distributors, and ensuring that he moves adequate volume of inventory on the full product line offered by the producer. Physical distribution or logistics Physical distribution or logistics is concerned with the efficient movement of raw materials from suppliers to the production line, and of finished goods from the end of the production line to the customers. A number of associated activities must be performed and these may be grouped under the four main categories of: 1. transport; 2. inventory; 3. warehousing (including materials handling); and 4. communication. A wide variety of transportation modes is available to move goods - rail, highway, water, pipeline and air, each with different cost and service (speed) characteristics. Decisions must be made regarding the mode of transportation to use for each type of shipment. Inventory is of central importance in distribution system design. Since the cost of carrying inventory is high, procedures for proper management of inventory must be installed. Warehouses (or depots) store inventories. Decisions must be made as to how many warehouses are required, where they should be located and what products should be stocked in what quantities. Materials handling involves the movement of goods within the plants and warehouses. Suitable equipment (such as fork-lift trucks, conveyors, pallets) must be available to permit economic handling of goods. Finally, there must be good communication flow in order to co-ordinate all the logistics activities effectively. For example, a good communications system should be able to make available on demand the present stock position of each item at each stock location. 10. The Promotional Programme Advertising is defined as any form of non-personal communication through the mass media that is paid for by an identified sponsor. Along with sales promotion, personal selling, publicity and public relations it forms the promotional or communications programme of the marketer. Sales promotion is any activity that is used to stimulate sales of a product or service usually occurring once or over a limited period of time. Examples are 21
  28. 28. Business Information Handbooks 'sales' conducted by retail stores at festival periods such as Christmas, the giving away of free samples of the product, and price reductions on goods. Personal selling refers to the use of salesmen to push the product or service. The sales force must be selected, trained, motivated (especially through a good compensation plan) and controlled for effective performance. Publicity is information about a company and its products that is conveyed to the public by the mass media because such information is newsworthy and the company pays nothing for it. Public relations efforts of the marketer are concerned with building and maintaining good relations with special publics such as customers and the public at large. And such image-building may use advertising as a tool. The various components of the promotional programme are not used in isolation. For example, although advertising may be most suitable for one purpose and personal selling for another, the two are often employed simultaneously, the relative emphasis depending upon circumstances. Further, advertising may be used to announce a sales promotion activity. 11. Advertising Importance of Advertising Advertising is a young industry in Africa. Since many products are relatively scarce in the country, the typical producer is able to dispose of his output without much promotional effort. With the exception of consumer products companies - especially cosmetics and toiletries manufacturers - African marketers do not spend much on advertising and some do not advertise at all. Yet the trend is changing as more and more companies are realising that advertising can be a positive force in their marketing as competition increases. An indicator of the growing importance of advertising is the rapid growth in Africa of the number of advertising agencies. There are two basic objectives of advertising, namely: • to inform the target audience about the product or service; • to create or stimulate demand for the product or service through persuasion. 22
  29. 29. Business Information Handbooks These translate ultimately into sales of the product, but in planning a specific advertising campaign the marketer may choose a more concrete goal such as 'to increase consumer awareness of the product by thirty per cent'. The key advertising decisions are: • setting the advertising budget; • creating advertising copy; and • selecting media and vehicles and allocating from the budget to them. The advertising budget may be based on a percentage of sales or it may be keyed to a level comparable to what the competitors are spending. Advertising copy is defined as the words and picture or illustration that make up the advertisement and the way they are laid out to create a total impression. Through the copy the advertiser says what he wants to say (called the theme or message) in the way he wants to say it. Various advertising media are available such as radio, newspapers magazines, television, outdoor advertising and cinema films. Radio is currently the most popular medium in Africa, but each medium has its advantages in reaching particular types of target audiences. After selecting the suitable media, the next job is to decide how much time or space to purchase in each vehicle (e.g. daily advertisements of ten or twelve lines in the newspaper medium) and how these insertions will be spread over the time period covered by the advertising campaign. This is called media scheduling. In planning and executing his advertising programme, the advertiser relies heavily on the services of his chosen advertising agency. The advertising agency advises clients on advertising strategy, creates advertising copy, supervises advertising production and buys media time and space. The larger agencies provide many other services, such as advising on marketing planning and sales promotion, designing and producing brochures and point- of-sale displays, advising on publicity and public relations and conducting marketing research. Advertising Channels In the good old days, it was widely believed that supply created its own demand and as a result, many enterprises did not see marketing (in its various forms) as an important set of activities. The story is different now. It is indeed so different that without marketing, a business could hardly stay competitive. It is anticipated that in the near future, enterprises would have to undertake a lot of marketing activities to maintain their market share. 23
