Business operations grade 11

What is marketing?

activities a company undertakes to promote the buying or selling of a product/service

What does marketing include:

- advertising

- selling

-delivering products to consumers or other businesses

What is marketing at its core

seeks to take a product/service, identify its deal customer and draw the customer's attention to the product/service available

What does the marketing function assist businesses to achieve?

to locate customers and retain their loyalty

What does marketing create?

value for businesses by connecting potential customers with the products/services of the organisation

Roles of the marketing function

- Identify the needs of customers and determine the value they place on getting those needs satisfied.

- Share information gathered from customers with the production function to ensure that the products/services offered meet the customers' expectations.

- Promote the products/services that the business offers to potential clients/customers.

- Provide feedback from customers about the business' products/services and identify areas of improvement.

Marketing activities

processes that a business implements to increase their market share and to enhance their brand and image

What do efficient marketing activities ensure?

the brand and image of the brand remains in the customer's thoughts

Types of marketing activities

- standardisation and grading

- storage

- financing

- risk-bearing

- buying and selling

- transport

standardisation

the process of ensuring that goods are produced to the same standards in terms of size/weight/colour

- there should be differentiation in terms of the products

Grading

products that cannot be manufactured according to predetermined standards are graded according to quality of the product

examples of products that will be graded

fruits, vegetables, eggs

Storage

the act of keeping the products at a facility for safekeeping after the manufacturing thereof

What does storage ensure?

that sufficient products will be available to meet the demand for the products

- that products are preserved to meet future demands

What bridge is storage?

gap between production and consumption

Transport

the movement of products from one place to another

What do large-scale production of products require?

to be transported to all markets all over the country

- transport also makes it possible for certain products to be exported to other countries

What does transport ensure

the final products reach the consumers when it is required

Modes of transport

- road

- sea

- air

- pipelines

- rail

Financing

the act of obtaining funds to ensure that businesses can operate effectively in pursuit of the organisations' objectives

Where do businesses acquire funding?

financial institutions/investors to expand/maintain operations

Loan financing

available from financial institutions and must be repaid with interest over a certain period

Equity funding

available from private investors in return for a percentage of ownership of the business

Personal debt funding

the ability of an individual to finance business activities through credit card facilities/retirement funds/ home loans

Risk bearing

investments in business opportunities are subject to constant risks, despite the prediction of positive results

The first risk bearer of a business venture

the entrepreneur and shareholders in a business

What does risk bearing provide a business?

the opportunity to reduce losses incurred should a business venture not succeed by sharing the risk with another party

Insurance companies

prepared to share certain risks with the entrepreneurs and shareholders

Buying and selling

the process of exchanging goods/services for money

Buying and selling chain

raw materials > convert into finished products > sell the products to consumer

Product development

Improve on the current products and develop new products to remain competitive in the market environment

- important function of every business

What does a business need to find ( product development)

the fastest and most effective way to design and develop new products

- these products need to be designed to suit the needs of the target market and consumers

Product policy

first component of the marketing function

- explains how a business is going to develop a new product, design and designs

What does product policy deal with?

- the features

- appearance

- benefits of the product itself

Types of products

1. Industrial goods

2. Consumer goods

Industrial goods

used in the manufacturing process to produce other goods, eg. equipment and machinery

Consumer goods

goods that satisfy the needs of consumers

Types of consumer goods/products

- Convenience goods

- shopping goods

- speciality goods

- services

- unsought goods

Convenience goods

consumers are not willing to spend much effort on buying convenience goods because they differ very little in terms of price, quality and the satisfaction it provides customers

examples of convenience goods

bread, milk, soft drink

Shopping goods

more expensive than convenience goods

- consumers do not buy them regularly

- they are prepared to spend a considerable amount of time and energy going to various shops until they are that they are getting the best value for their money

examples of shopping goods

televisions, motor vehicles, clothing

speciality goods

usually have a specific brand name

- consumer know exactly what they want and are willing to search until they find exactly what they are looking for

examples of speciality goods

jewellery, branded clothing

Services

not tangiblle

- rendered by service providers to consumers

examples of services

garden services

unsought goods

goods that consumers do not think of until the need for such products arises

examples of unsought goods

funeral services, reference

Importance of product development

- if the product design does not suit the target market, there will be very little demand for the product

- Businesses need to develop new products in order to replace order products when the sale of goods decline

- products become different from those of the competitors

product design

process used to design goods that suit the needs of customers

Steps of product design

1. Generating a new idea

2. Screen and evaluate the idea

3. testing and developing the concept

4. Business analysis

5. Market testing

6. technical implementation

7. Commercialisation

8. Product review and price adjustment

Generating a new idea

- a need that was identified

- the results of conducting a SWOT analysis

- using creative thinking techniques

- solving a problem

- researching the market

Screen and evaluate the idea

the newly generated idea is critically evaluated to see if there is a need in the market, and whether it could be workable or profitable for the business

Testing and developing the concept

- Part of this stage is deciding whether producing the chosen product would be profitable within a reasonable period

- the market will also be tested in this stage

- consumers' reaction to the product must also be measured

Business analysis

should include a system of metrics to evaluate the success of the product

- the profitability, breakeven point, sales volume and final selling price are determined in this step

Market testing

the actual sample product is tested in the market, and the responses from the market testing are used to make the necessary adjustments to the product.

Technical implementation

during this stage, systems and processes are put into the production planning and control process.

What does technical implementation include:

- analyzing the product ideas in detail through a process if research and development

- converting product ideas into drawings and designs.

