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close this bookExport Marketing for a Small Handicraft Business (Oxfam, 1996, 192 p.)
close this folder3 Markets and their characteristics
View the document3.1 The perception of value
View the document3.2 Competition
View the document3.3 Market structures
View the document3.4 The costs of distribution
View the documentSummary

3.1 The perception of value

'There is ... no such thing as a "market". People talk about the Swiss market or the American market, but they do not exist ... so I suggest you forgo using the word "market" and think first in terms of customers and then the countries where they happen to be. This good advice might help to break down a little of the mental barrier which would-be exporters instinctively put up against overseas markets. Markets in every country have a great deal of diversity. In a typical handicraft producing country the range of different markets might be something like: the local village market place; the rural or small town shop; the smart large town or capital city shop; tourist stalls and shops; a fair or exhibition; museum or gallery shops; a trading organization; and an export company. All of these might be places where a production unit could sell its products. The price obtainable, or the requirements about quality or packaging, might be different for the same product, depending on which market it chose.

The situation in the countries which import most handicrafts is much the same. In Britain, Oxfam Trading has a chain of shops. Because these are located all over the country, it might be assumed that we sell to most of the country's markets. This is not the case. Markets are differentiated not so much by geography as by income levels and attitudes of the customers. Of course, these can have something to do with geographical location; an area in which most of the people are poor will not have shops selling very expensive products. However, in most areas in Britain, there are people of all income levels. So you cannot really talk about 'the market in London'. There is smart London, where rich people shop, and street-market London, where most of the customers are on low incomes. Marketing people often speak of 'going upmarket'-meaning targeting their products to well off customers-or 'downmarket'-to ones less well-off.

Markets are defined according to the type of customers who use them. For example, an alternative trading organization wants to export baskets made by a tribal group. These are of functional shape, commonly used by people in the domestic market as bowls for fruit or bread. What is distinctive about them is their form of decoration, employing natural dyes, and using symbols which have meaning in the culture of the community. The tribal group has an established price which is calculated loosely on its estimation of their production costs.

The ATO must choose how to offer the product, with the objective of making the maximum profit. It has to decide at what price to offer it, how to promote it, and where to place it in the market. What it wants to find out is how to give the baskets their highest possible market value.

The price which a customer is prepared to pay for a product has little to do with the cost of production. Think about the things you buy yourself: do you know how much they cost to produce? Not normally. What you do know is how much they are worth to you. Customers buy products which are offered in a way which corresponds to the value they are prepared to give them.

Value is the price at which a product can be sold. It will vary according to the way in which the ATO undertakes the marketing process. There are several ways in which it could increase the value of the baskets:

Quality of manufacture: customers might be prepared to pay more for items of high-quality production.

Promotion of decorative qualities: the ATO would seek to stress the beauty rather than the function of the baskets in its presentation, offering them as works of art rather than fruit bowls.

Providing information about the product: in this case, information about the cultural significance of the design might be produced on a highquality label.

Targeting the promotion at specialist outlets: there are high-class shops or galleries where customers are seeking distinctive original products of artistic merit.

In other words, the value of the baskets would depend on how they were presented to which market, and where the ATO was successful in placing them. The quality of production, promotion and presentation of the product, and the skill at placing it, will affect the price which the seller can obtain. Value derives from the total offer, not just the product itself.

It follows that changing one aspect of the offer will affect other aspects. Oxfam Trading sells through Oxfam's shops and through a mailorder catalogue. In the catalogue it is possible to achieve a higher quality of presentation, because products are professionally photographed, often in display settings. As a result, we can often obtain a higher price than would be possible in our shops, where space is limited for display. Conversely, we would probably be more successful selling a woollen rug in our shops, where customers could feel the quality. In a photograph it would look similar to a cotton or acrylic rug, and this might adversely affect its value. The presentation of products through packaging and display is called merchandising, and it clearly influences consumers in their buying decisions.

Value is a concept which varies according to the nature of the particular market into which a product is placed. For some, variation in a design may have value because the product is unique; for others it may imply imperfection compared to an industrial product. A specialist outlet requiring individual, culturally interesting products might accord value to an original musical instrument. For other markets its value may be low because people do not know how to play it.

The same consumer will often make two different buying decisions in two different market places. A good example is the tourist market. When people travel to a new place, they generally like to buy some souvenirs, for themselves or as gifts. They tend to shop much less carefully than they would at home, and to accept lower quality. The fact that the product is made locally is the important factor. The same product on sale in their own country would usually have less appeal. It would be more expensive because of distribution costs, and the consumer would not normally be looking for a product from a particular country. Tourist markets are generally a poor guide to buying habits in the countries from which those tourists come.

If there are rational reasons why consumers accord value to products, there are also a number of less tangible ones, such as:

distinctiveness
emulation of others
pride in their personal appearance
pride in the appearance of their property
association with social achievement
expression of artistic taste
ambition
romantic interest
maintaining health
cleanliness
proper care of their children
satisfaction of appetite
pleasing the sense of taste
securing personal comfort
alleviating laborious tasks
security from danger
pleasure of recreation

While not all of these may be applicable to handicrafts, the list serves to emphasise that consumers have a very wide variety of motivations, and accord value to products for all sorts of reasons. Large companies invest significant sums of money on research into why people buy their products. They often advertise these products in ways which create attractive ideas and images rather than tell people much about the products themselves. This understanding of consumer behaviour was well captured by the head of Revlon Inc., a North American cosmetics manufacturer, who said, 'In the factory we make cosmetics. In the store we sell hope.

It is also worth noting that people often buy things simply because they enjoy shopping! Market research in Europe has indicated that up to 25 per cent of people go shopping as a leisure activity. They may well choose to buy a product because they are just relaxed and happy.

Two aspects of the offer which cannot usually be included in a list of consumer motivations are how and where the product was made. As consumers, we know that we are not often interested in whether a product is made by hand or machine, or in which country. The only occasion on which these factors have importance is where they give additional value to the product. If hand manufacture can achieve a quality which a machine cannot, then it will have more value; if the quality is the same, the value is the same. The place of origin of a product may have value for a customer with an interest in a particular country, but most will be only concerned about quality, design, price and presentation.

There is a further factor to which markets accord value. This is the quality of service. The best offer in the world is worthless if ultimately the contract is not fulfilled. Exporters must be very clear about the expectations of customers which they themselves have created. Like the other aspects of the total offer to the customer, service is a variable. An exporter may choose to offer certain special services-for example, free samples, documents sent by courier, best quality packing materials-and recover the cost by edging prices upwards. Alternatively, cheaper but less reliable forwarding agents might be selected in order to keep the price down. Service may be the single point of differentiation between exporters who are trying to sell the same product into the same market. For example, in Kerala, in southern India, coconut matting is exported in large quantities at fixed prices set by the state government. Given that the product quality is strictly controlled, it is only in the quality of service offered to the customer that one exporter may claim superiority over others.

The combination of the various aspects of the offer-the product, its price, promotion and placing on the marke-—and the service to the customer together comprise what is called the marketing mix. The marketing process can be seen as the attempt to convert a capacity to produce into a marketing mix of the highest possible value.