Product Promotion - Business Studies Form 2 Notes

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Insurance - Business Studies Form 2 Notes

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Introduction
The Purpose/Importance of Product Promotion
Methods of Product Promotion
Ethical Issues in Product Promotion
Trends in Product Promotion

Introduction

Product is an item or service offered to the consumers at a price.
Therefore, product promotion is the communication or any activity undertaken to inform the consumers, persuade and remind them to buy the product from the market.

The Purpose/Importance of Product Promotion

It informs the customer of the availability, price, and where to obtain the product to satisfy their wants
It persuade the buyer to buy their products a head of their competitors products in the market
It reminds the customers of the continued existence of a given product in the market
It educate the consumers of the usage of the product to satisfy their needs fully
It informs them on any improvement that has been made on the product
It stimulates the demand of the product being promoted in the market
It brings out the positive features of the product
It opens new market for the product in the environment

Methods of Product Promotion

Product promotion may be carried out in the following ways:

Personal selling
Advertising
Sales promotion
Publicity

Personal Selling

This is a method of promotion where there is an oral presentation in the conversation with the prospective customer. It is done by with the use of salesmen who informs the prospective buyer of all the aspects of the product

Methods of Personal Selling

Personal selling can be carried out in the following ways;

Through sales person approaching the customers
- A case where the sales person approaches the prospective customers after drawing their attention, explaining details of the product and even demonstrating how the product works in order to persuade the customer to buy.

Steps Involved in Personal Selling Through Sales Person
1. Identify prospective customers who could possibly require the product
2. Preparing the presentation by gathering all the possible information about the product , as well as designing an appropriate methods that will be used to present to the customer
3. Establishing the customers contact, as well as choosing an appropriate time to meet the customer to be. That is the time when the customer may receive him
4. Arousing the consumers interest in the product by attracting his/her attention through approach and languages, as well as making the prospective customer develop interest in the product
5. Dealing with the objections on the product which may have been brought about by the customer to b
6. Closing the sale by inquiring whether the prospective customer will be interested in the product or not. This should be done in a polite manner
7. Offering after sale service to the customer on the product that has been sold
Shows, trade fairs and exhibitions
- This is where the manufacturer of a given product gets a chance to display publicly to the prospective customer to inform them about the product. The prospective customers’ attention is then drawn to the product and more information is given to him about the product at the point where it is displayed.

Advantages of shows, trade fair and exhibitions
1. It gives the customer an opportunity to compare various products before making a decision on what to buy
2. It gives the sales person an opportunity to explain in fine details the features of the product to the prospective customers
3. The manufacturers of the product gets a chance to receive immediate feed back from their customers through interactions during the shows
4. The number of people visiting their stall to asses their products will help them determine their potential market size for the product
Disadvantages of shows, trade fairs and exhibitions
1. It is expensive to hire a stall for the exhibition of the product
2. The sales person may have to explain over and over again for the prospective customers as they may not enter into the stall at the same time
3. The trade fairs are not frequently organized, therefore an organization rely on it as the only means of product promotion may not succeed
Showrooms
- These are large rooms where goods are displayed, especially bulky and durable goods like cars, furniture’s, etc for the customer to see and be informed about them to stimulate their interest in them
- The room allows the customer to get more information about the product from the sales person in the showroom

Advantages of showrooms
1. They enables the seller to get immediate feed back on the product
2. They enable the customers to get clarification on the product they need to purchase
3. It is a cheap method of production
4. It provides an opportunity for the usage of goods to be demonstrated
5. The information the prospective customer get from the show room is more reliable
Disadvantages of showrooms
1. They are usually located away from the town centers, making them not be accessible by many
2. It is expensive to hire showrooms
3. They require security to protect the goods inside them which may be very expensive
4. Some prospective customers may tamper with goods in the room while trying to operate them
Free Gifts
- A gift is an item given to the customer free of charge after buying a product which it is pegged on or buying products of a given value. The gift may not necessarily be the same as the product bought, but they are meant to encourage the customer to buy more or give the customer opportunity to explore the product given as a gift.

