Week 7 Discussion - Promoting Your Product/Service
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cf_katz_ESB_6e_chap009_PPT.pptxChapter Nine Small Business Marketing: Customers and Products
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The Marketing Process
Product, price, promotion, and placement are the 4 Ps of marketing.
The customer development process focuses specifically on meeting the needs of the customer, hopefully leading to a new product/service.
The product development process perfects the product or the innovation within the product.
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Customer Roles
When you buy a product/service and use it yourself, you are the end user, and the purchaser.
In organizations, a person or office is the purchaser for other end users.
Yet another person may be the decision maker who determines what will be bought for end users, then the purchaser places the order.
For individuals or organizations, an additional role is the influencers making suggestions/recommendations to people in any of these roles.
Understand these roles to better understand your customers.
Use the roles to help map out the purchasing process.
Closely related to this is the idea of the customers’ budget cycle, or for major purchases the capital budgeting cycle.
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Initial Customer Profiles
A customer profile starts with face-to-face interviews.
The goal is an unbiased sense of how customers think about the issue your product/service helps resolve or improve.
Analyze results by looking at the customer job.
Identify their pains or the gains they wish they could achieve.
Find out how they deal with the pain or gain right now.
Locate where there is a possibility for something better.
What if interviews show customers are unresponsive to your solution?
You can change or pivot your product/service to better fit the customers’ pains and gains.
Or pivot your customer base to those willing to purchase your product.
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Target Market
Target market is one of a set of nested terms for the market sizes.
Total available market (TAM).
Serviceable available market (SAM).
Serviceable obtainable market (SOM).
Penetrated market (PM).
There can be more than one target market.
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Target Market – The Target Customer
Ways to find your target customer.
Benefit matching – the closer customers’ needs/pains/gains align with features of your product/service, the happier they will be.
Long-term value (LTV) or customer lifetime value (CLV) – go after the customer who will bring the most revenue and profit to your firm.
Influencer impact – word of mouth or social media exposure can lead to sales from customers you did not know to target.
Minimizing churn – keeping existing customers is more valuable than finding new ones.
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Target Market – Finding First Customers
First customers are a key challenge for a start-up and though sales for cash are good, there are other nonfinancial benefits.
Feedback.
Testimonials.
Sharing on their social media accounts.
Three ways to find first customers are:
Family and friends – they may not need or use the product.
Early adopters – likely to impulse buy but more difficult to find them.
People in pain – they appreciate your product the most and provide feedback but they are even harder to find.
Connecting with the people in pain is the most useful and may be worth discounting, or giving away, your product to obtain a chance at follow-up.
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Target Market – Thinking about Customer Service
Use outstanding customer service to convert customers into fans.
Show interest in and concern for everyone in your business – customers, employees, suppliers, and the community.
Go the extra mile for these people.
Take time to be nice to all these people.
Be honest and open in how you operate.
When mistakes are made, fix them.
Keep in mind the SERVICE acronym as a way to teach employees what outstanding customer service entails.
Social, enthusiastic, responsible, vibrant, intelligent, courteous, engaged.
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Segmenting Your Market
Most products/services work best with particular markets.
Successful entrepreneurs leverage this idea using market segmentation to identify the best market(s) for their good or service.
Segmenting divides the total market into manageable pieces.
Your target market is the segment(s) you select on which to target your marketing efforts.
Geographic segmentation.
Demographic segmentation.
Benefit segmentation.
Psychographic segmentation.
Some companies have created specialized customer profiles based on combinations; called predetermined market segments.
These commercial products can help you know more about your customers, but they should not replace the knowledge you gain on your own.
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A Segmentation Example
You live in Phoenix, are bilingual in English and Spanish, and want to start a day-care with a bilingual focus.
You create a customer profile and find interest but are unsure about where to locate the day-care center.
You’ve segmented your market to a life cycle position – parents of small children – and want a location central to your demographic.
Using the website zipwho or city-data, find the zip code with the biggest target demographic in the area.
With your target zip code, go to PRIZM to identify the five largest market segments within a specific zip code.
The main reason for targeting a market segment is so you do not waste effort and money targeting the wrong customers.
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Marketing Research
Marketing research can verify the size of the potential market.
It is where and how you get the facts to support your plan.
And the proof that your plan has a good chance of success.
Research falls into two major categories.
Primary research is gathered to answer a specific marketing question.
Secondary research has already been gathered for another reason, but can be just as useful.
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Primary Research
This information is extremely current, but can be costly – online options are the most reasonably priced.
One method of obtaining primary research is observation, called ethnographic research.
Another method is the focus group, either formal or informal.
Typically a survey is used when gathering information from large numbers of people.
Surveys contain open- and closed-ended questions.
Scalar questions ask for a rating.
Dichotomous questions offer two choices for an answer.
Categorical questions offer predetermined categories.
Open-ended questions allow interviewees to answer any way they wish.
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Secondary Research
The challenge is finding good data – gathered in an unbiased way, reported fairly, and from a reputable source.
Supplement commercial databases with free databases.
Market size is typically given as either the number of people in a market or the number of businesses in the industry.
The easiest way to find selling prices is online.
Profitability for specific stores is nearly impossible to find, but industry standards for profitability are easier to find.
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The Basics: Crafting Your Value Proposition
The relation of product or company capabilities to customer pains and gains is the value proposition.
The challenge is to boil down those multiple items to one short value proposition mantra that describes the benefit you offer your customer.
To get your value proposition mantra, list those needs only you meet and look for a way to draw a commonality from among them.
