Marketing Basics

To succeed, entrepreneurs must attract and retain a growing base of satisfied customers. Marketing
programs, though widely varied, are all aimed at convincing people to try out or keep using particular
products or services. Business owners should carefully plan their marketing strategies and performance
to keep their market presence strong.
What is Marketing?
Marketing is based on the importance of customers to a business and has two important principles:

1. All company policies and activities should be directed toward satisfying customer needs.
2. Profitable sales volume is more important than maximum sales volume.
To best use these principles, a small business should:

• Determine the needs of their customers through market research

• Analyze their competitive advantages to develop a market strategy
• Select specific markets to serve by target marketing

• Determine how to satisfy customer needs by identifying a market mix

Market Research
Successful marketing requires timely and relevant market information. An inexpensive research
program, based on questionnaires given to current or prospective customers, can often uncover
dissatisfaction or possible new products or services.

Market research will also identify trends that affect sales and profitability. Population shifts, legal
developments, and the local economic situation should be monitored to quickly identify problems and
opportunities. It is also important to keep up with competitors' market strategies.
Marketing Strategy
A marketing strategy identifies customer groups which a particular business can better serve than its
target competitors, and tailors product offerings, prices, distribution, promotional efforts, and services
toward those market segments. Ideally, the strategy should address unmet customer needs that offer
adequate potential profitability. A good strategy helps a business focus on the target markets it can serve
best.
Target Marketing
Owners of small businesses usually have limited resources to spend on marketing. Concentrating their
efforts on one or a few key market segments - target marketing - gets the most return from small
investments. There are two methods used to segment a market:

1. Geographical segmentation - Specializing in serving the needs of customers in a particular

geographical area. For example, a neighborhood convenience store may send advertisements only to
people living within one-half mile of the store.
2. Customer segmentation - Identifying those people most likely to buy the product or service and
targeting those groups.
Managing the Market Mix

Every marketing program contains four key components:

• Products and Services

• Promotion
• Distribution
• Pricing

These are combined into an overall marketing program.

Products and Services - Product strategies may include concentrating on a narrow product line,
developing a highly specialized product or service, or providing a product-service package containing
unusually high-quality service.

Promotion - Promotion strategies include advertising and direct customer interaction. Good
salesmanship is essential for small businesses because of their limited ability to spend on advertising.
Good telphone book advertising is also important. Direct mail is an effective, low-cost medium available
to small business.

Price - The right price is crucial for maximizing total revenue. Generally, higher prices mean lower
volume and vice-versa; however, small businesses can often command higher prices because of their
personalized service.
Marketing Research
What is Marketing Research?
According to the American Marketing Association, marketing research is the systematic gathering,
recording, and analyzing of data about problems relating to the marketing of goods and services.

Every small business owner-manager must ask the following questions to devise effective marketing
strategies:

• Who are my customers and potential customers?

• What kind of people are they?
• Where do they live?
• Can and will they buy?
• Am I offering the kinds of goods or services they want - at the best place, at the best time and in
the right amounts?
• Are my prices consistent with what buyers view as the product's value?
• Are my promotional programs working?
• What do customers think of my business?
• How does my business compare with my competitors?

Marketing research is not a perfect science. It deals with people and their constantly changing feelings
and behaviors, which are influenced by countless subjective factors. To conduct marketing research you
must gather facts and opinions in an orderly, objective way to find out what people want to buy, not just
what you want to sell them.
Why do it?
It is impossible to sell products or services that customers do not want. Learning what customers want,
and how to present it attractively, drives the need for marketing research. Small business has an edge
over larger concerns in this regard. Large businesses must hire experts to study the mass market, while
small-scale entrepreneurs are close to their customers and can learn much more quickly about their
buying habits. Small business owners have a sense their customers' needs from years of experience,
but this informal information may not be timely or relevant to the current market.

