PRINCIPLES OF BUSINESS

SECTION 6 - MARKETING

NAME__________________________________________________________

GRADE_________________________________________________________

OBJECTIVES
(i) explain the concepts of market and marketing;

(ii) explain marketing activities

(iii)describe the “marketing mix”;

(iv)describe the factors that influence consumer behaviour

(v) identify factors affecting packaging and presentation of goods

(vi)describe methods of promoting sales;

(vii)identify the techniques of selling

(viii) explain the various terms of sales

(ix)list the functions of consumer organisations

(x) outline the role of customer service;

(xi) describe forms of customer service;

(xii)explain the concept of intellectual property rights

MARKETING

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6.1 THE CONCEPTS OF MARKET AND MARKETING

(a) (i) Market

● A market is any situation that brings buyers and sellers together for the purpose
of exchange.

(ii) Types of Markets

● A consumer market is a market for products and services that are bought by
individuals.
● An Industrial market involves the sale of goods between businesses not the
general public.

(b) (i) Marketing

● Marketing is all the activities that enable trade to take place in a profitable and
efficient way.

(ii) New Trends in marketing

● Social media marketing- is a form of internet marketing that gains attention
through social media sites such as Twitter, You tube, Facebook, Link-in and
many others

● Integrated marketing – this is a method that creates a unified strategy that

promotes a brand across multiple media (television, radio, and social media)
so that the message is similar in all approaches.

6.2 MARKETING ACTIVITIES

● Marketing activities include : market research, pricing, packaging, branding, sales

promotion, advertising, and distribution. Each of these activities will be discussed
below:

a) MARKET RESEARCH

● A market research is the collection and analysis of data about the consumer’s
preference and competitors. It is important to research any new market you are
moving into to avoid wasting time and money on failed projects.

(i) Consumer Taste

● A consumer’s taste refers to the products and services that consumer’s chooses over
others.
● Market research helps to rank individual choices and assist the firm in making better
decisions about the products/services offered.

(ii) Competitor
● Market research helps a firm to obtain information about their competitor in order to
make better designs, offer competitive prices, and become more effective.

(iii) Consumer Behaviour

● Consumer behaviour is a study of the public reactions towards a product.

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 ● Market research helps a firm to understand what prompts a consumer to purchase a
particular product and what stops him from buying it.

(b) PRICING

● Pricing is the monetary value of a good/service or the amount asked for the
product/service
● Pricing strategy is a way of finding a competitive price of a product or a service.
Strategies include:

Pricing Strategies

(i) Pricing at a Premium

● This is where a business sets its cost higher than their competitors. This
strategy is most effective in the early days of a product’s life

(ii) Pricing for Market Penetration

● This penetration strategy is used to attract buyers by lowering the prices on
goods and services. This is used by big companies to pull customers away
from their competitors.

(iii) Cost Plus Pricing

● This is the simplest method, it involves using the cost of producing a single
item and then adding overheads cost and a profit margin to arrive at a selling
price. 1000 + 300+ 200= $1500

(iv) Price Skimming

● This strategy involves setting prices high at the introductory stage of the
product. It helps the business to maximise on sales at the introductory phase of
the product.

(v) Bundle Pricing

● A small business may sell multiple products for a lower rate than consumers
would face if they bought each item individually. It is an effective strategy for
unsold items that is taking up space.

c) PACKAGING

● Packaging is the way in which a saleable product is wrapped/ displayed or

presented to the customer.
● Labelling is an important part of packaging this may be a small tag attached to the
product.

Forms of Packaging

● Forms of packaging include boxes, glass containers, plastic bags, paper, metal
cans, cloth [crocus bag]

Presentation/Benefits of Packaging

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 ● It enhances the appearance of the product - e.g. it should look bright, attractive
and different from its competitor
● It protects and preserves the products – e.g. wrapped to protect the product
● It provides information - e.g. ingredients, description of the content, location of
the business etc.
● It makes it more convenient for the consumer to handle – e.g. easy to carry and
transport
● It promotes the product – e.g. it carries the firm’s logo and brand name to allow
customers to identify the product

d) BRANDING

Use of Brand Names

● A brand name is a symbol, colour, name or trade mark that distinguishes a product
from its competitors.

Reasons for Branding

● It helps to create customer loyalty, that is the faithfulness of a customer to buy a
particular brand regularly
● It is easier for the firm to promote the product resulting in an increase in sales
● Branding leads to returning customers, if a firm delivers what their brand promises,
the customer will return
● Having a strong brand helps the firm to charge a high price especially if the product is
of a high quality.

e) Sales Promotion
● Sales promotion is a process used to persuade the consumer to buy a product and
make repeat purchases which will increase sales.

