ELATE: E-Learning and Teacher Education
TEACHER’S GUIDE
Subject:
Entrepreneurship Education
Unit:
4
Class:
S.3
Topic:
Marketing in a Small Business Enterprise
Introduction
Marketing
in a small business enterprise is brought to the centre of the stage
in its own right. This unit looks at marketing, the marketing mix,
market research and channels of distribution. It also considers the
methods of sales promotion and the factors determining business
location.
Main
Content and Concepts to Emphasize
- Meaning of marketing
- Marketing mix
- Market research
- Channels of distribution
- Sales promotion
- Business location
By the
end of this topic, students should be able to:
- Define marketing
- Identify the elements of a marketing mix
- Conduct a school market research survey
- Describe the channels of distribution
- Identify the methods of sales promotion
- Discuss the factors affecting business location
Teaching/Learning
Materials, Activities and Guidance
- Markers
- Flip charts
- [game simulation and case study]
1.
Meaning of marketing
Marketing
is the performance of activities that are necessary to get goods and
services from the producer to the customer. It refers to a series of
activities undertaken by an entrepreneur in order to find out who
his/her customers are and their needs. Marketing is concerned with
informing the customer that a good/service is on sale and persuading
him/her to buy the good/service. The main objective of marketing is
to ensure that customer’s needs and wants are satisfied while the
entrepreneur also makes profits. [Marketing
is the way of assembling information that one needs to reach a
customer in order to make sales.]
Marketing
is the entire process of planning, pricing, promoting and
distributing goods and services to consumers. Marketing completes the
function of production by transferring the goods from the place of
production to the place of consumption. Some of the marketing
activities undertaken include:
- Finding out what people or customers need or want
- Developing/providing goods and services that meet the identified needs or wants of customers
- Setting prices which the customers can afford and are willing to pay and will enable the entrepreneur to make profits
- Making products available at places where the customers can easily access them
- Promoting the products by informing and attracting customers to buy them and retain their interest in buying from the business
[four
Ps – Product, Price, Promotion, and Place] however, marketing may
also include two Cs – Customer (customer
is king, customer is never wrong,
customer is the
end point in the entire production process,
actually the
customer is your business, without them you have no business at all,
etc.,) Competition—for
every product there could somebody out there capable of making a
better product than you. And so this represents both a challenge and
an opportunity. The opportunity is that competition helps you see and
learn from others and improve, so that you can reach the market
early/in time. Conversely, competition can easily wipe out your
business, through introducing better methods of production, large
financial outlays, advanced technology, marketing and sales systems.
]
A
market for any business means all buyers (people, institutions,
businesses, etc) within a specified geographical area, who need the
business products and are willing and able to buy them. For example,
a market for products of a trading business consists of people and
institutions, which exhibit all the following three characteristics:
- Need or want the products being sold by the trading business
- Able to buy the products
- Willing to buy the products
Selling
Selling
is a two-way communication between the buyer and the seller. Selling
is a process through which sellers get rid of their goods to
consumers through the use of money. The means of exchange is money,
which allows proper exchange of goods and services. In selling, there
is usually a person to person dialogue between the buyer and the
seller. The purpose of this personal contact is to enable the
entrepreneur or his/her representative (sales person) to persuade the
buyer to accept a product/service at the stated price. In selling, a
prospective buyer may be told how the product/service will help meet
his/her needs, its price, how to use it, and why it would be good to
buy it, etc.
The
creative selling process (salesmanship) includes the following steps:
(a)
Prospecting
This
means locating the customers. Prospects are people or firms that are
likely to buy the products. In prospecting, an entrepreneur finds out
where to go, who to see and what to do and say.
(b)
Pre-approach
In
this step, an entrepreneur gathers information about his/her own
products and the products of his/her competitors and prospects, i.e.,
personal information about the age, preferences, interests, income,
etc. of the customers, which helps the entrepreneur to sell
products/services that meet his/her customer’s needs.
(c)
Approach
This
is the first face-to-face meeting with the customer. The approach
should be well planned and managed so as to create a good impression
and win the customers.
(d)
Sales presentation
This
is to attract and retain the buyer’s attention. The entrepreneur’s
proposition should be to create interest in the customer’s mind.
