BUSINESS OPERATIONS

TOPIC 10: MARKETING FUNCTION

STANDARDISATION

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

• There should be no differentiation.
  GRADING

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

• Refers to the act of obtaining funds to ensure that businesses can operate effectively in pursuit of the organisations’ objectives.

• The business acquires funding from financial institutions/investors to expand and maintain operations.
  RISK BEARING

• This provides businesses with the opportunity to reduce losses incurred should a business venture not succeed by sharing the risk with another party.

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

PRODUCT POLICY

• This policy explains how a business is going to develop a new product, design, and package.

• The product policy deals with the features, appearance and the benefits of the product itself.
  PRICING POLICY

• Pricing policy is set after considering the competitive situation in the market environment. The pricing policy has significance under imperfect competition.

DISTRIBUTION POLICY

• Every business needs a distribution policy so that it knows how and where products need to be distributed.

COMMUNICATION POLICY

• The focus of the marketing communication policy is to increase sales and generate higher overall profitability for the business.

• Effective marketing communication must take place with customers to maintain interest in the business as well as purchasing products and services.

TYPES OF CONSUMER GOODS

CONVINENCE GOODS

• These are low priced goods purchased by consumers without much thought.

• Examples of coincidence goods are bread, milk, soft drinks, etc.

SHOPPING GOODS

• These goods are more expensive than convenience goods.

• Examples of shopping goods are television, motor vehicles, clothing, etc.

SPECIALITY GOODS

• These goods usually have specific brand names.

• Examples of speciality goods are jewellery, branded clothing, etc.

SERVICES

• Services are not tangible.

• Examples of services are garden services, etc.

UNSOUGHT GOODS

• These are goods that consumers do not think of until the need for such products arise.

• Examples of unsought goods are funeral services, encyclopaedias, fire extinguishers and reference books.

INDUSTRIAL GOODS

• These are goods used in the manufacturing process to produce other goods.

• Examples of industrial goods are spare parts, equipment and machinery, etc.

STEPS IN THE PRODUCT DESIGN (1ST THREE STEPS IN DETAIL)

1. Generating a new idea: A business should aim to identify opportunities that competitors have not done yet. Ideas for new products can come from: using creative thinking techniques, competitor research, a need that was identified, solving a problem, and analysing market trends.

2. Screen and evaluate the idea: Screening means that the newly generated idea is critically evaluated to see if there is a need in the market and whether it could be workable and profitable for the business. The business needs to decide whether the product can be developed at the right price with suitable profit margins.

3. Testing and developing the concept: At this stage the product will be decided whether it will be profitable within a reasonable time period. Businesses must determine how the product will best provide the necessary benefits and how best to produce the product in the most cost-effective way.

4. Business analysis

5. Market testing

6. Technical implementation

7. Commercialisation

8. Product review and price adjustment

PACKAGING EXAMPLES

• Packaging for immediate use - Packaging will be immediately thrown away once used.

• Packaging for double use - Packaging can be used for different purposes than the original purpose.

• Packaging for resale - Buying products in bulk like a big box containing small boxes of washing powder.

• Kaleidoscopic packaging - Packaging used to advertise a sporting event.

• Speciality packaging - Packaging should suit the product like a new phone.

• Combination packaging - When products are packaged together such as soap and a face cloth/shower gel and sponge/matching perfume and cream.

PRICING TECHNIQUES

• Cost-based pricing: this is the practice of setting prices based on the cost of the goods or services being sold.

• Mark-up pricing: this is calculated as a percentage. Cost per unit.

• Target-based pricing: when companies set certain targets to achieve based on what the business believes customers are prepared to pay.

• Competition based pricing: a pricing method that involves setting prices in relation to the prices of competitors.

• Promotional pricing: a sales strategy in which a business temporarily reduces the price of a product or 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 to the market.

• Psychological pricing: customers will read the slightly lower price and consider it to be lower than the price is. E.g. R6.99 can be changed to R7.00 and customers will view it as cheaper.

• Bait pricing: when prices are set lower than the item’s cost price in order to attract customers.

• Skimming prices: involves charging the products higher prices when introduced then gradually decreasing the price over time.

TRADEMARKS (REQUIREMENTS AND IMPORTANCE FOR THE BUSINESS)

REQUIREMENTS:

• A trademark should be attractive for the customer.

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

• Should promote the image of the business.

• Should be different from competitors.

IMPORTANCE FOR BUSINESSES:

• It establishes an identity for the products.

• Protects the business against competitors who sell similar products.

