Entrepreneur Startup Model > Step 3: Marketing & Public Relations

A.- Marketing

I. Marketing Basics
To succeed, entrepreneurs must attract and retain a growing base of satisfied customers. Marketing programs, though widely varied, are all aimed at convincing people to try out or keep using particular products or services. Business owners should carefully plan their marketing strategies and performance to keep their market presence strong.

Marketing is based on the importance of customers to a business and has two important principles:

1. All company policies and activities should be directed toward satisfying customer needs.

2. Profitable sales volume is more important than maximum sales volume.

To best use these principles, a small business should:

• Determine the needs of their customers through market research

• Analyze their competitive advantages to develop a market strategy

• Select specific markets to serve by target marketing

• Determine how to satisfy customer needs by identifying a market mix

Marketing Strategy
A marketing strategy identifies customer groups which a particular business can better serve than its target competitors, and tailors product offerings, prices, distribution, promotional efforts, and services toward those market segments. Ideally, the strategy should address unmet customer needs that offer adequate potential profitability. A good strategy helps a business focus on the target markets it can serve best.

Target Marketing
Owners of small businesses usually have limited resources to spend on marketing. Concentrating their efforts on one or a few key market segments - target marketing - gets the most return from small investments. There are two methods used to segment a market:

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 segmentation - Identifying those people most likely to buy the product or service and targeting those groups.

Every marketing program contains four key components:

• Products and Services

• Promotion

• Distribution

• Pricing

These are combined into an overall marketing program.

Products and Services - Product strategies may include concentrating on a narrow product line, developing a highly specialized product or service, or providing a product-service package containing unusually high-quality service.

Promotion - Promotion strategies include advertising and direct customer interaction. Good salesmanship is essential for small businesses because of their limited ability to spend on advertising. Good telephone book advertising is also important. Direct mail is an effective, low-cost medium available to small business.

Price - The right price is crucial for maximizing total revenue. Generally, higher prices mean lower volume and vice-versa; however, small businesses can often command higher prices because of their personalized service.

Distribution - The manufacturer and wholesaler must decide how to distribute their products. Working through established distributors or manufacturers' agents generally is easiest for small manufacturers. Small retailers should consider cost and traffic flow in site selection, especially since advertising and rent can be reciprocal: A low-cost, low-traffic location means spending more on advertising to build traffic.

The nature of the product or service is also important in making decisions. If purchases are based largely on impulse, then high traffic and visibility are critical. On the other hand, location is less a concern for products or services that customers are willing to go out of their way to find. The recent availability of highly segmented mailing lists, purchased from list brokers, magazines, or other companies, has enabled certain small businesses to operate from any location yet serve national or international markets.

Marketing Performance
After implementing a marketing program, entrepreneurs must evaluate its performance. Every program should have performance standards to compare with actual results. Researching industry norms and past performance will help to develop appropriate standards.

Entrepreneurs should audit their company's performance at least quarterly. The key questions are:

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

2. Do employees ensure the customers are satisfied and leave wanting to come back?

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

II. Marketing Research
According to the American Marketing Association, marketing research is the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services.

Every small business owner-manager must ask the following questions to devise effective marketing strategies:

• Who are my customers and potential customers?

• What kind of people are they?

• Where do they live?

• Can and will they buy?

• Am I offering the kinds of goods or services they want - at the best place, at the best time and in the right amounts?

• Are my prices consistent with what buyers view as the product's value?

• Are my promotional programs working?

• What do customers think of my business?

• How does my business compare with my competitors?

Marketing research is not a perfect science. It deals with people and their constantly changing feelings and behaviors, which are influenced by countless subjective factors. To conduct marketing research you must gather facts and opinions in an orderly, objective way to find out what people want to buy, not just what you want to sell them.

Why do it?
It is impossible to sell products or services that customers do not want. Learning what customers want, and how to present it attractively, drives the need for marketing research. Small business has an edge over larger concerns in this regard. Large businesses must hire experts to study the mass market, while small-scale entrepreneurs are close to their customers and can learn much more quickly about their buying habits. Small business owners have a sense their customers' needs from years of experience, but this informal information may not be timely or relevant to the current market.