Creative selling can be achieved by:
- Making a strong point about a product right from the beginning of the presentation
- Mentioning more of the benefits of the product/service than of its features
- Giving the customer/buyer complete attention
- Involving the buyer in the discussion/conversation
- Listening to the customer to make him/her feel important and to understand his/her needs
(e)
Handling objections
Objections
arise when a buyer says ‘no’ to the price or design of the
product. This is the beginning of selling and it means the buyer has
interest in the product. The following methods may be used to handle
objections:
- Listen to the buyer and do not interrupt
- Use a ‘yes but’ method. If the customer for instance says, ‘Your price is too high or higher than our competitors’, say ‘Yes, the initial costs are a bit high but you will save in the long run if you use our product because it is durable and more elegant’
- Ask the customer what he/she does not like about the product and give an alternative to meet his/her need
- Turn the buyer’s attention from objection to another benefit of more appeal
(f)
Closing a sale
Finding
a way of making a customer act or buy the product. An entrepreneur
could ask questions like:
- Can I reserve one for you?
- What colour do you prefer?
- Would you like it delivered to you or will you collect it?
(g)
Follow-up
This
is the support an entrepreneur gives his/her customer after the sale
or purchase of his/her goods/services. This generates repeated
purchases. It can be done through a short letter or telephone call to
thank the customer.
MARKETING
AND SELLING
A
good marketing and sales information system should be able to
identify and clarify the following elements:
1.0
Difference between marketing and selling
Marketing
is the entire process of planning, pricing, promoting and
distributing goods and services to consumers, while selling is a
process through which sellers get rid of their goods to consumers
through the use of money. In tabular form:
|
Marketing
|
Selling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.1
Establishing how marketing and selling work together to create a
customer for a business. For instance, marketing deals with the
entire process of creating a customer for the business whereas sales
as sub-component of marketing specifically deals with those
activities carried out to influence customers’ decision. It entails
developing marketing and sales strategy for the business.
1.2
Target market
A
target market refers to the different kinds of customers where an
entrepreneur intends to sell his/her products. The target population
could include men, women, children, students, poor or rich people,
urban or rural people, youths, adolescents, etc.
Factors
which determine the target market
- Levels of income. People’s incomes greatly affect their demand or ability to buy goods and service
- Consumption habits. This is the consumer’s behaviour in purchasing different goods and services. Consumer’s expenditure patterns on certain products depends to some extent on their consumption habits, for example, smokers and drinkers are more likely to spend more on alcohol and cigarettes
- Competitors. People in similar or related business usually have similar objectives and should be considered when determining the target population
- Market share. The number of competitors and their market share in a given area can assist the entrepreneur to estimate the number of customers he/she can attract
- Age. Different age groups may need specific products, for example, children’s needs may be different from those of adolescents and adults
- Gender. Differences in gender may necessitate different products in different sizes, colours, fashion, etc
- Trends in the market, such as changes in the population structure, legal or regulatory changes, changes in the economy, life style, etc
1.3
Successful selling
Below
are some tips on how to become a successful salesperson:
- Improve the skills of selling and sales. A salesperson needs to know customers’ needs or wants. This can be done by finding out what the customer needs by listening and asking questions and by satisfying the customer’s needs by offering advice and suitable goods/services
- Know how to treat the customers. Customers are the most important people in any business. Ideally, customers should be treated in the same or better way the salesperson would like to be treated when he/she is a customer
- Know the products/services and how to sell them. The customer may ask many questions about how the product/service works or can be used. A salesperson should be sure of the answers and explain to the customer the uses of the product and its usefulness; the salesperson could also give the technical information that is needed
Activity
1
1.
Visualise/reflect on your experiences whenever you enter a shop or
market to buy something.
2.
Define marketing.
3.
Differentiate between marketing and selling.
4.
Describe the steps involved in the creative selling process and state
the importance of each stage.
5.
Recall a recent encounter with a salesman trying to sell you a
product.
6.
Analyze the effectiveness of the salesman’s approach, i.e.
presentation, dealing with objections and closing a sale.
7.
What factors determine the choice of the target market?
2.
