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CHAPTER 10 Market! Market! Market!

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Marketing takes in a wide area of activities but, in short, marketing is simply creating a demand for your product or services. Don't confuse marketing with selling, which is getting someone to actually purchase your product or service. Business success is much more dependent on marketing than on the product or service you are selling! As an entrepreneur you must be marketing (and ideally, selling) to every person with whom you make contact. Every dollar of services or products you sell will be the result of marketing. Knowing this, it is amazing how it can be forgotten. And once forgotten, it is frequently too late to recover.

TRUISM 20
Without marketing, failure is guaranteed.

You need to become familiar with basic marketing concepts and the purpose of this chapter is to introduce you to these basics. It won't make you an expert. There are literally thousands of references on the subject including books, tapes, and seminars. An excellent source of free marketing assistance is your local SCORE chapter. See references at the end of this chapter.

This chapter will specifically cover four major marketing steps:

1. Identification of target market
2. Pricing
3. Promotion
4. Distribution.

Like so many entrepreneurs my first business started with a single customer. I was contacted, while employed in a regular job, by a company that wanted to purchase a few hours of my time in order to solve a problem they were having. I did so, made a few dollars, and immediately got a taste for the independence associated with working on my own. Eventually, as my association with this company grew, I quit my job and started an electronic manufacturing business supporting this one customer. My business grew to support their needs. Suddenly, due to a corporate realignment, my friend, the president was replaced. Unfortunately, one of the new president's associates was in the same business as I. You know the rest of the story. I lost my only customer! I was so busy supporting my "best" customer and monitoring my growth, I forgot that I might need other customers! I had not spent any time marketing! It was a foolhardy mistake.

Marketing essentially consists of these four major steps:

1. Identify product or service and potential market.
2. Determine the price.
3. Develop promotion strategies.
4. Assess distribution channels.

Your planning activities should have included precise descriptions of your product and/or service along with potential markets. Your initial marketing activity will be to research these potential markets and make sure you chose correctly.

This research can take many forms such as direct mailing or personal interviewing. Even if you feel certain of your market segment, it is important to accumulate data based on more than intuition and observation. If you do not feel qualified to take on this research yourself you can hire a marketing firm. If you go this route, make certain you understand what you will receive for your money. Marketing is more an art than a science (as most marketing individuals are quick to point out) and it is sometimes hard to define their product. It is also important that you have realistic expectations from whatever marketing methods you use. For example, direct mail response is considered good if you receive 1-2% reply. If you are expecting 50%, you and your marketing consultant are having some communication difficulties.

DETERMINE THE PRICE

In a way, this is part of your market research since you can collect information relating to what a customer might pay. You need to look at pricing from two aspects. On the one hand, what does it cost for the product (to manufacture, acquire, etc.) including your overhead and profit. On the other hand, what is the customer willing to pay for the product. Hopefully, these numbers will be such that you can reconcile a fair price for both yourself and the customer.

You obviously need to be competitive and that's where research is important. You must understand your competitors' pricing and ensure that you are either competitive or are providing a product or service that is superior in such a way as to command a higher price. What you can't do is take a head-in-the-sand approach and assign a price for your product or service that is not based on solid market research. For the most part, since you are already familiar with the territory, you will probably be able to perform this research better than a marketing firm. You'll also save some money in the process.

To help in determining the price of your product or service keep the following in mind:

• Your total cost.
• Your competitors' cost.
• What the market is willing to pay.
• What type of promotions you will use.

Don't forget the two biggest pricing mistakes made by small businesses;

1. Setting a price that is too low. When in doubt, price high! It's easy to discount but hard to raise prices.

2. Not updating pricing often enough. You must constantly be aware of your market and change pricing accordingly.

Keep the following "pricing strategies" in mind when setting your prices:

• Pricing low to gain market share
• Pricing to promote a specific product
• Quantity pricing
• Trade discounts

Be careful about lowering prices just to meet or beat the competition. However there are some good reasons to lower prices. For example,

1. A strategy to increase market share.
2. Promote a new product or service.
3. Attract attention to a over stocked product.
4. Encourage high volume purchases.
5. Increase seasonal business (Christmas sale)

On the other hand if you have to increase prices in order to cover, for example, increased cost of materials, labor, etc. When an increase is necessary ease the pain for your customers by considering the following:

1. Notify your existing customers of the increase and, if possible, give them an opportunity to purchase at the existing prices.

