Support to Business Organisations and their Access to Markets (BOAM)

Appropriate Marketing Strategies

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The "5 P" Approach in Marketing  [top]

Marketing Strategy

A marketing strategy is about developing a good marketing mix. The elements of the mix are: Product, Price, Place/channel of distribution, Promotion and Person/process. The mix also involves selecting the target client/market: Studying the client with respect to his/her buying motive and behaviour, segmentation of the market using relevant bases, evaluating each of the segments, selecting the appropriate segment as target market.

1.  Product Development

Product development involves decisions with respect to:

• what product to produce?

• what should the design, model, appearance and style of the product be?

• what should the brand name of the product be? Comparison of the product with its competitors should also be considered. Thus, one should ask questions like: “Can I produce a product with better quality than others do? Can I provide warranty for my products? Can the design of my product be better than others? Can I use quality raw material? Can I label my product?”

2.  Selling Price

Price is a ratio reflecting the exchange value of a good or a service, measured in terms of money. The following questions may clarify the idea of pricing:

• My pricing strategy: Should I go for profit maximisation in the short-term? Profit optimisation in the long-term? A minimum return on investment? Keeping parity with competition? Fast turnaround and early cash recovery?

• My pricing methods: should I follow cost-based pricing? Demand-based pricing? Competition-oriented pricing? Affordability-based pricing? Or differentiated pricing?

The answers to the above questions will help setting the selling price for each product/service.

3.  Place of Business and Channel of Distribution

The place refers to the MSEs’ location of the business and the channel of distribution chosen to reach potential customers. One should ask questions like: “Can I get a proper business location not far from my customers and not too near to my competitors? Can I get proper premises with reasonable price/rent? What should be the channel of distribution?” Distribution is the physical movement of goods through a system called the value chain. Distribution channels include wholesaling, retailing, mail order, catalogue sales, telemarketing, contracting, or working through brokers.

4.  Promotion

The role of promotion is to facilitate exchange between product/service providers and customers. Commercial enterprises are concerned with attracting customers. Different types of enterprises will have distinct promotional mixes utilising a variety of promotional methods. The major promotional mixes are as follows:

Advertising: is a form of impersonal broadcasting through commercial mass media. Advertising is the pervasive form of promotion because it is one form that captures our attention.

Sales promotion: is a term used to imply an activity that is specifically designed to induce sales by enhancing the value for the consumer. This value may be created through volume discounts.

Publicity: is the result of public service announcements or news generated through media. Newspaper articles, recognition in public affairs, magazine stories and talk-show interviews.

5.  Person:

The person (i.e. the entrepreneur) should be competitive enough in terms of:

• practical abilities needed to produce the product/service;

• business management skills;

• personal characteristics and situation, commitment, motivation;

• taking risk.
   

Strategies in Relation to Quality  [top]

The objective of a business organization is to create goods to satisfy customer needs at a profit; and these needs can be satisfied if consumers get the right quality products. With more consumer satisfaction there could be higher demand for a product and consequently, more efficient utilisation of resources. If the quality of a product is not good, then it may be rejected. Quality is related to the success of an entrepreneur because, a product with quality can:

• create satisfied customers;

• facilitate volume purchase;

• easily bring repeat purchase.

In the past changes in market preference were not frequent. Nowadays, however, market changes very rapidly reflecting the changing needs of consumers. Research works by the American Productivity and Quality Centre note that, happy customers spread good news to about five people while, unsatisfied buyers spread the bad news to about nine to twenty people. There is a saying that, "bad news travels fast."

Strategies with regard to Training  [top]

MSEs need to receive regular training on how to:

• develop business ideas;

• carry out simple research;

• attain a better reputation;

• attract and satisfy customers;

• get known in the market;

• fight competition;

• use credit facilities and any other funds;

• costing for finished products and set sales prices.

If the budget allows, during the training period covering about 60-80 % of the expected sales value could be used as an incentive for participation. Nevertheless, this strategy should be employed only for a given period of time and with a purpose of encouraging MSEs to attending the session and benefiting from the training. A comprehensive and continuous training can be provided on how to use money efficiently and on how to correctly invoice the money earned from sales. Besides getting knowledge, training sessions have the advantage of facilitating MSEs into sharing ideas and discussing how to overcome problems. In the event that some MSE owners cannot understand the training to be provided, teaching their adult children can be an alternative, since it may be much easier to change the attitude of young children.
 

Strategies in Relation to Competition  [top]

Almost all micro and small enterprises have competitors. Therefore, the enterprises have to strategically stress their strengths over competitor offers. For instance, if one enterprise has lower costs in comparison to its competitor, then its pricing strategy can be based on selling at lower price. If the MSE has a broader selection of goods as compared to its competitors, then he/she should emphasize this issue and take advantage of more sales. If the competitor's store area is unattractive, a strategy can be set to make one’s own store more attractive for potential customers. In this way competition can be beaten. Joining chambers and trade associations is one way of interacting with competitors and learning how successful enterprises do business. If the enterprise suffers from different rivals, it could use a strategy that provides it with a competitive advantage over others as part of the sales deal.