Marketing mix
Marketing
mix is the term used to describe the combination of various elements
which constitute the core of a firm’s marketing system. These
elements include product, price, place, promotion and positioning,
commonly referred to as the 5Ps.
(1)
Product
This
refers to anything offered by a business to satisfy the customer’s
needs or wants. It can be a good or a service. Examples of products
include clothes, shoes, cars, books, etc.
Elements
of a product
There
are mainly four elements of
a product:
(i)
Description. This is the product name or how it can be
referred to. This description should be unique and appealing to
customers.
(ii)
Product attributes. These are features or characteristics that
make a product different from others. It can be in terms of taste,
colour, texture, etc. These attributes enable a product to stand out
from the rest.
(iii)
Quality. This is the extent to which the product meets the
customer’s needs, expectations or requirements. The quality must be
in response to what the customers want.
(iv)
[four element here]
Factors
to consider when developing a product
- Develop a product in response to the customer’s need
- Decide on the shape, colour, package, brand name, quantity and quality on what the customers want
- Decide whether to make your product similar to others or unique as compared to those of other sellers
- Determine the availability of raw materials necessary for making the product
- Government policy, i.e., the product to be produced should meet the standards of or the government’s policy
(2)
Price
This
is the monetary value of a product. An entrepreneur should sell
his/her products at prices which will attract the customers. However,
the prices should be low enough to attract customers and at the same
time high enough to enable the entrepreneur make a profit. [a
price of a product should enable a business recover money invested,
cause a company earn a profit, and help to cause customer to buy
again.]
Factors
to consider when determining price
- The cost of the product. The price set should be able to cover the incurred costs as well as enable the entrepreneur make a profit
- The quantity which people buy and how much they are willing to pay
- The quality of the product
- The price of the competitor’s products, i.e., if a product has close substitutes, an entrepreneur should ensure that the prices are in line with those of the competitors or even lower
- The profit margin which the entrepreneur wants
- Whether the product is seasonally demanded or not. Seasonal products like raincoats, Christmas cards are usually sold at high prices compared to products which are not seasonal.
Common
methods of pricing products
There
are mainly three methods of pricing products:
- Cost oriented pricing
The
price is based on the cost of the product. The price should cover the
costs of production as well as enable the entrepreneur make a profit.
For example, if the cost of making and selling a table is Shs.
30,000, an entrepreneur may decide to sell it at Shs. 35,000 so that
he/she makes a profit of Shs. 5,000 (35,000-30,000=5,000).
- Demand oriented pricing
The
price is mainly based on the desire to attract customers and increase
the demand for the products. For example, a high price is charged
when or where demand is high and a low price is charged when or where
demand is low.
- Competition oriented pricing
The
prices are mainly determined by the prices of competitors, although
they need not be the same. The entrepreneur may keep his/her prices
higher or lower than those of the competitors in view of certain
considerations. To remain competitive, however, an entrepreneur
should ensure that the products are of good quality, reliable and
available on demand.
(3)
Place
This
is concerned with the various methods of making the products
available to the customers. Getting the right product at the right
place and time involves transporting, storing and stocking products
so that the products are available whenever customers need them.
[Strategically placing a product
within the reach of the customer.]
Factors
to consider when choosing a place
- Efficient and effective transport network that will enable an entrepreneur to make products available to customers in time
- Availability of storage facilities. Good storage facilities protect the products from damage of moisture, heat, theft, etc
- Availability of security. This minimises risks of stock loss due to thefts and break-ins
- Ease of access to sell to customers. Customers prefer goods/services which are easily accessible in order to minimise transport costs and time wastage
- Delivery facilities. Products/services should be placed in such a way that the are easy to deliver to the customers
(4)
Promotion
[Enable
your customers know about your product, like, and buy it.]
This
involves the ways of informing and attracting customers to buy
products either for the first time or buy more of them. It involves
activities which influence people to buy products and the quantities
they will buy.
The
various ways of promoting products include:
- Intensive advertising
- Outside or window display of products
- Attractive arrangement of products inside the shop
- Offer of free samples, gifts, etc
- Use of sign posts, neon signs, etc
- Door-to-door advertising
- Use of music or banners to attract attention
- Nice packaging to attract customers
- Trade fares and exhibitions
- Publicity, etc
(5)
Branding/Positioning
[Branding
is the positioning of a product in the mind of a customer.]