● Examples of Sales Promotion

Free Samples - are mini replicas of the product, usually take place at trade fairs,
exhibitions and supermarket.

Coupons - are detachable tickets that entice the holder through the probability of
receiving something.

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 f) ADVERTISING
● Advertisements are messages paid for by those who send them and are intended to
inform or influence people who receive them.

Advertising Functions

● Build a firm’s image which will attract more customers

● Highlight special events such as sales, or features of the product
● It provides factual information such as the benefits and where the product can be
found.
● It is persuasive, it tries to entice the consumer to purchase the product by using
emotional and psychological appeals. E.g. use of sexual appeal adds

Forms of Advertisements
● Informative - gives detail information about the good or service
● Persuasive- uses a variety of techniques to persuade people to buy a product or
service regardless of whether they need it.
● Competitive - tries to influence the demand for a particular brand

g) The Distribution Chain

The distribution chain refers to the route used in getting the product from the producer to
the consumer in a convenient way.

● (i) Producer ⇨ Wholesaler ⇨ Retailer ⇨ Consumer

● (ii) Producer ⇨ Wholesaler ⇨ Consumer
● (iii) Producer ⇨ Retailer ⇨ Consumer
● (iv) Producer ⇨ Consumer

(i) The Producer/Manufacturer

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 ● The producer is the person who converts raw material or semi-finished goods into
finished products or services.

(ii) Wholesaler
● Is the middleman who buys goods from the producer in large quantities and sells in
smaller quantities to the retailer.

Functions of a Wholesaler

● Risk bearing- wholesalers take the risk of storing goods that may not be wanted by
customers or may become obsolete or out of fashion, or the prices may fall forcing them
to sell at a loss.

● Warehousing- wholesalers store goods and keep them until they are required by the
retailers ensuring them a ready supply of goods when needed.

● Breaking bulk- wholesalers buy goods in large quantities and repackage them in smaller
quantities and sell them to retailers.

● Transport- wholesalers pick up goods from the manufacturer and at times deliver goods
to the retailer’s premises in their own vehicles.

(iii) Retailer
● The retailer is a business that buys from the producer or the wholesaler and sells directly
to the consumer.

Functions of a Retailer

● Breaking bulk - retailers buy goods in bulk from the manufacturer and sells them in
smaller quantities to the consumers.

● Providing useful information – information gained from customers about the products
will provide feedback to the wholesalers and manufacturers.

● Providing presales and aftersales services - presales is checking the appliances that they
are working before they are sold. After buying the goods, some retailers offer repair and
maintenance services which is known as aftersales services.

Factors that Influences the Method of Distribution

✔ The type of goods, the value of the goods, who is the product for, and the
location.

6.3 MARKETING MIX

● Marketing mix is a collective term that refers to a range of marketing techniques and
strategies a firm uses to reach its target market.

● It consists of 4 elements - Product, Pricing, Place, Promotion [4P’s]

(i) Product
● Product is an item that is produced to meet the needs of the customer in terms of quality,
durability, performance and appearance.
● There is no need to market a product that is not needed by the customer

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 (ii) Pricing
● Pricing is the monetary value of a good/service or the amount asked for the product
● If the price is too high the customer may not buy the product, if it is too low they also
may not purchase it because they may think the quality is inferior.
● Firms may use various pricing strategies to enter the market as discussed above. (6.2)

(iii) Place [Distribution]

● This is concerned with getting the product to the right place using the appropriate
distribution channel.
● If the product is to be successful it must be distributed in a place that is accessible to
potential customers.
● E.g. Producer- Retailer- Consumer

(iv) Promotion
● Promotion is a method that a firm uses to make the consumer aware of the product.
● It helps to inform the customer about a product, create an image about the product or
encourage existing customers.

6.4 FACTORS THAT INFLUENCE CONSUMER BEHAVIOUR

● What makes consumers behave in the way they do when they make their purchase
decision? There are several factors that influence consumer behaviour as seen below:

● Price –generally the higher the price of a good, the consumer will buy less of that
product, however, if the price of the product is reduced, the customer would purchase
more.

● Price of substitutes – a substitute is one that can be bought instead of another one. When
the price of a product’s substitute increases then the demand for the first product will
increase.

