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Marketing a Small Business

+Purpose of the units

n  Understand what is marketing

n  Learn how to analyse your business and set marketing objectives

n  Develop marketing strategies

n  Determine a marketing mix for the business

n  Implement the marketing strategies

n  Monitor and improve marketing performance

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+What is marketing?

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+What is marketing?

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+What is marketing? n  Marketing is MORE than just advertising!

n The process of planning and executing the pricing, promotion and distribution of ideas/goods/services to create exchanges that have value for customers

n  Let’s break it down: n  Understanding and satisfying customer needs and

wants with products and services n  Involves an exchange n  Providing value and satisfaction (delighting

customers!) n  Providing solutions to problems and creating

customer relationships (not just making a sale!)

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+Satisfying needs

n  A product or service MUST meet a need

n  Need: the difference between your actual and ideal state i.e. feeling deprived of something e.g. run out of product, goes out of style, another hairdresser fails to meet expectations

n A product or service delivers a benefit when it satisfies a need

n The market for your service are all of the people who feel a particular need and have the resources (e.g. money and time) to use your services to satisfy that need

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+Not just about products

n  Ideas (e.g. Quit smoking campaign)

n  People (e.g. David Beckham)

n  Services (e.g. Qantas or Maurice Meade)

n  Non-profit organisations (e.g. Red Cross)

n  Events (e.g. Olympics)

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+The Marketing Process & Marketing Plan

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How does marketing work?

+From start to finish

n  Analyse your business and your market to identify marketing opportunities

n  Research and select target markets (identify who your consumers are and what makes them tick)

n  Design marketing strategies

n  Plan and implement marketing activities

n  Review and optimise your marketing strategy

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+Why plan your marketing?

If you fail to plan, you plan to fail!

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+Business plan vs marketing plan

n  Business plan includes your plans for everything to do with your business e.g. finance, staff, IT, marketing etc.

n  The marketing plan has its focus on attracting and keeping CUSTOMERS, and the resources you need to do this.

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+Contents of a marketing plan

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1.  Situation analysis/SWOT

2.  Marketing objectives

3.  Market segmentation, targeting and positioning strategy

4.  Marketing mix

5.  Budgets and marketing controls

Please see the HANDOUT.

+Current Situation & SWOT

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Where are we now?

+ Where are we know? Know as much about your salon as you can!

n  SWOT – Strengths, Weaknesses, Opportunities and Threats

n  Sales performance

n  Competitor analysis

+SWOT Analysis

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+Inside the business

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n Strengths: n  Areas where we are bigger, better and faster than our

competitors.

n Weaknesses: n  Areas where we are less able, smaller or slower than our

competitors.

n Skills and resources areas: n  Market share – what is the size of the client base? what is

the nature of the client base? n  Brand strength – how well are we known? do we have a

consistent look/feel in the market? n  Service quality – what do clients say about us? n  Service innovation - what skills do we have in the salon? n  Advertising effectiveness – how much money do we

have to promote the salon? how well does our advertising work?

+Why look outside the business?

A business needs to constantly watch and adapt to the environment

as it provides opportunities and threats.

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+Outside the business

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n Opportunities: n  What trends or events might affect us? How might we

benefit from these trends and events?

n Threats: n  How might we suffer from trends or events?

n Trends or events that might affect us: n  Demographic – age, gender, education, ethnicity,

geographic shifts, changing family structure. n  Sociocultural – multicultural, green movement, healthier

lifestyles, changing roles of men and women etc. n  Economic – inflation, wage increases, recession etc. n  Technological – fast pace of change, new innovations,

new distribution channels etc. n  Political/legal – smoking legislation, children, labelling,

advertising (DNC register, trade practices act) etc.

+Why/how to do a SWOT analysis?

