Business Information Handbooks
Marketing Strategies
Market segments – Marketing concepts
Market research – Product development
Pricing – Distribution channels
Promotion and Advertising
Accra 5/2006
__________________________________
GTZ
DANIDA
Business Information Handbooks
Draft
Marketing Strategies
Market segments - Marketing concepts
Market research – Product development
Pricing – Distribution channels
Promotion and Advertising
Accra, Ghana
May 2006
Published by:
- GTZ, German Technical Cooperation and
- DANIDA, Danish International Development Assistance
In collaboration with:
Small Business Services (SBS) Network
Project Implementation:
GFA Consulting Group, Germany
Table of contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Market and Marketing Definitions ....................................................... 1
Market Functions.................................................................................. 2
The Development of a Marketing Strategy ........................................ 3
Marketing Concept ............................................................................... 7
 External Constraints ......................................................................... 7
 Understanding and influencing Buyer Behaviour ............................. 8
 Forces that influence buying Decisions ............................................ 8
 Economic Determinants of Demand ................................................. 9
 Internal psychological Variables ....................................................... 9
 Social and cultural Influences ......................................................... 10
Market Segmentation ......................................................................... 11
Marketing Research ........................................................................... 11
 Marketing Plan Format ................................................................... 14
 Marketing Plan Questions .............................................................. 15
Product Development ........................................................................ 16
 Product Decisions ........................................................................... 16
 Branding and Packaging ................................................................ 16
 Building the Product Mix ................................................................. 16
 Product Innovation .......................................................................... 17
Pricing Decisions ............................................................................... 18
 Setting Base Price .......................................................................... 18
 Pricing in the Distribution Channel ................................................. 18
Channels for Distribution and Logistics .......................................... 18
 Selecting Distribution Channels ..................................................... 19
 Selecting and motivating Distributors ............................................. 19
 Physical Distribution or Logistics .................................................... 20
The Promotional Programme ............................................................ 20
Advertising .......................................................................................... 21
 Importance of Advertising ............................................................... 21
 Advertising Channels...................................................................... 22
Attachments
 Marketing Guide
 Market Field Study Plan
 List of SBS Network Business Information Handbooks
 List of SBS Consultants
Business Information Handbooks
1.
Market and Marketing Definitions
Marketing is an important operating arm of a business enterprise. Its activities
begin even before the product or service is produced and continue after the
sale is made. This paper will provide an overview of the marketing function.
Starting with basic definitions of marketing and market and discussing
marketing functions and the role of marketing in the economy, the paper
proceeds to cover the development of marketing strategy, consumer
behaviour and marketing research, and concludes with a treatment of the
marketing decision areas - product, price, distribution and promotion.
Marketing is as old as history itself. It embraces the activities we engage in to
satisfy our economic needs and wants.
The central idea in marketing is the transaction, which is the exchange of
desired objects by two parties. Such exchange could be product for product
(as in trade by barter), or product for money in its various forms. For marketing
or exchange to take place, it is necessary that there be:
1. two or more parties who have unsatisfied wants;
2. some products or services and money to exchange; and
3. some means of communication between the parties involved.
We now give a definition of marketing.
Marketing is the set of activities that facilitates exchange transactions
involving economic goods and services for the ultimate purpose of satisfying
human needs. What activities are implied in the above definition? They are
many, but will be discussed under 'marketing functions'.
Market as product buyers
To the African the word 'market' almost invariably means the marketplace
which not only fulfils its economic role as a place for buying and selling, but
also serves as an important social, political and religious meeting place
especially in the rural areas. A second meaning of market, which is to be
emphasised by us, is market as consisting of buyers of a product or service.
Our formal definition of market is:
A market for a product or service consists of individuals or organisations that
have purchasing power and that are current or potential buyers of the product
or service.
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We should note three things about this definition.
1. A market could be ordinary people purchasing according to their
needs or it could be organisations such as business firms, non-profit
institutions such as schools and hospitals, or the government federal, state or local.
2. To be included in the market for a product an entity must have
purchasing power, that is money in its various forms - cash, cheque,
credit.
3. Current buyers and potential buyers are included in the definition of
a market. Thus, for a product being newly introduced in an area, the
market consists entirely of potential buyers. A major challenge to
marketing is to convert potential buyers to actual buyers; in short to
create a customer.
A fourth meaning of market is the verb sense, that is 'to market a product'. It
suggests the performance of activities needed to bring an existing product to
buyers, a meaning clearly related to the meaning of marketing. We now take
up a discussion of these activities or marketing functions.
2.
Marketing functions
Within any business organisation, the marketing arm of the company fulfils
some important functions which are activities that must be performed to move
products from producers to consumers. From the literature ten such activities
may be identified as follows.
1. Product Development Marketing advises on what to produce; the
quality, style, design, brand name and packaging - all based on
consumer and market research.
2. Pricing Marketing plays a large role in setting prices, whether at,
above or below the competitor's prices, and in determining a system
of discounts for the middlemen who handle the product.
3. Buying This involves selecting from an assortment of goods, determining quantity and quality, selecting sources of supply and
negotiating the terms of purchase. (This is sometimes called purchasing or procurement.)
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4. Advertising is the impersonal presentation of goods through the
mass media - radio, television, newspapers, etc. Advertising
agencies may assist marketing in performing this function.
5. Personal selling. This is selling done through person-to-person
contact. A large number of salesmen are engaged in outside sales
work or in retail sales in shops and market-places. The sales force
must be properly selected, trained and motivated to perform.
6. Sales Promotion and Merchandising This involves the development
of such tools as point-of-purchase displays, window displays, free
samples of the product, exhibitions at trade fairs, news releases,
price reductions during special 'sales' and so forth.
7. Physical Distribution Marketing arranges for the physical handling of
goods: storage, transportation and proper inventory management
and delivering the products/services to customers.
8. Market research Marketing must gather and analyse information
about demand, consumer wants, competition, government policies,
new products and general changes in our social structure. This
function underscores the fact that marketing begins even before the
product is produced.
9. Credit Management and Financing. Credit is often used in serious
business transactions where firms buy and sell on credit. In addition,
various types of financing provide permanent as well as temporary
capital for the marketing process.
10. Post-sale Transactions. Marketing must arrange to handle customer
complaints after the sale, and provide for after-sales service,
especially for machines, equipment and consumer durable goods.
This shows that marketing does not end with the ringing of the cash
register.
3.
The Development of a Marketing Strategy
Any organisational entity that engages in marketing activities to serve a
customer group with a product or service is a marketer. We now consider how
a marketer plans his marketing programme. This is part of the overall job of
marketing management, which is concerned with the tasks of setting
marketing goals, analysis of market conditions, planning the marketing effort,
setting up suitable organisation, execution of plans and control of operations.
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Marketing mix: variables controlled by the marketer
A key input into the development of marketing strategy is market analysis,
which is a detailed inquiry into market conditions - buyers (size, location,
quantities purchased, attitudes and preferences, etc.), competitors and
middlemen carrying the product. The marketer then chooses a target market
to cultivate and develops his marketing strategy by making decisions
regarding the product, the price, the distribution and the promotion in order to
satisfy the needs of the target market and provide the best chances of
achieving the stated marketing goals.
The combination of controllable variables - product, price, distribution and
promotion - which spells out the marketer's strategy is called the marketing
mix. The kinds of decisions to be made for each component of the mix are as
follows.
1. Product assortment: design, quality, branding and packaging;
product additions, modifications and deletions.
2. Price Setting base price; middlemen's margins, allowances,
discounts; freight payments and geographic considerations,
product-line pricing; charging established prices.
3. Distribution Selecting channels of distribution; selecting and
managing distributors or middlemen to carry the product;
establishing a logistics system for storing, handling and transporting
the product.
4. Promotion to stimulate market interest in the product by determining
the relative contributions to be made by advertising, personal selling
and sales promotion (for instance, free samples); choosing
advertising message; creating advertising copy, choosing suitable
media; managing the sales force.
The concept of the marketing mix was popularised by Neil Borden in 1954.
Another author, Eugene McCarthy in his book Basic Marketing: A Managerial
Approach uses a useful mnemonic - 'the Four P's' - to denote the four
elements of the marketing mix - Product, Price, Place and Promotion - where
'Place' stands for distribution.
The key notion suggested by the word 'mix' is that the plan of action is an
integrated one in which the decisions on the four variables make sense in
relation to one another. Thus, a high quality product would ordinarily carry a
high price, be distributed through retail outlets having a quality image and the
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advertising would be in appropriate media that could display the superior
features of the product.
Another point to be noted is that when a marketing mix is developed, an
alternative mix that differs on all or some of the four decision variables might
conceivably be used to meet the needs of the market and the goals of the
marketer. This means that there are different ways to reach a target, but none
is guaranteed success ab initio. To illustrate, we consider alternative
marketing mixes for the marketing of bottled palm wine.
