Grade 11 Business Studies - Marketing Function

The Marketing Function

Overview

• This section covers the marketing function, including:

  • Marketing.

  • Product development policy.

  • Pricing policy.

  • Distribution policy.

  • Communication policy.

  • Marketing in the informal sector.

  • Electronic marketing.

  • Foreign marketing.

Learning Objectives

• Define marketing.

• Explain the role of the marketing function.

• Describe marketing activities:

  • Standardization and grading.

  • Storage.

  • Transport.

  • Financing.

  • Risk-taking.

  • Buying and selling.

• Identify marketing activities in scenarios and case studies.

• Describe the product policy:

  • Types of products.

  • Product development.

  • Brands.

  • Packaging.

• Describe categories of consumer goods/products.

• Explain the importance of product development.

• Describe the steps/phases of product design.

• Explain the purpose of packaging.

• Describe types/forms of packaging.

• Explain brands.

• Explain the importance of brands for businesses and consumers.

• Describe the requirements for a good brand.

• Explain price.

• Explain the importance of pricing.

• Describe pricing techniques:

  • Cost-based pricing.

  • Markup prices.

  • Customer-based/goal-based pricing.

  • Competition-based pricing.

  • Promotional prices.

  • Penetration prices.

  • Psychological prices.

  • Bait/lure prices.

  • Skimming prices.

• Identify pricing techniques in scenarios.

• Describe factors that influence pricing.

• Identify these factors in scenarios.

• Define distribution.

• Describe the channels of distribution.

• Differentiate between direct and indirect channels of distribution.

• Explain intermediaries.

• Describe the types of intermediaries.

• Explain the role of intermediaries in the distribution process.

• Illustrate the different distribution channels through sketches.

• Explain why manufacturers would prefer direct or indirect distribution methods.

• Define a marketing communications policy.

• Describe the components of the marketing communications policy:

  • Sales promotions.

  • Advertising.

  • Publicity.

  • Personal sales.

• Explain the purpose of sales promotions and give practical examples.

• Explain the purpose of advertising and give examples of advertising mediums.

• Explain publicity.

• Give examples of publicity, for example, press releases to the media.

• Discuss the effectiveness of personal sales to promote business products.

Key Concepts

• Marketing: Activities a company undertakes to promote the buying and selling of a product or service.

• Product Policy: The first component of the marketing mix. It explains how a business will develop a new product and the packaging of the product.

• Distribution: How the business gets its product to the consumer.

• Marketing Communication: Includes how products or services are communicated to the target market.

• Technology for Marketing: Changed how the message is conveyed to potential customers. Internet advertising and social media advertising have increased the ability to introduce products nationally and internationally at a relatively low cost.

• Foreign Marketing: Imports and exports have recently increased, increasing the scope of potential buyers, including international buyers. Businesses need to get processes and systems in place that are in line with international regulations on how products may be marketed to foreign buyers.

• Brand: A name given to a product by the manufacturer of the product.

• Target Market: A specific group of consumers to whom the product or service is aimed.

• Pricing Policy: Refers to how the business determines the prices of products based on cost, demand, and competition.

• Cost: An amount that must be paid or spent to buy or obtain something.

• Markup: The amount added to the cost price of goods to allow for overhead costs and profit.

• Substitute: A person or object that can be used in place of something else.

• Website: A set of related web pages located under a single domain name.

• Profit Margin: The portion of the selling price that is not linked to input costs/overhead costs, and contributes to the gross profit margin of the business.

• Penetration: The sale of a business's products in a specific market or area.

• Lure: A specific sales tactic that attracts consumers with specific statements about quality or low prices.

• Skimming: A business initially charges the highest possible price that consumers will pay and then gradually lowers the prices over a period.

• Monopolistic Competition: In monopolistic competition, businesses take the prices as asked by its competitors.

• Oligopoly: A state of limited competition where the market is divided between a small number of manufacturers or sellers.

• Monopoly: A market structure characterized by a single seller selling unique products in the market.

