Business Information Blog

Archive for December, 2011

When I teach small business classes on marketing strategy, I often ask participants the question, “Who are your customers? Who will buy your product?” I am often surprised that otherwise savvy small business people either have no idea who will buy from them, or they assume that ‘everyone’ will.

Assumptions like this can lead to wrong decisions, wrong pricing, wrong marketing strategy – and ultimately, business failure.

The most successful small businesses understand that only a limited number of people will buy their product or service. The task then becomes determining, as closely as possible, exactly who those people are, and ‘targeting’ the business’s marketing efforts and dollars toward them.

You, too, can build a better, stronger business, by identifying and serving a particular customer group – your target market.

One of the first things you need to do is to refine your product or service so that you are NOT trying to be ‘all things to all people.’ Become a specialist!

For example, in my business, an Eco-tourism company, we made some specific decisions early in our market planning. As a charter boat business, we knew that there were plenty of fishing charter operators in the area, and ‘party boats’ as well. So we decided that we would offer sightseeing or special event charters, and that we would not allow alcohol on board, or fishing rods. Yes, this decision eliminated a percentage of the market – but it also gave us a ‘niche’ that we could capitalize on, and expanded our market in a way that other charter operators could not take advantage of.

Next, you need to understand that people purchase products or services for three basic reasons:

• To satisfy basic needs.

• To solve problems.

• To make themselves feel good.

You’ll need to determine which of those categories your product or service is the solution to, and be prepared to market it accordingly.

Your product or service may fit more than one category, too – our charter business primarily targets folks who just want to feel good – spending a day out on the water, relaxing and being waited on. But it also targets people who have visitors coming from out of town, or even overseas, because we represent a solution to the problem of “What will we do while our company is here? How can we entertain them, or show them our area?”

The next step in creating an effective marketing strategy is to zero in on your target market. Continue on to the next page to learn how to use market segmentation to define your target market.

Small business owners who are concerned about their sales and marketing capabilities could begin to see improvement by breaking down the term “sales and marketing” into discrete, manageable elements. You end up with a checklist that can be reviewed in order to prioritize areas needing improvement – a checklist that will serve as the groundwork for an effective marketing strategy.

In the suggested list below, I will use examples from a retail florist business to make some points clear.

• MARKETS. How much do you really know about your current markets or future market? Why do your customers buy from you? What could you offer that would attract more non-customers? How can you sell to more of the profitable customers? If you add features or services, will people pay more for them or will they attract more customers? Are there bulk, institutional, industrial, or corporate markets beyond normal retail that you are ignoring?

Florist: Have you thought about selling regular weekly arrangements to area businesses, especially car dealers, law firms, real estate firms, etc. at a reduced rate, but with a one year contract for 50 arrangements?

• COMPETITION. Who are they and why are they after you? What is the overall market trend and how are you holding up in terms of market share and profit position? How do you really rank against competitors? What substitutes are there to your products and how much of a threat are they?

Florist: If your funeral business is dwindling, what cultural trends (“no flowers” announcements for example) are important here and how can you counter them (such as sending flowers or a fruit basket to the home of survivors, for example)?

• DISTRIBUTION. How can you get your products/services out to new outlets profitably? Are there unbranded opportunities? Can you bundle in your products with someone Else’s?

Florist: Can you partner with service providers for high school proms in the area (photographers, limo services) and offer a one-stop package for young people? This could become a good new sales channel for you.

When writing the business plan, the Marketing Plan section explains how you’re going to get your customers to buy your products and/or services. The marketing plan, then, will include sections detailing your:

• Products and/or Services and your Unique Selling Proposition

• Pricing Strategy

• Sales/Distribution Plan

• Advertising and Promotions Plan

The easiest way to develop your marketing plan is to work through each of these sections, referring to the market research you completed when you were writing the previous sections of the business plan.