Problem
Suppose that market analysis indicates promising opportunities for the
marketing of bottled palm wine, where it is assumed that the technology for
the preservation of palm wine has been perfected. Sketch two alternative
marketing strategies that could be implemented.
General observations
Palm wine is an alcoholic drink which is in direct competition with beer.
Because the wine tapers are getting older and young men in the rural areas
are not available, or if available not interested in learning the skill of wine
tapping, the product is getting more and more scarce and its price is virtually
exceeding that of beer. The bottler of palm wine, under the present conditions
of scarcity of supply of the raw material, will therefore have the major problem
of how to make the price of the finished product competitive with the price of
beer.
Marketing mix 1
One strategy is to make the product of very high quality, and package it in a
distinctive bottle that does not look like the beer bottle. For pricing, the price
is set higher than beer but not as high as imported foreign wines. For
distribution, the kind of high volume distribution channels utilised for beer is
not used; instead the channels for hot drinks and foreign wines is used; this
means that the product is displayed on shelves in shops. For promotion, it is
now apparent that, given the decisions made already on the other components
of the marketing mix, the promotional job is to present the bottled palm wine
as a prestige drink that is surrounded by tradition and certainly superior to
beer; a product that one should use in traditional and other important
ceremonies as well as for quiet enjoyment. Advertising copy that will properly
portray this image could include traditional ceremonial settings, and drinking
with cow horns and calabash cups instead of glasses. Actually, the product is
positioned to compete with foreign table wine and not with beer.
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It is apparent that the above strategy will not lead to very high volume sales,
but with a moderately high price the level of sales could lead to profitable
operations.
The Marketing Mix
-
-
PRODUCT
Scope of product mix
Depth of product mix
Quality
Design
Packaging
Maintenance
Service
Warranty service
Possibility of returning a
purchase
PROMOTION
Advertising
Public relations
Personal sale
Sales Promotion
Brand Policy
-
PRICE
Price positioning
Rebates and conditions of
payment
Financing conditions
-
PLACE
Channels of distribution
Distribution density
Lead time
Stock
Transport
-
Marketing mix 2
An alternative strategy, especially if the wine supply problem could be solved,
for example through palm plantation development and improved tapping
methods, is to position bottled palm wine as a direct substitute for beer. The
product will be of good quality but will not be fancifully packaged; in fact, beer
bottles could be used. The emphasis will be to reduce the costs of production
as much as possible. The price will be competitive with beer, that is, it will not
exceed the price of beer.
Distribution channels will be similar to those used for beer distribution, that is
there will be appointment of major distributors and attaches as well as direct
supply to major customers such as hotels and clubs. Promotion will portray
the product as more satisfying and nourishing than beer, a product that fits
into any occasion - whether traditional or modern. Provided the price is low
enough, the wine can be presented as the common man's drink, whether in
the village or in the city.
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We have so far given only the bare outlines of two alternative marketing mixes.
Many details remain to be filled in for actual implementation. It cannot be
determined ahead of time which strategy will be more successful than the
other, especially as the effects of uncontrollable variables such as competitive
reactions are not known.
4.
Marketing concept
If a business conducts its affairs in such a way that the needs of its customers
are always kept in view, and every effort is made to give value and satisfaction
to the customers while pursuing its own goals such as profit, it is said to be
guided by the philosophy of the marketing concept. Such expressions as 'the
customer is king' or that 'marketing should begin and end with the consumer'
or being 'customer oriented' are all statements expressive of the marketing
concept.
The marketing concept is quite an idealistic philosophy, especially in Africa
where various basic products and services are in scarce supply, and the
sellers have little interest or motivation in pleasing customers. Further,
government monopolies exist and seem unconcerned about customer needs
or complaints. The marketing concept is likely to be applied more seriously
when there is a strong competition in the market; the marketer who creatively
caters to customer needs is likely to win a differential advantage over less
imaginative competitors and thereby realises more sales and profits.
External constraints: variables not controlled by the marketer
We have seen that a marketer controls the variables - product, price, distribution and promotion - to determine his marketing mix, and that he should
execute his plans with the philosophy of the marketing concept. In addition,
he has to contend with a number of external variables that affect the marketing
effort. These variables are not ordinarily controllable by the marketer and are
therefore classified as environmental constraints. They include competitors,
the state of the economy such as growth or recession, consumers and their
unpredictable behaviour, suppliers and middlemen, business-related laws and
regulations, technology, the physical environment such as natural resources
and climate and the larger society with its culture. These complicate the
marketer's tasks enormously and lead to a situation where strategies that were
effective yesterday may not work at all today.
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It should be noted that while the environmental variables affect marketing, the
environment in turn is affected by marketing. For example, consumers' needs,
values and preferences determine what is produced and how it is presented,
and the larger society with its culture - customs, languages, religions and so
on - casts a pervasive influence on the marketing effort. Marketers' actions in
turn influence society by exposing people to new products, services and ideas,
thereby for better or for worse breaking down the traditional modes of
behaviour and fostering new attitudes and habits.
Understanding and influencing buyer behaviour:
Knowing your consumer
It cannot be over-emphasised that marketing should begin with a thorough
understanding of the consumer himself - his needs, location, preferences,
attitudes, perceptions and socio-economic characteristics (age, sex, income,
etc.). The marketer then tries to build the information gathered into the design
and execution of his marketing strategy and tries, through promotional
methods such as advertising, to influence consumer attitudes and behaviour
in favour of his product or service.
When a marketer launches his product or service and fails to secure sufficient
consumer patronage, it is often a signal that he has not done his homework
with regard to consumers' needs, though occasionally it might be due to the
inept planning and execution of his marketing programme.
It is sometimes necessary to make a slight distinction between 'buyer' and
'consumer' because the person who makes the buying decision is not always
the ultimate consumer or user of the product. The marketer is immediately
interested in understanding the behaviour of the product buyer, but he should
also be interested to know how the product is used and be concerned about
the satisfaction (or lack of it) of the consumer.
Buyers may be conveniently divided into household buyers and non-household buyers. The latter group includes industrial, commercial,
institutional (schools, hospitals, etc.) and government buyers.
Forces that influence buying decisions
The forces that determine what, when, where and why consumers buy and
the prices they are willing to pay are varied and interrelated in a complex
manner. These may be conveniently organised into three groups.
1. Economic determinants of demand.
2. Internal psychological variables.
3. Social and cultural influences.
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Economic determinants of demand
The key economic factors that influence buyer behaviour are income,
availability of credit, expenditure patterns, prices of the product and prices of
complementary and substitute goods and elasticity of demand. Total
household income minus all taxes is called disposable income. The portion of
disposable income that is left over after expenditures on food, housing,
clothing and other necessities is called discretionary income, which is
available for expenditure on luxuries and other non- essentials.
There are two kinds of elasticity of demand: income elasticity of demand and
price elasticity of demand. Income elasticity of demand is defined as the
percentage change in the quantity of a commodity consumed divided by the
percentage change in income. Elastcity indicates sensitivity of demand when
either the price of the product changes or the income of the buyer changes.
To take demand for food as an example, it turns out that income elasticity of
demand for food is lower for rich families than for poor families. This is so
because if incomes are already high, further increases will not influence food
consumption substantially, but if incomes are low, a large share of additional
incomes will be spent on food.
Price elasticity of demand is defined as the percentage change in quantity
demanded divided by the percentage change in price. When this quantity is
greater than unity demand is said to be elastic, and if less than unity demand
is inelastic. The marketer is interested in the effect of price changes on total
revenues. When demand is inelastic, price changes will result in less than
proportional changes in quantity sold, thus revenues may not be eroded if
price goes up. As an example, the demand for drugs and medicines is usually
price inelastic, because the need to secure health is essentially insensitive to
price or cost.
Internal psychological variables
An important factor in the buying decision is the buyer himself. Why does
she/he want to buy the item? Is the type of person related to the desire to buy
the item? How does she/he receive and organise information about the item?
How does s/he feel about the item in terms of likes and dislikes? What does
s/he know and remember about the item? These questions are probing the
effects of the internal psychological forces of motivation, personality,
perception, attitudes and learning, respectively. For any given buying
situation, one force may be dominant or multiple forces may be at work.