  30. 30. Business Information Handbooks There are many marketing channels open to small enterprises, each presenting a different level of opportunity and cost, etc. Many enterprises have used a combination of these channels as radio advertising slots, flyers, business cards, directional signs, newspaper advertising, personal selling, sales promotion, after sales service and shop designs. Each of these options is useful either when used alone or in combination with other options, depending on the product, target market and the objective of the use of the option. Each of these options also comes with cost implications which should be weighed against the enterprise’s cash flow situation and the expected response from the target market. It is always advisable to be less optimistic about the expected results from use of any or a combination of these options. Radio Advertising is used quite extensively by the large and medium enterprises and to a limited extent the upper small enterprises. It is a powerful marketing channel that has the potential of bringing good returns on the investment made. There are however some precautions that need to be exercised by enterprises wanting to use this channel. In the first place, it is true that an increasingly large proportion of the population of Ghana do listen to radio for various purposes such as news, music, information on products, services, etc. It is also true that there are close to 20 radio stations in Accra/Tema alone and this phenomenon presents the question of who listens to which radio station at what time. It is only when this question is accurately answered that advertising via radio could yield potential benefits. There are testimonies of enterprises that have used radio advertising to grow their businesses from micro through small to relatively large enterprises. There are others that no doubt have been impoverished for using the same channel of marketing. For one thing, it costs quite a bit of money to undertake a sustained marketing campaign on radio which could achieve the desired impact on the target market. Thus if this investment does not yield the expected impact, the enterprise’s cash flow could be unduly encumbered. The experts advise that a radio campaign that has yielded good results for the typical small enterprise has taken about six weeks of three slots a week on at least two radio stations. This has a huge cost implication for the small enterprise. 24
  31. 31. Business Information Handbooks Flyers The use of flyers is catching up with small enterprises in Ghana. This channel of advertising is used mostly when a new product/enterprise is being launched. It is a relatively cheap form of advertising but its impact is often not assured as the proportion of the reading public is not large enough. To be successful, it has to be targeted in terms of timing and audience. Some of the successful flyers have been sent to restaurants and bus stops where the target market generally has some time to spare. It could also be useful in heavy traffic. This option though is not recommended. Directional Signs Directional signs are widely used by both small and medium enterprises. It is not as costly as the other channels of marketing and its effects are longer lasting. It is however the case that most small enterprises do not use enough of these directional signs and therefore do not benefit fully from the use of this channel of marketing. Thus in a situation where only two directional signs are placed, potential customers are unable to easily locate the enterprise’s place of business. The metropolitan authorities have begun imposing taxes on sign/directional posts and in some cases the size of the post is limited. These have an effect on the impact of the investment made. Newspaper Adverts Newspaper advertising is one of the best ways of getting across information on a product or service to the marketplace. The product or service gets very wide attention. If it is placed in the national daily, especially the Daily Graphic, the response is often very encouraging, albeit not long lasting. Thus is it recommended that to obtain the optimum benefits from newspaper advertising, such placements should be repeated a number of times. The cost of advertising in the newspapers has shot up in recent times and small enterprises find it extremely difficult to advertise the number of times that would normally yield the required results. Personal Selling The use of personal selling is also a potent form of marketing. However, below a certain volume of business, its use is not recommended. It requires the use of well trained and motivated salesmen to achieve the desired impact. It could be very expensive but effective as the buyer is able to clear all concerns about the product/service at the point of purchase. 25
  32. 32. Business Information Handbooks Sales Promotions Sales promotion has been an effective marketing tool over the years. It includes the buy-one-get-one-free strategy to raffles to free samples and the trade fair attendance etc. Sales promotions have been effectively combined with radio and newspaper advertising. Business Development Services in Ghana www.ghanabusiness.org SBS Network Consultants assist you for Marketing If you need assistance for Marketing ask one of the experienced SBS Network business consultants. Please find a complete list of consultants with fields of competencies on the last page of this publication. 26
  33. 33. Business Information Handbooks Attachments • Marketing Guide o Guiding Questions o Marketing Plan Example o Workbook • Market Field Study Plan List of SBS Network Business Information Handbooks List of SBS Consultants
  34. 34. Business Information Handbooks Attachment 1: THE MARKETING GUIDE Part I: Guiding Questions Part II: Marketing Plan Example Part III: Workbook PART I – GUIDING QUESTIONS 1.1 What is the product? Give a short description of the product, its size, colour, shape, the quality, the packaging, and the range of products to be offered. Describe product features, uses and benefits, whether it is a new or an existing product. 1.2 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 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? 1.3 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.)
