7 Chapter 7 – Marketing Strategy

The Importance of a Marketing Strategy

Small-business marketing and big business marketing are not the same. The basic marketing principles that guide both are the same, but there are important differences with respect to scope, budget, risk factors, and areas of opportunity.[1]  (See Chapter 6 “Marketing Basics” for a discussion of marketing principles.) Small businesses cannot compete with the marketing budgets of big companies. As a result, small businesses do not have the luxury of large staffs and the staying power that comes with high profits. There is little room for error. Failed strategies can lead to ruin.

The scope of small business marketing does not extend across the same level of multiple products and services that characterize most big businesses. Combined with having few if any products in the pipeline, this significantly reduces the insulation that small businesses have against ups and downs in the marketplace or strategic failures. “Small business marketing strategies have to be more targeted, cost-effective and more elaborately planned so as to minimize the losses in case the strategy fails.”[2]

Competition is the most significant risk factor facing small businesses. Trying to eliminate an established brand takes a lot of work, but it is an overnight job to wipe out a small business. Competition is a huge threat for small businesses.[3] This means that small businesses should be very knowledgeable about their competition to deal effectively with them.

Opportunity areas for small businesses are also very different from those of big businesses. The small business can take advantage of niche markets and local needs and wants. They are much better able to emphasize personal, one-to-one interactions and can market real time in ways that cannot be matched by big businesses. Smaller can actually end up being more powerful.[4]

Given the special marketing vulnerabilities of small businesses, the importance of understanding the components of a marketing strategy should be clear. A marketing strategy involves selecting one or more target markets, deciding how to differentiate and position the product or the service, and creating and maintaining a marketing mix that will hopefully prove successful with the selected target market(s)—all within the context of marketing objectives. Marketing objectives are what a company wants to accomplish with its marketing strategy: “Strategy is not a wish list, set of goals, mission statement, or litany of objectives…A marketing strategy is a clear explanation of how you’re going to get there, not where or what there is. An effective marketing strategy is a concise explanation of your stated plan of execution to reach your objectives…Marketing without strategy is the noise before failure.”[5]

Key Takeaways

  • Small-business marketing and big business marketing are not the same.
  • The most significant risk factor facing small businesses is competition.
  • It is important for a small business to have a marketing strategy so that it is better positioned to choose among options.
  • An effective marketing strategy is a concise explanation of a business’s stated plan of execution to reach its objectives.
  • Marketing without strategy is the noise before the failure.

The Marketing Strategy Process

The focus of this text is on the management of the small business that is up and running as opposed to a start-up operation. As a result, the considerations of marketing strategy are twofold: (1) to modify or tweak marketing efforts already in place and (2) to add products or services as the business evolves. In some instances, it may be appropriate and desirable for a small business to backfit its marketing activities into a complete marketing strategy framework.

The marketing strategy process consists of several components. Each component should be considered and designed carefully: company vision, company mission, marketing objectives, and the marketing strategy itself.

Marketing Strategy Process

The marketing strategy process - company vision, company mission, marketing objectives, and marketing strategies

Source in footnote. [6]

Vision and Mission

It is awfully important to know what is and what is not your business. -Gertrude Stein Jay Ebben[7]

The vision statement tries to articulate the long-term purpose and idealized notion of what a business hopes to become. (Where do we see the business going?) It should coincide with the founder’s goals for the business, stating what the founder ultimately envisions the business to be.[8] The mission statement looks to articulate the more fundamental nature of a business (i.e., why the business exists). It should be developed from the customer’s perspective, be consistent with the vision, and answer three questions: What do we do? How do we do it? And for whom do we do it?

Both the vision statement and the mission statement must be developed carefully because they “provide direction for a new or small firm, without which it is difficult to develop a cohesive plan. In turn, this allows the firm to pursue activities that lead the organization forward and avoid devoting resources to activities that do not.”[9] Although input may be sought from others, the ultimate responsibility for the company vision and mission statements rests with the small business owner. The following are examples of both statements:

  • Vision statement. “Within the next five years, Metromanage.com will become a leading provider of management software to North American small businesses by providing customizable, user-friendly software scaled to small business needs.”[10]
  • Mission statement. “Studio67 is a great place to eat, combining an intriguing atmosphere with excellent, interesting food that is also very good for the people who eat there. We want fair profit for the owners and a rewarding place to work for the employees.”[11]

Marketing Objectives

Marketing objectives are what a company wants to accomplish with its marketing. They lay the groundwork for formulating the marketing strategy. Although formulated in a variety of ways, their achievement should lead to sales. The creation of marketing objectives is one of the most critical steps a business will take. The company needs to know, as precisely as possible, what it wants to achieve before allocating any resources to the marketing effort.

Marketing objectives should be SMART: specific, measurable, achievable, realistic, and time-based (i.e., have a stated time frame for achievement). It has been recommended that small businesses limit the number of objectives to a maximum of three or four. If you have fewer than two objectives, you aren’t growing your business like you should be in order to keep up with the market. Having more than four objectives will divide your attention, and this may result in a lackluster showing on each objective and no big successes.[12] If a small business has multiple marketing objectives, they will have to be evaluated to ensure that they do not conflict with each other. The company should also determine if it has the resources necessary to accomplish all its objectives.[13]

For small businesses that already have, or are looking to have, a web presence and sell their products or services online, e-marketing objectives must be included with all other marketing objectives. E-marketing is defined as “the result of information technology applied to traditional marketing.”[14] The issues of concern and focus will be the same as for traditional marketing objectives. The difference is in the venue (i.e., online versus onground). Examples of e-marketing objectives are as follows: to establish a direct source of revenue from orders or advertising space; improve sales by building an image for the company’s product, brand, and/or company; lower operating costs;[15] provide a strong positive customer experience; and contribute to brand loyalty. The ultimate objective, however, will be “the comprehensive integration of e-marketing and traditional marketing to create seamless strategies and tactics.”[16]

The Marketing Strategy

With its focus being on achieving the marketing objectives, marketing strategy involves segmenting the market and selecting a target or targets, making differentiation and positioning decisions, and designing the marketing mix. The design of the product (one of the four Ps) will include design of the company website. Differentiation refers to a company’s efforts to set its product or service apart from the competition, and positioning is placing the brand (whether store, product, or service) in the consumer’s mind in relation to other competing products based on product traits and benefits that are relevant to the consumer.[17] These steps are discussed in the sections “Segmentation and the Target Market” through “Marketing Strategy and Promotion”. It has been said that “in some cases strategy just happens because a market and a product find each other and grow organically. However, small businesses that understand the power of an overarching marketing strategy, filtered and infused in every tactical process, will usually enjoy greater success.”[18]

Key Takeaways

  • The marketing strategy process consists of company vision, company mission, marketing objectives, and the marketing strategy itself.
  • The company vision: Where do we see the business going?
  • The company mission: Why does our business exist?
  • Marketing objectives: What do we want to accomplish with our marketing strategy?
  • Marketing strategy: How will we accomplish our marketing objectives?
  • Marketing objectives should be SMART: specific, measurable, achievable, realistic, and time-based (i.e., have a specific time frame for accomplishment).
  • Small businesses should limit the number of objectives to three or four to increase the chances that they will be achieved.
  • E-marketing objectives must be included with traditional marketing objectives.
  • E-marketing and traditional marketing should be integrated to create seamless marketing strategies and tactics.
  • Marketing strategy involves segmenting the market, selecting a target or targets, making differentiation and positioning decisions, and designing the marketing mix. The design of the product will include design of the company website.

Segmentation and the Target Market

Segmentation

Market segmentation dividing a market into relatively homogeneous subgroups that behave much the same way in the marketplace, is the necessary precursor to selecting a target market or target markets. The extensive bases on which a company is able to segment a market are presented in the table below called “Market Segmentation”. The challenge is knowing which group(s) to select. Many small business owners have a good intuitive sense of the segments that make sense for the business, and they choose to go with that intuition in devising their marketing strategy. However, that intuition may not be precise or current enough to be of the most help in planning a marketing strategy. Marketing research can be of help here, even to the smallest of businesses.

Marketing research can help the small business identify and refine the segments that offer the greatest opportunities. Part of that process will be to identify segments that meet the requirements of measurability, substantiality, stability, accessibility, actionability, and differential response.[19] Meeting these requirements will increase the chances for successful segmentation.