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We should particularly emphasise the role of attitudes and preferences in
purchase decisions. An attitude is a learned predisposition to react to an
object in a certain way - positively or negatively. It describes one's feelings in
terms of liking or disliking the object. A preference is the condition of liking one
object better than another. A positive attitude will lead to the purchase of an
item, but a negative (or neutral) attitude will not. A major task of advertising is
to induce positive buyer attitudes towards the product. Behaviour itself may
affect attitude even as attitude affects behaviour. A person may not have been
interested in a particular product and may have had no attitude towards it, but
after trying it she/he develops an attitude - positive or negative. Or a person
may have had a negative attitude before trying a product and then modifies
the attitude to positive after trial. This is the main reason why the giving out of
free samples of a product is a key sales promotion tool.
Social and cultural influences
Man is a social being whose behaviour is influenced by other persons and by
the groups he belongs to or aspires to belong to (called reference groups).
Family members, friends, neighbours and work associates are familiar
examples of people who influence us. Social conformity is strong in buying
decisions. It is sometimes surprising how many things we own that are also
owned by people we associate with. Purchase decisions for certain product
categories, especially those that are 'conspicuously consumed', are
particularly prone to social influence. Examples can be found in clothes and
fashions for young people on whom peer group pressure is strong, cars for
men, clothes and jewellery for women and home furnishings and durable
goods for households on which friends, relatives and neighbours exert
considerable influence.
Going beyond personal and group influence, we consider the larger society or
culture. People live in a cultural milieu that embraces their history, values,
morals, customs, art and language. Culture exerts a broad influence on buying
behaviour and determines the kinds of products that may be used by the
people. For example, Muslims would not buy pork products or alcoholic drinks.
More importantly for marketing, culture and tradition determine the openness
of a people to new ideas and their willingness to try new products and
services.
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5.
Market segmentation
Markets consist of buyers who differ in many ways and who may therefore be
classified into sub-markets or market segments on the basis of a suitable
characteristic or variable. Variables such as geographic location, age, sex,
income, social class, benefits sought from use of product or problems faced
have been used to segment or subdivide markets. Assuming that a market
can be subdivided, the marketer then decides whether to ignore the existence
of market segments and make one product offer to the entire market, or to
recognise the existence of sub-markets and design into the product those
features that meet the unique needs of one, some or all of the identified
segments. In the latter case, all other aspects of the marketing mix - price,
distribution and promotion - will be geared to the demands of the segment(s).
Obviously, any market segment isolated should represent substantial demand
before it would be worth giving it special attention. It is apparent that a
marketer who wishes to enter a market already crowded with competition
should proceed by first doing market segmentation (if feasible) to determine if
there exists a segment ignored by the other competitors. Of course, if the
marketer feels that he has a superior product, he might decide to challenge
the competition in their entrenched segments.
6.
Information for Decisions: Marketing Research
Adequate information is the life-blood of decision-making and management.
Companies normally develop their own regular system of gathering marketing
information. In Africa, there appears to be a heavy dependence on field
reports filed by sales representatives concerning market conditions,
competitors' actions, middlemen and consumer reactions to companies'
products and marketing policies. In many cases a separate research
department does not exist, little or no research budget is provided and work is
rarely sourced out to outside research organisations. Such outside research
firms are few today because the demand for their services is low.
Benefits of research:
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Various benefits can be derived by taking marketing research seriously even
if it is done on a modest budget. Marketing research is the primary tool for
conducting market analysis where as much information as possible is
gathered about consumers (e.g. their needs, attitudes and preferences, socioeconomic characteristics), competitors (their products, prices, etc.) and
middlemen (their types, discounts or margins enjoyed, etc.).
The marketer exploits the information gathered from market analysis to plan
his marketing mix - product, price, distribution, and promotion. Research can
tell what products are needed, which product features are popular, which price
ranges are acceptable to buyers, which retail outlets are favoured by buyers,
through which mass media the buyers are likely to be reached and so forth.
When the marketing plan is launched, research is needed to monitor results
and investigate various kinds of problems relating to the marketing effort. For
example, research is needed to measure the effectiveness of advertising or to
determine the reactions of middlemen to a new product.
Costs of research
Marketing research may be a costly undertaking if properly done. The value
of information obtained should always be balanced against the cost of
acquiring it. Cost elements include personnel and materials for field work and
data processing and report preparation costs.
The option of not doing research should always be considered, especially
when the decision that may benefit from it must be made quickly. Indeed, the
problem of time availability is a serious one, because many marketing
decisions must be made quickly and yet good research requires ample time
for proper design and execution.
The marketing research process
Marketing research may be defined simply as the gathering and analysis of
information to guide marketing managers in marketing planning and problem
solving. It is a systematic process that involves some recognisable steps. Four
basic steps of marketing research are:
1 Problem formulation.
2 Situational analysis and exploratory research.
3 Formal research.
4 Solution.
Problem formulation
A clear definition of the research problem is probably the most important
research task. But it is not an easy matter. Frequently, the symptoms of a
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problem - for instance declining sales - are obvious to all, but the cause or
causes are less obvious. The researcher holds discussions with the sponsor
of the research in order to understand the latter's problems and marketing
objectives. The context or environment in which the problem is embedded is
examined to gain a better insight into the problem. This involves asking about
internal (company) and external factors that may bear on the problem.
Situational analysis and exploratory research
The key characteristic of the second stage of the research process is
consultation of secondary sources of information. We should now distinguish
between secondary data which are data that existed prior to the need to solve
the problem, and primary data which are fresh data collected specifically to
solve the problem. Secondary data sources include internal company records
on the product's sales, costs, customers and other marketing variables;
outside sources include publications by government agencies (in Africa,
especially the Federal Office of Statistics) and private bodies; relevant
research both inside and outside the company; informal interviews with
informed people both inside and outside the company.
If the problem was properly identified in the first step, the analysis in step 2
may be sufficient to solve it, in which case further formal research would be
unnecessary. Usually, the analysis of the second stage leads to a better
definition of the problem and very likely suggests the need for formal research.
Formal research
Formal research entails the collection of primary or fresh data to solve the
problem or meet the information need. The most frequently used formal
research method is the marketing survey. Major activities in survey design and
execution involve questionnaire construction, the actual data collection
(through mail survey, telephone survey or personal interviews) and the editing
and coding of returned questionnaires. The population of respondents from
whom information is to be obtained could consist of individual consumers,
households or organisations. Although a selection of a representative sample
from the relevant population is made, sometimes it will be wise to do a census,
that is to include every member of the population, if the numbers are small.
This is often the case when organisations are surveyed; consumer surveys,
on the other hand, usually involve use of samples because of the large
numbers of consumers.
Solution
The final step in the research process is data analysis and interpretation of
results. The simplest analytical method, especially for surveys, is ordinary
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tabulation and frequency counts, followed by calculation of percentages. For
example, if respondents were asked if they would purchase a product at a
stated price, research might find something like 'forty per cent of respondents
said they would definitely buy, while only twenty .per cent said they would
definitely not buy.'
When the researcher completes his data analysis and interpretation of results,
he prepares his recommendations for the company. A written report
embodying the recommendations should, as far as possible, be free of
technical jargon, be in clear style and use charts and tables where necessary.
It should be reasonably brief and above all include specific action implications
for the sponsor. Examples of concrete recommendations are: 'The company
should seriously consider increasing the price of the brand by twenty per cent.'
or 'The current budget for advertising should, at a minimum, be doubled.'
Marketing decisions areas
The key areas in which marketing managers have to make decisions
correspond to the four components of the marketing mix: product, price,
distribution and promotion. Sales force operations may be isolated from
promotion as a separate area of decision making; if international marketing is
undertaken by a company, then all the above decision areas will be relevant
in the context of serving markets outside national boundaries. Having earlier
outlined the kinds of decisions made while discussing the marketing mix, we
shall now elaborate on the key decisions only.
Marketing plan format
1.
2.
3.
4.
5.
6.
7.
Description of Product(s)
Target Market Segments
Target Market Area
Demand Analysis
Supply Analysis
Competitors’ Marketing Strategies
 Product Strategy
 Price Strategy
 Place Strategy
 Promotion Strategy
Project Marketing Strategies
 Product Strategy
 Price Strategy
 Place Strategy
 Promotion Strategy
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8.
9.
10.
Sales Forecast
Fixed Assets for Marketing
Total Marketing Expenditure Budget
Marketing plan guiding questions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
What is/are the product(s)?
Which target market segment does each of the product
aim at? or: To whom will the business sell its products?
Which geographical areas will be the chosen
segments?
What will be the demand for the product, similar
products and substitutes within the target market
segments in the target market areas?
What will be the supply of similar products and
substitutes within the target market segments from the
target market areas?
What are the strategies of the competitors who supply
to your chosen target market segments and target
market areas in terms of product, price, place and
promotion?
What will be your strategies to supply to your chosen
target market segments and target market areas in
terms of product, price, place and promotion?
What will be the selling price and how much will be
sold?
What fixed assets will be required for marketing and
how much will they cost? What will be the life of the
assets and how will they be depreciated?
