Small Business Management

Transcription

1 Small Business Management Market Research & Marketing The purpose of a business is to create and keep a customer. You have to do those things that will make people want to do business with you. All other truths on this subject are derivative. Levitt (1969) Learning outcome:- Demonstrate an understanding of organisational, operational, marketing and financial aspects of small business start-up management DDT Robert Jones 2002 Digital Display Technology Week Chaos Groups forming Presentations Remember, that time is money Benjamin Franklin (1748)

2 Market context the micro-environment:- (based on Porter, M.E.) We start on the outside of the market looking in. We need to know our customers and our competitors, with good Market Research (1). Later, we engage in Marketing (2) activities 1 Market research 2

3 Market Research 1 research objectives? 2 target customers? Needs oxygen, water, food Wants freshly prepared sandwich Expectations nice location, great atmosphere 3 check existing information secondary research 4 identify new information required 5 decide methods primary research 6 collect data 7 analyse info and data 8 evaluate & review Secondary research There are advantages & disadvantages (desk research) Sources of information:- (Internal sources) Personal contact networks - it s not what you know, it s who you know Trade associations Online databases Competitor sources External sources local govt Published statistics Press articles Govt information Mintel (mkt intelligence) = Excellent source Access free of charge Via ARU Library online Economist Information Unit (EIU) KeyNote Reports Dun & Bradstreet Chamber of Commerce etc

4 Competitor analysis Yellow Pages (quick & simple!) Website (use GOOGLE search) Trade press Business press Pretend to be a customer Observe foot-fall Empty dust bins & search through trash Work for an established competitor Assess competitors strengths & weaknesses Assess customers needs, wants & expectations Now you can identify the gap in the market And possibly exploit the competitors weaknesses Customer analysis demographic Who is your target group? changes are very important age gender social group income group ethnic group spending patterns etc You cannot be all things to all people. Successful new firms focus on a niche.

5 Market research Primary data specific to your start-up project There are advantages & disadvantages Methods available:- Surveys & questionnaires there is a large amount of textbook coverage of this area, refer to your texts on design of questionnaires and interviews. Spend time on designing effective questionnaires, with a mix of closed and open questions, avoid bias, be careful with your use of multiple choice responses (Likert scale). Outcomes:- - learn about your customers needs, wants and expectations Attitudes Expectations Buying patterns Competitor activities Contact methods Personal Telephone Mail Focus group discussions Observations Experimentation Each of these has advantages and disadvantages. Often the new start-up is simply a COPY of existing offerings. You must find something different that the customers will value = DIFFERENTIATION This is your USP = Unique Selling Proposition

6 Market research and Marketing link the SME with its micro-environment:- The central role of market research and marketing:- Your firm 1 Market research Its environment 2 Marketing Products/services Markets Marketing methods 4 Ps Product/service Pricing Promotional mix Place Policy mkt channel Question:- what are the other Ps?

7 Evolution of SME marketing (Carson):- 1 Initial activity at start-up 2 reactive selling as demand grows / declines 3 d-i-y approach, disjointed 4 integrated, proactive, sophisticated, longer term view, specialist input Marketing is seen as a cost by small business owners, not a way to identify & exploit opportunities. Marketing is not just selling or advertising. It includes:- Research Test marketing this is advisable for start-ups Analysis (statistical basis, probabilities, uncertainties). SPSS software Promotion including advertising 22% Word of mouth 73% (Midland Bank 1991) Cold calls 29% Shop adverts 17% Yellow Pages 15% Exhibitions 10% Sales people 7% Direct mail 5%

8 also:- Recommendation Referral Repeat purchase Public relations - network, contacts Packaging, presentation Service after sale Business card (double sided) Business club Directories Website Sponsorship Local radio Cable TV Marketing is a mixture of:- Management experience Art, skill Common sense gut feeling = intuitive feeling for psychology & motivation Flair USP Well known successful SMEs have all of these and perhaps:- Strong on design Innovation Different (differentiated) = USP Aggressive in their market Well respected (=good reputation) Excellent customer relations

9 Small firm marketing Common criticisms (Carson inter alia, cited by Stokes, D (2002) Small Business Management, Thomson Ad hoc, not planned Under-used and misunderstood Reactive, not proactive Restricted scope Simplistic & haphazard Owner manager involvement In my view, these observations may be accurate, but they are understandable, given the lack of resources in small firms. Customer Loyalty Ladder based on Christopher (1991), et al ( Entrepreneurship & Small Business, Palgrave 2001, p110) Partner Advocate Supporter Regular customer Customer Your customers, in effect, become your key marketeers Word of mouth is so important Prospect

