This article discusses the marketing process, beginning with the most important step – researching and identifying your target market. The next steps, which include defining and developing your competitive edge, will underline the value of your product or service for this market. Market positioning, image-building and branding will all emerge from this research.
Other vital elements of the marketing process, including writing a marketing plan and creating a marketing budget, are explained, as well as tips and solutions on turning some of the basic business activities you’re already engaged in into marketing opportunities, eg using business cards or stationery to their full potential. This type of marketing can be extremely effective and not necessarily expensive.
This article also outlines the other elements of what is often called the marketing mix, including sales promotions, merchandising, public relations, and advertising. Finally, this chapter gives some advice on the all-important aspect of selling – often the final step in the marketing process.
Marketing essentials
Put simply, marketing includes any activity that lets potential customers know about your product or service, what makes it special or better than others in the marketplace, and (ideally) encourages them to buy it. Marketing includes all forms of advertising and sales, but it means much more for many businesses.
Businesses can survive for some time with poor record keeping, insufficient finance or a lack of management skills, but they won’t last without a market. You may have the best service available, but what if no one wants to buy it? A strong market for your service may exist but what if nobody knows about it or how surprisingly affordable it is? What if everyone thinks your product is the same as all the others on the market? Something must be done to make the phone ring – and that is marketing! Businesses of any size should include marketing, however simple, as a core part of their day-to-day activities.
Getting started
As a small business owner wanting to market a product or service, you need to have a marketing strategy. A good strategy should define your market, outline the benefits that your product or service offers that market, establish how you will reach that market and set out a budget to achieve your goals.
But what exactly is marketing?
Marketing means different things to different people. A marketing manager will talk about distribution lines, market segmentation and product life cycles. An electrician will advertise in the local paper, put signs on the ute and get t-shirts printed with the name of the business on the back. Then you have the accountants who sponsor the local soccer team with their business name on the jerseys so that mums and dads on the sidelines might think about the company at tax return time. And guess what? This is all marketing!
How does marketing work?
Marketing supports sales and product development in a range of ways. It’s based on the ability to identify, attract and satisfy customers. Of course, this all needs to be done at a price that represents value to the customer and profit to your business. So the costs of marketing must be factored into the budget and pricing. Not all elements of marketing will threaten your budget – some are business basics that are free or very affordable essentials that you will do in the course of business anyway, eg have your logo and company name on all stationery and quote slips. The good thing about marketing is that you can choose which elements work best for the product and service, as well as fitting your budget.
The aim of marketing is to have the right product or service:
at the right price
at the right place
at the right time
with the right appeal to suit your market and product
brought to the attention or awareness of the target market.
Knowing & identifying your market
One of the most important factors in marketing is to know your market – this means knowing the customers you have as well as the customers you don’t have. If you know your market you will have the added advantage of being able to change your product or service according to your customers’ actual wants and needs.
Business owners with great ideas often convince themselves that they have a market – and they might be right. They decide on what they are going to offer, start the business and wait for the customers to roll in. They see their customers as a crowd of people out there somewhere, just waiting for this product or service.
| Highlight The real fact is that many businesses do not do enough research and never really know who their customers are. Because many small business owners have not thoroughly identified or segmented their market, they make the mistake of trying to reach the whole market at once, often with little success. These are often the businesses that also find themselves in difficulty because they don’t have a suitable marketing strategy to pull them through. |
Market segmentation
Market segmentation is a key strategy for business survival. No business can attempt to be all things to all people. A business must select a particular market that is measurable, accessible, large enough to be economically viable, and reasonably alike on some set of characteristics. In this way the resources of the business are focused on a specific set of needs, and the business will better use the resources that it has available.
Information on the population and its characteristics (demographic data) and incomes and spending patterns (socio-economic data) indicates differences within the marketplace, differences which provide the opportunity to be selective about choosing the particular market that is the most opportune. This process is identified as market segmentation.
For those in business, everyone in the whole world could be “the market”. Think of segmentation as dividing one large market into smaller components which are the same in at least one respect.
