Small business success is based on the ability to build a growing body of satisfied customers. One of the greatest needs of small business managers is to understand and develop marketing programs for their products and services.
Modern marketing programs are built around the "consumer marketing concept" which directs managers to focus their efforts on identifying, satisfying, and following up the customers' needs, all at a profit.
The Consumer Marketing Concept
The consumer marketing concept recognizes the importance of customers to a firm and states that: 1) All company policies and activities should be aimed at satisfying customer needs, and 2) Profitable sales volume is a better company goal than maximum sales volume.
To use the marketing concept, a small business should:
1. Analyze the product/service and competitive advantages in the market place.
2. Determine the needs of their customers through market research.
3. Target specific markets to serve.
4. Determine how to satisfy the needs of each segment by managing the market mix.
Why People Buy
People buy products or services to satisfy needs and wants. At the low end are the basic needs of food, shelter and clothing. At the upper end are consumer wants which satisfy ego and self-gratification. There are also several stages in between. It is important to define the motivation of prospects to buy your product.
Generally, personal shoppers and businesses buy because of some of the following reasons:
Product
Prestige
Convenience
Quality
Price
Durability
Too often, new businesses strive for the lowest price as a means for an order. In personal services and consulting, for example, price will be one of the lowest criteria.
In a new business, the marketing activities are the key to success because even if the product is the best and there are ample funds, nothing happens until there is a sale.
Product or Service
Product is the first and most important element of the marketing mix. A product is anything that can be offered to a market for attention, use or consumption that might satisfy a need or want.
Each product offered to customers can be looked at on three levels. The core product is the essential service that the buyer is really buying. The tangible product is the features, styling, quality, brand name and packaging that constitute the tangible product. The augmented product is the tangible product plus the various services accompanying it, such as warranty, installation, service maintenance, and free delivery.
Services are intangible and unlike physical products, they cannot be seen, tasted, felt, heard or smelled before they are purchased. To reduce uncertainty, the buyers will look for signs or evidence of the service quality. They will draw inferences about the quality of the service from the place, people, equipment, communication material, symbols and price that they see.
In addition to the market research discussed in the previous chapter, it is important to consider:
How does this product or service satisfy user needs?
What future trends may affect your product or service and users?How will sales be affected by competitive products?
How will sales be affected by competitive products?
Have prototype of your product or service been evaluated by consumers?
Description of product or service:
Benefits to consumer
Packaging
Brand name recognition
Performance standards
Warranty, service and parts
Perceived quality of product
Price
The price is the second component of the marketing mix and concerns any factor that influences the final cost of your product or service, including the list price, discounts, allowances, and credit terms.
In determining a price, your objective should be to select that price which gives you the greatest net profit per year. Generally, sales volume goes up as prices go down and vice versa. Your objective is net profit, not the largest sales volume. Research to evaluate the level of profit based on the interaction of product price and volume of sales. Consider these pricing variables:
New concept pricing: If your business has a truly innovative product or service, then the key consideration is: How much will people pay for this convenience or satisfaction.
Directly competitive or substitute merchandise: If your business is one of many selling the same general product you need to determine whether you can get a higher price for user benefits, quality, performance, service, etc.
In reverse, will you get more volume and more profits if you lower your price? Sometimes selling for a low price can be perceived by prospects as implying you offer nothing but a price advantage.
Interchangeable products or services: When your product/service is not a direct substitute, you need to determine how much the user will pay for the different features providing benefits.
Discounts: How will you provide discounts to high volume buyers?
Credit: You must develop a way to evaluate business customers and how to extend credit or sell cash on delivery (C.O.D.).
Study what people will pay compared to the competition and determine what price produces greatest net profit. Also, remember it is easier to lower prices than to raise them. Personal or business buyers will have specific criteria or intuitive reasons for buying and low price is not always a key decision point.
Promotion
Promotion is the third of the four major elements of the company's marketing mix. As the marketer, you must know how to use advertising, sales promotion, publicity, and personal selling to communicate the product's existence and value to the target customers.
First, the communicator has to define the promotion objective, whether it is to create awareness, knowledge, preference, conviction, or purchase. Then design a message with an effective content, structure, format and source. The basic message will be, "This is my product or service, here is the benefit to you, it costs this much, and you can buy it here."
Second, the promotions budget is established on the basis of what is affordable, as a percentage of sales, on the basis of competitors' expenditures, or on the basis of objectives and tasks.
Third, select your media. The media decision calls for defining the reach, frequency and impact goals; choosing among media types; and selecting specific media.
Signs: Help people find your firm; reach people who are passing by your establishment and could make a purchase; and present an image of your business.
Newspapers: Weeklies and dailies are costly and not particularly suited to new businesses. Most have coverages broader than your trading area. Look in small community papers for a "Directory of Services."
Yellow Pages: A minimum listing in one or more categories becomes a silent salesperson for you. Large display layouts or color may not be cost effective.
Brochures: Most business-to-business firms need brochures, flyers, specification sheets or other graphic materials to be silent salespersons. Low-cost brochures can be developed by computer graphics at most printing centers.
Mail coupons: There are several firms providing home coupon messages. The typical rate is 32-44 per home. Evaluate by discussing the performance with the printers and other users.
Personal direct mail: There are many direct mail services in the Yellow Pages that write, print and mail sales letters or flyers to a selected group. Because so much "junk" mail is received by home owners, a simple message is important. Readers who open this mail spend 5-8 seconds scanning the piece to see if there are benefits for them. Professional help would improve the impact of your letter.
Business direct mail: Using directories or buying mailing lists, personalized letters can be directed to specific names or titles, locally or nationally. A productive techniques is to indicate in a short letter that you will call in a few days to discuss how you can help this prospect to save money or other benefits.
The manageable number is 10-20 mailings per day so you can follow up in three days. This places further emphasis on having such a letter done professionally to capture the reader's attention quickly and thoroughly.
Cablevision: Some local channels are an attractive buy. Most local cable companies can sell 30-second commercials on channels such as CNN and ESPN at very low prices. Ask their advertising department for rates.
Trade Shows: Can provide important contacts for product research and an opportunity to meet prospects. Display space may be expensive but should be considered.
Radio: Some small stations may target specific audiences that might match your target market. Ask for an advertisers' list.
Publicity: Even in the early stages of a new business, it is possible to develop a write up about some interesting aspect of your business and have it accepted by weekly newspapers.
Fourth, develop aMarketing Plan. Make decisions on costs and scheduling of all marketing activities. Once you have developed a plan for advertising or personal sales promotions or publicity, these should be identified on a schedule.
Remember, it costs much less to keep an existing customer than it does to get a new one.
Finally, implement your plan. Marketing implementation is the process of turning plans into action assignments, describing who does what, when, and how. All the communications must be managed and coordinated for consistency, good timing and cost effectiveness.
