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Marketing

MARKETING FOR YOUR NEW BUSINESS

The marketing and selling of the wonderful new product or service you have worked so hard on is one of the most exciting - and exhausting - facets of your new business. Because however good the product is, however desirable and reasonably priced, unless it is effectively marketed and distributed, your prospective customers will be totally unaware of it and your business is going to fall flat on its face before its first faltering steps.

Sales and marketing are enormous areas of business concern. In the average-sized company, whole departments are set up to deal with these aspects, marketing experts spend years learning their skills and expensive seminars are sold to businesses to inform them of the latest techniques in this highly organised profession. How can you, as a small businessman or woman – hope to compete?

Well, to start with, you already have some of the vital ingredients of a good marketing person. Firstly, you have an intimate knowledge of the product and its properties – you designed and made it, didn’t you?

Then, you must obviously have an enormous amount of enthusiasm for your product – or else you wouldn’t have got this far. You’ve also done your homework and learned who your customer is, where he is and why he wants your product.

PLANNING YOUR MARKET STRATEGY

Marketing is a key ingredient to the success of any business – big or small. But it means far more than just selling your product or service. Marketing activities encompass planning your product or service, then pricing, promoting and placing (or distributing) that product or service in such a way as to keep your customers happy and your business profitable. A marketing strategy, simply defined, is nothing more than the process of combining elements from the marketing mix (product, price, place & promotion) to meet the needs of a unique target market. It goes without saying therefore that the first step in developing a marketing strategy is to create a clear target market profile.

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South African companies in general under spend on marketing. In franchising, for example, South African companies’ average marketing expenditure is 1,8% of sales whereas in America it is 5% of sales. Many South African businesses consider marketing to be a luxury. They spend money on marketing as a last resort. And when business gets tough, they immediately cut back on their marketing expenditure.

Rule number 1 of any successful entrepreneur – be an aggressive, innovative, intelligent marketer.

Bigger companies usually have more money to plough into the presentation and promotion (advertising, publicity and selling) of their products. But this doesn’t necessarily mean they have the advantage. Careful thought and questions cost nothing and these are all you really need to ensure that you can design a product that satisfies your customers’ needs and has a special place in the market.

Assuming that you are able to implement the design of your product or service properly, attention to your customers’ needs is a far better guarantee of success than expensive advertising.

MARKETING TOOLS

Marketing contributes to the successful exchange of goods and services between producers and consumers. In order for the marketing function to accomplish its task effectively, there are four elements that must be examined:

• Product • Price • Place • Promotion

These are commonly called the “four P’s” of marketing. The combination of these components is known as the marketing mix. If a business can effectively combine the four elements of the marketing mix, sales of products or services it should be profitable and customers should be satisfied.

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Just as different ingredients are added together to bake a cake, so are the different marketing instruments added together to represent the entire market offering of a product or service.

Each component of the marketing mix has a function.

1. PRODUCT

In any enterprise the service or product supplied is crucial to the enterprise. This is why the enterprise exists – to supply the consumer with the service or product. To develop the product component of the marketing mix effectively, it is extremely important to know who the potential customers are and what they want or need. Then the right product must be produced or purchased.

1.1 Product description

A product or a service is something that exists to satisfy the need of a customer. Customers do not buy products or services; they buy the benefits that those products or services offer. For example:

they buy clean rooms, not the polish; they buy security, not the burglar bars; they buy experience, not the destination.

An important part of marketing is creating new products. Business survival depends on new product innovations. By being creative and flexible an entrepreneur can provide a better service than his or

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her competitors. There are various ways that you can adapt and vary your product or service to suit the needs of your customers.

Some ways to adapt and vary your products and services are:

If you propagate seedlings , you can vary the colour and quality You can vary your type of packaging. If you provide garden services, you can vary the options to make up different service

packages. You should constantly display new designs in your showroom. The nursery should have

regular promotions that offer, for example, special product combinations or price discounts.

a) Industrial products

Industrial products are used to produce other products. For example, steel is used to produce machinery and equipment.

Commercial products are products that are not used directly in the production of other products, but assist in that production, for example computers, filing cabinets, office supplies. b) Consumer products

Consumers buy consumer products to eat, drink or use. Consumer products are divided into three main groups: convenience products; shopping products; and speciality products. Often, consumer products can belong to more than one of these groups because consumers use products for more than one purpose and have a variety of places where they can buy them.

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• Convenience products These are products that consumers can easily buy at a variety of shops. They are low-priced and do not rely on strong brand name recognition. They are products like:

- Staple products that are bought and used often, for example bread, potatoes, coffee.

Staple services may be dry-cleaning, garbage collection, and car services.

- Impulse products are products that shoppers buy on impulse. They are often displayed at point of purchase areas in supermarkets. Impulse products are products like chocolates, gifts, and magazines.

- Emergency products are bought when consumers need them urgently, for example medicines and bandages. Emergency services are those provided by a security company late at night or by an ambulance service. • Shopping products Shopping products are purchased only after customers compare a variety of similar and competitive products. Consumers generally compare price, style, quality or service provided by the seller.

• Speciality products These are identified by strong brand names. They have special features that make them different from competitors’ products. Some examples of speciality footwear products are ‘Caterpillar’, ‘Doc Martin’s’ and ‘Nike’.

Examples of different kinds of services are:

• Accommodation services — renting of hotel rooms, flats, houses, etc. • Household services — repair services for household appliances like fridges and cleaning of houses, etc. • Recreational services — cinemas, holiday resorts, theatres, sport clubs,etc. • Personal services — beauticians, dry-cleaners, barbers, hair salons, etc. • Professional services — tourist guides, travel agents, advertising consultants, etc. • Financial services — travel insurance, commercial banks, foreign exchange, etc.

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1.2 PACKAGING DECISIONS

Packaging

1.2.1. Trademarks

A trade mark is a symbol, word or words on packaging that identifies a company or a product. It helps customers to recognise products from similar competitive products.

A range of products with the same trade mark tells customers that those products are of a similar standard. For example, Woolworths sells quality products. Customers buying products with the Woolworths trade mark expect the same standard of good quality from all Woolworth’s products.

Products in self-service shops depend heavily on their trade mark to attract customers. The trade name is usually part of the trade mark and can consist of a single word (Hertz), additional words (Southern Sun Hotels) and even phrases (Cape Point Nature Reserve). Consumers use the trade name to show their specific choice amongst competitive products, for example Coca Cola or Pepsi Cola.

The following guidelines can help you identify a good trade name for your business: • it tells something about the product (South African Airways); • it uses ingredients, benefits, or type of industry (Weighless, Wet Wipes, Budget Rent-a Car); • it is said, spelled and remembered easily (Omo, Royco, Ford); • it creates a special image of being up market or fashionable, even if it is sometimes difficult to say (Je T’aime, Elseve, Grande Roche Hotel); • it shows high quality (Elite Choice Butter, King George Ill Hotel); • it uses initials (BMW, J & B Whiskey); • it uses numbers (VAT 69, Five Roses, Two Oceans Aquarium); • it uses personal names (Victoria & Alfred Waterfront, Ernst & Young); • it uses geographical names ( Cape Sun Hotel, Greyton Lodge); • it uses animal names (Whale Watchers’ Inn, Dolfin Beach Hotel); • it uses common names (Sunbeam, Whirlpool); • it uses a combination of words (Pine Forest Holiday Resort, Harbour View Cottages); • it uses foreign words (Nestle, Boschen Meer Leisure Resort). By using trademarks new products can easily be added to a known product line Panado because the reputation of products associated with the trade mark is already established. It is more difficult to introduce a new product with a new trade mark. But if products associated with a trade mark have a bad reputation, or are linked with poor quality, the trade mark can be a warning for customers not to buy products with that trade mark again. 1.2.2. The importance of packaging Packaging plays an important part in the marketing of most products. Packaging with a good design makes consumers notice the product, therefore helps to sell the product. Businesses depend on packaging and on their logo to create a visual identity for the company.

