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SmallBizU
™
eLearning University
Marketing 101:
The Fundamentals
Presented By
SmallBizU Online eLearning Classroom
http://www.smallbizu.org
© copyright 2002 SmallBizU
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Objectives of this course…
 To help you understand what marketing is.
 To help you learn how to conduct market research.
 To help you understand how to analyze your market
environment and determine your target market.
 To help you determine how to position your product.
 To educate you on the 4 P’s (product, price, place &
promotion) and how to apply them to marketing.
 To show you the basics on how to create a marketing
plan.
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Course Outline
1. What is marketing?
2. Conducting market research
3. Analyzing the market environment
4. Selecting your target markets
5. Market positioning
6. Designing products & services
7. Pricing products & services
8. Placing products & services.
9. Promoting products & services
10. Creating a marketing plan
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What Is Marketing?
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What is marketing?
 Most people mistakenly identify marketing with
selling and promotion.
 While selling and promotion are a part of
marketing, they are not most important part.
 In Principles of Marketing Philip Kotler stated:
– If the marketer does a good job of identifying consumer
needs, developing appropriate products, and pricing,
distributing, and promoting them effectively, these
goods will sell very easily.
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Defining Marketing…
 Marketing can be defined as an activity directed at
satisfying needs and wants through exchange
processes.
 The ultimate goal of marketing is to make selling
nonessential,
 To know and understand the customer so well that
the product or service fits him or her and sells
itself.
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Goods, Services, & Ideas…
 Marketing deals with goods, services, and ideas.
 A good is something someone can touch.
 A service is providing an intangible benefit to
customers.
 An idea can include concepts or images.
 For this course, we will use the word product to
refer to goods, services, and ideas.
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Needs, Wants, & Demands…
 One of the underlying concepts of marketing is
trying to satisfy a customer’s needs, wants and
demands.
 Needs are plentiful. Basic human needs include
food, clothing, warmth, safety and belonging.
 Wants are simply needs shaped by culture and the
individual.
 Demands are simply the wants of a consumer
when backed by the ability to pay for that want.
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Exchange Processes…
 Marketing usually occurs to help facilitate an
exchange between a buyer and seller.
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Dynamic marketing environment…
 There are many forces that affect the marketing
environment, including:
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Competition
Laws and Regulations
Economic and Social Conditions
Cultural Factors
 These forces can be dramatic and difficult to predict.
 Be aware of these forces because they can create
threats and generate opportunities for your business.
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The marketing mix…
 The marketing mix is another important concept
when it comes to marketing.
 The marketing mix refers to activities that a firm
can control to produce the response it wants from
the target market.
 These variables can be categorized into four
groups, also know as the four P’s of marketing.
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The 4 P’s of marketing…
1. Product – This is what you are offering to your
target market, be it a tangible product or a
service.
2. Price – The amount you will charge for your
product.
3. Place – Channels your product will go through to
reach the customer.
4. Promotion – How you raise awareness with your
target market.
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The 5th P of marketing…
 While the previous four P’s are important to the
marketing mix, there is one that is left out.
 Positioning
 Positioning is not dealing with where you will
place your product in the market, but where you
will place you product in the mind of the
consumer.
 Marketing Mix worksheet
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Conducting Market Research
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Marketing research data…
 There are two main types of data that will help
you in researching your market.
 The first is secondary data. Secondary data is
information that already exists somewhere. It was
collected for another purpose.
 Primary data, consists of information collected
for the specific purpose at hand.
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Start with secondary data…
 Researchers will usually start by collecting secondary
data.
 Secondary data can be obtained quicker and at lower
costs.
 When collecting secondary data evaluate it carefully
to make sure that it is:
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Relevant
Accurate
Current
Impartial
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Researching your industry…
 With all the resource outlets that exist today, there are
many opportunities for you to gather secondary
information on the industry you will be participating in.
 The following sources should help you in getting started:
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NAICS Code
Hoovers
Standard & Poor’s
Trade Associations
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Researching your customer…
 Before you start researching your customer, it is
important that you determine whether they will be
individuals in a particular area or if they will be
other businesses.
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Researching consumers…
 There are many secondary data sources for
researching consumers.
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Consumer expenditure surveys
Census data
Demographics
Psychographics
• VALS – (Values, Attitudes, & Lifestyles Surveys)
• Zip code psychographics
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Researching businesses…
 If your target customers are other businesses, the
following links may be helpful in conducting
research:
– Business expenditure survey
– Economic census
– IRS data
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Estimating your market size…
 After you have determined who your customer
will be and found some of their characteristics,
 You need to estimate the size of your target
market.
 IRS, Census, RMA, and Dun & Bradstreet are all
sources that can help you estimate your target
market size.
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Collecting primary data…
 Since primary data does not already exist it can
become very costly and time consuming to gather.
 There are several ways to collect primary data.
 The most common methods are observation,
survey, and experiment.
 These methods can be done by mailings, telephone
calls, and personal interactions to name a few.
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The three research approaches…
 Data is gathered in the observational approach by
watching people in either a natural or artificial
setting.