How much of expenditure will be incurred in terms of
marketing, including cost of marketing personnel?
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7.
Product Development
Product decisions
The product or service is the offer that the marketer makes to buyers and it is
of central importance in the marketing effort. A product may be defined as a
bundle of physical and psychological satisfactions that a buyer receives from
a purchase. It includes not only the tangible object, but also such supportive
elements as packaging, convenience of purchase, post-sale services and
others that buyers value.
Branding and packaging
A product should be given a unique brand name to distinguish it from other
goods offered to buyers. The name should be distinctive and easy to
pronounce, and it should capture the essential product idea. The name should
be registered as a legal trade mark, thus protecting it from use by competitors.
It is a fact that many African manufacturers do not bother to put any brand
names on their products, and some unscrupulous ones assign names that
sound almost identical to the names of well-known successful products. These
suggest lack of confidence in the product's quality by the producer. In any
case, a producer who is marketing a successful but nameless product is
making a grave error that should quickly be corrected.
Packaging has the basic function of protecting the product, hence the package
must be durable enough to survive handling during distribution. It should be
aesthetically pleasing and be distinct enough to stand out when placed side
by side with competitors' brands on the retail shelf. It should also be
convenient to handle by consumers (consider the convenience of the aerosol
spray can that revolutionised the packaging of certain liquid products). The
package label, apart from providing certain kinds of information that may be
required by law such as net weight, volume and ingredients, may be used by
the producer to promote the product if a well-designed promotional message
is inscribed on it.
Building the product mix
The product mix is the composition of products being marketed at any point in
time by a company. When products are closely related, especially with regard
to end use, they constitute a product line. An example of a product line is a
phonograph turntable, a stereo amplifier, speakers and a voltage stabiliser (for
Africa). A product line may be narrow (that is limited) or broad depending on
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whether the associated products are few or many. Two of the common ways
to build up a product line are:

by adding differentiated features to a basic product design in
order to
appeal to different market segments (market
segmentation strategy); and

by adding products that are complementary, meaning used
together. Sometimes a manufacturer will market brands of a
product that are virtually identical except for brand name and
packaging, although advertising will claim unique differences.
This strategy is called multi-branding and is commonly observed
in consumer packaged goods industries such as toilet soap and
detergents.
The manufacturer's objective is to improve his competitive position by
securing larger shelf space in retail stores and thereby taking sales away from
other producers' brands.
Proper management of an existing product mix includes knowing when to
modify products or delete those faring badly in the market-place. Sales figures
and consumer research provide the necessary information for the decisions.
Product innovation
A 'new' product is one that is new to a company, but not necessarily new to
the market where the generic product may already exist. The management of
a true product innovation (that is, a product new to the market) follows six main
stages which we simply outline here.






Idea generation: product ideas may come from many sources company, salesmen, customers, competitors.
Idea screening: selecting the most viable ideas to exploit.
Business analysis: analysis of sales, costs and profit
projections.
Product development: building and testing prototypes, etc.
Test marketing: placing product samples in actual retail stores
to test consumer acceptance.
Commercialisation: full-scale marketing on a national basis.
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8.
Pricing decisions - Factors that influence price setting
Setting base price
The base price is the price that the producer receives at the factory gate; it
does not include any mark-ups or allowances to compensate middlemen for
distributing the product. The most important method of setting a base price is
the full cost method. The rationale for full-cost pricing is that all products
should bear their full share of costs. Any product's price, therefore, must cover
all allocated costs plus a 'reasonable' profit mark-up or margin. The formula
for full-cost pricing is: Price = ATC(1 + M) where ATC is average total cost per
unit of the product, and M is the profit mark-up percentage.
Pricing in the distribution channel
We must now consider how the 'ex factory' price is translated down the
distribution channel (i.e. through wholesalers and retailers) to the consumer.
Suppose the producer has not suggested what the retail price should be and
merely asks the distributors or wholesalers to pay his producer price per item.
To cover their costs and provide for profit, the distributors will add their profit
mark-up percentage or margin to their cost before selling to retailers; and the
retailers in turn will add their own mark-up before selling to the final buyer.
Thus, a chain of mark-ups exists in the channel of distribution. Each
middleman uses a pricing formula identical to the mentioned equation, where
ATC represents his unit cost of the product. In some cases the producer may
recommend a retail price for his product and then allow middlemen discounts
based on that retail price. This type of discount is called a trade or functional
discount; it covers the middleman's operating costs and profits and represents
his inducement or rebate for performing important functions in the distribution
channel. For example, suppose the recommended price for a standard- sized
can of paint is 1 110 $ per unit, granting a discount of twenty-five per cent
means that the manufacturer bills the distributor for 1 110 $ (1 - 0.25) or 117.50
$. Thus, if the distributor gets a shipment of 100 cans, the invoice is for 11 750
$.
9.
Channels of Distribution and Logistics
The task of distribution is to make the goods physically available to buyers. A
distribution channel is defined as the combination of institutions through which
a producer markets his products to the ultimate buyer. By institutions we mean
middlemen such as wholesalers, distributors, retailers and agents. These
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middlemen perform important functions such as contacting current and
potential buyers of the product, inventory ownership and risk bearing (that is,
taking title to goods before they are sold), various kinds of sorting and handling
of the product, storage and transportation, extending credit or financing (of
their customers) and providing the producer with information about their local
market.
Selecting distribution channels
A producer can distribute his product through a variety of channels. If the
producer decides to sell directly to consumers, he uses a direct channel. This
may take the form of having sales people going from door to door to peddle
the product, or it may mean that the producer establishes a network of whollyowned retail outlets.
Five sets of factors affect channel selection:
1. The market coverage desired by the producer, e.g. to cover an
extensive market area will need the use of indirect channels for
intensive distribution.
2. The degree of channel control desired, e.g. to ensure proper
presentation of the product to consumers, the producer uses
direct channels by eliminating all middlemen.
3. Product characteristics, e.g. a bulky product like coal may use
direct channels to minimise handling.
4. Market characteristics, e.g. frequent and/or impulse purchase
by buyers would suggest the use of intensive distribution, every
available channel is used.
5. Manufacturer characteristics, e.g. only a manufacturer with
adequate financing can own its retail outlets, if such direct
distribution is called for.
Selecting and motivating distributors
Having selected the types of channels to employ, the producer has to pick
particular middlemen or distributors. He uses such selection criteria as the
credit-worthiness of the distributor, his selling ability, inventory and storage
space and his personal qualities. The producer may adopt a variety of
measures to build enthusiasm and excitement among the revellers, such as
providing sales training for distributor personnel, providing useful tips on
purchasing and stock control and supplying sales promotion aids such as
printed material on the products and point of purchase and showroom
displays. Proper management of distributors includes a periodic evaluation of
each distributor's sales performance in relation to previous periods or other
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distributors, and ensuring that he moves adequate volume of inventory on the
full product line offered by the producer.
Physical distribution or logistics
Physical distribution or logistics is concerned with the efficient movement of
raw materials from suppliers to the production line, and of finished goods from
the end of the production line to the customers. A number of associated
activities must be performed and these may be grouped under the four main
categories of:
1. transport;
2. inventory;
3. warehousing (including materials handling); and
4. communication.
A wide variety of transportation modes is available to move goods - rail,
highway, water, pipeline and air, each with different cost and service (speed)
characteristics. Decisions must be made regarding the mode of transportation
to use for each type of shipment. Inventory is of central importance in
distribution system design. Since the cost of carrying inventory is high,
procedures for proper management of inventory must be installed.
Warehouses (or depots) store inventories. Decisions must be made as to how
many warehouses are required, where they should be located and what
products should be stocked in what quantities. Materials handling involves the
movement of goods within the plants and warehouses. Suitable equipment
(such as fork-lift trucks, conveyors, pallets) must be available to permit
economic handling of goods. Finally, there must be good communication flow
in order to co-ordinate all the logistics activities effectively. For example, a
good communications system should be able to make available on demand
the present stock position of each item at each stock location.
10.
The Promotional Programme
Advertising is defined as any form of non-personal communication through the
mass media that is paid for by an identified sponsor. Along with sales
promotion, personal selling, publicity and public relations it forms the
promotional or communications programme of the marketer. Sales promotion
is any activity that is used to stimulate sales of a product or service usually
occurring once or over a limited period of time. Examples are 'sales' conducted
by retail stores at festival periods such as Christmas, the giving away of free
samples of the product, and price reductions on goods.
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Personal selling refers to the use of salesmen to push the product or service.
The sales force must be selected, trained, motivated (especially through a
good compensation plan) and controlled for effective performance.