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Packaging is also important to consumers because it identifies products, gives information and protects the products. Other features like safety for customers, convenient sizes, hygienic storing and convenience of re-use are also important.

Packaging with features like drip-free spouts, aerosol sprays, roll-on sticks can help to generate sales. Effective packaging can also be useful in getting a good position on shelves or lots of shelf space in shops, especially when it helps the retailer get maximum turnover. Sometimes packaging is so special, different and attractive that customers are willing to pay more for the product just to get the packaging, for example tins of biscuits that depict local icons or attractions. Sometimes changes in a product’s packaging make customers think that the whole product has been changed. This can be useful when modifying existing products or introducing new ones.

• Examine the pictures of various packaging shown in the picture above, and then explain the purpose of this packaging.

• Can you suggest other packaging for these products?

• Design a trade mark and the packaging for your own product or service.

Packaging can be described as the group of activities involving the design, manufacture and filling of the container or wrapper with the product item, so that it can be effectively protected, stored, transported and identified. Therefore, packaging should meet specific criteria.

Criteria for good packaging:

• the packaging should protect the product against damage and spoilage; • the packaging should be easily packed and transported by the

middleman; • the packaging should fulfil a promotions function; • packaging should help to distinguish the product from competing

products; • packaging should be easily handled, opened and stored by the

consumer; • the packaging should help to emphasise the image of the product. The

packaging of an expensive perfume should, for example, emphasize its exclusive image;

• the packaging should be such that it does not contribute to environmental pollution.

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1.2.3 Types of packaging a) Family packaging The packaging of all the products looks very similar, for example Protea Hotels. b) Individual packaging This involves special packaging when the manufacturer wants to make the product stand out from other products. It usually makes the product appear to be a much better quality than other products, for example Mount Nelson Hotel. c) Re-usable packaging This means that after the product has been used the container can be re-used for some other purpose, for example Rennie’s Travel bags. Customers get these travel bags to hold all their travel documents, but after their journey they can use the bag for other purposes. d) Multiple packaging This is when several products from the same company are packaged together in a single container, for example Johnson & Johnson Baby Products gift packs. e) Kaleidoscope packaging This is when pictures of famous personalities like sportsmen and women, or movie characters are printed on the packaging to create a demand for the product. Products like cold drinks, sweets, crisps often use this method of packaging to encourage young consumers to buy the product.

Labels Labels on products mainly give information. The often show the product name and trade mark, the ingredients, warnings, the name of the manufacturer and directions for use.

What to look for Like most other aspects of business, you need to carry out a little market research to determine the type of packaging required. In this regard, the following questions can be asked: What competitors are in the market and how are you going to handle them? Are you going to beat them in price? What will the end of a price war be? The saying is that a little one should never challenge a bog one on price but rather on service and quality. How will additional competition affect the market? Can your equipment handle changes in packaging? Flexibility is the small entrepreneur’s strength against the larger organisation. By the same token, small business is far better placed to take advantage of niche markets which may be well serviced. In this regard, if you are aiming at families, a product packed in family sized containers would obviously have merit.

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2. PRICING YOUR PRODUCT

Pricing is a powerful marketing tool because of what it says about your product or service. Do you want to be positioned at the bottom of the market? Or do you want to be perceived as a premium quality sales or service provider? As a rule of thumb, the more unique you are and the more value you offer to the customer, the higher the prices you will be able to charge.

Remember, if you position yourself as a discounter or “cheapie”, your margins are going to be very thin. And thin margins mean a very hard life, no matter how good you are.

An effective pricing strategy also depends on good buying. Do your homework and make sure that you buy at the best prices.

With pricing, entrepreneurs need to consider what the customer is willing to pay, and what the customer expects for that price. Customers should feel that they are getting value for money when buying a product or service.

Entrepreneurs must set the price high enough to cover costs and get a reasonable profit, but low enough to attract customers and get satisfactory product sales. The right price today may be a bad price the next day because of changing market conditions.

2.1 The importance of pricing

a) Price suggests the image of the company and its product or service

The pricing policy of a business gives important information about the image that the company wants to suggest to customers. An up market travel agency selling expensive packages gives a different image from a bucket shop that sells cheap, flight — only products. High prices often give the idea of good quality and up market products or services.

free sample offers;

free delivery;

product guarantees that are longer than average

money-back guarantees;

allowing for bargaining;

promoting how long the product will last;

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• Exclusive shops

These shops have higher normal prices to create exclusive image and to themselves apart from competitors.

To make up for charging higher prices customers expect the shop to give better quality products, more services and more extras’ like free delivery or free alterations.

• Speciality shops

Customers expect staff in speciality shops to be very knowledgeable about the type of products they sell. For example, customers may go to a shop specialising in indigenous art, rather than to the art section of a department store because the speciality shop offers better advice about indigenous art. Also a specialty shop offers a bigger range of speciality merchandise.

Jewellery shops, perfumeries, computer stores are some examples of specialty shops.

• Regular shops

Most shops in the market are regular shops. They sell a wide variety of merchandise at normal prices. Examples are restaurants, hardware stores and supermarkets. Regular shops offer fewer special services and other extras.

Regular shops need to carefully compare prices offered by competitors because their customers compare prices of products a lot.

b) Competition Competitors’ prices can have serious consequences on your business and on the prices of your products or services. Because of this it is important for you watch competitors’ prices, especially on the same products or services. Two factors are important when examining competitors’ prices: The place where your competitors sell their products or services The nature of the products or services that compete with your own. Unless your business gives customers benefits like better quality products, extra services, convenient Iocation or good credit terms, your prices must equal competitors’ prices or you will lose sales. The nature of competitors’ products or services will also influence your pricing policies. You need to identify your products or services that are substitutes for your competitors’ and then keep prices on these products or services in line with your competitors’ prices. For example, the sandwich shop owner should consider the hamburger restaurant, the take- away shop and the coffee shop as competitors because they all sell fast foods. Although none of them offers the same menu, they are all competing for the customer who wants a quick meal.

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You should avoid a direct price war with competitors, but should think about what extras you can offer. For example, small tour operators cannot compete with the prices of big bulk buying operators, but can offer non-price competition through more personal service, free airport transfers and tour changes on short notice. Effective pricing methods a) Introducing a new product If a new product’s price is too high, it can fail because of low sales volumes However, if the price is too low, the sales may not cover costs. When pricing a new product, you need to satisfy these three objectives: getting the product accepted by customers; keeping your market share as competition grows; making a profit. When introducing a new product there are three strategies to choose from. These are penetration, skimming or sliding-down-the-demand-curve. • Penetration Using the method of penetration the idea is to get quick acceptance of the product and achieve a wide distribution in the market. The entrepreneur introduces the product at a low price. The low profit margins may discourage competitors from entering the market with similar products.

• Skimming Using the skimming method the product’s price is set much higher than its cost, and it is widely advertised and promoted to attract customers that do not worry about price. A result of the skimming method is that the product gets an exclusive image and customers believe they are buying a high quality product.

• Sliding down the demand curve Here the product is introduced at a high price, but with technological developments in manufacturing the company can lower production costs and the product’s price before its competitors are able to do so. Calculators, computers and cell phones are examples of products introduced at a high price, but lowered as technology progressed.

