ENT1/6: SALES PROMOTION

Sales Promotion refers to various activities undertaken by an entrepreneur to increase the sales of goods and services. It involves ways or behaviour that any entrepreneur uses to influence people to buy more of his goods or services so as to maintain profits.

Sales promotion explained in the video below

Objectives of sales promotions
 To inform or remind the public of the products available for sale
 To target a particular segment of the market to whom the products are to be sold
 To stabilize sales/retain market for the products
 To increase the sales of the entrepreneur by attracting new customers and retaining old ones
 To bridge the gap between the entrepreneur and the customers
 To out compete rival brands or to meet the challenge of competition
 To introduce new brands to market. This can be done by distributional samples
 To maintain sales of seasonal products

Ways / methods / techniques / tools used by entrepreneur to promote sales

The various methods through which a business person can communicate with his/her customers to promote sales include the following
Giving free sample. These are distributed to attract customers to try out a new product and thereby creating new customers. Sometimes these samples may be distributed among selected persons in order to popularize the product e.g when century Bottling Company (Coca-Cola) was introducing the 500 ml and 1 liter bottle, people in Kampala were given free soda (samples).

Through premium or bonus offer. This is where a product is accompanied by an extra pack of product(s), in order to induce consumers to buy a particular product.

This is very common today with toothpaste products like the big sized collegate herbal which is packed with a tooth brush. It is also useful for encouraging and rewarding existing customers.

Through exchange schemes. This refers to exchange of an old product for a new one at a price less than the original price of that product. It is useful for drawing attention to product improvement. It is common with those shops that sell phones and their accessories in Kampala.

Through price – off offer. Under this offer, products are sold at a price lower than the original price. It boasts sales in off peak seasons and during introducing a new product in the market.

Through use of coupons. These are issued by manufacturers either in the packet of a product or through an advertisement printed in newspaper or magazine through mail. These coupons are presented to the retailers while buying the product and the holders buy at a discount.

Through trade fairs and exhibitions. These may be organized at local, regional, national and international levels to introduce new products, demonstrate the products and to explain the special features and usefulness of the products.

Goods are displayed and demonstrated and their scale is conducted at a reasonable discount e.g UMA trade fairs at Lugogo show ground.

Through trading stamps. These stamps are distributed among customers according to the value of their purchase. Customers collect these stamps of sufficient value within a particular period in order to get some benefits

Through scratch and win offer. Some companies use scratch and win scheme to induce the customers to buy a particular product. A customer scratches a marked area on the package of the product and gets benefits according to the message written there.

Through money back offer. Customers are given assurance that full value of the product will be returned to them, if they are not satisfied with the product. It creates customers confidence regarding the product’s quality especially when introducing a new product.

Selling goods on credit. This attracts customers who cannot pay promptly. It is offered to customers well known to the business to avoid bad debts.

Through window display. This involves putting the products near glass windows such that passerby, observe them and if possible buy by impulse.

Offering cash and trade discount. This is offered to those customers who buy goods in large quantities and those who buy on credit and pay promptly in an agreed period of time.

Giving donations. Donations can be given by way of contributing money or goods to charitable organisations or to disabled children’s homes. This is done to attract publicity for the enterprise and its product.

Organizing competition or games. Business may offer products to winners of a game in order to attract them buy particular products.

Creating the right attitudes in employees. Training employees to be friendly to customers and knowledgeable about the products / services they are selling increases sales.

Maintaining links with others. Proper communication with other people like current and potential customers, whole sales, agents, retailers keeps the right people well informed about the business.

Offering after sales services. These include delivery, maintenance, repairs, installation, servicing etc from a bigger impact on the business image and customer royalty as long as they are not affecting the profit margin of the business.

Giving out free gifts. Producers may offer free gifts to their customers to encourage them buy more. Such gifts may be enclosed in the packages of goods or may be given directly to the buyers. For example, if you buy fuel worth 5,000 shs and above, from Jovena petrol stations, you are given Sackets of OMO.

Carrying out Intensive advertising of products in newspapers, radio, television, posters, sign posts, Music, banners, bill boards, electronic display (neon signs), calendars, brochures etc.

Using nonproductive value methods like providing free and convenient parking space, sales guides to customers etc, these also help to promote a firm’s product and they are mainly used by supermarkets.
Note.
Non product value method of sales promotion do not involve financial benefits to the customer and do not involve financial loss to the entrepreneur. For example free and convenient parking space, guiding customers on how to use the product

Product value methods of sales promotion involve a financial benefit to the customer and a financial loss to the entrepreneur, for example reducing the price of the articles, offering delivery services

Importance of carrying out sales promotion in business

 It leads to increased sales. This is because promotion of goods and services increases market for the entrepreneur which leads to increased profits
 It helps the business to become popular and also acquire good will result of the various promotional activities that may be undertaken by the firm
 It informs new customers about the availability of the entrepreneur’s product. This is makes the goods and service of the entrepreneur to become known to the public
 It helps the business man to regain market share so that he does not lose some of the customers to other business men or competitors