10 The Marketing Mix 4Ps Small firms marketing is different. Many small firms do not use the 4Ps as academics suggest:- Product / service Product small firms often innovate e.g. Cambridge area Service small firms often copy larger existing firms but is a straight copy good enough? Price There are several options for pricing:- new small firms tend to underprice 1 Competitive price charge the same as competitors = price taker - this is what your customers expect, a sensible price to start a business 2 Market price charge what customers will pay = price maker - if your product is unique / special, charge top price 3 Cost plus basis charge costs plus say 50% profit margin = cost-plus e.g. fruit stall in the market square, also very large government contracts A common mistake is for a new start-up to compete on lowest price, this can be fatal why? Promotion Small firms do limited promotion, it is ad hoc. They react to competitors loss of customers declining sales Place Small firms, by their nature, restrict the place or distribution channel. See:- Stokes, D (2002) Small Business Management, Thomson

11 The Marketing Mix updated: the 5Ps + e-commerce Adapted by R Jones November 2001 Price Basis = cost-plus or market List price Discounts Payment terms Special offers Service & spares prices Euro price transparency Security of payment? Product / service Design, sizes, colours Materials Specification, timing, Quality, consistency, reliability? Packaging After-sales service People Service Advice Support Relationships Place Location physical / virtual Layout Delivery? distribution Routes to market Mail order, telephone Internet Promotion Advertising Point of sales displays Colour Image / logo Leaflets & brochures, posters PR Personal selling Telephone Website Mail shots Look out for rapid changes enabled by internet / e-commerce Look out for continuing influences of common currencies Opportunites? Threats? Opportunites? Threats??

12 e-business options fan model PriceWaterhouseCoopers, Presence pages (basic info, as per Yellow Pages, useful or irritating?) 2. Basic electronic transactions 3. Advanced electronic transactions 4. Transformed Business Processes 5. Completely virtual company Many small businesses still seem to have only a presence page website, with a telephone number a wasted opportunity? More recently social websites, with active blogs an interesting form of promotion by dialogue In reality small firms often exploit 2Ps, not 4Ps = Product & price orientation Why? 1 less money to spend on marketing 2 lack of specialist marketing skills 3 distrust or lack of interest in marketing See:- Stokes, D (2002) Small Business Management, Thomson See also:- Kosiur (1997)

13 Recent advances in marketing Strategic Entrepreneurial Marketing - 4Is This is especially important in Cambridge, as you can see at the Enterprise Tuesday meetings Innovation incremental changes Informal information Through NETWORKING Identification of Target markets Interactive Marketing methods Innovation = adjustments to products / services market approaches Identification of markets = finding a niche Interactive marketing methods = responsiveness - internet!! Informal information gathering = networking = opportunities See:- Stokes, D (2005) Small Business Management, Thomson

14 Price and value Pricing is a tricky area, especially for new small firms. Pricing is not a science, it is not an art perhaps it is a combination of these. From:- Johnson, G. & Scholes, J. (2005) Exploring Corporate Strategy, 7 th ed, Financial Times Prentice Hall, page 243 Using this model, you can map the different niches that are possible. Which value / price strategy will be the most favourable for your start-up plan? Which value / price strategy / ies should you avoid? Which positions on the clock agree with Michael Porter s Generic Strategies? Which position would Michael Porter advise against? Check Yellow Pages for your business sector. Which price / value messages do you see?

15 From:- Johnson, G. & Scholes, J. (2005) Exploring Corporate Strategy, 7 th ed, Financial Times Prentice Hall, page 243

16 The three levels of product See: Dibb, Simkin, Pride & Ferrell (2002) Marketing Concepts & Strategies, Houghton Mifflin, Boston USA Augmented product Actual Product Core product Core product core benefit or service; generic, often a copy Actual product Brand name / features / quality / durability / design / styling / packaging / capabilities begins to provide differentiation Augmented product customer service / after sales support / warranty / installation / personnel / delivery and credit begins to make product / service special The more augmented the product / service, the more valuable to the customer, the higher the price and the higher the profit