Transcript WHAT IS MARKETING?

BUSINESS STUDIES
Grade 11
TERM 3
Business
roles &
Business
operations
THE MARKETING
FUNCTION
THE MARKETING FUNCTION
REVISION:
 The EIGHT Business Functions:
1. General Management
2. Purchasing Function
3. Production Function
4. Marketing Function
5. Public Relations
6. Human Resources
7. Administration Function
8. Financial Management
THE MARKETING FUNCTION
WHAT IS MARKETING?
 Definition:
The management process that is responsible for the
profitable identifying, forecasting and satisfaction of the
requirements of consumers.
 Focus:
Consumers and their needs and desires (and to meet these
needs and desires).
 Main objective:
To give value to customers with the purpose to create long
term customer satisfaction.
THE MARKETING FUNCTION
THE ROLE OF THE MARKETING FUNCTION:
 To support the overall goal of the business
enterprise – which is usually to make as much
profit as possible.
 The function cannot operate in isolation.
 Must collaborate with functions such as:
General Management
Production Function
Financial Function
Human Resources
THE MARKETING FUNCTION
THE MARKETING FUNCTION CONSISTS OF FOUR POLICY INSTRUMENTS:
 Namely:
 Product policy
 Pricing policy
 Distribution policy
 Marketing communication policy
 These four policy instruments are known as the four P’s
or the marketing mix:
 Product
 Price
 Place (of distribution)
 Promotion
THE MARKETING FUNCTION
THE MARKETING FUNCTION CONSISTS OF FOUR POLICY INSTRUMENTS:
 The extended marketing mix consists of these 7 elements:
 Product
 Price
 Place (of distribution)
 Promotion
 People
 Processes which includes policies and procedures
 Physical environment of the business
THE MARKETING FUNCTION
TO CREATE THE RIGHT MARKETING MIX, BUSINESSES HAVE TO
MEET THE FOLLOWING CONDITIONS:
 The product must have the right features, such as the right
specifications, quality and style.
 The price must be right.
 The goods must be available in the right place at the right time.
 The target group needs to be made aware of the availability of
the product through promotion.
 The people involved in the delivery of service to customers play
a very important role.
 The service delivery process and procedures to be followed to
deliver a good service to a customer must be considered.
 The physical environment of the business in which the service is
delivered should contribute to a positive experience for the
consumer.
THE MARKETING FUNCTION
THE MARKETING FUNCTION CONSISTS OF FOUR POLICY INSTRUMENTS:
PRODUCT POLICY
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•
•
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Goods and services
Product development and design
Packaging
Trademarks
PRICING POLICY
•
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•
•
Importance of pricing
Pricing techniques / strategies
Price determination
Factors influencing pricing
Price adjustments
DISTRIBUTION
POLICY
MARKETING
COMMUNICATION
POLICY
• Channels of distribution
• Direct and indirect distribution
• Intermediaries
•
•
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Sales promotion
Advertising
Publicity
Personal selling
E-marketing
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
 Locating the consumer
 Standardisation and grading
 Storage
 Transport
 Financing
 Risk bearing
 Buying and selling
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Locating the consumer (Market research):
 Marketing is aimed at the consumer – it is therefore important
to know where the consumers who are interested in buying the
products are located.
 This activity is done with the aid of market research.
 The aim of market research is to locate consumers and to
provide information about:
 The spending power of consumers.
 The preferences of consumers.
 Consumers’ willingness to spend.
 The demographics of consumers.
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Standardisation and grading:
 Standardisation is the process of developing and establishing a
uniform set of criteria to ensure the production of quality
goods.
 Grading is the process of classifying agriculture products into
particular categories, for example Grade A potatoes.
 For example: grading of tomatoes will depend on their colour,
weight, ripeness and odours and they are graded into dif ferent
classes: Class 1; Class 2 and Class 3.
 On the tomato box there will be a label that will specify which
grade of tomatoes it contains .
 Grade specifications are used to control the grading process
with inspection by inspectors.
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Storage:
 After goods have been produced, it must be stored until it’s
consumed or dispatched to intermediaries, wholesalers or
retailers.
 The storage facility will be influenced by the type of goods that
need to be stored.
 Perishable goods can only be stored for a limited period of
time.
 Reasons for storage are to prevent goods from spoilage and to
balance demand and supply.
 For example: cold storage makes it possible for fruit grown in
winter, such as apples and pears to be available all year.
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Transpor t:
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Products must be transpor ted from the storage facility to wholesalers,
shops or intermediaries .
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The type of transpor t will be influenced by the type of goods that must
be transpor ted.

Business enterprises can choose from various types of transpor t for
example, road transpor t, railway transpor t, air transpor t and sea
transpor t .

There are five dif ferent forms of transpor t – rail, water, road, pipeline
and air.
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Before a business enterprise can decide on which type of transpor t to
use, the following impor tant factor s must be taken into consideration :
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Speed
Cost
Safety
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Transpor t:
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Other factors that will influence the form of transport include
the following:
Cost
Some forms of transport are more expensive than others and the
buyer will have to pay for the transport cost, so it must be affordable.
Type of product If the product is heavy or bulky, it would need rail or road transport
or even water transport, whereas if a product is expensive, light and
breakable, it might need air transport.
Travel time
The different forms of transport vary in speed. While air transport is
very fast, water transport is much slower. If a product is needed
urgently, a faster form of transport will have to be used
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Financing:
 Money must be available for activities such as the marketing of
goods and for insurance.

The aim of marketing is to sell goods in order to earn back the
money that was spend on the production of the goods:
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Financing:
Different forms of credit finance include:
 Credit on open account – buyer gets the goods and is given a
certain period of time to pay amount.
 Instalment sale – buyer pays a deposit and then pays the
balance off over a specified period of time. Interest is
charged on the balance owed.
 Lease agreement – consumer is allowed to use the goods,
but does not become the owner of the goods.
 The buyer can get finance through a credit card or a loan
from commercial banks. This type of credit can be used to
purchase goods at any time up to a certain limit. Interest is
charged on the outstanding amount.
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Risk bearing (Insurance):
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From the moment a business enterprise takes ownership of
raw materials or semi-finished goods, the business is
responsible for the goods.
This means that the business enterprise carries the risks
involved with owning the goods – the factory or warehouse
can, for example catch fire, goods can be stolen or goods
can perish.
As soon as wholesalers, retailers or intermediaries take
ownership of the goods, the goods are not the responsibility
of the business enterprise any more .
The goods then become the responsibility of the new owner.
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Risk bearing (Insurance):
Different types of risks:
 Human risks – theft, bad debt, breakage and damages
due to negligence and strikes.
 Physical risks – can be the result of natural causes
such as storm damage, earthquakes, fire, lightning,
floods, droughts and insect outbreaks.
 Economic risks – a result of changes in the demand
for or supply of certain products, price fluctuations,
changes in fashion trends, technology advances and
tougher competition.
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Risk bearing (Insurance):
 A business can insure itself against human and
physical risks, but not against economic risks.
 Insurance is a contract entered into by two parties,
namely the insurer and the insured.
 In return for the payment of a premium by the
insured, the insurer agrees to cover the losses
suffered by the insured as a result of a specified
possible event.
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Buying and selling:
 Some business enterprises produce goods, while other business
enterprises buy finished goods which are then sold for a profit .
 Business enterprises that produce goods must buy raw
materials in order for production to take place .
 Various other products are also purchased :
 Maintenance services (machinery)
 Water and electricity
 Marketing services
 Once goods have been acquired or produced, it must be sold.
 If business enterprises are unable to sell the goods it has
produced or purchased, the goods will either become obsolete,
or the goods may perish.
THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Buying and selling:
 Businesses such as wholesalers and retailers buy their goods
from producers or manufacturers for resale.
 These businesses are called intermediaries and are the link
between producers or manufacturers and the end consumer.
 Through the marketing activity of selling, the buyer takes
possession of the goods.
 Forms of selling include:
Personal selling Direct selling between the manufacturer and the buyer.
Agency selling
Brokering
Other selling
Someone who sells goods on commission for others.
A sales agent who sells a particular product is a broker.
Vending machines, mail-order, door-to-door selling, self-service
selling and online-shopping.
THE MARKETING FUNCTION
PRODUCT POLICY:
1 . Goods and services:
 A product is something that satisfies consumers’ needs the
wants.
 Consumers buy products, because they believe that they will
benefit from owning the product .
 A product can either be a good, a service or a combination of a
good and a service.