 The survey approach is best suited for those who
are looking to gather descriptive information.
 The experimental approach involves selecting two
groups, giving them different treatments, and then
measuring the effects.
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Contacting research subjects…
 With mail questionnaires you can collect a fairly large
amount of information at a low cost.
 Telephone interviewing costs more than mail
questionnaires but can provide more information quickly.
 Individual interviewing is another way of gathering
information. This type of interviewing may require an
incentive to get people to participate.
 Gathering a group of people together to discuss certain
topics with a trained interviewer is known as group
interviewing.
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The anatomy of a questionnaire…
 When developing a questionnaire keep the
following in mind:
– Take your time to make sure that it is carefully
developed and tested.
– Carefully choose your wording of each question.
– The sequence of the questions is also important.
– Make sure that all the questions included in the survey
are necessary.
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Interpreting market research…
 Interpreting data can easily become overwhelming
if you are not careful.
 Make sure that you report only major findings.
 Do not use too many statistical analyses just for
the sake of using them.
 Put your findings into simple terms so that even
someone not familiar with the survey will be able
to understand them.
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Analyzing The Market Environment
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Macro and micro environments…
 The marketing environment is made up of two
environments;
 The microenvironment is the immediate
environment that effects the companies ability to
serve customers.
 The macroenvironment consists of larger social
forces that affect all players in the
microenvironment.
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Analyzing your company…
 All groups in a company - Accounting, R&D,
Manufacturing, Top Management – are part of a
company’s microenvironment.
 All these departments will have an impact on the
marketing decisions and actions of the company.
 For this reason, the marketing manager should try
to work closely with these departments and others
when establishing a marketing plan.
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Distribution channels...
 Distribution channels will also play a role in the
microenvironment.
 Suppliers, middlemen, warehouses and
transporters are just a few of the factors that will
effect the business.
 Be aware of these factors and how they will affect
your market planning and decisions.
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Analyzing your customers…
 Which customer market will the company operate
in?
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Consumer
Industrial
Reseller
Government
International
 Each of these markets’ characteristics should be
analyzed on how they will effect the company.
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Competitive forces…
 The number of firms that supply a similar product
will play a role in the competitive environment.
 Once you determine the number of competitors,
you should then analyze competitive tools that
will set you apart from the competition or give the
competition an advantage over you.
 The first competitive tool most companies will use
is price.
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Monitoring competition…
 Be aware of the actions of your competitors.
 Also develop an understanding of the market you
are participating in,
 and what the customers in this market want.
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SEPTE analysis…
 A SEPTE analysis is a process that helps in
analyzing the macroenvironment.
 SEPTE stands for…
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Social environment
Economic environment
Political and legal environment
Technological environment
Environmental issues
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Social environment…
 Social environmental factors include
demographics and cultural aspects.
 These factors affect customer needs and the size of
potential markets.
 Some social factors include:
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population growth rates
population shifts
age structure (youths, young adults, retirees, etc.)
the changing in family structure
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Economic environment…
 Economic trends can affect the marketing
environment in several ways.
 Fluctuations in real income determine how much
consumers will have to spend on discretionary
goods and services.
 Also take into account the income distribution and
the average income of your target market.
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Other economic factors…
 Other economic factors include income, cost of
living, interest rates, and savings and borrowing
patterns.
 These factors can have a substantial impact on the
marketplace.
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Political and legal environment…
 Developments in the political and legal
environment can have serious consequences on
your marketing efforts.
 Be aware of:
– Legislation regulating business
– The affects of government agencies such as the FDA,
FCC, or EPA on your company.
– Growth of public interest groups that positively or
negatively affect your business.
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Technological environment…
 Technological factors can lower barriers to entry
and influence outsourcing decisions.
 Some examples of technological factors include
R&D activity, automation and rate of
technological change.
 Another factor that may affect the technological
environment is if a company concentrates only on
minor improvements or major innovations.
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Environmental issues…
 In our ever changing world, marketers should pay
close attention to certain environmental factors
that could create tremendous impacts on the
marketplace.
 Impending shortages on raw materials, increased
cost of energy, increased levels of pollution, and
government regulations and intervention all play a
role in the environmental marketplace.
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SEPTE analysis…
 Now that you have walked through the steps of the
SEPTE analysis, apply it to your own
marketplace.
 The following worksheet will help you through
the process.
 SEPTE analysis worksheet
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Selecting Your Target Markets
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Consumer vs. Business…
 The first step in selecting your target market is to
determine whether your customers are consumers
or businesses and industries.
 Keep in mind that you can have more than one
target market. However, if you find the
description of your market too broad or general,
then ask yourself:
 Is there really more than one target market here?
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Geographic location…
 Next consider the geographic level you will target.
 Will your customers be mostly at the local, state,
national or international level?
 You also need to decide what the geographic
makeup of your target market will be.
 You can classify your target market as either rural,
suburban, urban, or a mix of any of these.
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Demographic variables…
 What characteristics will your target market share
that will differentiate them from others?
 These variables should be measurable and can
include any of the following:
-
Age
Gender
Race
Ethnicity
Income
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- Education
- Occupation
- Family Size
- Marital Status
- Social Class
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Demographic resources…
 Many resources are available to help you define
the demographics of your target market.
