Business Skills Workshop #6
Wednesday, April 14, 2010 & April 21, 2010
Business Skills
Training Handbook
Livelihood Development via Agro-Processing
SFA2006 (GCP/RLA/167/EC) Location: Grenada
Dr. Reccia Charles
Business Skills Training, Page 1
Product
What is a product? A product is anything that can be offered to a
market for attention, acquisition, use, or consumption that might
satisfy a want or need.
Broadly defined, “products” also include services, events, persons,
places, organizations, ideas, or mixes of these.
Dr. Reccia Charles
Business Skills Training, Page 2
Services are a form of product that consists of activities, benefits, or
satisfactions offered for sale that are essentially intangible and do not
result in the ownership of anything.
How should you think of your products? When developing products,
businesses first must identify the core customer value that
consumers seeks from the product basically the problem-solving
benefits. They must then design the actual product (product and
service features, design, a quality level, a brand name, and
packaging) and find ways to augment (enhance or magnify) it in
order to create this customer value and the most satisfying customer
experience.
Consumer vs. Industrial products - the difference: Industrial
products are those purchased for further processing or for use in
conducting a business. Thus, the distinction between a consumer
product and an industrial product is based on the purpose for which
the product is bought. If a consumer buys a lawn mower for use
Dr. Reccia Charles
Business Skills Training, Page 3
around home, the lawn mower is a consumer product. If the same
consumer buys the same lawn mower for use in a landscaping
business, the lawn mower is an industrial product.
Industrial products are those purchased for further processing or
for use in conducting a business. The three groups of industrial
products and services are:
Materials and parts include raw materials and manufactured
materials and parts.
Capital items are industrial products that aid in the buyer’s
production or operations, including installations and accessory
equipment.
Supplies and services include operating supplies and maintenance
and repair services.
Quality, Quality & Quality - essential to positioning: Quality can be
defined as “freedom from defects.” Quality has a direct impact on
product or service performance; thus, it is closely linked to customer
value and satisfaction.
Dr. Reccia Charles
Business Skills Training, Page 4
Branding
Brand
A brand is a name, term, sign, symbol, or
design, or a combination of these, that identifies
the maker or seller of a product or service.
Why Brand?
Branding helps buyers
in many ways. Brand
names help consumers
identify products that
might benefit them. Brands say something
about product quality and consistency.
Is it worth it?
Branding gives the seller several advantages.
The brand name becomes the basis on which a
whole story can be built about a product.
The brand name and trademark provide legal
protection for unique product features.
The brand name helps the seller to segment
markets.
Dr. Reccia Charles
Business Skills Training, Page 5
Branding 101
Brand Positioning
Marketers can position brands at any of three levels.
•They can position the brand on product attributes.
•They can position the brand with a desirable benefit.
•They can position the brand on beliefs and values.
Brand Name Selection
Desirable qualities for a brand name include the following:
1. It should suggest something about the product’s benefits and
qualities.
2. It should be easy to pronounce, recognize, and remember.
3. The brand name should be distinctive.
4. It should be extendable.
5. The name should translate easily into foreign languages.
6. It should be capable of registration and legal protection.
Do we always need to build our own brand?
A manufacturer has four options:
1. The product may be launched as a manufacturer’s brand (or
national brand).
2. The manufacturer may sell to resellers who give it a private brand
(also called a store brand or distributor brand).
3. The manufacturer can market licensed brands.
4. Two companies can join forces and cobrand a product
National Brands Versus Store Brands.
National brands (or manufacturers’ brands) have long dominated the
retail scene. In recent times, an increasing number of retailers and
wholesalers have created their own store brands (or private brands).
Dr. Reccia Charles
Business Skills Training, Page 6
Private brands now capture more than 20 percent of all North
American consumer package goods sales and will increase by 20
percent by 2010. Private brands allow for small and medium
manufacturers to reach greater markets will minimal costs.
40 percent of U.S. consumers now identify themselves as frequent
buyers of store brands, up from just 12 percent in the early 1990s.
In the battle of the brands between national and private brands,
retailers have many advantages:
•Retailers often price their store brands lower than comparable
national brands.
•Store brands yield higher profit margins for the reseller.
•Store brands give resellers exclusive products that cannot be
bought from competitors.
Dr. Reccia Charles
Business Skills Training, Page 7
Line Extensions occur when a company extends existing brand
names to new forms, colors, sizes, ingredients, or flavors of an
existing product category.