For example, the female population is one market. The female population in the 15-24 year age group is a smaller component of that market that is the same in at least one respect (all in the same age group). This segment can be broken down even further, eg female population in the 15-24 year age group residing in regional Victoria. What you must do is identify clearly your target market.
| Example Within the consumer-food category, there are many additional opportunities for segmentation, eg sex, income, age, family, education, occupation, religion, ethnic background, language, life-cycle stage and living accommodation. This information is relatively easy to obtain (see “What is market research?” above). Additional, if less obvious, criteria include social class, culture, lifestyle, buying habits, taste, usage rate and desired product benefit. Even though information on these factors by which a market may be defined is less readily available, it is no less significant as segmentation criteria. |
| Caution The most difficult bases on which to identify market segments include personality, life goals and attitudes. |
Advantages of market segmentation
There are numerous advantages to segmenting your market, such as:
You can identify and specify the market.
You can estimate the market’s potential size more accurately and evaluate its feasibility.
You can identify the specific needs of the market.
You can tailor the marketing mix (see “The marketing mix”) exactly to fit the needs of the market.
You can reduce marketing costs by being more effective and more efficient.
Working on your market segment
In determining a market segment, ask yourself the following:
What do I sell now? What is my present market share?
Am I known for my quality or my price?
What image do my customers and the public in general have of my business?
I serve only a limited number of customers. Why?
| Caution An error committed by many businesses is attempting to straddle the market – that is, attempting to sell a wide range of both high-quality and low-quality goods. As a result, the business carries only limited numbers of each item and fails to satisfy many customers who end up having to look elsewhere. |
Your target market
Your target market is the people you want to “reach” and who you want to respond to your marketing. The target audience is your most likely or potential customers.
In order to market successfully, you have to know who you are marketing to – basically who is most likely to want or need your product or service. Do you know who your customers are? How old they are? How much they earn? How often would they purchase your product or service? Often, all that is needed to find out this information is basic market research.
The Big Picture
Don’t expect a flood of new customers through the doors overnight. Only a very small number of people that your marketing reaches actually want or even need your product or service, and only a small percentage of these are interested in switching from their regular product or service to yours. This is one of the reasons why it is even more important to ensure that you know who your target market is.
The marketing mix
One of the major failings of business owners is their preoccupation with the specific product or service they have to offer. This is usually at the expense of other marketing elements that they have failed to consider.
Marketing is complex, therefore all decisions and plans must be based on the evaluation of all of the components affecting the product or service, including pricing, distribution and promotion.
The objective of the marketing mix is:
to place the right product (PRODUCT)
at the right price (PRICE)
in the right location (PLACE or distribution), and
to make the right consumer aware that this product is available to satisfy their needs (PROMOTION).
The marketing mix is also known as the “4 Ps”.
This marketing process requires strategies and decisions on each of these elements. The interaction and interrelationship of all of these four elements must be considered, each factor cannot be treated in isolation.
Product
The product components to consider include research, development and testing, the number of items to be included in the product line, packaging, branding, and the issues of product launch.
Price
Pricing decisions will include assessment of the market conditions and competition, desired target returns on investment, product positioning, and image through price/quality relationships.
Distribution
This is often referred to as the “place decision” and refers to the method or location for distribution. Decisions must be made as to whether you retail or wholesale, how many participants there will be in the distribution process, and in which physical locations each of the types of the product will be made available.
Promotion
Without question, promotion is one of the most complex elements in a marketing effort. Many business owners think of promotion as advertising.
This is wrong. Every product or service should have a promotional mix – that is a range of promotional options based on the needs of the marketplace and the characteristics of the product. It includes direct advertising, personal selling by sales representatives, sales promotion and premiums, unpaid direct promotion, public relations, and publicity. These elements form the promotion mix.
The promotion mix
The aim of promotion is to communicate and create awareness that the business has a product or service that will satisfy an individual’s needs. Unless the market is made aware that the product exists, then all the costs and decisions made in creating the product will have been for nothing.
Promotion is not only complex, but represents a significant proportion of the total operating expenses of any business.
| Highlight Remember that promotion by itself can’t sell a product or service if the need for that product or service is not there. Promotion can’t create need and will not push the consumer to purchase. The function of promotion is to create awareness and convey information. |
The factors of promotion
Promotion consists of five elements which together make up the promotion mix:
advertising
personal selling
sales promotion
publicity, and
public relations.