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n Why? n  Build on our strengths n  Overcome our weaknesses n  Exploit our opportunities n  Minimise the impact of our threats

n Gather data for your SWOT analysis (page 5 PB): n  Talk to staff and customers n  Get anonymous feedback n  Do research, look at statistics n  Look at staff performance reports n  Set up Google Alerts

n Also need to understand who your competitors are – who are they? what do they do well? what’s their marketing strategy? what do customers say about them? (page 16 MSB)

+Massage Inc. SWOT

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n  Strengths

n  Access to funding

n  Massage expertise

n  Low overhead costs (run business from home)

n  Opportunities n  Influx of graduating massage

therapists looking for work n  Limited entrepreneurial skills within

massage n  Wide acceptance of massage by

public n  More employers wellness perks n  Consumers happy to buy online

n  Weaknesses

n  Limited business management experience

n  Access to business savvy massage therapists

n  No existing customer base

n  No brand recognition/image

n  Threats

n  More hotels offering spa services

n  Consumers looking for the full “spa” experience

n  Increasing competition

n  Decreasing prices

+Setting marketing objectives

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Where do we want to be? What do we want to achieve?

+ Your marketing plan is a blueprint for the future.

n  Determine marketing objectives

n  How much do we want to sell?

n  At what price?

n  In which areas do we want to be located?

+SMART Objectives

n Marketing objectives are desired outcomes.

n S – Specific

n M – Measureable

n A – Achievable

n R – Realistic

n T – Time Framed

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+Types of objectives

n You want customers to be aware of you, and have a favourable attitude towards your business.

n You want to achieve certain levels of: n Sales - increased spend n Market share – more clients

n Pricing – introduce new services/products n Profit – increased visit frequency n Expenses – fill quiet times

n These can be written as objectives.

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+Examples

n  Vague: To keep our prices down.

n  SMART: To be the cheapest salon in our suburb by $10 at all times of the year.

n  Vague: To ensure our salon is well-known.

n  SMART: To achieve 50% unprompted brand awareness by the end of the year.

n  Vague: Get customers to buy more product.

n  SMART: To increase product purchasing by 20% by year end.

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+Target market

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Who are your customers?

+ Know your customers. They keep you in business!

n  Market segmentation

n  Target marketing

n  Positioning

+Market segmentation: dividing the market

n  What is the total market? People that currently require hairdressing services of any type in Perth.

n  Then divide the market into group of customers with similar needs, characteristics, behaviours and who respond in similar ways to your business/services.

n  Divide the market based on: n  Demographic - age, gender, education, family life cycle,

occupation, religion, ethnicity etc. n  Geographic – region, city size, urban/rural, climate n  Psychographic – social class, personality, lifestyle, activities,

interests, opinions n  Behavioural/operational variable – benefits desired, usage

rate, loyalty status

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+Geographic

n  Urban vs rural n  More than 70% of the population lives in the major cities

n  Rural customers are more brand loyal

n  Metropolitan n  Older, established parts have lost population

n  People in the suburbs spend more on motor vehicle expenses

n  Inner-urban areas, demand for coffee shops, cinemas, personal fitness etc. is growing

n  Areas with mostly single-family residences, look for lawnmowers, outdoor furniture, home furnishings etc.

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+Demographics

n  Infant market (0-4 years): Ensuring careers are established before having children, so more money to spend e.g. ABC Childcare because women have children later and continue to work

n  Child market (5-9 years): Influence parent’s purchasing, have their own money through pocket money, develop brand preference at an early age e.g. cereal

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+Demographics n  Tweens (10-12 years): Pre-teens consume clothes, music, fashion

accessories, TV shows, movies

n  Teenage market (13-18 years): Fickle – clothing, cosmetics, cars and music, influenced by the information age

n  Gen Y (late teens – 30) n  Born in the 1980s – convenience food, leisure, cars, education n  Lots of different types in this group: young couples, families with young children,

single professional women etc.

n  Generation X (30s-40s): Have school aged children, good prospects for groceries, home entertainment etc.

n  Baby Boomers (45-60): Middle-aged population, accumulated material possessions

n  Mature-age markets (60s-80s): Many no longer have financial responsibilities, holidays etc.

n  Gender, singles market, single-parent market, gay market

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+Values & Lifestyle

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+VALS2

Achievers

Work oriented

Successful

High job satisfaction

Respect authority, and favor the status quo

Demonstrate success through their purchase

+Believers

Family and community oriented people/religious beliefs

Modest means

Brand loyal

Favor Australian-made products

+Experiencers

Main component of action-oriented segment

Youngest in VALS2, median age is 25 years

Active in both physical and social activities

Favor new products

Adventurous

Experienced travellers

Tertiary educated

Opinion leaders

+Selecting your market segment

n  Which market segment will you serve? Who is the target market for your business? n  25-40, young professionals, single or small family, high income,

busy working lifestyle, attend work events/functions, high usage rate

n  25-50, men, family-oriented, middle-income, light usage rate, medium loyalty

n  You must match your business with your target market.

n  Everything you do should be centred around your target market – services, products, presentation, staff skills etc.