  • Measurability. Is it easy to identify and estimate the size of a segment? A small business that moves forward without a clear definition of its market segments is working blind. Intuition can only go so far. Are there people who are interested in freshly baked cookies for dogs (it would seem so), and how many of these people are there?[20]
  • Substantiality. Is the segment large and profitable enough to justify an investment? A small business may not require a huge number of customers to be profitable, but there should be enough people interested in the product or the service being offered to make operating the business worthwhile. Fancy designer clothes for dogs, for example, is a business that can survive—but not everywhere[21]
  • Stability. Stability has to do with consumer preferences. Are they stable over time? Although segments will change over time, a small business needs to be aware of preferences that are continuously changing. Small businesses can be more nimble at adapting their businesses to change, but too much volatility can be damaging to a business’s operations.
  • Accessibility. Can a business communicate with and reach the segment? A small business interested in women who work outside the home will present greater communication challenges than will stay-at-home wives and mothers.
  • Actionability. Is a small business capable of designing an effective marketing program that can serve the chosen market segment? There was a small manufacturer of low-priced cigarettes in Virginia that found it difficult to compete with the big brands and other established lower-priced brands such as Bailey’s. The manufacturer’s solution was to sell to Russia where “Made in Virginia, USA” worked very well with customers and retailers.[22]
  • Differential response. The extent to which market segments are easily distinguishable from each other and respond differently to company marketing strategies.[23] For the small business that chooses only one segment, this is not an issue. However, the small manufacturer of ramen noodles in New York City needs to know whether there are different segments for the product and whether the marketing strategy will appeal to those segments in the same positive way.

Once multiple segments have been identified, it is necessary to select a target market or target markets. If only a single segment has been identified, it becomes the target market.

Target Market

The selection of a target market or target markets will be based on the segments that have been identified as having the greatest potential for the business. (In Chapter 6 “Marketing Basics“, a target market refers to one or more segments that have been chosen as the focus for business operations.) Only some of the people in the marketplace will be interested in buying and/or using a company’s product or service, and no company has the resources to be all things to all people. Resources are always finite, but this will especially be the case for the small business, so all marketing efforts should be directed as precisely as possible.

Selecting the target market should be guided by several considerations:[24]

  • Financial condition of the firm. Limited resources may dictate the selection of only one target market.
  • Whether the competition is ignoring smaller segments. If yes, this may be a ready-made target market.
  • Is the market new to the firm? If yes, concentrating on one target market may make the most sense.
  • Specific need or want. Does the proposed target market have a specific need or want for the product or the service?
  • Ability to buy. Does the proposed target market have the resources to buy the product or the service?
  • Willingness to buy. Is the proposed target market willing to buy the product or the service?
  • Will this target market be profitable? There needs to be enough demand to make money.

Choosing the right target market is a critical part of the marketing strategy of a small business. The target market should be the best match for a company’s products and services, thus helping to maximize the efficiency and effectiveness of its marketing efforts.

If a small business wants to go with a niche market, the same considerations apply. A niche market is a small, more narrowly defined market that is not being served well or at all by mainstream product or service marketers. The great advantage of pursuing a niche market is that you are likely to be alone there: “other small businesses may not be aware of your particular niche market, and large businesses won’t want to bother with it.”[25] Ideally, a small business marketing to a niche market will be the only one doing so. Niches are very important to small businesses that want to sell pricey chocolates.[26] They focus on niches such as weddings, seasonal offerings, and specialty items. They also sell online in order to reach a broader market.

Key Takeaways

  • Market segments and target markets are the basis for creating an effective marketing mix.
  • Segmentation and target market decisions must be made for both onground and online customers.
  • Market segmentation precedes the selection of a target market.
  • There are many ways to segment a market.
  • Segments must be measurable, substantial, stable, accessible, actionable, and easily distinguishable from other segments.
  • The target market should be the segment or segments that show the greatest profit potential for a small business.
  • A niche market is a small, more narrowly defined target market that is not being served well or at all by other businesses.

Differentiation and Positioning

Differentiation

Differentiation, setting yourself apart from the competition, is one of the most important and effective marketing tools available to small business owners.[27] Effective differentiation can put a business (or a brand) in the top position among the competition, but an ineffective differentiation strategy can leave a business buried in the middle or at the bottom of the pack.[28] A successful differentiation strategy cannot be imitated by competitors—but it can bring you great success with consumers.[29]

Small businesses, whether business-to-consumer (B2C) or business-to-business (B2B), can differentiate their companies or brands in many different ways: quality, service, price, distribution, perceived customer value, durability, convenience, warranty, financing, range of products/services offered, accessibility, production method(s), reliability, familiarity, product ingredients, and company image are all differentiation possibilities.[30] There are others as well, limited only by the imagination. One way to uncover differentiation possibilities is to examine customer experience with a product or a service by asking the following questions:[31]

  • How do people become aware of their needs for a product or a service?
  • How do customers find a company’s offering?
  • How do customers make their final selection?
  • How do consumers order and purchase the product or the service?
  • What happens when the product or the service is delivered?
  • How is the product installed?
  • How is the product or the service paid for?
  • How is the product stored?
  • How is the product moved around?
  • What is the consumer really using the product for?
  • What do consumers need help with when they use the product?
  • What about returns or exchanges?
  • How is the product repaired or serviced?
  • What happens when the product is disposed of or no longer used?

No matter what the bases are for differentiating a company or a product, the decision should be made carefully with the expectation that the difference cannot be imitated. When customers are asked whether they can tell the difference between a particular small business and its closest competitors, the answer will hopefully be yes.

Positioning

Positioning is about the mind of the consumer: placing a company or a brand (sometimes they are the same, e.g., Carbonite, CakeLove, and Sugar Bakery & Sweet Shop) in the consumer’s mind in relation to the competition.[32]

The positioning decision is often the critical strategic decision for a company or a brand because the position can be central to customers’ perception and choice decisions. Further, because all elements of the marketing program can potentially affect the position, it is usually necessary to use a positioning strategy as a focus for developing the marketing program. A clear positioning strategy can ensure that the elements of the marketing program are consistent and supportive.[33]

Both big and small businesses practice positioning, but small businesses may not know it as positioning. The small business owner thinks about positioning intuitively, does not use the terminology, and does not always know how to promote the position. Additionally, in many if not most small businesses, “the positioning of products is based on the opinions of the business owner, his or her family, and selected friends and family.”[34] This notwithstanding, an understanding of positioning should be in every small business owner’s tool kit.

Successful positioning of a small business or its brand is built on a well-defined target market combined with solid points of differentiation. There are six approaches to positioning that the small business owner should consider:[35]

  1. Positioning by attribute. The most frequent positioning strategy. The focus is on a particular attribute, a product feature, or customer benefit. CakeLove in Maryland positions itself as “cakes from scratch” with natural ingredients (not the least of which is butter, lots of it).
  2. Positioning by price/quality. A very pervasive approach to positioning. Some small companies and brands offer more in terms of service, features, or performance, and a higher price serves to signal this higher quality to the customer. As an example, Derry Church Artisan Chocolates are very expensive, but they position themselves as having the very high quality that justifies a high price.Jim T. Ryan, “Sweet Strategy: Artisan Chocolatier Eyes Internet, Corporate Giving for Growth,” Central Penn Business Journal, November 26, 2010, 3–6.
  3. Positioning by use or application. Focuses on how a product is used or different applications of the product. A solitary custom tailoring shop located in a downtown professional office area could position itself as the only tailor where you can conveniently go “for lunch.”
  4. Positioning by product user. The focus shifts from the product to the user. KIND Snacks are cereal bars positioned as a snack bar for those who are interested in a snack that is wholesome, convenient, tasty, healthy, and “economically sustainable and socially impactful.”[36] It is a great snack for hikers and campers.
  5. Positioning by product class. Focuses on product-class associations. A cleaning service that uses only green products and processes can position itself as the green choice in cleaning services.
  6. Positioning with respect to a competitor. Comparing a small business brand to its competitors. Some comparisons will be very direct; others will be subtle.[37] A small manufacturer that does not miss delivery times and makes products that are free of flaws can position itself on the basis of timely delivery and manufacturing excellence.[38]

Joe’s Redhots’ Business Positioning Strategy

Joe’s Redhots will sell premium-quality hot dogs and other ready-to-eat luncheon products to upscale business people in high-traffic urban locations. Joe’s Redhots will be positioned versus other luncheon street vendors as “the best place to have a quick lunch.” The reasons are that Joe’s Redhots have the cleanest carts; the most hygienic servers; the purest, freshest products; and the best value. Prices will be at a slight premium to reflect this superior vending service. Joe’s Redhots will also be known for its fun and promotional personality, offering consumers something special every week for monetary savings and fun.[39]