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2.2 Other pricing methods • Odd pricing The prices end in odd numbers (5, 7, 9) because products selling for R12.99 seem cheaper than those selling for R13.00.

• Price Lining Each category of merchandise has items that are similar in appearance, quality, cost and performance. Many travel guide reference books group bed and breakfast accommodation together according to their grading, the facilities they offer and their pricing. • Leader pricing This is when the entrepreneur lowers the price on a popular product to attract more customers to the store. Although the business earns lower profit margins on the lower-priced products, consumers also buy other products that often improve general sales and profits. For example, the discounting of popular brands of film will attract tourists who are tempted to buy other photographic equipment. • Opportunistic pricing When products or services are in short supply, customers are willing to pay more for products they need.

• Discounts Shop owners sometimes use discounts to get rid of stale, old, out-of-fashion, damaged or slow moving merchandise.

PRICING TECHNIQUES

NEW PRODUCTS

• Penetration • Skimming • Sliding-down- The-demand-curve

OTHER TECHNIQUES

• Off pricing • Leader pricing • Price lining • Discounts • Opportunistic pricing techniques

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2.3 Turning slow-moving stock into cash.

Slow-moving products create a risk of financial loss because they can go bad or become outdated. Businesses like clothing stores that have high fashion products or seasonal products often have unsold products on their shelves for a long time.

Some entrepreneurs do not want to lower prices to try to sell these products, but it is better to sell this kind of merchandise as quickly as possible rather than keep it in stock at regular prices.

Entrepreneurs who delay lowering prices of outdated merchandise because they worry about reducing profits are making a big mistake. The longer the merchandise is on the shelves, the less the chance there is of making a profit on it.

The most common technique of getting rid of slow-moving merchandise is to mark-down prices. Advertising special prices on such merchandise helps the business get more customers and builds a good business image.

Other techniques of selling slow-moving stock are:

* to have middle-of the-aisle display stands that attracts customers;

* one-day-only sales;

* quantity discounts for volumes purchased,

* bargain tables packed full of a variety of merchandise;

* lights focusing on specific sale merchandise;

* tickets marking products on sale.

When BMW increased their car prices over a two-year period, competitors expected them to have fewer sales. But this did not happen. The company’s manager explains, “This pricing strategy helped a lot. The BMW 3 Series, a medium-priced local car has been competing against higher priced imported cars. To stop sales from dropping, BMW raised its prices to achieve a more up market image.” An increasing number of medium-priced products are struggling against competing products in the luxury and discount price ranges. Customers are choosing higher-priced or lower- priced products. Up market ice-creams like Aylesbury are doing well, and so are supermarkets’ no-name brands, but medium- priced products like Dairy Maid are fighting to hold their market share. These days, choosing the right price is even more important than it was in the past. Although much has been written about pricing products, the fact is that pricing is very difficult. Production costs influence a product’s price, but many other less obvious factors also influence pricing. Lower prices are preferred for most products, but there are exceptions like Mercedes Benz where the higher the price, the more customers want the product.

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Most customers think that high prices mean high quality. Image also plays an important part. For example, production cost of a bottle of perfume may only be R40, but the selling price of R200 suggests something special. A perfume manufacturer says, “Women are buying hope and mystery and a product that makes them feel special.” Customers consider more than pricing alone when making purchasing decisions. Factors like quality, reliability, service support and easy use are important for customers. 1. Why do some companies raise the prices of their products to make them? more attractive to customers? 2. What factors other than price does a customer consider when making a purchasing decision?

3. How can you use the knowledge of factors made in customers’ purchasing decisions to influence your pricing strategy?

2.4 Pricing by the retailer

To make your business successful you need to sell a product for more than it costs to produce. The difference between the cost of a product and its selling price is called a mark-up.

The following example shows mark-up:

A shirt costs R15 and the entrepreneur plans to sell it for

R25, the mark-up would be:

Rand mark-up = Retail price - Cost of merchandise

= R25 - R15

= R10

Or

Percentage mark-up (on retail price)

= Rand mark-up Retail price

= R10

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The initial mark-up is the average mark-up required on all products to cover:

the production cost of the products;

all other expenses;

a reasonable profit.

Example Sales of R380 000, expenses of R140 000 and a profit of R38 000 is expected in your business. Therefore the initial mark-up percentage = 140000 +38 000 380 000 = 50%

You know that an average mark-up of 50% is required to cover costs and generate an adequate profit. Now you can calculate your retail prices.

COST RPICE = R15

MARK-UP = R10

Initial rand mark-up = operating expenses + profits net sales

SELLING PRICE = R25

Operating Expenses R6

Net Profit R4

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Knowing that the mark-up of a product must be 50% of the retail price. Assuming that the cost of the item is R18, 00. Retail price = Rand cost percentage mark-up = R18, 00 50% = R36, 00 The entrepreneur establishes a retail price of R36, 00 for the item using a 50% mark-up.

The entrepreneur must check the selling price by asking these questions: Will it cover costs and generate the necessary profit? Does it match the company’s general price image? Is it within an acceptable price range? How does it compare with prices charged by competitors? Are customers willing and able to pay this price?

2.5 Pricing by the manufacturer The pricing method that manufacturers use most often is cost-plus pricing. In this method the manufacturer establishes a price consisting of raw materials used, labour, factory overheads selling and administrative costs, and the required profit margin.

BLOCK I

BLOCK 2

BLOCK 3

PROFIT

ADMINISTRATIVE COSTS

DIRECT LABOUR, DIRECT MATERIALS, FACTORY OVERHEADS

SELLING PRICE

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Joe grows and sells indigenous trees. His monthly operating figures are:

Rental for the factory = R2 000; His workers’ wages = R16 000

The materials used = R8 000; Administrative costs = RI0 000 p.m. (telephone and salaries)

An average of 1 500 trees per month are grown and sold.

Joe intends making a 20% net profit.

Calculation:

[BLOCK 3]: Direct costs = R16 000 + R R8 000 = R24 000

[BLOCK 2]: Admin costs = RIO 000 + R2 000 = R12 000

Total costs R24 000 + R12 000 = R36 000

[BLOCK 1]: Profit margin = 20% on total cost = 20% x R36 000

=R7200 The selling price = block 3 + block 2 + block I = R24 000+R12000+ R7 200 = R43 200 The selling price per tree grown = R43 200 1500 = R28, 80

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2.6 Pricing by a service business It is good for service businesses (for example LAWNMOWER repairs, car repairs, tour guiding, etc.), to use effective pricing strategies. Often a small service business just charges the going rate, or makes up a price they think is right.

a) Repair service Spare parts that replace damaged parts should be invoiced separately. These spare parts are bought and sold to customers at a certain mark-up plus cost price. A service business determines the price according to: the materials used to provide the service; the labour; the cost of overheads; a reasonable profit. They charge customers for their service on an hourly basis, usually the number of hours it takes to do the service.

Gloria’s Landscaping business uses the direct costing method to get their selling price: Variable expenses: Labour (wages) R 52 000 Materials R 40 500 Variable overheads R 11 500 R104 000

Fixed expenses: Rent R 2 500 Salaries 38 500 Fixed overhead 27 000 R68 000

Variable costs are: wages to the artisans, fuel and other motor car expenses, telephone costs, cleaning materials, etc. Fixed costs are: payments to the bank, rent and salaries of typist/telephonist/receptionist.