Goods
• Bread
• Toothpaste
• Clothing
Services
Combination of goods and
services
• Dental services
• Hair styling services
• Internet service provider
• Meal at a restaurant
• Cell phone contract
• Products ordered by mail
THE MARKETING FUNCTION
PRODUCT POLICY:
1 . Goods and services:
Goods
Services
• Physical, tangible things
• Non-physical and intangible
• Can be separated from the producer
• Cannot be separated from the producer
• Can be bought and owned
• Can be experienced or used
• First produced, then sold
• First sold, then produced
• Consumer knows exactly what he/she
is buying
• The consumer does not always exactly
know what he/she is buying before the
service is being delivered
• Can be transported and stored
• Perishable, cannot be transported or
stored.
THE MARKETING FUNCTION
PRODUCT POLICY:
1 . Goods and ser vices:
 Products are classified into dif ferent categories .
 Most products are intended for consumers or for businesses .
 Product that are meant for consumer s are known as consumer
products, and products that are meant for businesses are known as
business products or industrial products .
 Business products or industrial products are mainly used in the
production of other products .
 It is possible that one product can fall into both categories .
 For example, consumers buy paint to paint their houses, but business
enterprises also buy paint to paint the products they manufacture .
 The reason why products are classified as either consumer products
or business products is because dif ferent marketing strategies are
used to market these products.
THE MARKETING FUNCTION
PRODUCT POLICY:
1 . Goods and ser vices:
THE DIFFERENT TYPES OF GOODS AND SERVICES
Consumer goods: Goods that satisfy the daily needs of the consumer.
Convenience A relatively inexpensive item where little shopping
goods
effort is needed. Very little thought goes into
buying these goods.
Examples: bread,
milk and sugar
Select goods More thought and comparison is required when
shopping for these goods. The product is usually
more expensive and the consumer will consider
the price, quality and brand name of the product.
Examples:
jewellery, clothing
or furniture
Speciality
goods
A particular item that consumers search for
Examples:
extensively and they are reluctant to accept any
antiques, wedding
substitutes. A lot of time and energy goes into
dress, car
buying these goods. These products are expensive
and the consumer often makes a once-in-a-lifetime
purchase.
THE MARKETING FUNCTION
PRODUCT POLICY:
1 . Goods and ser vices:
THE DIFFERENT TYPES OF GOODS AND SERVICES
Industrial goods: Products that are used in the production of other goods.
Industrial
goods
Industrial goods are any products that are used in the
production of other goods. This can include a wide
range of raw materials or semi-finished goods as well
as capital goods, such as equipment and machines
that are used to produce a finished product.
Examples:
machinery,
equipment, trucks
Services: Personal help or assistance given to a customer. Special attention is given
to quality, the credibility of the supplier and the continuous availability of the service.
Personal
services
Personal services are aimed at the final consumer
and often carried out by professionals.
Examples: doctor,
plumber,
hairdresser
Auxiliary or These are all the services involved in taking the
Examples:
commercial goods or services from producers to consumers and transport,
services
are often carried out by intermediaries.
banking, telecom.
THE MARKETING FUNCTION
PRODUCT POLICY:
2. Product development and design:
 Business enterprises need to develop new products
to replace products that lose popularity over time .
 The popularity of a product changes as the product
moves through the different stages of its life cycle .
 The life cycle of a product refers to all the stages
that a product goes through from the time it is
introduced to the market until the time it is
withdrawn from the market.
THE MARKETING FUNCTION
PRODUCT POLICY:
2. Product development and design:
 The product life cycle is divided into four stages:
Stage 1:
Introduction
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Sales are low, because customers are not aware of the product yet.
Promotion efforts need to be informative to familiarise consumers with the
product.
Stage 2:
Growth
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Sales increase as consumers become aware of the product.
Profits grow rapidly at first and then gradually start to even off.
Competitors start to enter the market by introducing similar or better
products.
Stage 3:
Maturity
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Sales remain at a constant level.
Competition gets tougher as an increased number of competitors enter the
market.
Promotion efforts need to be convincing and persuasive because consumers
must be persuaded to remain brand-loyal as there are now many similar
products available on the market.
The maturity stage can last for several years.
•
Sales start to decline because new products inevitably replace old ones.
•
Stage 4:
Sales decline
THE MARKETING FUNCTION
PRODUCT POLICY:
2. Product development and design:
 It is therefore clear that business enterprises need to
develop new products to:
 replace older products that have reached the “sales
decline” stage.
 maintain market share by attracting customers through
developing new products.
 remain competitive, because competitors are constantly on
the lookout for ways to improve their products.
 satisfy the changing needs and wants of consumers.
 Business enterprises that need to design and develop new
products, usually make use of the following steps:
THE MARKETING FUNCTION
Step 1:
Generate
ideasPOLICY:
PRODUCT
•
Ideas can be obtained from various sources, including staff,
intermediaries, competitors and consumers.
Step
2:
• All possible
product ideas must be evaluated to determine
1 . Product
development
and design:
Select a few good ideas
which idea is most likely to result in a successful new product.
and evaluate each one
Step 3:
Analyse the profitability
of the product
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Step 4:
Develop the product
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Managers need to determine if manufacturing the product will
be profitable.
Possible costs, revenue and profit must be calculated.
•
During this stage, product ideas are analysed in detail through
a process called research and development.
Product ideas are then converted into drawings and designs.
Step 5:
Commercialise of the
product
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During this stage, the product is put on the market.
Step 6:
Market the product
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As the new product is still in the introduction phase, marketing
efforts need to be focused on informing consumers about the
product.
Later, as the product becomes well known, marketing efforts
should become more aggressive in order to persuade
consumers to keep buying the product.
•
THE MARKETING FUNCTION
PRODUCT POLICY:
3. Packaging:
 After a product has been designed and developed,
management must decide on the best way to package the
product.
 Packaging refers to the container or wrapping that holds a
product or group of products.
 Most packaging serves the following functions:
 physically protects the product
 promotes marketing of the product
 prevents product from spoiling
 prevents tampering or theft
 improves convenience in use or storage
 makes products easier to identify.
THE MARKETING FUNCTION
PRODUCT POLICY:
3. Packaging:
 A significant improvement in packaging can create a ‘new’
product by expanding the ways in which it can be used, and
thus its potential markets.
 For example: soup that is packaged in a microwavable bowl
might appeal to working people and lead to increased sales.
THE MARKETING FUNCTION
PRODUCT POLICY:
3. Packaging:
a) Requirements of good packaging:
 It protects and promotes the product.
 It prevents spoiling or damage.
 It links the product to the promotion strategy used to
promote the product.
 It informs consumers on how to use the product.
 It draws the attention of consumers.
 It reduces storing costs by minimising breakage.
 It must be easy to handle, distribute, transport and use.
 It must be easy to display on the shelves in store.
THE MARKETING FUNCTION
PRODUCT POLICY:
3. Packaging:
a) Requirements of good packaging:
 It indicates the correct mass or volume of the contents of
the product.
 It must suit the product.
 It must be suitably designed for the target market, for
instance convenience goods in inexpensive packaging,
such as milk in a plastic bottle.
 It must be able to distinguish itself from its competitors.
 It must support the image the business is trying to
create.
 It must be environmentally responsible.
THE MARKETING FUNCTION
PRODUCT POLICY:
3. Packaging:
b) Packaging could have ethical implications:
 While some people might say that the following practices
are unethical, others might argue that they are good
marketing strategies, e.g.:
 Some packaging makes consumers believe that the
content of the packaging is much more than it actually
is.
 Some products are packaged in a way that it might
easily be confused with competing products.
 Plastic bags are not environmentally friendly and
contribute to pollution.
THE MARKETING FUNCTION
PRODUCT POLICY:
3. Packaging:
c) Different kinds of packaging:
• Packaging for immediate use
• Packaging for double use
• Packaging for resale
• Kaleidoscopic packaging
• Specialty packaging
• Combination packaging
• Environmentally friendly packaging
THE MARKETING FUNCTION
PACKAGING FOR IMMEDIATE USE:
 Also known as unit packaging.
 Packaging needs to be cheap, because once the
product is consumed, the packaging is thrown
away.
THE MARKETING FUNCTION
PACKAGING FOR DOUBLE USE:
 Packaging can be used for purposes other than for
storing the original contents as well.
 Consumers will be reminded of the particular
brand after the original contents have been
consumed, because packaging can be re-used.
THE MARKETING FUNCTION
PACKAGING FOR RESALE:
 Retailers buy products in bulk from wholesalers or
suppliers.
 Retailers unpack the products to sell them
separately or in smaller quantities.
THE MARKETING FUNCTION
KALEIDOSCOPIC PACKAGING:
 Also known as frequent changing packaging.
 Although the basic colours and design of the
packaging remain unchanged, some detail of the
packaging changes to advertise an important
sporting event, or a competition.