● Quality - a consumer may ignore price and pay high amounts for a product if they are
getting good quality.

● Taste- people’s taste differ, therefore marketers must be aware of the various preferences.

● Tradition- some people will purchase a particular brand/product due to family tradition
such as buying Grace Foods products only.

● Income (affordability) – when a consumer’s income rises, expensive goods will become
more affordable. In contrast when consumer’s income fall, they tend to purchase cheaper
goods.

● Spending patterns- marketers need to identify patterns so they influence consumers e.g.
some customer always shop at a favourite store.

● Brand loyalty – marketers try to build brand loyalty to prevent consumers from switching
to another brand.

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6.5 FACTORS AFFECTING PACKAGING

i. Presentation – the package presents an important role in marketing the good, it’s
presentation should be eye catching and informative .

ii. Branding – gives the product a symbol or design that helps the product to be easily
recognized.

6.6 METHODS OF PROMOTING SALES

● Methods of promoting sales are strategies businesses use to tell customers about the
product and get them to buy the product through advertising, public relations, sales
promotion and personal selling.

(a) Advertising
(i) Functions and forms of advertising (see above)

(ii) Sales promotions such as:

✔ Trading stamps and coupons- a stamp/coupon is given by some stores to a

customer according to the amount spent and can be exchanged for various
articles.

✔ Loyalty points - loyalty program rewards customers who buy from a business
on a regular basis, this encourages the customer to return frequently.

✔ Rebate - is an amount paid by way of reduction, return, or refund on what has

already been paid or contributed.

✔ Bundling – is offering multiple products for sale as one combined product .E.g.
Flow offering extra services to the basic phone line such as internet access

(iii) Loss leaders - are items with huge discounts used to attract customers to the store

(iv) Social media – can be used to promote a firm’s brand or products through social
media such as Face-book, Instagram, Linked-in, and Twitter.

(b) Public Relations

● This is gaining free publicity by inviting members of the press and other media to
the business and special functions.

Examples of Public Relations

● Press release to draw public’s attention to company’s product

● Offering special awards such as scholarships for children
● Offering expense paid trips to long service members or employees
● Sponsoring sporting and cultural activities

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 c) Sales Promotion (see above)

d) Personal Selling

● Involves the sales person moving from place to place with their products
● It facilitates direct contact and immediate feedback
● It allows the customer to buy on credit from the seller
● Telemarketing can be considered as personal selling, as banks use this facility to make
arrangement for loans with customers

6.7 TECHNIQUES IN SELLING

(a) Sales Men and their Approaches

● Selling techniques refers to the methods that sellers use to make potential
customers aware of their product.

● Various selling techniques include:

✔ Cold calling or telemarketing – selling to an unknown persons

✔ Warm calling – contacting someone you know

✔ Hard selling – selling a product that may not be needed

✔ Soft selling – using gentle persuasion to convince a buyer

✔ Solution selling – helping people to choose the right product

✔ Customer selling- technique that focuses on different types of customers

.

(b) Merchandising and Adjusting of Pricing Policies

● Merchandizing is the presentation of goods in a shop, examples include:

✔ a well laid out shop that encourages customers to walk around

✔ colourful dramatic window displays

✔ well stocked shelves with banners and labels indicating price

✔ foods that can be taken out of the package to allow customers to see and touch
them

(c ) Methods of Retailing/Distribution Outlets

● Shops – these are small retail outlets which sells a variety of goods referred to as
sole traders, corner shops and convenience shops

● Department stores – are retail outlets that are divided into different departments
that sells a variety of product lines e.g. Woolworth

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 ● Mail order- potential customers are asked to buy goods through the post,
telephone or online. E.g. goods displayed in a catalogue can be ordered and
delivered by post to the consumer’s home.

● E-commerce – buying and selling goods and services via the internet and
distributing them by post, pay-pack or some other courier service.

● Telemarketing – buying and selling goods or services over the phone to make
contact with potential customers.

● Vending machines – self- service machine that use coins to purchase a drinks or
snacks located at convenient places 24 hours a day.

● Supermarket- these are large self -service stores selling mainly food and small
household items. They attract customers by offering specials and cutting prices
on certain items.

6. 8 TERMS OF SALES

● This involves the methods of payment you expect the customers to pay for
purchases e.g. cash, cheques, credit card or debit cards.