EXERCISE: Describe your target market!

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+Toni & Guy vs Just Cuts

n  Just Cuts

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n  Toni & Guy

+Positioning

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How do we stand out from our competition?

+Positioning

n  Now that you know your target market, decide which “position” you want to occupy in that market segment.

n  Positioning is the image or perception that customers have of of your business relative to competing products.

n  You can position by: n  Service features e.g. “we’re the colour experts” n  Benefits offered e.g. convenience “your local salon” n  Being different from your competitors e.g. “friendly service at an affordable

price” n  Buyer e.g. men’s/boys cuts n  Usage occasion e.g. wedding/bridal styling

n  Try to be different… 70% of Australian brands use “quality” as their positioning

n  Use a positioning map if you like

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+Positioning map for Kelloggs

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Premium price

Value for money

Less

nut

riti

ous

Nutritious

Sustain

All Bran

Coco Pops

Honey n Oat Bake

Cornflakes

Rice Bubbles

Frosties

Complete

Sultana Bran

Nutri-grain

Mini Wheats

Special K

+Marketing strategies

n  Sell more of what you already do by encouraging existing customers to spend more (i.e. increase share of wallet) or by attracting customers from your competitors (i.e. increase market share)

n  Attract new customers through advertising or expanding

n  Sell new or improved products and services

n  Start a new business line that you can use to attract new customers

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+SHALL WE TAKE A BREAK?

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+The Marketing Mix

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+ The 4 P’s:

n  Products/services

n  Price

n  Promotion

n  Place (or distribution)

+The Marketing Mix

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+ n  What is a product?

n  What makes services different from products?

n  How to choose a good brand name

n  What services/products to offer

n  Additional services to offer

Product

+What is a product?

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Promotion

Place (distribution)

Price

Product is the heart of the marketing

mix

+Three levels to a product

n  Core product: What is your customer really buying? Benefit/solution.

n  Actual product: Quality level, features, styling, brand name, packaging

n  Augmented product: Additional services and benefits

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+Service businesses

n  Intangible: Services can’t be touched, felt, seen, heard or smelt by customers. They are deeds, performances, effort. Unlike goods, services can’t be assessed before they are purchased. n  Use visual cues/image – branding, décor,

brochures give an indication of the quality to expect

n  Mention stats/figures to support your claims e.g. 8 out of 10 customers return

n  Associated images e.g. Qantas and images of Australia, Optus and animals

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+Service businesses

n  Inseparable: Can’t separate the person giving the service from the service itself. Close contact between the customer and the service provider. How much you can service is restricted by how many staff you have on hand and the size of your salon. n  Staff training – customer service is VERY important

n  Continually reward and evaluate your staff

n  Having different staff on different tasks to allow more clients to be seen

n  Need to ensure you have enough staff to help with customers

n  Strategies to deal with quiet times

n  Opening up additional salons to deal with demand

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+Service businesses

n  Perishable and fluctuating demand: Can’t store a hair cut, massage or facial i.e. empty seats and quiet times! n  Target new customer groups e.g. Senior’s day

n  Increase promotion during low times e.g. advertise days/times when no appointments are necessary

n  Price to even out demand e.g. discounted Tuesdays

n  Variability: Can’t ensure an identical service every time. n  Strict systems and policies for delivering services e.g. how to

deal with complaints, how to service customers…

n  Or create policies and then give your staff the freedom to respond to individual customer situations, needs and personalities.

