Marketing is a general term used to describe all the various activities involved in transferring goods and services from producers to consumers. In addition to the functions commonly associated with it, such as advertising and sales promotion, marketing also encompasses product development, packaging, distribution channels, pricing, and many other functions. The modern marketing concept, which is applied by most successful small businesses, is intended to focus all of a company's activities upon uncovering and satisfying customer needs. After all, an entrepreneur may come up with a great product and use the most efficient production methods to make it, but all the effort will have been wasted if he or she is unable to consummate the sale of the product to consumers.
The importance of marketing in the modern business climate cannot be overstated. In fact, management guru Peter F. Drucker has claimed that marketing "is so basic it cannot be considered a separate function…. It is the whole business seen from the point of view of its final result, that is, from the customer's point of view." Marketing is the source of many important new ideas in management thought and practice—such as flexible manufacturing systems, flat organizational structures, and an increased emphasis on service—all of which are designed to make businesses more responsive to customer needs and preferences. This suggests that small business owners must master the basics of marketing in order to succeed.
In the Macmillan Small Business Handbook, Mark Stevens discussed four main areas of marketing in which entrepreneurs should concentrate their efforts:1) determining the needs of customers through market research; 2) analyzing their own competitive advantages and developing an appropriate market strategy; 3) selecting specific target markets to serve; and 4) determining the best marketing mix to satisfy customer needs. The first three tasks are most appropriately performed when a start-up business is preparing to enter a market, or when an existing business is considering entering a new market or promoting a new product. The marketing mix, on the other hand, includes the main decision areas that an entrepreneur must consider on an ongoing basis. Some elements of the market environment, such as the general economic conditions, are beyond a small business owner's control. But he or she can adjust elements of the company's marketing mix—which consists of the "four Ps": product, place, price, and promotion—to better fit the market environment.
The term "marketing" is derived from the word "market," which refers to a group of sellers and buyers that cooperate to exchange goods and services. The modern concept of marketing evolved during and after the industrial revolution in the 19th and 20th centuries. During that period, the proliferation of goods and services, increased worker specialization, and technological advances in transportation, refrigeration, and other factors that facilitated the transfer of goods over long distances resulted in the need for more advanced market mechanisms and selling techniques. But it was not until the 1930s that companies began to place a greater emphasis on advertising and promoting their products and began striving to tailor their goods to specific consumer needs. By the 1950s, many larger companies were sporting entire marketing departments charged with devising and implementing marketing strategies that would complement, and even direct, overall operations. Since the 1970s, the primary marketing trend has been a greater focus on providing benefits, rather than products, to customers.
MACRO-MARKETING AND MICRO-MARKETING
Macro-marketing refers to the overall social process that directs the flow of goods and services from producer to consumer. It is the economic system that determines what and how much is to be produced and distributed by whom, when, and to whom. E. Jerome McCarthy and William D. Perreault, Jr. identified eight universal macro-marketing functions that make up the economic process:1) buying, which refers to consumers seeking and evaluating goods and services;2) selling, which involves promoting the offering; 3) transporting, which refers to the movement of goods from one place to another; 4) storing, which involves holding goods until customers need them; 5) standardization and grading, which entails sorting products according to size and quality; 6) financing, which delivers the cash and credit needed to perform the first five functions; 7) risk taking, which involves bearing the uncertainties that are part of the marketing process; and 8) market information, which refers to the gathering, analysis, and distribution of the data necessary to execute these marketing functions.
In contrast, micro-marketing refers to the activities performed by the individual providers of goods and services within a macro-marketing system. Such organizations or businesses use various marketing techniques to accomplish objectives related to profits, market share, cash flow, and other economic factors that can enhance their well being and position in the marketplace. The micro-marketing function within an entity is commonly referred to as marketing management. Marketing managers strive to get their organizations to anticipate and accurately determine the needs and wants of customer groups. Afterward they seek to respond effectively with a flow of need-satisfying goods and services. They are typically charged with planning, implementing, and then measuring the effectiveness of all marketing activities.
THE TARGET MARKETING CONCEPT
Micro-marketing encompasses a number of related activities and responsibilities. Marketing managers must carefully design their marketing plans to ensure that they complement related production, distribution, and financial constraints. They must also allow for constant adaptation to changing markets and economic conditions. Perhaps the core function of a marketing manager, however, is to identify a specific market, or group of consumers, and then deliver products and promotions that ultimately maximize the profit potential of that targeted market. This is particularly important for small businesses, which more than likely lack the resources to target large aggregate markets. Often, it is only by carefully selecting and wooing a specific group that a small firm can attain profit margins sufficient to allow it to continue to compete in the marketplace.
For instance, a manufacturer of fishing equipment would not randomly market its product to the entire U.S. population. Instead, it would likely conduct market research—using such tools as demo-graphic reports, market surveys, or focus groups—to determine which customers would be most likely to purchase its offerings. It could then more efficiently spend its limited resources in an effort to persuade members of its target group(s) to buy its products. Perhaps it would target males in the Midwest between the ages of 18 and 35. The company may even strive to further maximize the profitability of its target market through market segmentation, whereby the group is further broken down by age, income, zip code, or other factors indicative of buying patterns. Advertisements and promotions could then be tailored for each segment of the target market.