Advantages of Free Gifts
1. It enable the customer to enjoy the product given as a gift without paying for it
2. It persuades the customer to buy more of the product in order to get the gift
3. It is an additional product, and therefore increases the customers satisfaction
4. It may help in creating loyalty in the product being promoted
Disadvantages of free gifts
1. It makes the customer buy including products they didn’t require in order to the said gift
2. The cost of the product may be very expensive for the customer
3. Some middlemen may remove the gift and keep or even sell to the customer to maximize profit
Free Sample
- This is a product on trial given to the customers freely to influence their demand towards the product. It mainly used when the product is new and the customer may have not known about the existence of the product

Advantages of Free Sample
- It enables the customer try the product before making a decision to buy it
- The customer is able to enjoy the product that otherwise he may have not enjoyed
- The organization is able to get immediate feedback from the customer about their new product
- It enables the organization to acquire more customers for their product
Disadvantages of free sample
- Some of those receiving the sample may not come back to buy
- It may be an expensive method of promotion especially where many samples are to be given
- Goods given for free may reduce the value of goods that may have been sold to earn profit
- It is not suitable for expensive products

Circumstances Under Which Personal Selling is Appropriate

When launching a new product in the market which requires a lot of awareness to the prospective customers to enable them make a choice
When a product is tailored to meet the customer’s needs, as different consumers have different needs, taste and preferences to be addressed.
When demonstration is required on how the product works, especially the technical products
When the organization has the capacity to finance the sales force carrying out the personal selling
Where the market is concentrated within a given region that can easily be accessible by the task force

Advantages of Personal Selling

It is more flexible than any other method for the marketer is able to meet the needs of different people
It enable the prospective customer to know more details about the product before making a decision
The sales person is able to demonstrate the use of the product
The seller is able to get immediate feedback on the product
The seller is able to obtain the personal contact of the prospective buyer
It gives the buyer an opportunity to negotiate the terms of purchase
It takes care of both literate and illiterate prospective customer
The seller is able to persuade the prospective buyer to buy the product

Disadvantages of Personal Selling

It is labour intensive and therefore very expensive when the area to be covered is wide method
It is time consuming as it involves explanation and demonstration
It may only target a particular group of people
The seller has to meet the travelling and other expenses involved which may be very expensive
Salespersons may misuse the resources allocated for them, making the target not to be achieved
The process may inconvenience the prospective buyer’s program
It may only cover a given region which may not be wide enough

Advertising

This is the presentation of information about a product through public media such as newspapers, radios, billboards, etc

Types of Advertising

Product advertising: - this is a form of advertisement meant to promote a given product or a particular brand of product
Institutional advertising: - this is a form of advertisement meant to improve the image of the institution or organization and not a particular product. It is meant to create confidence in the customers about the institution
Primary demand advertising: - a form of advertisement meant to a new product that has been introduced in the market for the first time. It is mainly to create awareness of the existence of that particular product
Celebrity advertising: - a form of advertisement where a famous/popular person is used to promote a particular product. It is meant to convince those who identify themselves with that personality to buy the product
Informative advertising: - a form of advertisement meant to give the customer more information about the product to enable them make an informed decision
Competitive/persuasive advertising: - a form of advertisement carried out with organizations producing similar product to persuade the customers to buy their products ahead of their competitors
Corrective advertising: - a form of advertising meant to correct a misleading information that may have been given out about the product
Reminder advertising: - a form of advertising meant to remind the customers that the product still exists in the market and is still capable of satisfying their needs.

Advantages/Importance of Advertising to the Business

It maintain the sales of an already existing product
It create awareness in the customers about a new product in the market
It informs the customers about the changes that may have been made in the product
It helps in building image or reputation of the selling organization
It may increase the volume of the existing sales of a product
It reaches peoples who may have not been reached by the sales person
It complements the effort of the sales person to enable them achieve their sales objectives
It clears the customers misconception and prejudice about the product
It opens up new markets for the products

Disadvantages of Advertising to the Business

It may be costly to the business in terms of money and other resources
It leads to increase in cost of production if at all it has to be done frequently
The cost of the advertisement will always reduce the profit margin of the business
Poorly planned advertisement may negatively affect the business
Misleading advertisement may reduce the level of business operation

Advantages of Advertising to the Customer

They educate them on the usage of the product
They inform them on the products availability
They guide them on where to get the product
The outlines all the features about the product including prices to the customer
Competitive advertisement may lead to improved quality of goods to benefit the customer
Information on different prices through competitive advertisement makes the customer to benefit from the reduced prices

Disadvantages of Advertising to the Consumer

The advertisement may not disclose the side effect of the product
The advertising cost may be passed to the consumers through increased price
Some advertisement may persuade customers to buy what they do not require leading to impulse buying
Some customers may buy substandard goods due to misleading advertisement