Introduction

The marketing functions were presented in Grade 10 as one of the eight business functions of an organization. In Grade 11, a detailed analysis of marketing will be done in terms of the four components of the marketing mix, including product, price, distribution and communication.

10. 1 Marketing

The Meaning of Marketing

Marketing refers to activities that a business undertakes to promote the buying or selling of products or services. Marketing includes advertising, selling, and delivering products to the consumer or other businesses. The core of marketing involves taking the product or service, identifying the ideal consumer, and attracting consumers' attention for the available product or service.

The Role of the Marketing Function

To achieve its goal of adding value to investors' investments, it is very important for a business to track down consumers and maintain their loyalty. The marketing function supports the business in achieving this goal. It adds value for the business by bringing potential consumers and the products/services of the business together.

The roles of the marketing function include:

• Identifying the needs of consumers and determining what value they place on satisfying their needs.

• Sharing the information obtained from consumers with the production function to ensure that the products/services will meet the needs of the customers.

• Offering the product/service of the business to potential customers through marketing.

• Providing feedback from customers on the business's product/service and identify aspects that can be improved.

• Refining the experience that the customers experienced after he/she got the product.

Marketing Activities

Marketing activities refer to the methods that a business implements to increase their market share and improve their brand and image. Marketing activities play an important role in the success of a business. Effective marketing activities ensure that the brand and the image of the business remain in the consumer's minds.

Marketing activities include:

• Financing

• Risk Bearing

• Buying and selling

• Standardization and Quality Control

• Storage

• Transportation

It is important to be able to identify the marketing activities through different scenarios.

Standardization and Grading

• Standardization refers to ensuring goods are of the same standard in terms of size/weight/color.

• There should be no differentiation between the products.

• The quality of the final products can be measured against a pre-determined standard, for example, all 55-inch TVs will all look the same.

• Products that cannot be manufactured according to pre-set standards are graded according to the quality of the product.

• These are products that are harvested from nature and made available to consumers, for example, fruits, vegetables, eggs, and corn.

Storage

• The large-scale production of products makes it necessary to store such products.

• Storage refers to the action of storing products in a facility for preservation after it has been manufactured.

• Storage ensures that there are sufficient products to meet the demand for the products.

• It ensures that products are preserved to meet future demand.

• It also bridges the gap between production and consumption.

• The storage facility will be influenced by the type of goods that need to be stored.

Transport

• Transport refers to moving products from one location to another.

• The large-scale production of products makes it necessary for products to be transported to markets across the country.

• Transport makes it possible for certain products to be exported to other countries.

• It ensures that final products reach the consumer when needed.

• There are different modes of transport available for manufacturers, including road, sea, air, pipeline, and rail.

Financing

• Financing refers to the act of obtaining funds to ensure that businesses can function effectively to achieve the organization's goals.

• The business needs funds from financial institutions/investors to expand/stay in business.

• Financing with the help of loans is available and must be paid back with interest over a certain period.

• Equity is available from private investors in exchange for a percentage of ownership of the business.

• Personal debt financing refers to the ability of an individual to finance the business activities through his credit card/retirement funds/home loans.

Risk Taking

• Investments in business opportunities are subject to constant risks, despite forecasts of positive results.

• The first risk bearer of the business is the entrepreneur and the shareholders of the business.

• Risk bearing gives businesses the opportunity to reduce losses that may occur if a business cannot successfully share its risk with another party.

• Insurance companies are willing to share certain risks with the entrepreneur and shareholders.

Buying and Selling

• Buying and selling refers to the process where goods/services are exchanged for money.

• It is an integral part of any business activity.

• Manufacturers buy raw materials and convert them into finished goods, which are then sold to consumers.

• Consumers buy finished products for consumption.

10. 2 The Product Development Policy

Product development is an important function in every business – it is a continuous and dynamic process. A successful business must, however, improve on its current products and develop new products to remain competitive in the market environment. Most large businesses have a variety of products in the market and are involved in the design and development of new products. A new business must find the fastest and most effective way to design and develop new products. These products should be designed to meet the needs of the target market and consumers.