Brand Extensions extend a current brand name to new or modified
products in a new category.
Multibranding introduces additional brands in the same category.
New Brands introduces a new product in a new product category
with a new brand.
Dr. Reccia Charles
Business Skills Training, Page 8
Packaging
What packaging does
Packaging involves designing and producing the
container or wrapper for a product.
Labeling the product
Labels perform
several functions.
The label identifies the
product or brand. The
label describes several things about the
product. The label promotes the brand.
Labeling also raises concerns. As a result, several international and
state laws regulate labeling.
Label Regulations
The most prominent is the Fair Packaging and
Labeling Act of 1966.
Labeling has been affected in recent times by:
unit pricing (stating the price per unit of
standard measure),
open dating (stating the expected shelf life of the
product), and
nutritional labeling (stating the nutritional values in the product).
Dr. Reccia Charles
Business Skills Training, Page 9
New Products
New-product development process:
1. Idea generation—the systematic search for
new-product ideas. Major sources of newproduct ideas include internal sources and
external sources. The purpose of idea
generation is to create a large number of
ideas. The purpose of the succeeding stages is
to reduce that number.
2. Idea screening—helps spot good ideas and
drop poor ones as soon as possible.
3. Product concept—a detailed version of the idea stated in
meaningful consumer terms.
4.Concept testing—testing with groups
of target consumers. The concepts may
be presented to consumers symbolically
or physically. You need the customer’s
feedback!! Remember the customer is
always right. Remember we create what
the customer wants.
5. Marketing strategy development—designing an initial marketing
strategy for introducing the product to the market. The marketing
strategy statement describes the target market, the planned value
proposition, and the sales, market share, and profit goals for the
first few years.
Dr. Reccia Charles
Business Skills Training, Page 10
6. Business analysis—a review of the sales, costs, and profit
projections for a new product to find out whether they satisfy the
company’s objectives. If they do, the product can move to the
product development stage.
7. Product development—R&D or engineering develops the product
concept into a physical product.
8. Test marketing—the stage at which the product and marketing
program are introduced into realistic market settings.
9. Commercialization—introducing the new product into the market.
Where is the customer?
New-product development must be customer centered.
Customer-centered new-product development
focuses on finding new ways to solve customer
problems and create more customer-satisfying
experiences.
Dr. Reccia Charles
Business Skills Training, Page 11
The Product Life Cycle
The Stages of the products life
1. Product development begins when the company finds and
develops a new-product idea. During product development, sales
are zero and the company’s investment costs mount.
2. Introduction is a period of slow sales growth as the product is
introduced in the market. Profits are nonexistent in this stage
because of the heavy expenses of product introduction.
3. Growth is a period of rapid market acceptance and increasing
profits.
4. Maturity is a period of slowdown in sales growth because the
product has achieved acceptance by most potential buyers. Profits
level off or decline because of increased marketing outlays to
defend the product against competition.
5. Decline is the period when sales fall off and profits drop.
The Product Life Cycle concept can describe a product class
(gasoline-powered automobiles), a product form (cars), or a brand
(the Toyota Corolla).
•Product classes have the longest life cycles.
•Product forms have the standard PLC shape.
•Product brand PLC can change quickly because of changing
competitive attacks and responses.
Dr. Reccia Charles
Business Skills Training, Page 12
Strategies for each of the other life-cycle stages:
Introduction Stage
The introduction stage starts when the new product is first launched.
In this stage, profits are negative or low, promotion spending is
relatively high, only basic versions of the product are produced.
Growth Stage
The growth stage is where sales begin to climb quickly.
New competitors will enter the market. They will introduce new
product features, and the market will expand.
Dr. Reccia Charles
Business Skills Training, Page 13
The increase in competitors leads to an increase in the number of
distribution outlets. Prices remain stable. Profits increase during the
growth stage.
Maturity Stage
The maturity stage is characterized by slowing product growth.
The slowdown in sales growth results in many producers with many
products to sell. Competitors begin marking down prices,
increasing their advertising and sales promotions, and upping their
product-development budgets to find better versions of the product.
These steps lead to a drop in profit.
Product managers should consider modifying the market, product,
and marketing mix. In modifying the market, the company tries to
increase the consumption of the current product. In modifying the
product, the company tries changing characteristics such as quality,
features, style, or packaging to attract new users and to inspire more
usage. In modifying the marketing mix, the company tries changing
one or more marketing mix elements.