 It’s used to persuade the customers to buy the products of an entrepreneur instead of buying those from their producers. This is because many customers got to know such products through sales promotion

 It helps the entrepreneur to introduce new product designs. Some adverts are aimed at informing the public about the new styles, fashions, and tastes of a product. This is especially done through the giving of samples and gifts

 Helps an entrepreneur to constantly remind customers of the availability of the products hence increasing sales in areas of low or declining demands

 It creates direct contact between business man and customers such that other middlemen aren’t able to increase prices which may lower demand for the given firm’s products

 It promotes publicity of an enterprise of an enterprise thereby helping the businessmen to out compete his competitors hence making a lot of profits in the business

Sales promotion strategies

A sales promotion strategy is an activity / technique that is designed to help in the boasting of sales of products or services.
Examples of sales promotion strategies
 Free sample campaign
 Advertising campaign
 Public relations activities e.g sponsoring sports
 Free gift campaign
 Trading stamp campaign
 Demonstrations / trade shows
 Prize trading competition
 Temporary price reduction
 Door to door sales
 Tele- marketing
 Personal sales letter and e-mails.

Types of sales promotion strategies
There are three types of sales promotion strategies

 A push strategy. This involves pushing distributors and retailers to sell your products or services to the customers to buy by offering various kinds of promotion and personal selling efforts. E.g buy-back guarantees, free trails etc.

 A pull sales promotion strategy. This involves getting the consumer to buy or purchase the product or service directly from the company itself. If focuses more on the seller than the consumer. E.g coupons, samples, refunds, loyalty programs etc

 Combination of pull and push sales promotion strategies. These involve the combination of the push and pull strategies. It focuses on both the distributors as  well as the consumers. If offers customer’s initiative side by side with the dealer discounts.

ADVERTISING

Refers to the spreading of information about one’s products to the customers. Or, is a system through which information about the existing goods and services is brought to the knowledge or awareness of the public / customers.

TYPES / FORMS OF ADVERTISING
Informative. It is a type that aims at creating awareness, reminding the customers about existing goods and services, facts like the nature of the product, where it’s found, the price, its use, the quality, terms of sale are very important. E.g advertising for a job opportunity, when also advertising for cigarette a phase like “Cigarette may be harmful to your health” is informative advertisement.

Persuasive. This is also called competitive advertising. It is type which aims at inducing or convincing consumers to buy the producer’s products and leave out other producers’ product. It is common for branded products and goods which are close substitutes e.g drinks. It tends to be misleading in most cases and hence at times
undesirable common phrases are used such as “simply the best”, “our product is second to none”.

General / mass advertising. This is where producers in the same industry combine and advertise as one person instead of each of them advertising his/her own brand they form a trade association whose aim is to advertise members’ products. Such association also undertakes other services in the interest of members like
negotiations with government e.g UMA

Direct advertising. This is where the adverts appeals to a specific group of people e.g a radio programme in a particular language, local language newspapers, advertising of fair and lovely products for ladies

Indirect advertising. This is one that does not appeal to a specific of group. It’s for whoever comes across it. E.g posters inviting people for a music show, aids awareness posters appeal to general public regardless of class, age, level of education

Institutional advertising. This one that attempts to promote the recognition and goodwill towards the firm or industry. Like when Uganda Christian University advertises all the other campuses benefit and are recognised.

Aims / purpose / objective of advertising.
 To stimulate buying by encouraging people to buy products being advertised even if they did not intend to buy.
 To arouse interest for example most adverts especially on television andmagazines are aimed at increasing people’s interest towards the goods or services of the producer.

 To create desire through indicating the benefits and satisfaction one is likely to gain from using a particular good or service for instance “Colgate makes you stronger”.

 To convey / pass on information to the public about product for example its quality, price, use, where it can be found etc.

 To introduce new products or designs, new styles, fashions and taste of a product by creating customer interest for it. For example a new brand Samsung cellular phone, a new model of Mercedes Benz car.

 To inspire / create confidence in consumers in using a good or service for example “you have Got what you want” for Pilsner larger” people who think differently” for club beer.

 To attract new customers through advertising a product by giving its good qualities attracts customers for instance “Pau clere for smooth skin”

 To sustain customers by advertising products repeatedly with an aim of keeping the already existing customers in the market. For example MTN, UTL, Century Bottling Company, etc continuously advertise so as to maintain their market share.

Guidelines for preparing an advertising media
 do not cluster the whole space with words or picture
 the advertisement should be easy to recognize and should stand out like including the logo of the business
 the head line should emphasize benefits of the customers from the product
 the content should be simple and easy to understand
 It should include important information about the business e.g location, telephone contact and services offered.
 One must be honesty in the advertisement must deliver what his or her promises
 The name of the business must be in line with the type of the business
 The selection of certain things used to attract customers like colours should be emphasized.

