Chapter 5: Marketing In Small Business PDF

CHAPTER FIVE In Small Business  Marketing Marketing – the effort to identify and satisfy customers’ needs and wants. involves finding out who your customers are, what they need and want, the prices, the level of competition.  Sensing, serving and satisfying the needs of custo...

CHAPTER FIVE In Small Business  Marketing Marketing – the effort to identify and satisfy customers’ needs and wants. involves finding out who your customers are, what they need and want, the prices, the level of competition.  Sensing, serving and satisfying the needs of customers in well-defined target markets. Abebaw W., 2022 2 Marketing Genuinely Committed for your Success! Questions Who are my customers?  What are my customer’s needs and wants? How can I satisfy my customers’?  How do I make a profit as I satisfy my customers?  Marketing Cont’d… Core Concepts of Marketing Needs, Wants and Demand a. Need: a state of deprivation of some basic satisfaction. e.g. food, clothing, shelter, safety & etc. e.g. I need food. b. Wants: desires for specific satisfiers of needs and involves preference which is usually shaped by social forces. e.g. I want kitfo. Abebaw W., 2022 4  Marketing Cont’d… c. Demand: wants for specific products that are backed by ability and willingness to buy them. d. Product: anything that can be offered to satisfy a need or want. It can be tangible and intangible. e. Value: consumer’s estimate of the products overall capacity to satisfy his or her needs. Abebaw W., 2022 5  Marketing Cont’d… f. Cost: the amount of money that are going to be expended. g. Exchange: - the act of obtaining a desired product from someone by offering something in return. h. Transaction: - the trade of values between two parties. Abebaw W., 2022 6  Marketing Philosophies 1. The Production Concept 2. The Product Concept 3. The Selling Concept/Sales Concept 4. The Marketing Concept 5. The Societal Marketing Concept Abebaw W., 2022 7  Marketing Philosophies Cont’d… 1. The Production Concept - consumers favor products that are available and highly affordable.  Improve production and distribution  Availability and affordability is what the customer wants’ Works in at least two situations:  where the demand for a product exceeds supply Abebaw W., 2022 8  Marketing Philosophies Cont’d… where the product’s cost is high and has to decrease to expand the market.  focuses on achieving high production efficiency and wide distribution. 2. The Product Concept consumers will favor those products that offer the most quality, performance or innovative features. . Abebaw W., 2022 9  Marketing Philosophies Cont’d… a good product will sell itself the focus is on making superior products and improving them over time.  mangers assume that buyers admire well-made products and can appraise product quality and performance.  products are usually designed with little or no customer input. Abebaw W., 2022 10  Marketing Philosophies Cont’d… 3. The Selling Concept/Sales Concept  consumers will buy products only if the company promotes/ sells these products.  creative advertising and selling will overcome consumers’ resistance and convince them to buy. practiced more aggressively with unsought goods, those goods that buyers normally do not think of buying. E.g. insurance, encyclopedia, and funeral plots. Abebaw W., 2022 11  applied when the firms have over capacity.  Marketing Philosophies Cont’d… 4. The Marketing Concept  Focuses on needs/ wants of target markets and delivering satisfaction better than competitors  The consumer is king! Find a need and fill it’ it can be expressed in terms of:  Meeting needs profitably  Find wants and fills them  Abebaw W., 2022 12  Marketing Philosophies Cont’d… Love the customers, not the product etc.  focuses on customer satisfaction. 5. The Societal Marketing Concept holds that the organization should determine the needs, wants and interests of target markets. Abebaw W., 2022 13  Marketing Philosophies Cont’d… delivering satisfactions more effectively and efficiently than competitors in a way that maintains or improves the consumers and the society’s well- being.  Satisfaction + Society’s well-being Abebaw W., 2022 14  Marketing Research Marketing Research is the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company.  involves the gathering of information about a particular market. Abebaw W., 2022 15  Marketing Research Marketing Research: the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company. involves the gathering of information about a particular market. Abebaw W., 2022 16  Marketing Research Cont’d… Marketing research involves: 1. Define the problem and research objectives 2. Develop the research plan 3. Collect the information 4. Analyze the information 5. Present the findings 6. Make the decision Abebaw W., 2022 17  Marketing Research Cont’d… 1. Define the problem and research objectives  the research problem should be thoroughly described  the problem and research objectives guides the entire research process. 2. Develop the research plan determine the information needed develop a plan for gathering it efficiently presenting the plan to marketing management Abebaw W., 2022 18  Marketing Research Cont’d… Secondary data - consists of information that already exists somewhere, having been collected for another purpose.  Primary data - consists of information, collected for the specific purpose at hand. 3. Collecting the Information The researcher should watch field work closely to make sure that the plan is implemented correctly Abebaw W., 2022 19  Marketing Research Cont’d… 4. Analyzing the Information process and analyze the collected data to extract important information and findings.  tabulate the results and compute averages and other statistical measures. 