Meaning of Product Policy

The product policy is the first component of the marketing mix. The product is the main component of the marketing mix, for example, if there is no product, there is no business. This policy explains how the business will develop, design, and package a new product. The product policy deals with the characteristics and appearance, as well as benefits of the product itself.

Types of Products

Products can be divided into two categories:

• Industrial goods: used in the manufacturing process to produce other goods (e.g., car parts, equipment, machinery).

• Consumer goods: goods that satisfy the needs of the consumer.

Categories of Consumer Goods/Products

• Convenience goods:

  • Consumers do not want to spend a lot of time and effort on buying convenience goods because there are very small differences in terms of price, quality, and the satisfaction it offers to consumers.

  • These are low-priced items that consumers buy without thinking about them much.

  • Examples include: bread, milk, soft drinks.

• Shopping goods:

  • These goods are more expensive than convenience goods.

  • Consumers do not buy these items regularly.

  • They are willing to spend time and effort going to different stores to get the best value for their money.

  • Examples include: televisions, motor vehicles, clothing.

• Specialty goods:

  • These goods usually carry specific brands.

  • Consumers know exactly what they want and are willing to search until they get what they are looking for.

  • Examples include: jewelry, brand-name clothing.

• Services:

  • Services are not tangible.

  • Services are delivered to consumers by service providers.

  • Examples include: gardening service.

• Unsolicited (unplanned) goods:

  • Consumers usually do not think about these goods until they need them.

  • Examples include: funeral services, encyclopedias, fire extinguishers, and reference books.

  • The purchase of unsolicited goods can occur as a result of danger or fear of danger.

Product Development

• Product development is a process used to design goods that will meet the needs of consumers.

• If product development does not match the needs of the target market, the demand for the products will be very small.

• Businesses must develop new products so that older products can be replaced as the demand for the products decreases.

• Businesses are able to remain competitive because they are always looking for ways to improve their products.

• Products are distinguished from those of competitors.

Product Design

Product design begins with the development of new innovative ideas. The process of designing a new product begins with an idea and goes through until it is evaluated after the entire process is completed. Product design is usually the first step of the product life cycle, but sometimes adjustments must be made if sales begin to decline at the end of the product life cycle.

Steps of Product Design

Product development helps businesses to manufacture high-quality products, which will give maximum satisfaction to consumers. Product development helps to expand markets for products and can increase earnings from profits for businesses.

The stages of product development include:

1. Generating a new idea

2. Screening ideas

3. Concept development and testing

4. Business analysis

5. Test marketing

6. Technical implementation

7. Commercialization

8. Reviewing and price adjustments

Steps a Business Will Follow in the Product Development Process

• Generate new ideas: Aim to identify opportunities not yet pursued by competitors. Ideas for new products come from:

  • An identified need

  • The result of a SWOT analysis

  • Using creative thinking techniques

  • Solving a problem

  • Market research

  • Analyzing trends in the market

  • Competitor research

  • Employees and consumers.

• Screen and evaluate the idea: Critically evaluate the new idea to see if there is a need in the market and if it will be workable and profitable for the business. The business must decide if the product can be developed at the right price with achievable profit margins – an innovative idea must lead to a profitable product.

• Test and develop the concept: Decide if the manufacturing of the chosen product will be profitable within a reasonable time. The product life cycle of some products is very short, so new products must be profitable within a relatively short period. The market will also be tested during this step. Businesses must determine when the product is at its best to deliver the necessary benefits as well as how to manufacture the product in the most cost-effective way. Possible costs, income, and profit must be analyzed. Consumers' response to the product must also be measured.

• Business Analysis: Business analysis of a new product must include metrics to evaluate the success of the product. Profitability, break-even point, sales volumes, and final selling price are determined during this step.

• Test Marketing: A real sample of the product is tested in the market and the responses from the test marketing are used to make the necessary adjustments to the product.

• Technical Implementation: Systems and processes are built into the production planning and control process. Planning, scheduling, monitoring, and quality control are worked out and put in place for production. The technical implementation involves:

  • Detailed analysis of the product ideas through a process of research and development.