This
means targeting a particular segment of customers for whom an
entrepreneur aims to sell his/her products. For example, sweets,
chocolates can be placed at the counters where children can easily
access them. When positioning a product, an entrepreneur can be
guided by the following:
- What product/service do I offer?
- What emphasis do I attach to each product/service?
- Who are my target buyers/
- Where do they want to find the product/service?
- Who are my direct competitors?
- What unique attributes do my products have compared to my competitors?
- What are my business personality traits?
- How do customers want to be served?
Activity
2
1.
Identify the elements of a marketing mix.
2.
Examine the different methods of pricing products in an enterprise.
3.
Describe the various methods used by entrepreneurs to promote sales.
4.
Design a sign post for a business of your choice.
5.
Collect used boxes and tins of merchandise and arrange a ‘shop’
in an attractive and convenient way at the back of the class
(entrepreneurial business).
6.
Assess your business and find out how you have used the 5Ps to market
your products/services.
7.
Develop a case study on how the business is using the 5 Ps to improve
its marketing and selling of its products.
3.
Market research
Market
research is the systematic, purposeful and exhaustive search for
facts relevant to any problem in the field of marketing. Market
research involves getting information about customer values, buying
habits, expectations and competitors for purposes of designing a
product/service that satisfies the customer. Market research is
intended to capture, create or retain an existing market. Market
research can either be primary or secondary research. Primary
research involves collecting of information or data from the field,
while secondary research is where a marketer uses data or information
that is already published or available, for example, from libraries,
journals, textbooks, etc.
Market
survey
This
is the process through which information is collected and analyzed on
the basis of which marketing opportunities and problems may be
identified. A market survey is carried out to reach a decision
whether or not to start, maintain or expand an enterprise. A marketer
always seeks answers to the following questions:
- Who are the customers?
- When do they buy?
- What products do they buy?
- In what quantity?
- What prices are they willing to pay?
A
market survey aims at:
- Exploring a window of business opportunity
- Understanding customer needs, values, habits, tastes, lifestyles, expectations and preferences
- Investigating a marketing problem i.e. declining market share
- Knowing your competitors and their prices
- Monitoring the impact of change
- Launching a new product
- Improving customer care
- Forecasting future market trends
- Assessing size of a market
Market
survey information can be obtained by:
- Visiting business premises, such as shops, markets
- Telephone surveys
- Observation
- Questionnaires
- Interviewing
The
key activities in a market research survey include:
(a)
Define market objectives
The
objective of any research is either to solve a problem or introduce
an innovation that accomplishes a desired goal. For example, to find
out why profits have decreased by 10 percent while sales have
increased by 20 percent in the same period.
(b)
Conduct a situation analysis
Apply
a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis
on the internal and external environment, i.e.
- Identify the strength, weaknesses, threats and opportunities of the firm
- Analyse markets, nature of competition, industry,
- Redefine the problem and develop a hypothesis. A hypothesis is a tentative supposition or solution to the problem
- Carry on investigation to approve or disapprove the hypothesis
A SWOT
analysis can be presented in tabular form:
|
|
Strengths
|
Weaknesses
|
|
Internal Environment
|
|
|
|
|
Opportunities
|
Threats
|
|
External environment
|
|
|
(c)
Conduct an informal investigation
- Define the problem under investigation
- Seek opinion of internal stakeholders (employees, managers), etc.
(d)
Plan and conduct a formal investigation
Once
the problem is defined, the innovative team determines what
information is required. The sources of information include primary
and secondary data. It is advisable to exhaust secondary data if it
is available. The information can be found in libraries, trade
journals, Ministry of Trade publications, newspapers, etc.