THE MARKETING FUNCTION
SPECIALIT Y PACKAGING:
 Packaging must suit the product.
 Smart products, such as a grand watch or an
expensive new phone must be packaged in a way
that matches the price and nature of the product.
THE MARKETING FUNCTION
COMBINATION PACKAGING:
 Complementary products are packed together because
these products are usually purchased together.
 Combination packaging is also a strategy to increase
profits, because consumers who were only interested
in buying one product, now spend more money by
buying a complementary product.
THE MARKETING FUNCTION
ENVIRONMENTALLY FRIENDLY PACKAGING:
 This is biodegradable and easily recycled or re used packaging.
 Plastic bags and containers are not friendly to our
planet, but packaging made from paper, for
example, is environmentally friendly.
THE MARKETING FUNCTION
PRODUCT POLICY:
4. Branding:
 Branding means a name, a term, a symbol or a design
that is used to identify a product.
 A brand name is that part of the name that can be
spoken – letters, words and numbers,
 A brand mark is the element that is not made up of
words, but is often a symbol or a design.
 When a new product is introduced to the market,
consumers will not use it until they know more about
the product.
 Marketers may issue free samples to customers to
encourage consumers to use the new product.
THE MARKETING FUNCTION
PRODUCT POLICY:
4. Branding:
 There are three stages of brand acceptance.
Stage 1:
Brand
recognition
When consumers are able to identify the product, the
marketer has achieved the first step towards brand
acceptance, which is brand recognition.
Stage 2:
Brand
acceptance
If a consumer asks for a specific brand, it is seen as
brand acceptance. If the specific brand is not available,
however, the consumer will buy another brand.
Stage 3:
Brand
insistence
Some consumers are not willing to buy any other brand
except the brand they want. This is seen as brand
insistence, because at this stage consumers will accept
no alternative brands. This gives the business the
competitive edge over other businesses.
THE MARKETING FUNCTION
PRODUCT POLICY:
5. Trademarks:
 A trademark is a registered mark (under the Trade
Marks Act) that a manufacturer puts on its products
to distinguish its products from other
manufacturers.
 Trademarks include words and symbols that are
legally registered.
 Branding refers to any means used by an enterprise
to identify a product and to distinguish it from other
products, including names, symbols and
trademarks.
THE MARKETING FUNCTION
PRODUCT POLICY:
5. Trademarks:
 Advantages of branding and the use of trade marks
include:
 Consumers know what they are buying. Sales staff
therefore do not need to spend a lot of time and effort
on convincing consumers to buy a particular product.
 Trademarks enjoy legal protection. Trademarks can
therefore not be copied by competitors.
 Consumers are more likely to accept new products
that are marketed under a well known brand or trade
mark.
THE MARKETING FUNCTION
PRODUCT POLICY:
5. Trademarks:
 A good trademark needs to meet certain
requirements:
 A good trademark makes it easy for consumers to
recognise the product.
 A good trademark is easy to recognise, remember
and pronounce.
 A good trademark helps build brand familiarity.
 A good trademark is an indication of quality.
THE MARKETING FUNCTION
PRODUCT POLICY:
5. Trademarks:
 A trademark can be a brand name, a slogan, a
logo or a specific shape, or a combination of
these, for example:
Brand name:
Slogan:
Logo:
Specific shape:
Colour:
Coca-Cola or Aquafresh
“Let your fingers do the walking”
McDonalds “
“
Coca-Cola bottle
Edgars’s red square
THE MARKETING FUNCTION
PRODUCT POLICY:
5. Trademarks:
 A trademark is an intangible asset and your
business’s most important marketing tool.
 The consumer identifies your business’s goods and
services with the distinctive features of your
trademark.
 This may lead to brand insistence and brand
loyalty.
THE MARKETING FUNCTION
PRODUCT POLICY:
5. Trademarks:
FORMS OF TRADEMARKS
Manufac- The manufacturer markets all
turer’s
the products under one brand
trademark name, for example Nestlé.
E.g. Nestlé chocolates, Nestlé
hot chocolate, Nestlé
coffee.
Individual The manufacturer gives each
trademark of the products its own
individual brand name.
E.g. Volkswagen Golf, Jetta,
Polo and Passat.
Generic
Products that do not include
trademark the company name or other
identifying terms, such as
Vaseline, Sellotape.
E.g. Elastoplast is a brand name
for Johnson & Johnson’s line of
adhesive bandages and related
products.
Retailer’s The retailer markets the
trademark manufacturer’s product under
a name of its own.
E.g. Woolworths.
THE MARKETING FUNCTION
PRODUCT POLICY:
5. Trademarks:
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Importance of trademarks:
The trademark forms the starting point for advertising the
business and its products.
The business can extend its product range, because it is
easy to market product under a well-known and popular
trademark.
A trademark can speed up a purchase transaction and
increase sales.
A trademark creates loyalty among consumers and makes it
difficult for the consumer to chose substitutes.
A trademark creates a product image that can be trusted by
consumers.
THE MARKETING FUNCTION
PRODUCT POLICY:
5. Trademarks:
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Registration of trademarks:
Trademarks can only be protected if the trademark is registered
according to the requirements of the Trademarks Act.
This is done to ensure that only that specific business may use
the trademark.
The rights of the owners of trademarks are protected for a
certain period of time.
After that, the trademark can be renewed.
The Companies and Intellectual Property Registration Office
(CIPRO) administers the Register of Trademarks, which is the
record of all the trademarks that have been applied for and
registered in the Republic of South Africa.
THE MARKETING FUNCTION
PRICING POLICY:
 The price of the product refers to the amount of
money that must be paid by the buyer to
experience the benefits of the product.
 Businesses should have a pricing policy that
enables them to maintain and increase profits,
maintain market share, increase sales and remain
competitive.
THE MARKETING FUNCTION
PRICING POLICY:
1. Importance of pricing:
 Determining the most suitable price for a product is
important, because:
 pricing affects the number of products that an enterprise is
able to sell which, in turn, affects profitability.
 the price given to a product can influence consumers’
attitudes towards the product or the whole brand.
 the pricing policy should explain when and to whom
discounts will be granted.
 the price of a product must make provision for transport
costs.
 the price of a product must make provision for VAT.
THE MARKETING FUNCTION
PRICING POLICY:
2. Pricing techniques / strategies:
 A business can adopt different pricing strategies for
several reasons, such as:
 to try to break into a new market
 to try to increase its market share
 to try to increase its profits
 to make sure all its costs are covered and a particular
profit is earned.
THE MARKETING FUNCTION
PRICING POLICY:
2. Pricing techniques / strategies:
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


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Leader pricing
Bait pricing
Psychological pricing
Prestige pricing
Complementary product pricing
Skimming
Penetration pricing
Value pricing
Promotional pricing
Differential pricing
Discount pricing
THE MARKETING FUNCTION
LEADER PRICING:
 Prices are set very low, although still above cost price.
 The aim is to draw customers into stores so that
customers do not only buy the items on sale, but other
products as well.
 Leader prices are specials that are advertised
regularly.
 Leader items are usually products which are
frequently used, so consumers will recognise
a bargain.
THE MARKETING FUNCTION
BAIT PRICING:
 Prices are set very low to attract customers.
 However, once customers enquire about the bait
priced product, sales staff point out all the
disadvantages of buying the product on promotion,
compared to other more expensive products that
are not on promotion.
 The aim of bait pricing is to encourage customers
to upgrade and to buy a more expensive product.
THE MARKETING FUNCTION
PSYCHOLOGICAL PRICING:
 Prices are set in a way that the prices have special
appeal to customers.
 Odd-even pricing is an example of psychological
pricing. Odd-even prices are set a few rand or cent
lower than the next even figure, for example
R99.99 instead of R100.
 Odd-even prices make products appear cheaper.
THE MARKETING FUNCTION
PRESTIGE PRICING:
 Consumers are concerned with the quality of a
product.
 Prices are set high to suggest quality.
 If prices are too low, consumers will assume that
there is something wrong with the product and will
not be interested in buying the product.
 Prestige pricing is often used to sell services
because consumers look at the price to determine
the quality of service they will receive.
THE MARKETING FUNCTION
COMPLEMENTARY PRODUCT PRICING:
 The price of one product is set low in order to
increase the sales volume and profit of another
product.
 For example, the price of a shaver might be very
low to enable the retailer to sell the blades which
are more expensive.
THE MARKETING FUNCTION
SKIMMING:
 Enterprises aim to obtain maximum levels of
profitability by setting prices relatively high when
the product is still in the market introduction
stage.
 During this stage competitors have not yet
emerged and consumers have nothing to compare
the product by.