  35. 35. Business Information Handbooks - communication facilities (e.g., post office, telephone, fax, telex, etc.) Good location is one of the most crucial factors in market development, hence choice of location should therefore be carefully considered. Location should also be differentiated in terms of marketing outlets or factory location. In most small businesses, marketing outlet and factory may refer to one and the same location. 1.4 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, on existing contacts or channels of distribution you are familiar with. In general, it is easier to deal with a limited market area, since travel time and distribution costs can be kept to a minimum. 1.5 Within the market area, to whom will the business sell its products? Here we are really talking about a specific target group 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, taste, income, lifestyle, etc. Will you sell to wholesalers, retailers, and if so, what are the consequences? If you plan to have a retail outlet, choice of location is critical. 1.6 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
  36. 36. Business Information Handbooks good to check some statistics, if they are available. If you cannot avail of any reliable statistics (secondary data), it may be better to make a simple and low-cost sample survey, i.e., gather firsthand 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. Market Survey Checklists The following is 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 rapport 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: a) accurate collection of information so that a reliable level of sales and production can be forecasted; b) establishment of good relations with your own potential customers or buyers. I. 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 distributors and then sell them in smaller quantities to grocery stores and retail shops (customers). Since there are usually 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:
  37. 37. Business Information Handbooks 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 example: 1 2 3 4 5 6 7 8 10 11 12 months 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 design, more varieties, better features, new product specifications? 7) What are 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 a suitable quality and priced competitively, how much of your product would they take as a sample order? II. 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 out to be of poor quality, then the customer will complain to the shop from where he made the purchase, 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.
  38. 38. Business Information Handbooks 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, give-aways, 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 neighbourhood? 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 on 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 cash or on credit? 12) Does he sell on commission? III. 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 interviewees have touched on or captured.
  39. 39. Business Information Handbooks 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 which can be asked from customers and consumers are: 1) Why did you buy this product? 2) When (What month) did you buy it? 3) How often do you buy this product? 4) Will you be needing more of this product in 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. 1.7 What share or percent of this market can be captured by the business? This is always a difficult question to answer precisely, since 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 competition. However, some guidelines can be given. If you have done your market survey properly, you will know the following information about your competitors: a) whether there are few or many competitors; b) whether they are large or small in size; c) whether their product features are similar or not similar to one another; d) whether their product features are similar or not similar to yours.
  40. 40. Business Information Handbooks The following decision guide may help in processing this information to make an estimate of your market share. DECISION GUIDE Number of Their Size * Their Product Market Share (in Competitors Features %) Many Large Similar 0 - 2,5 Few Large Similar 0 - 2,5 One Large Similar 0 - 5 Many Large Dissimilar 0 - 5 Few Large Dissimilar 5 - 10 Many Small Similar 5 - 10 Few Small Similar 10 - 15 Many Small Dissimilar 10 - 15 One Large Dissimilar 10 - 15 Few Small Dissimilar 20 - 30 One Small Similar 20 - 50 One Small Dissimilar 40 - 80 No competitor 100 * It is assumed that your business will be in the "small" category when entering the market. 1.8 How much of the product will be sold? Now that you have estimated the market share you can realistically capture, you 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 60 to 80% of the market share in the beginning. This is to give allowance for some errors in estimating the market. 1.9 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
  41. 41. Business Information Handbooks 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 a good business strategy to anticipate your competitors' reaction to your pricing strategy. 1.10 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: • advertisements on radio, newspapers, magazines, trade journals or, if appropriate on television, • volume discount (reduced prices when selling in bulk), • handbills distribution, • prompt, regular, courteous and efficient service to your clients, • good merchandising ensuring proper display of your product on the shelves of your market outlets, • special credit facilities to regular customers, • posters,
  42. 42. Business Information Handbooks • billboards, • signboards, • free samples, • free trial, • press release, • buy one - take one, • raffles, • coupons, • sponsorship of local shows, festivals, • participation in trade fairs and exhibits, • personal selling. One word of caution on promotional measures. These activities cost money to your business, so be sure that for every promotional measure adopted, there is a foreseeable increase in sales. Without a justifiable increase in sales, cost will escalate, hence increasing the unit cost of the product. 1.11 What marketing strategy is needed to ensure that sales forecasts are achieved? 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 for 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 that customers will automatically buy your product. Analyse what the best time of the year is to promote your product – there might be seasons where marketing would not have any effect. 1.12 How much do you need to promote and distribute your product? You must have a marketing budget that includes your marketing cost such as for promotion, distribution and salaries of your sales force, if any. Not all measures are equally adequate for your product.
