Lesson Content:

Explain the concept of market

Market any situation which brings together the sellers and buyers of goods (tangible
commodities) or services (work performed for reward) either directly or indirectly.
Or
An actual nominal place where forces of demand and supply operate and where buyers and
sellers interact directly or through others to trade.

Direct market – exchange may take place in a well-defined place, such as in a local street
market, a wholesale, market or retail store.

Indirect market – the market place may be less defined, such as selling by post, telephone,
and Internet, where online auction takes place. The internet doesn’t have a physical place but
shows that a market can exist electronically with no meeting between buyer and seller.

Function of a market
To establish a link in the chain of supply between the seller for example a producer or
supplier and the buyer for example the customer.

Explain the concept of marketing

Marketing - is all those activities that facilitate trade to take place in the most profitable and
efficient manner. This includes identifying customers’ needs such as market research and
those activities that satisfy those needs by providing the goods and services that consumers
require. Businesses are also consumers because they also use goods and services provided by
others.

Types of market
There are two (2) types, consumer and industrial.

Consumer market – market for products, goods and services bought particularly by
individuals. Many types of good make up the consumer market.
These goods are:
a. consumer non-durables – fast moving goods; goods low in value and relatively quickly
sold and repurchased eg. Fresh and canned food stuff, cosmetics
and magazines.

b. consumer durables – high unit value but slow-moving items e.g. cars, washing machines,
refrigerator etc.

c. soft goods – identified separately; they are longer lasting than faster-moving goods but are
replaced more frequently than consumer durables e.g. clothes, shoes and bed
coverings.

d. services – tasks provided to benefit the consumer e.g. car repairs, plumbing, house repairs
etc.

Industrial market – involves the sale of goods between businesses. These are goods aimed at
other businesses as opposed to the general public consumers. This
market
involves selling:

a. capital goods – finished goods needed over a long period of time eg. Machinery, vehicles
computers etc

b. consumable products – goods bought frequently such as those for resale; stationery,
lubricants, raw materials

c. services – provided by specialists such as logistics (transportation), security systems,

recruiting agencies

New trends such as social media marketing and integrated marketing have created a marked
addition to marketing techniques.
Social media marketing (SMM) refers to the process of gaining attention through social
media sites such as twitter, youtube facebook etc. The aim of SMM is to produce content
that appeals to users and links with advertising, which increases brand exposure and creates
broader customer-awareness reach. This aids market research by:

a. getting feedback from users or potential users of products

b. building email marketing lists
c. improving brand recognition
d. identifying potential buyers

As an example, a company engaged in marketing could use social media in the following
ways:
a. inviting users to ask questions, provide reviews, enter contest, join mailing lists
b. offering incentives to encourage social media users to provide information about
themselves by offering prizes, discounts in exchange for information and attention.

Integrated marketing – unified, holistic approach to communication in marketing e.g.

advertising, sales promotion, public relations, direct marketing and social media marketing to
ensure all messages and communications are consistent across all approaches employed both
online and off line.

Marketing activities

These are activities of the marketing department.

a. Market research – the process of gathering information about what consumers are
buying or
what potential customers are likely to buy.

Market research has three (3) broad aims:

1. to find out what customers want - (no resources are wasted producing goods and services
that are not needed.)
2. to assess likely demand to ensure over-producing does not occur
3. to discover what will influence consumers – product name, style and colour of packaging,
best target, audience, acceptable price range, effective ‘hidden persuaders’ etc
Consumers differ in preferences – this is called consumer taste. There can be bundling of
goods which can be ranked e.g. bundles offered by telecommunication companies.

Businesses are affected by competition. If competitors are marketing the same products or
services, these influence prices and also the need to ensure quality of goods and services is
comparable, if not better.

Consumer behavior refers to the way how consumers choose and consume products and
services. Understanding consumer behavior is an important factor that is influential in
creating a marketing plan. Consumer behavior is influenced by price, product qualities,
preferences, emotions and attitudes.

b. Pricing - identifying the right price that will encourage sales. There are different pricing
methods such as: cost-plus pricing, market-oriented or market-based pricing,
promotional pricing, market-skimming, psychological pricing, penetration pricing
and odd price (explain each type)

c. Packaging – creating a suitable outer wrapping or container for a product. Packaging

should not only be attractive but should present details about the contents, potential hazards,
correct methods of usage etc. Packaging:
i. promotes the product
ii. enhances the appearance of product
iii. protects the product
iv. helps prevents health hazards
v. makes it more convenient for the consumer to handle

d. Branding - differentiating the product of a company from other brands and establishing
loyal customers. A significant registered name, term, symbol or design that
is
easily recognized and identified. A registered name is for exclusive use of
the
company that has registered it.

e. Sales promotion – short-term methods used to encourage consumers or potential

customers to buy during a specified period. Examples are, point of
sale displays, promotional pricing (discount vouchers, free gifts,
loyalty cards)
f. Advertising – advertisements are messages paid by those who send them (advertisers),
that aim to inform and influence the people who receive them (prospective
customers). The functions of advertising are:
1. introduce new products or services
2. persuade consumers to buy
3. highlight the unique features of a product or service
4. create a firm’s image in relation to its products or service
5. draw attention to special events, such as sales and concessions
6. increase demand and thereby market share
7. educate consumers about products, services and issues e.g. health issues

There are different types of advertising: informative and persuasive

Informative – gives detailed information about goods and services and leaves customers to
decide, without persuasion, whether or not to purchase.