  • Conversion of the product ideas into sketches and designs. These sketches and designs are usually done with the help of computers, because computers enable designers to make multi-dimensional drawings and designs that will show what the actual product will look like.

  • Quality control.

• Commercialization: The product is introduced, and marketing and advertising campaigns are implemented. Marketing of the product must initially focus on giving information to consumers about the product, as it is still the launch phase. Later, as the product becomes more well-known, more aggressive efforts can be used to persuade consumers to continue to buy the product. Commercialization includes:

  • Manufacturing of the product

  • Packaging of the product

  • Distribution to stores.

  This step requires a lot of capital.

• Reviewing the product and price adjustments: Review the new product development cycle to see if it is effective, and the business must check if there is anything that can be improved. Pricing and forecasts should also be reviewed if necessary.

Packaging of Products

Most products require some type of packaging, which can range from a cardboard container to a label. The type of product will determine what type of packaging is needed. Products must be protected in packaging – some against germs, breakage, moisture, and damage. For example, eggs are packaged in containers to ensure that there is little or no breakage during handling. Other products are packaged in such a way that it attracts attention, and then the packaging serves as a marketing tool. Information about the product must appear on the packaging, which includes any warnings or dosage requirements. The packaging can also display the trademark of the product. In South Africa, the SABS requires that the ingredients of all food items be displayed on the packaging. A lot of attention is given to the design of designer clothes, perfume and jewelry as part of the marketing of the product. Some small products are packaged in larger containers to create a perception that it is larger. For example, a SIM card for a cellphone is small but is usually packaged in a much larger container. Packaging is usually designed to make fragile items safer to transport. After a product has been designed and developed, the business must decide on the best way to package it.

The purpose of packaging a product can be used to:

• Physical protection of the product against any damage

• Promote the marketing of the product

• Prevent the product from spoiling.

• Prevent the product from being tampered with or stolen.

• Improve convenience for the use or storage of a product

• Identify products

• Distinguish the product from competitors' products

• Contribute to the profitability of the business through sales or use of resources

• Attract attention to show the value of the product as a marketing tool.

• Connect the product to the marketing strategy used to market the product.

Type/Forms of Packaging

• Packaging for immediate use/unit packaging

  • Packaging should be cheap because it is discarded immediately after use.

  • For example: a packet of potato chips, chocolate bar wrapper.

• Packaging for dual use

  • Packaging can be reused for purposes other than storing the original contents.

  • Consumers are therefore reminded of the specific brand after the original contents have been used up.

  • The container can be used for something else once the contents have been used up.

• Packaging for resale

  • Traders buy products from wholesalers or suppliers in bulk.

  • They then remove the products and sell them separately in smaller quantities.

  • For example, a large container in which there are smaller containers with washing powder.

• Kaleidoscopic/constantly changing packaging

  • Some detail of the packaging changes to advertise an important sporting event/competition.

  • The container or wrapper changes constantly.

• Specialty packaging

  • The packaging must match the product.

  • For example: Packaging of an expensive cellphone.

• Combination packaging

  • Several complementary products are packaged together because such products are usually bought together.

  • For example, Soap and a washcloth/shower gel and a sponge/matching perfume and hand cream.

Meaning of Brands

A brand is a name/logo/symbol that is used by the manufacturer/business to distinguish products/or the business from competitors' products or businesses. A brand is officially registered and is protected by law against unlawful use. It is a registered mark that the manufacturer places on the product to distinguish his products from other manufacturers' products. Once a trademark is registered, it may only be used by the person/business that registered it.

The Importance of Brands for the Business and Consumers

• Importance of brands for the business

  • A brand establishes an identity/reputation for products

  • A registered trademark protects businesses from competitors selling similar products.

  • A well-known brand helps to make the brand immediately recognizable.

  • A degree of protection is offered because trademarked products can be traced back to the manufacturer thereof.

  • Businesses can use brands for marketing/advertising of products.

• Importance of brands for consumers

  • A brand creates a feeling of security and consistency for consumers.