– U.S. Census Bureau
– Consumer Spending Surveys
– Business Expense Surveys
– American Factfinder
– State and County Quick Facts
– EasiDemographics
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Psychographics of your market…
 Psychographics help define characteristics of a
group based on their lifestyle, personality, and
social class.
 One of the most popular surveys of
psychographics is known as the VALS.
 Value, Attitude, Lifestyle Surveys
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VALS…
 VALS place consumers into certain segments
based on their responses to a particular survey.
 There are eight segments that they may be placed
into.
 These segments are then defined by certain
characteristics and traits that they share.
 For more information go to:
– http://www.sric-bi.com/VALS/
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Zip code psychographics…
 People with similar lifestyles tend to live in the
vicinity of one another.
 Zip code psychographics can help you define
characteristics of a region by just knowing its zip
code
 For more information go to:
– http://cluster2.claritas.com/YAWYL/Default.wjsp?System=WL
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Selecting your target market…
 To recap, when selecting your target market it is
easiest to start broad and then move to more
narrow to define your market.
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Are you targeting consumers or a business/industry?
What is the geographic makeup of your target market?
What are the demographics of your target market?
What are the psychographics of your target market?
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Market Positioning
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The concept of positioning…
 One of the best-known names in American advertising
circles is David Ogilvy.
 After spending several billion dollars on advertising,
Ogilvy listed 32 things his ad agency had learned.
 Of the thirty-two, he said that the single most important
decision involved positioning the product.
 He claimed that marketing results depended less on how
advertising was written than how the product or service
was positioned.
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The origins of positioning…
 In their 1981 book, Positioning: The Battle for your Mind, Al
Ries and Jack Trout describe how positioning is used as a
communication tool to reach target customers in a crowded
marketplace.
 Not long thereafter, Madison Avenue advertising executives
began to develop positioning slogans for their clients and
positioning became a key aspect of marketing
communications.
 While positioning begins with a product, the concept really is
about positioning that product in the mind of the customer. In
other words, marketing is a battle of perception, not products.
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What is positioning?
 Ries and Trout explain that the concept is really about
positioning a product in the mind of the customer. Strategy
is therefore planned in the mind, not the marketplace.
 This approach is needed because consumers are
bombarded with a continuous stream of high-volume
advertising.
 The consumer's mind reacts to this high volume of
advertising by accepting only what is consistent with prior
knowledge or experience.
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How positioning works…
 It is quite difficult to change a consumer's impression once
it is formed.
 Consumers cope with information overload by
oversimplifying and are likely to shut out anything
inconsistent with their knowledge and experience.
 In an over-communicated environment, the advertiser
should present a simplified message and make that
message consistent with what the consumer already
believes by focusing on the perceptions of the consumer
rather than on the reality of the product.
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The importance of being first…
 The easiest way of getting into someone's mind is to be
first.
 It is very easy to remember who is first, and much more
difficult to remember who is second. Even if the second
entrant offers a better product, the first mover has a large
advantage that can make up for other shortcomings.
 However, all is not lost for products that are not the first.
By being the first to claim a unique position in the mind of
the consumer, a firm effectively can cut through the noise
level of other products.
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A few positioning examples…
 Miller Lite was not the first light beer, but it was
the first to be positioned as a light beer, complete
with a name to support that position.
 Similarly, Lowenbrau was the most popular
German beer sold in America, but Beck's Beer
successfully carved a unique position using the
advertising: "You've tasted the German beer that's
the most popular in America. Now taste the
German beer that's the most popular in Germany."
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Finding your unoccupied position…
 If a product is not going to be first, it then must
find an unoccupied position in which it can be
first.
 At a time when larger cars were popular,
Volkswagen introduced the Beetle with the slogan
"Think small.”
 Volkswagen was not the first small car, but they
were the first to claim that position in the mind of
the consumer.
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Other positioning examples…
 Other positions that firms successfully have
claimed include:
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age (Geritol)
high price (Mobil 1 synthetic engine lubricant)
gender (Virginia Slims)
time of day (Nyquil night-time cold remedy)
place of distribution (L'eggs in supermarkets)
quantity (Schaefer - "the one beer to
have when you're having more than one.")
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Repositioning the competition…
 Sometimes there are no unique positions to carve out. In
such cases, Ries and Trout suggest repositioning a
competitor by convincing consumers to view the
competitor in a different way.
 Tylenol successfully repositioned aspirin by running
advertisements explaining the negative side effects of
aspirin.
 Repositioning a competitor is different from comparative
advertising. Comparative advertising seeks to convince the
consumer that one brand is simply better than another.
Consumers are not likely to be receptive to such a tactic.
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Repositioning Stoli…
 Consumers tend to perceive the origin of a product by its
name rather than reading the label to find out where it
really is made.
 Such was the case with vodka when most vodka brands
sold in the U.S. were made in the U.S. but had Russian
names.
 Stolichnaya Russian vodka successfully repositioned its
Russian-sounding competitors by exposing the fact that
they all actually were made in the U.S., and that
Stolichnaya was made in Leningrad, Russia.