Marketing research focuses and organizes marketing information. It ensures that such information is timely and permits entrepreneurs to:

• Reduce business risks

• Spot current and upcoming problems in the current market

• Identify sales opportunities

• Develop plans of action

How to do it
Without being aware of it, most business owners do market research every day. Analyzing returned items, asking former customers why they've switched, and looking at competitor's prices are all examples of such research. Formal marketing research simply makes this familiar process orderly. It provides a framework to organize market information.

Market Research - The Process
Step One: Define Marketing Problems and Opportunities
Step Two: Set Objectives, Budget, and Timetables
Step Three: Select Research Types, Methods, and Techniques
Step Four: Design Research Instruments
Step Five: Collect Data
Step Six: Organize and Analyze the Data
Step Seven: Present and Use Market Research Findings

Define the Problem or Opportunity
The first step of the research process, defining the problem or opportunity, is often overlooked - but it is crucial. The root cause of the problem is harder to identify than its obvious manifestations; for example, a decline in sales is a problem, but its underlying cause is what must be corrected. To define the problem, list every factor that may have influenced it, then eliminate any that cannot be measured. Examine this list while conducting research to see if any factors ought to be added, but don't let it unduly influence data collection.

Assess Available Information
Assess the information that is immediately available. It may be that current knowledge supports one or more hypotheses, and solutions to the problem may become obvious through the process of defining it. Weigh the cost of gathering more information against its potential usefulness.

Gather Additional Information
Before considering surveys or field experiments, look at currently held information: sales records, complaints, receipts, and any other records that can show where customers live and work, and how and what they buy. One small business owner found that addresses on cash receipts allowed him to pinpoint customers in his market area. With this kind of information he could cross-reference his customers' addresses and the products they purchased to check the effectiveness of his advertising.
Customers' addresses tell much about them. Lifestyles - and buying habits - are often correlated with neighborhoods.
Credit records are an excellent source of information, giving information about customers' jobs, income levels, and marital status. Offering credit is a multifaceted marketing tool with well-known costs and risks.
Employees may be the best source of information about customer likes and dislikes. They hear customers' minor gripes about the store or service - the ones customers don't think important enough to take to the owner. Employees are aware of the items customers request that you do not stock. They can often supply good customer profiles from their day-to-day contacts.

Outside Data

Secondary Research
Secondary research exploits published sources like surveys, books, and magazines, applying or rearranging the information in them to bear on the problem or opportunity at hand. A tire sales business owner might guess that present retail sales of tires is strongly correlated with sales of new cars three years ago. To test this idea, it's easy to compare new car sales records with replacement tire sales three years later. Done over a range of recent years, this should prove or disprove the hypothesis and help marketing efforts tremendously.

Localized figures tend to provide better information as local conditions might buck national trends. Newspapers and other local media are often quite helpful.

Primary Research
Primary research can be as simple as asking customers or suppliers how they feel about a business or as complex as surveys conducted by professional marketing research firms. Direct mail questionnaires, telephone surveys, experiments, panel studies, test marketing, and behavior observation are all examples of primary research.
Primary research is often divided into reactive and non-reactive research. Non-reactive primary research observes how real people behave in real market situations without influencing that behavior even accidentally. Reactive research, including surveys, interviews, and questionnaires, is best left to marketing professionals, as they can usually get more objective and sophisticated results.

Those who can't afford high-priced marketing research services should consider asking nearby college or university business schools for help.

III. Competitive Analysis
Business takes place in a highly competitive, volatile environment, so it is important to understand the competition. Questions like these can help:

1. Who are your five nearest direct competitors?

2. Who are your indirect competitors?

3. Is their business growing, steady, or declining?

4. What can you learn from their operations or from their advertising?

5. What are their strengths and weaknesses?

6. How does their product or service differ from yours?

Start a file on each of your competitors including advertising, promotional materials, and pricing strategies. Review these files periodically, determining how often they advertise, sponsor promotions, and offer sales. Study the copy used in the advertising and promotional materials, and their sales strategies.