Decline Stage
The sales of most product forms and brands eventually dip. This is
the decline stage. Management may decide to maintain its brand
without change in the hope that competitors will leave the industry.
Management may decide to harvest the product, which means
reducing various costs (plant and equipment, maintenance, R&D,
advertising, sales force) and hoping that sales hold up.
Management may decide to drop the product from the line.
Dr. Reccia Charles
Business Skills Training, Page 14
The Business Buyer
The Wholesaler & Supermarket Buyer
Business buyer behavior refers to the buying
behavior of the organizations that buy goods
and services for use in the production of other
products and services that are sold, rented, or
supplied to others. It also includes the behavior
of retailing and wholesaling firms that acquire
goods for the purpose of reselling or renting
them to others at a profit.
So what?
In the business buying process, business
buyers determine which products and
services their organizations need to
purchase, and then find, evaluate, and
choose among alternative suppliers and
brands.
Same as the consumer? No.
The business market is huge. In fact, business
markets involve far more dollars and items than
do consumer markets.
The main differences between consumer and
business markets are in market structure and
demand, the nature of the buying unit, and the
types of decisions and the decision process
involved.
Dr. Reccia Charles
Business Skills Training, Page 15
Business Buyers
Who decides what to buy?
The decision-making unit of a buying organization is called its buying
center: all the individuals and units that participate in the business
decision-making process.
The buying center includes all members of the organization who play
any of five roles in the purchase decision process:
•Users are members of the organization who will use the product or
service.
•Influencers often help define specifications and also provide
information for evaluating alternatives.
•Buyers have formal authority to select the supplier and arrange
terms of purchase.
•Deciders have formal or informal power to select or approve the
final suppliers.
•Gatekeepers control the flow of information to others.
The buying center is not a fixed and formally identified unit within
the buying organization. It is a set of buying roles assumed by
different people for different purchases.
Typical buyer responses and their role in the buying process:
“This Seasoning better be good, because I have to put this product
together.”
This is characteristic of a user, who is a member of the
organization who will use the product or service.
“I specified this seasoning at another branch, and it worked for them.”
Dr. Reccia Charles
Business Skills Training, Page 16
Influencer—they often help define specifications and also
provide information for evaluating alternatives.
“Without an appointment, no sales rep gets in to see Ms. Johnson.”
Gatekeeper—controls the flow of information to others.
“Okay, it’s a deal—we’ll buy it.”
Decider—has formal or informal power to select or approve the
final suppliers.
“I’ll place the order first thing tomorrow.”
Buyer—has formal authority to select the supplier and arrange
terms of purchase.
The business buying process
The business buying process consists of eight stages:
1. Problem recognition: recognition of a problem or need that can be
met by acquiring a specific product or service.
Dr. Reccia Charles
Business Skills Training, Page 17
2. General need description: describes the characteristics and
quantity of the needed item.
3. Product specification: decide on the best product characteristics
and specifies them accordingly.
4. Supplier search: search to find the best vendors.
5. Proposal solicitation: buyer invites qualified suppliers to submit
proposals.
6. Supplier selection: review the proposals and select a supplier or
suppliers.
7. Order-routine specification: the final order with the chosen
supplier or suppliers and lists items such as technical
specifications, quantity needed, expected time of delivery, return
policies, and warranties.
8. Performance review: buyer may contact users and ask them to
rate their satisfaction. This review may lead the buyer to continue,
modify, or drop the arrangement.
Various influences on business buyer
The various influences on business buyers include:
•Environmental: economic developments, supply conditions,
technological changes, political and regulatory developments,
competitive developments, and culture/customs.
•Organizational: objectives, policies, procedures, organizational
structure, and systems.
•Interpersonal: authority, status, empathy, persuasiveness.
•Individual: age, income, education, job position, personality, and
risk attitudes.
Dr. Reccia Charles
Business Skills Training, Page 18
Case Examples
Miss Meena’s Starch Production
Miss Meena wants to start her own business. She thinks about
processing potatoes into starch. In September she wants to buy an
electric grinder at $600; three basins at $50 each; and three sieves at
$30 each. In October she plans to buy 500 lbs of potatoes at $0.4 per
lb. After processing she will sell the starch within the same month. In
November and December she plans to do the same.