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Repositioning Pringles…
 When Pringle's new-fangled potato chips were introduced, they
quickly gained market share.
 However, Wise potato chips successfully repositioned Pringle's in
the mind of consumers by listing some of Pringle's non-natural
ingredients that sounded like harsh chemicals, even though they
were not.
 Wise potato chips of course, contained only "Potatoes. Vegetable
oil. Salt.“
 As a result of this advertising, Pringle's quickly lost market share,
with consumers complaining that Pringle's tasted like cardboard,
most likely as a consequence of their thinking about all those
unnatural ingredients.
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Avis tries harder…
 Consumers rank brands in their minds. If a brand is not number
one, then to be successful it somehow must relate itself to the
number one brand.
 A campaign that pretends that the market leader does not exist
is likely to fail. Avis tried unsuccessfully for years to win
customers, pretending that the number one Hertz did not exist.
Finally, it began using the line, "Avis is only No. 2 in rent-acars, so why go with us? We try harder."
 After the campaign, Avis quickly became profitable. Whether
Avis actually tried harder was not relevant to their success.
Rather, consumers finally were able to relate Avis to Hertz,
which was number one in their minds.
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Applying positioning…
 Sun Tzu stated, "battles are won or lost before
they are ever fought."
 The concept of positioning applies to products in
the broadest sense.
 Services, your business itself, tourist destinations,
countries, and even careers can benefit from a
well-developed positioning strategy that focuses
on a niche that is unoccupied in the mind of the
consumer or decision-maker.
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To position your product or service…
 Ask yourself, “How can I be the first to claim a unique
position in the mind of my customer.”
 What exactly is my positioning message?
 Remember, your consumer's mind reacts by accepting only
what is consistent with their prior knowledge or
experience.
 Don’t try to change their mind, instead find a position that
they already believe to be true or have trouble being in
opposition to such as the “Clean Air Act.”
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Finding your niche…
 Remember, you must own your niche and own it
outright. No one else can occupy your space.
 If you can’t own it, especially from a marketing
expenditure outlay, then decrease the size of niche
until you can.
 If somebody else occupies your chosen space try
to reposition them.
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Finally, let’s consider your message…
 Your positioning message is what you will consistently
reinforce to your selected niche.
 The message should help your customer identify,
understand, and remember your position.
 To be effective, your message needs to be short—usually
under five words—three or less is better.
 You should also try to let go of the intangibles such as your
product features and price points and speak to your
customer’s emotions. For example: Just do it—Nike.
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To craft your message…
 Begin by listing why your customers choose to do
business with you rather than your competitors.
 Try to list about three to five reasons listed in the
order of importance.
 Now, narrow down the key difference between
your business and your competitors in a single
word.
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Be very careful…
 When you listed why your customers choose to do
business with you, it is probably true that you
included words like: quality, customer service,
expertise, selection, or location.
 Repeat this to yourself: These words represent
boring, rational argument. In fact, they are
probably the exact words that your competitor
would list as well.
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Avoiding rational logic…
 When you appeal to rational thought you, in
effect, create an argument in the customer’s mind.
 To solve this issue, try moving your message from
the customer’s head to their heart.
 To do this you need to appeal to their emotions.
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An example of selling emotions…
 A grass seed company tried an experiment.
 They took their seed and put it into two separate packages:
– One simply said Grass Seed and the price of $.99.
– The second was named Lawn Seed and showed a beautiful lawn
flowing down toward a river. The price was $3.99.
 Remember, the seed inside the packages was identical.
But nonetheless, the Lawn Seed outsold the grass seed by a
factor of 4:1.
 People don’t want grass seed but rather the hope, feeling,
and aspiration of having the beauty of that pictured lawn—
and that’s really what they are paying for.
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Consider your message again…
 Go back and review your positioning message and ask
yourself, “Does it create boring, rational argument or does
it sell emotional hope and aspiration?”
 Start by re-writing your message in a sentence and then
whittle your message down to three words or less.
 Remember Nike didn’t say, “We have the highest quality
shoes made through state-of-the-art processes of the best
procured materials meaning they are long-lasting, durable,
and offered at an excellent price point.”
 No, be very clear, they said: “Just do it.”
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Designing Products & Services
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What is it that you sell?
 One of the first questions to ask yourself is what
does your product do?
 Other questions that you should address are:
– What need is addressed by the product?
– What are its features and benefits?
– Who supplies the products or materials?
 Whether you make or resell a product, these
questions are important to answer.
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Manufacturing a product…
 If you manufacture a product, the following
questions need to be addressed:
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–
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–
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How is it produced?
What materials and labor are required?
How will its quality be measured and controlled?
What is its technological lifespan?
What research and development has been conducted
and what still needs to be done?
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Selling a service…
 Delivering a service can be quite different then
manufacturing a product.
 Some questions to address may include:
–
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–
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What services do you offer?
How do they work?
What materials or equipment is needed?
What are your labor needs for these services?
What are the steps in your service process?
What benefit(s) do you provide customers?