There are infinite ways to address the wants and needs of a target market. For example, product packaging can be designed in different sizes and colors, or the product itself can be altered to appeal to different personality types or age groups. Producers can also change the warranty or durability of the good or provide different levels of follow-up service. Other influences, such as distribution and sales methods, licensing strategies, and advertising media also play an important role. It is the responsibility of the marketing manager to take all of these factors into account and to devise a cohesive marketing program that will appeal to the target customer.
THE FOUR Ps
The different elements of a company's marketing mix can be divided into four basic decision areas—known as the "four Ps": product, place, promotion, and price—which marketing managers can use to devise an overall marketing strategy for a product or group of goods. These four decision groups represent all of the variables that a company can control. But those decisions must be made within the context of outside variables that are not entirely under the control of the company, such as competition, economic and technological changes, the political and legal environment, and cultural and social factors.
Marketing decisions related to the product (or service) involve creating the right product for the selected target group. This typically encompasses research and data analysis, as well as the use of tools such as focus groups, to determine how well the product meets the wants and needs of the target group. Numerous determinants factor into the final choice of a product and its presentation. A completely new product, for example, will entail much higher promotional costs to raise consumer awareness, whereas a product that is simply an improved version of an existing item likely will make use of its predecessor's image. A pivotal consideration in product planning and development is branding, whereby the good or service is positioned in the market according to its brand name. Other important elements of the complex product planning and management process may include selection of features, warranty, related product lines, and post-sale service levels.
Considerations about place, the second major decision group, relate to actually getting the good or service to the target market at the right time and in the proper quantity. Strategies related to place may utilize middlemen and facilitators with expertise in joining buyers and sellers, and they may also encompass various distribution channels, including retail, wholesale, catalog, and others. Marketing managers must also devise a means of transporting the goods to the selected sales channels, and they may need to maintain an inventory of items to meet demand. Decisions related to place typically play an important role in determining the degree of vertical integration in a company, or how many activities in the distribution chain are owned and operated by the manufacturer. For example, some larger companies elect to own their trucks, the stores in which their goods are sold, and perhaps even the raw resources used to manufacture their goods.
Decisions about promotion, the third marketing mix decision area, relate to sales, advertising, public relations, and other activities that communicate information intended to influence consumer behavior. Often promotions are also necessary to influence the behavior of retailers and others who resell or distribute the product. Three major types of promotion typically integrated into a market strategy are personal selling, mass selling, and sales promotions. Personal selling, which refers to face-to-face or telephone sales, usually provides immediate feedback for the company about the product and instills greater confidence in customers. Mass selling encompasses advertising on mass media, such as television, radio, direct mail, and newspapers, and is beneficial because of its broad scope. A relatively new means of promotion involves the Internet, which combines features of mass media with a unique opportunity for interactive communication with customers. Publicity entails the use of free media, such as feature articles about a company or product in a magazine or related interviews on television talk shows, to spread the word to the target audience. Finally, sales promotion efforts include free samples, coupons, contests, rebates, and other miscellaneous marketing tactics.
Determination of price, the fourth major activity related to target marketing, entails the use of discounts and long-term pricing goals, as well as the consideration of demographic and geographic influences. The price of a product or service generally must at least meet some minimum level that will cover a company's cost of producing and delivering its offering. Also a firm would logically price a product at the level that would maximize profits. The price that a company selects for its products, however, will vary according to its long-term marketing strategy. For example, a company may underprice its product in the hopes of increasing market share and ensuring its competitive presence, or simply to generate a desired level of cash flow. Another producer may price a good extremely high in the hopes of eventually conveying to the consumer that it is a premium product. Another reason a firm might offer a product at a very high price is to discount the good slowly in an effort to maximize the dollars available from consumers willing to pay different prices for the good. In any case, price is used as a tool to achieve comprehensive marketing goals.
Often times, decisions about product, place, promotion, and price will be dictated by the competitive stance that a firm assumes in its target market. According to Michael Porter's classic book Competitive Strategy, the three most common competitive strategies are low-cost supplier, differentiation, and niche. Companies that adopt a low-cost supplier strategy are usually characterized by a vigorous pursuit of efficiency and cost controls. A company that manufactures a low-tech or commodity product, such as wood paneling, would likely adopt this approach. Such firms compete by offering a better value than their competitors, accumulating market share, and focusing on high-volume and fast inventory turnover.
Companies that adhere to a differentiation strategy achieve market success by offering a unique product or service. They often rely on brand loyalty, specialized distribution channels or service offerings, or patent protection to insulate them from competitors. Because of their uniqueness, they are able to achieve higher-than-average profit margins, making them less reliant on high sales volume and extreme efficiency. For example, a company that markets proprietary medical devices would likely assume a differentiation strategy.
