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Lesson: Marketing Basics Small Business Marketing The art and science of customer satisfaction The purpose of marketing is to help you attract and keep customers. As such, you should consider marketing as an investment, not an expense. Marketing techniques will enable you to communicate with potential customers, creating awareness of the value of your products and stimulating demand among selected buyers. Marketing is the process of developing mutually satisfying, ongoing, profitable relationships with current and potential customers. In contrast to a simple sales approach, which is product-oriented, the marketing concept is people-oriented. Based on the relationship between the business and the buyer, this approach emphasizes the importance of the tangible and intangible aspects of economic transactions. It recognizes that long-term relationships are much more financially rewarding and personally satisfying to both parties than the quick sale. Small businesses that interact with their customers regularly are in an excellent position to take advantage of these basic marketing principles, thereby ensuring repeat business and positive word-of-mouth referrals. A marketing approach emphasizes satisfying customer needs-necessities such as food, clothing, and shelter - and wants, such as status, entertainment, and style. To meet the challenges of a highly competitive market, small businesses must attend to customer needs which should direct strategic business decisions. Successful companies make a practice of listening to past, current, and prospective customers. The insights gained through this input enable businesses to design desired products and services, anticipate changing customer needs, and modify products and services accordingly. Companies that are attuned to customers stay ahead of the competition. If you are to succeed in today's marketplace, you must master both the art and science of satisfaction. As we explore the basics of marketing, you will find that you already practice many of these skills every day. In essence, marketing is about communication with your customers. If you are a good listener, you are well on your way. The customer as the driver Marketing encompasses all those activities that facilitate the flow of goods and services from the producer to the consumer. It is clear that the needs and wants of customers should be central to the overall mission and direction of every company, guiding each area of business operation and every phase of the marketing process from creation to consumption of products and services. Research and development. Customers' wants and needs point to appropriate avenues for growth and diversification. Product planning. Customers' wants and needs define the nature and types of products, their features and benefits. Distribution. Customers' convenience dictates availability, outlets, and delivery of products and services. Merchandising. Customers' tastes will guide development and placement of logo, brand marks, trademarks, and packaging. Advertising. Customers' interests, opinions, tastes, and values will direct your advertising message, methods, and media placement. Sales promotion. Customers' interests will suggest opportunities for point of purchase, crossmarketing, and other promotions. Publicity. Customers' preferences and habits will determine opportunities for targeted publicity, special events, and community involvement. Sales. Sales staff will focus on long-term relationships, ongoing service. Keeping the customer's point-of-view in mind throughout the business cycle enables companies to identify emerging business opportunities, introduce innovative products and services, and create whole new markets. The contemporary marketplace TODAY'S MARKETPLACE. The contemporary marketplace is every bit as colorful and crowded as the bazaars, souks, and stalls of other times and places. They’ve been replaced by corner markets, small businesses, shipping magnates, and international corporations. The modern marketplace also encompasses the on-line world, a global computer network that enables even the smallest business to reach national and international markets. You are already familiar with the workings of the marketplace. As a consumer, you know from experience the satisfactions of purchasing a high-quality product and the frustration of being stuck with a "lemon." You know about competition and may have taken advantage of price wars between companies in industries as diverse as airlines and automobiles. This personal knowledge will be invaluable as you make decisions about your own business. TODAY'S CONSUMER. Despite the similarities of our marketplace to the markets of simpler times, you should be aware of significant differences, principally in technology, communications, regulation, and, as a result, changing consumer expectations. Consider the telecommunications industry as an example: Today's sophisticated media consumer, who has access to innumerable products and services, is no longer satisfied with a few simple choices. Since the introduction of television, audiences have come to expect such features as color, stereo and big-screen viewing, and programming, not only from the major networks but from cable companies and satellites as well. Now traditional telecommunications companies are scrambling to respond to the challenge posed by the interactive programs available on the information superhighway. Along the way, audiences have been inundated by advertising and programs in questionable taste. Consequently, consumers are less susceptible to the claims of advertisements and more critical of program offerings. And the industry is faced with governmental regulation or a voluntary rating system. Telecommunications and related businesses must be sensitive to the impact of all these factors on their current operations and their future plans and prospects. Similar issues and developments face companies large and small in every field of endeavor. Take a moment to reflect on the changes in your area of business over the last 50 years. What are the primary differences in technology, advertising, and promotion, in governmental or industry regulation, and in customer expectations? Understanding and responding to both continuity and change will be essential to your success in the modern marketplace. Defining and understanding your target markets Common and intelligent uses for research, both primary and secondary, are: To understand what motivates a customer to purchase a particular product or service To understand a customer's behavior with regard to product purchases and usage Market segments In order to conduct research with current or potential customers, you first must be able to identify and define the customer you wish to understand. Because each individual customer is as unique as a fingerprint, no single product will satisfy everyone. Some people like Coke"; others prefer Pepsi"; and many cola drinkers may give up caffeine, sugar, or even sodas themselves as the aging process or social changes stimulate increasing health consciousness. Despite this variety among customers of almost all products, specific market segments can be identified: groups of individuals with shared histories, interests, values, incomes, and other qualities who are likely to have common needs, wants, and behaviors. Markets can be segmented according to shared consumer characteristics (e.g., age or sex) or similar behaviors (hiking, sewing, television viewing). By using these categories, either alone or in combination, to analyze your target market, you can gain valuable insight into what makes your customers tick and what makes them buy. DEMOGRAPHIC SEGMENTATION. This approach focuses on objective consumer characteristics such as age, sex, ethnic background, religion, educational level, occupation, income, and household size. GEOGRAPHIC SEGMENTATION. This approach focuses on the physical location of consumers and can include international, national, regional, area, or local breakdowns and also such factors as climate and population. PSYCHOGRAPHIC SEGMENTATION. This method focuses on subjective factors such as lifestyle, attitudes, and values influenced by social class, generational experiences, and group affiliations. Defining and understanding your competition Another valuable benefit of marketing research is a better understanding of your competition, the other major player in the marketplace. Getting specific data about your competitors can be somewhat difficult as they are unlikely to share their secrets voluntarily. However, a significant amount of information is available through a variety of public and private sources. You should make a practice of reading the local newspaper and business publications. When conducting research on a particular competitor, back issues of the local business journals can be an invaluable resource. Public documents such as tax records and annual reports are sometimes informative. You may also want to review findings of the Better Business Bureau or, if you have larger corporate competitors, a financialratings company such as Dun and Bradstreet. In addition, watch for your competitors' advertising and promotions in all types of media. One of the most effective means for a small-business owner to get detailed information is to mystery-shop, posing as a potential customer. You can do this by phone or have a friend or colleague do it in person. These visits will give you the best view of facilities, professionalism, and customer orientation. Ask for quotes on specific products or services, estimates of days required to provide a specific service or product, extra services such as gift wrapping or overnight delivery, guarantees and other relevant information. You will learn a great deal about your competition and may get some innovative ideas as well. Once you have completed your research, the information you have compiled should be analyzed and filed for future reference. Add to this profile on a regular basis in order to maintain ongoing, up-to-date information about your competitors. Are you ready to apply this information to your business? Go to the Marketing Basics worksheet next.