| Marketing Basics |
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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? |
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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.
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| Market Research |
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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 |
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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. Every marketing program contains four key components:
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. Distribution - The manufacturer and wholesaler must decide how to distribute their products. Working through established distributors or manufacturers' agents generally is easiest for small manufacturers. Small retailers should consider cost and traffic flow in site selection, especially since advertising and rent can be reciprocal: A low-cost, low-traffic location means spending more on advertising to build traffic. The nature of the product or service is also important in siting decisions. If purchases are based largely on impulse, then high traffic and visibility are critical. On the other hand, location is less a concern for products or services that customers are willing to go out of their way to find. The recent availability of highly segmented mailing lists, purchased from list brokers, magazines, or other companies, has enabled certain small businesses to operate from any location yet serve national or international markets. |
| Marketing Performance |
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After implementing a marketing program, entrepreneurs must evaluate its performance. Every program should have performance standards to compare with actual results. Researching industry norms and past performance will help to develop appropriate standards. Entrepreneurs should audit their company's performance at least quarterly. The key questions are: 1. Is the company doing all it can to be customer-oriented? |
| Marketing Research | |||||||||||||||||||||||||||||||||||||||
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What is Marketing Research? |
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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:
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| 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:
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| 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 |
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| 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, list every factor that may have influenced it, then eliminate any that cannot be measured. Examine this list while conducting research to see if any factors ought to be added, but don't let it unduly influence data collection. | |||||||||||||||||||||||||||||||||||||||
| Assess Available Information | |||||||||||||||||||||||||||||||||||||||
| Assess the information that is immediately available. It may be that current knowledge supports one or more hypotheses, and solutions to the problem may become obvious through the process of defining it. Weigh the cost of gathering more information against its potential usefulness. | |||||||||||||||||||||||||||||||||||||||
| Gather Additional Information | |||||||||||||||||||||||||||||||||||||||
| Before considering surveys or
field experiments, look at currently held information: sales
records, complaints, receipts, and any other records that can
show where customers live and work, and how and what they buy.
One small business owner found that addresses on cash receipts
allowed him to pinpoint customers in his market area. With this
kind of information he could cross-reference his customers'
addresses and the products they purchased to check the
effectiveness of his advertising.
Customers' addresses tell much about them. Lifestyles - and buying habits - are often correlated with neighborhoods. Credit records are an excellent source of information, giving information about customers' jobs, income levels, and marital status. Offering credit is a multifaceted marketing tool with well-known costs and risks. Employees may be the best source of information about
customer likes and dislikes. They hear customers' minor gripes
about the store or service - the ones customers don't think
important enough to take to the owner. Employees are aware of
the items customers request that you do not stock. They can
often supply good customer profiles from their day-to-day
contacts. |
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| Outside Data | |||||||||||||||||||||||||||||||||||||||
| Secondary Research
Secondary research exploits published sources like surveys, books, and magazines, applying or rearranging the information in them to bear on the problem or opportunity at hand. A tire sales business owner might guess that present retail sales of tires is strongly correlated with sales of new cars three years ago. To test this idea, it's easy to compare new car sales records with replacement tire sales three years later. Done over a range of recent years, this should prove or disprove the hypothesis and help marketing efforts tremendously. Localized figures tend to provide better information as local conditions might buck national trends. Newspapers and other local media are often quite helpful. There are many sources of secondary research material. It can be found in libraries, colleges, trade and general business publications, and newspapers. Trade associations and government agencies are rich sources of information - GALES' Directory is available at any public library. Sources of Secondary Research ASAE
Directory of Associations Online Primary Research Primary research can be as simple as asking customers or suppliers how they feel about a business or as complex as surveys conducted by professional marketing research firms. Direct mail questionnaires, telephone surveys, experiments, panel studies, test marketing, and behavior observation are all examples of primary research. Primary research is often divided into reactive and non-reactive research. Non-reactive primary research observes how real people behave in real market situations without influencing that behavior even accidentally. Reactive research, including surveys, interviews, and questionnaires, is best left to marketing professionals, as they can usually get more objective and sophisticated results. Those who can't afford high-priced marketing research services should consider asking nearby college or university business schools for help. For More Information on This Topic: Missouri
SBDC's "Market Research Workbook" |
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| Competitive Analysis | |||||||||||||||||||||||||||||||||||||||
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Business takes place in a highly competitive, volatile environment, so it is important to understand the competition. Questions like these can help:
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What to address in your competitor analysis |
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| Ideas for gathering competitive information | |||||||||||||||||||||||||||||||||||||||
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