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  • 1. Chapter 11 Building the Business: Marketing
  • 2. Marketing
    • Must make consumers aware of the product/service that the firm is selling
    • Must AGRESSIVELY make target market aware
    • Must build a credible case as to why the new business will be better, cheaper, higher quality, and more attentive than the current offerings.
  • 3. Introduction
    • Developing a marketing plan is not an easy endeavor
    • Consulting companies are available to help develop a marketing plan
      • Consulting companies are expensive
      • Hard to justify cost with low levels of cash at the onset of operations.
  • 4. Developing a Marketing Plan
    • Must develop a working marketing plan that includes:
      • Identifying your market
      • Ideal and general target customer
      • Determine a pricing strategy in-line with the firm’s strategy
      • Promotion
      • Sales management procedures
      • Sales forecasting.
  • 5. Identifying Target Market
    • Marketing efforts need to be as focused as the small business’s mission
    • The small business is trying to reach those people “most likely” to buy
    • Remember that people will only travel short distances
      • Do not market too broadly – financial implications are not good.
  • 6. Geographic Area
    • How will the small business reach potential customers in the area?
      • Flyers
      • Contacting local HR Departments of local companies
      • Sponsoring events
    • Try to maximize the marketing effort at all times.
  • 7. Target Customer
    • Must understand the market that is served and the targeted customers are critical to the success of marketing the new small business
    • Look towards finding the “ideal” customer
    • Should ask the following questions:
      • How many “ideal” individuals live within your market area?
      • What is a realistic percentage of customers to attract?
      • Are the projections consistent with cash flow projections?
      • If not, what needs to be changed?
  • 8. Exercise 2
    • Who is your ideal customer?
    • What is the geographical range of your business? How far can you reasonably expect people to travel for your product or call you to serve them?
  • 9. Market Pricing
    • One approach to setting prices is to value the product(s) at price levels that you believe they are worth on the market
    • Good when there is very little, if any, competition
    • Only direction for price of a new entry is downward in the future
  • 10. Cost-Plus Pricing
    • Determine the total cost (breakeven point) of the product—don’t forget to include “overhead costs”
    • Add a “mark-up” to the total cost of the product to make a profit
    • “ Mark-up” is what should be tempered by comparison with competition
  • 11. Loss Leaders
    • Not uncommon to sell a “loss-leader”
    • Main purpose is to get customers into the store
    • Do not employ a “loss-leader” until the small business has a solid foundation and momentum
    • “ Loss-leaders” require considerable skill to implement and involve tremendous risk…
  • 12. Pricing
    • Do not make the mistake of pricing each individual item that is available for sale
      • Too time consuming
    • Place products in reasonable categories to ease the pricing process.
    • Use attractive pricing $99.99 instead of $100
  • 13. Pricing of a Service
    • More complex than pricing goods
    • Time becomes the base operating cost
    • Closely examine the pricing policies of your competitors (Market Pricing)
    • Pricing can be a valuable tool to juggle customer flow and available time.
  • 14. Important Points to Remember About Pricing
    • A small business starting out will need to offer an even greater value for the money charged to build a customer base
    • Only after the company has developed a positive reputation can the value offered be changed to provide a greater financial benefit for the firm
    • Remember that consumers rarely want to change their supplier of goods and services…(brand loyalty)
  • 15. Important Points to Remember About Pricing
    • Small increments of money should be avoided – regardless of what that means to margins
    • The difference in appeal between an item being priced at $1.01 and $0.99 is substantial
    • Offering a quantity discount depends on the business
      • Most likely not going to be used in a retail business.
  • 16. Pricing Strategy
    • Some people say that when a very famous company lowered its price on its high quality television sets, that it ruined the company
    • People perceived that the lowered price meant the company had lowered quality and they refused to buy the product
    • The result was that the company actually sold fewer television sets and lost money.
  • 17. Pricing Strategy
    • Can you think of other examples of products that would suffer fewer sales if they lowered their prices?
    • Can you think of any products or services where lowering prices could result in enough increase in sales to result in higher profits?
  • 18. Exercise 3
    • How will you price your product/service? Why?
    • What do your competitors charge? Should your price vary from the industry standard?
  • 19. Promotion
    • Promotion is the means in which a product or service is advanced
    • Promotion must be targeted to the market and customer groups within the industry
    • Successful promotion reaches the target customer in the most efficient manner possible.