The challenge for a small business is to decide which approach to positioning a company or a brand is the best fit. This decision “often means selecting those associations which are to be built upon and emphasized and those associations which are to be removed or de-emphasized.”[40] In the process of writing a positioning statement, something that is encouraged as a way to keep the business on track, be aware of the difference between a broad positioning statement and a narrow positioning statement. A broad statement should encompass enough to allow a company to add products without the need to create a new positioning statement on a frequent basis; a narrow positioning statement puts a company in a “specialist” position in its market.[41]

  • Broad position statement. “Professional money management services for discerning investors”
  • Narrow position statement. “Equity strategies for low risk investors”
  • Broad position statement. “Elegant home furnishings at affordable prices”
  • Narrow position statement. “Oak furniture for every room in your house”[42]

Key Takeaways

  • Differentiation and positioning considerations are relevant to each element of the marketing mix as well as the onground and online marketplaces.
  • Differentiation and positioning can contribute to the competitive advantage of a small business.
  • Differentiation is one of the most important and effective marketing tools available to a small business owner.
  • Small businesses, both B2B and B2C, can differentiate their companies or brands in many different ways.
  • Ideally, differentiation should be done in a way that cannot be imitated by the competition.
  • Positioning is about placing a company or a brand in the mind of the consumer in relation to the competition. It is always comparative.
  • Small businesses practice positioning as much as larger companies do, but they may not use the terminology.
  • All small business owners should understand what positioning is and how they can use it to their advantage.

Marketing Strategy and Product

The key element in the marketing mix is the product. Without it, price, promotion, and place are moot. The same is true for marketing strategy. Fulfilling a company’s vision and mission and achieving its marketing objectives must be led by the product.

There are multiple decisions and considerations that factor into product or service development: features and benefits, product mix, design, brand, the product life cycle, and the company website. Knowing product development issues can be very helpful for even the smallest business that is looking to keep its current product line responsive to the customers while also looking to expand its product line as the company grows (if growth is desired).

Factors in Product or Service Decisions

Factors in Product or Service Decisions - features and benefits, product mix, design, brand, product life cycle, company website

Product Features and Benefits

A product has multiple layers: core, augmented, and symbolic. These three layers can help a small business owner understand the product features and benefits that will best deliver value to current and prospective customers. These layers also provide the bases for differentiating and positioning the product. The product layers refer to both products and services and business-to-consumer (B2C) or business-to-business (B2B) customers.

The Product Layers

The Product Layers - core, augmented, symbolic

The core layer is the nuts and bolts of a product, its physical anatomy, and its basic features. It is also the basic benefit or problem solution that B2C or B2B customers are looking for. Someone buying an airline ticket, for example, is buying transportation.[43] Someone buying an ice cream cone is buying a delicious and fun treat. The core layer is also where considerations of quality begin. Quality “refers to overall product quality, reliability, and the extent to which [the product or the service] meets consumers’ needs,” and the perception of quality has the greatest impact on customer satisfaction.[44] Decisions about design, manufacturing, preparation, ingredients, service delivery, component parts, and process materials all reflect a business’s philosophy about quality. The augmented layer is where additional value is added via things such as packaging, promotion, warranties, guarantees, brand name, design, financing opportunities where appropriate, prompt and on-time service, and additional services that may enhance a product. The augmented layer for Southwest Airlines is its well-known brand name, its packaging and promotion as a “fun” flying experience, and its “bags fly free” policy. The ice cream cone that is purchased in an old-fashioned ice cream parlor will likely be considered of greater value to many customers than the ice cream cone purchased at a Dairy Queen. It is this layer where many marketing mistakes are made because opportunities are missed. The symbolic layer captures the meaning of a product to a consumer—its emotional and psychological connections. There are many loyal customers of Southwest Airlines because they really enjoy flying with them. It is inexpensive, convenient, and fun. The old-fashioned ice cream parlor will engender nostalgia and create powerful emotional ties. The most serious marketing errors are made when the symbolic product layer is either ignored or not understood. The power of symbolism should never be underestimated.

Every small business should look at its products within the context of the product layers. It is the creativity and imagination of the small business owner with the product layers that can set a business apart. They provide an excellent basis for dissecting an existing product to see where opportunities may have been missed, features could be added or changed, and features or enhancements could be explained more effectively in promotional activities. The product layers should also be used to develop new products that the business plans to introduce.

Product Mix

All small businesses have a product mix, the selection of products or services that is offered to the marketplace. With respect to the product mix for small companies, a company will usually start out with a limited product mix. However, over time, a company may want to differentiate products or acquire new ones to enter new markets. A company can also sell existing products to new markets by coming up with new uses for its products.[45] No matter the approach, the product mix needs to be created so that it is responsive to the needs, wants, and desires of the small business’s target market.

For small businesses engaged in e-marketing, product selection is a key element for online success. Part of the challenge is deciding which products to market online because some products sell better online than others.[46] If a business has a brick-and-mortar presence, a decision must be made whether all the inventory or only part of it will be sold online. Items that sell well online change over time, so it is important to keep up to date on the changes.[47] A second decision to be made is the number of items in the catalog (i.e., the number of items you will sell). Given intense online competition and shoppers’ desires for good selections, there needs to be a critical mass of products and choices—unless a company is lucky enough to have a very narrow niche with high demand. If a company has only one or two products to sell, the situation should be evaluated to determine whether selling online will be profitable.[48]

Product Design

In his book, Re-imagine! Business Excellence in a Disruptive Age,[49] Tom Peters devotes two chapters to the importance of design to business success. He says that design is “the principal reason for emotional attachment (or detachment) relative to a product service or experience”—and he quotes Apple’s CEO, Steve Jobs, in saying that design is the “fundamental soul of a man-made creation.”[50] This is true whether the product comes from a big business or a small business.

Product design involves aesthetic properties such as color, shape, texture, and entire form, but it also includes a consideration of function, ergonomics, technology, and usability[51] as well as touch, taste, smell, sight, and sound. The pulling together of these things, as appropriate to the specific product or service being designed, should result in a design that matches customer expectations[52]

Design offers a powerful way to differentiate and position a company’s products and services, often giving company a competitive edge.[53] Improved profit margins from increased sales and increased market share are often the result. It is essential to get the visual design of a product right for the market you are appealing to. It can make the difference between selling a product—or not.[54]

Design is particularly important in making and marketing retail services, apparel, packaged goods, and durable equipment. The designer must figure out how much to invest in form, feature development, performance, conformance, durability, reliability, repairability, and style. To the company, a well-designed product is one that is easy to manufacture and distribute. To the customer, a well-designed product is one that is pleasant to look at and easy to open, install, use, repair, and dispose of. The designer must take all these factors into account.

The arguments for good design are particularly compelling for smaller consumer products companies and start-ups that do not have big advertising dollars.[55]

Quirky.com is a small business that has taken product design to a whole new level: collaboration. First seen as a “bold but ultimately wild-eyed idea,”[56] Quirky recently secured $6 million in venture financing. A company like this could be very helpful to a small business that is looking to introduce a new product.

Design issues also apply to services. Some of the design issues for services that are delivered in a store (e.g., dry cleaning, repair, and restaurant) are the same as for any retail store: the design of the physical space, the appearance of the personnel, the helpfulness of the personnel, the ease of ordering, and the quality of service delivery. For services that are performed at a customer’s home or at a business site, the design issues include timeliness; the appearance and helpfulness of personnel; the quality of installation, service, and repair; and the ease of ordering the service. The special characteristics of services (i.e., intangibility, perishability, inseparability, and variability, as defined in the figure below) present design challenges that are different from those faced by physical products.

The Characteristics of Services

The Characteristics of Services - Intangible, perishable, inseperable, variable

Source in footnotes[57]

Whether a small business is offering a product, a service, or a combination of the two to either the B2C or B2B marketplace, there is no question that excellent product design is a gateway to business success.

Packaging Design

The design of the product or the service package is another decision component of the product. Packaging can be defined as “all the activities of designing and producing the container for a product.”[58] Packages “engage us consciously and unconsciously. They are physical structures but at the same time they are very much about illusion. They appeal to our emotions as well as to our reason.”[59] Thus the package communicates both emotional and functional benefits to the buyer, and it can be a powerful means of product differentiation. A well-designed package can build brand equity and drive sales.[60] A poorly designed package can turn the customer off and can lead to wrap rage—the anger and frustration that results from not being able to readily access a product, which often leads to injuries. Although difficult-to-open packaging may be seen as necessary by the manufacturers and retailers, it does not do much for a positive customer experience.