2. Try and advertise the increase along with "new and improved" products or services.

3. Give the customer something in return for the increased costs. For example, free shipping with orders above a certain value.

4. If possible, delay the increase for existing customers.

I hired a marketing consultant, to market my product development services. He wanted to market heavily in Florida for various reasons, including his contacts in the area, as well as that state's growth of companies that might need my services. We signed a contract that guaranteed him a monthly retainer for a year and defined his "services" in return for this retainer. He indicated that opportunities were vast in Florida and I could expect significant contracts as the result of his efforts. When the net results of his efforts were zero after 6-months, I was concerned enough to terminate his efforts in spite of the contract. We went to court and he prevailed. Our contract didn't state that his efforts had to result in any contracts. He got a year's worth of work from my company and I learned two things: 1) Write contracts very explicitly and have them reviewed by an attorney. Make sure you understand what you are getting for your money. 2) Marketing is indeed an art and specific guarantees are generally not possible. Also, the results of any marketing effort may take some time to become evident.

DEVELOP PROMOTION STRATEGIES

The possibilities for promotion are as varied as your imagination. See the following checklist for some ideas.

CHECKLIST #8: PROMOTION STRATEGIES

• Advertising on TV and radio
• Advertising in trade journals
• Advertising in magazines
• Advertising in newspapers/newsletters
• Personal contacts with potential customers
• Promotions (sales, open houses, etc.)
• Yellow Pages advertising
• Signs/displays
• Billboards
• Direct mail (see below)
• Seminars
• Your own newsletter
• Press releases, traditional and using the Internet. For example, the Internet News Bureau at http://www.newsbureau.com/.
• Attendance at trade shows
• Publication of articles in trade journals, etc.
• Business card advertising (use the back of the card for your sales message).
• Advertising/marketing on the Internet (See Chapter 14)

DIRECT MAIL

Direct mailing campaigns, if used correctly, can be a very productive and cost effective promotion strategy. The uniqueness of direct mail is that you can target, through mailing lists, very specific groups of people. For example, those whose income exceeds some amount, those who own homes, a specific brand of car, or appliance, or who vacation in the Caribbean. The point being, you can get your sales message to the people most likely to take advantage of your offer. To properly take advantage of a direct mail program, you probably will need some help from someone in the business. However, knowing some of the basics of the direct mail business can be an advantage.

As with all aspects of marketing, you need a well-defined plan with a budget.

Timing of mailings is important. Statistics show that January, February and October are the best, June and July the worst.

Prepare your mailing piece thoughtfully ... you get only one chance. It's a good idea to get professional assistance here. A good copywriter can be invaluable. Once again, shop around and ask lots of questions. Make sure you know what you are buying.

Choose mailing lists carefully. List costs vary but an average is $50 per thousand names for one-time use. Don't try to cheat and use the list more than once ... owners normally "seed" the list and you will be found out.

Keep detailed records of returns (undeliverable mail) you receive. Reviewing this data will allow you to more effectively select future lists.

If you will purchase labels from the list provider, determine if your labels will be manually or machine affixed. You need to order the labels in the correct form.

When you receive returns from your list mailing, you may now use those names to generate your own mailing list.

Make certain you understand the following specifics of the list you purchase: 1. The total number of names.
2. How the list was compiled and its date.
3. List profile (how the list was complied.)
4. The media on which the names will be provided (labels, computer disk, etc.)
Consider using a full-service mailing house who will take care of all the details for you. As always, shop around and ask questions.

Test the list before purchasing a large quantity of names. Purchase 1000 to 5000 names and analyze the returns.

Have realistic expectations. Responses from list mailings are very low.

Search the Internet for sources of lists. For example, HR Direct at http://www.hrdirect.net/.