Techniques
of predicting demand
a)
Direct derivation
- Petroleum dealers can estimate the market for petroleum products from records of past sales of dealer companies, Uganda Revenue Authority records, vehicle registration department, Ministry of Energy, and Ministry of trade journals
- Insurers who want to invest in Uganda can estimate size of the market from fire accident records. Insurers in life assurance can easily get medical records from hospitals
- Security companies may derive crime rates in cities from police records
b)
Survey of buyer intentions
The
innovative team surveys a sample of potential customers. The team
goes out to talk, listen, see and note, ask current customers how
much they buy, in what quantity? at what prices? The team
investigates consumer panels to find out their buying habits and
preferences. The willingness of potential customers to buy is
translated into estimates.
c)
Testing marketing
A
known geographical area is chosen, for example, Kampala, Jinja,
Mbarara, etc. The sales force tests the new product in the area. The
findings are analysed and used to project the larger market.
d)
Evaluation
A feed
back system tells the innovative team whether the plan is working.
The budget results are compared with the actual result. The
difference is noted, quantified and investigated, and management
takes action.
Benefits
of a market research
- Identify new marketing opportunities
- More accurate view of current marketing initiatives
- Gain competitive insight
Activity
3
1.
Define market research.
2.
Identify the aims of a market survey.
3.
Identify the key activities in a market research survey.
4.
Design a school market research survey tool to collect information
from other students in the school on:
-
Class
- Age
- Gender
-
Religious affiliation
-
Extra curricular activities
- Goods and services they would like no buy but are not available in
the school
5.
Conduct a school market research survey using the tool above.
6.
Analyse the findings from the school market research survey.
7.
List the goods and services that would sell best to students in the
school.
8.
Discuss the possibilities of selling the identified goods and
services in the school.
9.
Present your findings to the rest of the class/peers.
4.
Channels of distribution
A
channel of distribution refers to the arrangement through which goods
move from the producer to the final user/consumer. Every entrepreneur
requires a channel that he/she can use to distribute his/her
products/services to the right customers at the right time and cost.
It consists of all middlemen who participate in the distribution of
products and serve as a link between the manufacturer and the
consumer.
Types
of distribution channels
There
are different ways through which an entrepreneur can distribute
his/her products:
(a)
Direct Distribution
This
refers to a method whereby an entrepreneur makes and sells his/her
products to customers who consume or use the product. It is also
known as short channel distribution.
(b)
Retail distribution
Retail
distribution channel involves the entrepreneur selling his/her
products to retailers and other entrepreneurs who also sell to
customers as final users or consumers of the product.
(c)
Wholesale distribution
Wholesale
distribution channel involves an entrepreneur selling the products in
large quantities to wholesalers who also sell them in smaller
quantities to retailers who finally sell them to customers who are
the final users of the product.
(d)
Marketing and selling agents
These
are agents who sell products on behalf of entrepreneurs and are paid
a commission based on the value of the amount sold.
Factors
considered when choosing a distribution channel
- The nature of the product; in general, bulky or heavy products are distributed directly to reduce on the costs of transport; perishable goods are sold directly or through a short channel.
- The nature of the market; when the market is very small and located within a narrow area, an entrepreneur can use direct selling. In case of a mass market where customers are scattered geographically, a longer distribution channel can be used.
- The nature of the business; direct selling is only possible for a manufacturer who is financially strong and possesses marketing expertise. Direct selling is not economical for a single product firm.
- Cost of distribution; when the distribution costs are low, direct selling is the best since it reduces costs to the final consumer. But if the distribution costs are high, the long channel of distribution is preferred since the producer can pass on the cost of distribution to the middlemen.
- Availability of storage facilities; if the producer, wholesaler and retailer have good storage facilities, the customers can buy from any depending on his/her convenience.
- Reliability of the channel; a reliable channel is able to provide goods/services to customers on whenever they need them.
- Availability of middlemen; when the middlemen are available, the long channel of distribution is the best but if not available ,direct selling is the best.
- The value of the product; if the product can easily break, direct selling is the best and this reduces on the risks.
- Desire to control the product market and prices; when the producers want to control the prices of their product, direct selling is preferred since middlemen can cause price fluctuations.
- Number and location of production units; if the production units are many and not established very far, direct selling can be the best channel, but if they are produced far away, then middlemen would be the best.
- Degree of competition; if there is high competition, then a short channel will be used and vice-versa.
Activity
4
1.
Define a distribution channel.
2.
Describe the various types of distribution channels for goods and
services.
3.
Explain the factors which should be considered when selecting a
distribution channel.
5.
Sales promotion
Sales
promotion is a method used by entrepreneurs to capture a new market
or expand and retain and existing market for given goods or services.
