Business roles &
Business operations

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:
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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 • Goods and services
• Product development and design
• Packaging
• Trademarks
PRICING POLICY • Importance of pricing
• Pricing techniques / strategies
• Price determination
• Factors influencing pricing
• Price adjustments
DISTRIBUTION
POLICY •
• Channels of distribution
Direct and indirect distribution
• Intermediaries
MARKETING
COMMUNICATION
POLICY
• Sales promotion
• Advertising
• Publicity
• Personal selling
• E-marketing

THE MARKETING FUNCTION
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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 different 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:
Transport:
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Products must be transported from the storage facility to wholesalers, shops or intermediaries.
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The type of transport will be influenced by the type of goods that must be transported.
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Business enterprises can choose from various types of transpor t for example, road transport, railway transport, air transport and sea transport.
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There are five dif ferent forms of transport – 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 important factors must be taken into consideration :
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Speed
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Cost
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Safety

THE MARKETING FUNCTION
MARKETING ACTIVITIES:
Transport:
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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:
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Money must be available for activities such as the marketing of goods and for insurance.
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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.
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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.
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As soon as wholesalers, retailers or intermediaries take ownership of the goods, the goods are not the responsibility of the business enterprise any more .
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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):
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A business can insure itself against human and physical risks, but not against economic risks.
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Insurance is a contract entered into by two parties, namely the insurer and the insured .
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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:
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Some business enterprises produce goods, while other business enterprises buy finished goods which are then sold for a profit .
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Business enterprises that produce goods must buy raw materials in order for production to take place .
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Various other products are also purchased :
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Maintenance services (machinery)
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Water and electricity
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Marketing services
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Once goods have been acquired or produced, it must be sold.
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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:
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Businesses such as wholesalers and retailers buy their goods from producers or manufacturers for resale.
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These businesses are called intermediaries and are the link between producers or manufacturers and the end consumer.
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Through the marketing activity of selling, the buyer takes possession of the goods.
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Forms of selling include:
Personal selling Direct selling between the manufacturer and the buyer.
Agency selling Someone who sells goods on commission for others.
Brokering A sales agent who sells a particular product is a broker.
Other selling 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 Services
• Bread
• Toothpaste
• Clothing
• Dental services
• Hair styling services
• Internet service provider
Combination of goods and services
• Meal at a restaurant
• Cell phone contract
• Products ordered by mail

THE MARKETING FUNCTION
PRODUCT POLICY:
1. Goods and services:
Goods
• Physical, tangible things •
Services
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
• Consumer knows exactly what he/she is buying
Can be transported and stored
• First sold, then produced
• The consumer does not always exactly know what he/she is buying before the service is being delivered
• Perishable, cannot be transported or stored.

THE MARKETING FUNCTION
PRODUCT POLICY:
1 . Goods and ser vices:
 Products are classified into different categories .
 Most products are intended for consumers or for businesses .
 Product that are meant for consumers 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 different 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.
Examples: bread, milk and sugar
Convenience goods
A relatively inexpensive item where little shopping effort is needed. Very little thought goes into buying these goods.
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.
Speciality goods
A particular item that consumers search for extensively and they are reluctant to accept any substitutes. A lot of time and energy goes into buying these goods. These products are expensive and the consumer often makes a once-in-a-lifetime purchase.
Examples: jewellery, clothing or furniture
Examples: antiques, wedding dress, car

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 commercial services
These are all the services involved in taking the goods or services from producers to consumers and are often carried out by intermediaries.
Examples: transport, 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
• 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
Stage 3:
Maturity
• 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.
• 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.
Stage 4:
Sales decline
• Sales start to decline because new products inevitably replace old ones.

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: • Ideas can be obtained from various sources, including staff, intermediaries, competitors and consumers.
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
Step 4:
Develop the product
Step 5:
Commercialise of the product
Step 6:
Market the product
• 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.
• During this stage, the product is put on the market.
• 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.
c)
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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
SPECIALITY 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 reused 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:
 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:
 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
Stage 3:
Brand insistence
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.
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:
 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:
 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:
 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:
 A trademark can be a brand name, a slogan, a logo or a specific shape, or a combination of these, for example:

THE MARKETING FUNCTION
PRODUCT POLICY:
 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:
Manufacturer’s trademark
Individual trademark
Generic trademark
Retailer’s trademark
FORMS OF TRADEMARKS
The manufacturer markets all the products under one brand name, for example Nestlé.
The manufacturer gives each of the products its own individual brand name.
Products that do not include the company name or other identifying terms, such as
Vaseline, Sellotape.
The retailer markets the manufacturer’s product under a name of its own.
E.g. Nestlé chocolates, Nestlé hot chocolate, Nestlé coffee.
E.g. Volkswagen Golf, Jetta,
Polo and Passat.
E.g. Elastoplast is a brand name for Johnson & Johnson’s line of adhesive bandages and related products.
E.g. Woolworths.