Brand

A brand is defined by the American Marketing Association as “a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors…A brand may identify one item, a family of items, or all items of that seller. If used for the firm as a whole, the preferred term is trade name.”[61] A brand is a promise to the consumer that certain expectations will be met, a promise that—if broken—may result in the loss of that customer. A company’s brand is probably its most important asset.

Building a brand is an ongoing process for a small business because it wants a memorable identity. It is important for the business to constantly monitor its brand to ensure that it represents the core values and needs of its existing and potential customers.[62] The brand needs to reach people on an emotional level[63] because customers ultimately make decisions on an emotional level, not a logical level. For this reason, a small business should think in terms of tapping into as many senses as possible with its brand. “Almost our entire understanding of the world is experienced through our senses. Our senses are our link to memory and can tap right into emotion.”[64] Scenting the air of a store with a fresh fragrance could be a powerful contributor to the store’s brand.

Whether a small business wants to keep its brand (but may be monitoring it) or is looking to rebrand (changing the brand), there are four fundamental qualities of great brands that should be kept in mind:[65]

  1. They offer and communicate a clear, relevant customer promise, such as fun, speedy delivery, or superior taste.
  2. They build trust by delivering on that promise. Keeping a customer informed when something goes wrong can help build and retain trust.
  3. They drive the market by continually improving the promise. A small business should always be looking to make things better for its customers. Think in terms of the total customer experience.
  4. They seek further advantage by innovating beyond the familiar. If a small business focuses on the customer experience, there are undoubtedly ways to improve the brand by adding the unexpected.

The ultimate objective is to have a brand that delivers a clear message, is easy to pronounce, confirms a company’s credibility, makes an emotional connection with the target market, motivates the buyer, and solidifies customer loyalty.[66]

Product Life Cycle

Every product has a life span. Some are longer than others. The pet rock had a very short life span. The automobile is still going strong. Some products or services experience an early death, not able to make it very far out the door. Take, for example, Colgate Kitchen Entrees (yes, as in the toothpaste); Cosmopolitan Yogurt (off the shelves in eighteen months); and Ben-Gay Aspirin (the idea of swallowing Ben-Gay was not a winner).[67]

Even the big guys make mistakes, so small businesses are not immune from product goofs. The products that do make it, however, go through what is known as the product life cycle (PLC), defined as “the performance of the product in terms of sales and profits over time.”[68] The traditional PLC is shown in the figure below.

The Traditional Product Life Cycle

The Traditional Product Life Cycle - development, introduction, growth, maturity, and decline

Source in footnotes[69]

Small-business owners should understand the PLC because there are specific implications for marketing strategy. The product development (incubation) stage is when a product is being prepared for sale. There are costs but no sales. The product introduction stage is when a product is available to buy for the first time. Sales will generally be low but increasing, marketing expenses will be high, and profits will be typically low or nonexistent. The focus of the marketing strategy will be to create awareness, establish a market, and create demand for the product.[70] The product growth stage is when sales grow rapidly as the target market adopts a product and competition enters the marketplace once it observes the success. Marketing strategy should focus on differentiation and building a brand preference. There is substantial profit improvement.[71] Rapid growth must be managed carefully so that the company does not succeed into failure. The product maturity stage is characterized by slow growth because most of the buyers interested in a product have bought it. Sales may increase but slowly due to intense price competition. Profits stabilize or decline. The marketing strategy must focus on getting people to switch brands by using special promotions and incentives.[72] The product decline stage is when sales decline and profits erode. A product has become obsolete because of an innovation (think VHS to DVD to Blu-Ray) or the tastes of the target market have changed. The marketing strategy works to reinforce the brand image of the product. The product may be dropped from the product line or rejuvenated if possible and practical.

There are many small business owners who may not see the PLC as applying to their products or services. After all, accounting services are accounting services, a luncheonette is a luncheonette, and hardware is hardware. Thinking this way would be a mistake. Accounting practices change, people’s tastes change, hardware solutions change, and government regulation inserts itself. What is successful today may not be successful tomorrow. The PLC provides guidance for watching how a product or a service progresses in the marketplace so that the necessary marketing strategy steps can be taken.

The New Product Development Process

If the development of a new product is being considered, the following steps are suggested as guidance:

  • Generate new product ideas. Search for ideas for new products.
  • Screen new product ideas. Make sure the product fits the target market and the overall mission of the business.
  • Develop and evaluate new product concepts. Develop product concepts and determine how consumers will view and use the product.
  • Perform a product business analysis. Calculate projected business costs, return on investment, cash flow, and the long-term fixed and variable costs. Long-term fixed costs are production costs that do not vary with the number of units produced (e.g., annual rent). Long-term variable costs are production costs that vary with the number of units produced (e.g., selling more hot dogs will require more hot dogs, ketchup, mustard, and relish).
  • Design and develop the product. Develop a product prototype. A product prototype is an exact match to the product description developed in the concept development and evaluation stages. It is a sample.
  • Test market the product. Introduce the product to a market to find out how the product will be received when it is introduced for real. The test market should be as close as possible in terms of characteristics (e.g., demographics) as the target market. For a small business, an appropriate test market might be a few select customers.
  • Launch the product or the service. The product is introduced to the full marketplace.[73]

The Company Website

A company’s website is part of its product or service. The conventional wisdom is that all businesses should have a website. The reality is that there are many small businesses that do very well for themselves without a web presence. The small local deli, accounting or insurance services, a legal firm, a liquor store, or a dental office may not see the need for a website. At the same time, customers are increasingly expecting a web presence, so any small business that does not have a website runs the risk of losing sales because of it. The time may also be approaching when not having a website will be perceived as odd, with questions raised as to the seriousness of the business. Every small business without a website should determine whether this matters to them or not.

This section about the company website is targeted to the small business that has a web presence already or is planning to have one. A small business owner should have a basic understanding of website design to contribute to the discussion and communicate effectively when working with professionals.[74]—as well as to organize the owner’s visceral reaction when it is time to evaluate other websites, plan the company’s website, or revise the company’s current website.[75]

Stanford University’s Persuasive Technology Lab found that people quickly evaluate a website by visual design alone, with the visual design setting the tone for the user’s experience.[76] “Image is everything online. Good design evokes trust, makes navigation clear, establishes branding, appeals to target customers, and makes them feel good about doing business with the website they are on. Design does not have to be expensive for it to work. It does, however, need to represent an organization and appeal to a visitor. Professional design is not something organizations spend money on; it is something they invest in to support trust, positioning, and long-term marketing” (emphasis added).[77]

This section of the chapter discusses website objectives and the fundamental design elements: layout, color, typography, graphics, interactivity, navigation, usability, content, and performance. User experience is also discussed.

Website Objectives

“The goal of any Web site is to deliver quality content to its intended audience and to do so with an elegant design.”[78] Website objectives define what a company wants its website to do. For example, a website can build awareness of the business; build awareness of particular brands or services; distribute information to supporters, customers, and stakeholders on products or issues; sell products or services; build relationships with customers; develop a new marketing strategy or reinforce an existing strategy; manage an event (e.g., online registration and payment); build the company image; and gather marketing research by collecting data from users or conducting online surveys.[79] Whichever objective or combination of objectives is chosen, each objective should meet the criteria discussed in the section called “The Marketing Strategy Process”. Clear-cut objectives will increase the chances that a company’s website design and content will work to achieve those objectives.[80]

Website Layout

Layout refers to the positioning of the various elements that comprise a web page: where each text object will be positioned on each page or screen, the width and length of columns, the amount of space that will be placed between the lines of text, the alignment to be used (e.g., left or right), whether the page will be text only or use more advanced designs (e.g., multiple columns),[81] and the placement of graphics. Layout is important because it is one of the first things a visitor perceives when landing on a website. Research shows that “web users spend 69% of their time viewing the left half of the page and 30% viewing the right half, [so] a conventional layout is thus more likely to make sites profitable.”[82]

Color

Color is a powerful component of design. It affects mood and emotion, and it evokes associations with time and place. For example, psychedelic color combinations take us back to the 1960s, and turquoise and yellow combinations remind us of art deco in the 1950s. For websites, color is important in defining a site’s environment because “people see color before they absorb content.”[83] A lasting color impression occurs within ninety seconds and accounts for 60 percent of acceptance. What are the implications for website design? Decisions regarding color can be highly important to success.