ADVERTISING MEDIA

It refers to the several channels / methods through which advertising message are conveyed to the public. An advertising medium refers to channel through which advertising is delivered to the prospective customers

Types advertising media
Newspapers. These are printed on papers in black and white or coloured and they are used to advertise various business products showing even the illustrations

Advantages of newspaper advertising

 Messages can reach a huge number of people in a given geographical area
 There is flexibility in deciding on the advert size and placement within the newspaper
 The advert can be large enough as necessary to communicate as much story as possible
 Exposure to the advert is not limited since readers can go back to the message again and again if so desired
 Free help is always possible in creating and producing advertising copy

Disadvantages of newspaper
 Newspapers are usually read once and stay shortly in the readers minds
 The print quality of the newspapers is not the best especially for photographs
 The page size of the newspaper is fairly large and small advertisements can look tinny
 Competition is high within the same newspaper which requires making it attractive to capture the reader’s attention
 Advertising space is expensive in a newspaper
 Poor photo reproduction limits creativity
 It is a highly visible medium thus competitors can quickly react to your prices
 Some readers prefer online versions of the publication to the print version Magazines
These are in form of booklets which bear advertising message. They are on quality papers, with more colours published weekly or monthly

Advantages
 It leads to high reader involvement since more attention is paid to the advert
 Better quality permits better colour reproduction and full colour adverts
 The smaller page permits even small adverts to stand out
 Allows better targeting of audience since one can select a magazine publication that cater for audience or that specialize in the topic of interest of the audience

Disadvantages
 The long lead time requires planning a week or months in advance
 The slower lead time heightens the risk of your advert getting overtaken by events
 There is limited flexibility in terms of advert placement and format
 Space and advert layout costs are higher

Radio
This is where the programmes are broadcasted in local languages spoken in the country so that adverts can reach all groups of people

Advantages
 All classes of people, literate and illiterate equally benefit by listening to adverts in their language
 Detailed explanations through repeated advert a clear view about the product
 The radio also provides entertainment in form of music combined with advert giving an impression about the products being advertised
 Radio programmes are on air the whole day giving enough time to broadcast adverts in all major languages
 It covers a wider geographical area because it has a wider coverage
 Many people can afford a radio

Disadvantages
 Radio adverts and announcements are expensive
 It may be difficult to broadcast in all languages. Therefore too many programmes on radio to provide time for commercial news / adverts

Television

Television as a medium can be used to show film display about the product advertised

Advantages
 It reaches many people at the same time at one moment
 It offers entertainment in form of music and films
 Provides details about the goods concerning the direction and application of such goods
 It can serve both literate and illiterate people
 Messages can be perceived both visually and audually
 It can serve a large geographical area
Disadvantages
 Few people have access to the television. It is only rich – ones can afford TV set
 It is very expensive to sponsor programmes on TV
 There is language problem especially in a country with many advertising languages like Uganda with so many local languages
 It may not adequately sever blind
 Sometimes the information given to use is not enough

Outdoor advertising

Outdoor advertising is also a very popular form of advertising which makes use of several tools and techniques to attract the customers outdoors. The most common examples of outdoor advertising are bill boards, Kiosks, banners, posters, neon signs and also general events and trade shows organized by the company

a) Trade fair and exhibition. This is where a group of traders gather to display their different products to buyers e.g UMA Lugogo show ground for trade fairs. The aim is to bring products in contact with wholesalers and customers

Advantages
 There is close contact between manufacturers and buyers
 Normally they sell at reduced prices
 Occasionally they demonstrate the operation of some of their products
 Many buyers normally turn up both locally and internationally increasing the turn over (sales)

Disadvantages
 They are not permanent like shops, they occur once in a given season
 They are costly to arrange if they are to succeed
 They are limited especially to urban centres thus rural areas may not benefit from them
 The blind cannot benefits from trade fairs and exhibitions

b) Posters. These are designed carefully by producers to convey the message for the goods. These can be located on the walls of pus parks, schools, railway stations, sports grounds etc

Advantages
 Posters are most effective and economical way of advertising
 All are wide spread i.e. their coverage is big
 The cost of display is very low
 They are displayed 24 hours a day

Disadvantages
 The blind cannot benefit from them
 Illiterate people may not benefit from them
 They can vandalized or destroyed by rain and people

c) Neon signs. These may be installed on major buildings where writing on them advertise for commodities

d) Sign posts. These are majorly informative, however, they also persuade people to buy e.g Mukwano products

e) Banner. Is a cloth with writing is put up advertising the occasion, they are commonly used by musicians and other artists. They advertise conference and events

f) Window display. The goods are well organized in clear glass windows of shops. The buyers are able to inspect the goods on display, compare their labeled price and make a choice

Advantages
 Windows display leads to window shopping which influences the buyers mind to buy the commodity
 The buyers are able to see what they buy
 It is not costly to arrange the goods on display in the shop