Since she only needs the grinder for one week a month, she agreed to
rent her grinder to her neighbour, who will pay $50 rent at the end of
each month.
Miss Meena's fixed assets can be used for 10 years, except for the
sieves, they need to be replaced every 3 years.
Miss Meena has only $350 in savings of her own, and needs to borrow
$800 from the credit union to be able to realize her plan. She will
borrow the money in September and plans to repay the full amount
on January 1. The duration of the loan is 4 months. The credit union
charges 2% interest per month.
To improve the quality of the starch Miss Meena will use a chemical.
To process the 500 lbs of potatoes, 0.5 lb of the chemical will be
enough. This chemical is only sold by the lb, at $30 per lbs; so she has
to buy 1 lb in September.
Miss Meena thinks she can produce a total of 150 lbs of starch out of
500 lbs of potatoes. She will sell this to the local macaroni factory.
The factory's price depends on the quality. Miss Meena thinks she can
sell 80 lbs of the highest quality at a price of $3/lbs; 40 lbs of medium
quality at $2/lbs and 30 lbs of low quality which sells at $1/lbs. Each
time she sells, a total of $80 of other expenses, such as for
transportation are made.
Dr. Reccia Charles
Business Skills Training, Page 19
Miss Meena invited you to come and review her preliminary business
plan with her. She wants to know whether this is a good business and
wants your advice on how to proceed.
Tasks:
1. What type (category) of product is Miss Meena offering?
2. Imagine that Miss Meena’s business had failed. Redesign her
product from scratch (product development stage) to introduction
in the marketplace.
3. Explain what Miss Meena needs to consider when designing her
product (hint: What are the business buyer behavior & business
buying processes that will affect her chances of success?)
4. Explain how Ms. Meena can design a customer-driven product?
(hint: What customers will we serve (what’s our target market)?
and How can we serve these customers best (what’s our value
proposition)?)
Dr. Reccia Charles
Business Skills Training, Page 20
Dr. Reccia Charles
Business Skills Training, Page 21
Ms. Meena’s Starch vs.
Ms. Meena’s Starch
Ms. Meena’s Starch
Ms. Meena’s Starch
Potato Starch
(USA)
Potato Starch
(USA)
Potato Starch
(China)
Potato Starch
(China)
Potato Starch
(China)
Potato Starch
(China)
Dr. Reccia Charles
Business Skills Training, Page 22
Case Examples
Lin's cabbage world
Lin is a farmer in the Birchgrove village in Grenada. She has 2
children. Her husband works as a store worker.
Lin tills 5 acres of banana land. For many years she has been
harvesting bananas and has not made good profits.
Because of her very low profits from cultivating bananas, she thought
about planting vegetables. But before she made a decision, Lin made a
careful survey in the market of which types of vegetables are in
demand and commands higher price. She went to several market
places and found out that cabbage sells at a very high price and were
in high demand.
She went to an agricultural technician from the Ministry of
Agricultural and asked how cabbage is grown. Fortunately there was
a workshop to be given on cabbage for 2 days. She attended the 2 day
workshop and learned how to raise cabbage. Since the workshop was
basically conducted through demonstration and field practicum, Lin
learned how to plant, water, fertilize, weed and harvest cabbage. She
also learned that on 5 acres of land, she will need $2,000 for land
preparation, fertilizers, chemicals, labor and other incidental
expenses.
Lin has only $1000. She went to her parents and requested for a loan
of $1000 at 2% interest per month. Then she went to the market
place and secured the commitments from buyers for her cabbage
produce. With a ready market for her cabbage, she started to grow
cabbage in her land. She religiously followed what she had learned
Dr. Reccia Charles
Business Skills Training, Page 23
from the workshop at the Ministry of Agricultural. Lin recorded all
her production expenses on cabbage production.
After 3 months, she started harvesting cabbage and selling them to
her buyers. She also recorded all her sales. Her total sales amounted
to $6,000. She made a profit of $4,000. Out of the profit, she paid her
loan of $1,000 to her parents including the interest. All the rest of the
profit, she reinvested in cabbage production by renting an additional
5 acres of land.
Tasks:
1. What type (category) of product is Miss Lin offering?
2. Imagine that Miss Lin’s business had failed. Redesign her product
from scratch (product development stage) to introduction in the
marketplace.
3. Explain what Miss Lin needs to consider when designing her
product (hints: What are the business buyer behavior & business
buying processes that will affect her chances of success? How
much effort does a consumer make when buying the product and
what affects consumers decision to buy this type of product?)