Marketing research focuses and organizes marketing information. It ensures that such information is
timely and permits entrepreneurs to:

• Reduce business risks

• Spot current and upcoming problems in the current market
• Identify sales opportunities

• Develop plans of action

How to do it
Without being aware of it, most business owners do market research every day. Analyzing returned
items, asking former customers why they've switched, and looking at competitor's prices are all
examples of such research. Formal marketing research simply makes this familiar process orderly. It
provides a framework to organize market information.
Market Research - The Process
Step One: Define Marketing Problems and Opportunities

Step Two: Set Objectives, Budget, and Timetables

Step Three: Select Research Types, Methods, and Techniques

Step Four: Design Research Instruments

Step Five: Collect Data

Step Six: Organize and Analyze the Data

Step Seven: Present and Use Market Research Findings

Define the Problem or Opportunity
The first step of the research process, defining the problem or opportunity, is often overlooked - but it is
crucial. The root cause of the problem is harder to identify than its obvious manifestations; for example, a
decline in sales is a problem, but its underlying cause is what must be corrected. To define the problem,
Competitive Analysis
Business takes place in a highly competitive, volatile environment, so it is important to understand the
competition. Questions like these can help:

1. Who are your five nearest direct competitors?

2. Who are your indirect competitors?
3. Is their business growing, steady, or declining?
4. What can you learn from their operations or from their advertising?
5. What are their strengths and weaknesses?
6. How does their product or service differ from yours?

Start a file on each of your competitors including advertising, promotional materials, and pricing
strategies. Review these files periodically, determining how often they advertise, sponsor promotions,
and offer sales. Study the copy used in the advertising and promotional materials, and their sales
strategies.
What to address in your competitor analysis

• Names of competitors - List all of your current competitors and research any that might enter
the market during the next year.
• Summary of each competitor's products - This should include location, quality, advertising,
staff, distribution methods, promotional strategies, customer service, etc.
• Competitors' strengths and weaknesses - List their strengths and weaknesses from the
customer's viewpoint. State how you will capitalize on their weaknesses and meet the
challenges represented by their strengths.
• Competitors' strategies and objectives - This information might be easily obtained by getting
a copy of their annual report. It might take analysis of many information sources to understand
competitors' strategies and objectives.

• Strength of the market - Is the market for your product growing sufficiently so there are
enough customers for all market players?
Ideas for gathering competitive information

• Internet - The internet is a powerful tool for finding information on a variety of topics.
• Personal visits - If possible, visit your competitors' locations. Observe how employees interact
with customers. What do their premises look like? How are their products displayed and priced?
• Talk to customers - Your sales staff is in regular contact with customers and prospects, as is
your competition. Learn what your customers and prospects are saying about your competitors.
• Competitors' ads - Analyze competitors' ads to learn about their target audience, market
position, product features, and benefits, prices, etc.
• Speeches or presentations - Attend speeches or presentations made by representatives of
your competitors.
• Trade show displays - View your competitor's display from a potential customer's point of
view. What does their display say about the company? Observing which specific trade shows or
industry events competitors attend provides information on their marketing strategy and target
market.
• Written sources:
General business publications
Marketing and advertising publications
Local newspapers and business journals
Industry and trade association publications
Industry research and surveys
Computer databases (available at many public libraries)

For More Information on This Topic:

SBDC Net Industry Information

Marketing Plan
A sound marketing plan is key to the success of your business. It should include your market research,
your location, the customer group you have targeted, your competition, positioning, the product or
service you are selling, pricing, advertising, and promotion.

"You're in business to serve a customer need," says Derek Hansen, founder of American Capital
Access. "If you're not sensitive to customers, don't know who your customers are, how to reach them
and, most of all, what will convince them to buy your product or service, get help."

Effective marketing, planning and promotion begins with current information about the marketplace. Visit
your local library, talk to customers, study the advertising of other businesses in your community, and
consult with any relevant industry associations. This interactive tool will help you assess your marketing
strengths and weaknesses.