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Intellectual property…
 Intellectual property is any product of the human
intellect has some value in the marketplace.
 Intellectual property can include business
strategies, images, ideas and concepts.
 In some cases it can be worth more to a business
than tangible assets.
 For more information on intellectual property visit
the World Intellectual Property Organization.
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Patents, trademarks & copyrights…
 An important issue that comes up when discussing
intellectual property is how to protect it.
 Protection can be obtained through a trademark,
patent or copyright.
 For information on patents, trademarks and
copyrights go to…
– United States Patent and Trademark Organization
– United States Copyright Office
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Packaging your product…
 After you have addressed questions about your
product, you should then consider how you will
package it?
 The primary function of packaging use to be to
hold and protect the product.
 Today, however, packaging is becoming an
increasingly important marketing tool.
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Designing the packaging…
 Many decisions are needed about the packaging –
size, shape, color, material, and label.
 Be sure that the packaging is consistent with the
product you are offering.
 Run engineering, visual and consumer tests when
developing the packaging.
 Also reevaluate the packaging frequently after it
has been introduced into the market.
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UPC barcodes…
 Once a company has designed the packaging for a
product, many want to include a UPC barcode on
their product.
 You can obtain a UPC barcode through the
Uniform Code Council, Inc.
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Product liability insurance…
 Americans initiate more product liability lawsuits
than do customers in any other country in the
world.
 There has been a 983 percent increase in product
liability cases heard by federal courts since 1974.
 A few famous cases you might recognize…
– Firestone Tire/Ford Explorer (tire blowouts)
– Mrs. Liebeck vs. McDonald’s (hot coffee)
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Product liability insurance…
 Product liability may occur when a customer
suffers harm from using the product.
 To incur liability you don’t necessarily have to be
the manufacturer.
 Everyone down the supply chain (including the
wholesaler and retailer) could be affected.
 A competent professional can help you determine
what level of insurance your business will need.
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Regulatory issues…
 Depending on what type of product you will offer
plays an important role in regulatory issues that
will apply.
 To find out what regulatory issues apply to your
product visit the following agencies:
– Federal Trade Commission
– Food and Drug Administration
– Consumer Product Safety Commission
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Product Mix…
 While some companies only offer one product or
service, most companies try to diversify
themselves by offering a product mix.
 A product mix is the set of all product lines and
items that a particular seller offers to buyers.
 Use the worksheet below to help you organize
your product mix.
– Product Mix Worksheet
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Product life cycle…
 A new product will go through a four stage
process throughout its lifetime.
 The Product Life Cycle Diagram
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Stages of the product life cycle…
 In the introduction stage the firm is seeking to
build awareness and develop the market.
 During the growth stage the company is seeking to
increase their market share by building preference
over their competitors.
 In the maturity stage growth slows as similar
products appear on the market.
 Sales fall rapidly in the decline stage.
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Pricing Products & Services
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Pricing decisions…
 There are a number of internal and external factors
that will come in to play when setting prices.
 Some of the internal factors may include pricing
objectives, strategy and costs.
 External factors may include nature of the market
and demand, competition and the economy.
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Pricing objectives…
 Pricing objectives help answer the question: What
are you trying to achieve with your pricing
strategy?
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Survival
Profit
Return on Investment
Market Share
Cash Flow
Status Quo
Product Quality
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Pricing strategy…
 Once you have determined your objectives you
should then focus on the methods you will use to
determine your prices.
 Keep in mind laws that regulate pricing and
pricing strategies such as the Clayton Act.
 For more information on the Clayton Act go to:
– http://www4.law.cornell.edu/uscode/15/12.html
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Types of pricing strategies…
 There are several basic pricing strategies.
– Skim Pricing - Set your price high with the goal of capturing
short-term profits.
– Penetration Pricing - Set your price low to discourage
competition and appeal to a larger market segment.
– Fixed Pricing - Price is set by manufacturer or middleman and
not subject to negotiation.
– Variable Pricing - Price is negotiated between buyer and seller.
– Price Lining - Establishes only a few prices for all the items
within a given product line.
– Keystone Pricing - percentage markup applied to the product’s
cost.
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More pricing strategies…
 Other pricing strategies include:
– Customary Pricing - set price at the considered standard
level for the product.
– Psychological Pricing - strategies that try to make the
product’s price more desirable.
– Prestige Pricing - encouraging consumers to equate pricing
with quality and status.
– Geographic Pricing - charging different prices for different
regions of geography.
– Pricing Leader - determining if you will be a price leader or
follower.
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The nature of the market…
 Be aware of the floor and ceiling prices in your market.
 The costs of the product will set the floor for the
marketer.
 The ceiling is set by the market and its demand.
 Set your price between these two points but keep in
mind consumers will compare the price of the product
against the value of owning it.
 Avoid establishing where the costs will outweigh the
benefits, and consumers will no longer buy your
product.
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Competition and their prices…
 Consumers will compare the price and value of a
product to that of comparable items.
 Learn the prices and quality of your biggest
competitors.
 Use this information in helping you to establish a
pricing point of your own.