 As time passes, the price is decreased to make
products more affordable to a wider range of
consumers.
THE MARKETING FUNCTION
PENETRATION PRICING:
 Products are sold at very low prices to attract
consumers when the product is introduced to the
market.
 The aim is to convince consumers to buy a product.
 As soon as the introductory offer is over, the price
is increased.
 Market penetration prices are sometimes known
as stay-out pricing, because competitors are often
unable to match such low prices.
THE MARKETING FUNCTION
VALUE PRICING:
 Setting a fair price that gives consumers good
value.
 Value pricing is about offering quality products to
consumers at lower prices than those of
competitors.
THE MARKETING FUNCTION
PROMOTIONAL PRICING:
 Would be used when you want to price the product
at a low price for a set period to attract new
customers.
 At the end of summer, a shop might have a lot of
winter clothes left unsold. The shop can then have
a scale offering ‘buy-one-get-one-free’.
 This will encourage customers to buy one item in
order to get the second one free.
 This will also help the business get rid of end -ofseason stock.
THE MARKETING FUNCTION
DIFFERENTIAL PRICING:
 Used when different prices are set for different
segments of the market.
 For example, pensioners are offered lower prices,
for instance by cinemas and airlines.
THE MARKETING FUNCTION
DISCOUNT PRICING:
 Suppliers offer a discount off a price to encourage
customers to purchase more of the goods.
 Example, Was R399 Now only R199.
THE MARKETING FUNCTION
PRICING POLICY:
3. Methods of price determination:
 A combination of the following methods is usually used to
determine prices.
a) Cost as basis for prise setting:
 It is important that business enterprises determine suitable prices
for products to recover the costs that were incurred to sell the
product and to ensure that the enterprise makes a profit.
 Business enterprises therefore need to sell their products for more
than cost price.
 Business enterprises usually add an amount to the cost price to
determine the selling price, this amount is known as the mark -up.
 For example: If XYZ Grocery Store pays R3 for a chocolate bar,
they need to sell it for a higher price to make a profit. If XYZ
Grocery Store adds R1 to the cost price of R3, we can say that the
mark-up is 33½ % on cost price.
THE MARKETING FUNCTION
PRICING POLICY:
3. Methods of price determination:
b) Competitors’ prices as basis for price setting:
 It is a good idea to have a look at prices of direct
competitors.
 For example: If Airline A charges R800 for a return
ticket from Johannesburg to Cape Town and Airline B
charges R850 for the same trip, Airline C can charge
a price in the same range as Airline A and Airline B.
 If competitors supply products at a particular price
and if consumers are willing to pay the price, it does
not make sense to charge less for those products.
THE MARKETING FUNCTION
PRICING POLICY:
3. Methods of price determination:
c) Consumer buying power as basis for price setting: (Demand)
 It is a good idea to determine, with market research, what consumers
are willing to pay for a par ticular product.
 If consumer s are, for example, willing to pay R800 for a pair of
designer jeans, it does not make sense to charge less than R800.
 Consumers’ attitudes and consumers’ ability to pay also influence
price setting.
 Consumers’ spending power changes as economic conditions in a
countr y change.
 Manufacturer s must aim to keep prices in line with what consumers
are willing and able to pay for products.
 When manufacturers increase prices, consumer s can be expected to
show resistance towards the higher prices.
 But, as time passes, consumers will grow used to and accept the new
prices.
THE MARKETING FUNCTION
PRICING POLICY:
4. Factors influencing pricing:
 Even if manufacturers have taken the cost to produce a
product, competitor’s prices and the buying power of
consumers into account, other factors remain that also
influence pricing:
a) Form of markets:
Perfect
• In a perfect competition market there are many buyers and sellers’
competition
prices are determined by supply and demand.
• Products are similar (homogenous) and there are many substitute
goods.
• If a manufacturer in a perfectly competitive market increase its
prices, consumers can buy the same or similar products elsewhere.
• Profit margins are relatively low.
• For example: selling second-hand cars, or vegetables, bread and
milk.
THE MARKETING FUNCTION
PRICING POLICY:
4. Factor s influencing pricing:
a) Form of markets:
Monopolistic • This is a market where one seller rules or leads the market even
competition
though there are other sellers selling the same or similar product or
services.
• Each supplier has its own brand of a particular product.
• Consumers are often loyal to the one seller’s brand.
• This is characteristic of the fast-food industry, in which all services
are basically the same, but are marketed differently, so there is a
perception that some fast-food restaurants must be better than
others.
• For example: SAB manufactures different kinds of beers which
compete with each other.
Oligopoly
• This is a market that is controlled by a small group of firms.
• In an oligopoly, there are at least two firms controlling the market
and each can decide on their own price, for instance.
• Telkom and Neotel, or SABC and Multichoice.
THE MARKETING FUNCTION
PRICING POLICY:
4. Factors influencing pricing:
a) Form of markets:
Monopoly
• This is where a single company or group owns all or nearly all of the
market for a given type of product or service.
• By definition, monopoly is characterised by an absence of
competition, which often results in high prices and inferior products
or services.
• Difficult to enter a market that is controlled by a monopoly, usually
because of high entry costs or because a particular business
enterprise has exclusive rights over a particular resource.
• Eskom is an example.
THE MARKETING FUNCTION
PRICING POLICY:
4. Factors influencing pricing:
b) Availability of substitute products:
 Substitute goods are similar products that are used for the
same purpose, for example butter and margarine.
 If a certain product becomes too expensive or scarce,
consumers will start buying substitute goods.
c) Nature of demand:
 The demand for products is either elastic or inelastic.
 An elastic demand means that the demand for a product will
change depending on the price of the product and the buying
power of consumers, e.g. the demand for designer clothing.
 An inelastic demand means that the demand for a product
remains unchanged, e.g. the demand for toothpaste.
THE MARKETING FUNCTION
P R ICIN G P O L ICY:
4 . Fa c to r s i n flue nc ing p r i c ing :
d ) N o rm a l t ra de pra c t i c e s:
 So m e e n te rpri ses o f fe r c a s h o r ot h e r t y pe s o f di s c o unt s.
 Th e s e di s coun ts s h o uld be t a ke n i n to c o n s idera tion w h e n t h e e n te rpri se de ci de s
o n pri c e s fo r i t s pro duc t s to e n s ure t h a t eve n t h o ug h a n e n te rpri se o f fe r s
di s c o unt s to c us to m er s i t i s s t i ll pro fi t a bl e.
Various types of discount
Cash
discount
The business gives the customer a 10 % discount, for example, with cash
sales.
Seasonal A discount for customers who buy products or services out of season. For
discounts example, a clothing retailer may sell winter stock at the start of the summer
season at a discounted price.
Bulk
discount
Consumers who buy in large quantities often get a discount, which means
they are getting products at a lower price per unit.
Trade
discount
This is a discount usually offered to intermediaries in the same trade. For
example, a manufacturer might give a particular wholesaler a trade discount
when the wholesaler buys from the manufacturer.
THE MARKETING FUNCTION
PRICING POLICY:
4. Factors influencing pricing:
e) Consumer reaction:
 Consumers have unlimited needs and wants which they want to
satisfy with limited buying power.
 If prices of particular products become too high, consumers will
either stop buying the products or try to find cheaper
alternatives.
 On the other hand, if consumers think that products are too
cheap, consumers might think that there is something wrong
with the products.
THE MARKETING FUNCTION
PRICING POLICY:
4. Factors influencing pricing:
f) Reaction of distributors/sellers:
 Expensive products are dif ficult to sell.
 If distributors/sellers know that consumers will not buy the
products on the shelves because the products are too
expensive, distributors/sellers might not be willing to stock
expensive products.
 Instead, distributors/sellers will be more willing to stock
cheaper alternatives, because consumers will buy the cheaper
alternatives which will result in increased profits for
distributors/sellers.
THE MARKETING FUNCTION
PRICING POLICY:
4. Factors influencing pricing:
g) Manufacturing, distribution and marketing costs:
 The price of a product should cover all the costs incurred to
manufacture, distribute and market the product.
 Manufacturers/sellers must ensure that the prices of products
cover all such costs, but remain good enough to attract
consumers.
h) Fixed prices of products:
 When government decides to fix the prices of products,
businesses cannot change the price and ask more or less than
what is regulated.
 For example, the retail profit margin of petrol is fixed in South
Africa.
THE MARKETING FUNCTION
PRICING POLICY:
5. Price adjustments:
 Sometimes prices need to be adjusted.
 Price adjustments can be due to several reasons, including attracting
new customers, maintaining market share, inflation or the fact that
consumers have less money to spend.