What to address in your competitor analysis

• Names of competitors - List all of your current competitors and research any that might enter the market during the next year.

• Summary of each competitor's products - This should include location, quality, advertising, staff, distribution methods, promotional strategies, customer service, etc.

• Competitors' strengths and weaknesses - List their strengths and weaknesses from the customer's viewpoint. State how you will capitalize on their weaknesses and meet the challenges represented by their strengths.

• Competitors' strategies and objectives - This information might be easily obtained by getting a copy of their annual report. It might take analysis of many information sources to understand competitors' strategies and objectives.

• Strength of the market - Is the market for your product growing sufficiently so there are enough customers for all market players?

Ideas for gathering competitive information

• Internet - The internet is a powerful tool for finding information on a variety of topics.

• Personal visits - If possible, visit your competitors' locations. Observe how employees interact with customers. What do their premises look like? How are their products displayed and priced?

• Talk to customers - Your sales staff is in regular contact with customers and prospects, as is your competition. Learn what your customers and prospects are saying about your competitors.

• Competitors' ads - Analyze competitors' ads to learn about their target audience, market position, product features, and benefits, prices, etc.

• Speeches or presentations - Attend speeches or presentations made by representatives of your competitors.

• Trade show displays - View your competitor's display from a potential customer's point of view. What does their display say about the company? Observing which specific trade shows or industry events competitors attend provides information on their marketing strategy and target market.

• Written sources:
  General business publications
  Marketing and advertising publications
  Local newspapers and business journals
  Industry and trade association publications
  Industry research and surveys

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B.- Marketing Plan

A sound marketing plan is key to the success of your business. It should include your market research, your location, the customer group you have targeted, your competition, positioning, the product or service you are selling, pricing, advertising, and promotion.

"You're in business to serve a customer need," says Derek Hansen, founder of American Capital Access. "If you're not sensitive to customers, don't know who your customers are, how to reach them and, most of all, what will convince them to buy your product or service, get help."

Effective marketing, planning and promotion begins with current information about the marketplace. Visit your local library, talk to customers, study the advertising of other businesses in your community, and consult with any relevant industry associations. This interactive tool will help you assess your marketing strengths and weaknesses.

Once you have all the necessary information, write down your plan:

1. Define your business

   • Your product or service

   • Your geographic marketing area - neighborhood, regional or national

   • Your competition

   • How you differ from the competition - what makes you special

   • Your price

   • The competition's promotion methods

   • Your promotion methods

   • Your distribution methods or business location
      

2. Define your customers

   • Your current customer base: age, sex, income, neighborhood

   • How your customers learn about your product or service - advertising, direct mail, word of mouth, Yellow Pages

   • Patterns or habits your customers and potential customers share - where they shop, what they read, watch, listen to Qualities your customers value most about your product or service - selection, convenience, service, reliability, availability, affordability

   • Qualities your customers like least about your product or service - can they be adjusted to serve your customers better?

   • Prospective customers whom you aren't currently reaching
      

3. Define your plan and budget

   • Previous marketing methods you have used to communicate to your customers

   • Methods that have been most effective

   • Cost compared to sales

   • Cost per customer

   • Possible future marketing methods to attract new customers

   • Percentage of profits you can allocate to your marketing campaign

   • Marketing tools you can implement within your budget - newspaper, magazine or Yellow Pages advertising; radio or television advertising; direct mail; tele-marketing; public relations activities such as community involvement, sponsorship or press releases

   • Methods of testing your marketing ideas

   • Methods for measuring results of your marketing campaign

   • The marketing tool you can implement immediately

The final component in your marketing plan should be your overall promotional objectives: to communicate your message, create an awareness of your product or service, motivate customers to buy and increase sales, or other specific targets. Objectives make it easier to design an effective campaign and help you keep that campaign on the right track. Once you have defined your objectives, it is easier to choose the method that will be most effective.