  • 20. Pure Promotions
    • Includes any form of advertising that costs and is purely designed to promote the products/services of the company
    • Examples:
      • Signs
      • Flyers
      • Web pages
      • Newspaper
      • Radio
      • Television.
  • 21. Signs
    • Often-overlooked means of advertising a company
    • Catchy-name, well-designed logo, and substantial effort to promote the visibility of the name and logo can provide significant benefits
    • Simple but distinctive is an important part of a customer, or potential customer, remembering the firm.
  • 22. Flyers
    • Effective if able to target a very specific geographic area and customer profile
    • Flyers can be changed frequently
    • Low cost to produce
    • Delivered with low labor-cost
    • Tend to have a smaller impact on customers.
  • 23. Web Page
    • A web page is no longer a competitive advantage, but is now an expectation
    • Primary resource for reaching customers outside of the firm’s “target region”
    • Look towards a professional to develop anything beyond the most basic of web pages.
  • 24. Newspapers
    • Involves two steps:
      • Designing the ad
      • Placing it in the newspaper
    • Downside to newspaper advertisements is that the firm will pay for “views” by individuals who most likely will never be customers.
  • 25. Radio and Television
    • Unlike newspapers, there are numerous radio and television stations available to “run” your ad
    • An advertising agency is recommended in developing and placing the advertisement
    • A genre of advertisement that is more difficult and financially demanding
    • Be cautious to not upset any person or group with your advertisement.
  • 26. Mixed Promotions and Community Support
    • Schools are always in the need for constant sponsorship
      • Provides maximum exposure to the potential client base in a relatively inexpensive manner
    • Allows to put a stamp on positive activities and reach parents and/or children that you are trying to reach
    • Another potential source is sponsoring local youth sports teams.
  • 27. Virtually Free Promotion
    • Promotions that have a very limited financial cost but have a time commitment requirement from someone in the firm
    • Bootstrap marketing — efforts that require little capital
    • Speaking opportunities to civic organizations, schools, churches, clubs.
  • 28. Exercise 4
    • List some of the promotional activities that are relevant in the area where you live.
    • 2. Which of these would be most economical for a small business?
  • 29. Sales Management
    • Refers to the method, means, and individuals that constitute the relationship with the customer
      • Encompasses the entire process of how the sales process is managed.
  • 30. Sales Management Issues
    • How many contact points will the business have with each customer
    • How will each customer be greeted
    • What is the process for managing the customer once an order has been placed
    • What look will the sales force present
    • What controls are in place to ensure the quality of the product delivery
    • How much information will be collected on each customer
    • What will the business do with the information collected…
  • 31. Sales Management
    • Designing and maintaining a successful sales management system requires a consistent approach and an image that is designed around the firm’s mission statement
    • The small business’s relationship with the customer is critical for success.
  • 32. Forecasting Sales
    • Market potential methods (also known as “top-down” approach) estimate the potential sales of the firm based on the number of potential customers in the area
      • Data is modified by a likely percentage of those customers that will use the business
    • Customer demand method estimates how many customers the business can handle given their location, staffing, etc.
      • Estimates center on the number of customers needed to breakeven.
  • 33. Distribution Channels
    • Independent sales agents
    • Contract sales force
    • Web-based business
    • Mail order/catalog.
  • 34. Independent Sales Agents
    • Used to sell industrial products
    • Independent representative agrees to sell the product for a percentage of the sales price
    • Securing the right representatives for the right price can be crucial to success.
  • 35. Contract Sales Force
    • Contract sales companies provide independent salespeople with a wide variety of experiences and contacts
    • Relatively expensive means of jump starting sales
      • Can be the difference between the firm’s success and failure
    • The effort is to lock up long term contracts.
  • 36. Web-Based Business
    • Web page displays the products, the means for the customer to ask questions, and allows the customer to purchase the product
    • Dependent upon the design of the website to present information about the products and their benefits
    • Web page design is critical.
  • 37. Mail Order and Catalog Business
    • Catalogs are mailed to the homes of customers
    • Provide a consistent set of products and provide a means to order those products
    • Understanding and targeting your customer is critical
    • Be wary of credit card fraud
      • Plagued the industry.
  • 38. Chapter Exercises
    • What channels do you intend to use to market your product/service?
    • What are the costs for each?