Publicity is information about a company and its products that is conveyed to
the public by the mass media because such information is newsworthy and
the company pays nothing for it. Public relations efforts of the marketer are
concerned with building and maintaining good relations with special publics
such as customers and the public at large. And such image-building may use
advertising as a tool.
The various components of the promotional programme are not used in
isolation. For example, although advertising may be most suitable for one
purpose and personal selling for another, the two are often employed
simultaneously, the relative emphasis depending upon circumstances.
Further, advertising may be used to announce a sales promotion activity.
11.
Advertising
Importance of Advertising
Advertising is a young industry in Africa. Since many products are relatively
scarce in the country, the typical producer is able to dispose of his output
without much promotional effort. With the exception of consumer products
companies - especially cosmetics and toiletries manufacturers - African
marketers do not spend much on advertising and some do not advertise at all.
Yet the trend is changing as more and more companies are realising that
advertising can be a positive force in their marketing as competition increases.
An indicator of the growing importance of advertising is the rapid growth in
Africa of the number of advertising agencies.
There are two basic objectives of advertising, namely:
 to inform the target audience about the product or service;
 to create or stimulate demand for the product or service
through persuasion.
These translate ultimately into sales of the product, but in planning a specific
advertising campaign the marketer may choose a more concrete goal such as
'to increase consumer awareness of the product by thirty per cent'.
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The key advertising decisions are:
 setting the advertising budget;
 creating advertising copy; and
 selecting media and vehicles and allocating from the budget to them.
The advertising budget may be based on a percentage of sales or it may be
keyed to a level comparable to what the competitors are spending. Advertising
copy is defined as the words and picture or illustration that make up the
advertisement and the way they are laid out to create a total impression.
Through the copy the advertiser says what he wants to say (called the theme
or message) in the way he wants to say it. Various advertising media are
available such as radio, newspapers magazines, television, outdoor
advertising and cinema films. Radio is currently the most popular medium in
Africa, but each medium has its advantages in reaching particular types of
target audiences. After selecting the suitable media, the next job is to decide
how much time or space to purchase in each vehicle (e.g. daily
advertisements of ten or twelve lines in the newspaper medium) and how
these insertions will be spread over the time period covered by the advertising
campaign. This is called media scheduling.
In planning and executing his advertising programme, the advertiser relies
heavily on the services of his chosen advertising agency. The advertising
agency advises clients on advertising strategy, creates advertising copy,
supervises advertising production and buys media time and space. The larger
agencies provide many other services, such as advising on marketing
planning and sales promotion, designing and producing brochures and pointof-sale displays, advising on publicity and public relations and conducting
marketing research.
Advertising Channels
In the good old days, it was widely believed that supply created its own
demand and as a result, many enterprises did not see marketing (in its various
forms) as an important set of activities. The story is different now. It is indeed
so different that without marketing, a business could hardly stay competitive.
It is anticipated that in the near future, enterprises would have to undertake a
lot of marketing activities to maintain their market share.
There are many marketing channels open to small enterprises, each
presenting a different level of opportunity and cost, etc. Many enterprises have
used a combination of these channels as radio advertising slots, flyers,
business cards, directional signs, newspaper advertising, personal selling,
sales promotion, after sales service and shop designs.
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Each of these options is useful either when used alone or in combination with
other options, depending on the product, target market and the objective of
the use of the option. Each of these options also comes with cost implications
which should be weighed against the enterprise’s cash flow situation and the
expected response from the target market. It is always advisable to be less
optimistic about the expected results from use of any or a combination of these
options.
Radio Advertising is used quite extensively by the large and medium
enterprises and to a limited extent the upper small enterprises. It is a powerful
marketing channel that has the potential of bringing good returns on the
investment made. There are however some precautions that need to be
exercised by enterprises wanting to use this channel.
In the first place, it is true that an increasingly large proportion of the population
of Ghana do listen to radio for various purposes such as news, music,
information on products, services, etc. It is also true that there are close to 20
radio stations in Accra/Tema alone and this phenomenon presents the
question of who listens to which radio station at what time. It is only when this
question is accurately answered that advertising via radio could yield potential
benefits. There are testimonies of enterprises that have used radio advertising
to grow their businesses from micro through small to relatively large
enterprises. There are others that no doubt have been impoverished for using
the same channel of marketing.
For one thing, it costs quite a bit of money to undertake a sustained marketing
campaign on radio which could achieve the desired impact on the target
market. Thus if this investment does not yield the expected impact, the
enterprise’s cash flow could be unduly encumbered.
The experts advise that a radio campaign that has yielded good results for the
typical small enterprise has taken about six weeks of three slots a week on at
least two radio stations. This has a huge cost implication for the small
enterprise.
Flyers
The use of flyers is catching up with small enterprises in Ghana. This channel
of advertising is used mostly when a new product/enterprise is being
launched. It is a relatively cheap form of advertising but its impact is often not
assured as the proportion of the reading public is not large enough. To be
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Business Information Handbooks
successful, it has to be targeted in terms of timing and audience. Some of the
successful flyers have been sent to restaurants and bus stops where the
target market generally has some time to spare. It could also be useful in
heavy traffic. This option though is not recommended.
Directional Signs
Directional signs are widely used by both small and medium enterprises. It is
not as costly as the other channels of marketing and its effects are longer
lasting. It is however the case that most small enterprises do not use enough
of these directional signs and therefore do not benefit fully from the use of this
channel of marketing. Thus in a situation where only two directional signs are
placed, potential customers are unable to easily locate the enterprise’s place
of business.
The metropolitan authorities have begun imposing taxes on sign/directional
posts and in some cases the size of the post is limited. These have an effect
on the impact of the investment made.
Newspaper Adverts
Newspaper advertising is one of the best ways of getting across information
on a product or service to the marketplace. The product or service gets very
wide attention. If it is placed in the national daily, especially the Daily Graphic,
the response is often very encouraging, albeit not long lasting. Thus is it
recommended that to obtain the optimum benefits from newspaper
advertising, such placements should be repeated a number of times.
The cost of advertising in the newspapers has shot up in recent times and
small enterprises find it extremely difficult to advertise the number of times
that would normally yield the required results.
Personal Selling
The use of personal selling is also a potent form of marketing. However, below
a certain volume of business, its use is not recommended. It requires the use
of well trained and motivated salesmen to achieve the desired impact. It could
be very expensive but effective as the buyer is able to clear all concerns about
the product/service at the point of purchase.
Sales Promotions
Sales promotion has been an effective marketing tool over the years. It
includes the buy-one-get-one-free strategy to raffles to free samples and the
trade fair attendance etc. Sales promotions have been effectively combined
with radio and newspaper advertising.
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Business Information Handbooks
Business Development Services in Ghana
www.ghanabusiness.org
SBS Network Consultants
assist you for Marketing
If you need assistance for Marketing ask one of the experienced
SBS Network business consultants. Please find a complete list
of consultants with fields of competencies on the last page of
this publication.
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Attachments

Marketing Guide
o
o
o

Guiding Questions
Marketing Plan Example
Workbook
Market Field Study Plan
List of SBS Network Business Information Handbooks
List of SBS Consultants
Business Information Handbooks
Attachment 1:
THE MARKETING GUIDE
Part I: Guiding Questions
Part II: Marketing Plan Example
Part III: Workbook
PART I – GUIDING QUESTIONS
1.1
What is the product?
Give a short description of the product, its size, colour, shape, the
quality, the packaging, and the range of products to be offered.
Describe product features, uses and benefits, whether it is a new or
an existing product.
1.2
How does it compare in quality and price with its competitors?
In answering this question, determine what will make the product
unique in the market. Will it be of better quality than what is currently
available, or will the price be significantly different to make it easier
to sell? What other features will make it different from competitors'
products?
1.3
Where will the business be located?
Location of the business is essential to either reduce costs, or
increase the chances of customers stopping at the business to look
at your products or at least make inquiries. If the business is retail or
service oriented, it must be near the market. If it is production
oriented, it may be better to be closer to its raw material sources or
near infrastructure facilities (e.g., port), transport and utilities (e.g.,
power) centres.
The important factors to consider in location are:
proximity to essential raw materials
proximity to markets and distribution channels
availability of transport facilities
availability of efficient and cheap skilled labour
existence of related industries (forward/backward linkages)
infrastructure facilities (e.g., road, power, port, etc.)
Business Information Handbooks
communication facilities (e.g., post office, telephone, fax,
telex, etc.)
Good location is one of the most crucial factors in market
development, hence choice of location should therefore be carefully
considered. Location should also be differentiated in terms of
marketing outlets or factory location. In most small businesses,
marketing outlet and factory may refer to one and the same location.
1.4
What geographical areas will be covered by the project?