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C.- Ads and PR

I. Advertising

What Advertising Can Do For Your Business

• Remind customers and prospects about the benefits of your product or service

• Establish and maintain your distinct identity

• Enhance your reputation

• Encourage existing customers to buy more of what you sell

• Attract new customers and replace lost ones

• Slowly build sales to boost your bottom line

• Promote your business to customers, investors and others

What Advertising Cannot Do For Your Business

• Create an instant customer base

• Cause an immediate sharp increase in sales

• Solve cash flow or profit problems

• Substitute for poor or indifferent customer service

• Sell useless or unwanted products or services

Advertising's Two Important Virtues

• You have complete control. Unlike public relations efforts, you determine exactly where, when and how often your message will appear, how it will look, and what it will say. You can target your audience more readily and aim at very specific geographic areas.

• You can be consistent, presenting your company's image and sales message repeatedly to build awareness and trust. A distinctive identity will eventually become clearly associated with your company, like McDonald's golden arches. Customers will recognize you quickly and easily - in ads, mailers, packaging or signs - if you present yourself consistently.

What Are Advertising's Drawbacks?

• It takes planning. Advertising works best and costs least when planned and prepared in advance. For example, you'll pay less per ad in newspapers and magazines by agreeing to run several ads over time rather than deciding issue by issue. Likewise, you can save money by preparing a number of ads at once.

• It takes time and persistence. The effectiveness of your advertising improves gradually over time, because customers don't see every one of your ads.
  You must repeatedly remind prospects and customers about the benefits of doing business with you. The long-term effort triggers recognition and helps special offers or direct marketing pay off.

Getting Ready to Advertise - Drawing the Blueprint

1. Design the Framework

   • What is the purpose of your advertising program? Start by defining your company's long-range goals, then map out how marketing can help you attain them. Focus on advertising routes complementary to your marketing efforts. Set measurable goals so you can evaluate the success of your advertising campaign. For example, do you want to increase overall sales by 20% this year? Boost sales to existing customers by 10% during each of the next three years? Appeal to younger or older buyers? Sell off old products to free resources for new ones?

   • How much can you afford to invest? Keep in mind that whatever amount you allocate will never seem like enough. Even giants such as Proctor & Gamble and Pepsi always feel they could augment their advertising budgets. But given your income, expenses and sales projections, simple addition and subtraction can help you determine how much you can afford to invest. Some companies spend a full 10% of their gross income on advertising, others just 1%. Research and experiment to see what works best for your business.
      

2. Fill in the Details

   • What are the features and benefits of your product or service? When determining features, think of automobile brochures that list engine, body and performance specifications. Next, and more difficult, determine the benefits those features provide to your customers. How does your product or service actually help them? For example, a powerful engine helps a driver accelerate quickly to get onto busy freeways.

   • Who is your audience? Create a profile of your best customer. Be as specific as possible, for this will be the focus of your ads and media choices. A restaurant may target adults who dine out frequently in the nearby city or suburban area. A computer software manufacturer may aim at information managers in companies with 10-100 employees. A bottled water company may try to appeal to athletes or people over 25 who are concerned about their health.

   • Who is your competition? It's important to identify your competitors and their strengths and weaknesses. Knowing what your competition offers that you don't, and vice versa, helps you show prospects how your product or service is special, or why they should do business with you instead of someone else. Knowing your competition will also help you find a niche in the marketplace.
      

3. Arm Yourself with Information

   • What do you know about your industry, market and audience? There are many sources of information to help you keep in touch with industry, market and buying trends without conducting expensive market research. Examples include U.S. Government materials from the Census Bureau and Department of Commerce. Public, business or university libraries are also a good option, as are industry associations, trade publications and professional organizations. You can quickly and easily learn more about your customers by simply asking them about themselves, their buying preferences and media habits. Another, more expensive, alternative is to hire a professional market research firm to conduct your research.

4. Build Your Action Plan - Evaluating Media Choices

   • Your next step is to select the advertising vehicles you will use to carry your message, and establish an advertising schedule. In most cases, knowing your audience will help you choose the media that will deliver your sales message most effectively. Use as many of the above tools as are appropriate and affordable. You can stretch your media budget by taking advantage of co-op advertising programs offered by manufacturers. Although programs vary, generally the manufacturer will pay for a portion of media space and time costs, or mailer production charges, up to a fixed amount per year. The total amount contributed is usually based on the quantity of merchandise you purchase.

