BA350

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Chapter Nine
Small Business Marketing:
Customers and Products
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Education.

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The Marketing Process
Product, price, promotion, and placement are the 4 Ps of marketing.
The customer
development
process focuses
specifically on
meeting the needs of
the customer,
hopefully leading to a
new product/service.
The product
development
process perfects the
product or the
innovation within the
product.
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Customer Roles
• When you buy a product/service and use it yourself, you are the end
user, and the purchaser.
• In organizations, a person or office is the purchaser for other end users.
• Yet another person may be the decision maker who determines what
will be bought for end users, then the purchaser places the order.
• For individuals or organizations, an additional role is the influencers
making suggestions/recommendations to people in any of these roles.
Understand these roles to better understand your customers.
• Use the roles to help map out the purchasing process.
• Closely related to this is the idea of the customers’ budget cycle, or
for major purchases the capital budgeting cycle.

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Initial Customer Profiles
A customer profile starts with face-to-face interviews.
• The goal is an unbiased sense of how customers think about the issue
your product/service helps resolve or improve.
Analyze results by looking at the customer job.
• Identify their pains or the gains they wish they could achieve.
• Find out how they deal with the pain or gain right now.
• Locate where there is a possibility for something better.
What if interviews show customers are unresponsive to your solution?
• You can change or pivot your product/service to better fit the
customers’ pains and gains.
• Or pivot your customer base to those willing to purchase your product.

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Target Market
Target market is one of a
set of nested terms for the
market sizes.
Total available market
(TAM).
Serviceable available
market (SAM).
Serviceable obtainable
market (SOM).
Penetrated market (PM).
There can be more than
one target market.
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Target Market – The Target Customer
Ways to find your target customer.
• Benefit matching – the closer customers’ needs/pains/gains align with
features of your product/service, the happier they will be.
• Long-term value (LTV) or customer lifetime value (CLV) – go after
the customer who will bring the most revenue and profit to your firm.
• Influencer impact – word of mouth or social media exposure can lead
to sales from customers you did not know to target.
• Minimizing churn – keeping existing customers is more valuable than
finding new ones.

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Target Market – Finding First Customers
First customers are a key challenge for a start-up and though sales for
cash are good, there are other nonfinancial benefits.
• Feedback.
• Testimonials.
• Sharing on their social media accounts.
Three ways to find first customers are:
• Family and friends – they may not need or use the product.
• Early adopters – likely to impulse buy but more difficult to find them.
• People in pain – they appreciate your product the most and provide
feedback but they are even harder to find.
Connecting with the people in pain is the most useful and may be worth
discounting, or giving away, your product to obtain a chance at follow-up.

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Target Market – Thinking about Customer Service
Use outstanding customer service to convert customers into fans.
• Show interest in and concern for everyone in your business –
customers, employees, suppliers, and the community.
• Go the extra mile for these people.
• Take time to be nice to all these people.
• Be honest and open in how you operate.
• When mistakes are made, fix them.
• Keep in mind the SERVICE acronym as a way to teach employees
what outstanding customer service entails.
Social, enthusiastic, responsible, vibrant, intelligent, courteous, engaged.

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Segmenting Your Market
Most products/services work best with particular markets.
• Successful entrepreneurs leverage this idea using market
segmentation to identify the best market(s) for their good or service.
• Segmenting divides the total market into manageable pieces.
• Your target market is the segment(s) you select on which to target
your marketing efforts.
• Geographic segmentation.
• Demographic segmentation.
• Benefit segmentation.
• Psychographic segmentation.
Some companies have created specialized
customer profiles based on combinations; called
predetermined market segments.
These commercial
products can help
you know more
about your
customers, but they
should not replace
the knowledge you
gain on your own.

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A Segmentation Example
You live in Phoenix, are bilingual in English and Spanish, and want to
start a day-care with a bilingual focus.
• You create a customer profile and find interest but are unsure about
where to locate the day-care center.
• You’ve segmented your market to a life cycle position – parents of
small children – and want a location central to your demographic.
• Using the website zipwho or city-data, find the zip code with the
biggest target demographic in the area.
• With your target zip code, go to PRIZM to identify the five largest
market segments within a specific zip code.
The main reason for targeting a market segment is so you do not waste
effort and money targeting the wrong customers.