ASSESS DISTRIBUTION CHANNELS

Distribution channels are the methodology of get-ting your product or service to the customer. The items of interest here include:

Location of your business (most important for retail operations).

Using wholesalers and distribution centers.

Packaging and shipping details.

The specifics of your product or service will determine what else may be important. What's critical is to consider distribution in your overall planning efforts.

Depending upon the particular circumstances of your business it may make sense to use a marketing firm to set up an integrated marketing program. Remember, however, that when dealing with the marketing firm you, and only you, are responsible for what you get out of the relationship. Shop before selecting and make sure you under-stand what to expect from the service.

GET THE WORD OUT Marketing is also promotion. Here are a few ideas for promoting yourself and your business.

Write an article. Think about it. You're an expert in something so tell the world. Write an article for one or more of the magazines in your area of expertise. Many will pay you for the article but even if they don't it's worth the effort since your article byline can gain you publicity. [My bylines always include a mention of one of my books and how to order a copy!]. This is such an important marketing tool, I'm providing a "step-by-step" guide to get you going:

1. Identify magazines and other periodicals that relate to your product or service and would be interested in related subject matter. Do this by visiting your local library and asking at the reference desk for a copy of "Standard Periodical Directory" by Oxbridge Communications. This fantastic reference lists every periodical currently being published. While you're at it, check out the listings of Associations that might be interested in your material. I guarantee that whatever your product or service, you will find dozens of applicable listings.

2. Review a few articles in the publications you find and note the writing "style." Is it humorous? Academic? For periodicals you cannot find, call the magazine and ask for a sample issue and a copy of their writing guidelines. Call (or e-mail) the remaining magazines on your list and ask for their writing guidelines.

3. Reviewing the content of the various publications will give you many ideas for topics and possible articles.

4. It's time to write! Get over any "fear" you have of writing. The process is easy and rewarding. Begin writing your article for the most likely candidate from your list of periodicals and follow their style of writing. Keep these writing guidelines in mind:

• Pick a subject and organize your thoughts on paper.
• Start with a quick outline to help you stay focused and organized.
• Write using short sentences and paragraphs.
• Don't use big words - you are not trying to impress anyone - you are teaching.
• The first paragraph should quickly identify the purpose and content of the article.
• The last paragraph should be a call for action or a conclusion.
• Write each paragraph deductively. That is, make your point immediately and follow up with supporting information.
• Don't be verbose. Read any legal or insurance document for an example of how NOT to write.
• Carefully check grammar and spelling (do NOT rely on your word processor spell checker - remember those checkers still cannot correct "there" to "their" if required).
• Have an associate review your work and ask for critical comments. Wait a couple of days and review your work yourself. Correct as necessary.

5. Think carefully about your "byline" -the information that you want included at the end of your article. This byline should be a sneaky "sales message" and give some indication of your expertise. As an example, here is a byline I frequently use:

Robert Sullivan is the author of "The Small Business Start-Up Guide" and "United States Government - New Customer! Order toll-free by calling (800) 375 8439. Visit the Small Business Advisor at http://www.isquare.com

6. Give your article an effective title (use a subtitle if it makes sense). Print your article using 1.5 or double spacing with large (at least 1-inch) margins (or refer to the magazines guidelines, if any). Include your byline at the end of the article. If submitting by e-mail (a preferred method), use single spacing.

7. Submit your article to EVERY periodical you have found (even though you have written your article in the "style" of one of the selected periodicals). Your package should include the following:

• A copy of the article
• A cover letter briefly describing the article (include the number of words) and the fact that you are not requesting payment but only require that your byline be included. You should also request a copy of the issue that will include your article. (Think positive!)
• A small photo of yourself (a head shot). Color or black and white is okay but it should be glossy. Many publications like to include a picture of the author.

8. Follow-up each submittal. E-mail is always best, if available.

9. Don't get discouraged. Keep writing and submitting.

Present a Seminar. If you have the expertise and background, this is a great way to present your information to a number of people simultaneously and get paid for it. Also, a seminar is a great way to sell your product such as a book, report, etc. An excellent reference on how to develop and promote a seminar is "Successful Seminars & Workshops" by Howard Shenson, which is available in many bookstores.