Determining the geographical coverage (that is, where to market the
product) depends very much on the nature of the product; how well it
lends itself to transport and distribution; the size of the market in
different localities; the presence of strong competitors in the areas
under consideration; your willingness to travel and, of course, on
existing contacts or channels of distribution you are familiar with.
In general, it is easier to deal with a limited market area, since travel
time and distribution costs can be kept to a minimum.
1.5
Within the market area, to whom will the business sell its
products?
Here we are really talking about a specific target group or market
segments among the population, within the specified market area
you have chosen, to whom you will aim to sell your products. Identify
these customers as clearly as possible (e.g., their characteristics
and profile in terms of age, sex, income, buying practices,
consumption pattern, etc.) in order to ensure that the product does
indeed suit their taste, needs, wants, taste, income, lifestyle, etc.
Will you sell to wholesalers, retailers, and if so, what are the
consequences? If you plan to have a retail outlet, choice of location
is critical.
1.6
Is it possible to estimate how much of the product is currently
being sold?
This estimate should be possible to do in a number of ways.
Basically, the approach is to move from the general to the particular.
For example, you can start by estimating consumption, usage or
sales of the product per head of the population in your market area.
Then, one by one eliminate certain segments (specific groups
categorised by age, income, location, sex, habits, etc.) of the
population who may not be your consumers so that, in the end, a
reasonable figure can be assumed to be correct. If possible, it is
Business Information Handbooks
good to check some statistics, if they are available. If you cannot
avail of any reliable statistics (secondary data), it may be better to
make a simple and low-cost sample survey, i.e., gather firsthand or
primary data. For example, if you know how many shops there are
which sell your or similar products, and if you question a few of them
regarding their sales, you can estimate the total sales of the product.
Market Survey Checklists
The following is a series of checklists which can guide you in your
interview with wholesalers, retailers, and consumers (people who
use the product) or customers (people who buy your product). The
questions are intended to be illustrative and you should learn how to
begin your interview (by building rapport with your interviewees so
that they will open up and not feel suspicious or threatened) and
pose your questions diplomatically, politely and clearly to get the
desired information and accurate answers.
If the questions are adequately answered, you can make a
preliminary estimate of the total demand in your market area and the
share of the market which you can realistically capture, given an
effective marketing strategy. If similar products are distributed mainly
by wholesalers and retailers, conducting such a survey is really the
first step in establishing a relationship with your customers and
finding out their needs.
a)
b)
There are two main reasons for doing the survey:
accurate collection of information so that a reliable level of
sales and production can be forecasted;
establishment of good relations with your own potential
customers or buyers.
I.
Wholesalers/Importers' Checklist
Most consumer products such as biscuits, sugar, toothpaste,
matches, etc., find their way to the consumers through wholesalers
who purchase the goods in bulk from a factory or distributors and
then sell them in smaller quantities to grocery stores and retail shops
(customers).
Since there are usually few wholesalers and many retailers, it is
often best to start your market survey by seeing the wholesalers.
Once you have defined your market area, try and locate all the
wholesalers who supply your area and ask the following questions:
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1)
2)
3)
4)
How many wholesalers are there in your market area? What
are their names and where are their locations?
What market areas does each wholesaler cover?
How much of your product does each sell per year? Is it
increasing every year? If yes, by how much?
Are there seasonal fluctuations?
For example: 1 2 3 4 5 6 7 8 10 11 12 months
High
Medium
Low
5)
6)
7)
8)
9)
10)
What about the extent of competition? Are they large in size,
are their product features the same, what are their quality
standards? What are their marketing practices?
What about product improvements, i.e., do they think the
market needs some new design, more varieties, better
features, new product specifications?
What are their selling price of your product?
At what price do they buy it?
What is the length of credit extended to them by their
suppliers (one week, one month?), if any?
Assuming your product is of a suitable quality and priced
competitively, how much of your product would they take as
a sample order?
II.
Retailers' Checklist
Retail shops are the last link between producers and consumers.
Ultimately, they make the final sale to the public. Their proximity to
the buyers makes them valuable sources of information on what
people actually want and buy.
For example, if a person buys ink which turns out to be of poor
quality, then the customer will complain to the shop from where he
made the purchase, rather than going to the factory. For this reason,
retailers are in a strategic position to identify gaps in the market,
particularly between what his customers demand and what his
wholesalers can supply. Some creative retailers may be able to give
you new product ideas that could also be made in your factory.
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The objectives of interviewing retailers are:
a)
to cross-check data provided by wholesalers;
b)
to learn about the needs, wants, taste, buying habits, etc., of
the consumers;
c)
to look for potential new products;
d)
to learn how to position your product as against your
competitors' products;
e)
to learn how to market your product more effectively;
f)
to help identify promotional measures that will be useful in
selling the product (e.g., display boards, give-aways,
samples, etc.);
g)
to help formulate the marketing strategy of the business.
Some questions which may be asked from the retailer:
1)
How much of the product does he sell in a year?
2)
How many competitors does he have in his neighbourhood?
3)
Does he experience any seasonal fluctuation in sales?
4)
From what wholesaler or manufacturer does he buy the
product?
5)
Is he given any credit by his suppliers?
6)
If he is given credit for the product, for how long is the credit
given?
7)
Does he sell on wholesale anywhere, if so, where?
8)
What is his purchase price for the product?
9)
What is his selling price for the product?
10)
Does he have any ideas whether his customers would like
any changes or improvements in the product?
11)
Does he buy the product cash or on credit?
12)
Does he sell on commission?
III.
Customers' or Consumers' Checklist
Even if you have interviewed wholesalers and retailers, it is
important to discuss market acceptance with customers (who buy
the product) and consumers (who use the product). Their feedback
is very useful, either to cross-check previously collected opinions or
to stimulate new ideas that neither of the other two groups of
interviewees have touched on or captured.
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In particular, if your product is a capital good (e.g., machinery), it is
necessary to talk to consumers as they normally purchase directly
from the factory. Some questions which can be asked from
customers and consumers are:
1)
Why did you buy this product?
2)
When (What month) did you buy it?
3)
How often do you buy this product?
4)
Will you be needing more of this product in future? How
many?
5)
How much did you pay for it?
6)
Are you satisfied with it?
7)
Would you like to see any changes or improvements?
8)
From where did you buy it (locality), from whom?
9)
Why did you buy it from this particular supplier?
You must have a record of the profile of your interviewees (wholesalers,
retailers, consumers) such as age, occupation, income, buying habits,
sex, consumption pattern, etc. as this information will be helpful in
analysing and describing your market.
1.7
What share or percent of this market can be captured by the
business?
This is always a difficult question to answer precisely, since much depends
on your ability as an entrepreneur to sell your product, your network, the
effectiveness of your marketing strategy and your aggressiveness in pushing
the product combined with business common sense. It also depends on the
extent and strength of competition. However, some guidelines can be given.
If you have done your market survey properly, you will know the following
information about your competitors:
a)
whether there are few or many competitors;
b)
whether they are large or small in size;
c)
whether their product features are similar or not similar to
one another;
d)
whether their product features are similar or not similar to
yours.
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The following decision guide may help in processing this information
to make an estimate of your market share.
DECISION GUIDE
Number of
Their Size *
Their Product
Market Share (in
Competitors
Features
%)
Many
Large
Similar
0 - 2,5
Few
Large
Similar
0 - 2,5
One
Large
Similar
0 - 5
Many
Large
Dissimilar
0 - 5
Few
Large
Dissimilar
5 - 10
Many
Small
Similar
5 - 10
Few
Small
Similar
10 - 15
Many
Small
Dissimilar
10 - 15
One
Large
Dissimilar
10 - 15
Few
Small
Dissimilar
20 - 30
One
Small
Similar
20 - 50
One
Small
Dissimilar
40 - 80
No competitor
100
* It is assumed that your business will be in the "small" category when
entering the market.
1.8
How much of the product will be sold?
Now that you have estimated the market share you can realistically
capture, you make an estimate of your targeted sales (sales
forecast), that is, every month for the first year and yearly for the
next five years. The first annual sales forecast is generally a fraction
of the estimated market share and could be anywhere from 60 to
80% of the market share in the beginning. This is to give allowance
for some errors in estimating the market.
1.9
What is the selling price of the product?
There are three common ways of determining the selling price of
your product. These are:
a)
The "Cost-Plus Method"
This is done by adding a reasonable profit margin (say 20% to the final
total product cost (i.e., marketing cost plus production cost plus
administration cost, plus finance cost). The final product cost per unit is
determined by dividing the total product cost by the number of units
produced. To this figure you may add a profit margin.
