Entrepreneurship Marketing in a Small Business

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MARKETING IN SMALL BUSINESS ENTERPRISE  

MARKETING AND SELLING

 A good marketing and sales information system should be able to identify and clarify the following elements:

1.0 Difference between marketing and selling

Marketing is the entire process of planning, pricing, promoting and distributing goods and services to consumers, while selling is a process through which sellers get rid of their goods to consumers through the use of money. In tabular form:

Marketing	Selling
Focuses on customer’s needs	External market orientation. Focuses on seller’s needs
Customer enjoys supreme importance	Product enjoys supreme importance
Product planning and development to match products with market	High pressure to sell goods already produced
Integrated approach to achieve long term goals	Fragmented approach to achieve immediate gains
Converts customers’ needs into products	Converts products into cash
Caveat vendor (let the seller beware)	Caveat emptor (let the buyer beware)
Profit through customer satisfaction	Profits through sales volume

1.1 Establishing how marketing and selling work together to create a customer for a business.

For instance, marketing deals with the entire process of creating a customer for the business whereas sales as sub-component of marketing specifically deals with those activities carried out to influence customers’ decision. It entails developing marketing and sales strategy for the business.

1.2 Target market

A target market refers to the different kinds of customers where an entrepreneur intends to sell his/her products. The target population could include men, women, children, students, poor or rich people, urban or rural people, youths, adolescents, etc.

Factors which determine the target market

• Levels of income. People’s incomes greatly affect their demand or ability to buy goods and service
• Consumption habits. This is the consumer’s behaviour in purchasing different goods and services. Consumer’s expenditure patterns on certain products depends to some extent on their consumption habits, for example, smokers and drinkers are more likely to spend more on alcohol and cigarettes
• Competitors. People in similar or related business usually have similar objectives and should be considered when determining the target population
•   Market share. The number of competitors and their market share in a given area can assist the entrepreneur to estimate the number of customers he/she can attract
• Age. Different age groups may need specific products, for example, children’s needs may be different from those of adolescents and adults
• Gender. Differences in gender may necessitate different products in different sizes, colours, fashion, etc
•  Trends in the market, such as changes in the  population structure, legal or regulatory changes, changes in the economy, life style, etc

1.3 Successful selling

Below are some tips on how to become a successful salesperson:

• Improve the skills of selling and sales. A salesperson needs to know customers’ needs or wants. This can be done by finding out what the customer needs by listening and asking questions and by satisfying the customer’s needs by offering advice and suitable goods/services.
• Know how to treat the customers. Customers are the most important people in any business. Ideally, customers should be treated in the same or better way the salesperson would like to be treated when he/she is a customer.
• Know the products/services and how to sell them. The customer may ask many questions about how the product/service works or can be used. A salesperson should be sure of the answers and explain to the customer the uses of the product and its usefulness; the salesperson could also give the technical information that is needed.

Activity

1. Visualise/reflect on your experiences whenever you enter a shop or market to buy something.

2. Define marketing.

3. Differentiate between marketing and selling.

4. Describe the steps involved in the creative selling process and state the importance of each stage.

5. Recall a recent encounter with a salesman trying to sell you a product.

6. Analyze the effectiveness of the salesman’s approach, i.e. presentation, dealing with objections and closing a sale.

7. What factors determine the choice of the target market? 

MARKETING MIX

Marketing mix is the term used to describe the combination of various elements which constitute the core of a firm’s marketing system. These elements include product, price, place, promotion and positioning, commonly referred to as the 5Ps.

(1) Product

This refers to anything offered by a business to satisfy the customer’s needs or wants. It can be a good or a service. Examples of products include clothes, shoes, cars, books, etc.

 Elements of a product

There are mainly four elements of a product:

(i) Description: This is the product name or how it can be referred to. This description should be unique and appealing to customers.

(ii) Product attributes: These are features or characteristics that make a product different from others. It can be in terms of taste, colour, texture, etc. These attributes enable a product to stand out from the rest.

(iii) Quality: This is the extent to which the product meets the customer’s needs, expectations or requirements. The quality must be in response to what the customers want.