Produce an Audiotape. (or CD) A cassette audio tape or CD is inexpensive to produce and duplicate. Audio tapes relating to self-help topics are great sellers. Check your yellow pages or better yet, the Internet for sources of cassette and CD producers.

Install a FAX-on-DEMAND System. This allows a customer to call your number and request specific documents be fax'ed back to them. The system is fully automatic and is like having an additional employee who works 24 hours a day responding to customer requests for information. A number of companies provide fax-on-demand systems. Check out Faxback on the Internet at http://www.faxback.com or call them at (800) 329 2225.

Produce a Videotape. If you're presenting seminars or other sessions have them videotaped. These tapes can be packaged and sold for more than the cost of the original seminar! Video production companies in your area can be found in the yellow pages.

Give a Speech. Make yourself available as a speaker in your area of expertise. Even if you don't get paid for the presentation, the exposure is worth your time. A good way to begin is to make yourself known to your local library association who frequently are looking for presenters on a variety of topics.

Generate Information. Regardless of what you do or sell, create an informational report or brochure about the product or service. Produce it to read like a learning tool and include useful information for the reader. Be sure to include ordering details for your product or service. Advertise your report via e-mail, direct mail, and in your other business literature. Sell it for enough to cover your production and mailing costs. You will generate a mailing list at no cost to you AND sell your product or service. Printing companies such as "Sir Speedy" can produce these packages quickly and very inexpensively.

CUSTOMER SATISFACTION (Keeping your customers)

Your marketing program exposes your product or service to potential customers. Hopefully the pro-gram will also bring these customers to your door. Once at the door, the trick is to keep them. It's really simple to do this ... keep your customers satisfied. The old adage is true, "Your best advertisement is a satisfied customer." A customer satisfaction program is a must for your business. Also remember that it is less expensive to retain an existing customer than to find a few one.

Put yourself in the place of the customer when assessing your performance. It is frequently the little things that make a difference. The following checklist highlights a few tried and true elements of a customer satisfaction program. Please take note that some of these suggestions apply only to certain types of businesses.

CHECKLIST #9: CUSTOMER SATISFACTION PROGRAM

• Make sure that ALL your employees understand that the customers are #1.
• Never, never argue with a customer.
• Treat EVERYONE as a potential customer.
• Don't use a telephone answering machine or a voice mail system unless absolutely necessary. Customers like to talk to real people, not machines. Think how irritating it is for you to wade through the typical voice-mail "menu." But, choose a machine over an answering service. With a machine you know what will be said to the caller.
• Answer the telephone by the second ring.
• Say "Thank you" frequently ... be courteous.
• Provide something free (coffee, bagels, pens).
• ALWAYS return telephone calls promptly.
• Answer your own telephone.
• Handle all complaints quickly and personally if required.
• Install a complaint "hot line" for customers to use.
• Make your product/service easy to purchase.
• Arrange for purchase by credit card.
• Have an "open house" periodically.
• Provide free samples.
• Sponsor a free lecture.
• Don't oversell (don't be a pest but be there when needed).
• Call your own office from time to time just to see how you're treated.
• Go the "extra mile" for your customer.
• Don't ever blame anything on a "computer problem."
• Have a sale just for "preferred" customers.
• If you deal in an expensive product or service with few customers, follow up each sale with a telephone call or written communication.
• Use customer satisfaction surveys. You will always learn something that is surprising.
• Stay visible within your community (volunteer your time, join toastmasters).

TRUISM 21
You never know who your next customer will be, so
treat everyone as a potential customer.

SELLING TO THE GOVERNMENT

There is one unique customer we should briefly discuss before leaving the subject of marketing -The United States Government, who just happens to be the world's largest consumer of goods and services. It is a mistake to think that just because you are a small or new business that this giant customer is out of your reach. In fact, most purchases by the government are from small businesses! Appendix VIII includes specific information for marketing to the government.

SUMMARY

Market every day and treat every person you meet or talk to as a potential customer. Remember that your largest or oldest customer can disappear tomorrow and whatever marketing techniques you use will need time for results.