Advertising media

These are channels or agents through which an advertisement message is conveyed to the target group. They includes both the print and electronic media which includes; newspapers, journals, magazines, posters, bill-boards, brochures’, radio, television, neon signs, etc

Newspaper

These are daily or regularly publications which contains advertisement. They includes, Daily nation, Standard, Taifa Leo, citizen, star, etc

Advantages of the Newspaper

The can reach areas that other means may not reach
Many people can afford them as they are relatively cheap
They cover a wider geographical area, leading to a wider market
The message on the news paper can last for a longer period of time, making it to reach more customers
The advertisement appearing in the newspaper is readily acceptable by the reader
Colored print makes the advertisement to be more attractive to the reader who in turn gets the information

Disadvantages of the Newspaper

Many of them are written in English or Kiswahili, making them to only target those who can read and understand the language
It discriminate against the illiterate group who cannot read the information
They have short lifespan as they may be read only on the day it is circulated
It cannot be used to focus on a specific target as they are read by almost everybody
Some of the prospective customers are always in a hurry to read the newspaper and may not pay attention to the advertisement

Magazines and Journals

These are periodic publications meant to target a particular class or group of people. They may be published monthly, quarterly, annually, etc. The information reaches the targeted group as they read them

Advantages of magazines and Journals

The specific information for the targeted people can be published
They can be read and re-read before the next publication may the information to last longer and plead with the prospective customer
Their publication is of high quality and colourful, making them to draw the attention of their targeted group easier and passing the information to them
The quality material they are made of makes them to last longer and can be accessed even by those who may have not been around during their publication

Disadvantages of Magazines and Journals

If the time gap between the publication time and circulation time is wide, the advertisement may fail
They are a bit expensive which makes some of the potential customers not to afford them
The cost of advertising on them may be expensive for the organization
Their circulations may be limited to a small geographical region
The publications may not be available in the vernacular language to reach those who are not able to read either English or Kiswahili

Posters and Billboards

A form of advertising that may contain the information about the product either in words, pictures or both for the customer to see and read.

Advantages of Posters and Billboards

They are able to convey the information to the large audience, as they are placed in strategic positio
Posters are cheap and easy to prepare
The use of different colors makes them to be more attractive and appealing to more audience
It can be used by both literate and illiterate group
The message may last for a longer period of time
Billboards are conspicuous and hence attractive to the audience

Disadvantages of Posters and Billboards

May be affected by adverse weather condition, especially rain
If not placed strategically, it may not reach the targeted group
Incase destroyed by the passersby, the information may not meet the targeted group
Bill boards are expensive to make and maintain

Transit/Transport Advertising

A form of advertisement whereby vehicles such as trailers, matatus, buses, etc are used to carry and convey the advertisement message

Advantages of Transit Advertisement

The message reaches most of the people in the environment
They message last long as the paints always last on the vehicle
Transit vehicles may carry the message a long way to their final destination
It is captivating to the members of the public especially the promotion convoy, hence can easily reach the target

Disadvantages of Transit Advertisement

During the rush hour, the crowd may hinder some from getting the information
It mainly relay the information to those served by the vehicles
The noise produced by the promotion convoy may be a nuisance to some members of the public

Brochures

These are small pamphlets carrying message and pictures about product being advertised.

Advantages of Brochures

They are easy to carry around as they are small in size
They are effective in meeting the targeted group
Their cost of production is not very high
They can be distributed at different places to meet the targeted group
Can be made attractive by the use of different colours
They have a long life and therefore can be used repeatedly
They can be used to direct others on where to get the product

Disadvantages of Brochures

The information may not reach the illiterate group
They may be ignored by the intended users
They may require frequent updating if many changes are made on the product making it expensive

Radio

This is a channel that allows for the advertised messages to be conveyed through sound to the listeners, with some background music accompanying the message

Advantages of Radio

Different languages may be used to reach different people
It is accessible even to the remote areas that is not covered by other media
One can choose the time to advertise to reach the targeted group
Able to serve many people at the same time
It can be used for both literate and illiterate members of the group
The advertisement can be repeated over and over again according to the advertisers needs
The music accompaniment may attract many people to listen to the information
Can reach even the blind as they are able to hear
The message can be conveyed in different languages

Disadvantages of Radio

Their advertisement does not have any reference
It may be more expensive than the print media
Poor timing may make the message no to reach the targeted group
It may interrupt some programmes to the annoyance of the listener
It short and brief advertisement may be missed by the listeners
It is difficult for the listener to visualize the product

Television (T.V) and Cinema

Television is a form of media advertisement where the written words are combined with motion pictures and sound to pass the information
Cinema is where the advertised messaged is conveyed during film shows in the cinema halls. It may be before or after the movie.