If competitors sell on a door-to-door basis then those who have no buyers at home can develop delivery to "x" buyer's premise. The strategy has to look into aspects that the buyer cares about.

The issue of getting data and information is relevant, not only to competition, but to all other marketing mixes. Besides, information is a knowledge source of what is going on or what competitors are doing. In relation to the shortage of data and information already mentioned earlier, the service providers can play a role in establishing centres for data and information that the MSEs can effectively use in their proximity. It obviously requires a good budget, but with the assistance of some financiers the topic can be considered.

Pricing Strategies  [top]

The strategy of considering price decreases for market entry can be carefully applied and based on study. However, under-pricing without studying the market can be a dangerous risk. Since a small decrease in cost structure leads to high improvement in profit, the best tactic would be to minimize costs. With due consideration to the profit margin, temporary price reduction can be used as a strategy to increase sales or to sell products in high stock. Reduced offer announcements encourage customers of purchasing larger quantities. The tactics of decreasing cost would be the safest way to improve profit margins. The pricing strategy has to regard the profit margin. In view of this fact, the volume of sales has an important meaning. Some enterprises focus on unit sales and not too much on profit margins, which can be risky. The price being the most common strategic element of marketing, some related schemes will be outlined below. Offering reduced prices is a valuable tool to attract customers as well as to try a product. However, this should only occur for a given period of time.

Micro and small enterprises that are engaged in selling their products to organizations or companies can send price reduction notices in attractive envelopes. This is the cheapest means. A strategy to produce good quality products and charge an appropriate price is a practical approach to pricing. A more practical approach to the micro enterprises could be to produce a lower quality product and charge a lower price. Nonetheless, the market has to be segmented first, since this can be unsafe, if applied to the wrong market. The best and most preferable pricing strategy is to lower costs and consequently to minimize profit margins, which will both benefit the manufacturer as well as the buyer. For instance, if a micro or small enterprise has a profit margin of 10 % and lowers its costs by that extent, it will automatically be able to increase its profits. In this case raising profits by increasing sales would require a 100 percent increase in sales. Offering special store/retail shop discounts to loyal customers is a workable strategy that is also imaginable. 

Sales Strategies  [top]

An analysis of the marketing segment could be carried out to identify the target customer and to get to know how best to appeal to the respective customer. Some strategic elements are recommended below. Most MSEs may require retail stores to sell their products. Although, location means a lot in retailing, a viable location usually costs a lot. A small shop with an attractive set-up and front can be a good selling location. Establishing a retail shop is a necessary activity, but it is not easy. Joining chambers and trade association can help in doing so. The study notes that the attainment of retail areas can be enhanced in its processes by using chambers and associations, as compared to a single micro or small enterprise operator on his/her own. If the vicinity markets are not large enough to support daily sales, then the whole sales strategy can be an alternative. If sales staff is not trained in handling customers, they are up to shift to other firms. Even window shoppers can be potential buyers. Therefore, sales forces need to cater also for them and show them that they are also interested in them as customers. However, this issue should be handled very carefully.

Avoiding giving away the store to family and social visitors is crucial. Other wise, over a period of time, a good amount of profit will be realized with every visitor consuming part of the products that should have been for sales.

Selling in collaboration with highly visible and well-respected supermarkets or distributors is a further alternative. In such cases buyers do not ask whether the products are of good quality or not. They assume that the product is of good quality, which is connected to the high profile of the partner. This does not however imply that the MSE that uses this outlet should offer low quality products as this would have a negative repercussion on the supermarket which it uses as an outlet Therefore, this approach can boost the enterprises sales and attract more customers. An example of this would be, if we could take the 'Meskerem' supermarket or 'Fantu Gebeya' as well known supermarkets and allow micro and small enterprises, that sell things such as kitchenware, pottery products, handicraft, small furniture, shoes, or woven products, to place their products in the shop and indirectly introduce their products, need not compete with the supermarket products. If the market place is regional, then the products can be distributed or promoted by means of a compatible retailing shop that is also regional. 

Assigning a sales person with good communication skills is good selling tactics. Socializers sell by means of building friendships. Although friendship is an integral part of selling, the product should be the right one, both in its performance and pricing.

Quick and easier sales can be reached by selling on a gross or bulk basis. However, it has to be noted that the profit margin can be thin. In such cases, the selling strategy should include tactics on how to introduce efficient selling systems with a minimal number of staff. The scheme should consider:

• how to make collection control more efficient;

• how to make credit sales system tighter;

• how to maximize sales volumes so that overhead costs can be spread reasonably.
   

