Role of marketing strategies in the success of small businesses

1. Role of Marketing Strategies in the
Success of Small Businesses
Atish Chattopadhyay*
New leaders are born every day and most of them have the entrepreneurial spirit in them. But how
successful will they be? Well, they must first know their domains. They must identify the key areas of
interest to the customers, time and cost to reach them and must be sure of the future prospects of the
growth of their business. Marketing concepts when well understood and properly implemented make
a successful enterprise, in turn capable entrepreneurs.
E ach day, thousands of individuals ask the difficult question,"Should I start my own business? " .
When queried, 85 % of the populace answered that they would like to be in business for
themselves. The driving force behind this desire to start a new venture is the desire to be one's
own boss and be independent. But there is no definitive measurement developed that allows the
determination of whether a person can be a successful entrepreneur or not .The process of starting a
new venture is embodied in the entrepreneurial process. The process has four distinct phases-
 Identification and evaluation of the opportunity
 Development of the business plan
 Determination of the resources required and
 Managing the resulting enterprise
Opportunity identification and evaluation is the most difficult task. Most entrepreneurs do not have
formal mechanisms for identifying business opportunities- they consider various sources: consumers
and business associates, members of the distribution system and technical people. Also technically
oriented or qualified individuals often conceptualize business opportunities while working on other
projects. The next step in establishing a new business is the formulation of the business plan. It helps the
owner to crystallize and focus the ideas. It helps in setting objectives and yardstick against which
performance is monitored. It also acts as a vehicle to attract external finance needed by the people. It is
used to convince the potential investors.1

2. The planning process is shown diagrammatically 2
ENVIRONMENTAL ANALYSIS :THREATS AND OBJECTIVES
MARKET : product position and prospects
COMPETITION : traditional , new firms , new industries
TECHNOLOGY : changes and development
THE ECONOMY : growth , inflation , law
OPERATINGNE
EDS
PERSONAL BUSINESS STRATEGIES products OPERATING
OBJECTIVES OBJECTIVES AND TACTICS manpower BUDGETS
finance
FEED BACK LOOPS
BUSINESS ANALYSIS : STRENGTHS AND WEAKNESSES
PRODUCT : product/service, price, promotion, place
PROFIT/CASH FLOW : its sources and uses
PEOPLE : management and key skills
FACILITIES : age and utilization
Thus, a business plan should ideally
 Describe every aspect of a particular business
 Include a marketing plan
 Clarify and outline financial needs
 Identify potential obstacles and alternative solutions and
 Serve as a communication tool for all financial and professional sources.
A business plan is a major tool which guides the formation of a venture as well as primary
document needed to manage it. It is the process that begins when the entrepreneur gathers information
and then continues as projections are made, implemented, measured and updated.3 Thus it is an
ongoing process.
See Annexure for a complete outline of a business plan.
As can be seen from the above plan, two major parts make up the marketing section. The first
part is research and analysis i.e. who will buy the product or in other words identification of the target
market. Measure of the market size, trends and estimated market share one expects to capture. The
second part is the marketing plan which includes the market strategy - sales and distribution, pricing,
advertising, promotion and publicity . Identification of the advertising plan and cost estimates to
validate the proposed strategy.

3. An entrepreneur needs to consider the following points with respect to marketing while planning a
business:
 The customer of the new venture.
 Customer’s decision making process about buying the product or service.
 The degree to which the product or service compels purchase for the customer.
 The pricing of the product or service.
 The strategy to reach the identified customer segment.
 Cost (in time and resources) to acquire a customer.
 Cost to produce and deliver the product or service
 Cost to support a customer.
 Ease of retaining a customer.
How entrepreneurial small firms can achieve and sustain market growth is summarized in various
models proposed by Coopers & Lybrand (1994),Cranfield Study (Burns 1994), and German versus UK
firms (Brickau ,1994). The entry point in the model is to identify a market niche.4
Challenges to small firm growth
For those firms whose main aim is growth, there are a number of challenges that have to be faced. In
1994 Churchill proposed a six-stage model for company growth. Each stage of the model is characterised
by what Churchill describes as "an index of increasing size, complexity and or dispersion".
The model allows owners to assess the type of challenges facing them at current and future stages:
 Conception / existence
 Survival
 Profitability and stabilization
 Profitability and growth
 Take - off
 Maturity
The model outlines expansion of customer base and increase in turnover as one of the key
challenges faced in the conception / existence stage.5