Disadvantages
 The blind never benefit from this form of advertising
 Sometimes goods on display are different from what is being sold

Direct mail. It involves direct communication by the producer to the general public through mail

Business directory. This involves businesses listing or selected classification puts in the book with an assumption that if people need the product / service they look at the classification and contact the manufacturer

Internet advertising. This is online advertising. It offers the possibility of reaching potential customers 24 hours a day, seven days a week. The promotional message can be delivered with the click of a mouse at customer’s home on work place

Importance of advertising to an entrepreneur

 It increases firm’s sales due to increased demand for goods and services. When more adverts are carried out people will demand for more goods leading to mass production hence increased profits

 It helps an entrepreneur to introduce a new product or design into the market. Some adverts are aimed at informing the public about the new styles, fashions and tastes of a product

 It facilitates large scale production. This is because it results into increased demand which annually results in large scale production and its associated

Advantages
 Due to increased production, Advertising stimulates research and development activities this is so because competing producers on how to find ways on how to improve their product so as to out compete their competitors with sales for research in productions

 It persuades the customers to buy those products of an entrepreneur instead of buying those from other producers. This is because many customers get to know such products

 It promotes sales of goods and services of entrepreneurs by informing people about them and asking them to buy the advertised

 It helps the entrepreneurs’ business to become popular and also acquire good will. This is because it helps to build reputation and image of the advertisement and creates customers’ loyalty

 It helps the entrepreneur to constantly remind consumers of the availability of his products hence increasing sale in areas of low or declining demand

 It informs new customers about the availability of entrepreneurs’ products. This makes the goods and services of the entrepreneur to become known to the public

 It helps the business to retain its market share so that it does not lose some of the customers to the other business men / competitors

 It creates direct contact between the business man and the customers such that other middlemen are not able to increase prices, which may lower demand of a given firm’s products

Disadvantages of advertising
 unsuccessful advertisement lead to wastage of resources
 It increases the operational costs of a business ie it is expensive.
 It leads to closure of weak or high cost firms in the market.
 It leads to movement from one producer to another without increase in total demand in the market.

Components of an advertising media
 The appeal; this refers to the underlying idea that captures the attention of the message receiver.
 Value proposition. This is the reason for customers to be interested in a product.
 Slogan. This is a word or phrase that is repeated across several different messages and different media e.g where quality matters, gives you wings to fly etc.
 Business name
 Business location
 Product offered
 Contact
 Illustration of the product where possible
 Benefits of the product to the customer.

FACTORS FOR CONSIDERING WHEN SELECTING AN ADVERTISING MEDIUM

The cost of the medium. Expensive products are better advertised through expensive media like the television, newspapers and magazines whereas cheaper goods are advertised through cheap means like radios and posters.

Target consumers have to be considered. It will be useless to advertise a product in newspapers and magazines when your group is composed of illiterates and local people who cannot even read nor access the magazines and newspapers, you rather use radio, then if you are targeting rich people and literates, and you can then use
television and newspapers.

Age group of target market has to be considered, different age groups have different media like if you are targeting youths, better use televisions, magazines, whereas if you are targeting adults, use radios and newspapers since they listen to radios more than televisions.

Speed and urgency of the information should be considered, where an entrepreneur needs to access his market very fast, he selects media like the radio, television etc than magazines that are out weekly, monthly etc

Geographical area to be covered. One selects an appropriate medium that can reach the geographical area he/she is targeting, newspapers, radios and televisions cover a wider area while outdoor advertising and window display that target customers in a small area like a trading center.

Medium used by competitors, one is expected to use a medium that is better off than the competitors’ in terms of market coverage, urgency, reliability etc but this should be done in consideration of the cost of the medium in comparison with expected returns

Availability of the medium, for instance however much as one would wish to use neon signs as a medium of advertising in areas where there is no electricity / power,  it would not be possible, like in remote areas thus one should consider media forms that are available and affordable.

Nature of the commodity to be advertised should be considered, like there are some commodities that can best be advertised by showing their fashions, models, colour and forms like cars, machines etc, so such items cannot be advertised over the radios instead of a television is appropriate as it will portray all the necessary features to the potential market.

Number of people reached by the medium, newspapers reach more people than magazines and while radio does it better than the television.

Economic status of the target group. Traders use television, newspapers or magazines while advertising to the rich while the radio and outdoor advertising appeals mostly to the ordinary people.