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Marketing Research
Marketing research can verify the size of the potential market.
• It is where and how you get the facts to support your plan.
• And the proof that your plan has a good chance of success.
Research falls into two major categories.
• Primary research is gathered to answer a specific marketing
question.
• Secondary research has already been gathered for another reason,
but can be just as useful.

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Primary Research
This information is extremely current, but can be costly – online options
are the most reasonably priced.
• One method of obtaining
primary research is
observation, called
ethnographic research.
• Another method is the focus
group, either formal or
informal.
• Typically a survey is used
when gathering information
from large numbers of people.
Surveys contain open- and closed-
ended questions.
• Scalar questions ask for a
rating.
• Dichotomous questions offer
two choices for an answer.
• Categorical questions offer
predetermined categories.
• Open-ended questions allow
interviewees to answer any way
they wish.

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Secondary Research
The challenge is finding good data – gathered in an unbiased way,
reported fairly, and from a reputable source.
• Supplement commercial databases with free databases.
• Market size is typically given as either the number of people in a
market or the number of businesses in the industry.
• The easiest way to find selling prices is online.
• Profitability for specific stores is nearly impossible to find, but industry
standards for profitability are easier to find.

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The Basics: Crafting Your Value Proposition
The relation of product or company capabilities to customer pains and
gains is the value proposition.
The challenge is to boil down those multiple items to one short value
proposition mantra that describes the benefit you offer your customer.
• To get your value proposition mantra, list those needs only you meet
and look for a way to draw a commonality from among them.
• You can use a short mantra, such as “We help X do Y by doing Z.”
• Or use a longer version including your competitive advantage.
• The final goal for developing and testing your value proposition is how
it stacks up against other offerings available to customers.

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Planning for Marketing
The goal is to create the specifics of the marketing strategy you will use
to generate sales for your business.
• Marketing is one of the building blocks for your business plan, it
cannot be set in concrete.
• In preparing the marketing section of the business plan, you will be
doing most of the work for a stand-alone marketing plan.
• For start-ups, a marketing plan helps a firm build its brand and
relationship with customers.
• You can get help creating a marketing plan at the SBA or SCORE.

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Product: Goods versus Services
A product is anything offered to satisfy consumers including goods,
services, people, and ideas.
• A car has tangibility, but its warranty and service plans are intangible.
• Perishability of services is an issue – a cab ride is an example of the
inseparability of services.
• While products are generally consistent, services show heterogeneity.
• Some combinations fall between pure goods and pure services.
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Product: The Total Product Approach
In marketing, the total product includes the entire bundle of products
and services you offer.
• The total product is how your customers describe your good/service.
• What you describe as your good/service is the augmented product
and has features that differentiate it from competitors.
• Underneath both of these lie the core product, which is a basic
description of what your company does.
Why is the total product important for small business owners?
• Your consumers see your product as more than the core component.
• Using the total product approach allows you to find the most cost-
effective “bundle” of value and cost benefits for your target market.

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Product: New Product Development Process
Developing a simple me-too product may only take hours and steps
may be skipped. Regardless of the pace, this is a necessary process.
Use prototypes to further consumer testing.
Commercialization is the process of making the new product available
to consumers.
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Product Life Cycle
Not all products
survive the
introduction phase.
Acceptance of the
product increases
rapidly in the
growth phase.
As growth slows,
products enter the
maturity phase.
Sales and profits
fall during the
decline phase.
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Service Life Cycle
Services go
through the same
four stages, but it is
easier to extend
the life cycle and
eliminate the
decline stage.
On-the-run
changes mean
your service starts
a new life cycle
with each tweak of
its offering.
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Using the Product Life Cycle
The product life cycle shares challenges with firm or industry life cycles.
• It is hard to know exactly where in a cycle a product/service might be.
• You must be aware of the product cycle and consider where your
product might be and what that means.
• You should understand that the determination can be imperfect and
unpredictable.
• Knowing where your product stands in the life cycle gives you a way to
think about your product, customers, and competition.

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