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Marketing

Marketing emphasizes the customers’ needs and wants. A comprehensive marketing plan starts with describing your marketplace. Your business should be driven by the customer. The marketing plan should fit your product development, pricing, promotion and distribution around the customers’ needs.

A typical problem in an entrepreneurial business is that the marketing is focused on a product. When it does not monitor change, then it fails to adapt to the real needs and desires of clients. Take, for example, the typewriter sales business. Entrepreneurs who did not monitor the innovation of personal computers were put out of business when they failed to monitor the real needs and desires of customers. All of your company’s policies should be aimed at satisfying your customers’ needs and desires. Everyone in the company has a marketing job!

A second problem commonly made in entrepreneurial companies is that they focus on increasing sales rather than increasing profit. Profitable sales volume is better than maximum sales volume. Regular sales analysis will uncover your most profitable market segments and product lines.

Market Research

Knowing if there is a demand for your business may be hard to assess. Small business success is based upon the ability to cultivate and develop a loyal customer base. You must focus your efforts on identifying, satisfying and following up on the customer’s needs. To reduce the risk of starting a new business, you can do market research. Although research cannot guarantee success in your business, it can improve your chances by estimating sales potential and avoiding losses caused by lack of responsiveness to market demand.

Before You Start

Before investing your time and money in a market research study, there are a number of things you should consider to help you determine what your customers want:

  • Who will purchase the product or service?
  • Who makes the buying decisions?
  • What is the current demand?
  • What other products or services currently satisfy that demand?
  • How many companies provide those products or services?
  • When is the product purchased?
  • Why is it seasonal?
  • Where is the product purchased?
  • Where is the buying decision made?
  • How does the potential customer buy the product now?
  • Will that customer buy the product again?
  • How are purchases financed or serviced?

The Marketing Mix

The five key variables to successful marketing – called the marketing mix – are people, products and services, price, promotion and product distribution. In marketing textbooks, these are called the five Ps of Marketing.

People

Your customers and prospects drive the marketing plan. You should analyze these people before you do anything else in your business.

Products and Services

Effective product strategies can vary greatly. They include concentrating on a narrow, specialized product line or providing a large selection of products. Your strategy may be to provide a high level of customer service or low cost products with minimal service. Different products and services will meet the needs of different customers

Price

Determining the price level and pricing policies are a major factor affecting total revenue. Higher prices mean lower sales volume, whereas lower prices may reduce profitability. While a small business can frequently command higher prices because of the personalized services it offers, many customers will still shop based on price alone.

Promotion

This marketing area includes advertising, sales, public relations, publicity, events and other promotional tools. Since every employee is part of the marketing process, keeping a focus on customer service is a necessity to grow sales. High quality sales will also aid sales growth. This includes consultative selling techniques.

Product Distribution

You must identify the best method for product distribution. Manufacturers can distribute their own products or utilize established distributors or manufacturer’s agents. Small retailers must give careful consideration to cost and traffic flow when determining site location. Advertising and rent are usually reciprocal. In other words, low cost rent usually means low traffic. As a result, you must spend more on advertising to build traffic.

You will utilize the 5 Ps of marketing when you develop a marketing plan. Before you start the plan, however, you must do market research.

What You Must Know To Do Your Own Market Analysis

Know your product. What need will it satisfy? How does it compare to the competition? Is it priced fairly? Your marketing strategy should work to disclose customers’ problems and areas of dissatisfaction that can be easily remedied. This process will help identify opportunities for new products and services.

Try to determine the quality and quantity of your market segment. For example, in the retail business, it would be helpful to know the average income of the people in your selling area to predict spending levels and to estimate how many people are potential customers. Use the following resources to help you:

Census Bureau
Statistical information on population, age, education and income demographics
census.gov

Colorado Department of Labor & Employment
Industry and labor market statistics
colorado.gov/cdle

Department of Local Affairs State Data Center
Useful demographic information
demography.dola.colorado.gov

Determine the proper location for your business. Gather information about traffic patterns (vehicular and pedestrian) to assess sales potential. The Colorado Department of Transportation (CDOT), Division of Transportation Planning (dot.state.co.us), has information on vehicular movement on state highways. Some local governments have similar information for city and county roads. In addition, you should observe pedestrian movement during business hours to estimate the amount of walk-in traffic your business might receive.

Market research should identify trends that may affect your sales and profitability. Population shifts, legal developments and local economic conditions must be monitored to identify problems and opportunities. Competitors’ activities should be monitored. Check Yellow Pages online to locate your major competitors. What strategies are they using successfully or unsuccessfully? Are you prepared to take advantage of a competitor leaving the market or respond to a new competitor entering the market? Do comparison price shopping so you can be competitive and but still profitable.