  • It promotes loyalty towards a specific brand and creates consistency for consumers.

  • Consumers will more easily accept new products that are marketed under a well-known brand.

  • Brands represent a certain quality standard and standard price for the consumer.

Requirements of a Good Brand

• A brand must be attractive to the consumer.

• The brand must match the product.

• The brand must be appropriately designed for the target market.

• It must be distinguishable from competitors.

• It must promote the image of the business.

• Businesses use it for display and must therefore be suitable for use in displays.

• It must be possible to connect the product to the marketing strategy.

• It must indicate the name and contact details of the manufacturer.

10. 3 The Pricing Policy

Pricing policy is determined after consideration of the competitive situation in the market environment. We must know if businesses are faced with perfect or imperfect competition. In perfect competition, manufacturers have no control over the price. Therefore, the pricing policy only applies to imperfect competition.

The Meaning of Price

Price is the easiest of all market variables to influence, but it is one of the most complicated decisions to make. Determining the selling price of a product takes the cost of production into account. The price must be affordable for consumers, but also allow the business to recover costs and make a profit.

The Importance of Pricing

• It defines the value of the product in terms of production cost and use for the consumer.

• It is a tangible price point that makes the consumer realize that the product is value for money in terms of time and investment.

• The pricing process must take into account flexibility/discounts/territory/life cycle/status/allowances.

• The price of a product can influence the consumer's attitude towards a brand.

• If prices are set too high, it will have a negative impact/decrease in sales.

• If prices are too low, consumers may perceive that the product's quality is not good.

• The price of a product must allow for transport costs.

• The price of the product must include VAT.

Pricing Techniques

There are several pricing techniques that determine the prices of products. A pricing strategy takes segments, ability to determine, actions of competitors, trade barriers and input costs, etc. into account. It is aimed at specifically defined consumers versus competitors' prices. Several pricing techniques businesses can use include:

• Cost-based/oriented prices

• Markup prices

• Customer/target-based prices

• Competition based/oriented prices

• Promotion pricing

• Market penetration prices

• Psychological prices

• Bait prices

• Skimming prices

Cost-Based/Oriented Pricing

Cost-based pricing is the practice of determining prices based on the cost of the goods or services being sold. A certain profit margin or fixed amount of profit is added to the cost of the item, which then determines the price at which it will be sold. The cost of production and expenses are calculated and a suitable profit margin is added to determine the selling price.

Markup Prices

Markup prices are calculated as a percentage. A percentage is calculated by taking the unit cost per unit. For example, a business that manufactures muffins can calculate the price per muffin as $R15,00$ and then decide to add a profit of 50%. This will then work out to a selling price of $R22,50$ per muffin.

Client/Target Based Price

Client/target-based price is used when businesses set certain targets that must be achieved, based on the prices that they believe customers are willing to pay. This type of pricing is based on the perception of the product that the business wants to establish in the client's mind.

Competition-Based/Oriented Prices

Competitor-based pricing is a pricing method based on determining prices by looking at the prices of competitors. This approach is also called the running rate pricing or competitive pricing. The more competitors there are in the market, the lower prices are likely to be. If the prices are set at a higher level than that of the competitors, the consumers may be convinced that the product is better in terms of quality and use thereof.

Promotion Pricing

Promotional pricing is a sales strategy whereby businesses temporarily lower the prices of products or services for a short period, for example, certain times of the year, end-of-season series, old stock that is sold at discount prices. Examples include special offers or discounts for a limited period/“Buy-one-get-one free” type of promotions.

Market Penetration Prices

Market penetration prices happen when products are sold at very low prices to attract consumers to products that are introduced to the market. The goal is to persuade consumers to buy the product and once the introductory offer is over, the prices are increased. This is often used for new products, but is not a profitable marketing strategy in the long term.

Psychological Prices

Psychological prices use the consumer's emotional reaction to promote sales. The idea behind it is that consumers will read the prices as a little less and then see it as a lower price. For example, avocados and apples are priced at $R6,99$ and $R24,99$ respectively, instead of $R7,00$ and $R25,00$. The consumer will then consider that the prices are cheaper.