4. Explain how Ms. Lin can design a customer-driven product? (hint:
What customers will we serve (what’s our target market)? And
How can we serve these customers best (what’s our value
proposition)?
Dr. Reccia Charles
Business Skills Training, Page 24
Ms. Lin’s Cabbage vs.
Ms. Lin’s Cabbage
Ms. Lin’s Cabbage
Ms. Lin’s Cabbage
Competing Cabbage
Competing Concept
Competing Concept
Competing Cabbage
Competing Concept
Competing Concept
Dr. Reccia Charles
Business Skills Training, Page 25
Case Examples
Netty’s Herb Tea Processing Project
Ms. Netty is one of the active members of the women's group in the
Victoria village, a farming community with rolling terrains located
some 20 miles from the George’s town. Like other households in the
village, her husband is engaged in farming. She's 33 years old and
takes care of the household work and their three children.
Since she joined the group she has been thinking how to help her
husband generate additional income for the family. At first, upon
discussion with other women members, she thought of a small scale
furniture workshop. But the start-up capital required was $50,000
and she could not afford such capital.
She finally decided on a herb-tea processing project. The raw
materials (herb leaves) are readily available in the village since most
farmers, including her husband, grow herbs in the village. Moreover,
she learned from the sales-van traffickers who often visit their village
looking for herbs, that processing herbs would earn her good income.
She learned from them that if she sells in George’s Town, she can
make a gross profit of $2 per lb and or even higher at $20 if she sells
in the U.S. Also, she has a younger sister who used to work in a herbtea processing factory in the U.S. and she was confident she could
learn the techniques required in such activity.
Encouraged by the potential of the project she obtained a loan from
the women's group. In addition, she had some savings of her own and
she was able to start the project in March 1993.
In dry season the herb crops produce the best quality tea leaves. Ms.
Netty decided to process herb-tea only during this season For the
whole season she was able to sell 56 lb. In selling at George’s Town
she later learned that there are different prices depending on the
quality of dried tea and the appearance of the packaging.
Dr. Reccia Charles
Business Skills Training, Page 26
Nevertheless after investigating which among the three
supermarkets in George’s Town offered the best price, she settled into
one supermarket. She however incurred losses when she tried to sell
in the U.S. About 20 lbs was not paid for at all.
She personally took care of the project. Her husband and children
assisted her in some of the activities of the project like preparing the
stove and stirring the leaves on the pan. They could process 5 lbs of
wet leaves per day. She had minimal expenses for the project. She
bought about 50% of the wet tea requirements from the village. The
rest of the wet herb-tea leaves, she obtained from their own harvest.
She also had sufficient cooking gas which was already good for the
whole season She did not buy the needed pans as she had already two
before the project and these were enough for the quantify she has
been processing.
She was not able to keep records of the financial transactions but she
is confident she was able to earn from her business. Although the
income of the project is mixed with their other household income, she
was sure that the whole net profit could be used to invest in another
project, a furniture-manufacturing project. At the same time, she is
planning to expand her herb-tea processing project for the whole year
that is including during dry and rainy seasons. She also plans to hire
workers so that she can process more.
Tasks:
1. What type (category) of product is Miss Netty offering?
2. Imagine that Miss Netty’s business had failed. Redesign her
product from scratch (product development stage) to introduction
in the marketplace.
Dr. Reccia Charles
Business Skills Training, Page 27
3. Explain what Miss Netty needs to consider when designing her
product (hints: What are the business buyer behavior & business
buying processes that will affect her chances of success? How
much effort does a consumer make when buying the product and
what affects consumers decision to buy this type of product?)
4. Explain how Ms. Netty can design a customer-driven product?
(hint: What customers will we serve (what’s our target market)?
And How can we serve these customers best (what’s our value
proposition)?
Dr. Reccia Charles
Business Skills Training, Page 28
Ms. Netty Herb Tea vs.
Ms. Netty Herb Tea
Ms. Netty Herb Tea
Ms. Netty Herb Tea
Lipton Herbal
(UK)
Celestial Herbal Tea
(USA)
Good Earth Tea
(India)
Stash Herbal Tea
(USA)
Bigelow Herb Tea
(USA)
Yogi Herbal Teas
(USA)
Dr. Reccia Charles
Business Skills Training, Page 29