Each business needs to select the elements for the promotional mix that are relevant and compatible with its product, the stage in its business life cycle, the channel of distribution, and the media and communications behaviour of the target market. But in most situations a combination of promotional elements will be required to achieve the desired goals.
There is no point in spending great sums of money on media that do not reach the target market, so the promotional mix must be designed backwards from the market. Expertise is readily available from marketing consultants and advertising agencies, who can plan promotional expenditures to maximise the desired impact.
The promotion mix decision factors
There are several factors influencing the decision as to a promotion mix.
Consumer characteristics – The characteristics of the consumer must be matched to the promotion utilised:
If the market covers a large geographic area then advertising is probably the most effective approach and mass media will usually be required.
If the consumer is a select group of individuals then personal selling may be ideal.
If the main consumers are larger commercial enterprises, mass media advertising plus sales promotion and personal selling may be needed.
Product factors
Promotion must be tailored to the characteristics, features, and applications of the product or service being sold.
If the product is new, then demonstrations of the use and benefits are often required. This is where visual media, eg television and print, combined with in-store demonstrations can be effective.
If the product is complex and technically sophisticated, then personal selling is also the best approach.
For low-cost mass-market consumer goods, sales promotion through free sampling to induce trial and repeat purchase combined with advertising is a reasonable combination (think about free trial packs of shampoo inserted into magazines or mailboxes, etc).
The above examples or alternatives show the complexity of the decision.
| Tip You will probably spend more on the promotional mix during a product’s initial stages when your goal is making the market aware that your product or service exists. |
Distribution factors
The nature and type of distribution to be used for the product is very relevant to the promotional mix.
If the business is a manufacturer, promotion must not only be to consuming markets, but it must also be directed to wholesalers, distributors, and retailers. This promotion, combining personal selling, advertising and sales promotion, is designed to support the channels of distribution and encourage their distribution of the product. The longer the channel of distribution, the greater and more complex the promotion decision.
If the business is a retailer then it should only be concerned with the direct promotion of its products to the consumer.
Company factors
The size and scale of operations of the business have a direct relationship to the promotional mix. New and smaller businesses with limited budgets may only be able to afford brochures, some direct mail and perhaps personal selling. Obviously the promotion budget determines the promotional mix.
Competitive factors
The general trend for most small businesses is the “follow the leader” approach – duplicating the activities of competitors. If, however, your goal is “differentiation” then this is not a wise strategy. No business is exactly like its competitors, so a promotional mix should reflect an awareness of competitors, but should include a mix that truly reflects the marketing objectives and character of the business.
Promotional budget
Let’s face it – resources are nearly always limited, and rarely is there enough to cover the costs of everything you would like to do in terms of marketing and promotion. This “leftovers” philosophy can prove to be dangerous, particularly for new businesses.
| Highlight Marketing should be integrated into your main business function, and money must be allocated to establish the business and create awareness of products or services. This is a first priority for business survival. |
In times of recession, the trend in many sectors is to cut back on promotion as media costs rise sharply. However, during economic downturns, if competitors are reducing promotional activities, then the best response would be to increase the promotion planned to gain a marketing edge and potentially to increase market share.
| Example Just Fresh Bakery Promotional Mix and BudgetAdvertisingnew packaging $10,000 display ad in food service magazine – 3 months $3,600 Public relations and publicity award to local community college to promote baking courses – $400 Sales promotion special discounts for one month: if restaurant takes 10 or more dozen, one dozen free – $5,000 Personal selling hiring of one additional sales representative to visit unserviced locations – $20,000 Just Fresh Bakery is a small commercial baker specialising in the production of muffins for cafés, delicatessens and catering companies. The company’s sales are currently $500,000 per year. The objective of the promotional campaign is to induce more local cafés and restaurants to carry the Just Fresh Bakery products and to promote them in restaurants. $50,000 (10% of sales) will be allocated, since the objective is to provide coverage of nearly 2,000 restaurant outlets Australia-wide during a three-month period. A budget of $40,000 has been set aside to carry out the campaign. During the campaign, the results will be evaluated each month in terms of increased sales, media coverage and sales-call reports. At the end of the period the impact will be evaluated and a new campaign planned. |
