Chapter 11. Unique Marketing Issues

Selecting a Market and Establishing a Position

To succeed, a new firm must know who its customers are and how to reach them. A firm uses a three-step process to determine who its customers are. It is important that a new venture choose its target market and position inside in its target market quickly because virtually all of its marketing choices hinge on these critical initial choices. These are the process of selecting a target market and positioning strategy:

Segmenting the Market

The first step in selecting a target market is to study the industry in which the firm intends to compete and determine the different potential target markets in that industry. This process is called market segmentation. Market segmentation is important because a new firm typically has only enough resources to target one market segment. Markets can be segmented in many ways, such as by geography (city, state, country), demographic variables (age, gender, family, size, income), psychographic variables (personality, lifestyle, values), behavioral variables (benefits sought, product usage rates, brand loyalty), and product type (varies by product)

Selecting the Target Market

The market must be sufficiently attractive, and the firm must be able to serve it well. Typically, a firm (especially a start-up venture) doesn't target an entire segment of a market because many segments are too large to target successfully. Instead, most firms target a niche market within the segment. A niche market is a place within a market segment that represents a narrow group of customers with similar interest. By focusing on a clearly defined market, a firm can become an expert in that market and then be able to provide its customers with high levels of value and service.

Crafting a Unique Market Position

The firm's next step is to establish a "position" within their it that differentiates it from its competitors. Once a company has identified its position and primary points of differentiation, a helpful technique is to develop a product attribute map, which illustrates a firm's positioning strategy relative to its major rivals. 

Branding

A brand is the set of attributes⎯positive or negative⎯ that people associate with a company. These attributes can be positive, such as trustworthy, innovative, dependable, or easy to deal with. Or they can be negative, such as cheap, unreliable, arrogant, or difficult to deal with. One of the keys to effective branding is to create a strong personality for a firm, designed to appeal to the chosen target market.

Most experts warn against placing an overreliance on advertising to build a firm's brand. A more affordable approach is to rely on word of mouth, the media, and the ingenuity to create a positive buzz about a company. A buzz means creating awareness and a sense of anticipation about a company and its offerings. It is important for firms to understand brand equity and how to use it to create value. Brand equity is the term that denotes the set of assets and liabilities that are linked to a brand and enable it to raise a firm's valuation.

The 4Ps of Marketing for New Ventures 

A firm's marketing mix is the set of controllable, tactical marketing tools that it uses to produce the response it wants in the target market. Most marketers organize their marketing mix into four categories:

Product

A firm's product, in the context of its marketing mix, is good or service it offers to its target market. A service is an activity or benefit that is intangible and does not take on a physical form, such as an airplane trip or advice from an attorney. 

Price

Price is the amount of money consumers pay to buy a product. It is the only elements in the marketing that produces revenue; all other elements represent costs. Price is an extremely important element of the marketing mix because it ultimately determines how much money a company can earn.

Most entrepreneurs use one of two methods to set their products, which are:

• Cost-based pricing → The list price is determined by adding a markup percentage to a product's cost.
• Value-based pricing → The list price is determined by estimating what consumers are willing to pay for a product and then backing off a bit to provide a cushion. 

Promotion

Promotion refers to the activities the firm takes to communicate the merits of its products to its target market. The goal of these activities is to persuade people to buy the product.

Here are the most common activities entrepreneurs use to promote their products:

• Advertising → making people aware of a product in hopes of persuading them to buy it. 

Here are the steps involved in putting together an advertisement

1. Identify the purpose of the ad → Clearly identify one or more purposes that you expect the advertisement to achieve
2. Determine the target audience → Identify who you want to see the ad
3. Select a medium → Select a medium for the ad, such as TV, radio, or newspaper
4. Create the ad → Create an ad is appropriate for your audience, product, and budget
5. Select a place and time for the ad to appear → Select the specific place and the specific time of day (or location in a newspaper) for an ad to appear
6. Fulfill expectations → Make sure to have enough product on hand (or people to take orders) if the ad is successful.

• Public Relations → refers to efforts to establish and maintain a company's image with the public. The major difference between public relations and advertising is that public relations is not paid for directly. Attending trade shows can also contribute to a firm's visibility. A trade show is an event at which the goods or services in a specific industry are exhibited and demonstrated. 

Social Media → Use of social media consists primarily of blogging and establishing a presence and connecting with customers and others through social networking sites.

Other Promotion-Related Activities → Activites that help a firm to promote and sell its products. A fairly new technique that has received quite a bit of attention is viral marketing, which facilitates and encourages people to pass along a marketing message about a particular product. A technique related to both viral marketing and creating buzz is guerilla marketing. Guerilla marketing is a low-budget approach to marketing that relies on ingenuity, cleverness, and surprise rather than traditional techniques.

Place (or Distribution)

Place, or distribution, encompasses all the activities that move a firm's product from its place of origin to the consumer. A distribution channel is a route a product takes from the place it is made to the customer who is the end user.

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Some firms enter into exclusive distribution arrangements with channel partners. Exclusive distribution arrangements give a retailer or other intermediary the exclusive rights to sell a company's product.

Sales Process and Related Issues

A firm's sale process depicts the steps it goes through to identify prospects and close sales. Some companies simply wing it when it comes to sales, which isn't recommended. It's much better to have a well-thought-out approach to prospecting customers and closing sales.

Here are the steps of sales process:

1. Prospect for (or gather) sales leads
2. Make the initial contact
3. Qualify the lead
4. Make the sales presentation
5. Meet objections and concerns
6. Close the sale
7. Follow up