THE MARKETING FUNCTION
PRODUCT POLICY:
 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:
 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:
 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 particular product.
 If consumers 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.
 Manufacturers must aim to keep prices in line with what consumers are willing and able to pay for products.
 When manufacturers increase prices, consumers 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 competition
• In a perfect competition market there are many buyers and sellers’ 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 competition
• This is a market where one seller rules or leads the market even 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 RICING P OLICY:
4. Factor s influencing pricing: d) Normal trade practices:
 Some enterprises of fer cash or other types of discounts.
 These discounts should be taken into consideration when the enterprise decides on prices for its products to ensure that even though an enterprise of fer s discounts to customer s it is still profitable.
Various types of discount
Cash discount
Seasonal discounts
The business gives the customer a 10 % discount, for example, with cash sales.
Bulk discount
Trade discount
A discount for customers who buy products or services out of season. For example, a clothing retailer may sell winter stock at the start of the summer season at a discounted price.
Consumers who buy in large quantities often get a discount, which means they are getting products at a lower price per unit.
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 difficult 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 discounts
Aim to encourage consumers to buy in large quantities.
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. Price adjustments:
 Business enterprises also make use of price discrimination as a technique to adjust prices.
 Price discrimination means that not all consumers 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
Time 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.
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 different 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 . Channels of distribution:
 Indirect distribution: b) Manufacturer Retailer Consumer
 Goods move from the manufacturer to the retailer before the goods are sold to consumers.
 In this channel of distribution, retailers take responsibility for advertising the goods.
 E.g. when a retail store like Pick ‘n Pay buys stock from manufacturers like
Clover and Hullets and then sell these goods to consumers.
c) Manufacturer A gent Retailer Consumer
 Goods move form the manufacturer to an agent.
 Goods are then sold by agents to retailers before being sold to consumers.
 The responsibility to sell goods fall on both the agent and the retailer.
 E.g. when manufacturers of slimming products or dietary supplements use agents to market the products to retailers like pharmacies. Consumers 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 manufacturers 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
Selling agents
• A person who has authority from a principal to purchase certain commodities on the principal’s behalf.
• 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
Wholesalers
•
• Export or import agents who specialise in international trade.
It is their responsibility to ensure that the import and export processes run smoothly
• 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
Television and cinema
• Reach many people.
• Appeal to consumers’ eyes and ears.
Newspaper • Reaches many people.
• Quick to place.
• Usually placed a few times per week or month.
Disadvantages
• Expensive form of advertising.
• Compete with hundreds of advertisements for similar products.
• Expensive form of advertising.
• Often thrown away once the newspaper is read.
• Illiterate consumers cannot understand advertisements.

THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
2. Advertising:
 Advertisement media includes:
Advertising media
Advantages
Radio • Relatively inexpensive.
• Many people are reached.
Direct mail • Message can easily be changed.
Magazines • Reaches specific target market.
Outdoor advertising
• Relatively inexpensive.
• Attracts attention.
Disadvantages
• Exposure is short lived.
• Many people don’t really pay attention to what is said on the radio.
• Often thrown away, because it is seen as junk mail.
• Compete with several other advertisements.
• 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 attention
Hold interest
Arouse desire
Inspire action
• Advertisers should make use of large headlines, shocking statements or any kind of special effect to attract the interest of the target market.
• 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.
• 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.
• Advertisements must convince people to actually buy the product.
• Some products are expensive and potential consumers might need encouragement to buy the product.

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.
Step 1:
Market research
Step 2:
AIMS
Step 3:
Budget
The eight steps for a successful
Identify the target market that the advert is aimed at, that is, possible buyers. Investigate competitors and their products.
Define objectives that are clear, precise and measurable, for instance increased sales and/or increased product or brand awareness.
Determine how much money is available for the advertising campaign.