 One way of adjusting prices is to grant discount:
Quantity
Aim to encourage consumers to buy in large quantities.
discounts
Cash discounts Aim to encourage consumers to pay cash.
Seasonal
discounts
Aim to encourage consumers to buy products before they actually
need the products, for example buying winter clothes for the
following season at the end of the current winter season.
Trade discounts Discount offered by one supplier to another.
Sales price
discounts
Discount offered to consumers. Aim to encourage consumers to buy
when the products are on sale and not when they actually need the
products.
THE MARKETING FUNCTION
PRICING POLICY:
5. P rice ad ju stments:
 Business enterprises also make use of price discrimination as a technique to
adjust prices.
 Price discrimination means that not all consumer s pay the same price for the
same product.
 There are dif ferent forms of price discrimination, including:
Consumer’s
discrimination
Different prices are charged to different consumers. For example:
Landscape architects receive discounts when they buy from certain nurseries.
Product
discrimination
Different prices are charged for the same product at different outlets. For
example: Snacks bought at the cinema are more expensive than the same
snacks bought from a grocery store.
Place
discrimination
Different prices charged for goods because of the place. For example: Front
row tickets at a sporting match are more expensive than other tickets.
Time
discrimination
Some agricultural products are not available all year round. When these
products are scarce, they are more expensive. Avocados are a good example.
Sometimes during the year they are much more expensive than at other
times.
THE MARKETING FUNCTION
DISTRIBUTION POLICY:
 Distribution is about the route that a product follows from the time it
was produced or manufactured until it is sold to the end consumer.
 This route is called the distribution channel.
1 . Channels of distribution:
 A producer or manufacturer can decide to distribute the product
directly to the end consumer, or to make use of intermediaries
(middlemen) to help with the distribution function.
 The diagram below shows dif ferent distribution channels:
THE MARKETING FUNCTION
DISTRIBUTION POLICY:
1. Channels of distribution:
 Direct distribution:
a) Manufacturer
Consumer
 This distribution channel is known as the basic channel of
distribution, because goods move directly from the
manufacturer or the producer to the consumer.
 Manufacturers making use of this channel take
responsibility for marketing the products.
 E.g. when a farmer sells his fresh produce directly to
members of the public.
THE MARKETING FUNCTION
DISTRIBUTION POLICY:
1 . C hannels o f distribution:
 Indirect distribution :
b) Manufacturer
Retailer
Consumer
 Goods move from the manufacturer to the retailer before the goods are
sold to consumer s.
 In this channel of distribution, retailer s take responsibility for adver tising
the goods.
 E.g. when a retail store like Pick ‘n Pay buys stock from manufacturer s like
Clover and Hullets and then sell these goods to consumer s.
c) Manufacturer
A gent
Retailer
Consumer
 Goods move form the manufacturer to an agent.
 Goods are then sold by agents to retailer s before being sold to consumer s.
 The responsibility to sell goods fall on both the agent and the retailer.
 E.g. when manufacturer s of slimming products or dietar y supplements use
agents to market the products to retailer s like pharmacies. Consumer s
then buy the products from the retailer without ever having contact with
the agent.
THE MARKETING FUNCTION
DISTRIBUTION POLICY:
1 . Channels of distribution:
 Indirect distribution:
d) Manufacturer
Wholesaler
Retailer
Consumer
 This channel of distribution is also known as the traditional
channel of distribution.
 According to this channel, goods move from the manufacturer
to the wholesaler.
 Goods are then bought by retailers and sold to consumers.
 E.g. when a wholesaler, such as Makro or Trade Centre, buys
goods in bulk from manufacturers. Retailers such as cafes then
buy products in bulk from wholesalers. The retailers unpack the
goods in smaller quantities before the products are sold to
consumers.
THE MARKETING FUNCTION
DISTRIBUTION POLICY:
1 . Channels of distribution:
 Indirect distribution:
e) Manufacturer
Agent
Wholesaler
Retailer
Consumer
 This channel of distribution is the most complicated channel.
 According to this channel, goods move from the manufacturer
to an agent.
 The agent is then responsible for selling the goods to
wholesalers.
 Small retailers then buy the goods from wholesalers.
 Retailers take responsibility for selling the products to
consumers.
 E.g. when manufacturers of fabric use agents to sell the fabric
to wholesalers. Smaller fabric retailers then buy the fabric
from the wholesalers where it is finally sold to consumers.
THE MARKETING FUNCTION
DISTRIBUTION POLICY:
2. Direct and indirect distribution:
 A direct distribution channel is where goods move directly from
the manufacturer to the consumer.
 An indirect distribution channel is when goods do not move
directly from the manufacturer to consumers, but pass through
the hands of other role players, such as agents, wholesalers and
consumers.
THE MARKETING FUNCTION
DISTRIBUTION POLICY:
2. Direct and indirect distribution:
 Reasons why manufacturer s prefer to make use of direct or indirect
distribution methods include:
Direct distribution
Indirect distribution
•
•
•
•
•
Manufacturers want complete control
over the marketing process.
Manufacturers sell goods more
effectively to consumers than
intermediaries.
Products may become very expensive if
intermediaries add their mark-ups.
A manufacturer, who is in direct
contact with consumers, knows
consumers well.
Suitable intermediaries may not be
available, or if intermediaries are
available they might not be willing to
sell the particular goods on behalf of
the manufacturer.
•
•
•
•
•
Consumers are usually spread over a large
geographical area.
Because consumers are often spread over
large geographical areas, distribution
becomes very expensive.
Direct distribution requires a large investment
in advertising. Manufacturers may want to
avoid spending large amounts on advertising
by transferring the marketing of its products
to intermediaries.
Intermediaries sometimes provide credit to
consumers, which help attract consumers.
Intermediaries often have expert knowledge
of distribution.
THE MARKETING FUNCTION
DISTRIBUTION POLICY:
3. Intermediaries:
 Intermediaries are also known as agents or middlemen.
 Intermediaries are mainly tasked with the distribution
and marketing of products to consumers, or to other role
players such as wholesalers or retailers.
 There are numerous kinds of agents in commerce.
 The actual authority of the particular agent will depend
on the commercial relationship between the agent and
his or her principal.
 A principal is the head of an agency and has the right to
empower agents.
THE MARKETING FUNCTION
DISTRIBUTION POLICY:
3. Intermediaries:
 Intermediaries can include some or all of the following:
Buying
agents
• A person who has authority from a principal to purchase certain
commodities on the principal’s behalf.
Selling
agents
• Selling agents sell building s and fixed property such as houses or
businesses.
• Selling agents bring buyers and sellers together.
• Selling agents facilitate transactions between buyers and sellers.
• It is not unusual for selling agents to take control of pricing, selling and
advertising.
Brokers
• Agents who sell businesses on behalf of business owners are often referred
to as business brokers.
• Agents who sell insurance are referred to as insurance brokers.
• Other brokers buy and sell commodities that cannot be specifically
individualised, for example grain, wheat or shares.
• Brokers usually have short relationships with clients because the
relationship ends when the transaction is concluded.
THE MARKETING FUNCTION
DISTRIBUTION POLICY:
3. Intermediaries:
 Intermediaries can include some or all of the following:
Factory
representatives
•
Factory representatives are often employees of an enterprise with authority to
conclude agreements and to act as seller or purchasing agent on behalf of the
enterprise.
Some factory representatives are independent contractors who have the authority to
market products of one or more business.
Factory representatives often sell similar, yet non-competing products.
Import
and
export
agents
•
•
Export or import agents who specialise in international trade.
It is their responsibility to ensure that the import and export processes run smoothly
Wholesalers
•
Wholesalers buy products in bulk (large quantities) from the manufacturer and store
them in warehouses.
They then sell these products in smaller quantities, usually to retailers.
Examples are Makro and Cash & Carry.
•
•
•
•
Retailers
•
They are the last link in the distribution process, as they buy goods in fairly large
quantities from manufacturers or wholesalers and sell them in smaller quantities to
customers. Examples are Pick ‘n Pay, Edgars or CNA.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
 Once products have been developed, priced and
distributed, they need to be marketed.
 The marketing manager’s work is to inform the target
market that the product is available.
 The right product needs to be made available at the right
place and at the right price.
 When consumers are informed about the product, it is
known as marketing communication or sales promotion.
 The marketing communication policy mainly refers to
different ways of selling products.
 These different methods include sales promotion,
advertising, publicity and personal selling.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
1 . Sales promotion:
 Sales promotion refers to activities aimed at stimulating consumers’
interests in an enterprise’s products through activities such as:
 Buy-one-get-one-free – For example, Clicks offers the customer to
purchase one product and get the other one for free.