Persuasive – a variety of techniques are used to persuade customers to purchase regardless of

whether they need it or not. Hidden persuaders are used, such as:
• sex appeal
• ambition
• personality appeal
• social acceptability
• work simplifications
• health

g. Distribution - methods used to make the product available to consumers. This is using a
distribution channel for example, wholesale, retail or internet.
1. producer →wholesaler → retailer → consumer
2. producer → wholesaler → consumer
3. producer → retailer → consumer
4. producer → consumer
Intermediaries can be used by producers or manufacturers to distribute products to
consumers.

There are factors that influence methods of distribution such as:

1. who the product is for
2. type of product
3. value of the product
4. geographical location
5. technical factors
6. scope of the retailer
(explain each)

Marketing Mix

(1) Product this product includes a tangible item or service. and includes product designing,
packaging, labelling and branding.
(2) Price includes various pricing strategies and methods.
(3) Place distribution of products.
(4) Promotion advertising, public relations and sales promotions.

Factors That Influence Consumer Behaviour

The following factors will cause consumers to either increase or decrease their demand for a
product.
-The price of a commodity
Consumers can afford to buy more of a good when its price falls and less when its price rises.

-The prices of other goods and services (substitutes and complements)

Substitute products are those that can be used alternatively as they satisfy the same need for a
consumer. For example, a weekly shopper may decide to purchase fish instead of chicken because
the price fish has fallen significantly less than the price of chicken. Therefore either fish or
chicken will be adequate for dinner. If by the next week the price of fish rises and becomes more
expensive than chicken then the consumer will opt for chicken.

Complements are goods that are used together e.g. bread and butter. If the price of butter rises
then its demand will fall and so will the demand for bread. Conversely if the price of butter falls,
its demand will rise and so too will the demand for bread.
Income of consumers
As income level rises consumers will demand more goods and services
Taste and Preferences
A change in consumers taste for goods and services will impact their demand.. For example,
changes in fashion will result in a drastic decline in demand for an out going fashion and a rise in
demand for what is trendy.

Expectations of a future Rise in Price

If consumers expect the price of a commodity to rise in the near future, they will try to purchase
more now, before the price increases.

Brand Loyalty
Brand loyalty will ensure a continuous demand for a product regardless of changes in its price or
the prices of other goods and services.

Spending Patterns
Consumer spending surveys compile information on consumer spending patterns based on
income levels. This informs businesses of what goods and services are in demand.

Changes in the size of the population

A population decline will cause demand to fall in a particular region. One reason for a population
decline in a region is migration.

Packaging And Presentation Of Goods

Packaging refers to designing and producing the container that holds the product. A good
package must identify, protect and advertise the product. It must also make the product
convenient to use. Therefore products such as toothpaste are best packaged in a tube as it has to
be squeezed out. Milk must be poured from its container. Egg containers are so shaped to hold
them securely.

A package must also sell the product. It must first attract customer to buy. It must provide
information about the product i.e. ingredients, amount of contents, price, the name and address
of the manufacturer and instructions for usage. The brand name is also displayed on the
package.

Branding
A brand is any identifiable feature of a product which makes it different from its competitor. A
brand may be a name, term, symbol, design or combination of these. Examples of brand names
include: Avon and Colgate. A brand symbol e.g.

represents the Nike brand. A branded product will increase the value of the product in the eye of
the consumer.

Methods Of Promoting Sales

Promotion includes all forms of advertising, public relations and sales promotion.

Advertising is the paid presentation of goods or services through the media for the purpose of
encouraging consumer patronage. The media refers to television, radio, magazines, newspapers,
billboards, websites etc.

The Purpose of Advertising

-to attract attention

-to inform customers

-to increase sales

Sales Promotion

Sales promotion is a marketing strategy that is used to induce customers to buy immediately.