(iv) four element here

Factors to consider when developing a product

• Develop a product in response to the customer’s need
• Decide on the shape, colour, package, brand name, quantity and quality on what the customers want
• Decide whether to make your product similar to others or unique as compared to those of other sellers
• Determine the availability of raw materials necessary for making the product
• Government policy, i.e., the product to be produced should meet the standards of or the government’s policy

(2) Price 

This is the monetary value of a product. An entrepreneur should sell his/her products at prices which will attract the customers. However, the prices should be low enough to attract customers and at the same time high enough to enable the entrepreneur make a profit. [a price of a product should enable a business recover money invested, cause a company earn a profit, and help to cause customer to buy again.]

Factors to consider when determining price
 

• The cost of the product. The price set should be able to cover the incurred costs as well as enable the entrepreneur make a profit
• The quantity which people buy and how much they are willing to pay
• The quality of the product
• The price of the competitor’s products, i.e., if a product has close substitutes, an entrepreneur should ensure that the prices are in line with those of the competitors or even lower
• The profit margin which the entrepreneur wants
• Whether the product is seasonally demanded or not. Seasonal products like raincoats, Christmas cards are usually sold at high prices compared to products which are not seasonal.

 Common methods of pricing products

There are mainly three methods of pricing products:

• Cost oriented pricing
  The price is based on the cost of the product. The price should cover the costs of production as well as enable the entrepreneur make a profit. For example, if the cost of making and selling a table is Shs. 30,000, an entrepreneur may decide to sell it at Shs. 35,000 so that he/she makes a profit of Shs. 5,000 (35,000-30,000=5,000).

• Demand oriented pricing
  The price is mainly based on the desire to attract customers and increase the demand for the products. For example, a high price is charged when or where demand is high and a low price is charged when or where demand is low.

• Competition oriented pricing
  The prices are mainly determined by the prices of competitors, although they need not be the same. The entrepreneur may keep his/her prices higher or lower than those of the competitors in view of certain considerations. To remain competitive, however, an entrepreneur should ensure that the products are of good quality, reliable and available on demand.

 (3) Place

This is concerned with the various methods of making the products available to the customers. Getting the right product at the right place and time involves transporting, storing and stocking products so that the products are available whenever customers need them. [Strategically placing a product within the reach of the customer.]

Factors to consider when choosing a place

• Efficient and effective transport network that will enable an entrepreneur to make products available to customers in time
• Availability of storage facilities. Good storage facilities protect the products from damage of moisture, heat, theft, etc
• Availability of security. This minimises risks of stock loss due to thefts and break-ins
• Ease of access to sell to customers. Customers prefer goods/services which are easily accessible in order to minimise transport costs and time wastage
• Delivery facilities. Products/services should be placed in such a way that the are easy to deliver to the customers

(4) Promotion

This involves the ways of informing and attracting customers to buy products either for the first time or buy more of them. It involves activities which influence people to buy products and the quantities they will buy. Enable your customers know about your product, like, and buy it.

The various ways of promoting products include:

• Intensive advertising
• Outside or window display of products
• Attractive arrangement of products inside the shop
• Offer of free samples, gifts, etc
• Use of sign posts, neon signs, etc
• Door-to-door advertising
• Use of music or banners to attract attention
• Nice packaging  to attract customers
• Trade fares and exhibitions
• Publicity, etc

(5) Branding/Positioning

This means targeting a particular segment of customers for whom an entrepreneur aims to sell his/her products. For example, sweets, chocolates can be placed at the counters where children can easily access them. Branding is the positioning of a product in the mind of a customer. When positioning a product, an entrepreneur can be guided by the following:

• What product/service do I offer?
• What emphasis do I attach to each product/service?
• Who are my target buyers/
• Where do they want to find the product/service?
• Who are my direct competitors?
• What unique attributes do my products have compared to my competitors?
• What are my business personality traits?
• How do customers want to be served?

Activity

1. Identify the elements of a marketing mix.

2. Examine the different methods of pricing products in an enterprise.

3. Describe the various methods used by entrepreneurs to promote sales.

4. Design a sign post for a business of your choice.

5. Collect used boxes and tins of merchandise and arrange a ‘shop’ in an attractive and convenient way at the back of the class (entrepreneurial business).