 New technological media – Websites and cell phones that support a
sales promotion. For example, Nestlé prints individual codes on KIT KAT packaging, and a consumer enters the code into a dynamic
website to see whether they have won a prize. Consumers could also
text codes via their cell phones.
 Free gifts – Elizabeth Arden and other beauty houses give you a free
gift if you buy some of their products.
 Discounted prices – Mango airline emails their customers with the
latest low-price deals once new flights are released or additional
destinations are announced.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
1 . Sales promotion:
 Joint promotions – Fast-food restaurants often run sales promotions
where toys relating to a specific movie release are given away with
promoted meals.
 Free samples – Tasting of food and drink at sampling points in
supermarkets. For example, Red Bull is given away to potential
consumers at supermarkets.
 Vouchers and coupons – Available in newspapers and magazines.
 Competitions and prize draws – In newspapers, magazines, on the
television, radio and the internet.
 Cause – Related and fair-trade products that raise money for charities
and for less well-off farmers and producers, are becoming more popular.
 Finance deals – Some car manufacturers offer 0 % interest finance over
three years on selected vehicles.
 Demonstrating products – Some businesses for example Verimark
demonstrates how there products work.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
1 . Sales promotion:
 Organising a sales promotion is quite easy and results are
usually achieved immediately, but the effects of a sales
promotion are often short lived.
 Consumers tend to buy the product on promotion just because
the product is on promotion, but the next time consumers do
shopping, they tend to buy the products they usually buy.
 Sales promotion has three main objectives:
 The first objective is to inform consumers about a product.
 The second aim of sales promotion is to persuade consumers to
buy a product.
 Thirdly, sales promotion aims to remind the target market of
the availability of a product.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
2. Advertising:
 We come across advertisements every day when we watch T V,
read the newspaper or magazines, listen to the radio or visit
websites.
 Advertising persuades people to buy certain products.
 It brings goods to the attention of consumers.
 Advertising involves communication with a large number of
consumers at the same time.
 Advertising is neither personal nor personalised.
 The advertiser pays for the message he/she wants to convey to
consumers.
 Advertising aims to persuade consumers to try out new products
and to keep buying products the market already knows.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
2. Advertising:
 Advertisement media includes:
Advertising
media
Advantages
Disadvantages
Television
and cinema
• Reach many people.
• Appeal to consumers’ eyes
and ears.
• Expensive form of advertising.
• Compete with hundreds of
advertisements for similar
products.
Newspaper
• Reaches many people.
• Expensive form of advertising.
• Quick to place.
• Often thrown away once the
• Usually placed a few times per
newspaper is read.
week or month.
• Illiterate consumers cannot
understand advertisements.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
2. Advertising:
 Advertisement media includes:
Advertising
media
Radio
Advantages
Disadvantages
• Relatively inexpensive.
• Many people are reached.
• Exposure is short lived.
• Many people don’t really pay
attention to what is said on the
radio.
Direct mail
• Message can easily be
changed.
• Often thrown away, because it is
seen as junk mail.
Magazines
• Reaches specific target
market.
• Compete with several other
advertisements.
Outdoor
advertising
• Relatively inexpensive.
• Attracts attention.
• Exposure relatively short,
because billboards are changed
regularly.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
2. Advertising:
 The advertising media in the above table represents the most
commonly used advertising media.
 However, there are several other types of advertising media
including cell phone advertising, advertising on elevator -doors
or advertising on the covers of rented DVD’s.
 The type of advertising media an enterprise will use depends on
factors such as:
 the advertising objectives
 the target market the enterprise is aiming to reach
 the amount of money that is available.
 Once an advertiser has chosen the most suitable advertising
medium, the advertiser must decide on a message to
communicate to the target market.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
2. Advertising:
 This message must reflect the AIDA principle:
Attract • Advertisers should make use of large headlines, shocking statements or
attention
any kind of special effect to attract the interest of the target market.
Hold
interest
• Once a person’s attention has been drawn by an ad, the ad must keep
the person’s interest.
• Advertisers hope that people will remember how good the
advertisement made them feel and therefore remember the ad.
Arouse
desire
• The advertisement must convince people that the particular product will
meet their specific needs and that they will be better off if the buy the
product.
• Advertisers sometimes rely on testimonials from other people to
convince consumers to buy a product, or comparisons between products
are drawn to emphasise the benefits of a particular product.
Inspire
action
• Advertisements must convince people to actually buy the product.
• Some products are expensive and potential consumers might need
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
2. Advertising:
 This message must reflect the AIDA principle:
Attract attention • Advertisers should make use of large headlines, shocking
statements or any kind of special effect to attract the interest of
the target market.
Hold interest
• Once a person’s attention has been drawn by an ad, the ad must
keep the person’s interest.
• Advertisers hope that people will remember how good the
advertisement made them feel and therefore remember the ad.
Arouse desire
• The advertisement must convince people that the particular
product will meet their specific needs and that they will be better
off if the buy the product.
• Advertisers sometimes rely on testimonials from other people to
convince consumers to buy a product, or comparisons between
products are drawn to emphasise the benefits of a particular
product.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
2. Advertising:
 This message must reflect the AIDA principle:
Inspire action
• Advertisements must convince people to actually buy the
product.
• Some products are expensive and potential consumers might
need encouragement to buy the product.
• It is therefore a good strategy to include a toll free number in an
ad so that consumers can call the number and operators can
then try and convince consumers to buy the product.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
2. Advertising:
 Advantages of advertising include:
 Advertising increases sales.
 Advertising informs consumers about products.
 Advertising simplifies the jobs of sales personnel because
consumers know exactly what they want by the time they enter a
store.
 Advertising shows people what products are available – this may
inspire people to work harder so that they can afford the product
they desire.
 Consumers compare the advertisements of competing products.
Because advertisements focus on the advantages of a particular
product, advertising can indirectly lead to the improvement of
products.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
3. Successful advertising campaign:
 The following table shows the eight steps to plan an advertising
campaign and ensure a successful outcome.
The eight steps for a successful
Step 1:
Market research
Identify the target market that the advert is aimed at, that is,
possible buyers. Investigate competitors and their products.
Step 2:
AIMS
Define objectives that are clear, precise and measurable, for
instance increased sales and/or increased product or brand
awareness.
Step 3:
Budget
Determine how much money is available for the advertising
campaign.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
3. Successful advertising campaign:
The eight steps for a successful
Step 4:
Choice of media
Specify the medium (magazines, radio, television,
newspapers, the Internet). Consider:
• What are the rates charged?
• What is the available space and listening or viewing times?
• Will the advertising medium chosen reach the target
market?
• Will the nature and content of the message be suitable?
Step 5:
Create the advert
using the AIDA
principle
Content of advert must have:
• Attention-grabbing headline
• Explanatory body content.
Design of advert must have:
• Attention-grabbing layout
• Appropriate artwork for the medium.
THE MARKETING FUNCTION
The eight steps for a successful
Step
6:
Consumer seesPOLICY:
the campaign.
MARKETING
COMMUNICATION
Launch
campaign inadvertising campaign:
3. Successful
the media
Step 7:
Supply the goods to
shops
Consumer buys the product
Step 8:
Review the campaign
Establish the success of the campaign. The following
methods can be used to test the results of the campaign:
• Ask the customers – Customers can be asked how they
became aware of the product. This can be done by using
staff members to enquire in shops.
• Built-in feedback – Such as coupons to be completed and
returned.
• Number of customers – Determine how many customers
visited the shop after the marketing campaign was
launched.
• Sales volumes – Sales volumes may be compared with the
sales volumes before the campaign was launched.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
4. Ethics of advertising:
 A continued profit depends on high ethical standards.
 All advertising should be legal, decent, honest, and
truthful.
 Every advertisement should be prepared with a sense
of social responsibility and should conform to the
principles of fair competition.
 No advertisement should damage public confidence in
advertising.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
4. Ethics of advertising:
 The following advertising practices are considered unethical:
 Deceptive advertising is when a business uses false statements
or withholds relevant information to get people to buy the
product or service. For example, if customers are offered to
‘buy-one-get-one-free’, it is unethical to double the price of the
product to cover the cost of the free item.
 Negative advertising is where a business points out the
disadvantages of a competitor’s product or lies about a
competitor’s product.
 Pressure to buy luxury goods can create false wants and can be
damaging to consumers finances.
 Advertising should not include any form of discrimination or
damage to human dignity.
THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
5. Publicity:
 Publicity is unpaid communication in the mass media about a business
enterprise, its employees, its goods or ser vices.
 Because publicity is not paid for, business enterprises cannot control
what is said about them – publicity can therefore be positive or negative.
 Publicity can, for example, take the form of a news stor y in a newspaper,
a press release or a media statement.