- Quality control

Commercialisation

during this stage the product is launched, and marketing an advertising campaigns are implemented

- marketing of the product should initially focus on informing consumers about the product because it is still in its introductory phase

Commercialising includes

- production of the product

- packaging of the product

- distribution to the stores

Which stage requires a lot of capital

commercialisation

Product review and price adjustment

the new product development cycle should be reviewed for efficiency, and the business should check if there is anything that can be improved

- pricing and forecasts should be reviewed where necessary

The purpose of packaging

- most products need some type of packaging, which can vary from a box to a label

- The packaging for designer clothing, perfume, and jewellery is carefully designed as part of the marketing of the product.

- Some small products are packaged in larger containers to create the perception that they are bigger.

- Packaging is usually designed to make the transportation of fragile items easier or safer.

- After a product has been designed and developed, the business must decide on the best way to package it.

The purpose of packaging of a product

- physically protect the product from any harm

- promote the marketing of a product

- prevent a product from getting spoilt

- prevent tampering or theft of a product

- identify products

Types of packaging

- packaging for immediate use

- packaging for double use

- packaging for resale

- frequently changing packaging

- speciality packaging

- combiination packaging

Packaging for immediate use

packaging needs to be cheap, because once the product is consumed, the packaging is thrown away

eg) packet of chips

packaging for double use

packaging can be re-used for purposes other than storing the original contents

eg) ice-cream tub

Packaging for resale

retailers buys products in bulk from wholesales or suppliers

eg) big box containing many boxed of washing power

Frequently changing packaging

some details of the packaging change to advertise and important sporting event/competition

eg) the advertisement of a sporting event

Speciality packaging

packaging must suit the products

eg) packaging for an expensive phone

Combination packaging

various complementary products are packaged together because such products are usually purchased together

eg) soap and face cloth

Trademark

the name/logo/symbol used by a manufacturer/business to differentiate its products/business from competitors

- officially registered and protected from unauthorised use by law

Once a trademark is registered

only be used by the person/business that registered the trademark

Importance of trademarks to businesses

- established an identity/reputation for products

- protects businesses against competitors who sell similar products

- helps to make a brand instantly recognisable

- use to market/advertise their products

importance of trademarks to customers

- Creates a sense of security and consistency for customers.

- Promotes loyalty and creates consistency for customers.

- Consumers are more likely to accept new products that are marketed under a well-

known brand/trademark

- It represents a certain standard of quality and price to the consumer.

Requirements of a good trademark

- must be attractive for the consumer

- it is important that it suits the product

- must be suitable designed for the target market

- different from its competitors

- must indicate the name and contact detailers of the manufacturer

Pricing Policy

set after considering the competitive situation in the market environment

The meaning of pricing

the determination of the selling price of a product considers the cost of production

- the price needs to be affordable for the customer but also allow businesses to cover costs and to make a profit

The importance of pricing

• It defines the value of the product in terms of production costs and customer use.

• It is a tangible price point that lets customers know whether the product will be worth their time and investment.

• The price of a product must make provision for transport costs.

• The price of a product should take the VAT into account.

Pricing techniques

- cost-based pricing

- mark-up pricing

- customer based pricing

- competition-based pricing

- promotional pricing

- penetration pricing

- psychological pricing

- bait pricing

- skimming prices

Pricing strategy

Considers segments, ability to pay, market conditions, competitor actions, trade margins, and input costs, amongst others.

Cost-based pricing

setting prices based on the costs of the goods/services being sold

- a profit percentage is added to the cost of an item, which determines the price at which it will be sold

Mark-up pricing

calculated as a percentage

- percentage is calculated from the cost per unit

Customer-based pricing

when companies set certain targets to achieve, based on what the business believes customers are prepared to pay

- depends on the perception of the product the business wants to create in their customers' minds

competition-based pricing

- pricing method that involves setting prices in relation to the prices of competitors

- the more competitive in the market, the lower prices are likely to be.

Promotional pricing

- sales strategy in which a business temporarily reduces the price of a product/service to attract more customers

Penetration pricing

happens when products are sold at very low prices to attract consumers to products that are being introduced into the market

What is the aim of penetration pricing?

to convince customers to buy the product, as soon as the introductory offer is over, the price is increased

Psychological pricing

uses the customers' emotional response to encourage sales

What is the idea behind psychological pricing?

customers will read the slightly lower price and consider it to be lower than the price is

Bait pricing

prices are usually set lower than the item's cost price in order to attract customers

Skimming prices

the prices attached to a new innovative product that is considered unique and prestigious

- involves charging higher prices when the product is introduced to test demand

Factors that influence pricing

- input costs

- demand for the product

- target market

- type of product

- the pricing technique is used to determine the price

- competitive and substitute products

- the economic climate and availability of goods and services

Forms of markets

- perfect competition

- monopolistic competition

- oligopoly

- monopoly

Perfect competition

- the number of buyers and seller is very large

- products are similar and there are many substitute products

monopolistic competition

- there are many suppliers/sellers

- each supplier has his/her brand of a particular product eg) McDonalds

Oligopoly

- only a few supplier/sellers control the prices of products

- products are same eg) MTN, Vodacom

Monopoly

- only one supplier/seller controls prices and products

eg) Eskom

Meaning of distribution

- the 4th P of the marketing mix

- about how the business gets its goods/services to its customers

Channels of distribution

the path in which the product is moved from the producer to the consumer