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Economic factors…
 Booms, recessions, inflation and interest rates all
effect the pricing of a product.
 These economic turns will affect the costs to
produce and consumers’ sensitivity to price and
benefits of the product.
 Be aware of the current economic conditions and
the economic forecast for the future when
establishing a price.
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Determining gross margins…
 Once you have set the cost you can then determine
the gross margin for the product.
Product Price (to consumer)
Product Cost (to you)
Gross Margin of Product
minus
equals
 Compare your product’s gross margin with industry
standards from sources such as RMA.
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Placing Products & Services
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Placing decisions…
 Placing your product is the third of the four P’s.
 It encompasses channels of distribution that serve
as a transporter for getting your product to your
customers.
 Decisions you will need to make in placing your
product include market coverage, channel member
selection, logistics, and location.
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Market coverage…
 You must first determine which markets you are
going to reach and with what objectives.
 Be sure to include items such as the desired level
of service and functions to be performed by
channel members.
 Constraints to developing your objectives may
come from several sources.
– Customers, products, intermediaries, company policies,
competitors, and the environment.
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Channel member selection…
 Marketing channels direct the flow of products
from producers to consumers.
 They may go directly from producer to buyer.
Producer
Consumer
 Or the may have several steps between production
to consumers.
Producer
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Wholesaler
Retailer
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Part of the process…
 What part of the distribution process does your
business handle, if any?
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Warehousing
Order processing
Inventory management
Packaging
Materials handling
Receiving
Transportation and shipping
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Retailers in the distribution channel…
 As you move down the marketing channel from
manufacturing, to wholesaling and so on, it may
become unclear what your distribution channel
will look like.
 Often, retailers believe that they do not have a
distribution channel.
 The fact is a retailer’s location is their distribution
channel.
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Number of channel members…
 You must decide how many intermediaries will be in the
marketing channel.
 Several middlemen will be needed for intensive
distribution - stocking your product in as many outlets as
possible.
 Limited dealers will be granted the rights to distribute your
product with exclusive distribution.
 Selective distribution stands in the middle. It requires
more than one intermediary, but fewer than the intensive
distribution.
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Supply chain management…
 An important function of the marketing channel is
the joint effort of all members to create a supply
chain.
 Supply chain management refers to the long-term
partnerships among channel members to reduce
inefficiencies, costs, and redundancies in the
market channel.
 If managed correctly, a competitive advantage can
be established.
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Logistics of your channel…
 When planning your distribution channel you
should be able to answer the following questions.
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What will the ordering process look like?
Where will inventory be located?
How much inventory should be kept on hand?
How should goods be shipped?
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Shipping options…
 There are several ways to handle shipping.
 FOB Factory Pricing: The costs of transporting the
product from seller to buyer are borne by the buyer.
 Freight Absorption Pricing: Paying some of the
transportation costs in order to bring the price in line with
competitors.
 Uniform Delivered Pricing: A standard price charged
regardless of location.
 Zone Pricing: Charging different prices for different
regions of geography.
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Location of your business…
 An important decision that you need to make is
where will your business be located.
 Make sure the location you select fulfills the needs
of your business; location needs, space needs,
accessibility needs, etc.
 Also check to see what traffic counts the facility
experiences. (check with your state Department of
Transportation)
 Choosing a Successful Location for Your Business
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The cost of your location…
 What will it cost to lease or buy the needed
facility?
 Make sure that you can afford the location that
you choose.
 Also find out the term and duration of the lease of
the desired location.
 For more information, go to: Finding and Renting
Space for Your Business
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Channel regulations…
 There are a multitude of federal, state, and local
laws governing channel management.
 Through such laws as the Sherman Antitrust Act
and the Federal Trade Commission Act, the
government is trying to make sure that free trade
and competition are protected.
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Promoting Products & Services
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The promotional mix…
 The promotional mix consists of four main tools.
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Advertising,
Personal selling,
Sales promotion and
Publicity
 By identifying these tools you will be able to lay
out the basis of a media plan and promotional
budget for your company.
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Advertising and its various forms…
 Advertising deals with communicating with your
customers in a very public way.
 By advertising you are able to repeat your
message to customers numerous times in various
formats.
 However, be aware that while you are able to get
your message to customers, they do not have to
pay attention to it.
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The various forms of advertising…
(Click on a link below)
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Direct mail
Trade shows
Yellow pages
Newspaper
Magazines
Radio
Television
Outdoor advertising
Email advertising
Telemarketing
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Direct mail…
 Direct mail allows for the most careful aim of
your target.
 Direct mail is one of the least expensive methods
of marketing on a per-sale basis.
 But be aware that an expected response rate for a
general direct mailing can be as low as 2%.
 For help on direct mailings go to:
– http://www.the-dma.org
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Trade shows…
 Trade shows provide an opportunity to make
contacts with purchase-minded people.
 Identify objectives and locations for shows that
you believe will generate the most leads for your
business.
 For help identifying trade shows go to:
– http://www.tsnn.com
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Yellow pages…
 In the yellow pages you are on level playing ground with
your competitors because your ad can appear as big as
theirs.