6. Assess your business and find out how you have used the 5Ps to market your products/services.

7. Develop a case study on how the business is using the 5 Ps to improve its marketing and selling of its products. 

MARKET RESEARCH AND SURVEY

MARKET RESEARCH

Market research is the systematic, purposeful and exhaustive search for facts relevant to any problem in the field of marketing. Market research involves getting information about customer values, buying habits, expectations and competitors for purposes of designing a product/service that satisfies the customer. Market research is intended to capture, create or retain an existing market. Market research can either be primary or secondary research. Primary research involves collecting of information or data from the field, while secondary research is where a marketer uses data or information that is already published or available, for example, from libraries, journals, textbooks, etc.

MARKET SURVEY

This is the process through which information is collected and analyzed on the basis of which marketing opportunities and problems may be identified. A market survey is carried out to reach a decision whether or not to start, maintain or expand an enterprise. A marketer always seeks answers to the following questions:

• Who are the customers?
• When do they buy?
• What products do they buy?
• In what quantity?
• What prices are they willing to pay?

A market survey aims at:

• Exploring a window of business opportunity
• Understanding customer needs, values, habits, tastes, lifestyles, expectations and preferences
• Investigating a marketing problem i.e. declining market share
• Knowing your competitors and their prices
• monitoring the impact of change
• Launching a new product
• Improving customer care
• Forecasting future market trends
• Assessing size of a market

 Market survey information can be obtained by:

• Visiting business premises, such as shops, markets
• Telephone surveys
• Observation
• Questionnaires
• Interviewing

The key activities in a market research survey include:

(a)  Define market objectives

The objective of any research is either to solve a problem or introduce an innovation that accomplishes a desired goal. For example, to find out why profits have decreased by 10 percent while sales have increased by 20 percent in the same period.

(b)  Conduct a situation analysis

Apply a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis on the internal and external environment, i.e.

• Identify the strength, weaknesses, threats and opportunities of the firm
• Analyse markets, nature of competition, industry,
• Redefine the problem and develop a hypothesis. A hypothesis is a tentative supposition or solution to the problem
• Carry on investigation to approve or disapprove the hypothesis

A SWOT analysis can be presented in tabular form:

	Strengths	Weaknesses
Internal Environment
	Opportunities	Threats
External environment

(c)  Conduct an informal investigation

• Define the problem under investigation
• Seek opinion of internal stakeholders (employees, managers), etc.

(d)  Plan and conduct a formal investigation

Once the problem is defined, the innovative team determines what information is required. The sources of information include primary and secondary data. It is advisable to exhaust secondary data if it is available. The information can be found in libraries, trade journals, Ministry of Trade publications, newspapers, etc.

Techniques of predicting demand

a) Direct derivation

• Petroleum dealers can estimate the market for petroleum products from records of past sales of dealer companies, Uganda Revenue Authority records, vehicle registration department, Ministry of Energy, and Ministry of trade journals
• Insurers who want to invest in Uganda can estimate size of the market from fire accident records. Insurers in life assurance can easily get medical records from hospitals
• Security companies may derive crime rates in cities from police records

b) Survey of buyer intentions

The innovative team surveys a sample of potential customers. The team goes out to talk, listen, see and note, ask current customers how much they buy, in what quantity? at what prices? The team investigates consumer panels to find out their buying habits and preferences. The willingness of potential customers to buy is translated into estimates.

c) Testing marketing

A known geographical area is chosen, for example, Kampala, Jinja, Mbarara, etc. The sales force tests the new product in the area. The findings are analysed and used to project the larger market.

d) Evaluation

A feed back system tells the innovative team whether the plan is working. The budget results are compared with the actual result. The difference is noted, quantified and investigated, and management takes action.

Benefits of a market research

• Identify new marketing opportunities
• More accurate view of current marketing initiatives
• Gain competitive insight

Activity

1. Define market research.

2. Identify the aims of a market survey.

3. Identify the key activities in a market research survey.

4. Design a school market research survey tool to collect information from other students in the school on:

- Class

- Age

- Gender
            - Religious affiliation

            - Extra curricular activities

- Goods and services they would like no buy but are not available in the school.

5. Conduct a school market research survey using the tool above.

6. Analyse the findings from the school market research survey.

7. List the goods and services that would sell best to students in the school.

8. Discuss the possibilities of selling the identified goods and services in the school.

9. Present your findings to the rest of the class/peers.

CHANNELS OF DESTRIBUTION

A channel of distribution refers to the arrangement through which goods move from the producer to the final user/consumer. Every entrepreneur requires a channel that he/she can use to distribute his/her products/services to the right customers at the right time and cost. It consists of all middlemen who participate in the distribution of products and serve as a link between the manufacturer and the consumer.

