The purpose of marketing is to identify customers’ needs
and to satisfy those needs with goods and services
with a “value package” that is fairly priced.
Because marketing is so broad and vital to success,
I believe that only the “Executive Summary” is
more important in your business plan. Marketing must
be planned, implemented and ultimately controlled in
order to maximize your sales at a reasonable cost.
Most marketing professionals segment the marketing
effort into four parts, commonly referred to as the “4 P’s.” These are: product,
place, price and promotion. I would like to discuss how these affect your business in the
following paragraphs.
Product - This includes the physical product or service
and includes quality, warranty, timeliness and any
other benefits that your customers receive. This
is your value package. For example, if the customer believes that he or she
will be perceived as being stylish or having an improved
image after using your product,
this is a product benefit. You should choose what real or perceived benefits
that you wish to emphasize to various segments of your market…SELL THE
VALUE PACKAGE!
Price – Pricing is an art that ultimately affects the sales approach to
your customers. If price is low compared to your competition, sales can be closed
by emphasizing this low price. If price is higher than your competitor’s,
it must be justified by the increased benefits of your “value package.” Both
product (including the resulting benefits) and price must be considered in tandem
in your business plan. If you are using a low price to sell, then you must consider
costs that can be eliminated or minimized in order to maintain an acceptable
profit margin. This low price objective is used to penetrate the market faster
than by using a higher price. A very high price, known as
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skimming” should only be used if you have a truly
unique product with high quality and no readily available
substitute that is comparable in benefits received. An
example would be a new computer chip that is faster or
smaller than your competition’s computer chip.
All pricing should also take into account the break-even
point. This is the amount of sales needed to cover all
costs of production and marketing, both fixed costs,
which do not vary with output and the variable costs, which do change with
output. How long will it take you to reach this break-even
point and do you have enough
resources to last that long are questions that you should ask yourself. If
the answer is no, I can’t last that long, then pricing or production or marketing
or financing or some combination of these will need to be changed.
Place – This refers to the channels your product/service must take before
reaching the consumer. Each additional channel offers benefits to the firm but
also add additional mark-ups. Should you use a wholesaler? A retailer(s)? A broker?
A distributor? Should you franchise your firm’s methods and services? Many
of these, and others, may be changed in the future, but you should at least decide
how this will be undertaken initially.
Promotion – Promotion includes personal selling, advertising, publicity,
networking and sales promotion.
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Personal selling requires the most effort per unit sale, but initially may require
the least amount of out-of-pocket cost.
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Advertising, one of the glamour fields of business, is used for mass selling
and can also be used for different purposes like product introduction and reinforcing
the perception of a product/service. It can easily be misused by choosing the
wrong venues, wrong times or wrong
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messages. Some
venues are: direct mail, newspapers and magazines, flyers,
radio and TV, billboards, the “Yellow Pages” and
e-commerce sites on the internet. Each of these has its unique
benefits and each has widely different costs. A market segment
must be selected and then a venue (or venues) must be chosen
to make the greatest impact for the least cost per customer.
E-commerce and the “Yellow Pages” are especially
effective for many start-up ventures where customers go looking
for a product or service.
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Publicity is non-paid attention given to your firm. You are using
the media at no cost! Good sources are your local newspapers
who will print your press release in order to get you to advertise
in the future and also as a point of local interest or service.
, Most small newspapers are looking for “filler” so
you are actually doing them a service. For example, if your employees
do a community service project, let the community know about
it.
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Networking is the act of making people know and like you with
the expectation that they will buy from you in the future. You
should be networking all of the time with everyone you know and
meet. Join groups like the Jaycees, religious groups, women’s
groups, men’s groups, clubs, and any other activities……SELL
YOURSELF!
Remember, behind every successful entrepreneur is a product
or service that gives good value to your customer. Repeat
business (which be as much as 90% of your
business and referrals) caused by customer satisfaction, is one of your
cheapest and best sources of new customers. Good luck with
your new venture!
©
2005, Roland D. Tolefson
Roland D. Tolefson, Professor (Retired)
Business Management
Anne Arundel Community College |