The key to the effective use of color in website design is “to match the expectations of the target audience. Financial services sites tend to use formal colors (e.g., green or blue) with simple charts to illustrate the text but not many pictures. Sites directed at a female audience tend to feature lighter colors, usually pastels, with many pictures and an open design featuring lots of white space. Game sites are one type of site that can get away with in-your-face colors, Flash effects, and highly animated graphics.”[84]

Colors should be selected that reflect the purpose of the site and enhance the design. Understanding the meaning of color and the cultural use of color and how colors interact is important in website design to convey the right tone and message and evoke the desired response to the site.[85] The wrong choice could adversely affect a visitor’s experience at the site,[86] which could adversely affect a company’s sales and image.

Color Perceptions for Business

“The following list provides the traditional meanings of common colors and suggests compatible business usage:

  • Pink. Romance, love, friendship, delicacy, feminine; ideal for relationship coaches, florists, and breast cancer awareness sites.
  • Purple. Royalty, spiritual, transformation, creativity, new age; ideal for spirituality-based or new age businesses and businesses in the creative realm.
  • Blue. Solid, communication, calm, wisdom, trust, reassuring; ideal for financial businesses, insurance companies, and lawyers.
  • Green. Growth, money, abundance, fertility, freshness, health, environment; ideal for grocers, environmental businesses, therapists, healthcare businesses.
  • Red. Energy, strength, passion; ideal for bold businesses based on power and for professionals; use in combination with black.
  • Black. Power, sophisticated, elegant, formal, style, dramatic, serious; ideal for fine dining establishments; commonly used as an accent color.
  • Gold and yellow. Wealth, wisdom, prestige, power, energy, joy, clarity, light, intelligence, optimism; ideal for the construction industry.
  • White. Purity, goodness, simplicity, clean; ideal for almost every business.
  • Brown. Friendship, earthy, comfort, content, reliable, sturdy; ideal for businesses involved in administrative support.
  • Orange. Vibrant, enthusiasm, energy, warmth; ideal for creative businesses and teachers.
  • Gray. Security, staid, quality, professional, stable; ideal for the legal industry.”[87]

Typography

“Typography is the art of designing a communication by using the printed word.” [88] More specifically, it is the use of typefaces (or fonts) in a design. Typeface refers to a particular type or font (e.g., Times New Roman and Arial). Typography is an integral part of web design and plays a role in the aesthetics of the website.[89] About 95 percent of the information on the web is written language, so it is only logical that a web designer should understand the shaping of written information (i.e., typography).[90] It is possible to blow away more than 50 percent of website visitors and readers by choosing the wrong typeface.[91]

Graphics

Graphics, defined as pictures, artwork, animations, or videos, can be very effective if used correctly. Graphics can provide interest, information, fun, and aesthetics, but they can also take forever to load, be meaningless or useless, not fit on the screen, and use colors that are not browser safe colors (i.e., colors that look the same on PC and Macintosh operating systems). Images enhance a web page, but they should be selected and placed carefully.

Graphics should be used to “convey the appropriate tone of your message. As the old saying goes, a picture is worth a thousand words. Make sure your images correspond to the text and are appropriate to the business you offer. For example, an audiologist shouldn’t use a picture of a woman holding her glasses because the spotlight should be on hearing.”[92] Graphics should also help create a mood, or a sense of place. The use of the graphics has to be thoroughly considered because they slow the loading of a website.[93]

It has been shown that quality images boost sales and enhance the visitor experience. “Consumers who browse products on websites want to see the products they’re considering for purchase represented by the highest quality image possible…People do not buy what they cannot see, so the higher the quality and resolution of [the] imagery, the better [the] results will be.”[94] The key for any small business that wants graphics on its website is to consider how the graphics will add value to the user experience. The graphics should be for the direct benefit of the user, not the business. Do not get carried away with lots of images and animations because they can make a web page very hard to read. Graphics are a major part of the design, not just afterthoughts.[95]

Site Navigation

People will not use a website if they cannot find their way around it. If web users cannot find what they are looking for or figure out how the site is organized, they are not likely to stay long—or come back.[96] “The purpose of site navigation is to help visitors quickly and easily find the information they need on a website. Among the questions considered in site navigation are, How will visitors enter a site? How will visitors use the site? How will they find out what is available at the site? How will they get from one page to another and from one section to another? How will visitors find what they are looking for?”[97]

Site navigation must be easy, predictable, consistent, and intuitive enough so that visitors do not have to think about it.[98] “Designing effective navigation can also entice your visitors to try out the other things you offer on your site.”[99] The key to understanding navigation is to realize that if it is too hard to use or figure out, web visitors will be gone in a nanosecond, perhaps never to be seen again. What does this mean to a small business? Lost sales and lost opportunities.

Site Usability

A website’s usability, or ease of use, “can make or break an online experience, and it is directly correlated to the success of the site.”[100] Website usability measures the quality of a user’s experience when interacting with a website,[101] and it works hand in hand with site navigation. According to usability.gov, usability is a combination of five factors:[102]

  1. Ease of learning. How fast can a user who has never seen the user interface before learn it sufficiently well to accomplish basic tasks? The user interface is the way a person interacts with a website.[103]
  2. Efficiency of use. Once an experienced user has learned to use the website, how fast can he or she accomplish tasks?
  3. Memorability. If a user has used the website before, can he or she remember enough to use it effectively the next time or does the user have to start over again learning everything?
  4. Error frequency. How often do users make errors while using the website, how serious are these errors, and how do users recover from these errors?
  5. Subjective satisfaction. How much does the user like using the website?

Usability is necessary for survival on the Internet. If a website is difficult to use, people will leave,[104] and they may be inclined to tell everyone they know on Facebook and Twitter about their negative experiences. It is as simple—and as serious—as that. Small-business owners should consider postlaunch usability testing to help ensure the best user experience. Three free tools are HubSpot’s Website Grader, SiteTuners, and Google Analytics.

Site Interactivity

Site interactivity is about things on a company’s website site that prompt some kind of action from visitors.[105] Visitors become engaged with the site, they stay longer, they look deeper into the site to see what the company is offering, they are less likely to jump to another site, and they feel that they are part of a community and connected. This will keep them coming back to the site.[106]

There are many ways in which a small business can provide interactivity on its site. The following are some examples:[107]

  • Free calculators for calculating payments when something is being financed
  • Surveys, polls, or quizzes
  • Blogs, bulletin boards, and discussion forums
  • Facebook and Twitter links
  • Searchable database of frequently asked questions
  • Site search engine
  • Interactive games, puzzles, and contests
  • Articles that engage visitors, allowing them to add comments or opinions
  • Three-dimensional flip-books

The sources of interactivity on a website are limited only by a small business owner’s creativity and, of course, budget. However, it should never be a question of saying yes or no to interactivity. It is a matter of how much, what kind, and where. Remember that when customers feel compelled to do something, they are that much closer to buying.[108]

Content

Content refers to all the words, images, products, sound, video, interactive features, and any other material that a business puts on its website.[109] It is the content that visitors are looking for, and it is what will keep them on the site. High-quality content will also keep people interested so that they come back for more. “A poorly and ineffectively ‘written’ website has an adverse impact on the efficiency of the website. Moreover, it also gives a negative impression of the brand [or company] behind it. Without good ‘content’ a website is an empty box.”[110]

Good content is relevant, customer-centric (i.e., it is written in the language and words of the target audience(s) that visit the website), and complies with what we know about how people read online content. They don’t. They scan it—because it takes 25 percent longer to read the same material online than it does to read it on paper.[111] If a company’s content does not fit its target audience(s), the website will not generate good results.[112]

Most small businesses may think that they must generate all website content. However, some of the best and most successful content may be the easiest to create: the content generated by website users. Interestingly, it is not uncommon for user-generated content to get higher search engine rankings than a business’s home page, not an insignificant fact. [113] User-generated content includes the following:[114]

  • Message boards
  • Product reviews
  • New uses for a company’s products (e.g., using a dishwasher to cook a whole salmon)
  • Testimonials or case studies (how users solved problems)
  • Social media pages
  • Twitter feeds
  • Video contest submissions
  • Interviews with users
  • Online groups or communities such as LinkedIn or Ning

The gold standard of user-generated content is customer reviews. Customer reviews can increase site traffic by as much as 80 percent, overall conversions by 60 percent, and the average order value by 40 percent. With respect to the posting of both positive and negative reviews, it has been shown that “users trust organizations that post both negative and positive reviews of their product if organizations address the feedback constructively.”[115]

There are many factors that will contribute to the success of a small business website. However, the website will not do as well as it should, and it will not reach its full potential, without good quality content.[116]

Product Display

How a website displays products will impact the success of the website. As a result, product display should be seen as a website design issue. Key decisions that should be made for each category of product that is available on the website include the choice of which products to feature, how to provide product detail pages (an individual page for each product is preferable because there is more room for product details), the sort options that will be available to the shopper (e.g., price), and where items on special will be placed on the page (the upper right corner is recommended).[117]