Business Information Handbooks
b)
The "Comparative Method"
This method compares your product with others in the market and
then, based on your product's quality and other features, you may fix
your price lower, higher or the same as your competitors'.
c)
"What the Market Will Bear Method"
This method is based on supply and demand of the product. For
instance, if there is a scarcity of the product in the market (sellers'
market), you can set your selling price high, hence your profit margin
could be higher. Similarly, if there is a surplus of the product in the
market (buyers' market), you may be forced to lower your price, and
consequently your profit margin. (Two alternatives to avoid reducing
profit margin are: (1) to reduce the product cost by identifying which
areas under marketing, production, administration and finance can
be reduced), and (2) to identify other market segments who can
afford to buy at the original price).
In practice, all three methods should be used from time to time in
any business, but in general and especially when starting a
business, it is safer to use the "Cost-Plus Method". It is also a good
business strategy to anticipate your competitors' reaction to your
pricing strategy.
1.10
What promotional measures will be used to sell the product?
Promotion is one of the most neglected aspects of marketing a
product. Promotion is necessary to entice and convince buyers to
purchase your product and not your competitors'. Promotion is
generally divided into advertising, sales promotion, publicity and
personal selling. Some of these measures are:
 advertisements on radio, newspapers, magazines,
trade journals or, if appropriate on television,
 volume discount (reduced prices when selling in
bulk),
 handbills distribution,
 prompt, regular, courteous and efficient service to
your clients,
 good merchandising ensuring proper display of your
product on the shelves of your market outlets,
 special credit facilities to regular customers,
 posters,
 billboards,
 signboards,
 free samples,
Business Information Handbooks








free trial,
press release,
buy one - take one,
raffles,
coupons,
sponsorship of local shows, festivals,
participation in trade fairs and exhibits,
personal selling.
One word of caution on promotional measures. These activities cost
money to your business, so be sure that for every promotional
measure adopted, there is a foreseeable increase in sales. Without a
justifiable increase in sales, cost will escalate, hence increasing the
unit cost of the product.
1.11
What marketing strategy is needed to ensure that sales
forecasts are achieved?
Formulating a marketing strategy means proper planning, balancing
and integration of the business's product strategy, pricing strategy,
distribution strategy and promotion strategy. In order to market
effectively, you must identify your market, know your product and
study your competitors. You also have to spend some amount for
promotion, price your products correctly and distribute them to your
retailers and/or consumers effectively and efficiently. You should not
assume that because your product is good that customers will
automatically buy your product. Analyse what the best time of the
year is to promote your product – there might be seasons where
marketing would not have any effect.
1.12
How much do you need to promote and distribute your
product?
You must have a marketing budget that includes your marketing cost
such as for promotion, distribution and salaries of your sales force, if
any. Not all measures are equally adequate for your product.
Business Information Handbooks
PART II – MARKETING PLAN EXAMPLE
1.1
Description of the Product
Common laundry soap is currently sold in small round balls with a
diameter of 3 inches or 7 centimetres which can easily be cupped in
the palm of the hand and then rubbed with water into the clothes that
are being laundered. The size and weight of each piece vary slightly
according to customers’ needs and what they can afford, but the
normal range is between 200-400 grams per piece. Depending on
the type of oil used in making the soap, the colour can range from
light to dark brown. The soap carries the brand name "Energiser".
1.2
Comparison of the Product with its Competitors'
Mr Marketing, who regularly deals in soap in his grocery store, has
long observed that the quality of soap currently sold in the market is
poor and he has received many requests from his customers for a
better quality soap. Due to the distance of the town from the capital
city (about 50 km), only three soap distributors regularly supply soap
in the area. Quality of the soap is based on its cleansing power,
smoothness in rubbing soap against the clothes, no chemical
reaction to the hands, and less water consumption for a clean rinse.
The proposed manufacturing project aims to fulfil these four
requirements.
The main factor in determining a soap's quality is the oil used. Mr
Marketing intends to use palm oil instead of the more commonly
available rice bran oil. He sells the ordinary quality soap at a price of
cedis 13,500 per kilo (kg), but his regular customers say they would
be willing to pay up to cedis 15,500 per kg, if the soap is superior.
1.3
Location
The business will be located in Mr Marketing's present store location
in the centre of Georgetown at 38, Training Street. This location has
been chosen for the following reasons: the production operation can
easily be supervised by the owner; it is near the transportation hub; it
is close to its targeted markets; and only minor investment in
building expansion will be needed.
1.4
Market Area
Mr Marketing plans to distribute the soap principally in his grocery
store and in ten neighbouring villages which are within two hours'
ride by public transport from the town centre. This area has been
selected because: (a) Mr Marketing personally knows many of the
Business Information Handbooks
major retailers of soap in these villages; (b) it is close to the factory
location; and (c) it is often neglected by distributors from the capital
city of Accra.
1.5
Main Customers
While the main buyers of soap are eventually individual households,
Mr Marketing plans to sell his soap in his grocery store where there
are many walk-in clients from the town as well as retailers from the
villages. In the ten neighbouring villages he has contacted the 15
major soap retailers and they have agreed to sell his soap, provided
its quality is at least as good as what they are selling now. These
retailers have confirmed that their customers are demanding a better
quality soap.
1.6
Total Demand
These retailers, when surveyed, claim that each of them sell
approximately 1,000 kg of soap every month, or a total demand of
about 15,000 kg per month.
1.7
Market Share
A sample survey of competitors in the area indicated that there are
only three manufacturers selling soap to the 15 major retailers to
whom SBS Soap Manufacturing plans to sell its product. The
competitors are small in size and the quality of their products is
inferior to what is planned by the project.
Because the number of competitors is small, their size is small and
their product is dissimilar to the one proposed, a market share of 20
to 30% is estimated as being reasonable. The more conservative
estimate of 20% in the first year will be assumed. In the initial stages
of production, operating at 100% capacity cannot be assumed.
There are bound to be initial operating problems, raw material
shortages, distribution difficulties, etc., hence only 80% is projected
to be served in the first year.
1.8
Selling Price
The selling price is based on "Cost-Plus Method". Mr Marketing feels
that a profit mark up of 8% over the total product cost is very
reasonable and competitive especially at this initial stage.
Unit product cost is estimated at cedis 12,960. Adding the 8% profit
mark up, his wholesale price is cedis 14,000 whether delivered or
walk-in. This means that by adding another 10% mark up for the
retailer, the retailer’s selling price will be cedis 15,400. At this price, it
Business Information Handbooks
is slightly below the price of cedis 15,500 which his regular
customers indicate to be willing to pay for a superior quality soap. He
charges the retail price of cedis 15,400 for walk-in single purchase
clients.
1.9
Sales Forecast
If the total demand is 15,000 kg per month and the projected market
share is 20%, the project’s potential market size is 15,000 kg x
20/100 or 3,000 kg per month. However, for practical purposes, only
80% of the projected market size will be considered for sales
forecast, that is, 3,000 kg x 80/100 or 2,400 kg per month, or 28,800
kg in a year.
Mr Marketing believes that the market is expanding quite rapidly as
the town of Georgetown has the highest population growth rate
among the 20 towns in the province of Businessheaven, and a large
cement plant will be built soon near the town. Conservatively, he
projects that his sales volume will increase by 10% every year and
attain 100 % of the projected market share by the third year. He
estimates that 70% of his sales will come from wholesale and the
remaining 30% from walk-in single purchase customers.
Year
2003
2004
2005
2006
2007
1.10
1.11
Projected Sales
Volume (kg)
Amount (cedis)
28,800
32,400
36,000
36,000
36,000
403,200,000
453,600,000
504,000,000
504,000,000
504,000,000
Promotional Measures
In order to secure the goodwill of the retailers, 15 days’ credit will be
extended to these village shopkeepers who regularly buy in bulk.
Present manufacturers/ distributors do not extend credit. Other
promotional measures to help in marketing the product will be free
delivery for volume purchases, word of mouth advertisement by
satisfied clients, use of posters, and regular and prompt supply by
the manufacturer.
Marketing Strategy
The project's marketing strategy is based on the following strategies:
a) product strategy
- it has a superior product.
Business Information Handbooks
- it has an appealing brand name ‘’Energiser’’
connoting more cleansing power.
b) pricing strategy
- its retail price of cedis 15,400 is lower than the
most expensive brand (cedis 15,500).
- the business will extend l5 days' credit to regular
village shop-owners.
c) promotion strategy - free delivery;
- word of mouth advertisement;
- prompt, courteous & efficient service;
d) distribution strategy - over-the-counter sales in his existing grocery
store;
- l5 major village retail stores.
1.12
Marketing Budget
SBS Soap Manufacturing will have very modest cost to promote and
distribute its product. It will rely mostly on word of mouth promotion
by satisfied customers as well as endorsement by the retailers of the
product because of its superior quality. Hence, the only cost it will
incur will be occasional give-aways and distribution of the product
(including transportation and sales commission) for a total monthly
marketing budget of cedis 50,000, or annual budget of cedis
600,000.