Once you have all the necessary information, write down your plan:

1: Define your business

• Your product or service

• Your geographic marketing area - neighborhood, regional or national
• Your competition
• How you differ from the competition - what makes you special
• Your price
• The competition's promotion methods
• Your promotion methods
• Your distribution methods or business location

2:Define your customers

• Your current customer base: age, sex, income, neighborhood

• How your customers learn about your product or service - advertising, direct mail, word of
mouth, Yellow Pages
• Patterns or habits your customers and potential customers share - where they shop, what they
read, watch, listen to
• Qualities your customers value most about your product or service - selection, convenience,
service, reliability, availability, affordability
• Qualities your customers like least about your product or service - can they be adjusted to serve
your customers better?
• Prospective customers whom you aren't currently reaching

3:Define your plan and budget

• Previous marketing methods you have used to communicate to your customers

• Methods that have been most effective
• Cost compared to sales
• Cost per customer
• Possible future marketing methods to attract new customers
• Percentage of profits you can allocate to your marketing campaign
• Marketing tools you can implement within your budget - newspaper, magazine or Yellow Pages
advertising; radio or television advertising; direct mail; tele-marketing; public relations activities
such as community involvement, sponsorship or press releases
• Methods of testing your marketing ideas
• Methods for measuring results of your marketing campaign
• The marketing tool you can implement immediately

The final component in your marketing plan should be your overall promotional objectives: to
communicate your message, create an awareness of your product or service, motivate customers to buy
and increase sales, or other specific targets. Objectives make it easier to design an effective campaign
and help you keep that campaign on the right track. Once you have defined your objectives, it is easier
to choose the method that will be most effective.

For more detailed information, review the following guide: “Marketing Your Business for Success.”

Executive Summary
Current Situation
Ads and PR
Advertising
What Advertising Can Do For Your Business

• Remind customers and prospects about the benefits of your product or service
• Establish and maintain your distinct identity
• Enhance your reputation
• Encourage existing customers to buy more of what you sell
• Attract new customers and replace lost ones
• Slowly build sales to boost your bottom line
• Promote your business to customers, investors and others (Learn more)

What Advertising Cannot Do For Your Business

• Create an instant customer base

• Cause an immediate sharp increase in sales
• Solve cash flow or profit problems
• Substitute for poor or indifferent customer service
• Sell useless or unwanted products or services

Advertising's Two Important Virtues

• You have complete control. Unlike public relations efforts, you determine exactly where, when
and how often your message will appear, how it will look, and what it will say. You can target
your audience more readily and aim at very specific geographic areas.
• You can be consistent, presenting your company's image and sales message repeatedly to
build awareness and trust. A distinctive identity will eventually become clearly associated with
your company, like McDonald's golden arches. Customers will recognize you quickly and easily
- in ads, mailers, packaging or signs - if you present yourself consistently.

What Are Advertising's Drawbacks?

• It takes planning. Advertising works best and costs least when planned and prepared in
advance. For example, you'll pay less per ad in newspapers and magazines by agreeing to run
several ads over time rather than deciding issue by issue. Likewise, you can save money by
preparing a number of ads at once.
• It takes time and persistence. The effectiveness of your advertising improves gradually over
time, because customers don't see every one of your ads.
You must repeatedly remind prospects and customers about the benefits of doing business with
you. The long-term effort triggers recognition and helps special offers or direct marketing pay
off.

Getting Ready to Advertise - Drawing the Blueprint

1:Design the Framework

• What is the purpose of your advertising program? Start by defining your company's long-range
goals, then map out how marketing can help you attain them. Focus on advertising routes
complementary to your marketing efforts. Set measurable goals so you can evaluate the
success of your advertising campaign. For example, do you want to increase overall sales by
20% this year? Boost sales to existing customers by 10% during each of the next three years?
Appeal to younger or older buyers? Sell off old products to free resources for new ones?
• How much can you afford to invest? Keep in mind that whatever amount you allocate will never
seem like enough. Even giants such as Proctor & Gamble and Pepsi always feel they could
augment their advertising budgets. But given your income, expenses and sales projections,
simple addition and subtraction can help you determine how much you can afford to invest.
Some companies spend a full 10% of their gross income on advertising, others just 1%.
Research and experiment to see what works best for your business.

2:Fill in the Details

• What are the features and benefits of your product or service? When determining features,
think of automobile brochures that list engine, body and performance specifications. Next, and
more difficult, determine the benefits those features provide to your customers. How does your
product or service actually help them? For example, a powerful engine helps a driver accelerate