Preparing advertising message for goods and services (elements of advertising media)

Most advertising messages share common components within the messages including

a) The appeal. This refers to the underlying idea that captures the attention of a message receiver. Appeals can be into categories as motional, fearful, humorous and sexual.

b) Value proposition. The advertising message often contains a reasons for customers to be interested in the product which often means the advert will emphasize the benefits obtained from using the product.

c) Slogan. To help position the product in customer’s mind and distinguish it from competitors’ offerings, advertisement will contain a word or phrase that is repeated a cross several different message and different media outlets e.g “everywhere you go” for MTN.

d) Awareness value. The advertisement should bring the awareness for the product or service.
e) Problem solving. The advertisement should provide the information regarding the use and utility benefit of the product that may remain in the minds of customers.

f) Recall value. The advertisement should be so effective that the product should stick to the memory of customers.

g) Sincerity. An advertisement must gain the confidence of the customers. It should avoid bold claims and the product should deliver the results as per claims made by the company.

h) Enlightening / educative value. A good advertisement should educate the general public about uses of the product

i) Instinctive value. A good advertisement must possess natural value so that customers are induced, persuaded and motivated to think well of a product and take to its use.

j) Strong fee offer. Good words which contain a strong offer should be used which tell the reader the next step in the buying process and encouraging him to take it now
k) Clear illustration. Good adverts do not use abstract concepts which puzzle the reader on what is being sold.

PUBLICITY. Is the movement of information with the aim of increasing public awareness of a business product. It is the communication through significant unpaid presentations about the organisation in the impersonal media.

DISTRIBUTION CHANNELS

A distribution channel refers to the arrangement or path through which products move from the producer to the final consumers. The distribution channel consists of a set of business entities (middlemen) who participate in the distribution of goods and services as a link between the manufacturer and the consumer.

Features / characteristics of an effective distribution channel
– Maximizes the sales of an entrepreneur
– Maximizes profits for the producer / entrepreneur
– Maximizes the cost of distribution of the product and the general costs involved.
– Convenient to operate by the entrepreneur / producer and the customer.
– Capture a big market share i.e captures many customers.
– Does not affect the quality of the final product
– Minimizes the risks involved in distributing the product.

TYPES OF DISTRIBUTION CHANNELS

Distribution channel are classified according to the number of middlemen involved. There are mainly three types of distribution channels ie the short/direct channel, medium channel and the long channel.

Direct distribution / manufacturer to consumer channel. This channel is also known as direct – selling or short channel distribution. It is a method where an entrepreneur makes and sells his products directly to customers. This channel, a producer or trader may sell directly or through his or her own retail stores through mail or door to door selling

Retail distribution / manufacturer to retailer to customer. This is known as the medium channel. This is where the manufacturer sells to large scale retailers who in return sell to the final consumers. It is common in the distribution of most goods hence increasing the firm’s total sales and profitability

Wholesale distribution / manufacturer to wholesalers to retailers to customers. This is the traditional and normal channel of distribution. In this channel, manufacturer sell products to wholesalers usually in bulk who in turn sell to retailers in relatively small quantities who finally sell them to final consumers in affordable quantities

Other types of distribution channels.
Manufacturer to agents to wholesalers to retailers to consumer. In this channel, the producer / manufacturer distributes his/her products to agents in different places who then sell to the wholesalers who sell to the retailers and finally retailers sell to the final consumers

Manufacturer to agents to retailers to consumer. In this channel the manufacturer distributes his/her products to her agents who then sell them to retailers and retailers finally sell to the customers

Manufacturer to agents to consumer. This is channel the manufacturer distributes his/her products through appointed agents found in different parts of the country or world who in turn sell to consumers

Factors that should be considered when choosing a distribution channel for goods and services
 The nature of the product. Durable goods are distributed through a long channel because they cannot easily be damaged; bulky goods are sold directly to the consumers to reduce the transport costs. Also perishable products are sold directly to consumers.

 The location of potential customers. Where customers are near and within the reach of your business, a direct or short channel will be preferred. This helps an entrepreneur in identifying customer needs easily and reducing the distribution costs and the reverse is true where customers are far from your business

 The level of competition. High levels of competition in the market require the use of a shorter distribution channel in order to ensure that goods are delivered in time so as to out compete the other firms. On the other hand, low levels of competition in the market allow the entrepreneur to use medium or longer
channel.

 The nature of the business. A manufacturer who is financially strong with marketing experience can afford to use direct selling to customers. Similarly if a manufacturer wants to have control over distribution and promotion of the
products he uses direct selling. On the other hand a firm dealing in a single product and where the manufacturer is not financially strong, he may opt to use a long channel of distribution.

 The cost of distribution. Where the cost of distribution is high, and the producer has low level of finance, he/she prefers selling directly to the final consumers. On the other hand where the cost of distribution is low and the product is not perishable, the manufacturer can use a long channel of distribution.

 The manufacturer’s distribution policy. Different manufacturers have different policies as to their distribution of goods and services. Where the distribution policy of enterprise is to directly reach customers, then a direct  channel of selling to consumers is suitable. The business can use a longer channel of distribution if the distribution policy requires using middlemen.

 The value of goods. Highly valuable products and does not need a lot of handling, the short distribution channel should be used. On the other hand if the product is of low value a longer distribution channel may be used to minimize the costs.