Firms that pursue a niche market strategy succeed by focusing all of their efforts on a very narrow segment of an overall target market. They strive to prosper by dominating their selected niche. Such companies are able to overcome competition by aggressively protecting market share and by orienting every action and decision toward the service of its select group. An example of a company that might employ a niche strategy would be a firm that produced floor coverings only for extremely upscale commercial applications.
BUSINESS VERSUS CONSUMER MARKETS
An important micro-marketing delineation is that between industrial and consumer markets. Marketing strategies and activities related to transferring goods and services to industrial and business customers are generally very different from those used to lure other consumers. The industrial, or intermediate, market is made up of buyers who purchase for the purpose of creating other goods and services. Thus, their needs are different from general consumers. Buyers in this group include manufacturers and service firms, wholesalers and retailers, governments, and nonprofit organizations.
In many ways, it is often easier to market to a target group of intermediate customers. They typically have clearly defined needs and are buying the product for a very specific purpose. They are also usually less sensitive to price and are more willing to take the time to absorb information about goods that may help them do their job better. On the other hand, marketing to industrial customers can be complicated. For instance, members of an organization usually must purchase goods through a multi-step process involving several decision makers. Importantly, business buyers will often be extremely cautious about trying a new product or a new company because they do not want to be responsible for supporting what could be construed as a poor decision if the good or service does not live up to the organization's expectations.
A chief difference between marketing to intermediate and consumer markets is that members of the latter are typically considering purchasing goods and services that they might enjoy but are not absolutely necessary. As a result, they are more difficult to sell to than are business buyers. Consumers are generally less sophisticated than intermediate buyers, are less willing to spend time absorbing individual marketing messages of interest to them, and are more sensitive to the price of a good or service. Consumers typically make a buying decision on their own, however (or, for larger purchases, with the help of a friend or family member), and are much more likely to buy on impulse than are industrial customers.
Despite the differences, a dominant similarity between marketing to intermediate buyers and consumers is that both groups ultimately make purchases based on personal needs. Consumers typically act on their desires to belong, have security, feel high selfesteem, and enjoy freedom and status. Business and industrial consumers react more strongly to motivators such as fear of loss, fear of the unknown, the desire to avoid stress or hardship, and security in their organizational role.
A discussion of marketing would not be complete without mentioning the emerging field of Internet marketing. Increasingly, small businesses have sought to take advantage of the global reach of the World Wide Web and the huge number of potential customers available online. Although it may seem like a completely new field, Internet marketing actually combines many of the basic elements of traditional marketing. "Internet marketing employs the same methods and theory as traditional public relations and integrated marketing—the basic tools for any campaign," Maria Duggan and John Deveney wrote in Communication World.
In their article, Duggan and Deveney outline five steps for marketing managers to follow in putting together an Internet marketing campaign. Whether the campaign is intended to increase awareness of an existing brand, draw visitors to a Web site, or promote a new product offering, the first step involves identifying the target market. As is the case with any other type of marketing campaign, the small business must conduct market research in order to define the target audience for the campaign, and then use the information gathered to determine how best to reach them.
The next step is to develop a strategy for the campaign. This involves setting concrete and measurable goals and tying the campaign into the organization's traditional marketing efforts. The third step is to present the strategy to key decision makers in the small business. It is important at this stage to develop a timeline and budget, and also to be prepared to encounter resistance among colleagues not familiar with cyberspace. The fourth step is to implement the Internet marketing campaign. The final step, evaluation, should be conducted throughout the process. Online surveys of customers are one source of potential feedback.
MARKETING FOR SMALL BUSINESSES
In the early stages of forming a small business, a business plan is a vital tool to help an entrepreneur chart the future direction of the enterprise. A well-prepared business plan should include an extensive marketing component that explores the needs of the target market and lays out a marketing program to meet them. In fact, some experts claim that entrepreneurs should actually design their organizations in a way that gives the marketing function prominence. Once the needs of the target customers have been identified, these experts say, every aspect of the company's marketing program, as well as the basic image that the company develops, should be oriented toward satisfying these needs. For example, the company's selection of advertising, channels of distribution, packaging, price, and even vehicles and dress codes should all be coordinated to appeal to the target market.
As a small business grows, it may be helpful to create a separate marketing plan. While similar in format to the general business plan, a marketing plan focuses on expanding a certain product line or service rather than on the overall business. According to the Entrepreneur Magazine Small Business Advisor, creating a marketing plan helps a small business to define its markets, review its competitive position, develop goals and objectives, and determine the marketing tactics and financial resources needed to achieve its goals.
A number of resources are available to assist small businesses in marketing their products and services. It may be prudent to seek legal advice before implementing a marketing plan, for example. A firm with experience in consumer law could review the small business's product, packaging, labeling, advertising, sales agreements, and price policies to be sure that they meet all relevant regulations to prevent problems from arising later. In addition, many advertising agencies and market research firms offer a variety of means of testing the individual elements of marketing programs. Although such testing can be expensive, it can significantly increase the effectiveness of a company's marketing efforts.