Lure Prices

With lure prices, prices are normally set lower than what the item's cost price is in order to attract consumers. It is used to get consumers into the store to buy the product and then also buy other items. Consumers are encouraged to buy other products if the advertised product is sold out.

Skimming Prices

Skimming refers to the prices that are linked to new innovative products that are considered a unique and sought-after item. It then involves asking higher prices when the product is introduced in order to test the demand therefor. Some consumers are willing to pay higher prices, because such inventions have a prestige value. As the popularity of the product increases, the prices are gradually lowered. Skimming prices can only be successful and profitable in the short term.

Factors Influencing Pricing

• Input costs: The higher the input costs, the higher the final price will be. An increase in transport costs will mean an increase in the final price.

• Demand for the price: The higher the demand, the higher the volume of production, which leads to lower input costs and a decrease in the final price.

• Target market: The income levels of the target market can influence the price of the product.

• Type of product: Higher prices can be charged for luxury products. The pricing technique is used to determine the price. Promotional prices can be lower than demand-oriented prices.

• Competing and substitute products: If there are similar products that can replace the product, high prices will lead to a decrease in sales due to sales of the substitute products. If the price and demand for complementary products increase, the other product can increase at the same rate, for example, prices of computers and keyboards can be increased at the same time.

• Economic climate and availability of goods and services: If there is a shortage of a certain product, people are willing to pay more for it.

Market Forms

The following market forms will influence pricing:

• Perfect Competition

  • There are many buyers and sellers.

  • Products are similar, with many substitutes (e.g., shares traded on the JSE).

• Monopolistic Competition

  • Many suppliers/sellers, each with their own brand (e.g., restaurants McDonald's, Burger King, Sterrs).

• Oligopoly

  • Only a few suppliers/sellers controlling prices.

  • Products are homogenous, e.g., MTN, Vodacom, Cell C.

• Monopoly

  • Only one supplier/seller, with high-profit margins.

  • Consumers have no alternatives (e.g., Eskom).

10. 4 The Distribution Policy

Once products have been developed, produced, and priced, they must be made available to consumers at the right place and right time. Products need to be distributed to the target market in the best possible and feasible way. Intermediaries help businesses to distribute their goods and services.

Meaning of Distribution

Distribution (place) is the fourth P of the marketing mix. Distribution is the way in which businesses bring their goods/services to consumers. Products are either sold directly to consumers, or intermediaries are used.

Distribution Channels

The distribution channel is the path a product follows from the manufacturer to the consumer. It is the most effective and cost-effective way for a product to reach its target market.

A distribution channel consists of many businesses that contribute to shifting the product from the manufacturer to the final user/consumer. It starts with the manufacturer and ends with the final consumer. The main goal of a distribution channel is to ensure that the right product is available at the right time.

Three types of participants in distribution channels include:

• Service Providers/Manufacturers

• Intermediaries

• Clients/Consumers

Direct and Indirect Distribution Channels

When a direct distribution channel is used, manufacturers sell directly to consumers without using intermediaries. The goods move from the manufacturer/manufacturer to the consumer. When indirect distribution channels are used, the manufacturer uses intermediaries to distribute and sell the goods.

The goods move through the hands of agents, wholesalers, and retailers before it reaches the consumer.

Differences Between Direct and Indirect Distribution Channels

• Direct Distribution Channels

  • Manufacturers carry all the risks

  • This distribution channel includes the manufacturer and the consumer.

  • The wholesaler and retailer are left out in this process.

  • The reference here is to marketing and sales of products to consumers without the inclusion of intermediaries.

  • Manufacturers take full control of the product and the marketing.

  • This ensures better end-consumer prices because no costs are added by intermediaries.

  • Direct channels provide immediate feedback.

  • More specialized and trained employees are needed for this type of distribution.