   • When developing your advertising schedule, be sure to take advantage of any special editorial or promotional coverage planned in the media you select. Newspapers, for example, often run special sections featuring real estate, investing, home and garden improvement, and tax advice. Magazines also often focus on specific themes in each issue.
      

5. Using Other Promotional Avenues

   • Advertising extends beyond the media described above. Other options include imprinting your company name and graphic identity on pens, paper, clocks, calendars and other giveaway items for your customers. Put your message on billboards, inside buses and subways, on vehicle and building signs, on point-of-sale displays and shopping bags.

   • You might co-sponsor events with nonprofit organizations and advertise your participation; attend or display at consumer or business trade shows; create tie-in promotions with allied businesses; distribute newsletters; conduct seminars; undertake contests or sweepstakes; send advertising flyers along with billing statements; use telemarketing to generate leads for salespeople; or develop sales kits with brochures, product samples, or application ideas.

   • The number of promotional tools used to deliver your message and repeat your name is limited only by your imagination your budget.

The Advertising Campaign
You are ready for action when armed with knowledge of your industry, market and audience; a media plan and schedule; your product or service's most important benefits; and measurable goals in terms of sales volume, revenue generated, or other criteria.

The first step is to establish the theme that identifies your product or service in all of your advertising. The theme of your advertising reflects your special identity or personality, and the particular benefits of your product or service. For example, cosmetics ads almost always rely on a glamorous theme. Many food products opt for healthy, all-American family campaigns. Automobile advertising frequently concentrates on how the car makes you feel about owning or driving it rather than performance attributes.

Tag lines reinforce the single most important reason for buying your product or service. "Nothing Runs Like a Deere" (John Deere farm vehicles) conveys performance and endurance with a nice twist on the word "deer." "Ideas at Work" (Black & Decker tools and appliances) again signifies performance, but also reliability and imagination. "How the Smart Money Gets that Way" (Barron's financial publication) clearly connotes prosperity, intelligence, and success.

II. Comparing Advertising and Public Relations

Advertising
Space or time in the mass media must be paid for.
You determine the message.
You control timing.
One-way communication - using the mass media does not allow feedback.
Message sponsor is identified.
The intention of most messages is to inform, persuade, or remind about a product - usually with the intention of making a sale.
The public may view the message negatively, recognizing advertising as an attempt to persuade or manipulate them.
Very powerful at creating image.
Writing style is usually persuasive, can be very creative, often taking a conversational tone - may even be grammatically incorrect.


Promotion
Coverage in mass media, if any, is not paid for.
Interpretation of the message is in the hands of the media.
Timing is in the hands of the media.
Two-way communication - the company should be listening as well as talking and the various PR venues often provide immediate feedback.
Message sponsor is not overtly identified.
The intention of public relations efforts is often to create good will, to keep the company and/or product in front of the public, or to humanize a company so the public relates to its people or reputation rather than viewing the company as a non-personal entity.
The public often sees public relations messages that have been covered by the media as more neutral or believable.
Can also create image, but can sometimes stray from how it was originally intended.
Writing style relies heavily on journalism talents - any persuasion is artfully inserted in the fact-based content.

III. Trade Shows
Trade shows are designed to let entrepreneurs meet many potential customers face-to-face in a brief period of time inexpensively. According to the Trade Show Bureau, more than 4,300 were held nationwide in 1994, attracting 85 million visitors.

"A trade show can significantly help your business," comments Barbara Kimmelman of Sellit Inc., marketing and trade show consulting firm in Santa Monica, California. "Qualified buyers in your category are congregated in that city for a few days. Not only can you make an impression, but you can captivate them."

Trade shows help level the playing field for smaller firms, since booth space is generally inexpensive ($13 per square foot on average, with the typical small booth covering 100 square feet), and even small companies can usually afford attractive displays. With creative marketing and booth design, small businesses can actually appear as substantial as much larger corporations.