Performance

No matter how well designed a website is, and no matter how high the quality of content, a website that takes too long to load will lose visitors. A website’s loading speed determines how fast the pages respond to a user request. Faster site speed is preferred by the users who want an optimal browsing experience, and the small business that wants increasing incoming connections and high sales. Users want faster speeds.[118]

Visiting a fast-loading site is a pleasant experience. Visiting a slow-loading site is not. Surveys now show that a person will wait less than three seconds (perhaps even less) for a webpage to load before leaving, with a one-second delay possibly meaning a 7 percent reduction in sales.[119] Google claims that the amount of site traffic drops by 20 percent for every 0.5 seconds of load time.[120]

There are several factors that slow down the loading time for a website, not the least of which is the connection speed of the user’s computer. This is out of the control of the web designer and the site owner (the small business). The biggest culprit, however, is a large graphic or several small graphics on a single page.[121] There are ways around this, known by any credible website designer. The impact of “slow down” features should be tested before the site launches and monitored afterwards.[122] The small business owner can take advantage of some of the popular tools that are available, usually for free, to measure a company’s website speed: YSlow (a Firefox extension); Google Page Speed (a Firefox add-on); or Webmaster Tools.[123] Once the problem areas have been identified, steps can be taken to make improvements. The goal is to have an interesting and speedy site.

Key Takeaways

  • The key element in the marketing mix is the product. Without it, price, promotion, and place are moot.
  • All products and services have three layers: core, augmented, and symbolic.
  • All small businesses have a product mix, the selection of products or services that is offered to the marketplace.
  • Product selection is a key element for online success because some products will sell better online than others.
  • Product design is the principal reason for emotional attachment or detachment relative to a product, a service, or an experience. It presents a powerful way to differentiate and position a company’s products and services.
  • The product or service package communicates both emotional and functional benefits to the buyer, and it can be an important means of product differentiation.
  • A company’s brand is probably its most important asset.
  • The product life cycle refers to a product’s life span.
  • A company’s website is part of its product or service. Website objectives must be developed and decisions must be made about the fundamental design elements of layout, color, typography, graphics, interactivity, usability, content, product display, and performance.

Marketing Strategy and Price

Marketing, whether online or onground, is the only activity that generates revenue for most small businesses, and the price element in the marketing mix accounts for that. Price can be defined very narrowly as the amount of money charged for a product or a service. However, price is really more than that. It is “the sum of all values (such as money, time, energy, and psychic cost) that buyers exchange for the benefits of having or using a good or service.”[124] Ultimately, the meaning of price will depend on the viewpoints of the buyer and the seller.[125]

Deciding on a price for its products or services is one of the most important decisions that a small business will make. The price of a product or a service must be a price that the company’s target market is willing to pay and a price that generates a profit for the company. If this is not the case, the business will not be around for long.[126]

Choosing the right pricing strategy is not an easy thing to do because there are so many factors involved. For example, competition, suppliers, the availability of substitute products or services, the target market, the image and reputation of a business, cost and profit objectives, operating costs, government regulation, and differentiation and positioning decisions will all impact price. Pricing is a complex activity, often seen as an art rather than a science. For small businesses that are marketing or want to market online, pricing strategies are even more complicated. For example, online buyers have increasing power that leads to control over pricing in some instances (e.g., online bidding on eBay). There is also price transparency where buyers and sellers can easily and quickly view and compare prices for products sold online, and some companies use dynamic pricing by varying prices for individual customers.[127]

There are several pricing strategies available to the small business owner. However, having the lowest price is not typically a strong position for small businesses because larger competitors can easily destroy any small business that is trying to compete on price alone.[128] Think Walmart. The best choice for a small business will be the strategy that helps the business reach its sales and profit objectives, enhances the reputation of the company, satisfies the target market, and sends the correct price-quality signal. Price-quality signaling occurs when the cost of a good or a service reflects the perceived quality of that product or service.[129]

Pricing Objectives

Pricing objectives (i.e., what the company wants to accomplish with its pricing strategy) should be related to a company’s objectives and should follow the decision about where a company wants to position its products or services. [130] Different small businesses in the same industry may have different pricing objectives based on size of the business; in-house capabilities; and whether the focus is on profit, sales, or government action.[131]

  • Sales-based objectives. Increasing sales volume and market share relative to the competition may involve penetration pricing, where a business prices a new product below that of the competition to quickly penetrate the market at the competitor’s expense, acquire a large market share, and then gradually raise the price. This objective might be appropriate for a small business that is introducing a new product or service to a very competitive marketplace.
  • Profit-maximization objectives. Quickly recovering the costs of product development while providing customer value may involve price skimming, where a new product is priced higher than that of the competition to maximize profit. This objective would work for a small business with customers who are more concerned with quality, uniqueness, and status rather than price. However, a product’s image and quality must warrant the high price.
  • Status-quo-based objectives. Used to minimize the impact of competitors, government, or channel members and to avoid a sales decline, these objectives are reactive rather than proactive, so they should be adopted for the short term only. Small businesses must be able to meet the needs of their target market.

Pricing Strategy

Once the pricing objectives are set, a small business must determine a pricing strategy. The small business owner can consider a variety of approaches. Discount pricing, cost-based pricing, prestige pricing, even-odd pricing, and geographic pricing are discussed here. In general, traditional pricing strategies can also be applied to the online environment.[132] How goods and services are priced tells consumers a lot about what to expect from a small business.

Discount Pricing

A small business might choose a discount pricing strategy.[133] if it is looking to drive traffic and sales short term or if it wants to be permanently seen as the value leader in an industry.[134] Discount pricing is used with customers who buy in large quantities, customers who buy during off-peak times (seasonal), promotions used to increase traffic, and loss leaders (products that are discounted to get customers in the door in the hope that they will also buy more profitable products). Discount pricing can be used in the online environment in ways similar to brick-and-mortar stores. If the discounting is short-term, inventory can be reduced, and revenues are increased temporarily.[135] An important disadvantage, however, is that customers often associate low price with low quality, particularly if a brand name is unfamiliar. A discount pricing strategy could lead to a product or a service being perceived as low quality. Also, price reductions can be easily matched by the competition, eliminating any but the earliest advantage.[136]

Cost-Based Pricing

Cost-based pricing is a very simple approach. A company figures out how much it costs to make a product or deliver a service and then sets the price by adding a profit to the cost. For example, if it costs a small toy manufacturer $10 to make its signature stuffed animal (taking into account fixed and variable costs) and the company wants a 20 percent profit per unit, the price to the retailer will be $12.[137]

Cost-based pricing is very easy to use. It is flexible (allowing different profit percentages to be added to different product lines), allows for easy price adjustments if costs go up or down, and is simple to calculate. On the downside, cost-based pricing ignores product demand, what the competition is doing with pricing, and positioning, and it provides no incentive for cost efficiencies.[138]

Prestige Pricing

Prestige pricing (or premium pricing) taps into the belief that a high price means high quality. Although this relationship exists in many instances, it is not true in all cases. Nonetheless, prestige pricing is “a strategy based on the premise that consumers will feel that products below a particular price will have inferior quality and will not convey a desired status and image.”[139] A small children’s clothing store that carries only top-of-the-line merchandise would use a prestige pricing strategy. Clothing from this store would be seen as having a higher perceived value than clothing from Macy’s but perhaps comparable in value to clothing from Bloomingdale’s, Nordstrom, or Neiman-Marcus.

Prestige pricing can be very effective at improving brand identity in a particular market. However, it is not typically used when there is direct competition because such competition tends to have a downward effect on pricing. Unique products usually have the best chance of succeeding with prestige pricing.[140]

Even-Odd Pricing

Also known as the “nine and zero effect,”[141] even-odd pricing can be used to communicate quality or value. It assumes that consumers are not perfectly rational, which is true. Emotion plays a much larger role in consumer behavior than rationality.

Even-numbered pricing, or setting selling prices in whole numbers (e.g., $20), conveys a higher-quality image. A small, high-end gift shop, for example, would use even pricing for most if not all its products, with odd-numbered prices (e.g., $18.97) used for products that are on sale. Odd-numbered prices give consumers the impression that they are getting a great value. It is a psychological effect with no basis in logic. But it does work in practice.

Geographic Pricing

Some small companies will use a geographic pricing strategy. This pricing strategy takes the geographic location of a customer into consideration, the rationale being that distribution can increase product delivery costs and thus the cost of the product.[142] Taxes, the cost of advertising, competitors who benefit from government subsidies, consumer demand, differences in costs of living, and the general cost of doing business are other factors that enter into the decision to use geographic pricing. Small businesses that sell outside the United States would likely encounter the need for geographic pricing. This strategy might also be appropriate when selling in different states.