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

• Can be used to market or advertise products.

DIFFERENT TYPE OF MARKETS (EXAMPLE MONOPOLY/PERFECT COMPETITION)

• Perfect competition - the number of buyers and sellers are huge. example: shares traded on JSE.

• Monopoly - Only one seller/supplier controls prices and products. Example: Eskom.

DIRECT AND INDIRECT DISTRIBUTION (EXAMPLES ONLY)

• Manufacturer-consumer: example, a famer may sell his/her fresh produce directly to customers. (Direct distribution)

• Manufacturer-retailer-consumer: example, retailers such as Spar, Pink n Pay buy their stock from the manufacturers and sell them to customers.

• Manufacturer-agent-retailer-consumer

• Manufacturer-wholesaler-retailer-consumer: example, wholesalers such as Makro buys goods in large quantities from manufacturers and then sells them in bulk to retailers. Retailers then sell the bulk goods in units to their customers.

• Manufacturer-agent-wholesaler-retailer-consumer

SALES PROMOTIONS

MEANING OF SALES PROMOTIONS:

• Sales promotion is used by the business to complement other promotion methods.

• Refers to short-term customer-orientated strategies applied by the business to increase the sale of products and services.

PURPOSE OF SALE PROMOTIONS:

• To increase and improve the number of products and services sold to customers and increase the sales of products of the business.

• To inform existing and new potential customers about the products and services of the business.

• Persuade immediate purchases with potential customers.

• Determine which sales promotion works best at reaching the target market.

EXAMPLES OF SALES PROMOTIONS:

• Free gifts

• Buy one, get one free

• Bundle discounts

• Free samples

AIDA-PRINCIPALS OF ADVERTISING

• Attract- Grab the attention of potential customers.

• Interest- Spark interest in the product/service

• Desire- Develop the desire in the customer to acquire what is being offered.

• Action- Induce action which may potentially lead towards purchasing the product or service.

PERSONAL SELLING

MEANING:

• Personal selling is a form of face-to-face selling in which the salesperson tries to convince the customer to purchase a product/service.

• The salesperson highlights the features of the product to convince the customer that the product would add value to their lives.

EFFECTIVENESS:

• Improves customer relationships and customer loyalty because it is an effective marketing communication tool that can be a powerful source of customer feedback.

• Increases immediate sales as personal selling is directed at potential members of the target market.

• Creates and improves brand awareness with existing and new customers.

• Provides detailed demonstrations off the usability of the product with the customer.

PUBLICITY AND THE ROLE OF PUBLIC RELATIONS

THE ROLE OF PUBLIC RELATIONS IN PUBLICITY

• Aims to present a favourable image of the business and its products and services.

• Plays a critical role in developing positive publicity and minimising the effects of negative publicity on the business.

• The public relations function and marketing function are interconnected as they aim to establish and build brand loyalty.

• The public relations strive for members of the external stakeholders to view the business in a positive light.

MEANING:

• Publicity creates public awareness of the business through media coverage and other forms of communication.

• Refers to unpaid communication in the mass media about the business and its operations.

• It is often considered to be part of the public relations of the business.

TOPIC 13: PRODUCTION FUNCTION

PLANNING

• This process will include the layout of the factory to suit the production system.

• It will determine the flow of materials to optimise the process.

• It must include decisions on the purchasing of the materials, machinery and equipment.

LOADING

• Involves the allocation of every person to a specific task and/or machine.

• It is linked to the output required to fulfil orders and the prevention of overloading employees and machines.

ROUTING

• Involves planning of the sequence in which the operation will take place.

• Management must decide what the best and cheapest way to sequence the production process will be.

IMPORTANCE OF PRODUCTION PLANNING

• Aims at decreasing costs and time and increasing output by organising the resources and workplace to maximise efficiency.

DISPATCHING

CORRECTIVE ACTION

ASPECTS OF WORKPLACE SAFETY POLICY

• Signature of the CEO

• Review date of the policy

• Be visibly displayed for all workers to see.

• Acknowledge the right of each employee to work in a safe and healthy environment.

SABS: FUNCTIONS

• Sets and publishes national standards.

• Provides training regarding all aspects of standardisation.

• Testing products

• Promotes design excellence.

ASPECTS INCLUDED IN TQM

• TQM involves every part of the business and quality’s everyone’s responsibility.

• Machines and equipment are checked regularly.

• All impute are checked thoroughly and discussions are held on how to improve quality.

THE ROLE OF QUALITY CIRCLES