  43. 43. Business Information Handbooks PART II – MARKETING PLAN EXAMPLE 1.1 Description of the Product Common laundry soap is currently sold in small round balls with a diameter of 3 inches or 7 centimetres which can easily be cupped in the palm of the hand and then rubbed with water into the clothes that are being laundered. The size and weight of each piece vary slightly according to customers’ needs and what they can afford, but the normal range is between 200-400 grams per piece. Depending on the type of oil used in making the soap, the colour can range from light to dark brown. The soap carries the brand name "Energiser". 1.2 Comparison of the Product with its Competitors' Mr Marketing, who regularly deals in soap in his grocery store, has long observed that the quality of soap currently sold in the market is poor and he has received many requests from his customers for a better quality soap. Due to the distance of the town from the capital city (about 50 km), only three soap distributors regularly supply soap in the area. Quality of the soap is based on its cleansing power, smoothness in rubbing soap against the clothes, no chemical reaction to the hands, and less water consumption for a clean rinse. The proposed manufacturing project aims to fulfil these four requirements. The main factor in determining a soap's quality is the oil used. Mr Marketing intends to use palm oil instead of the more commonly available rice bran oil. He sells the ordinary quality soap at a price of cedis 13,500 per kilo (kg), but his regular customers say they would be willing to pay up to cedis 15,500 per kg, if the soap is superior. 1.3 Location The business will be located in Mr Marketing's present store location in the centre of Georgetown at 38, Training Street. This location has been chosen for the following reasons: the production operation can easily be supervised by the owner; it is near the transportation hub; it is close to its targeted markets; and only minor investment in building expansion will be needed. 1.4 Market Area Mr Marketing plans to distribute the soap principally in his grocery store and in ten neighbouring villages which are within two hours' ride by public transport from the town centre. This area has been
  44. 44. Business Information Handbooks selected because: (a) Mr Marketing personally knows many of the major retailers of soap in these villages; (b) it is close to the factory location; and (c) it is often neglected by distributors from the capital city of Accra. 1.5 Main Customers While the main buyers of soap are eventually individual households, Mr Marketing plans to sell his soap in his grocery store where there are many walk-in clients from the town as well as retailers from the villages. In the ten neighbouring villages he has contacted the 15 major soap retailers and they have agreed to sell his soap, provided its quality is at least as good as what they are selling now. These retailers have confirmed that their customers are demanding a better quality soap. 1.6 Total Demand These retailers, when surveyed, claim that each of them sell approximately 1,000 kg of soap every month, or a total demand of about 15,000 kg per month. 1.7 Market Share A sample survey of competitors in the area indicated that there are only three manufacturers selling soap to the 15 major retailers to whom SBS Soap Manufacturing plans to sell its product. The competitors are small in size and the quality of their products is inferior to what is planned by the project. Because the number of competitors is small, their size is small and their product is dissimilar to the one proposed, a market share of 20 to 30% is estimated as being reasonable. The more conservative estimate of 20% in the first year will be assumed. In the initial stages of production, operating at 100% capacity cannot be assumed. There are bound to be initial operating problems, raw material shortages, distribution difficulties, etc., hence only 80% is projected to be served in the first year. 1.8 Selling Price The selling price is based on "Cost-Plus Method". Mr Marketing feels that a profit mark up of 8% over the total product cost is very reasonable and competitive especially at this initial stage. Unit product cost is estimated at cedis 12,960. Adding the 8% profit mark up, his wholesale price is cedis 14,000 whether delivered or walk-in. This means that by adding another 10% mark up for the