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Total costs R172 000

Gloria calculates that she and her staff spend about 12 800 hours doing landscaping services. The jobs use different amounts of materials. Gloria must work out the labour cost per hour without including the price of the materials. So the total cost per hour spent on the job comes to: = R172000—R40500 12800 hours Therefore the price per hour: = R10,27 + 18% = R10,27+R1,85 = R12,l2 per hour Gloria would charge R12,12 per hour plus the actual cost of materials used and any mark-up on the cost of the material. A job that takes four hours to complete would have the following price: Cost of service (4 hours x 12, 12 per hour) R 48, 48 Cost of materials 21, 00 Mark-up on materials (10%) 2, 10 Total price R 71, 58 b) Providing a service

Examples of businesses providing a service are tourist guides, doctors, typists, dry cleaners, bed and breakfast accommodation, etc. With this type of business no spare parts are replaced, therefore customers are not charged for spare parts. Variable costs are: typist using paper and ribbon, computers need paper and ink, dry cleaners use washing powders, hair stylist use shampoo, conditioners, etc.

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Gloria has the following monthly expenses in her business: Rental = R1780 Fixed costs = R1300 Wages = R20 per hour Variable costs = R5 760 Each employee works on average 180 hours per month. Mary needs 35% profit on sales. Variable costs: R 5 760 Wages (2 x R20 x 180) 7 200 R12 960

Fixed costs: Rent R 1 780 Fixed overhead 1 300 R 3 080 Total costs: R16040

Total hours employed: 2 x 180 hours = 360 hours The total cost per productive hour for Gloria’s salon: = R16040 = R44, 56 per hour 360 hours She expects a net profit of 35%. Therefore the price per hour:

= R44, 56 + 35% profit = R44, 56 + R15, 60 = R60, 16 per hour Under these conditions Gloria would charge R60, 16 per hour. A job that takes three hours to complete would cost:

Cost of service (3 hours x 60, 16 per hour) = R 180, 48

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2.7 The most common pricing problems are: * Pricing is too cost orientated: companies fail to take into account demand intensity or

customer psychology. * Price not revised often enough to capitalize on changes in market. * Price often set independently of the rest of the marketing mix. * Price is not varied enough for: different product item or different market segments.

Your best guideline to price – given, of course, that you cover costs and give yourself at least minimum profit margin – is the type of person who will be buying the product. Is that person prepared to pay a lot so long as the product has the right image (and does the job, of course), or is that person more concerned with the value for money?

A good rule is to look at what your target customer is prepared to pay or is already paying for a similar product. A lot of small businesses make the mistake either of thinking that they have to compete on a price basis – or they overprice because they haven’t found their cheapest suppliers – and sometimes they simply haven’t checked what everyone else is charging. There may be a very good reason why the price of a competitive product is higher than yours and it’s worth defining that reason to your own satisfaction before you start.

If you have competition at a similar price, don’t automatically go for a price cut to make sales, use other persuasions to secure customers. Base them on the advantages of your product over the competition – simpler design, higher quality, better delivery. It is clear pricing – not over or under pricing - that will sell your product. The old adage that “Cheapest is not always the best” still holds sway with a great many consumers, even in an economy with high levels of unemployment. Remember also that you don’t have to sell huge volumes to make good money. Many people are prepared to pay more for an exclusive product – if it’s really unique and good quality, don’t under-price yourself.

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3. PLACE You have informed your target market how your product or service can satisfy their needs. You have told them what benefits your product or service offers the. Now you need to decide how to get your product or service to your customers. Place simply means making the product or service available at the place that is convenient for customers. In order to implement this component, the entrepreneur must know the customers’ buying habits.

Finding the right place depends upon the type of product or service and how the customer normally buys it. Products must be available in the right quantities and locations when the customers want them.

Placing your product on the market – a major decision about your product is how it will get to the customer. Will you sell direct to the end-user, or form a chain of people in order to get that product in position?

Yet fancy advertising campaigns are useless when your product is not on the shelves or when your store is under stocked. You must have a plan for getting your product to the consumer and keeping it in front of him / her.

The more people who sell your product, the more profit you give away and the less control you have, but you can obviously sell far more of your product this way. You can sell to a retailer or to a wholesaler, either on your own or through agents.

3.1 LOCATION

Factors To Be Considered When Establishing A Business Undertaking

The choice of the geographical location for the premises of a business is very important. The nature of the proposed product or service will decide whether the enterprise needs to be situated for the customer’s convenience or near the source of raw materials. Choosing a popular shopping mall will mean competition and the opportunity to attract passing trade. A retailer will choose either the CBD (Central Business District) shopping complex depending on his market and merchandise and preference. Holiday and tourist trade is often seasonal. The natural attractions draw the market and enterprises may be established in fairly isolated areas or on popular beaches. Rural communities also need commodities and services. An entrepreneur’s preference also helps decide where he’ll set up his own business

MARKET

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This is where suppliers and buyers meet to buy and sell a product or service in order to satisfy certain needs.

An entrepreneur must decide on the demographic and psychographic factors of his clients and develop his product, business or service to satisfy those specific customers. Market research will establish whether there is a need which warrants a new business. It is also necessary to research the future development of the market. Is the need likely to increase or decrease? The market for a particular service or product is limited. Prospective owners need to determine in advance what share of the market will be theirs. Will that slice be sufficient to make a business profitable? Consideration of your market is essential when looking for a place to locate your business. If you are a PRIMARY producer it is unlikely you will retail your product. If you are a SECONDARY or TERTIARY producer, you will need to be readily accessible to prospective clients or customers. If your business is established to supply the END USER, it is essential to locate your business so that a sufficient flow of customers can easily patronize you. The CENTRAL BUSINESS DISTRICT attracts different customers from suburban shopping complexes. The location of the complex will determine the socio-economic group of the shoppers. These shoppers need to fall into the demographic and psychographic segmentation of your market. 1) e.g. An eating house selling traditional food would be more suitably located in lower Pixley Simelane Street, a CBD location, than at The Pavilion Shipping Centre, a suburban shopping complex. 2) A water-slide, whose market is fairly well-off children, is situated at Warner Beach, popular with residents and more especially in an area with holiday accommodation. 3) A pie-shop in a small shopping complex; but part of a larger shopping area, has a discount, bottle store next door, a large parking area, a taxi rank and is situated on a main linking highway between three suburbs.

TRANSPORT FACILITIES The availability and the cost of transport facilities; rail, air, road and pipelines must be considered when deciding on a geographical location of a business. Situating a factory in a rural area where the raw materials are produced, cuts down on the cost of transporting heavy primary products, but the isolated environment could discourage prospective employees. The cost of transportation of materials in relation to finished products and the possibility of using one’s own transport rather than hired transport must be considered. Using own transport would require more capital and added responsibility. Products, services or produce (fruit and vegetables) can increase in value by transporting them from their place of origin to and an area of high demand. Safe, reliable and reasonably priced transport is essential to gain access to this favourable market. Transport may need to be specialised. Perishables like fruit and flowers need to be air freighted in refrigerated holds. Adequate and affordable transport must be available to take staff to work.

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CAPITAL Capital is money saved and available to be used to start a business. Own capital is the entrepreneur’s private savings, LOAN capital is borrowed from a bank or SBDC and interest is paid on the loan. The choice of location could be limited if a shortage of capital forced the entrepreneur to choose the cheapest location possible. The available capital must also determine whether business premises are hired or bought. If loan capital is used to establish the business, the suppliers might set specific conditions or express preferences as to where the business premises should be located.

MUNICIPAL CONCESSIONS AND RATES The attitude, regulations and tariffs of local authorities must be considered when choosing a municipal area for a business. Some local authorities encourage industrial development and special concessions are offered. Health and building regulations are not uniform nationally. Property rates and tariffs for water, electricity and sewerage also differ. Every municipality has unique problems. Careful consideration of these and local tariffs will help the prospective owner to decide on a location.