THE MARKETING FUNCTION
MARKETING COMMUNICATION POLICY:
3. Successful advertising campaign:
Step 4:
Choice of media
Step 5:
Create the advert using the AIDA principle
The eight steps for a successful
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?
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
Consumer sees the campaign.
3. Successful advertising campaign: the media
Consumer buys the product Step 7:
Supply the goods to shops
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 advertising 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
MARKETING COMMUNICATION POLICY:
6. Per sonal selling:
 Personal selling is an aggressive sales method that involves face -to-face communication between salespersons and consumers.
 Personal selling is an ef fective sales method because the salesperson is ready to answer all the questions asked by consumers.
 The salesperson can also adjust his/her message so that the message is more attractive to the person the message is delivered to.
 Unlike adver tising, personal selling can take factors 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
MARKETING IN THE FORMAL AND INFORMAL SECTORS:
The formal sector
2. Marketing in the formal sector:
 The formal sector is also known as the primar y economy.
 People par ticipating in the formal sector either own registered businesses or are employed by registered businesses.
 Par ticipants in the formal sector are registered for tax purposes which enable them to make a meaningful contribution 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 monitors 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
MARKETING IN THE FORMAL AND INFORMAL SECTORS:
The formal sector
3. Advantages and disadvantages of the formal sector:
Advantages of the formal sector
• Activities that take place in the formal sector are regulated.
• Products supplied by the formal sector are legal.
• People employed in the formal sector contribute towards the
Unemployment Insurance Fund. They are therefore entitled to claim from the Unemployment Insurance Fund in case it becomes necessary.
• Government is able to generate income in the form of tax from the formal sector.
• Products bought from the formal sector can be returned if they are faulty.
• The formal sector can make use of services offered by the informal sector because services offered by the informal sector are often cheaper than services offered by the formal sector.
Disadvantages of the formal sector
• The formal sector is sometimes overly regulated.
• Entry into the formal sector is more difficult than entry into the informal sector.
• Jobs in the formal sector are scarce.

THE MARKETING FUNCTION
MARKETING IN THE FORMAL AND INFORMAL SECTORS:
The informal sector
1 . Description of the informal sector:
 Many entrepreneurs 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 start these businesses, as no records have to be kept and no tax is paid to government.
 Another characteristic is that the owners 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:
The in formal s ector
2 . Marketing in th e informal s e ctor:
The 4 P’s of marketing in the informal sector
Product Price Place Promotion
• 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.
• Often lacks information on prices.
• Prices of products often based on demand and what customers can afford to pay.
• 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 goods.
• 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
MARKETING IN THE FORMAL AND INFORMAL SECTORS:
The informal sector
3. Advantages and disadvantages of the informal sector:
Advantages of the informal sector Disadvantages 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
• 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 TECHNOLOGY FOR MARKETING:
1 . Electronic marketing (E -marketing)
 The internet is a very powerful marketing medium, because billions of people globally have access to the internet.
 Many business enterprises have created websites which can be accessed by consumers.
 Publicity ar ticles about an enterprise can be displayed on the website.
 Nowadays, many consumers 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 advertising is usually much cheaper than advertising 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 TECHNOLOGY FOR MARKETING:
2. Advantages and disadvantages of Electronic marketing
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 website, and individual customers visit the site, you can greet them with targeted offers.
• Having a social media presence and managing it carefully can give you a reputation for being easy to engage with.
• Your customers are only ever a few clicks away from completing a purchase. Unlike other media, which require people to get up and make a phone call, or go to a shop, e-marketing is immediate and easy.
• With e-marketing a business has the ability to sell anything legal online.
• The majority of Internet marketers lack customer service. Some websites have poor navigation, which makes it difficult for the visitor to find what they are looking for.
• There is a risk of security on the
Internet. As a result, many of the visitors will not want to use their credit cards to make a purchase.
• There is a lot of competition to sell products. By the time a customer finds you, they have already been clicking on many links. Unless they can find what 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 different cultures have different 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 Disadvantages
• 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.
• 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. Exports
 Exporting takes place when an enterprise in one countr y sells its products to businesses or consumers in foreign countries.
 Some business enterprises export surplus products to foreign markets where these products are sold ver y cheap – this is known as dumping.
 South African business enterprises export 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 export subsidies to businesses that show an interest in export.
 Export subsidies such as tax rebates and a refund on import duties on raw materials or semi-finished goods imported to produce finished goods can be offered to these businesses.
 Export subsidies mean lower costs for the business and ultimately products can be sold at lower prices abroad.

THE MARKETING FUNCTION
FOREIGN MARKETING:
2. Exports
Advantages and disadvantages of Exporting
Advantages Disadvantages
• Assistance form government in the form of export subsidies results in lower costs.
• Selling goods and services to a new international market increases sales and profits.
• Businesses become competitive in the domestic market before they venture into the international market. Being competitive in the domestic market helps businesses to learn new strategies that can help them in the international markets.
• Selling to multiple markets allows companies to diversify their business and spread their risk. As a result, companies are not tied to changes within the domestic market or to one specific country.
• Because it takes more time to develop extra markets and the pay-back periods are longer, exporting can put financial strain on businesses.
• Businesses may need to change their products to meet foreign country safety and security codes, and other import restrictions.

THE MARKETING FUNCTION
FOREIGN MARKETING:
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 differ 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.
 Sufficient 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 sufficient 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.