5. Present the Findings interpret the findings, draw conclusions, and report them to management. Abebaw W., 2022 20  Marketing Cont’d… 6. Make the Decision the manager must decide what action the research suggests  make the data directly available to marketing managers Abebaw W., 2022 21  Marketing Research for MSEs 1.Market Research in the Pre-Start-Up Phase Before entrepreneurs actually commit themselves to opening a business they have to answer the following: Who Is the Customer? A clear profile of potential customers is a basic element of market research. Customers may be young or old, married or single, teachers or students, homeowners or renters, poor or wealthy. Abebaw W., 2022 22  Marketing Research for MSEs This identification of the customers can be done through geographic, demographic, psychographic and behavioral segmentation basis. Where Is the Market? Part of the customer scenario will involve locating the potential customer base. This helps to get the advantage of location and making arrangements to make the products easily accessible/available for the customers. Abebaw W., 2022 23  Marketing Research Cont’d… Who are the Market Players (Competitors)? Helps to identify both the existing competitors and potential that provide substitute products. When the firm studies the competitors, it identifies the weak side they have and their strong side. Abebaw W., 2022 24  Marketing Research Cont’d… 2. Market Research after Start Up Competitive Analysis – a company must constantly compare its products, prices, channels and promotion with those of close competitors.  find areas of potential competitive advantage and disadvantage. Abebaw W., 2022 25  Marketing Research Cont’d… launch more effective marketing campaigns against its competitors and prepare stronger defenses against competitors’ actions. Abebaw W., 2022 26  Marketing Intelligence(MI) is everyday information about developments in the marketing environment that helps managers prepare and adjust marketing plans.  collects information by searching the environment and delivers it to marketing managers. Abebaw W., 2022 27  Marketing Intelligence(MI) Cont’d… MI is responsible to collect the information relevant to a company’s markets, gathered and analyzed specifically for the purpose of accurate and confident decision-making in determining market opportunity, market penetration strategy, and market development metrics. Abebaw W., 2022 28  Marketing Intelligence(MI) Cont’d… Sources of market intelligence Existing competitors Trade publications Securities Analyst’s Reports Government sources Potential customers Abebaw W., 2022 29  Marketing Strategies Marketing Strategy - is a formulated plan that describes how a new venture will compete.  focuses on the enterprises activities related to competing in its market niche. Strategies for new ventures 1. Concentration strategies i. Vertical growth - taking over a function previously provided by a supplier or by a distributor. Abebaw W., 2022 30  Marketing Strategies Cont’d… Backward integration- assuming supplier’s function Forward integration: assuming distributor’s function ii. Penetration strategies - focuses on the firm’s existing products in existing market by: Encouraging existing customers to buy more  Engaging in extensive marketing campaign Abebaw W., 2022 31  Marketing Strategies Cont’d… does not involve anything new for the firm  relies on taking market share from competitors and/or expanding the size of the existing market. iii. Horizontal Growth: expanding the firm’s products into other geographic locations or increasing the range of products services offered to current markets. Abebaw W., 2022 32  Marketing Strategies Cont’d… 2. Diversification Strategies i. Concentric (Related) Diversification: diversifying into an industry related to its current one. a. Products diversification (New Product Development)  Focal product, service or line of merchandise,  New products or services closely related to those initially offered. Abebaw W., 2022 33  Marketing Strategies Cont’d… Directed to the same market segment or niche as those initially offered. b. Markets diversification(New market development) Focal product, service or line of merchandise, Focus of products, services or line of merchandise is maintained, Abebaw W., 2022 34  Marketing Strategies Cont’d… New market segments open through expanded range of customers, niches. ii. Conglomerate (unrelated) Diversification: involves diversifying in to an industry unrelated to the current one. Abebaw W., 2022 35  Marketing Mix and Marketing Strategies 1.Product: refers to goods/services produced for sale. the product /service should relate to the needs and wants of the customers. 2. Pricing: refers to the process of setting a price for a product/service.  must be low enough to attract customers to buy and high enough to earn your business a profit. Abebaw W., 2022 36  4P’s Cont’d… To set your price you need to: Know your costs. Know how much customers are willing to pay. Know your competitors price.  Know how to make your prices more attractive Pricing Strategy  price is the value placed on what is exchanged. Abebaw W., 2022 37  4P’s Cont’d… Price is the only element a marketer can change quickly in response to demand shifts. TR = Price * Quantity Profit = TR – TC Where, TR – Total Revenue, TC – Total Cost Abebaw W., 2022 38  Pricing strategies 1. Price Skimming: charging the highest possible price.  consumers’ demand must be inelastic. 2. Penetration Pricing: prices of products are reduced compared to competitors’ price for the same product to penetrate into markets and to increase sales. Abebaw W., 2022 39  Pricing strategies the cost of production should be lower.  appropriate when the demand is elastic. 3. Cost-plus pricing: any amount that is above unit cost may be considered. 4. Mark-up pricing: a certain percentage of the selling price is added to unit cost. Abebaw W., 2022 40  Pricing strategies 5. Competition Oriented Pricing: considers competitors prices primarily; but the market type matters. 6. Odd-even pricing: is psychological pricing method based on the belief that certain prices or price ranges are more appealing to buyers. E.g. 499 Abebaw W., 2022 41  4P’s 3. Place: referred to as distribution  availing your products or services to your customers  You can distribute your product through:  selling directly to the consumers  retail distribution and wholesale distribution 4. Promotion: informing your customers about your products and services and attracting them to buy them. Abebaw W., 2022 42  Distribution Strategies Direct versus Indirect Channels 1. Direct Channel Door to door selling Manufacturer’s sales branches Direct mail: 2. Indirect Channel  Merchant middlemen: Wholesalers  Retailers  Agent middlemen: Abebaw W., 2022 43  Distribution Strategies Channel Levels/length Zero level Channels (M to C): One level channel (M to R to C): Two level channels (M to W to R to C): Three level channels (M to A to W to R to C): Abebaw W., 2022 44