 The availability of middle men. When the desired middlemen are not available the direct selling may be necessary, while if the available middlemen are desirable and able to handle the goods, a long and medium channel which involves middlemen should be used.

 The availability of storage facilities. For the cases where the storage facilities are available at the manufactures premises, a direct channel is always used but if the producer lacks storage facilities along channel is used.

 The reliability of the channel. A producer should choose a channel which is reliable and has a good image that will not alter the quality of the products. In case middlemen dilute products, then the producer may sell directly to consumers.

 The level of frequency in using the product. Products which are used frequently to customers are always sold through retail outlets and other middle men.

 Nature and size of the market where good are to be sold. When the market is small / narrow, the manufacturer uses direct selling (short channel). If the market is big and with geographically scattered customers, a long channel is
better.

 Method of delivery. Where a manufacturer owns delivery trucks he/she can use short channel. On the other hand, an entrepreneur who has no proper distribution
means can use a longer channel involving middlemen.

 Scale of production. Small scale producers who lack sufficient capital to handle the marketing task of their output sell their products through middlemen while large scale producers tend to have enough capital to handle the marketing costs and therefore can delivery to the customers.

 Amount of goods to be brought by consumer. Producers whose customers buy on large scale sell directly. On the other hand, sell through middlemen who are able and willing to provide all the relevant services to the customers enable the entrepreneur to sell through them.

MIDDLEMEN IN THE CHANNEL OF DISTRIBUTION
Middlemen refer to wholesaler, retailers and agents that serve as intermediaries between the manufacturer (producer) and his customers/ clients.

There are two type of middlemen ie the merchant who buys goods and the agent middlemen.

 Merchant middlemen. These are middlemen who buy goods and handle them as their property before reselling. They include retailers and wholesalers.

 Agent middlemen. An agent middleman is a person who employed by another person to represent him in dealing with third party. An agent hold goods on behalf  of the seller (principal) and the goods never become his. Examples of agents include the factor agents, brokers, del-credere agents etc.

RETAILERS.
A retailer is a trader who buys goods in large quantities and sells them to the consumer in small affordable quantities. A retailer is the last link in the chain of distribution of goods between the producers to the final consumer.

Roles / functions of a retailer in the chain of the distribution
 Selling goods directly to customers
 Breaking the bulk through selling goods in small quantities.
 Offering storage facilities for the goods until they are picked by the final consumers
 Offering transport facilities for himself when buying gods from the wholesaler or producer thereby saving him the burden of transport
 He anticipates demand of consumers and informs the wholesalers who in turn informs the producer.
 He offers a variety since he buys goods from different producers.
 He at times offers credit to trust worth customers.
 He acts as a financier of a wholesaler by paying him promptly.
 He carries out advertising on behalf of the wholesaler and producer
 He offers after sales services to the final consumers

WHOLESALERS
A wholesaler is a trader who buys goods from the manufacturer and sells them to the retailers or final consumer in smaller quantities.

Role/functions of the wholesaler in the chain of distribution
 Providing a link between the producer and the retailer.
 keeping prices stable by ensuring a steady supply
 Transporting goods from the producer to his warehouse and then to the retailer’s shop.
 Providing the manufacturer with ready working capital by paying for the goods bought promptly.
 Breaking bulk by selling goods in small quantities that retailers can afford.
 Providing storage facilities for the goods bought from the manufacturer by keeping them in his warehouse.
 Preparing goods for sale by grading, pre-packaging and pricing goods which reduces the retailers’ workload and enables him/ her to serve customer faster.
 Providing consumer with steady supplies throughout the year by holding large stocks and releasing them regularly.
 Advising the retailer on a range of goods to be held, prices to be charged, services to be offered etc.

DISADVANTAGES OF MIDDLEMEN IN THE CHANNEL OF DISTRIBUTION.
 Middlemen tend to overcharge their customers and they do this because they want to make a lot of profits.
 Some middlemen tend to dilute some products so that they get more units in order to make large profits. This is especially common with liquid items like milk, juice etc which leads to poor quality products.

 Hiding of commodities. Some middlemen create artificial shortages by hiding of certain goods in order to sell them when their prices have increased. This means consumers to pay higher prices especially for essential goods like sugar, soap, paraffin, salt etc.

 Sale of defective goods. Some middlemen sell defective and expired products to the customers which may be harmful to their customers especially food stuffs.

 Their profit margins of wholesalers as middlemen tend to be too high as compared to those of the manufacturers and retailers in most cases. This forces to charge high prices hence exploitation of customers through charging
higher prices.

 Wholesalers exploit manufacturers if do not buy goods from them in time. This leads to over production that can result into losses to the producers. Similarly, wholesaler can refuse to supply goods to some retailers due to minor reasons. This means they can spoil the business of the manufacturers and retailers.

 Sometimes, wholesalers provide incorrect information to the manufacturers regarding the market situations. This may lead to over or under production by the producer.