Types of distribution channels

There are different ways through which an entrepreneur can distribute his/her products:

(a) Direct Distribution

This refers to a method whereby an entrepreneur makes and sells his/her products to customers who consume or use the product. It is also known as short channel distribution.

(b) Retail distribution

Retail distribution channel involves the entrepreneur selling his/her products to retailers and other entrepreneurs who also sell to customers as final users or consumers of the product.

(c) Wholesale distribution

Wholesale distribution channel involves an entrepreneur selling the products in large quantities to wholesalers who also sell them in smaller quantities to retailers who finally sell them to customers who are the final users of the product.

(d) Marketing and selling agents

These are agents who sell products on behalf of entrepreneurs and are paid a commission based on the value of the amount sold.

Factors considered when choosing a distribution channel

• The nature of the product: in general, bulky or heavy products are distributed directly to reduce on the costs of transport; perishable goods are sold directly or through a short channel.

• The nature of the market: when the market is very small and located within a narrow area, an entrepreneur can use direct selling. In case of a mass market where customers are scattered geographically, a longer distribution channel can be used.

• The nature of the business: direct selling is only possible for a manufacturer who is financially strong and possesses marketing expertise. Direct selling is not economical for a single product firm.

• Cost of distribution: when the distribution costs are low, direct selling is the best since it reduces costs to the final consumer. But if the distribution costs are high, the long channel of distribution is preferred since the producer can pass on the cost of distribution to the middlemen.

• Availability of storage facilities: if the producer, wholesaler and retailer have good storage facilities, the customers can buy from any depending on his/her convenience.

• Reliability of the channel: a reliable channel is able to provide goods/services to customers on whenever they need them.

• Availability of middlemen: when the middlemen are available, the long channel of distribution is the best but if not available ,direct selling is the best.

• The value of the product: if the product can easily break, direct selling is the best and this reduces on the risks.

• Desire to control the product market and prices: when the producers want to control the prices of their product, direct selling is preferred since middlemen can cause price fluctuations.

• Number and location of production units: if the production units are many and not established very far, direct selling can be the best channel, but if they are produced far away, then middlemen would be the best.

• Degree of competition: if there is high competition, then a short channel will be used and vice-versa.

Activity

1. Define a distribution channel.

2. Describe the various types of distribution channels for goods and services.

3. Explain the factors which should be considered when selecting a distribution channel.

SALES PROMOTION

Sales promotion is a method used by entrepreneurs to capture a new market or expand and retain and existing market for given goods or services. It includes the behaviours that an entrepreneur uses to influence people to buy more of his/her goods and services. Entrepreneurs undertake a number of activities to make customers aware of their products. The main objectives of these activities are:

• To remind or inform the public about the existence or availability of the product
• To target a particular segment of the market (product positioning)
• To stabilize sales, i.e., maintaining the existing customers by reminding them about the product and its unique features
• To increase sales through attracting new customers by making them aware of your product

Methods of attracting customers

(a) Advertising

Advertising refers to any form of communication about a product or idea. It is the spreading of information about an entrepreneur’s products/services to customers. It is a powerful promotional tool used by individuals, businesses and non business organisations to inform, persuade and remind their target audiences. The methods of advertising include:

• Use of the media, for example, newspapers, magazines, radio, television, billboards, posters, leaflets, etc.
• Use of music, jingle bells or banners
• Door-to-door advertising
• Display of products outside the shop or through the window

(b) Sales promotion

This refers to anything that can be done by an entrepreneur to make customers buy more of his/her goods or maintain them. Sales promotion can be carried out through the following ways:

• Arrange the products inside the business premises properly
• Give free samples and gifts
• Be polite to the customers
• Talk to customers and understand what they require
• Exhibit knowledge about the product/service, i.e., its uses and benefits
• Improve product quality
• Brand your product, i.e., give it a distinctive name

Importance of sales promotion

• To inform the public about the availability of a particular product/service
• To stabilise sales through encouraging and attracting customers to continue buying the product/service
• To increase the sales volume, as more and more customers buy the product
• To target a particular market segment
• To reward royal customers
• To out compete rivals/competitors

Activity

1. What is meant by sales promotion?

2. Identify the methods of sales promotion used in your country

3. Discuss the importance of sales promotion.

Business location

The location of a business refers to the place where the business is situated. One of the earliest decisions an entrepreneur has to make is to choose where to locate his/her business. The most ideal location would be one where operational costs are minimised. The entrepreneur would also need to look at the benefits which an area offers as well as any form of government assistance which might be available.