You can use a short mantra, such as “We help X do Y by doing Z.”
Or use a longer version including your competitive advantage.
The final goal for developing and testing your value proposition is how it stacks up against other offerings available to customers.
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Planning for Marketing
The goal is to create the specifics of the marketing strategy you will use to generate sales for your business.
Marketing is one of the building blocks for your business plan, it cannot be set in concrete.
In preparing the marketing section of the business plan, you will be doing most of the work for a stand-alone marketing plan.
For start-ups, a marketing plan helps a firm build its brand and relationship with customers.
You can get help creating a marketing plan at the SBA or SCORE.
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Product: Goods versus Services
A product is anything offered to satisfy consumers including goods, services, people, and ideas.
A car has tangibility, but its warranty and service plans are intangible.
Perishability of services is an issue – a cab ride is an example of the inseparability of services.
While products are generally consistent, services show heterogeneity.
Some combinations fall between pure goods and pure services.
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Product: The Total Product Approach
In marketing, the total product includes the entire bundle of products and services you offer.
The total product is how your customers describe your good/service.
What you describe as your good/service is the augmented product and has features that differentiate it from competitors.
Underneath both of these lie the core product, which is a basic description of what your company does.
Why is the total product important for small business owners?
Your consumers see your product as more than the core component.
Using the total product approach allows you to find the most cost-effective “bundle” of value and cost benefits for your target market.
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Product: New Product Development Process
Developing a simple me-too product may only take hours and steps may be skipped. Regardless of the pace, this is a necessary process.
Use prototypes to further consumer testing.
Commercialization is the process of making the new product available to consumers.
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Product Life Cycle
Not all products survive the introduction phase.
Acceptance of the product increases rapidly in the growth phase.
As growth slows, products enter the maturity phase.
Sales and profits fall during the decline phase.
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Service Life Cycle
Services go through the same four stages, but it is easier to extend the life cycle and eliminate the decline stage.
On-the-run changes mean your service starts a new life cycle with each tweak of its offering.
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Using the Product Life Cycle
The product life cycle shares challenges with firm or industry life cycles.
It is hard to know exactly where in a cycle a product/service might be.
You must be aware of the product cycle and consider where your product might be and what that means.
You should understand that the determination can be imperfect and unpredictable.
Knowing where your product stands in the life cycle gives you a way to think about your product, customers, and competition.
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Accessibility Content: Text Alternatives for Images
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The Marketing Process – Text Alternative
The graphic depicts the marketing process in a two step flow chart.
The first step is connecting your customer to your product or service through the value proposition.
The second step applies the value proposition to the mechanics of making the connection through the four Ps of marketing (product, price, promotion, placement) which leads to the generation of sales.
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Target Market – Text Alternative
The nested circles of this image portray the many types of target markets.
The largest circle is the total available market or TAM, which represents everyone who might consider the product or service you are offering.
The next largest circle which lies within your TAM is the serviceable available market or SAM. This represents customers within your geographic reach. If you depend on local traffic, it could be your neighborhood. If you are online, it could be as large as your TAM.
The next largest circle lies within your SAM and is the serviceable obtainable market or SOM. This is also called your target market and represents customers you think would be interested in your product/service.
The final circle lies within your SOM and is your penetrated market, or PM. This is your actual number of customers divided by the target market to give you a percentage of the market your firm has attained.
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Product: Goods versus Services – Text Alternative
The goods-services continuum begins with pure goods on the left end of the continuum and pure service on the opposite end of the continuum.
The middle of the continuum shows three positions. The position nearer to the pure goods end of the continuum is considered a good-dominated product. The position nearer the pure service end of the continuum is considered a service-dominated product.
The middle of the continuum contains hybrids of both a product and a service.
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Product: New Product Development Process – Text Alternative
There are five steps in the new product development process.
The first step is idea generation/source of business ideas which include end users, customers, salespeople, marketing research, and competitors.
The second step is idea screening for business potential, in which you are looking for objective fit, return on investment (ROI) standard, product fit, and market trends.
The third step is idea evaluation/feasibility study and includes concept testing and business analysis.
The fourth step in the process is product development, including prototypes and test markets.
The fifth, and final step is commercialization or bringing the product/service to market and encompasses such things as a marketing plan, production, and market introduction.
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Product Life Cycle – Text Alternative
This line graph plots dollars on the vertical axis and time on the horizontal axis. The graph is broken into four stages: introduction, growth, maturity, and decline. Sales are plotted in a blue line and below that, but generally mirroring the sales line, is the line depicting profits.
The sales line starts at zero at the beginning of the introduction stage and increases slowly until it reaches the growth stage. Here, sales increase sharply until the maturity stage where sales peak and start to decline. Sales in the decline stage continue to slowly taper off.
The second line on the graph is the line depicting profits. Profits start below zero due to start up costs and breaks-even and begins making profits as the product is leaving the introduction stage. Profits continue to grow during the growth stage and peak during the maturity stage. During the decline stage, profits fall at a faster rate than sales.
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Service Life Cycle – Text Alternative
This line graph depicts sales on the vertical axis and time on the horizontal axis.
As the service is first introduced, it includes the initial service bundle of offerings. As soon as sales peak and start to decline, incremental changes are made to the service and it begins the cycle anew, starting at the bottom of the sales scale. Then as sales increase and peak for the second time and begin to fall, another incremental change is applied and the process starts again at the bottom of the sales scale. Sales peak for a third and fourth time, each time with incremental changes made to make the process begin again.
The graph ends up having four slightly s-shaped lines.
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