Terms and conditions for selling goods and services
Terms and conditions are areas, which agreed upon by the seller and the buyer to access, use and own the seller’s products

Cash basis. This is where immediate payment for goods and services is made, it is simplest and most preferred way of selling by businesses where goods and services are sold on cash basis, cash receipts should be issued to the buyer or seller.

Advantages of selling goods on cash basis.
 It ensures enough working capital for the business.
 It saves the business from extra paper work costs involved during credit transaction.
 It creates low risks for bad debts.
 It ensures constant supply of the business stock.
 It reduces administrative expenses that are associated with credit sales and debt management such as hiring edit officers.
 It allows selling to buyers from unknown customers.
 It facilitates the sale of small items.
 It enables flexibility in the business since capital/finances are always available.
 Extra expenses like legal expenses experienced when handling bad debtors are saved from the entrepreneur.
 It enables an entrepreneur to have ready cash to pay his creditors promptly and obtain cash transaction.

Disadvantages of selling goods on cash basis
 It is convenient to only a limited number of customers with ready cash.
 It is difficult to operate on cash basis in a very competitive market.
 It leads to low sales.
 It is a risky form when selling expensive items like industrial machinery.

Selling on credit. This involves a seller giving out his/her goods, or providing service to a customer but payment is to be made a future date

Reasons for carrying out credit selling
 To promote more sales and high rate of turn over
 To attract more customers who may come to enjoy credit services
 To ensure good relationship between the business and its customers
 To reduce stock losses resulting from expiry of goods. This is because stock which is about to expire can be given on credit basis
 To promote repeated purchases from the business customers
 To enable the business customers who lacks ready cash to acquire expensive goods.
 To ensure enough market for the business products
 To create an alternative technique for marketing business products
 To increase on the profits made by the entrepreneur on sales. This is because goods sold on credit are always charge highly
 To create a chance for selling very expensive goods like industrial machinery
 To ensure enough market for the business products

Circumstances/conditions under which goods may be sold on credit
 When goods are about to expire.
 When sales are low and there is a need to attract more customers.
 When an entrepreneur has enough working capital
 When an entrepreneur can also purchase on credit
 When there are set standards as regards to credit recovery
 When a credit customer has presented a collateral security
 When goods are getting out of fashion or expired
 In case there is a need to out compete other business competitors.
 When the entrepreneur expects prices to fall in the near future
 If the supply exceeds demand. I.e deflationary tendencies
 When the entrepreneur has got the means to know about the credit worthiness of the customer. E.g the customer may get recommendations from other traders or suppliers.
 When an entrepreneur has insured himself against losses which may result from bad debts
 When goods are very expensive and it is hard to be sold on cash basis
 When the credit customer is well known
 When the entrepreneur is operating on a large scale
 In case of dead stock

THE COSTS / DISADVANTAGES OF CREDIT SELLING
 It’s administratively expensive.
 It may make the business to run out of working capital.
 It may spoil the relationship between the business and its customers
 At times poor quality goods are sold to customers.
 It creates high chances of bad debts.
 It limits customers from making their own choices.
 The business may run out of stock in case credit customers take long to pay.
 The system is disadvantageous especially during inflationary tendencies where money value is not stable.
 Hinders the business expansion
 High recovery costs leading to cash problems.

FACTORS CONSIDERED WHEN SELLING GOODS ON CREDIT
 The condition and financial status of the borrower
 The collateral security possessed by the customer.
 The period for making payments
 Whether the customer is daily customer or irregular customer

WAYS OF MANAGING CREDIT SALES.
 By ensuring proper documenting of all credit sales made.
 By setting up short credit periods for the business debtors
 By continuously reminding the business debtors their due dates for clearing their dates.
 By extending discounts to business debtors who clear their debts in time. This will
encourage them to make prompt payment.
 By giving reminder notes to business debtors to remind them the due dates for clearing their debts
 By extending credit facilities to only well-known debtors with a good historical back ground.
 Asking for collateral security with a high value

WAYS OF ENSURING PROPER CASH MANAGEMENT.
 By ensuring proper counting and checking of the cash received to ensure that it is correct ie that it is the required amount
 By recording of all cash sales made.
 By locking of all the cash received in safe drawers all the time for security reasons
 By reconciling all the sales made per day with physical cash collected.
 By banking all the cash received intact on a daily basis
 By employing skilled personnel to handle business cash
 By carrying out proper accountability of cash expenditure
 By limiting unnecessary withdrawing of cash to reduce cash expenditures.
 By properly documenting all the cash documents for easy reference. E.g cash receipt.

PERSONAL SELLING
This is where a team of sales persons are employed to sell goods directly to consumers. It involves sending sales persons to suit customers in their home land offices and discuss with them about the existing products sold by them

QUALITIES OF A GOOD SALES PERSON
 Attractive personality ie the capacity to attract and influence customers
 He should have enough knowledge about the firm and products of the business and their qualities the target customers, competitors as well as the selling techniques
 He should be honest and sincere ie should be one who talks the truth, does not steal or cheat
 He should be persuasive to encourage buyers to buy more products from him /her
 Should be polite to the buyer ie should care for other peoples’ feelings
 He should possess good communication skills. Ie having the ability to approach a person since customers have different characteristics
 He should be smartly and decently dressed. This makes him to be more presentable.
 He should be hard working and fulfill the customer’s needs.