Different Channels of Distribution

1. Manufacturer/Producer – consumer

2. Manufacturer/Producer – retailer – consumer

3. Manufacturer/Producer – wholesaler – retailer – consumer

4. Manufacturer/Producer – agent – wholesaler – retailer – consumer

The distribution channel options in more detail include:

• Manufacturer – consumer

  • Products move directly from manufacturer to consumer, advertising and selling themselves without help from intermediaries.

• Manufacturer – retailer – consumer

  • Retailers are responsible for advertising and distribution to consumers, such as Spar, Shoprite, and Pick 'n Pay.

• Manufacturer – agent – retailer – consumer

  • Agent and retailer responsible for advertising, used by manufacturers of slimming products and dietary supplements.

• Manufacturer – wholesaler – retailer – consumer

  • Products distributed to wholesalers, then retailers (e.g., Makro). Retailers then sell in smaller units to the consumer.

• Manufacturer/manufacturer – agent – wholesaler – retailer – consumer

  • Most complex distribution channel. The products move from the manufacturer to an agent and then to a wholesaler. From there, the products move to the retailers and ultimately to the consumer.

Reasons Manufacturers Prefer Direct or Indirect Distribution Channels

• Direct Distribution Channels

  • Control over product and marketing, better end-consumer prices, no profit sharing with intermediaries.

  • Direct contact with the target market for feedback, sales personnel to collect information from consumers for future market research.

  • Websites as a method of distribution, well-trained staff to effectively market products.

• Indirect Distribution Channels

  • Experienced agents handle consumers, focus on core business, handle transport and storage.

  • No specialized staff needed to handle sales complaints, benefit from bulk purchases by wholesalers.

  • Larger market share covered, understand how the market functions.

  • Consumers are often widely dispersed so distribution is more extensive.

The Meaning of Intermediaries

This includes all people that are involved in the distribution process between the manufacturer and the consumer. They are middlemen who act as negotiators and mediators between the manufacturer and the consumer. Intermediaries include wholesalers, retailers, agents, and brokers. They are responsible for transport, storage, and delivery of the goods and services.

Different Types of Intermediaries

• Wholesalers: Buy products in bulk from manufacturers and store them in warehouses, then sell them again in smaller quantities to retailers. Examples include Cash and Carry and Makro.

• Agents: They act as representatives for manufacturers and wholesalers. They do not get ownership of the products. They are just a link between manufacturers and the retailers. They earn commission on sales. For example, sales of cars, property, or beauty products.

  • Buying agents: Has the authority to purchase certain goods on behalf of the business.

  • Sales agents: Bringing buyers and sellers together and helping with the transaction. Some sales agents have control over prices, sales, and marketing.

  • Import and export agents: They ensure that the import and export process runs smoothly.

• Retailers: Buying goods in large quantities from manufacturers and wholesalers and selling them in smaller quantities to consumers, for example, Pick 'n Pay, Edgars, Shoprite, etc.

• Brokers: They are intermediaries for sales that do not take ownership of the product. For example, Insurance brokers, wool brokers, stockbrokers, etc.

• Sales Representatives: They are often an employee of the business. They act as sellers and buyers for the business. Some representatives are independent contractors who sell products from more than one business.

The Role of Intermediaries in the Distribution Process

Intermediaries assist manufacturers in finding buyers, marketing products, reaching a wider consumer base, and can provide expertise and resources for logistics and distribution. Their knowledge of the market, along with specialized distribution services, often results in cost-effective options compared to direct distribution.

10. 5 The Communication Policy

The Meaning of the Marketing Communication Policy

The marketing communication policy describes all the messages and media that are used so that the business can communicate effectively with the consumers. The main goal of marketing communication is to create an increased demand for products and services. The business spends large amounts of money on the development of its marketing communication policy. The focus of the marketing communication policy is to increase sales and to improve the overall profitability of the business. An integral part of the marketing communication policy is effective communication of the products and services of the business with existing and new potential clients. Effective marketing communication must take place with consumers to maintain interest in the business, as well as sales of products and services. This is accomplished through information based on market research that highlights the needs and desires of consumers. The business makes every effort to convey the appropriate marketing message to the right consumer