Marketing for Entrepreneurial Ventures and Small Businesses

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Marketing for Entrepreneurial Ventures and Small
Businesses

• February 5, 2003

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(No Transcript)
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Agenda

• Marketing Research
• Marketing Plans
• Consumer Behavior
• Product Strategies

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Small Business Marketing

• What is marketing?
• Activities directing the flow of goods and
  services from producer to consumer or user.
• Small business marketing consists of those
  business activities that relate directly to
• Identifying a target market
• Determining target market potential
• Preparing, communicating, and delivering a bundle
  of satisfaction to the target market

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Small Business Marketing

• Market Analysis
• An evaluation process that encompasses market
  segmentation, marketing research, and sales
  forecasting
• The Marketing Mix
• The combination of product, pricing, promotion,
  and distribution activities.

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Small Business Marketing
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Different marketing philosophies

• Production-Oriented
• Emphasizes development of the product and
  production efficiencies over other activities
• Sales-Oriented
• Favors product sales over production efficiencies
  and customer preferences
• Consumer-Oriented
• All marketing efforts begin and end with the
  customer focus is on the consumers needsthis
  philosophy is the most consistent with long-term
  success of the firm

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Marketing Research for the New Venture

• Marketing research
• The gathering, processing, reporting, and
  interpreting of market information
• Misconceptions about Marketing Research
• Steps in Marketing Research
• Identifying the informational need
• Searching for secondary data
• Collecting primary data
• Interpreting the data
• Data collection options

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Estimating Market Potential

• A market is a group of customers or potential
  customers who have purchasing power and
  unsatisfied needs
• The Sales Forecast
• A prediction of how much (in units and/or
  dollars) of a product or service will be
  purchased within a market during a specified
  period of time
• An essential component of a business plan that
• Assesses the new ventures feasibility.
• Assists in planning for product scheduling,
  setting inventory levels, and personnel decisions

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Ingredients of a Market
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Dimensions of Forecasting
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The Forecasting Process

• The Starting Point
• Breakdown process (chain-ratio method)
• Forecasting begins with macro-level variable and
  works down to the sales forecast (top-down).
• Buildup process
• All potential buyers in various submarkets are
  identified and the estimated demand is aggregated
  (bottom-up)
• The Predicting Variable
• Direct forecasting
• The use of sales as the predicting variable
• Indirect forecasting
• Variables related to sales are used as proxies to
  project future sales

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Components of a Formal Marketing Plan

• Market Analysis
• Customer profile
• A description of potential customers in a target
  market
• Sales forecasts
• most likely, pessimistic, and optimistic
• The Competition
• Profile of key management personnel
• Overall strengths and weaknesses
• Related products being marketed or tested
• Likelihood of competitors entry into target
  market

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Components of a Formal Marketing Plan

• Marketing Strategy
• Total product and/or service plan
• Decisions affecting the total product
• Distribution plan
• Decisions regarding product delivery to customers
• Pricing plan
• Setting an acceptable value on the product
• Promotional plan
• Communicating information to the target market

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Consumer Behavior and Product Strategy

• Understanding the consumer
• Product management
• Product strategy alternatives for small
  businesses
• Building the total product offering

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A simplified model of Consumer Behavior
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Consumer Decision-Making

• Problem Recognition due to
• Change in financial status
• Change in household characteristics
• Normal depletion of a resource
• Product or service performance
• Past decisions
• Availability of products
• Information Search and Evaluation
• Using Evaluative criteria from an Evoked set
• Purchase decision
• Deciding how and where to make the purchase
  decision
• Post-purchase evaluation
• Cognitive dissonance

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Post-Purchase Activities
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Consumer Options for Dealing withProduct or
Service Dissatisfaction
Source Adapted from Del I. Hawkins, Roger J.
Best, and Kenneth A. Coney. Consumer Behavior,
8th ed. (Boston McGraw Hill, 2001), p. 642.
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Psychological Factors

• Needs
• Physiological, social, psychological, and
  spiritual.
• Consumers needs are never completely satisfied.
• A service or product can satisfy more than one
  need.
• Perceptions
• The individual processes that give meaning to the
  stimuli confronting consumers.
• Perceptual categorization
• The process of grouping similar things so as to
  manage huge quantities of incoming stimuli.
• Brand loyalty (a perceptual barrier) makes it
  difficult for competing brands to reach the loyal
  consumer.

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Psychological Factors

• Motivations
• Goal-directed forces that organize and give
  direction to the tension caused by unsatisfied
  needs.
• Provide the behavioral impetus for consumers to
  act to fulfill a need.
• Marketing is motivation and does not create
  needs.
• Attitudes
• An enduring opinion based on knowledge, feeling,
  and behavioral tendency.

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Sociological Factors

• Culture
• Behavioral pattern and values that characterize a
  group of consumers in a target market
• Social class
• Societal divisions that have different levels of
  social prestige
• Reference groups
• Groups that an individual allows to influence his
  or her behavior.
• Opinion leaders
• A group leader who plays a key communications
  role.

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Product Management

• A product is a total bundle of satisfactiona
  service, a good, or bothoffered to consumers in
  an exchange transaction.
• Includes both the main element (physical product
  or core service) and complementary components
  (features).
• A product strategy is the way the product
  component of the marketing mix is used to achieve
  a firms objectives.
• Product item The lowest common denominator in
  the product mixthe individual item
• Product line The sum of the related individual
  product items
• Product mix consistency The similarity of
  product lines in a product mix

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Services vs. Product Marketing
Pure ServicesMarketing
Pure GoodsMarketing
Characteristics
Tangiblegoods Occur at different times Greater
standardization Less perishability
Intangiblegoods Occur at the same time Less
standardization Greater perishability
Tangibility Production/Consumption Standardizatio
n Perishability
HybridServices/GoodsMarketing
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Product Development Process
IdeaAccumulation
BusinessAnalysis
Total Product Development
Product Testing
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Product Development Process

• Idea accumulation
• Increasing the number of ideas under
  consideration
• Business analysis
• Products relationship to the existing product
  line
• Cost of development and introduction
• Available personnel and facilities
• Competition and market acceptance
• Total Product Development
• Branding, packaging, pricing, and promotion
• Product Testing
• Proving the product design through consumer
  reaction to the product

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Building the Total Product Offering

• Branding
• A verbal and/or symbolic means of identifying a
  product.
• Rules for Naming a Product
• Select a name that is easy to pronounce and
  remember.
• Choose a descriptive name.
• Use a name that can have legal protection.
• Select a name with promotional properties.
• Select a name that can be used on several product
  lines of a similar nature.

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Building the Total Product Offering

• Packaging
• Color, design, and protection for the product.
• Labeling
• Shows the brand and informs the consumer.
• Warranties
• A promise that the product will perform at a
  certain level or meet certain standards.
• Implied and written warranties
• Policy considerations Cost, service capability,
  competitive practices, customer perceptions,
  legal implications

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Product Life Cycle
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Summary Marketing Plan

• Described small business marketing
• Discussed the nature and techniques of the
  marketing research process
• Explained the methods of forecasting sales
• Identified the components of a formal marketing
  plan