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+Branding

n  Brand: A name, term, symbol, design or combination of these that identifies a seller’s products and differentiates them from competitors’ products.

n  A brand name consists of words, letters and/or numbers that can be said out aloud (e.g. WA Academy)

n  What makes a good brand name? n  Be easy to say, spell and remember n  Relevant to your service n  Suggest your service’s characteristics, benefits, use n  Be distinctive, setting it apart from your competitors i.e. can be noticed

(e.g. use a symbol/colour/person’s name) n  Be designed to be used in different types of media e.g. magazine,

newspaper, billboard, uniforms, signage, vehicles etc. n  Not be offensive or have negative effects

n  Could also add a slogan to give you personality e.g. Spirit of Australia

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+Product/service mix

n  Product mix: The set of all product/service lines and items that a particular seller offers for sale.

n  What services are we going to offer?

n  What products are we going to stock?

n  Know when to add/remove services and products. Keep track of stock levels. Train or hire staff to deliver new services.

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Cut Colour Styling Products Makeup

Ladies Short Long Men Short Long

Shampoo Conditioner Styling

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+Product/service mix strategies

n  Your product/service mix might need to be changed over time to keep it fresh, and better appeal to your clients.

n  Add new services or products – can be related (hair extensions) or unrelated (makeup)

n  Remove a product or service n  Not making a profit n  Specialise in specific services

n  Trading up: Add a higher priced item to your services to make it look more prestigious and attract clients with a higher income (e.g. upgraded economy class flights).

n  Trading down: Add a lower priced item to the mix to attract people who can’t really afford your original service but still want the status that comes from buying from you (e.g. fashion designers for Target).

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+ n  What is price?

n  How to set prices

n  Cost-based pricing

n  Demand-based pricing

n  Competition-based pricing

Pricing

+Nature of pricing

n  Price: the amount of money charged for a product or service. What we pay for what we get.

n  Prices should be set somewhere between what the product/service costs to make/sell and its value to customers (what benefits are they getting?)

n  Prices should be reviewed and adjusted based on costs and demand.

n  Prices must support your positioning e.g. to be the cheapest.

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+Pricing strategies for services

n  Cost-based pricing: calculate the cost of the service and then add a percentage on top e.g. x cost + 20% profit n  Difficult to work out pricing for services. n  Too low might indicate low quality.

n  Demand-based pricing: pricing based on what customers are likely to pay. n  Difficult because it involves time, knowledge and skill, which

customers may not be able to work out. n  Can increase perceived value through additional services e.g.

hotel room with a view. n  Can price differently for different customers.

n  Competition-based pricing: look at what your competitors charge, and then decide to price above, below or similar to them. n  Need to be realistic when comparing with competitors. n  Can set prices lower e.g. discount pharmacies

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+Cost and profit

n  Profit = price the customer pays – what it costs you

n  Costs: staff, products, equipment, insurance, staff training, rent, marketing, general business expenses etc. n  Fixed costs: do not vary with sales e.g. rent n  Variable costs: vary with sales e.g. massage oil

n  What can go wrong when pricing? n  Take longer to sell n  Use more product than expected n  Staff don't charge correctly or at all n  Costs for products or staff wages increase

n  Focus your promotions on the services and customers that are generating the most profit/revenue. 80:20 rule.

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+Optimising services

n  Ensure you have enough staff in the salon to service clients and cover your expenses.

n  What to do during quieter times? n Discounts n Bundle services

n Value-added e.g. a freebie with the service (good for higher end salons where customers are less price conscious)

n Custom event

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+Optimising product sales

How much stock do we need?

n  Inventory: the amount of product/stock you need available to service clients.

n  Stock turn: the rate at which you need to reorder stock. n  Example: on average you have $10,000 of stock at any one

time, but required $50,000 for the year. n  Your stock turn is 5 times per year.

n  Record and understand: n  How much stock you need n  When you need it n  Peaks and lows n  What’s selling well and what’s underselling

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+Pricing products/services

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Product line pricing Setting price steps between product line items

Small/medium/large meal, Half head and full head

Optional-product pricing Pricing optional products sold with the main product

Extra battery for mobile, hands free kit, cover

Captive-product pricing Pricing products that must be used with the main product

Sony Playstation and games, Camera and film

Product-bundle pricing Pricing bundles of products sold together

McValue Meal, Cosmetic Packs, Hair care packs

+Price adjustments

n  Segmented pricing: segment by customer, time and location n  Adult ticket $18 n  Child $10 n  La Premier $30

n  Price adjustments: n  Museums charge lower admission for senior citizens and students

(segmented - customer) n  Restaurants charge less for ‘early bird’ customers. Hotels charge

less for Monday and Tuesday’s (segmented – time) n  Cinemas charge less for day tickets and on Tuesdays (segmented