The Trade Show Bureau reports that of the firms exhibiting at business-to-business shows, 44% have fewer than 50 employees. Sophisticated exhibitors do well at trade shows no matter what their size, while the naive and inexperienced can waste thousands of dollars and countless hours - and possibly do more harm than good. Using trade shows effectively takes only a little effort and planning.

Trade Show Benefits
Because trade shows generally take place at a single location, have short runs (usually one to three days), and bring together thousands of exhibitors and potential customers, they are a very powerful marketing medium. The Trade Show Bureau claims that the average total cost of closing a sale in the field is $1,080, while the cost of closing a sale to a qualified trade show prospect is $419.

Because business-to-business shows typically do not allow selling on the show floor, generating sales leads is the most common reason exhibitors participate. Norm Hughes, president of Norda Technologies, a software firm in Newton, New Jersey, uses the computer industry's major shows as his primary marketing vehicle for introducing new products, another popular reason for exhibiting.

It is possible during the course of one trade show to personally meet most of your important clients and suppliers, making shows a good way to establish and reinforce relationships.

Common reasons for exhibiting include:

• Generating sales leads.

• Generating actual sales at the show.

• Enhancing your image and visibility.

• Reaching a specific audience.

• Establishing a presence in the marketplace.

• Improving the effectiveness and efficiency of your marketing efforts.

• Personally meeting your customers, competitors and suppliers.

• Prospecting for new customers.

• Introducing new products and services.

• Demonstrating your product in ways not possible using other marketing channels.

• Recruiting distributors or dealers.

• Educating your target audience.

IV. eMarketing
E-mail marketing is one of the most effective ways to keep in touch with customers. It is generally cost-effective, and if done properly, can help build brand awareness and loyalty. At a typical cost of only a few cents per message, it's a bargain compared to traditional direct mail at $1 or more per piece. In addition, response rates on e-mail marketing are strong, ranging from five to 35% depending on the industry and format. Response rates for traditional mail averages in the 1-3% range.

One of the benefits of email marketing is the demographic information that customers provide when signing up for your email newsletter. Discovering who your customers really are – age, gender, income and special interests, for example – can help you target your products and services to their needs. Points to consider when creating your email newsletter:

• HTML vs. Plain Text: Response rates for HTML newsletters are generally far higher than plain text, and graphics and colors tend to make the publications look far more professional. The downside is that HTML email is slower to download, and some email providers may screen out HTML email.

• Provide incentive to subscribe: Advertise the benefits of receiving your newsletter to get customers to sign up for your newsletter, such as helpful tips, informative content or early notification of special offers or campaigns.

• Don't just sell: Many studies suggest that email newsletters are read far more carefully when they offer information that is useful to the customers' lives rather than merely selling products and services. Helpful tips, engaging content and humor are often expected to accompany email newsletters.

• Limit questions: As each demographic question you ask may reduce the number of customers signing up, it's best to limit the amount of information you solicit or give customers the option of skipping the questionnaire.

Establishing a Web Presence
Even if you choose not to sell your goods or services online, a business web site can be a virtual marketing brochure that you can update on demand with little or no cost. Your presence on the Internet can be a useful marketing tool by providing richer pre-sale information or post-sale support and service. This might temporarily differentiate your product or service from your competitors'. E-marketing has lessened the disadvantage that small businesses have faced for years when competing with larger businesses.

E-Commerce has redefined the marketplace, altered business strategies, and allowed global competition between local businesses. The term “electronic commerce” has evolved from meaning simply electronic shopping to representing all aspects of business and market processes enabled by the Internet and other digital technologies. SBA is preparing to help this new generation of Internet-enabled or eSmall Businesses.

Today's business emphasis is on e-commerce - rapid electronic interactions enabled by the Internet and other connected computer and telephone networks. Rapidly business transactions and unparalleled access to information is changing consumer behavior and expectations. The U.S. Small Business Administration (SBA) is reshaping its programs to better serve small businesses that taking advantage of the Internet and other emerging technologies.

Many small businesses assume that the Internet has little value to them because they feel that their product or service cannot be easily sold online. But inexpensive information processing and electronic media can help most small businesses provide better, faster customer service and communication.

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