 If you cannot stand out from your competitors never tell
your customers to “Find us in the yellow pages.”
 Instead, direct them to your listing in the white pages
where every listing in the same size.
 To advertise in the yellow pages call:
– 1-800-249-4449
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Newspaper…
 Newspapers are great for broadcasting news.
 Ad types, dates, frequency and sizes are all important
issues you need to address.
 However, try not to let the newspaper design or write the
copy for your ad. If they do, your ad may appear like all of
the other ads in the paper, including your competitors.
 For a listing of newspapers go to:
– http://newsdirectory.com/
– http://www.mediapost.com
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Magazines…
 An ad placed in a properly produced magazine can
give high credibility to a small business.
 With magazines you can reach a more specific
target than with newspapers.
 For a listing of magazines go to:
– http://www.newsdirectory.com
– http://www.mediapost.com
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Radio…
 Radio advertisements can bring you into more intimate
contact with prospects than a newspaper can.
 The response rate is usually equivalent to that of
television, but with lower costs.
 Estimated listener base, demographics of that base, time
of airing, and length of spots are all issues to keep in
mind when developing a radio ad.
 For a listing of radio stations go to:
– http://www.mediapost.com/
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Television and cable…
 While television can be highly effective, it can
also be very costly.
 To be effective, television ads must placed in front
of audiences on a regular basis.
 With cable you can have the advantage of being
able to pick which subscriber areas you want to
target and picking particular stations you want to
advertise on. (CNN, ESPN, etc.)
 For a listing go to http://www.mediapost.com.
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Outdoor advertising…
 Outdoor advertising is effective at reminding
people.
 It offers high repeat exposure and flexibility.
 However, with outdoor advertising there is no
audience selection.
 For a listing go to:
http://advertising.utexas.edu/world/index.asp?pageid=Outdoor
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Email Advertising…
 Emails are similar to direct mailings in that they
allow for the most careful aim of your target.
 Be sure to be aware of the laws that govern email
advertising.
 For a summary of these laws go to:
– http://www.techlawjournal.com/cong106/spam/Default.htm
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Telemarketing…
 Telemarketing can be a convenient way to educate
customers about your products and services while
offering a great deal of flexibility.
 However, be aware that many consumers today
see telemarketing as a nuisance.
 They may also be leery of telemarketing fearing
that it is a possible scam.
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Telemarketing fraud…
 The Federal Trade Commission (FTC) estimates
that fraudulent telemarketers swindle American
consumers out of more than one billion dollars
each year.
 Make sure that you are aware of the laws that
govern telemarketing.
 For more information go to:
http://consumer.net/telemarketing/tcpainfo.asp
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The pros & cons of personal selling…
 Personal selling may be the most effective tool at
certain times due to…
– Personal selling involves face-to-face communication.
– Lasting relationships can be established with personal
selling.
– When face-to-face with a salesperson, the customer is more
likely to respond.
 While personal selling is an effective tool, its cost
can be overwhelming to a company.
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Selecting a sales force…
 If you decide to take part in personal selling, a
sales force will be needed.
 Be sure to ask yourself how you will handle the
following:
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Recruitment and selection of sales personnel
Training sales personnel
Compensation and motivation
Controlling and evaluating sales force performance
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Sales promotion…

Sales promotions usually have three distinctive
characteristics that help to set them apart.
1. They provide information and help gain attention.
2. They provide an incentive to the customer.
3. They encourage the consumer to buy quickly.
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Consumer sales promotions…
 Sales promotions for consumers can come in
various forms.
 These forms include coupons, demonstrations,
frequent-user incentives, point-of-purchase
displays, free samples, money refunds or rebates
and contests or sweepstakes.
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Business sales promotion…
 There are also numerous ways to offer sales
promotions to businesses or industries.
 When targeting these types of customers try
offering quantity discounts, free merchandise,
buy-back allowances, dealer listings or
cooperative advertising.
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The appeal of publicity…
 A well planned publicity campaign along with
other promotional tools can be highly effective
and help you save money at the same time.
 Part of the appeal of publicity is that it can offer
high credibility, it can catch people off guard and
help dramatize a product or company.
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Types of publicity tactics…
 What types of publicity tactics will you employ?
 A press release is one option. Some reasons to
issue a press release include:
–
–
–
–
Support of a social cause
Winning of quality awards
New product launches
Speeches of top management
 Other types of publicity include public speaking
engagements and public events.
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What comes next?
 After you decide on which tools from the
promotional mix you want to use, you then need to
develop a promotional budget.
 This is usually a major obstacle for companies
because while they may know what tools they
want to use, they may not know how to allocate
money to properly use them.
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Setting the promotional budget…
 Many companies set their budget as a percentage
of current or forecasted sales.
 While other companies mirror their budget to that
of their competitors.
 Still some companies will approximate their
budget by how much the objectives they wish to
meet will cost in advertising dollars.
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A percentage of sales…
 For retail or location based service companies, the
following formula will usually work in helping to
estimate a promotional budget.
times
minus
Projected Gross Sales
12% (.12)
Cost of Rent
equals
Advertising Budget
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Creating A Marketing Plan
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Why have a formal plan?