 The main dif ference between publicity and adver tising is that publicity is
not paid for.
 Consumers also tend to perceive publicity as more credible than
adver tising.
 The value of publicity includes the following:
 It has a higher degree of credibility. It is reported by a third party.
 It is free. There are no associated media, space or time costs.
 A business can react quickly with a news release if it has to.
 As it is presented as news, consumers are likely to pay attention to it.
THE MARKETING FUNCTION
MA R KETIN G C OMMU N ICATION POLIC Y:
6 . Pe r son al s e lling :
 Per sonal selling is an aggressive sales method that involves face -to-fa ce
communicati on between salesper sons and consumer s.
 Per sonal selling is an ef fective sales method because the salesper son is ready
to answer all the questions asked by consumer s.
 The salesper son can also adjust his/her message so that the message is more
attractive to the per son the message is delivered to.
 Unlike adver tising, per sonal selling can take factor s like the consumer’s
culture or language into account.
 The message delivered by sales people can be individualised to suit the needs
of the consumer.
 Success in sales depends on some basic principles:
 Be sincere with people, listen to the customers and try to understand their needs
and wants.
 Have a passion for your product and show that you believe in it.
 Constantly work on your sales and communication skills.
 Ask questions and listen carefully before speaking again.
 People are all different, so customers also need to be treated differently.
THE MARKETING FUNCTION
MARKETING IN THE FORMAL AND INFORMAL
SECTORS:
 Developing countries such as South Africa
experience much unemployment and poverty.
 Therefore, the informal sector offers the
opportunities to start small businesses and to
create employment.
 Many businesses start off in the informal sector
and then grow into large successful businesses that
operate in the formal sectors.
 It is important that the formal and the informal
sector join hands and work together.
THE MARKETING FUNCTION
MARKETING IN THE FORMAL AND INFORMAL SECTORS:
The formal sector
1. Description of the formal sector:
 In the section on forms of ownership we studied the
different types of businesses in the formal sector.
 These businesses are registered with the South African
Revenue Services (SARS).
 Therefore, by law, they must pay income tax on their
profits and Pay As You Earn (PAYE) tax collected or paid
over, which is tax collected on behalf of the employees.
 These businesses are regulated by various laws prescribed
by government.
THE MARKETING FUNCTION
MA R KETIN G IN TH E FOR MA L A N D IN FOR MA L S EC TOR S :
Th e for ma l s e ctor
2 . Ma rket in g in t h e for ma l s e ctor:
 The formal sector is also known as the primar y economy.
 People par ticipating in the formal sector either own registered businesses or
are employe d by registered businesses.
 Par ticipants in the formal sector are registered for tax purposes which enable
them to make a meaningful contributi on to the economy through tax
contributions.
 Ef fective marketing is critical to the success of businesses in the formal sector.
 These businesses also have to abide by the rules and laws laid down by
government , which will influence marketing.
 Businesses in the formal sector has to pay attention to marketing and
adver tising regulations laid down by independent bodies such as the
Adver tising Standards Authority (ASA).
 The ASA monitor s and controls adver tising by listening to complaints form the
public about a par ticular adver tisement or adver tising campaign. If they find a
complaint to be well -founded, they will ask for the adver tisement to be
withdrawn.
THE MARKETING FUNCTION
M ARKETING IN T HE FORMAL AND IN FORMAL S ECTORS:
T he formal s ector
3 . Advantages and disadvantages o f th e formal s e ctor:
Advantages of the formal sector
Disadvantages of
the formal sector
• Activities that take place in the formal sector are regulated.
• The formal sector
• Products supplied by the formal sector are legal.
is sometimes
• People employed in the formal sector contribute towards the
overly regulated.
Unemployment Insurance Fund. They are therefore entitled to • Entry into the
claim from the Unemployment Insurance Fund in case it
formal sector is
becomes necessary.
more difficult
• Government is able to generate income in the form of tax from
than entry into
the formal sector.
the informal
• Products bought from the formal sector can be returned if they
sector.
are faulty.
• Jobs in the formal
• The formal sector can make use of services offered by the
sector are scarce.
informal sector because services offered by the informal sector
are often cheaper than services offered by the formal sector.
THE MARKETING FUNCTION
MARKETING IN THE FORMAL AND INFORMAL SECTORS:
The informal sector
1 . Description of the informal sector:
 Many entrepreneur s operate their businesses within the informal
sector.
 The informal sector includes all those business that are not taxed, are
not monitored by government or included in any gross domestic
product (GDP) calculations.
 Examples include street vendors, hawkers, shebeens, flea markets,
taxi drivers, home industries and spaza shops.
 One of the characteristics of the informal sector is that it is made up
of small businesses that require low capital investment.
 It is ease and cheap to star t these businesses, as no records have to
be kept and no tax is paid to government.
 Another characteristic is that the owner s usually do not need formal
training on how to run the business, although some form of training
can be beneficial.
THE MARKETING FUNCTION
MARKETING IN THE FORMAL AND INFORMAL SECTORS:
The informal sector
2. Marketing in the informal sector:
 People participating in the informal sector do not own
registered businesses and they are not registered for tax,
for example street vendors and hawkers.
 The informal sector is also known as the second economy.
 The informal sector is mainly a cash industry.
 Businesses in the informal sector often do not have the
funds to spend on marketing and they also often lack
expertise in marketing.
THE MARKETING FUNCTION
MARKETING IN THE FORMAL AND INFORMAL SECTORS:
T h e i n fo rmal s e c to r
2 . M a rket ing i n t h e i n fo rma l s e c to r:
The 4 P’s of marketing in the informal sector
Product
•
•
The types of goods and
•
services offered mostly
based on identified needs
in the community.
•
Lack of market research
often hampers the
informal trader. Often
fewer market
opportunities as a result of
inferior quality goods or
non-compliance with local
or international standards
for goods and services.
Price
Often lacks •
information
on prices.
Prices of
products
often based
on demand •
and what
customers
can afford
to pay.
•
Place
Most businesses
•
make use of direct
selling and sell
•
products or
services directly to
consumers.
Intermediaries are
not always willing
to distribute goods
produced by the
•
informal sector.
High profit margins
of intermediaries
force the informal
traders to
distribute their own
Promotion
Mostly based on
personal selling.
Informal trader
communicates
directly with
customers to
inform them about
the products and
services.
Advertising is often
done by using
cheaper media
options, such as
posters or flyers,
which are often
handwritten.
THE MARKETING FUNCTION
M ARKETING IN T HE FORMAL AND IN FORMAL S ECTORS:
The informal sector
3. Advantages and disadvantages of the informal sector:
Advantages of the informal sector
• Easy and inexpensive to enter
the informal sector.
• No education needed to enter
the informal sector.
• Provides job opportunities for
unemployed people.
• People who are employed in
the informal sector gain
working experience that
enables them to qualify for job
opportunities in the formal
sector.
• Owners running the informal
businesses gain valuable
business knowledge through
experience
Disadvantages of the informal sector
• People participating in the informal sector do not pay
tax. Yet, they make use of public services such as
public hospitals and roads.
• Illegal products such as drugs or stolen goods are
often sold in the informal sector.
• Faulty goods cannot be returned.
• The quality of products sold by the informal sector is
not guaranteed.
• Employees are not protected. They cannot belong to
trade unions or claim from Unemployment Insurance
Fund because employees employed in the informal
sector do not contribute towards the Unemployment
Insurance Fund.
• Lots of competition between informal traders selling
the same or similar products in the same area.
THE MARKETING FUNCTION
USE OF TECHNOLOGY FOR MARKETING:
 Our world today has changed a great deal with the
help of technology.
 Things that were once done manually have now
become computerised, and simply require a single
click of a button to carry out a task.
 Today personal computers, cell phones, fax machines,
pagers, email and the Internet have all not only
become an integral part of our culture, but also play
an essential role in our day -to-day activities.
THE MARKETING FUNCTION
USE OF T ECHNOLOGY FOR MARKETING:
1 . Electronic m arketing ( E -marketing)
 The internet is a ver y power ful marketing medium, because billions of
people globally have access to the internet.
 Many business enterprises have created websites which can be accessed
by consumer s.
 Publicity ar ticles about an enterprise can be displayed on the website.
 Nowadays, many consumer s do their shopping online.
 Cell phone adver tising is another form of electronic marketing.
 Some businesses build up a database with consumers’ cell phone
numbers.
 Consumers then receive text messages informing them about specials
of fered by the store.
 Electronic adver tising is usually much cheaper than adver tising in a
newspaper or magazine.
 Another advantage of sending text messages is that the enterprise is in
direct contact with the target market .