  45. 45. Business Information Handbooks retailer, the retailer’s selling price will be cedis 15,400. At this price, it is slightly below the price of cedis 15,500 which his regular customers indicate to be willing to pay for a superior quality soap. He charges the retail price of cedis 15,400 for walk-in single purchase clients. 1.9 Sales Forecast If the total demand is 15,000 kg per month and the projected market share is 20%, the project’s potential market size is 15,000 kg x 20/100 or 3,000 kg per month. However, for practical purposes, only 80% of the projected market size will be considered for sales forecast, that is, 3,000 kg x 80/100 or 2,400 kg per month, or 28,800 kg in a year. Mr Marketing believes that the market is expanding quite rapidly as the town of Georgetown has the highest population growth rate among the 20 towns in the province of Businessheaven, and a large cement plant will be built soon near the town. Conservatively, he projects that his sales volume will increase by 10% every year and attain 100 % of the projected market share by the third year. He estimates that 70% of his sales will come from wholesale and the remaining 30% from walk-in single purchase customers. Year Projected Sales Volume (kg) Amount (cedis) 2003 28,800 403,200,000 2004 32,400 453,600,000 2005 36,000 504,000,000 2006 36,000 504,000,000 2007 36,000 504,000,000 1.10 Promotional Measures In order to secure the goodwill of the retailers, 15 days’ credit will be extended to these village shopkeepers who regularly buy in bulk. Present manufacturers/ distributors do not extend credit. Other promotional measures to help in marketing the product will be free delivery for volume purchases, word of mouth advertisement by satisfied clients, use of posters, and regular and prompt supply by the manufacturer. 1.11 Marketing Strategy The project's marketing strategy is based on the following strategies:
  46. 46. Business Information Handbooks a) product strategy - it has a superior product. - it has an appealing brand name ‘’Energiser’’ connoting more cleansing power. b) pricing strategy - its retail price of cedis 15,400 is lower than the most expensive brand (cedis 15,500). - the business will extend l5 days' credit to regular village shop-owners. c) promotion strategy - free delivery; - word of mouth advertisement; - prompt, courteous & efficient service; d) distribution strategy - over-the-counter sales in his existing grocery store; - l5 major village retail stores. 1.12 Marketing Budget SBS Soap Manufacturing will have very modest cost to promote and distribute its product. It will rely mostly on word of mouth promotion by satisfied customers as well as endorsement by the retailers of the product because of its superior quality. Hence, the only cost it will incur will be occasional give-aways and distribution of the product (including transportation and sales commission) for a total monthly marketing budget of cedis 50,000, or annual budget of cedis 600,000. PART III - WORKBOOK 1.1 Description of the Product 1.2 Comparison of the Product with It’s Competitors
  47. 47. Business Information Handbooks Competitive Analysis of Product Features Proposed Competitor Competitor Competitor Business 1 2 3 Product Quality Price Delivery time Brand Name Multiple Use Taste etc. 1-Outstanding 2-Very Satisfactory 3-Good 4-Fair 5-Poor 1.3 Location <Location Map> 1.4 Market Area
  48. 48. Business Information Handbooks <List of Market Areas And Size of Market> 1.5 Main Customers <List of major Customers and Their Requirements> 1.6 Total Demand
  49. 49. Business Information Handbooks Table 1.6 Table of Projected Demand Year Quantity Amount (cedis) _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ 1.7 Market Share <Table of Projected Supply and Sources of Supply> 1.8 Selling Price
  50. 50. Business Information Handbooks Table 1.8 Comparison of Competitors’ Selling Prices Project’s Project’s Prices of Competitors Competitors’ Product(s) Selling Average Price Price Competitor Competitor Competitor 1 2 3 1.9 Sales Forecast Table 1.9 Projected Sales by Year, Sales Volume and Amount. Year Sales Volume (units) Sales Amount (cedis) _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ 1.10 Promotional Measures
  51. 51. Business Information Handbooks 1.11 Marketing Strategy <Table of competitors’ Marketing Strategy> 1.12 Marketing Budget
  52. 52. Business Information Handbooks Table : Marketing Budget Chose what applies to your product and marketing strategy: Item MONTHS 1 2 3 4 5 6 7 8 9 10 11 12 Projected Sales Marketing Expenses: Promotion (specify) Distribution (specify) Advertising (specify) Selling (specify) Total Expenses