Conducting a Market Study

If you want to hire someone to conduct your research, private firms offer full or partial services and will perform an extensive market study including design, administration and analysis. Fees will vary depending upon the study. Refer to the Choosing Advisors section of this book.

If you want to do your own research, the following list of contacts and agencies can serve as a general guide to sources offering market research information at little or no cost. In addition, refer to the Sources of Assistance section of this book.

US Department of Commerce/Census Bureau

The US Department of Commerce/Census Bureau offers statistical profiles of an area and general social and economic demographics such as population composition, age, income, education and industry of employed persons.
census.gov

Colorado Department of Labor and Employment/ Labor Market Information

This department’s Labor Market Information Section provides demographic breakdowns and publishes a “Colorado Labor Market Information Directory” and an “Annual Planning Information Report” covering state and local labor market areas.
colmigateway.com

Trade Associations

Trade associations may be useful to help you find out the number of similar merchants in your market area. Members who are currently in the market may also assist you with information to get started. You can find listings in the reference section of the public library in the “Encyclopedia of Associations.” While at the library, ask the reference librarian how to access this publication online.

Public Libraries

The Denver Public Library’s Business Reference Center is the most extensive in the state. The library provides access and assistance to help you research more than one million publications by federal, state and local government agencies and also has a business periodicals index. The larger suburban branches in the Denver metro area tend to possess better business collections than smaller branches. Inter-library loans to share resources are also available statewide.
denverlibrary.org

Colleges and Universities

Business school departments may offer student market studies for no charge, yet professors may charge a modest fee. Also, extensive library collections may be available for public use. For additional sources of marketing assistance, refer to the Sources of Assistance section of this book.

Develop a Marketing Plan

A marketing plan is one of the most important aspects of any small business. It will assist you in evaluating your company’s marketing needs and give a concise direction to your marketing efforts. Above all, if developed properly, the plan should help you increase your market share in a cost-effective, timely and productive manner. Marketing plans only work when you implement them – putting them in writing is the first step.

Steps to a Successful Marketing Plan

Determine the philosophy of your company. Define who the company serves and what those customers need and want today. Evaluate the company’s internal and external purpose.

Establish Marketing Goals

Include short- and long-term goals. Most companies have a number of marketing goals that need to be addressed. When determining these goals, it is important to prioritize them in order of need and availability of funds. Consider the following:

  • Are you selling as much to your existing clients as you could?
  • Are there new products and services that your existing clients would like that no one else can offer?
  • Are there new markets that would like your existing products and services?
  • How do you compare to the competition in pricing? Quality?
  • Is your image consistent with your message?
  • What are the best promotional techniques to reach each market segment?

Establish a Marketing Budget

A budget should be created for a minimum of 12 months. The key to a successful budget is realism. You should project sales by product for that period of time and marketing expenses, such as sales salaries, sales training, advertising, promotional materials, etc.

Create a Timeline

Your budget will drive your timeline. Most small companies must look at phasing in projects based upon cash flow constraints. You should also promote your business at a time that is convenient for your audience. Your market research should help answer these questions.

Follow the Plan and Track the Results

Once your budget and timeline is put together, track actual results against your projections. Then evaluate what is working and what needs to be changed. Monthly and weekly monitoring is critical. Sales people should be measured daily for results (e.g. closed sales, new leads, qualified leads, etc.). Most small companies change 20 to 50 percent of their marketing plan every quarter.

Develop Next Year's Marketing Plan

As you monitor results, new goals and strategies for the coming year will evolve. Keep track of these so that next year’s plan is easier to develop.

The Advertising Component

While advertising is a key component in a marketing strategy, advertising alone is not marketing. It is important to develop a clear message before committing and spending advertising dollars. An effective advertising campaign can quickly provide a return on your investment, while a poorly planned advertising campaign may drain profits from your business.

The basic premise of an advertising plan requires analysis of four key questions before you make your advertising decisions:

What Do You Want Your Advertising to Accomplish?

The first step in developing your advertising strategy is to specify your advertising goals. Be precise. Your goals should include increasing awareness of your business, attracting customers away from the competition, increasing the likelihood of keeping your current customers, developing customer loyalty and increasing the immediate sales and leads.

While all of the above goals are important, you should prioritize your specific goals and focus on one or maybe two goals at a time.

Who is Your Audience?

Once you have determined your advertising goals, select the target audience for your message. Your market research should have already identified your customers and potential customers. Advertising that tries to reach everyone rarely succeeds. Picture the people you must reach to achieve your advertising goals. Use the following as a guide for targeting and evaluating your customers:

  • Demographics such as gender, age, income, location of residence, occupation, marital status, etc.
  • Behaviors, such as awareness of your business, loyalties, hobbies and recreational activities, lifestyles, etc.
  • The wants and needs of your customers and the decision as to whether your product and services can fulfill those needs

What Should Your Advertising Say?