Strategic Location of Sales Shop  [top]

As a retail shop is an essential linkage within the marketing channel, the location has to be chosen strategically. Even if it is a micro or small enterprise the location is a deciding factor. The premise can be chosen by making a comparison analysis between the costs and benefits to be gained. Before choosing a location for the retail shop carrying out simple research concerning the potential buyers and the nature of the product could be advantageous. The study should identify the following:

• the type of potential buyers (attitudes towards the product and habits);

• the product type (e.g. durable, perishable, for low income, for adults, for girls);

• whether the product or service is in high competition or not;

• the method with which the retailer intends to attract the purchaser;

• the period of time in which buyers prefer to do their shopping.

Based on the result of the above research, the shop location can be selected by putting some criteria such as the ones cited below:

• if the product is consumable, such as food and beverages the shop can be located in residential neighbourhoods;

• if the product is meant for student consumption, then the shop can be located near schools and universities;

• if the product or service is aimed at tourists, it can be any busy location of interest to them;

• if the service is for young girls, such as hair dressing, the shop can be located in areas that can be reached easily and comfortably;

• if shoppers are from the upper class, the best location for the shop may be in a clean and safe area;

• if many competitors are situated in the same area, then this may be an advantage or disadvantage, all depending on your products and buyers – so please analyse this!
   

Distribution Strategies  [top]

If the number of handled steps is much more than a product should be handled, the product could be easily damaged. Accordingly, the strategy should be to handle only one merchandize at a time and to treat it delicately. This can be applied especially for perishable and restaurant products. Product storage has to be appropriate. Due to the nature of the micro enterprise’s market area, rats, insects and other rodents can be expected, in which case the products have to be protected from damage related to this problem. Establishing an appropriate distribution network is necessary; besides it is also tactical to give the enterprises' product literature to the distributors, if any is available. Distributing in gross deliveries to other outlets is a tactical alternative. As is the case with bread merchants and glue factories, it is preferable to sell bread to breakfast serving houses respectively glue to shoe and wood companies. This approach can bring forth advantages, such as:

• getting cash money;

• selling in larger quantities;

• saving time.

The system related to the receiving of orders has to be designed in such a manner that the order can be processed as soon as the customer places one. Customers having to wait for an order to be processed with staff doing something else leads to a bad customer relationship. The bread, 'dabo' and milk business enterprises can distribute door-to-door instead of selling in-house. There could be some consumers who prefer these products to be delivered to their houses. MSE operators are not in the position to directly improve the situation with regard to their poor infrastructure. The relevant government offices can effectively handle this issue. Since this topic is important, the service providers should play a role to that effect.
 

Packaging Strategies  [top]

Packaging is a competitive tool and an important factor in strategic marketing. The use of appropriate packaging can improve sales and transporting aspects related to the product. Therefore, setting packaging strategies is of importance. The packaging strategies for MSEs have to be very much cost oriented due to the limited access to finance they have. Some strategies will be discussed below. A strategic packaging container would be one that can communicate a message of quality, convenience and reliability. In the event of the enterprise considering a new packaging, a strategic container will be the one that can be used over a longer period of time. This is due to the fact that constructing a new one can be an expensive venture for MSEs. A package, which has a relevant design on the container, is an expressive receptacle. The design does not have to be an expensive one. The packaging should have a relevant graphic design on its outside. With respect to the MSEs the design need not be expensive, but should be one that can convey the 'Quality Message '.

Branding Aspect

As mentioned earlier some buyers are impulsive and make their shelf-choices quickly. Hence, the brand mark has to be clearly written. Most buyers in developed countries are brand-oriented. Manufacturers have to give much consideration to the quality of the product and equally good consideration to the branding. In most cases it is difficult to try or taste the quality and standard of a product at the point of sale. Therefore, buyers concentrate on brands of packaging or label design.

Transport and Protection Aspect

A product intended for export markets has to travel a long distance and changes in atmosphere. It passes rigorous climate, various rail, sea and air conditions. Hence, the protection function of the package requires serious attention. An exporter has to study the transportation means and condition of the expected voyage. It is necessary to introduce an appropriate packaging to reduce damage, theft and material handling during physical transportation. For example milk, butter and oil are more exposed to damage and theft compared to other products. If the target market appreciates reusable containers then developing a suitable, portable and reusable package will likewise be appropriate. In the case of competition being stronger in his packaging, then before a new container is developed it is necessary to analyse the competitor’s packaging situation.

Packaging Legislation

Nowadays, there are several issues on solid waste and they are becoming important agenda in international trade because of their implication in global competition and also because it can be a trade barrier, especially in the case of food and beverage products. Lack of important target market knowledge can lead to serious consequences. Some of the end results can be the rejection of products and the formation of a bad image. Certain packing materials could be totally banned or restricted because of certain ingredients in the material. Presently, importers and even some final consumers are conscious of the various different types and quality of retail packaging. Certain countries give great attention to the rules and regulations concerning consumption products such as food and drinks. This is because poor packaging can directly affect the health and safety of the final consumers. Some countries require the weight (both net and gross), the specification listing of ingredients, colour, method of usage and size to be written on the label clearly. For more information, please contact the Chamber of Commerce of the importing country and have a look at specimen products from competitors who are already in the foreign market.

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