Advantages of Television (T.V) and Cinema

It appeals to most people as it is entertaining
It makes it possible for the demonstration of the use of the product
It is able to reach both the literate and illiterate viewers
The advertisement can be aired over and over again to meet the targeted group
The advertisement may be modified when need arise
It has wide appeal to many people
The message can be conveyed in different languages

Disadvantages of Television (T.V) and Cinema

The cost of advertising through this media is high
The television sets are expensive to acquire, hence many people may not have them
Their uses are limited to places with electricity
The advertisement may not last longer
The time for airing the information may not suit the targeted audience

Neon Signs

This is a form of advertisement where the message is passed to the public through the use of electrical signals transmitted through neon lights. They are usually common in the banks, airlines, jewel shops, etc

Advantages of Neon Signs

The use of different colours makes them very attractive and catch attention of different people
They can be put strategically making them to be visible to many people
Can be used both at night and day
They direct the customer on where the goods are to be found

Disadvantages of Neon Signs

Can only be used where there is electricity
They are expensive to buy and maintain
The message may not easily reach the illiterate

Advertising Agencies

These are businesses that specialize in advertising work and are hired to carry out the functions for other businesses. They are paid a commission for this

Functions of Advertising Agencies

They help the organizations in designing their trademarks, logos and advertising materials
They book space and airtime for their clients in various media
They offer advisory services to their client on selling techniques
They advertise on behalf of their clients
They choose on behalf of their clients the appropriate media to be used

Publicity

This is the mentioning of the product or the organization in the mass media to make it be known to many people. There two types of publicity, that is free publicity (where the payment is not required) and Special featured publicity (where there is payment, for example sponsoring an event in the public)

Advantages of Publicity

It saves the organization money incase of free publicity
It is likely to cover a wider region as the publicity is in the media
The organization may earn credibility due to positive publicity
The information may be received positively by the customers as the message is likely to be more objective
It may improve the competitiveness of the firm

Disadvantages of Publicity

Unfavourable information about the organization may reach the public especially in free publicity
It is irregular and short lived
Might require special occasion or event in order to attract the mass media
The firm does not have control on how the information will appear in the media and the extend of the coverage

Public Relations

A process of passing information with an intention of creating, promoting, or maintaining good will and a favourable image of the organization in the public. It involves informing the public about the firm’s achievement and how it is contributing to the community welfare and development, to get more approval of the public

Advantages of Public Relations

May be used to correct the dented image of the firm
It informs the public about the activities of the firm
Assist in upholding the good image of the firm
It improves the relationship between the firm and its customers

Disadvantages of Public Relations

It is costly in terms of time and finance involved
The customer may make premature buying arising from the picture created by the firm
Effects may take long before they are actually realized
It may be difficult to evaluate the impact of the message, since the customers are not obliged to respond to it

Point of Purchase (Window) Display

This is where the items are arranged in the shops strategically, allowing the customers to see them easily. The arrangement is meant to attract the customer’s attention and induce them to buy goods as they pass close to the shop

Advantages of Point of Purchase Display

May induce the customer to buy the product due to their arrangement
As the customers get in to the shop, they are likely to buy including the other goods that were not being displayed
The customers are able to determine the features of the product with ease
It is relatively a cheaper method of promotion

Disadvantages of Point of Purchase

The method only work well with the potential customers who are near the shop and not far away
They may also attract thieves especially if the product displayed is of high value
In case the arrangement does not appeal so much to the customers, they may not get into the shop
It may be expensive setting up the display area

Direct Mail Advertisement

A form of advertisement which is sent to the potential customers directly in the form of a mail, for example the pricelist being sent to the potential customers

Advantages of Direct Mail Advertisement

It is able to reach the targeted group as they are sent to the potential customer directly
The message may be made to suit the requirement of the specific customer to be
There may be an immediate respond on the message
The potential customers incurs no cost to acquire the information

Disadvantages of Direct Mail Advertisement

Some mails may not get to the intended customers in time
The prospective customer may ignore the advertisement
May not be effective where the customer needs to examine the product
This method may be expensive especially in terms of material and money
It may only appeal to the literate group only

Catalogue

A booklet that gives information about the product that the organization deals in. It gives the description about the product, the picture as well as the prices of the product.