Key Takeaways

  • Marketing is the only activity that generates revenue for most small businesses.
  • Price accounts for revenue.
  • Determining a price for its products or services is one of the most important decisions that a small business will make.
  • There are many factors involved in choosing the right pricing strategy.
  • Having the lowest price is not typically a strong position for small businesses.
  • Pricing objectives should be created before a pricing strategy is selected.
  • In general, traditional pricing strategies can be applied to the online environment.
  • Discount pricing, cost-based pricing, prestige pricing, even-odd pricing, and geographic pricing are pricing strategies that can be considered by a small business.
  • How goods and services are priced tells consumers a lot about what to expect from a small business.

Marketing Strategy and Place

No matter how great a product or a service may be, customers cannot buy it unless it is made available to them onground or online or both. This is the role of the place P in the marketing mix—to get a product or a service to the target market at a reasonable cost and at the right time. Channels of distribution must be selected, and the physical distribution of goods must be managed.

Channels of Distribution

A small business may choose the direct, retail, wholesale, service, or hybrid channels. In general, business-to-business (B2B) distribution channels parallel those of business-to-consumer (B2C) businesses.

Channels of Distribution

Graphic of the Channels of Distribution - direct, retail, and wholesale

Direct Channel

Many small businesses use the direct channel. The direct channel involves selling directly to the final consumer with no intermediaries (retailers and wholesalers, also known as middlemen) in the process. The direct channel provides close contact with the customer and full control of all aspects related to the marketing of a company’s products.[143] The Sugar Bakery & Sweet Shop in East Haven, Connecticut (winner of the Food Network’s 2010 “Cupcake Wars”), uses the direct channel, as does the local farmer when selling fruits and vegetables to the local population. Michael Dell started out by selling computers from his dorm room, and the founders of Nantucket Nectars began their business by selling their home-brewed fruit drinks to boaters in Nantucket Harbor. Many B2B sellers also use the direct channel. Consolidated Industries, Inc., for example, sells helicopter parts directly to Sikorsky Aircraft and airline parts directly to Boeing. (See Chapter 5 “The Business Plan” for more information on Consolidated Industries, Inc.)

Retail Channel

Many small businesses may choose to produce or manufacture products and distribute them to retailers for sale. This is considered an indirect channel because the retailer is an intermediary between the producer or manufacturer and the final consumer. If a small business that makes one-of-a-kind, handcrafted picture frames sells its frames to a picture-framing business that in turn sells the frames to its customers, this would be an example of using the retail channel. An online business that sells products made by several producers or manufacturers would also be using the retail channel—and would be called an e-tailer.

Wholesale Channel

Wholesalers are also intermediaries. A wholesaler is “a [large or small] business that sells to retailers, contractors, or other types of businesses (excluding farms), but not to the general public (or at least not in any significant amount).”[144] A small business that chooses to use wholesalers is also using an indirect channel of distribution. Using a wholesaler makes sense when a business makes a product that it wants to sell in many stores that would not be easily or conveniently reachable through the direct channel or the retail channel. For example, Kathleen King’s small gourmet baked goods company (now known as Tate’s Bake Shop) earns much of its annual revenue from the wholesale distribution of its baked goods to approximately one hundred gourmet shops on Long Island, in New York City, and in other states.[145]

Although any small business that uses wholesalers will see a reduction in profit, there are several advantages to wholesaling. For example, wholesalers are able to sell and promote to more customers at a reduced cost, they can deliver more quickly to buyers because wholesalers are closer to them, and wholesalers can inventory products, thereby reducing inventory costs and risks to their suppliers and customers.[146] Small businesses that produce only one or a few products commonly use the wholesale channel of distribution. Retail outlets may not be placing orders from the small business because it is not known. The wholesaler can put the product in front of them.[147]

Multichannel Distribution

A small business may choose a multichannel distribution system (or hybrid channel). This channel option uses two or more channels of distribution to reach one or more customer segments, offering customers multiple purchase and communication options.[148] The multichannel approach offers three important advantages:[149]

  1. Increased market coverage. More customers are able to shop for a company’s product in more places, and customers who buy in more than one channel are often more profitable than one-channel customers.
  2. Lower channel cost. Selling by phone or online is cheaper than selling via personal visits to small customers.
  3. More customized selling. A technical sales force could be added to sell more complex equipment.

The hybrid approach works well for small businesses. Tate’s Bake Shop sells directly through its store in Southampton, New York, and online. It sells indirectly to gourmet retailers such as Sugar and Spice in Chappaqua, New York, through its wholesalers. Local restaurants also use the multichannel approach when customers can order online or by phone and then pick up the food at the restaurant.

Physical Distribution (Logistics)

Physical distribution (logistics) involves “all the activities involved in the physical flow and storage of materials, semifinished goods, and finished goods to customers in a manner that is efficient and cost effective.”[150] Logistics can be performed by the producer or the manufacturer, intermediaries, or the customer. Deciding on the right logistics solution may be the differentiator that puts a company ahead of its competition.[151] Logistics are relevant to both online and onground companies.

The costs of logistics can account for as much as 10–35 percent of a company’s gross revenues, so any money that can be saved can lead to more affordable products for consumers and increased profitability. The costs will vary by several factors (e.g., industry sector, company location, and company size). Retailers that offer a wide assortment of products will spend more on logistics because transportation and storage costs will increase as the number of carried products increases.[152]

Logistics involve the following four primary functions: transportation, warehousing, inventory control, and order processing.[153]

  1. Transportation. The transportation choices for a small business will determine whether products will arrive at their destination in good condition and on time. Transportation costs will increase product price. The choices include truck, rail, air, water, and pipeline. The table called “Characteristics of Different Modes of Transportation” below compares these choices. The selection of the best mode or combination of transportation modes depends on a variety of factors, including cost, speed, appropriateness for the type of good, dependability, and accessibility. All these things will affect customer value and customer satisfaction.
  2. Warehousing. [154] Producers and manufacturers must store goods before they are sold because production and consumption rarely match. Some inventory may be kept at or near the point of production or manufacture, but the rest is located in warehouses. Some warehouses also provide assembly, packaging, and promotional display construction services…all for a fee, of course.
  3. Inventory control. Inventory control is about ensuring that goods are where customers want them when they want them. In other words, it is about avoiding the “out of stock” situation that irritates customers. Small-business owners must understand how much inventory will be needed to address their customers’ needs on a timely basis and at the appropriate cost (think pricing strategy). High inventories are undesirable because they may lead to obsolete products, depressed sales of new models, and liquidation prices that may change customer expectations in the future.[155] Small businesses should think of inventory as a wasting asset: it does not improve with time and, in fact, becomes less valuable with every day that passes—taking up space and incurring heat, light, power, handling, and interest charges. Every day that shows inventory and no sales will also show no profit. The goal is to keep inventory as low as possible.[156]
  4. Order processing. [157] Every small business should want to shorten the elapsed time between an order’s receipt, delivery, and payment. Although there are typically multiple steps involved, the reality is that the longer the cycle, the lower the customer’s satisfaction, the higher the company’s costs, and the lower the company’s profits. Streamlining the process should be a priority.

Characteristics of Different Modes of Transportation

Mode Percentage of Total Transportation Cost Speed Product Examples*
Rail 42 Medium Lower Coal, stone, cement, oil, grain, lumber, and cars
Truck 28 Higher Higher Perishables, clothing, furniture, and appliances
Pipeline 16 Lower Low Oil, gas, chemicals, and coal as a semifluid
Water 13 High Low Coal, stone, cement, oil, grain, and cars
Air 0.4 High High Jewelry, perishables, electronics, wine, and spirits
*Small businesses are represented in each of the product examples given.

Source in the footnotes[158]

There are several things that small businesses can do to increase the efficiency and the effectiveness of their logistics.[159] For example, a business can select a logistics company that is industry-specific (e.g., wine or clothing) because that company will understand the shipping needs of the products or use small business logistics services from UPS or FedEx.

Logistics management also includes supply chain management. This is the focus of Chapter 11 “Supply Chain Management”.

Place and the Website

For small businesses that sell online or hope to sell online, the company website “places” the product or the service in the hands of the customer. As a result, there are several decisions that must be made to facilitate the process so that customers can have a good online experience[160] and be less inclined to abandon their shopping carts and leave the site without making a purchase.