 Many entrepreneurs insist that hustle is all that is
required in the marketing of their business.
 But energy alone is not enough. Energy must be
directed by intelligence.
 Intelligent marketing is marketing that is first and
foremost focused on a core idea.
 All your marketing must be an extension of this
idea—it isn’t enough to have a better idea—you
need to have a focused strategy.
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The plan’s structure…
 A complete marketing plan includes the following
three sections:
– The marketing plan identifies the market and your
strategy.
– The creative plan is similar to the marketing plan but is
limited to the content of your marketing materials.
– The media plan which sets forth and details your
selected media weapons and media calendar.
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Let’s start with the marketing plan…
 The marketing plan identifies the market and your
overarching positioning strategy.
 The length of your final marketing plan is up to you and
depends on your organizational culture and the audience
that will read and use the plan.
 At first, though, try to state it in just one paragraph.
 According to Jay Conrad Levinson, author of Guerilla
Marketing, a simple plan can be created in just seven
sentences.
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A simple marketing plan…
 Sentence one explains the purpose of the strategy.
 Sentence two explains how you’ll achieve this purpose. It
describes your competitive advantage and benefits.
 Sentence three describes your target market—or markets.
 Sentence four, the longest, outlines the marketing weapons
you’ll employ.
 Sentence five describes your niche—your positioning.
 Sentence six reveals the identity of your business.
 Sentence seven states your budget, which should be
expressed as a percentage of projected gross revenues.
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The creative plan…
 Almost any marketing person worth his or her salt will tell
you that marketing is not creative unless it sells.
 Advertising legend Leo Burnett used to remind his staff
that a person can be creative by coming downstairs with
his or her socks in their mouth—but what’s the point?
 There must be a reason for your creativity, and your
creativity should never detract from your message.
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Developing the creative plan…
 A creative strategy is similar to a marketing plan
but is limited to the marketing materials only—
and directed solely at their content.
 A creative plan can be written in as little as three
sentences which detail:
– The purpose of the creative message
– How the purpose will be achieved
– The mood, tone, or personality of the advertising
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Your marketing calendar…
 Once you’ve selected the marketing media and weapons
that can propel you to your goal, be sure you use them in
an orderly, logical manner.
 This can best be accomplished by the third and final
section of your marketing plan: the marketing calendar.
 A marketing calendar indicates whether or not you can use
these methods properly because it forces you to come to
terms with the costs and realities of the media you select.
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A more complex plan…
 In some cases you may need a more in-depth marketing
plan.
 This plan can be structured in the following format.
–
–
–
–
–
–
–
–
Executive Summary
Challenges
Situation Analysis
Market Segmentation
Selected Marketing Strategy
Short & Long-Term Projections
Conclusion
Appendix
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Executive summary & challenge…
 The executive summary is simply a summary of
the marketing plan.
 It should highlight the main points of your plan.
 The challenge section of the marketing plan
should include a brief description of the product
that will be marketed.
 The challenge should also include associated goals
such as sales figures and strategic goals.
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Situation analysis…
 The situation analysis should include the
following:
– Company Analysis - Goals, culture, strengths and
weaknesses.
– Customer Analysis - Number and type of customer,
value drivers and decision process.
– Competitor Analysis – Market position, strengths,
weaknesses and market share of competitors.
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Situation analysis…
 The situation analysis should include a section on
collaborators such as subsidiaries, distributors, etc.
 A SEPTE may also be included in the situation analysis.
 A SEPTE analysis will help in measuring the:
–
–
–
–
–
Social and cultural environment
Economic environment
Political and legal environment
Technological environment
Environmental issues
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SWOT analysis…
 A SWOT analysis is the last section of the
situation analysis.
 This type of analysis helps to determine internal
and external environmental factors.
 The internal factors are the strengths and
weaknesses of the business.
 The external factors are the opportunities and
threats in the market.
 SWOT analysis worksheet
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Market segmentation…
 The purpose of the market segmentation section is to help describe
the segment(s) of the market you are targeting.
 Included in this segmentation are:
–
–
–
–
–
–
–
A description of the target market
Percent of sales for this group
What they want
How they use the product
Support requirements
How to reach them
Price sensitivity
 Include a segment analysis for each market segment you are
targeting.
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Selected marketing strategy…
 This section of the marketing plan should include
a discussion of the strategy you have selected.
 It should include decisions you have made
regarding each of the 4 P’s (product, price, place,
and promotion).
 Be sure to include things such as brand name,
scope of product line, list price, payment terms,
distribution channels and advertising issues in this
section.
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Finishing up your plan…
 The short and long-term projections should
include immediate and future desired results and
how these results will be achieved.
 This section may also include a forecast of
revenues and expenses related to the plan.
 A conclusion should be placed at the end of the
plan to summarize the plan’s contents.
 Any other information that may pertain to the
marketing plan should be paced in the appendix.
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Just how important is marketing?
 The Father of Modern Management, Peter
Drucker emphasized the importance of marketing
when he said:
– “There are only two functions of a business: marketing
and innovation.”
 Remember, there is no business without first a
customer.
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