Examples of sales promotion methods are:

a. A sale on items.

b. Bargain packs, e.g. ‘two for price of one’.

c. Coupons. These are printed in the daily newspaper or magazines. The holders of coupons

are allowed a discount on the items bought.

d. Games, e.g. guessing riddles

e. Contest. Purchasers may receive a prize if they are the winners of a contest.
f. Trading Stamps. These are given to purchases with each item bought. Booklets filled with

these stamps may be returned by customers for goods, services or money in exchange.

g. Loss–Leader. A loss-leader is a product that is in high demand and is therefore used to attract
consumers to a business location by cutting its price very low. The business uses a loss leader to
attract large number of persons to its location so that other items will be sold. The profits lost on
this product will be made up on the high sales turnover of the other products that will be bought
along with the loss-leader.

Public Relations

Public relations activities are aimed at creating a favourable impression of a business in the eyes
of the public. Public includes its customers, its suppliers, the government and the surrounding
community. Public Relations activities include sponsorship of local sporting events, press
conferences, and donations to charity.

Techniques Of Selling

These are methods used to sell products more effectively by focusing on each customer’s personal
needs. Selling techniques include:

1. Personal Selling

2. After-sale services such as warranty and installation

3. Merchandising

4. Good Customer Relations

Personal Selling

This is the use of sales persons to present and sell goods and services of a firm. Sales persons
promote a firm’s goods directly to a specific consumer. They locate new customers, provide
display services, demonstrate the use of products, deliver goods, collect payments and provide
the firm with feedback
After Sales Services

Customers are entitled to these services once they have made a purchase. They include delivery,
installation and warranty. These services are free and therefore usually encourage consumers to
buy.

Merchandizing

Merchandizing refers to self service methods of sale. This is used in supermarkets and
department stores. It allows for a better display of goods and creates a more comfortable
shopping environment.

Good Customer Relations

Building good relationships with customers ensures customer satisfaction, repeat customers and

recommendation to new customers. The sales staff must be trained in the principles of good
customer relations. This entails, listening to customers being helpful and polite.

Terms Of Sale

A business establishment may offer its customers various terms to settle accounts.
Cash

This is preferable by most businesses and therefore customers are encouraged to make cash
payments. They are usually offered a lower payment amount for goods bought for cash.

Credit

Customers are allowed to pay at intervals over a short- term, usually one to three months to settle
outstanding balances.

Hire Purchase

Hire-purchase is a long term payment plan e.g. 24 – 36 months. Interest is charged to the
customer increasing the amount owed.

Cash Discount

A cash discount is a reduction in the price of a good that is paid for immediately or over a short
period of time by a customer. For example, if a an appliance store offers 5% discount on items
bought for cash then 5% of the sale price would be deducted from the actual bill

Trade Discount

A trade discount is the reduction in the price of a good given by a manufacturer or a wholesaler to
a retailer to allow the retailer to make a profit or to encourage bulk buying. Thus if an appliance
manufacturer offers 10% trade discount to retailers then 10% of the catalogue price or the quoted
price would be deducted from the retailers’ actual bill.

Consumer Organizations
Consumerism is defined as the education and the protection of consumers to prevent their
exploitation.
Consumer exploitation includes:
-overcharging
-offering poor quality goods and services
-short measurements and weights
Consumerism is practised by various groups in the economy: the government, private
institutions, and private firms.

Consumerism practiced by the government

This is done through various government agencies. These include:
1. The Consumer Affairs Commission – This institution was set up to disseminate information
about consumer rights and responsibilities as well as provide consumers with an avenue for
redress if they are exploited.
Consumer Rights
-The right to safety
-The right to be informed
-The right to choose
-The right to be heard
-The right to redress
-The right to consumer education
-The right to a healthy environment

Consumer Responsibility
-The responsibility to beware
-The responsibility to be aware
-The responsibility to think independently
-The responsibility to speak out
-The responsibility to complain
-The responsibility to be an ethical consumer
-The responsibility to respect the environment and avoid waste, littering and contributing to
pollution.

2. The Fair Trading Commission – This agency was set up to administer the fair trading act. It is
concerned with matters such as; Tied selling (marrying of goods), misleading advertising
(untruths about goods and services presented for sale), untrue sale (an announced sale for which
the price of items remain the same).and the use of market dominance to squeeze firms out of the
industry (For example, large firms may drop the price of their goods so low that small firms are
unable to compete with them.)

3. The Bureau of standards -The bureau carries out regular checks on business enterprises to
ensure that goods and services offered for sale meet the standards stipulated by this institution.
4. The Ombudsman
The Ombudsman is a government official who protects the rights of citizens who may suffer any
kind of injustice from dealing with a government agency or a government official. For example,
the Ombudsman will investigate the death of a loved one due to the negligence of a public
hospital.

Consumerism practiced by private Institution

-Local consumer groups
-Radio talk show hosts listens to consumers’ complaints

Consumerisms practiced by private firms

-Offering warranty/guarantees on items sold
-Labels carry information on ingredients, nutritional content and health risks that may be
associated with the product.