PART III - WORKBOOK
1.1
Description of the Product
1.2
Comparison of the Product with It’s Competitors
Business Information Handbooks
Competitive Analysis of Product
Features
Proposed
Business
Product Quality
Price
Delivery time
Brand Name
Multiple Use
Taste
etc.
1-Outstanding
2-Very Satisfactory
3-Good
4-Fair
5-Poor
1.3
Location
<Location Map>
1.4
Market Area
Competitor
1
Competitor
2
Competitor
3
Business Information Handbooks
<List of Market Areas And Size of Market>
1.5
Main Customers
<List of major Customers and Their Requirements>
1.6
Total Demand
Business Information Handbooks
Table 1.6
Table of Projected Demand
Year
Quantity
Amount (cedis)
___________________ ______________________________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ______________________________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
1.7
Market Share
<Table of Projected Supply and Sources of Supply>
1.8
Selling Price
Business Information Handbooks
Table 1.8
Project’s
Product(s)
1.9
Comparison of Competitors’ Selling Prices
Project’s
Prices of Competitors
Competitors’
Selling
Average
Price
Price
Competitor Competitor Competitor
1
2
3
Sales Forecast
Table 1.9
Projected Sales by Year, Sales Volume and Amount.
Year
Sales Volume (units)
Sales Amount (cedis)
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
1.10
Promotional Measures
Business Information Handbooks
1.11
Marketing Strategy
<Table of competitors’ Marketing Strategy>
1.12
Marketing Budget
Business Information Handbooks
Table : Marketing Budget
Chose what applies to your product and marketing strategy:
Item
MONTHS
1 2 3 4 5 6 7 8
Projected Sales
Marketing Expenses:
Promotion (specify)
Distribution (specify)
Advertising (specify)
Selling (specify)
Total Expenses
9
10
11
12
Business Information Handbooks
Attachment 2:
Market Field Study: Sequence of Events
A. Development of a questionnaire – Define....
 The reason or the intention for the interview
 The pattern
 The locations/areas of the survey
 Unforeseeable and calculable risks
 The questionnaire's contents
 Type and order of the questions (open/closed)
Then. . .
 Test your questionnaire
 Carry out an audit of the questionnaire
Recommendations: - Dos:...
 Situate delicate questions at the end of the questionnaire
 Use clear, simple and adequate language
 Pay attention to a logical sequencing of the questions
 Place an "icebreaker" at the beginning
 Include test questions (Cross-check)
DON'Ts:
 Avoid prejudiced/biased words
 Evade questions that imply an answer or that can hardly be
answered negatively can be answered
B. Preparations for the fieldwork
C. Interview
1.
Introduction
 Personal self-introduction
 Explain the reason for the interview
2.
Implementation / recommendations:
 No not forget the aim of the interview
 Keep an adequate distance to the person being interviewed
 Adapt your questions, if necessary
 Explain the reason for the interview clearly
 Thank the interviewed person asked for his efforts
D. Evaluation and Presentation
Business Information Handbooks
Business Information Handbooks
List of Publications for Business Development
Start and Improve your Business
Identification of viable business ideas, market and supply analysis, write a
business plan, organize business management, evaluate sales, improve and
diversify products.
Marketing Strategies
Marketing problems faced by Ghanaian businesses, marketing strategies,
managing prices, product development and promotion.
Export-Import and Trade Fair Guide
Export procedures, export business registration and licensing. Import
procedures. Trade Fair calendar and trade fair databases, trade fair
participation.
Business Planning
Business planning for start-ups, micro, small and medium enterprises: Nature
of Business, Business organization, Products and services, Marketing plan,
Management plan, Financial plan.
Bookkeeping and Cost Calculation Manual
Cash book formats, records on maintenance services, receipt, sales on credit,
raw material inventory, cash flow statement, Pocket Accountant software, cost
calculation, identify cost components, calculate variable and fixed costs,
calculate total cost per unit, how cost calculating improves your business.
Financing your Business
What finance do I need? What are the best sources of finance? Loan
application procedure. Bank categories. Loan conditions. Financial records.
Improve your Business Association
Needs assessment of your members, situation analysis, action planning,
services, fundraising, membership fees and accounting.
Business Information Handbooks
List of SBS Network Consultants
Name /
Company
Address
Competencies
Compta Consult
Accra
A.D. SOMUAH
Phone 233-21-761555
comptaconsult@yahoo.com
- Business Management
- Marketing
- Financial Management
EDC Consult
Abena Otu
Accra
Phone 233-21-227122
Mob. 0208150750
abenaotu@consultant.com
- Entrepreneurship Development
- Gender, Marketing
- Financial and Credit Management
- Organizational Development
- Monitoring and Evaluation
MEV Consult
Nick Okai
Tema
Phone 021-410682,
0244-630610
nickokai@yahoo.com
- Entrepreneurship Development
- Marketing,
- Productivity Improvement
- Community Development
Hopespring
Foundation
Afia-Darkwa
Amanor
Phone 233-21.50.39.31,
Mobile 233-24.43.72.522
info@hopespring
foundation.org
- Organizational Development
- Training in vocational and business
management skills
- Business and Carrier counseling
Praisel, Accra
Consulting
Alice Addai
Yeboah
Phone 233-021511932
or 0244 571474,
praiselconxx@yahoo.co.uk
- Enterprise Development
- Agriculture Development
- Micro-Finance
- Credit Delivery and Management
WEYDA Consult
Chalres Wiafe
Tel (233)24-4210228
20-8113312
Weyda04@yahoo.co.uk
- Business Development Services
- Staff Development Training
- Community Development
- Job Link Services for skilled medium
level Personnel
KED Business
Service
Ken Kpodo
T 233-244-273035 T 3122451
kkpodo@yahoo.com
- Working Capital Management
- Business Advisory
- Business Planning
- Micro-Finance Management
- Pastel Accounting Software Training
Business Information Handbooks
SMARTeam
Geralds Ahobor
Tema
Mobile:+233 24 4601706,
Phone:+233 22 305650.
smarteam_gh@yahoo.co.uk
- Capacity Building and Technical
Assistance to Micro and Small
Enterprises
- Technology and Product
Development
Ben-Gift Ltd
Bennet Niboi
Takoradi
Phone 233-31-23600
bgtakoradi@yahoo.com
- Business Start-up
- Human Resources
- Organisational Development
- Financil Management
- Marketing and Customer Care
ROHI Consult
David Atiga
Kumasi
Tel 00233-51-43396,
Mobile 0244-804367
atiga2002gh@yahoo.com
- Start-up Promotion
- Business Survival Programmes
- Growth Programmes
Y-SEF
Stanley Attafi
Ph 021-259021; 020-811
7831
Mobile 020-8117831
ysef2050@yahoo.com
- Business/Financial Management
- Support for Agribusiness initiatives;
- Micro finance intermediation;
- SMEs Needs Studies
Destiny Services
T 0244-537145,
020-823 8143
fadjeimensah@yahoo.com
- Business Development Services
- Business Promotion Services
- Health Care Support Services
Teen Net
Foundation
Billy BONSU
Phone 051- 43151
Mobile 024 - 4613923
billteenet@yahoo.com
- Business Planning and Promotion
- Marketing
- HIV/AIDS Training
FREE Consult
Phone 233- 0244- 716643
- Financial Management
- Budget and Cost Control Systems
- Marketing and Pricing
atohinson@yahoo.com
Praisal
Alice AddaiYeboah
Tel. 233- 021 511932
or 0244 571474
praiselconxx@yahoo.co.uk
- Costing, Pricing, Cash Management
Financing your Business Trainings
- Business Development
- Socio-Economic Issues
- Micro Finance, Credit Sourcing
Business Information Handbooks
DEKHAB
Associates
Phone 233-21-241425
Mobile 233-20-8112655 /
233-20-8195420
dekhabs@africa
online.com.gh
- Accounting / Financial Management
- Taxation and Tax Management
- Audit and Debt Consultancy
- Business Support for Investors
DENCO Foundry
Daniel
Phone 022-305221,
0244 –712181
dknumo@yahoo.co.uk
- Business / Financial Management
- Engineering management
- Small Business UpgradingTrainings
Institute of
Management and
Entrepreneurship
(IME)
Richard Doe-Dartey
0277 455419
kafui100pc@yahoo.com
- Financial Management
- Micro Credit Facility Management
- Accounting Software Development
- Event Management (workshops)
NAPDAP,Kumasi
Emmanuel
Dapaah
Tel 0244 531 614
napdap2004@yahoo.com
- Management Training
- Accounting related areas
- Preparation of Business Plan