(Note that if you are developing a marketing plan on its own, rather than as part of a business plan, the marketing plan will also need to include a Target Market and a Competitive Analysis section. You can find out how to do these sections of the marketing plan in “Writing The Market Analysis Section of The Business Plan” and “Writing The Competitive Analysis Section”.)

Products and/or Services

This part of the marketing plan focuses on the uniqueness of your product or service, and how the customer will benefit from using the products or services you’re offering. Use these questions to write a paragraph summarizing these aspects for your marketing plan:

What are the features of your product or service?

Describe the physical attributes of your product or service, and any other relevant features, such as what it does, or how your product or service differs from competitive products or services.

How will your product or service benefit the customer?

Remember that benefits can be intangible as well as tangible; for instance, if you’re selling a cleaning product, your customers will benefit by having a cleaner house, but they may also benefit by enjoying better health. Brainstorm as many benefits as possible to begin with, and then choose to emphasize the benefits that your targeted customers will most appreciate in your marketing plan.

What is it that sets your product or service apart from all the rest? In other words, what is your Unique Selling Proposition, the message you want your customers to receive about your product or service that is the heart of your marketing plan? The marketing plan is all about communicating this central message to your customers.

Are you at the mercy of wholesalers for your raw materials or product components? How can you manage suppliers and gain more buying power over them? Can you simplify your products and reduce your supply needs? Can you buy in bulk and store them somewhere in a cost effective manner? Can you buy some things per-fabricated cheaper than doing it yourself (or vice versa)?

Florist: Use the Internet to locate California-based rose growers who will air freight roses in volume for you and a loose consortium of other florists in your area. They’ll give you greater variety at the standard market rate, versus reduced availability and price gouging during holidays from local wholesalers. Be prepared for friction from them, however.

• POSITIONING. Where do your products/services fall in relation to the total market? Is this truly the position you want? Are you “all things to all people,” or should you move more toward a high-end position (charging a premium for a differentiated service), or a low-cost position (undercutting others’ prices but at a profit, due to high efficiency)? If you are truly “in the middle,” you should examine how well you’re doing regularly (with the help of a good accounting system).

Florist: Should you consider exiting no-growth “traditional lines” such as church flowers and move toward faster-growth lines such as silk flowers for weddings? Does your shop portray the position you want to be in?

Continue on to the next page to read more about the elements of sales and marketing that you need to consider as you build an effective marketing strategy.

A marketing plan outlines the specific actions you intend to carry out to interest potential customers and clients in your product and/or service and persuade them to buy the product and/or services you offer.

The marketing plan implements your marketing strategy. Or, as I put it in my article, “The Key to Marketing: Use a Plan”, “the marketing strategy provides the goals for your marketing plans. It tells you where you want to go from here. The marketing plan is the specific road map that’s going to get you there. “

A marketing plan may be developed as a standalone document or as part of a business plan. Either way, the marketing plan is a blueprint for communicating the value of your products and/or services to your customers.
See Writing the Marketing Plan for detailed instructions on creating a marketing plan for your business, whether as part of a business plan or as a stand-alone.

You can audit your own commercial electricity usage in order to see where changes can be made in order to save your business money. The process of conducting an audit is not difficult, and depending on the size of your business, should not take long to complete.

The first step should be to examine your electricity bills so that you know exactly how much you are paying. It could be that another supplier could offer you a better rate. This step alone could save you a significant amount of money each year. Free pricing estimates are the easiest way to make this determination.

The second step should be to see exactly how your electricity is being used. You may find that there is machinery that can be turned off at night, or lights that can be turned off when not in use. You may need to conduct an energy meeting with your employees in order to educate them on the many ways to help reduce electricity costs.

Consider conducting a commercial electricity audit every few months. A small amount of action could result in great rewards. Just because electricity is something that is vital to the success of your business does not mean that it is something that should be pushed into the background. Finding ways to keep more of your profits will always be important, and energy audits can be one of these.