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Marketing For Small Businesses:
An Overview


One of the greatest needs of managers of small businesses is to understand and develop marketing programs for their products and services. Small Business success is based on the ability to build a growing body of satisfied customers. Modern marketing programs are built around the "marketing concept" and performance, which directs managers to focus their efforts on identifying, satisfying and following up the customer's needs: all at a profit.

The Marketing Concept

The marketing concept rests on the importance of customers to a firm and states that:

1. ALL company policies and activities should be aimed at satisfying customer needs, and

2. PROFITABLE sales volume is a better company goal than maximum sales volume.

To use the marketing concept, a small business should:

  • Determine the needs of their customers (Market Research);
  • Analyze their competitive advantages (Market Strategy);
  • Select specific markets to serve (Target Marketing); and
  • Determine how to satisfy those needs (Market Mix).

Market Research

In order to manage the marketing functions successfully, good information about the market is necessary. Frequently, a small market research program, based on a questionnaire given to present customers and/or prospective customers, can disclose problems and areas of dissatisfaction that can be easily remedied, or new products or services that could be offered successfully.

Market research should also encompass identifying trends that may affect sales and profitability levels. Population shifts, legal developments, and the local economic situation should be monitored to enable early identification of problems and opportunities. Competitor activity also should be monitored. Competitors may be entering or leaving the market, for example. It is also very useful to know what your competitors' strategies are (i.e., how they compete).

Marketing Strategy

Marketing strategy a\encompasses identifying customer groups (Target Markets), which a small business can serve better than its target competitors, and tailoring its product offerings, prices, distribution, promotional efforts and services towards that particular market segment (Managing the Market Mix). Ideally, the strategy should try to address customer needs which currently are not being met in the market place and which represent adequate potential size and profitability. A good strategy implies that a small business cannot be all things to all people and must analyze its market and its own capabilities so as to focus on a target market it can serve best.

Target Marketing.

Owners of small businesses have limited resources to spend on marketing activities. Concentrating their marketing efforts on one or a few key market segments is the basis
of target marketing. The major ways to segment a market are:

1. Geographical segmentation: specializing in serving the needs of customers in a
particular geographical area (for example, a neighborhood convenience store may
send advertisements only to people living within one-half mile of the store).

2. Customer segmentatio: identifying and promoting to those groups of people most likely to buy the product. In other words, selling to the heavy users before trying to develop new users.

Managing the Market Mix

There are g\four key marketing decision areas is a marketing program. They are

  • Products and Services,
  • Promotion
  • Distribution and
  • Pricing.

The marketing mix is used to describe how owner-managers combine these four areas into an overall marketing program.

Products and Services: Effective product strategies for a small business may include concentrating on a narrow product line, developing a highly specialized product or service or providing a product-service package containing an unusual amount of service.

Promotion: This marketing decision area includes advertising, salesmanship and other promotional activities. In general, high quality salesmanship is a must for small businesses because of their limited ability to advertise heavily. Good Yellow Page advertising is a must for small retailers. Direct mail is an effective, low-cost medium of advertising available to small business.

Price: Determining price levels and/or pricing policies (including credit policy) is the major factor affecting total revenue. Generally, higher prices mean lower volume and vice-versa; however, small businesses can often command higher prices because of the personalized service they can offer.

Distribution: The manufacturer and wholesaler must decide how to distribute their products. Working through established distributors or manufacturers' agents generally is most feasible for small manufacturers. Small retailers should consider cost and traffic flow as two major factors in location site selection, especially since advertising and rent can be reciprocal. In other words, low-cost, low-traffic location means you must spend more on advertising to build traffic.

The nature of the product/service also is important in locational decisions. If purchases are made largely on impulse (e.g., flavored popcorn), the high traffic and visibility are critical. On the other hand, location is less a concern for products/ services that customers are willing to go out of their way to find (e.g. restaurant supplies). The recent availability of highly segmented mailing lists (purchased from list brokers, magazines, or other companies) has enabled small businesses to operate anywhere — and serve national or international markets.

Marketing Performance

After marketing program decisions are made, owner-managers need to evaluate how well decisions have turned out. Standards of performance need to be set up so results can be evaluated against them. Sound data on industry norms and past performance provide the basis for comparing against present performance.

Owner-managers should audit their company's performance at least quarterly. Lists of things to look for and of danger signals are given in some of the books recommended in this Bibliography.

The key questions to ask are:

1. Is the company doing all it can to be customer-oriented?

2. Do the employees make sure the customer's needs are truly satisfied and leave them with the feeling that they would enjoy coming back?

3. Is it easy for the customer to find what he or she wants and at a competitive price?

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