LABOUR SUPPLY The place where labour is available and the relative cost involved in hiring that labour needs careful consideration ‘when choosing a business location, the available labour must also possess the required education and training. Workers need to show potential for development and satisfactory productivity. The nature of the undertaking will determine the criteria for selection. Businesses which ate labour intensive may choose to locate close to a large labour pool. Some companies can employ labour worldwide because all data is immediately available by computer link. Now employees may not need to re-locate.

HOUSING The provision of housing is seldom the responsibility of the entrepreneur. However, if other factors require the undertaking be located away from existing residential areas, housing may have to be provided for employees. Housing for contract or seasonal workers might be provided. In addition to adequate housing, progressive employees might provide educational, recreational and shopping facilities for the staff of the proposed enterprise. This set up might be necessary for isolated large farming & mining or civil engineering projects. It is usual for farmers to provide housing for their staff.

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ELECTRICITY AND WATER SUPPLY Most municipalities supply piped water and electricity to their area. The prospective owner must be certain that the water supply is sufficient and suitable for his needs. Some equipment is operated by three phrase power, usually available in industrial areas.

Sufficient current must be available to power machinery. Seasonal loads and fluctuations in power must be assessed because they can cause serious problems. Outside the municipal areas, owners have to install pumps and pipelines and install generators for electricity or use gas or solar power.

PARKING FACILITIES The location must provide adequate parking for clients and personnel and for delivery of goods. The parking needs to be sufficient for the number of clients. More parking bays will be necessary for a retail store than a doctors consulting room. The possibility of theft of a vehicle or contents and safety of customers in parking areas could influence client potential. Controlled access to parking areas could increase security. Covered parking would provide comfort, but be expensive.

COMPETITION A thorough investigation of businesses selling a similar product or service in the vicinity of the proposed location must be made. If the market is large enough to support another supplier, the new business could benefit from the passing trade. Customers going to the existing business could buy from you instead if prices were competitive.

RAW MATERIALS The availability of raw materials of sufficient quantity and the required quality could cause an industry, which uses that particular primary product to be located in that region. Saw mills, are located in forest areas. Canning factories are located in fruit producing areas. Smelting works will be established near mines and Sasol is situated in a coal rich area. It is more economical to transport the manufactured product than the bulky raw material.

CLIMATE Production of certain agricultural products requires a special climate. Crops are regional. The Western Cape produces grapes and wheat, whereas mealies are planted in the Free State

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and sub-tropical fruit in the Lowveld. Some production processes require a particular type of climate. Climate can influence acquisition, retention and productivity of staff. Extreme or harsh conditions could require staff be paid proportionately higher salaries to attract personnel in those areas. Open air vending and restaurant seating are feasible propositions in East London. A good climate attracts tourists and holiday makers.

INDUSTRIAL AREAS Municipal areas are usually zoned for the benefit of the users. Houses and shopping malls are situated in residential areas and zones are allocated for businesses and commerce.

The CBD is usually the most important business district, although this could change with time. Industrial areas are separate and usually on the outskirts. They are serviced to meet the special needs of users Industrial sites arc large, usually have rail sidings and access to main highways. They will also have three phase power available and sufficient volume of water. Isolating industry prevents polluting residential areas with noise and smells.

3.2 Layout (a) Layout for retail and businesses Layout is the arrangement and display of merchandise. A well-designed layout of merchandise is important to the success of a retail business. It should attract customers into the shop; make it easy for them to find the merchandise and to compare the prices, quality and features of the merchandise. Helping customers to do this makes their purchasing decisions easier. Also, a cleverly designed layout plan leads customers past other products that they may buy on impulse. Impulse and convenience products are put near the front of the store. Some places in the store, called prime space, are better places to promote merchandise than other places because customers walk past them more often and notice the products. Retailers put products with the highest profit margins in prime space. They do not use prime space for merchandise like luxury or expensive products or speciality products that customers shop around for before buying. The area with the lowest floor value is the space furthest away from the entrance because fewer customers go there. Only about 25% of customers go more than halfway into the store. When customers enter a store they usually turn right and move around the store in a counter-clockwise direction. This information is important when determining prime space and the direction displays should face. Display your merchandise as attractively as possible. Customers look at displays to see the type of products your business sells. A display gives a better idea of products than those arranged on shelves or hanging on racks. Open displays of merchandise can be arranged around a main display making an attractive selling area. It is a good display technique to put together products that complement each

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other. For example shirts, ties and shoes can be displayed near each other. Large displays give customers an open look at the merchandise, and also reduces opportunities for shoplifting. The arrangement of merchandise in a small retail store

Merchandise

How or Why bought

Placement in Shop

Impulse goods as result of attractive visual merchandising displays

Small shop - near entrance Larger shop - on main aisle

Convenience goods With frequency in small quantities Easily accessible feature locations along main aisle

Necessities or staple goods

because of need Rear of one-level stores, upper floor of multi-level stores

Utility goods

for home use-brooms, pots, pans, similar items

as impulse items, up front or along main aisle

Luxury and major expense items

after careful planning and considerable ‘shopping around”

some distance from entrance

b) Layout for a manufacturing business When deciding the layout of a manufacturing business you need to consider the arrangement of departments, work stations, machines, and areas for keeping stock. The objectives are to arrange everything to help work flow smoothly throughout the production process and to allow for easy and economical movement of workers. Factors that influence the manufacturing layout design are:

Type of product Type of

production process

Finance available

Space available

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c) Types of layout for a manufacturing or service business • Product layouts In this type of layout workers and equipment are arranged according to the process of activities needed to make the product or to serve the customer. They follow an unbroken flow of activities:

This type of layout involves high volume production with continuous processes, or mass production, or manufacturing products that are all the same, for example tins of peas. An example of product layout businesses is automobile assembly plants, paper mills, oil refineries. This type of layout gives the advantage of lower costs when working with raw materials, making work easy therefore reducing costs, unskilled labour, less stock waiting to be processed. • Process layouts In this type of layout workers or equipment are arranged according to the work they do because the product or customer does not need to pass through a continuous work flow system. For example, when the product or service is customised or the production process is short. The advantages of this layout is that the process can change if necessary to do customised work and workers do not get bored by doing the same job over and over again. • Fixed position layouts In this layout type, because materials are too big or heavy, they are not moved down a production line. The product is made in one place with all the raw materials being taken to that place. Examples of products made using this type of layout are oil tankers, fibreglass swimming pools and passenger liners.

Raw material input finished product

or

Customer’s arrival customer’s departure

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3.3 Distribution

A product may follow a variety of routes before reaching your consumer. The different channels can be schematically represented as follows:

Types of distribution channels for consumer products

Channel A is a direct distribution channel. This channel is short and simple and no intermediaries are involved. The example of the farmer selling vegetables on a small scale was mentioned in the introduction and also serves as an example of encyclopaedias, is another example of such a channel.

Channel B is usually implemented when the retailer is financially strong and can buy large quantities from the manufacturer. An example is the motor manufacturers who use local retailers. It would be impractical for wholesalers to enter this channel since the costs of inventory holding are high and because of the large variety of cars that the wholesaler would have to keep in stock.

Channel C involves a wholesaler, retailer and then the consumer. This channel is frequently used for low-cost products and certain durable products. Once again refer to the example of Telefunken in the introduction. You will see that they use this type of channel.

Channel D is implemented when there is a variety of both manufacturers and retailers. The agent will help to coordinate this channel. Clothes can serve as an example here. A large number of manufacturers manufacture clothes. There are also a variety of retailers to sell clothing. The agent’s role is to help coordinate distribution.