Advantages of catalogue

It may be used to advertise all the products in the organization
The owner/organization has the total control over the catalogue
It gives detailed information about the product
Its colourful nature makes it an attractive promotion tool

Disadvantages of catalogue

It is expensive to produce increasing the cost of production
Change in price may affect the whole catalogue

Guarantee (Warranty Issue)

An assurance given to the customer that the product will serve as expected if used according to the instructions given by the manufacturer. For the guaranteed period the seller will be willing to maintain repair or replace the product for the customer

Advantages Guarantee

The confidence built in the customer by the guarantee to the customers makes them to buy more products.
It may create the customers loyalty to the product of the firm
The fact that the product can be replaced if it gets spoilt within the period is an advantage to the customer

Disadvantages of guarantee

Repairing or replacing the product may be very costly to the organization
The method may only be suitable for the durable goods
The customer may be tempted to mishandle the good during this period

Discount

This is a reduction in price of the commodity, allowing the buyer to pay less than what he would have paid the goods.

Types of discount

Quantity discount: - Allowed by trader to encourage him/her to buy more quantity of the product being offer
Trade discount: - Allowed to another trader who is buying products for resale to the consumers
Cash discount: - Allowed to the customer to enable him pay promptly for the goods bought

Loss Leader

Selling the price below the market price to entice the customer to buy

Psychological Selling

Playing with the customers psychology in terms of pricing by quoting odd prices such as 999, 199, 99, etc to convince the customer that the price has been reduced

Credit Facilities

Where the customer is allowed to take a product for his consumption and pay for it later. This entices the customer to buy more of the product

After Sales Service

These are services offered to the buyer after the goods have been bought. They may be in terms of packaging, transportation or installation which may be offered to the customers free of charge. This makes the customer to buy more goods with confidence

Sales Promotion

These are activities carried out to increase the sales volume of a business.
They are activities out of the ordinary routine of business that is carried out by the seller to increase his sales volume.
The methods of carrying out sales promotion includes all the methods of carrying out product promotion as discussed earlier, that is, shows and trade fair, showrooms, free gifts, free sample, personal selling, advertisement, window display, credit facilities, after sales services, etc

Factors to Consider when Choosing a Promotion Method

The cost of the promotion that is whether the company can afford it or not, for some promotion methods are very expensive that may not be easily affordable to the company.
The nature of the product being promoted especially whether it requires demonstration or not. Products which requires demonstration are best promoted through personal selling
The targeted group for the advertisement, on whether they can be reached by that method or not. The promotion method must reach the targeted group, if it has to be effective
The objective that the firm would like to achieve with the promotion, and whether the method is helping them to achieve that particular objective
The method used by the competitor in the market to enable them choose a method that will enable them compete favourably
The requirement of the law concerning product promotion, to enable them not use what the law does not allow

Ethical Issues in Product Promotion

These are rules and regulations to be followed when carrying out promotion to avoid violating other people or businesses right. They include;
- Cheating on performance of the product to attract more customers by given them wrong and enticing information about what the product can do.
- Cheating on the ingredients of the product by telling them that the product contains a suitable type of ingredient which does not exist just to lure them to buy the product
- Not telling them the side effects of the product which may affect them should they continuously use the product due to fear of losing customer
- False pricing, especially a case where they overprice their and later on reduce them slightly just to lure the customer, yet exploit them
- Not caring about the negative effect of the product on the environment, which may includes littering of the environment by the posters used for advertisement
- Social cultural conflict, especially putting up some forms of advertisement which are considered a taboo buy the community leaving around, such as hanging a billboard of a female advertising inner wears next to a church

Trends in Product Promotion

The following are some changes that have taken place to improve the product promotion activities
- Use of website/internet to advertise product worldwide, which has increased the coverage
- Encouraging gender sensitivity and awareness in product promotion to bring about gender balance
- Use of electronic billboards in advertisement to increase their visibility even at night
- Intensifying personal selling by the business to reach more customers
- Development of promotion convoys to move from one place to the other with music and dancers to attract more prospective customers
- Catering for the rights of the youths when carrying out product promotion and even involving them in carrying out the promotion
- Catering for the interest of those with special needs when carrying out advertisement
- Advertisement through mobile phones by sending them s.m.s about the product