THE MARKETING FUNCTION
USE OF T ECHNOLOGY FOR MARKETING:
2. Advantages a nd disadvantages of Electronic m arketing
Advantages
Disadvantages
• Your store is open 24 hours a day, 7
days a week. Your customers are
worldwide, and can shop anytime
that they want to.
• Ability to market services at a low
cost.
• Online tools make it easier to
establish how effective an
advertising campaign is. Can get
information about how customers
use your website or respond to your
advertising.
• Online marketing is not free. The cost of
software, hardware, website design,
maintenance of your site, online
distribution costs and, of course, time
must all be included in the cost of
providing your service or product.
• In South Africa, only a small percentage
of households shop online. While that
number will continue to grow, at present
you are reaching very few local
households.
• Most customers are still motivated to buy
in person. Many people prefer the live
interaction when they make purchases.
THE MARKETING FUNCTION
USE OF TECHNOLOGY FOR MARKETING:
2. Advantages and disadvantages of Electronic marketing
Advantages
Disadvantages
• If your customer database is linked to your • The majority of Internet marketers lack
website, and individual customers visit the
customer service. Some websites have
site, you can greet them with targeted
poor navigation, which makes it difficult
offers.
for the visitor to find what they are
• Having a social media presence and
looking for.
managing it carefully can give you a
• There is a risk of security on the
reputation for being easy to engage with.
Internet. As a result, many of the
• Your customers are only ever a few clicks
visitors will not want to use their credit
away from completing a purchase. Unlike
cards to make a purchase.
other media, which require people to get
• There is a lot of competition to sell
up and make a phone call, or go to a shop,
products. By the time a customer finds
e-marketing is immediate and easy.
you, they have already been clicking on
• With e-marketing a business has the ability
many links. Unless they can find what
to sell anything legal online.
they are looking for quickly, they will
move on to another site.
THE MARKETING FUNCTION
FOREIGN MARKETING:
 Foreign marketing occurs when a business enterprise markets
its products to consumers in foreign countries.
 The aim of foreign marketing is to increase the enterprise’s
consumer base and to sell more products, which ultimately
results in increased profits.
 Countries also do not have the ability to produce everything
they need, therefore they will need to import products from
other countries.
 Countries who produce more goods than they use, will export
those products to other countries.
 Marketing products in foreign markets can be quite challenging
– sometimes the product will have to be adapted to suit the
needs of the consumers in the foreign market.
THE MARKETING FUNCTION
FOREIGN MARKETING:
 An enterprise will also have to adapt its marketing strategy
because dif ferent cultures have dif ferent beliefs and values.
 Despite the challenges associated with foreign marketing,
foreign marketing has contributed to:
 globalisation
 improved products
 cheaper products
 the formation of multi-national ventures
 an improvement in transportation services
 the development of railways, roads, seaports and airports
THE MARKETING FUNCTION
FOREIGN MARKETING:
1. Imports
 Importing takes place when an enterprise in one country
buys products form a business in another country.
 Some imports are voluntarily, some imports are forced.
 An enterprise may choose to import products voluntarily
because it may be cheaper to import the products than to
buy or produce the products locally.
 Forced imports take place when an enterprise needs
products or resources that are not available locally or, if
consumers demand products that are only available in
foreign countries.
 An enterprise should consider importing when the local
currency has appreciated against foreign currencies.
THE MARKETING FUNCTION
FOREIGN MARKETING:
1 . Imports
Advantages and disadvantages of Importing
Advantages
•
•
•
•
Goods or services that are essential or attractive
to consumers but not available in South Africa
can be obtained form other countries.
Goods or services that satisfy domestic needs or
wants can be produced more cheaply or more
efficiently by other countries, and therefore sold
at lower prices.
Importing goods gives consumers a wider variety
of choice. This increases the standard of living.
Importing improves the quality of South African
products. Local manufacturers are competing
with international manufacturers and must make
sure that their items are of a high standard.
Disadvantages
•
•
•
•
By buying goods form other countries,
consumers are not supporting our own
economy. This leads to job losses and
a lower national standard of living.
Instead of spending money in our own
country, it is being spent in other
countries.
Import duties charged by government
could increase the cost of importing
products, and increase inflation.
Import quotas, government limits on
the amount of products to be imported,
could limit businesses from importing
large quantities of products needed,
THE MARKETING FUNCTION
FOREIGN MARKETING:
2. Expor ts
 Expor ting takes place when an enterprise in one countr y sells its
products to businesses or consumers in foreign countries.
 Some business enterprises expor t surplus products to foreign markets
where these products are sold ver y cheap – this is known as dumping.
 South African business enterprises expor t a range of products and
resources, such as gold, diamonds, wine, fruit and flowers, to foreign
countries.
 Government provides financial assistance in the form of expor t
subsidies to businesses that show an interest in expor t.
 Expor t subsidies such as tax rebates and a refund on import duties on
raw materials or semi -finished goods impor ted to produce finished
goods can be of fered to these businesses.
 Expor t subsidies mean lower costs for the business and ultimately
products can be sold at lower prices abroad.
THE MARKETING FUNCTION
FOREIGN MARKETING:
2. Expor ts
Advantages and disadvantages of Exporting
Advantages
Disadvantages
• Assistance form government in the form of export • Because it takes more time
subsidies results in lower costs.
to develop extra markets
• Selling goods and services to a new international
and the pay-back periods
market increases sales and profits.
are longer, exporting can
• Businesses become competitive in the domestic
put financial strain on
market before they venture into the international
businesses.
market. Being competitive in the domestic market • Businesses may need to
helps businesses to learn new strategies that can
change their products to
help them in the international markets.
meet foreign country safety
• Selling to multiple markets allows companies to
and security codes, and
diversify their business and spread their risk. As a
other import restrictions.
result, companies are not tied to changes within
the domestic market or to one specific country.
THE MARKETING FUNCTION
FOREIGN M ARKETING:
2. Expor ts
Advantages and disadvantages of Exporting
Advantages
Disadvantages
• Entering additional foreign markets usually will
expand production to meet foreign demand.
When production increases, products can be
made at a lower cost per unit and employment is
created.
• Businesses whose products or services are only
used during certain seasons domestically, may
be able to sell their products or services in
foreign markets during different times of the
year. Businesses then are not forced to give
large local discounts.
• Going international, the business can gain
valuable ideas and information about new
technologies, new marketing techniques and
foreign competitors.
• Collections of payment using the
available methods (open-account,
prepayment, on consignment and
letter of credit) is not only more
time consuming than for
domestic sales, but also more
complicated. Thus, companies
must weigh carefully the financial
risks involved in international
transactions.
• Finding information on foreign
markets is more difficult and
time consuming than finding
local information and analysing
domestic markets.
THE MARKETING FUNCTION
FOREIGN MARKETING:
 There are many laws that regulate imports and exports.
 These laws mainly aim at combating tax evasion and the import
or export of illegal products such as drugs.
 Some countries forbid the import of particular products because
pests and viruses are sometimes found in goods such as
wooden products or plants.
THE MARKETING FUNCTION
FOREIGN MARKETING AND PRODUCTION:
 The marketing and production functions need to work together
to ensure that the right quantities of products are produced at
the right quality, at the right time and in the right place.
 If an enterprise decides to export products, production will be
influenced, for example:
 Management must decide where production should take place.
 It will probably be most beneficial to move the production
process to the country where production costs are the lowest.
 Production costs dif fer from one country to the next due to the
availability of labour and resources.
THE MARKETING FUNCTION
FOREIGN MARKETING AND PRODUCTION:
1 . Production systems
 If the uninterrupted production system is used, management
must decide whether machines will be bought in the country
where production takes place, or whether machinery will be
transported/exported to the country where production takes
place.
 If the interrupted production system is used, management must
devise a plan to bring customers in contact with the producer.
2. Production planning
 Production planning must take place in the same country where
production takes place.
 Suf ficient time must be allowed for exporting the products and
finishing all the paperwork associated with the export and
import processes.
THE MARKETING FUNCTION
FOREIGN MARKETING AND PRODUCTION:
3. Safety
 Each country has its own occupational health and safety rules
and regulations.
 If production is moved to another country, management must
ensure that all safety procedures and policies are suf ficient and
that the safety procedures comply with the laws of the country.
4. Quality
 Each country also has its own quality control bodies.
 Management must ensure that the products that were
manufactured meet the quality requirements set by the country
where production takes place, as well as the quality
requirements of the countries where the products are exported
to and sold.
THE MARKETING FUNCTION
FOREIGN MARKETING AND PRODUCTION:
5. Costing
 The total production cost per unit must be determined before a
product can be priced.
 If production takes place in another country, this calculation
must be done carefully to take the exchange rate into account.