Each person in the chain takes a cut – but don’t be put off by this. Established shops and wholesalers have existing clients, infra-structures and marketing ‘images’ which you may not be able to reach on a small budget.

It’s well worth considering the potential increase in sales that you could save yourself by getting your product onto the market through a specialist distributor. But use your common sense: if your product is not designed for a mass market, you don’t need to give those profit margins away!

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4. PROMOTING YOUR PRODUCT

Advertising regularly plays an important role in keeping your business healthy, growing and alive. Every business needs sales to stay alive. To get those sales the business needs a co-ordinated promotion and advertising strategy.

Advertising can be a good way to increase sales by telling customers about your products or services. It also helps improve the image of your business and its products or services.

4.1 The Objectives of advertising

Retail or service businesses may use promotions and advertising for many reasons.

a) To generate immediate sales

Promotions and advertising can persuade your target market to buy your products or services quickly. Specific methods to do this are advertisements that encourage customers to visit the business, to offer special promotions, or to create deadlines for sale merchandise.

b) To create awareness of products or services

Promotions and advertising can make customers aware of the products or services that a business offers by providing information about those products or services.

You can generate consumer interest by advertising information on how to use products, what benefits customers can get from products, product prices, and special promotions or where to get the products.

When your business has established a good reputation in the business community, you need to continue using advertising to keep up a good volume of sales.

Manufacturing businesses place advertisements in trade journals, newspapers, direct mail campaigns to promote the company’s name and products.

Through advertising, the business tries to establish a positive image and to representatives make inform customers about its products before its sales personal calls to sell the products.

Some businesses also spend money on advertising the business itself to inform the public about the company. This is called attitude advertising. The purpose of this type of advertising is to create public awareness of the business name, trade mark, products or services and to create customer goodwill and confidence, as well as to improve the business’ general image in the community.

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Promotion involves trying to determine the proper means of communicating the availability and benefits of the product or service to the potential customer. Deciding on the right methods of promotion will involve a careful analysis of the product, price and place components of the marketing mix. Different products (and product classes) require different forms of promotion. The promotional tools available to the businessman include:

- advertise (LAWNMOWER, radio) - sales promotion (competitions, outdoor give always) - public relations and - personal selling

Guidelines For Choosing The Right Approach Include The Following:

Personal selling where the product is technical or complex and you need to go to customers and sell face to face.

Advertising and promotion (from straight newspapers ads through to mailshots or leaflet distribution and attendance at exhibitions) where the market is large and can justify the expense.

Publicity – getting stories about your business into newspapers or magazines or onto radio, particularly when you are trying to establish image and awareness at low cost.

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4.2 ADVERTISING

Many people equate advertising with marketing, yet it is only one aspect of the marketing process. Advertising is the way you communicate to your customers through the media – newspapers, radio, LAWNMOWER, outdoor, leaflets placed in mailboxes, posters on poles etc.

Advertising can cost a few rands per week, or thousands per day, depending on the size of the advertisement, the method and the media you choose. Many very small businesses reject the idea of advertising as being too expensive, before they have looked carefully into the matter – and that can be a mistake, because a thoughtfully constructed advertisement in the right publication can have a powerful impact for the small business.

Newspaper advertising is usually charged by the column centimetre, so you can have as much or as little as you want to pay for. If you choose your publication carefully, and even the specific target area within that publication, you can reach a great many people and, more importantly, the right people. This can be a cost-effective way of promoting your product.

If yours is a service business, then the appropriate column of the classified pages could be used for inexpensive advertisement, reaching the people who are looking for services. If your product or service is of interest to women specifically, then a small display ad on the women’s page could work for you, especially if the publication has days on which they deal with specific subjects.

The growing number of free suburban newspapers (or ‘Knock-and drops’ as they are often termed) around South Africa can be the ideal vehicle for products or services aimed at particular communities or suburbs. I addition, their advertising rates are generally much cheaper than the dailies.

If you are running a mobile hairdressing service, for instance, and you want to restrict your clientele to a manageable area close to your home, a suburban paper would reach the very people your service is aimed at.

Generally, suburban newspapers claim to ‘saturate’ an area – meaning every household in their distribution area gets a free copy. So if your product is aimed at just such an area or community, theoretically you should get greater coverage for less outlay than you would need if you were using a daily or a weekend newspaper.

Whichever type of newspaper you choose, their advertising departments have copywriters and artists who will design your advertisement for you, as well as salesperson who will advise on the best rates and position for your product, but for you own information, you should bear in mind the following points when drawing up an advertisement:

• Design the message to reflect the image of the business. For example, if the business is an exclusive shop the message and the whole advertisement must also look and sound exclusive.

• Customers should be able to recognise the advertisements of a specific business because they all look the same in terms of colour, borders and print styles.

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• Use attention getting methods with words like ‘free’, ‘save’, ‘you’, ‘new’, ‘bargain’ or use recommendations from customers.

• Translate the features of the product or service into specific benefits for customers. Tell the customer how the product or service benefits them, for example saving money, saving time, or providing peace and quiet.

• The layout of the information, pictures and logo should be simple so that the message is clearly seen and understood.

• The message should be short, direct and created around one idea. • Choose colours carefully. • The headline should get the reader’s attention. 80% of customers only read the

headline. • Use pictures or drawings that complement the product or service. Photos or

drawings often get more attention than words do. • Give the business’ name, logo, address, telephone numbers, hours of service, etc. • Include the price. This is an important factor for many customers.

What are the benefits of advertising? - advertising aids the introduction of new products. - can help expand the market. - can help sell the company image. - can help obtain immediate buying action. - can help develop good will for the company. - create and retain goodwill for a product. - generate store traffic and sell merchandise for local dealers. - promote new uses for an established product. - deliver helpful information to consumers. - provide offers, coupons and samples. - emphasise a trade name - keep and maintain customer interest after the sale. - attract new dealers and distributors. - counteracts advertising by competitors. - reminds the consumer.

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Selecting the advertising media

The selection of advertising media is a very important step because it will ensure that the advertising message will reach the specific target market in an effective way. Various advertising media can be used.

The following table identifies the most important advertising media, with their advantages and disadvantages:

Type of advertising medium

Advantages Disadvantages

Newspapers - Enables illustrations - Relatively cheap - Geographically selective

- Poor reproduction - Short lifespan - Is read curiously - Reaches a general

audience Magazines - Good reproduction

- Longer lifespan - Reaches specific market

segments - Loyal readers - National coverage

- Long lead time - Many advertisers and little

chance to dominate

Radio - Geographically selective in regional services

(e.g. East Coast Radio)

- National coverage with certain stations

(e.g. Radio 5)

- No literacy necessary - Listening habits sometimes

habitual

- Limited availability - No back reference to

message - No illustrations - Only short messages - Is a background medium

Television - Involves most senses - Good for demonstrations - Wide coverage - Prestige value - Can involve the whole family

- Limited availability - No back reference to

message - Relatively expensive - Reaches a general

audience - Repetition can irritate

viewer - Only national

Cinema - Involves most senses - Good for demonstrations - Selective - High quality reproduction

- Reaches a general audience

- Relatively expensive - Limited message

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- Lengthy

Billboards - Size and colour provide impact - Good for reminder advertising - Cost per potential customer low

- Short message - Short time in which to

convey message

- Detrimental to aesthetics of

environment

Transit Advertising (e.g. buses, taxis)

- Selectivity possible (for example, buy space

according to bus route)

- To an extent trapped in a bus

- Plays a more important role as mass transport

increases

- During rush hour commuters often

do not read messages

Direct Mail Advertising - Minimum wastage – reaches a specific

market

- Very flexible - Can be personalised - Can be used within a small

budget

- Difficult to keep address lists up to

date

- Often regarded as junk mail

- Often ignored Pamphlets - Wide coverage

- Relatively inexpensive - Enables illustration - Geographically selective - Can make use of colour

- Poor reproduction - Reaches a general

audience - Often regarded as junk

mail - Often ignored

A business without a sign, is a sign of no business

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4.3 SALES PROMOTION

Sales promotion can be defined as those promotional activities you perform to generate immediate sales of your product or service.