It includes the behaviours that an entrepreneur uses to influence
people to buy more of his/her goods and services. Entrepreneurs
undertake a number of activities to make customers aware of their
products. The main objectives of these activities are:
- To remind or inform the public about the existence or availability of the product
- To target a particular segment of the market (product positioning)
- To stabilize sales, i.e., maintaining the existing customers by reminding them about the product and its unique features
- To increase sales through attracting new customers by making them aware of your product
Methods
of attracting customers
(a)
Advertising
Advertising
refers to any form of communication about a product or idea. It is
the spreading of information about an entrepreneur’s
products/services to customers. It is a powerful promotional tool
used by individuals, businesses and non business organisations to
inform, persuade and remind their target audiences. The methods of
advertising include:
- Use of the media, for example, newspapers, magazines, radio, television, billboards, posters, leaflets, etc.
- Use of music, jingle bells or banners
- Door-to-door advertising
- Display of products outside the shop or through the window
(b)
Sales promotion
This
refers to anything that can be done by an entrepreneur to make
customers buy more of his/her goods or maintain them. Sales promotion
can be carried out through the following ways:
- Arrange the products inside the business premises properly
- Give free samples and gifts
- Be polite to the customers
- Talk to customers and understand what they require
- Exhibit knowledge about the product/service, i.e., its uses and benefits
- Improve product quality
- Brand your product, i.e., give it a distinctive name
Importance
of sales promotion
- To inform the public about the availability of a particular product/service
- To stabilise sales through encouraging and attracting customers to continue buying the product/service
- To increase the sales volume, as more and more customers buy the product
- To target a particular market segment
- To reward royal customers
- To out compete rivals/competitors
Activity
5
1.
What is meant by sales promotion?
2.
Identify the methods of sales promotion used in your country.
3.
Discuss the importance of sales promotion.
6.
Business location
The
location of a business refers to the place where the business is
situated. One of the earliest decisions an entrepreneur has to make
is to choose where to locate his/her business. The most ideal
location would be one where operational costs are minimised. The
entrepreneur would also need to look at the benefits which an area
offers as well as any form of government assistance which might be
available.
Factors
affecting business location
- Cost; whether an entrepreneur can afford it
- Convenience; whether the location is easy to find
- Market; the nearness of the market and the cost of delivering the goods
- Availability of raw materials; if the raw materials are bulky and expensive to transport, it is better for the entrepreneur to locate near them
- Transport costs; the pull of the market and the pull of the raw materials
- Land; these vary and some firms such as wholesalers might need large chunks of land and might therefore be influenced by the cheaper rent and property prices found in some areas
- Labour; the availability of labour might attract firms to an area, especially if the labour force has the required skills
- Safety; some industries have to locate their premises away from high population density levels and their choice of location is thus limited
- Waste disposal; certain industries produce considerable waste and the costs associated with the disposal might influence their location
- Facility requirements; such as reliable power and water supply
Activity
6
1.
Define business location.
2.
Discuss the factors affecting business location.
References:
Bagatya,
W.Z.K. 2007. The Principles and Practices of Advanced Level
Entrepreneurship Education. Kampala, Uganda. p.135-159.
Kabatire,
S. and Mutyaba, S.V. 2007. Entrepreneurship Skills. Netsoft
Publishers. Kampala, Uganda. p.74.
Kigenyi,
F.D. 2007. Entrepreneurship Education for UACE and Colleges.
Kampala, Uganda. p.77, 87.
National
Curriculum Development Centre (NCDC). 2002. Entrepreneurship
Education for Secondary Schools. Book 3. National Curriculum
Development Centre, Kampala, Uganda. p.24-37.
National
Curriculum Development Centre (NCDC). 2002. Entrepreneurship for
Secondary Schools. Book 5. National Curriculum Development
Centre, Kampala, Uganda. p.65-68, 77-83.
Sempijja,
M. 2006. Entrepreneurship Education for Advanced Level and Business
Institutions. Kampala, Uganda. p.65-69, 70-77.
Tayebwa,
K. 2007. Entrepreneurship Education Skills. Bagah Printers and
Stationers. Kabale, Uganda. pp.50-64.
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