  53. 53. Business Information Handbooks Attachment 2: Market Field Study: Sequence of Events A. Development of a questionnaire – Define.... • The reason or the intention for the interview • The pattern • The locations/areas of the survey • Unforeseeable and calculable risks • The questionnaire's contents • Type and order of the questions (open/closed) Then. . . • Test your questionnaire • Carry out an audit of the questionnaire Recommendations: - Dos:... • Situate delicate questions at the end of the questionnaire • Use clear, simple and adequate language • Pay attention to a logical sequencing of the questions • Place an "icebreaker" at the beginning • Include test questions (Cross-check) DON'Ts: • Avoid prejudiced/biased words • Evade questions that imply an answer or that can hardly be answered negatively can be answered B. Preparations for the fieldwork C. Interview 1. Introduction • Personal self-introduction • Explain the reason for the interview 2. Implementation / recommendations: • No not forget the aim of the interview • Keep an adequate distance to the person being interviewed • Adapt your questions, if necessary • Explain the reason for the interview clearly • Thank the interviewed person asked for his efforts D. Evaluation and Presentation
  54. 54. Business Information Handbooks Business Information Handbooks List of Publications for Business Development Start and Improve your Business Identification of viable business ideas, market and supply analysis, write a business plan, organize business management, evaluate sales, improve and diversify products. Marketing Strategies Marketing problems faced by Ghanaian businesses, marketing strategies, managing prices, product development and promotion. Export-Import and Trade Fair Guide Export procedures, export business registration and licensing. Import procedures. Trade Fair calendar and trade fair databases, trade fair participation. Business Planning Business planning for start-ups, micro, small and medium enterprises: Nature of Business, Business organization, Products and services, Marketing plan, Management plan, Financial plan. Bookkeeping and Cost Calculation Manual Cash book formats, records on maintenance services, receipt, sales on credit, raw material inventory, cash flow statement, Pocket Accountant software, cost calculation, identify cost components, calculate variable and fixed costs, calculate total cost per unit, how cost calculating improves your business. Financing your Business What finance do I need? What are the best sources of finance? Loan application procedure. Bank categories. Loan conditions. Financial records. Improve your Business Association Needs assessment of your members, situation analysis, action planning, services, fundraising, membership fees and accounting.
  55. 55. Business Information Handbooks List of SBS Network Consultants Name / Address Competencies Company Compta Consult A.D. SOMUAH - Business Management Accra Phone 233-21-761555 - Marketing comptaconsult@yahoo.com - Financial Management EDC Consult Phone 233-21-227122 - Entrepreneurship Development Abena Otu Mob. 0208150750 - Gender, Marketing Accra abenaotu@consultant.com - Financial and Credit Management - Organizational Development - Monitoring and Evaluation MEV Consult Phone 021-410682, - Entrepreneurship Development Nick Okai 0244-630610 - Marketing, Tema nickokai@yahoo.com - Productivity Improvement - Community Development Hopespring Phone 233-21.50.39.31, - Organizational Development Foundation Mobile 233-24.43.72.522 - Training in vocational and business Afia-Darkwa info@hopespring management skills Amanor foundation.org - Business and Carrier counseling Praisel, Accra Phone 233-021511932 - Enterprise Development Consulting or 0244 571474, - Agriculture Development Alice Addai praiselconxx@yahoo.co.uk - Micro-Finance Yeboah - Credit Delivery and Management WEYDA Consult Tel (233)24-4210228 - Business Development Services Chalres Wiafe 20-8113312 - Staff Development Training Weyda04@yahoo.co.uk - Community Development - Job Link Services for skilled medium level Personnel KED Business T 233-244-273035 T - Working Capital Management Service 31-22451 - Business Advisory Ken Kpodo kkpodo@yahoo.com - Business Planning - Micro-Finance Management - Pastel Accounting Software Training

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