The following activities are included in sales promotion:

brochures

exhibitions

demonstrations

samples

mail advertising

coupons

catalogues

reports

competitions

incentive offers

discounts

sales

There are a few sales promotion features to keep in mind:

Handing out samples can be a good aspect; the customer feels his is getting something for free. On the other hand if too many are handed out the customer can feel it is a cheap product.

Sales promotion is an activity between the dealer and the producer. The main aim of sales promotion is:

higher sales as quickly as possible

to change attitude

create brand name awareness

drawing new clients

increase the effectiveness of advertising

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A common mistake made with sales promotions is to promote only when sales are down. Rather try to “fish where the fish are”. If you promote when sales are doing well, you will elevate your sales to an even higher level.

So sales promotions can include competitions, incentive offers, sales, discounts, free gifts, etc.

Also bear in mind that promotion is not a synonym for discounting. Rather promote by adding value to the consumer. One example of this is “combo’s”, selling a combination of products at a price that the consumer perceives as good value. Rather than compromising on margins as you might with discounting, you are moving more products and increasing margins. Just visit any McDonalds to discover how to do this well.

For a sales promotion to be successful, it should be designed to present your products and services to potential customers in such a way that they “add a visit to your outlet” to their shopping lists.

Once you have attracted customers into your shop, your sales promotion should direct them to the items that you are promoting and then encourage them to buy those items.

Promotion can be the most active element of your marketing plan, if you are creative and have the support and ability to carry your ideas through.

Remember that sales promotion is only temporary. Once the promotion is over the consumers memory fade.

There are other means of advertising of promoting your product on a limited budget:

4.3.1 Special offers – you can arrange special offers through a magazine, or organise special ‘in-store’ promotions where you arrange an attractive display of your product and have a good ‘promoter’ (probably you!) on hand to explain and demonstrate the product. You could combine this with a discount coupon to make it even more attractive.

If you approach this creatively, you don’t have to spend much money and you should be able to get a store’s co-operation if you make sure that it will attract customers and provide the store with a good return for the space allocated to you.

4.3.2 Direct marketing – Direct marketing is when you send promotional material or communicate directly with the precise people who you want to become your customers. Direct marketing takes the form of letters and telephone calls to prospects. You can buy lists of potential customers from list brokers.

Direct marketing can be very powerful because you are talking directly to the people who either are your customers or who will become your customers. And here’s a vital point: always be talking to your existing customers so that they don’t leave you because of lack of interest. It’s much cheaper to keep an existing customer than it is to attract new ones.

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This can be a very good way of marketing on a limited budget if used properly. Direct marketing is based on choosing a ‘target’ group of the people you want to sell your product to. This target might be the buyers for shops you want to sell through, for instance, or the end of customers themselves.

Once you have selected your target, you communicate directly with them – usually by post. But to make this work, you don’t just send a letter. Send something that will draw people’s attention that points out the merits of your product or service – and that tells them where to contact you.

For example, you could send a little gift with a discount voucher for your product, inside a pretty wrapped box.

Even if you spend a few rands per person, and send your gift out to 100 people, you are communicating with exactly the people you need – so, unlike general advertisers, you are not wasting any money on people who are not likely to be the buyers – and you can measure exactly what response you get.

Other small budget ideas to promote your business or product are:

Make sure you are in the Telephone Directory and the Yellow pages

A small space or stand at trade fairs or exhibitions, community carnivals or fetes can be very effective in reaching customers.

Simple “A” boards outside your premises will attract customers

Local cinema, regional radios are generally cost-effective ways of advertising, as are specialist periodicals, which are aimed at your market.

If your target is the business community of Durban, why not consider the Durban Chamber of Commerce With the new postal rates increase, letter drops have increased substantially in price. A

way of overcoming this would be to try inserts which will often enable you to reach your clients, and is cheaper than going on a one to one basis through the post.

The old fashioned ‘word of mouth’ is still a very valuable way of gaining new custom. If your product or service is a good one, customers will be pleased to recommend it to their friends. Help the system along always leaving your business card (or two or three), or a couple of advertising leaflets, with your customers. By the same token, if they are in business, try and reciprocate by passing on leads to them. This is the concept of networking. Networking itself is extremely important advertising. A little bit of sponsorship here and there can get you into the right circles and pass your publicity on the right areas. At the end of the day however, word of mouth advertising is the best you can do.

Try some informal telephone canvassing – by simply phoning everyone you know and telling them all about your product or service. If they show interest, ask them for additional names and phone numbers to contact.

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Make sure you pin leaflets, advertising your business (alternatively, use your business card) on the notice board in all your local shopping centres and community centres.

Keep your name in the news by donating products to be used as prizes at local events, fetes, fundraising activities, etc.

Try to ‘handbill in the postbox system. Have some attractively, cheaply printed handbills made up and push them into every letterbox in a selected area. The response may not be immediate but, particularly with leaflets advertising home services – plumbing, gardening, repairs, etc. – people tend to keep them until a need arises.

4.3.3 Exhibitions – do they benefit business?

Like most aspects of running a business, in particular in the discipline of marketing and advertising, you will find that there are those businesses that swear by the value of exhibitions whereas others will indicate there is little or nothing to be gained from participation in them.

For the small businessman certain exhibitions can be extremely beneficial in extending market access for the business.

Be careful to weigh up the costs against the benefits:

In the first place, determine what type of customer is likely to be attracted to the show. Is it the type of person who will use your product or service?

What are the conditions relating to participating at the show in regards to opening hours? For example, if a show runs from 8 in the morning to 10 at night do you have the staff available to man such a stand for this periods and if not, can you leave an unattended stand without fear of losing either prospective orders or, facing theft of samples and equipment. In this regard an examination of through put of visitors to the exhibition on an hourly basis will certainly assist you in planning.

A complete feasibility study must be undertaken which should include amongst other items, the basic cost of the stand the cost of the layout. The latter may often involve bringing in a professional to assist you. Then think of running costs, for example staffing, the cost of samples and/or specials to attract people, telephone and catering.

Determine the potential revenue which you anticipate can be attracted through additional orders.

In other words you need to undertake considerable planning before participation.

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There are other things to look for. Is there a possibility, for example, of rather than taking a full stand, of participating with some other business (obviously complimentary as opposed to competition) and/or you may find that special provision is made by the organisers of the exhibition who are in fact running several umbrella stands whereby smaller businesses can make use of a smaller area at a lower cost rather than renting a full stand.

4.3.4 Free media publicity

Nothing beats great Public Relations (PR) to increase your visibility and credibility. Someone once said, “Advertising is what you pay for, PR is what you pray for!” The power of PR is that it is perceived by consumers as true. It appears in the press as editorial. People believe it because the newspaper or magazine is seen to be saying it, not you.

There are many small, inexpensive PR agents around. Hire one or do your own PR, but make sure you get publicity. It’s gold. In fact, we’ll make a confession to you: one of the main reasons we are writing this book is for its PR value. Anyone will tell you that you can’t make a lot of money on books in South Africa. But the amount of publicity we will receive with this book is worth thousands of rands.