– time) n  Liquor stores offer 10% discount on 6 bottles or more (discount –

quantity) n  Car dealerships have ‘end of financial year stock run

outs’ (discount – seasonal) n  Cash discount for payment within 30 days (discount – cash)

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+ n  What is distribution?

n  Issues with distribution

n  Technology and distribution

Place (Distribution)

+What is distribution?

n  To allow customers easy, effective access to products and services – at the right price.

n  Your location will need to match with your target market e.g. where they live/where they work/where they shop.

n  Services: direct channel from you to the customer

n  Products: indirect channel from the supplier/manufacturer to you and then to the customer

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+Issues with distribution of services

n  Location: n  Where are our target customers?

n  Consider traffic flow (look at foot traffic, speak with passers by)

n  Alternative channels e.g. Internet bookings and sales

n  You can only service so many clients: n  Open more salons

n  Add another person in between e.g. online salon broker

n  Change the service strategy e.g. quick cuts (no wash/treatment)

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+Technology

n  Online bookings

n  Online product sales

n  iPad/Android App for bookings

n  Email bookings

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+ n  What is promotion?

n  What promotions to use

n  Planning a promotional campaign

n  How much to spend on promotions

n  Promotion mix: n  Personal selling n  Advertising n  Sales promotion n  Public relations

Promotions

+What is promotion?

n  Aims to inform, persuade and remind customers about your business.

n  And ultimately to influence them to have a certain feeling, belief or behaviour.

n  Inform: tell people about your business.

n  Persuade: people to try/use your service.

n  Remind: given how cluttered and busy the marketing messages are in our world, we need to keep reminding customers that we exist.

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+The promotional mix

n  Promotion mix: the combination of promotion techniques used by a business i.e. personal selling, advertising, sales promotion and public relations.

n  Personal selling: n  The presentation of a product or

service to a prospective customer by a firm’s sales representative.

n  Advertising: n  Paid, mass communication in

which the sponsor is clearly identified e.g. TV, radio, print (newspapers, magazines), outdoor, cinema, direct mail/email

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+The promotional mix

n  Sales promotion: n  Activities to stimulate demand e.g.

competitions, in-store displays, tradeshows, product samples, promotional merchandise, coupons/vouchers

n  Publicity: n  Non-paid advertising that uses mass

communication. n  A “plug” or favourable mention of

your business.

n  Public relations: n  Planned communication effort to

influence attitudes and opinions of a specific target group e.g. charity sponsorship, annual reports etc.

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+Which promotions to use

n  Target market: depends on where customers are in terms of their readiness to buy: n  Awareness: knows the product exists n  Knowledge: features of the product n  Liking: associating it with a person or symbol n  Preference: comparing to competitors n  Conviction: increase strength of the buyer’s need n  Purchase: encourage them to buy e.g. interest-free terms

n  Where they are located e.g. local = personal selling, wider = advertising

n  How many customers there are e.g. few customers = personal selling

n  Nature of the product: e.g. low value supermarket vs expensive

n  Amount of money you have available for promotions e.g. percentage of sales, all available funds, matching competition

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+Promotion strategies for services

n  Use tangible symbols: photos of people, real people/staff in the promotions.

n  Show the service experience: ads with staff interacting positively with clients

n  Avoid over-promising: disappointed customers will tell others!

n  Build word-of-mouth promotion: encourage your clients to recruit friends and family and reward them for it. Or advertise how much of your business is from referrals.

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+The 5th P - People strategies!

n  In service businesses PEOPLE play a major role

n  Most businesses say their people are customer-focused but many don’t live up to that promise

n  Customers must be the focus

n  Customer service staff must be seen as the people who are responsible for satisfying customers

“If you’re not helping a customer, then you should be helping someone who is.”

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+Recruiting the right people

n  Training on systems, knowledge, skills AND attitude

n  Empower your staff to make decisions n  Less time taken to deal with

customers and fix issues n  Leads to new ideas n  Often to higher quality client

service

n  Reward your staff n  Tied to actual service delivery n  Transparent and easy to

calculate n  Varied rewards – not everyone

is motivated in the same way

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+NEXT WEEK Implement marketing strategies and monitor marketing performance