Advantages Disadvantages
Cash -Quick and convenient -Risk of money being stolen
payment -Fake notes may be used
-No risk of none payment

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6.9
FUNCTIONS
OF
CONSUMER

ORGANIZATION

Consumers

● Refers to any individual or group that derives satisfaction from goods and services
through the process of exchange.

Functions of Consumer Organizations

● Consumer organizations are advocacy groups that seek to protect people from
corporate abuse like unsafe products or false advertising. Consumer organization
consists of private and government organizations.

● Examples of consumer organizations are private organizations and government

agencies which are discussed below.

(a) Private organization - are institutions which educate and lobby for legislation to be
put in place to protect consumers. E.g. Consumer Affairs Commission addresses the
concerns of the consumer and organise consumer affairs and prepare publication.

(b) Government agencies- such as the Bureau of Standards and the Ombudsman.

(i) The Bureau of Standards

● It ensures that the goods produced are sold in good condition and are properly
packed and labelled.

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 ● It sets high standards for which the producer must abide if the goods are to be
accepted in the market.

.(ii) The Ombudsman

● An independent person appointed by the government to investigate any

injustice suffered by individuals dealing with government departments who
then makes recommendations to correct wrong doings.

6. 10 ROLES OF CUSTOMER SERVICE

● Customer service is the assistance provided by a business to those people who buy or
use its products or services.
● It provides an opportunity for the business to provide customer loyalty and customer
satisfaction

Roles

● Provides information so the customer is well-informed about the choices available to

them
● Practice adherence to copyright laws to avoid being sued or prosecuted
● Communicate effectively with customers with courtesy calls by contacting customers
to find out what they think about the product
● Providing credit facility, delivery services or discounts to customers when necessary
● Refund or replace a product if a customer is dissatisfied with a product they have
purchased

6.11 FORMS OF CUSTOMER SERVICE

● Warranty – is a promise issued by the manufacturer to repair or exchange the product

within a specified period in the event that the product does not function as intended.

● Aftersales - refers to all the help and information that a business provides to a
customer after they have bought a particular product. E.g. repair services, information
follow-up.

● Feed-back - information/reactions to a product/service which is used as a basis for

improvement.

● Toll free number/Call Centres - this allows callers to reach the business without
paying for the call.

● On Line Chat – allows the customer to talk with someone about the difficulties they
are experiencing with the product they have purchased.

● Suggestion Box -used for collecting information from customers about how the
business can be improved and it shows that the customer’s views are important.

● Surveys - used to find out how satisfied customers are and how the business can be
improved.

6.12 CONCEPT OF INTELLECTUAL PROPERTY RIGHTS

(i) Trade Marks

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 ● A trade mark is a registered brand or trade name, it may include a combination of a
name, slogan, logo or colours that identifies a company’s product or services.

(ii) Copy- Right

● Copy right is the ownership by persons of certain types of design, written work or
music. E.g. the following symbol indicates when a copyright exists ©.
● Copy right products cannot be reproduced for commercial use without permission
from the owners.

(iii) Patents

● Patent is the right granted to an inventor of a machine, formula, or technique.

● A business that wishes to use the invention must seek permission from the inventor.
● A person must receive a special licence to reproduce the product and must pay a fee.

Revision Questions

Question 1

Maggie recently bought books, shoes and clothes from an online company.

(a) (i) Define the term ‘e-commerce’. (2 marks)

(ii) State TWO advantages and TWO disadvantages of ‘e-commerce’.

(4 marks)

(b) OutlineTWO reasons why firms offer trade discounts. (4 marks)

(c) Maggie plans to buy a refrigerator from a local store.

Discuss any TWO of the following ‘terms of sale’ options that are available to

her:

-Hire purchase

- Lay away plan

-Trade credit (6 marks)

(d) Given that Maggie buys the refrigerator and it stops working after one month. Advise

her of TWO actions which she may take to get compensation from the store. (4 marks)

[Total 20 marks]

Question 2
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To succeed in business, firms must be conscious of their pricing and selling techniques.

(a) State FOUR selling techniques used by sales men to contact their customers. (4 marks)

(b) Explain the following pricing techniques used by firms to increase sales.

(i) Cost plus pricing (2 marks)

(ii) Penetration pricing (2 marks)

(c) Define EACH of the following terms of sales:

(i) Cash discount (2 marks)

(ii) Trade discount (2 marks)

(iii) Hire purchase (2 marks)

(d) Justify the use of EACH of the following methods as a means of increasing the sales of

insurance products:

(i) Personal selling (3 marks)

(ii) Advertising (3 marks)

[Total 20 marks]

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