There’s another area where you can sometimes get publicity absolutely free – and that’s through the editorial pages of newspapers and other publications.

Why is this possible? Because while the media have the editorial space you want, you have something of value to offer them too: an interesting story, a bright idea, something their readers would like to know about.

There’s no great secret in getting some of that space for your new business. And it’s not a case of who you know – the trick is knowing who to approach, and how to approach them properly.

You’re going to have to do a PR job on yourself and your business, and one of the first rules in business, when dealing with the media, is to make sure you’re talking to the right people.

Send a covering letter stating quite simply that you believe your jacket will be of interest to their readers and you hope they’ll consider featuring it in one of their issues.

You could enclose a stamped, addressed envelope for the return of your promotional material if they’re not interested, or for them to send a press cutting if your piece is published – but there is not guarantee you’ll get either.

As well as the specialist publications, you should approach the daily and weekly newspapers. Newspapers have different departments each with its own editor – news, features, sport, business, women’s page, arts etc. So you’ll have to decide which department might be interested in your product – or you can try a different ‘angle’ for one or two departments. There is no harm in giving it several shots.

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As a small business getting off the ground with a clever idea, your story might be of interest to the Business Editor, for instance, while the Women’s Editor may like the idea, if you are a woman building a successful business on the creation of a jacket for the ‘macho’ sportsman.

Start by asking yourself two simple questions:

Who or what is my product or service aimed at?

Which publications are those people likely to read?

Let’s say you’ve designed and are producing a fashionable little waterproof jacket with plenty of pockets that’s perfect for outdoor types who carry around lots of little fidgety things – fisherman, yachtsmen, photographers and the like.

First check out what magazines and publications they’d be interested in, the addresses of the publishers and the names of the editors.

Then write a brief piece about your jacket, what its advantages are, how much it costs, and where it’s available. Don’t worry about ‘being able to write’ – just state the facts clearly, and if the magazine is interested in the product a journalist will write it up from your information – or they may even contact you for more facts.

Journalists are always looking for an ‘angle’ – something that makes an interesting story, unique, exciting or fun for their readers – and different from the stories of their competition. So if you can find the angle that pleases a newspaper or magazine (and a different one for each publication you approach), you’ll have a greater chance of success.

When you’ve worked up these various angles, write a brief piece concentrating on the angle you have selected for each editor, enclose a photograph of the product, give your name and contact telephone number (you’d be surprised how many people don’t), and send it off.

If you prefer, you could phone the departmental editors direct and ask for an appointment to see them – but frankly I’d only advise that if you can really keep your story brief and to the point on the phone.

If they do show interest and ask you to come in and see them, go prepared. Have all the facts and details of your product at your fingertips. Take a sample so they know what you’re talking about – and don’t expect to grab their attention for longer than a few minutes.

Very often you’ll find the local community newspapers your best bet. They generally have much smaller staffs than the bigger newspapers and are actually on the lookout for editorial feature material, particularly concerning local people. And what better place to get your free publicity than in the local market you’re looking for?

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You could even try for some radio coverage. Charles Gentle, the programme director for ‘Lifestyle,” a Saturday morning programme on Radio South Africa, says that magazine programmes are constantly on the lookout for subjects of interest to listeners and in fact, at the end of the programme, they make a point of inviting listeners to write in with ideas and suggestions.

Check with both your local and national radio stations for the kind of programme that would be interested in you or your product, and find out the name of the programme director. Once again, write a brief letter giving details, and requesting them to get in touch with you for further information. Follow it up with a phone call to check that they have received your letter, and ask if they are interested – would they like to know more, see a sample?

Be persistent, but do not be pushy, demanding or rude. You’d be amazed at how many people phone journalists and demand that ‘somebody must write a story about me,’ or become aggressive because a piece of copy they sent in last week hasn’t yet been published. That sort of approach is always a total switch-off and will only result in media silence about you and your product if you try it.

Media people in general are usually quite happy to hear from readers, listeners or viewers and, if you have something of interest to say, you can be assured of a hearing at the very least.

If you are friendly, business like and enthusiastic, you will probably get a similar response from the person you are approaching. You may even get the valuable editorial space you’re seeking.

Don’t be tempted to write pages and pages on your jacket –most editors don’t have the time to wade through a mountain of superfluous words in order to find the facts. Your efforts will simply be tossed in to “File 13” – the wastepaper basket.

If possible, have some clear black and white photographs taken to illustrate the garment, then send off a copy of the photograph (plus your text) to each and every publication.

4.3.5 Sponsorships

Sponsorships are becoming increasingly important for small and medium enterprises. Society expects more and more of enterprises and sponsorships can be used effectively to retain the goodwill of the public.

Sponsorships mean that an enterprise gives it support and financial assistance to certain community activities. In this way communities can support activities in their area. Example, Kirsten’s Family Pick ‘n Pay (a franchise) in Weslawnmowerille recently sponsored a fun run / walk in an effort to raise funds for a local charity.

The enterprise must, however, keep in mind that it is not the specific task of the press to find newsworthy items about the enterprise, but rather that it is the responsibility of the enterprise.

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4.4 PERSONAL SELLING

Personal selling is offering a product or service to a potential client by a sales representative of the organisation. The sales representative must inform the potential buyer about the product or service by means of a direct relationship.

Personal selling is the face-to-face contact that the sales representative has with the client. The most important characteristic of personal selling is that the sales representative can adapt his message to the buyer’s circumstance, whereas advertisements focus on a specific market segment in its totality. Questions and objections can be handled directly by the sales representative.

Profit is the lifeblood of any business. Unless you can generate sufficient sales to give you your required net profit, your business will suffer, and may even die! The best way to ensure the continued life of your business is to ensure that no sales opportunity is missed.

Remember, the formula for arriving at net profit is:

R

SALES

less COST OF SALES

GROSS PROFIT

less OPERATING EXPENSES

NET PROFIT

xx xxx,xx

x xxx,xx

x xxx,xx

x xxx,xx

x xxx,xx

Without SALES taking place, you cannot exist, your “Cost of Sales” and “Operating Expenses” become expensive liabilities, and your Gross and Net “Profit” figures can only be “Losses”.

Once you have identified the elements which contribute to successful selling, you will be in a position to increase the sales of your own business, and will be on track for attaining a healthy net profit.

WHAT IS “SELLING”?

Selling is an activity in which “ownership” of something passes from one person to another in return for a consideration, which is normally money.

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Selling involves a transaction taking place. This sales transaction is made up of several elements. These are:

the sale

the delivery of the product

transfer of ownership

collection of payment

provision of evidence of the sale. (This could be cash sales slip, for example)

An important point to bear in mind is that all staff are sales staff, not solely those who carry that title. Packers, cashiers and cleaners can all contribute to higher sales turnover by their friendly attitude.

Your staff are you representatives and ambassadors to the buying public. They must understand what you expect from them and they must understand what the customer expects of them. For example, you don’t expect the same level of services and attention at a fast food restaurant as you do at a 5-star restaurant. But you do expect courtesy, friendliness, and cleanliness from your fast food restaurant employee

In addition to your own sales staff, agents and representatives also promote sales.

But without a doubt the most important sales person in the business is YOU.

Too many small businessmen feel that the marketing of products by companies such as Toyota and Unilever is one thing, but that needn’t be pursued to the same extent by small business. Marketing is in fact just as important to the small business as it is to the large corporates.

Innovation is the key with marketing. Innovation of ideas which will link people to your product or service. Be aware of the business environment around you, and whatever changes occur make sure that they relate to the effectiveness of your product. At the same time, be sure that you are ahead of your competitors by keeping an awareness of what they are up to.

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