CIRCUMSTANCES UNDER WHICH PERSONAL SELLING MAY BE NEEDED
 When the product is still new on the market
 When the competition is high
 When there is a need to extend after sales services to potential customers
 When goods are very expensive
 Where the market consist of few customers who can easily be accessible
 When the firm is financially capable of hiring a large number of sales persons
 When demonstration is needed
 When goods needs minimum handling

REASONS OBJECTIVES FOR PERSONAL SELLING
 To increase sales
 To out compete other business competitors
 To expand the market share
 To save customers from being exploited by the middle men in form of high prices.
 To attract new business customers
 To identify and collect the customers opinions and suggestions towards a given product
 To create a chance for bargaining by the business potential buyers
 To improve the relationship between the business and its customers. This is because it involves direct contact
 To create a room for carrying out bulk or heavy purchases to customers
 To create confidence and mutual trust between the sales person and the customers
 To create a chance for business potential customers to ask questions and clear their doubts about the business products
 To create a chance for giving after sales services to customers to customers. E.g demonstration

Procedures /steps of carrying out effective personal selling
 Pre-sale preparation. This involves recruiting, training and motivating the sales person. At this stage the sales persons acquires knowledge about the firm, products of the business and other qualities, the target customers, competitors as well as the selling techniques.

 Prospecting. This stage involves understanding the market properly ie analyzing/ knowing their prospective buyers, their needs and their purchasing power. This can be done through asking the already existing customers for their names, locations, needs etc and other potential customers who could want to benefit from
the product.

 Pre-approach. It involves identifying the customers’ habits, preferences, income levels, attitudes etc so as to be able to select the right sales appeal before approaching them.
 The approach. This is the first meeting face to face with the customers. The sales persons must introduce himself and the product of the firm in a polite and dignified manner.

 Presentation. This involves gaining customers attention by the sales man. It involves giving a brief description about the product in the question, to the customers, mentioning and explaining briefly the unique features that may not be self-evident. The sales person tells the prospective customer the price, terms and conditions of payment or delivery.

 Demonstration. Here the sales person displays how the product works. It is done to maintain the customers interest customers and a rousing his desire. Here the sales person is required to explain the utility and unique qualities of the product so that the prospective customers realize the need for the goods and services to
satisfy his wants.

 Handling objections. This involves clearing all the customers’ doubts and objections amicably by the sales man. At this stage the sales person should endeavor to convince the customers that he is making the best use of his money
by buying the product. However the sales person should avoid proving that his products are superior to those of the competitors.

 Closing the sale. This is the climax of personal selling. The sales person should carefully guide the customer in making the choice without imposing any view on him/her. Therefore the sales person shouldn’t force the transaction deal but rather allow the customer to make the final decision. For successful closing some adjustments in price and other things may sometimes be necessary. In closing the sale, the item bought should be packed properly and handled over to customer who has bought an article.

 Post sale follow up. These are activities undertaken by the sales person to ensure that customer is satisfied with the goods and services from the business.

Post sale follow up therefore includes after sales activities like free installation of the products, checking and ensuring its smooth performance Maintainace and ensuring after sales services. These activities help the entrepreneur to secure repeat sales evaluate the effectiveness of the sales persons.

Importance of personal selling to an enterprise
 It enables the entrepreneur through the sales persons to deal directly with customers. This allows the customers on how the product works

 It provides a two – way communication channel that helps entrepreneur to meet his customers’ requirements (needs) as regards prices, quality, and services offered as well as increasing sales for his products

 Personal selling enables the entrepreneur to negotiate specific needs to different customers as regards prices, quality etc

 It helps to gain quick feedback about the entrepreneur’s goods and services as well as suggestions for improvement
 It helps in winning customers confidence about goods and services

Disadvantages
 In addition, the free gifts and samples given to customers make it more expensive
 Some salesmen don’t give out samples to customers. They tend to use them for their own consumption and in the end, the products are not known to the public.

 Travelling salesmen face a lot of risks and problems like road accidents, highway robbery and bad weather conditions.
 Personal selling cannot effectively be carried out where many products are involved since this will call for employment of very many salesmen.

 It is expensive; this is because sales men are always paid commissions.
 It may make the final cost of the product high.
 Some sales men are not honesty enough.
 It has a very limited coverage and it appeals to very few individuals at time.
 It requires enough capital which most businesses lack.
 Some customers are not friendly and this makes it difficult to be approached.
 It needs special skills and techniques to be conducted successfully.
 Some attendants in show rooms may be rude and unfriendly to customers.