Factors affecting business location

• Cost; whether an entrepreneur can afford it
• Convenience; whether the location is easy to find
• Market; the nearness of the market and the cost of delivering the goods
• Availability of raw materials; if the raw materials are bulky and expensive to transport, it is better for the entrepreneur to locate near them
• Transport costs; the pull of the market and the pull of the raw materials
• Land; these vary and some firms such as wholesalers might need large chunks of land and might therefore be influenced by the cheaper rent and property prices found in some areas
• Labour; the availability of labour might attract firms to an area, especially if the labour force has the required skills
• Safety; some industries have to locate their premises away from high population density levels and their choice of location is thus limited
• Waste disposal; certain industries produce considerable waste and the costs associated with the disposal might influence their location
• Facility requirements; such as reliable power and water supply

Activity

1. Define business location.

2. Discuss the factors affecting business location.

References:

Bagatya, W.Z.K. 2007. The Principles and Practices of Advanced Level Entrepreneurship Education. Kampala, Uganda. p.135-159.

Kabatire, S. and Mutyaba, S.V. 2007. Entrepreneurship Skills. Netsoft Publishers. Kampala, Uganda. p.74.

Kigenyi, F.D. 2007. Entrepreneurship Education for UACE and Colleges. Kampala, Uganda. p.77, 87.

National Curriculum Development Centre (NCDC). 2002. Entrepreneurship Education for Secondary Schools. Book 3. National Curriculum Development Centre, Kampala, Uganda. p.24-37.

National Curriculum Development Centre (NCDC). 2002. Entrepreneurship for Secondary Schools. Book 5. National Curriculum Development Centre, Kampala, Uganda. p.65-68, 77-83.

Sempijja, M. 2006. Entrepreneurship Education for Advanced Level and Business Institutions. Kampala, Uganda. p.65-69, 70-77.

Tayebwa, K. 2007. Entrepreneurship Education Skills. Bagah Printers and Stationers. Kabale, Uganda. pp.50-64

MARKETING IN SMALL BUSINESS ENTERPRISE

LEARNER'S ACTIVITIES

Activity one

Marketing Activities

In a brain storm session, ask students to list names of products or services out on the market.
Solicit their suggestions and have students explain what makes each name effective.

Ask students to generate names of his/her own invention. This could be a product or service.

Have the students define the term ‘slogan’ and ‘jingle’. Discuss with the students the purpose of having a slogan or jingle. Ask students to mention sample slogans and jingles.

When a slogan is named, discuss the reasons for its effectiveness. Allow time for thought in which the students can create jingles for their inventions.

Introduce the concept of advertising. Discuss the visual effect created by a television commercial, magazine, or newspaper advertisement.

Collect magazine or newspaper adverts that are eye-catching. Ask students to explore newspapers and magazines for outstanding advertisements.

Have students create magazine adverts to promote their inventions.

Ask students to develop a radio promotion for their invention. This might include facts about the usefulness of the product/service, a jingle or song, sound effects, humor. Students may tape record their promotions and present them to the class.

Activity two

 Conducting a SWOT Analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weakness, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

Strengths: attributes of the person or company that are helpful in achieving the objective.

Weaknesses: attributes of the person or company that are harmful to achieving the objective.

Opportunities: external conditions that are helpful to achieving the objective.

Threats: external conditions which could do damage to the objective.

Divide the class into four groups.
Have the teams represent hypothetical companies.
Have each team develop a new slogan:
Group 1 – for a soft drink company
Group 2 – for a bread making company
Group 3 – for a toothpaste company
Group 4 – for a body lotion company
4. Make a list of strengths and weaknesses of yourself and your company on a piece of paper.
5. When all members have completed their assessments, compare and discuss your assessment with other members of your group.

Potential Internal Strengths	Potential Internal Weaknesses
1.	1.
2.	2.
3.	3.
4.	4.
Potential External Opportunities	Potential External Threats
1.	1.
2.	2.
3.	3.
4.	4.