Once you know who your target audience is and what they are looking for, you can decide what your advertising will say. Communicate a message that will be important and speak clearly to your customers. It should explain the important benefits your products and services offer.

Where Should You Place Your Advertising?

Many advertising media work well to reach a diverse range of target customers. No single medium is inherently good or bad. A good medium for one product may be a poor choice for another. Guide your advertising placement by a simple principle – go where your target audience will have the greatest likelihood of seeing and hearing your message. As you consider media choices, make your selection based upon which one(s) fits your advertising goal, reaches your target customer effectively and is within your advertising budget. The following is a brief summary of the advantages and disadvantages of some of the most commonly-used advertising media:

Television

Television reaches a great number of people in a short time. Small businesses usually use spot ads. A spot ad is placed on one station in one market. Cable TV is placed on a local cable channel. Advantages of television include the ability to convey your message with sight, sound and motion. The disadvantages of television include its higher cost, limited length of exposure and the clutter of many other ads. It may require multiple exposures to achieve message retention.

Radio

Radio also has the ability to quickly reach a large number of consumers. The major advantage of radio lies in its ability to effectively target narrowly defined segments of consumers. The vast array of radio programming formats lets an advertiser gear ads to almost any target audience. It is also relatively inexpensive. The disadvantages of radio are that the message is limited to audio-only, there may be a lot of ad clutter and exposure to the message is short and fleeting.

Newspapers

Newspapers have the advantage of reaching a specified geographic area. Other advantages include ad size, placement and short deadlines that allow for quick responses to changing market conditions. Disadvantages include potentially expensive ad space and ad clutter. Newspapers are generally read once then discarded, thus requiring multiple insertions.

Magazines

Magazines provide a means to reach a highly-targeted audience. Specific groups can be reached by using magazines of particular interest to the audience. This is true of both consumer and business magazines. Magazines frequently have a well-defined geographic, demographic or lifestyle focus. Magazines have a relatively long life; they are often reviewed by a single reader and are passed along to others. The disadvantages of magazines include long lead times, limited flexibility on ad placement and the high cost of production.

Billboards

Outdoor advertising is typically used to reinforce or remind consumers of the advertising message rather than original communication. The advantages include long life and high visibility and frequency of viewing. The primary disadvantage of billboards is the length of viewing time. The target audience is frequently moving so the message must be simple, direct and easily understood.

Direct Mail

Direct mailers use specific ranges of mailing addresses, normally by zip code, that place the advertisement directly into the hands of your target audience. With proper focus of the mailing list, there is low waste and greater flexibility on the message presentation. Disadvantages are the relatively high cost per contact, the accuracy of mailing lists and the audience confusion with junk mail.

Social Media

Social media is a form of marketing in which people can create, share and exchange information and ideas on online platforms and communities such as Facebook, Twitter, Instagram, Pinterest and YouTube. Social media platforms are highly interactive and differentiate from traditional marketing channels in quality, reach, frequency, usability, immediacy and permanence. This allows the user to connect with his or her audience and creates an exchange where business owners can promote both their goods or services as well as their company values, product updates, staff activities and more. A complete marketing strategy should include one or more social media platforms in order to round out your online presence. Carefully consider all social media platforms before choosing which one(s) is the best fit for your business.

Selecting the right advertising format or combination of formats is a crucial part of a successful marketing plan. Carefully consider how to best reach your target audience.

Evaluating Your Marketing Efforts

After you have completed the research, developed your plan and created your marketing tools, you need to monitor the effectiveness of your hard work.

Customer Reactions

Sales are the best monitor of your success. However, sometimes you need to look beyond that. Are you getting repeat customers? Do they tend to comment on your product or services? Are you listening to what they say?

Tracking Tools

Translate your sales figures into percentages and tabulate your customer responses. Specific things to track include total units/jobs performed, total number of customers, the number of repeat customers and customer database (including addresses, age, income range and how they heard about you).

Don't Change Too Quickly

A common mistake is changing a successful advertising message after it has run for a period of time. Remember that you will get tired of a message long before your customers will. It may take time for your message to sink in, let alone wear out.

If It Isn't Working...Fix It

Be smart when fixing a problem. Modify your marketing in stages so current customers aren’t confused.

A marketing plan is one of the most important aspects of any small business. It will assist you in evaluating your company’s marketing needs and give a concise direction to your marketing efforts.

While advertising is a key component in a marketing strategy, advertising alone is not marketing. It is important to develop a clear message before committing and spending advertising dollars.

After you have completed the research, developed your plan and created your marketing tools, you need to monitor the effectiveness of your hard work.

Resources are available to those businesses in agriculture, exporting and selling to the government.

Small businesses seeking to market their goods and services to the federal government must register.