4. Business growth and failure
Most small business starters do not make it past the entrepreneurial stage. Daft (1995) cites the work of
Land and Jarman in the US that suggests 84% of business that make it past the first year still fail within
five years. However failure is difficult to measure with any degree of accuracy.6
Murphy suggests two definition of failure: "A business can be said to have failed when it is
disposed of or sold or liquidated with losses to avoid further losses"; failure is defined as "the condition
of the firm when it is unable to meet its financial obligations to its creditors in full. It is deemed to be
legally bankrupt and is usually forced into insolvency liquidation".7
Birley and Niktari (1995) asked 486 bankers and accountants to give the reasons for client
failure. Eighty seven individual reasons were listed as contributing to the failure of an owner - managed
firm. These were reduced to two dozen themes listed below .8
1. 13.
Capital structure Quality
2. 14.
Management team Adverse publicity
3. 15.
The economy Ill Health
4. 16.
Customer diversity Partnership problems
5. 17.
Financial management Obsolescence
6. 18.
Owner attitudes Reliance on grants
7. 19.
Rising costs Family succession
8. 20.
Lack of planning Legislation
9. 21.
Pricing Cost of money
10. 22.
Suppliers Personal problems
11. 23.
Marketing Fire, Flood
12. 24.
Growth Industrial injury

5. The study points out that marketing and factors which are related to marketing like customer
diversity, pricing and adverse publicity are the reasons for failure. The reasons for failure in the small
firm have attracted much attention. Hall (1993) gave three explanations - one of them is related to the
structure of markets and segments of markets they compete in. Hall also surveyed the owners of small
business and their perceptions of primary cause of failure. His study pointed out those external issues
like lack of demand, reliance on a few customers, competitor behavior and poor forecasting are the key
contributors in failure.9 Peppard and Rowland identified a set of objectives a firm should set itself in
order to remain competitive. Delivery, pricing, relationship management were identified as the key
objectives of the firm. Peppard and Rowland identified that all firms are built upon three broad pillars-
people, technology and processes. When designing processes to meet customer requirements and the
customers within it, four critical elements need to be considered-- customer requirements, pattern of
demand, constraints, efficiency targets .10
These elements set the deliverables for a product or service delivery process, known as the service
task (Armistead, 1990). A clear understanding is critical if processes are to be redesigned to meet the
needs of the customers. For this many organizations focus on the customer care aspect.11 As Jack Welch
of General Electric remarked "The three most important things you need to measure in a business are
customer satisfaction, employee satisfaction and cash flows", pointing the importance of marketing for
any successful organization.12
Strategic marketing is a market-driven process of strategy development, taking into account a
constantly changing business environment and the need to achieve high levels of customer satisfaction.
It essentially focuses on organizational performances rather than the traditional concern about
increasing sales and builds competitive advantage by combining the customer-influencing strategies of
the business into an integrated array of market-focused actions. Marketing strategy is defined as the
analysis, strategy development, and the implementation activities in selecting target market strategies
for the product-markets of interests to the organizations, setting marketing objectives and developing,
implementing and managing the marketing programs, positioning strategies designed to meet the needs
of customer in each target market .13
A typical marketing strategy consists of: 14
 Analyzing market and competition
 Segmenting market
 Market targeting and positioning strategies
 Relationship strategies
 Product/ Customer strategies
 Distribution strategy
 Pricing strategy
 Advertising, service and sales promotion strategies
 Research and development strategies
 Marketing research strategies

6. The marketing concept is a consciously articulated philosophy of business that says, in essence, "The
customer is king". Implicit in the marketing concept is the need to ensure the long-term continuity of
predictable quality, sales and service, and in turn viability of the enterprise.
The marketing concept is interwoven with an explicit assumption that every organization has a
responsibility to its constituent stakeholders. A stakeholder is “any individual or group who can affect or
is affected by the actions, decisions, policies, practices or goals of the organization”.15 These include
owners, customers, employees, suppliers as well as private investors and lenders. Also communities are
stakeholders interested in profitable business that sustain tax revenues and employment. What is
needed is a strategic approach to marketing so that sale reinforces a composite set of objectives,
including customer satisfaction, profitability and long term continuity of the enterprise.16
____________________________________________________________________________________
* Faculty Member, ICFAI Business School, Kolkata.
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rd
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6. Daft , R .L : Organization theory and design St Paul : West 5 edition, 1995.
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Refence # 03J03-05-04.