  • Better sorting and searching. Make it easier for shoppers to find what they are looking for.
  • Multibrand combinations in a single cart. If multiple brands are carried, make it possible to combine shopping carts across brands and apply promotions on the entire cart.
  • Clarity on price and delivery rate. Prices and delivery rates should be marked clearly, with no ambiguity.
  • Multiple payment options. Offer more than credit cards. (See Chapter 4 “E-Business and E-Commerce” for a discussion of payment options.)
  • Check-out options. Do not require a customer to register before completing checkout.
  • Provide a product search engine. The larger and more complex the product selection, the more a product search engine is needed. Shoppers can search by product name; product type; price; product attributes, such as color, size, or material; or brand either alone or in combination.
  • Two clicks to buy. The fewer the number of clicks to buy, the greater the chances that a shopper will do just that.
  • Customer support. Offer customer support throughout the buying process. Make it easy to communicate with a real person; spell out the company’s warranty, refund, and return policies; ensure privacy and security; and let shoppers know if you put cookies on their computers.
  • Fulfilling orders. Ideally, send each customer an e-mail confirming when the order is completed, remind the shopper to print the order details, and provide a tracking number with a direct link to the carrier’s website so that the shopper can follow the progress of shipment.

Shopping cart abandonment, or leaving a website without buying any of the items in the shopping cart, is something that affects almost every Internet retailer, including small businesses. Cart abandonment estimates range from 20 percent to 60 percent.[161] An understanding of why shoppers are abandoning their carts should lead to some serious thinking during website design and operation. The table below gives examples of why shoppers abandon a purchase. Because shipping is the number one reason why shoppers abandon their shopping carts, think very carefully about what the shipping charges will be.[162]

Why Online Shoppers Abandon Their Shopping Carts

High shipping charges 46%
Wanted to comparison shop 37%
Lack of money 36%
Wanted to look for a coupon 27%
Wanted to shop offline 26%
Could not find preferred payment option 24%
Item was unavailable at checkout 23%
Could not find customer support 22%
Concerned about security of credit card data 21%[163]

Key Takeaways

  • Understand that place is about getting the product or the service to the target market where customers want it, when they want it, and at a reasonable cost.
  • A small business may choose the direct, retail, wholesale, service, or hybrid channels or some combination of these channels.
  • In general, B2B distribution channels parallel those of B2C businesses.
  • The direct channel involves selling to the final customer with no intermediaries involved.
  • Service businesses use the direct channel only because services are performed and consumed at the same time.
  • The retail channel is considered indirect because the retailer is an intermediary between the producer or manufacturer and the final customer.
  • The wholesale channel is also an indirect channel. The wholesaler is placed between the producer or manufacturer and the retailer.
  • The multichannel distribution system (hybrid channel) uses two or more channels to reach one or more customer segments.
  • Logistics are about getting materials, semifinished goods, and finished goods to customers efficiently and cost effectively. They can be handled by the producer or the manufacturer, intermediaries, or the customer.
  • Logistics include decisions related to warehousing, transportation, inventory control, and order processing. These decisions are relevant to both online and onground companies.
  • Websites play an important role in “placing” goods and services into the hands of customers.
  • It is important to reduce the number of customers who abandon their shopping carts (i.e., leave the website without purchasing the items in their shopping carts).
  • Shopping cart abandonment is common among online retailers. Shoppers abandon their carts for a variety of reasons, the most important one being high shipping charges.

Marketing Strategy and Promotion

Promotion, the fourth P in the marketing mix, is now more commonly referred to as marketing communications. Marketing communications can be defined as “the means by which firms attempt to inform, persuade, and remind customers—directly or indirectly—about the products and brands they sell. In a sense, marketing communications represent the ‘voice’ of the company and its brands and are a means by which it can establish a dialogue and build relationships with consumers.”[164] Marketing communications are all about getting the word out about a company’s products and services because customers cannot buy what they do not know about, and, in the process, creating more of a two-way relationship with customers than was typical of the more traditional notion of promotion. A further conceptual iteration is the term integrated marketing communications (IMC), which is “the coordination and integration of all marketing communication tools, avenues, and sources within a company into a seamless program designed to maximize the communication impact on consumers, businesses, and other constituencies of an organization.”[165] Small-business owners should be familiar and comfortable with all three terms because at least one of them will be the basis of conversations with vendors, employees, and other businesses. However, from a small business management perspective, IMC should be the guiding philosophy for a company.

Prior to selecting and designing any communications, however, objectives must be established for the marketing communications program.

IMC Objectives

Every small business must decide what it wants to accomplish with its IMC plan. Although many IMC plans may be oriented toward a single objective, it is possible for a program to accomplish more than one objective at a time. The problem is that this may be confusing to potential customers.[166] IMC objectives can fall into seven major categories: increase demand, differentiate a product (stressing benefits and features not available from competitors), provide more information about the product or the service (more information seen as being correlated with greater likelihood of purchase), build brand equity (the value added to a brand by customer perceptions of quality and customer awareness of the brand), reduce purchase risk (important for new products and gaining new customers of current products), stimulate trial (to build new brands and rejuvenate stagnant brands),[167] and brand recognition. As with all objectives, IMC objectives must meet the SMART (specific, measurable, achievable, realistic, and time-based) criteria.

Marketing Communications Mix

The marketing communications mix for a small business, either pure-play or brick-and-click, will consist of some combination of the following major modes of communication: advertising, sales promotion, events and experiences, public relations (PR) and publicity, direct marketing, interactive marketing, word-of-mouth communication, and personal selling.[168] Each mode of communication has its own advantages and disadvantages, which should all be considered carefully before any final selections should be made.

The Marketing Communications Mix

The marketing communications mix - advertising, sales promotion, events and experiences, PR and publicity, direct marketing, interactive marketing, and personal selling

Source listed in the footnotes[169]

Advertising

Advertising is “any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor.”[170] Advertising is around us all the time—for example, ads are on television and radio, in newspapers and magazines, in train stations and on trains, on the sides and inside of buses, in public restrooms, in taxis, on websites, and on billboards. Ads can also be found in other places, and the locations are limited only by the creativity of the company placing the ads.

Small businesses must choose advertising media (e.g., radio, television, newspapers, billboards, the Internet, and magazines) based on their product, target audience, and budget. A local travel agency selling spring getaways to college students, for example, might post flyers on campus bulletin boards, run ads in the campus newspaper (for the students) and local newspapers (for the parents), and run ads on the college radio station. Examples of tried and true advertising media for small businesses include the yellow pages, newspaper and magazine advertising, direct mail, business cards, vehicle advertising, radio and cable television advertising, bench/bus stop advertising, local website advertising, e-mail advertising, eBay listings, community involvement, and cross-promotion (joining forces with other businesses). Susan Ward, “17 Advertising Ideas for Small Businesses,” [171] Even advertising in the big leagues is not out of the question for a small business. Salesgenie.com decided to advertise during Super Bowl XLII in February 2008, choosing to risk major capital to connect with the huge Super Bowl customer base.[172]

Advertising on the Internet is also a consideration for the marketing communications mix of any business with a web presence. According to Lorrie Thomas, author of Online Marketing,[173] online advertising “can rocket your web marketing into the stratosphere” if it is done correctly. If not done correctly, however, it will “blast a giant crater in your budget.” Online advertising includes the following entities: banner ads (image ads that range in size and technical capability); e-mail advertising (ads in newsletters, an ad in another company’s e-mail, e-mailing a list with a dedicated message, or a company advertising to its own customers with its own e-mail list); news site advertising (placing ads on news, opinion, entertainment, and other sites that the audience frequents); blog advertising (buying ads directly on popular blogs); social media advertising (advertising on sites such as Twitter, Facebook, and LinkedIn); and affiliate marketing (company A places an ad for its product on the site of company B; company A then pays company B an agreed-on fee when a customer clicks on the ad and buys something.)[174] Another possibility is Google AdWords. A small business can promote itself alongside relevant Google search results and on Google’s advertising network. This allows a business to reach people who are already looking online for information about the products and services that a business offers.[175]

Advertising offers several advantages to the small business. For example, advertising is able to reach a diverse and geographically dispersed audience; it allows the seller to repeat a message many times; and it provides the opportunity for dramatizing the company and its products through the artful use of print, color, and sound. However, the audience does not feel obligated to pay attention or respond to an ad.[176] Whether the advantages of advertising outweigh the costs and disadvantages is something that must be decided by each small business.

Sales Promotion

Given the expense of advertising and the fact that consumers are exposed to so many advertising messages every day, many companies correctly believe that advertising alone is not enough to get people to try a product a product or a service. Enter lower-cost sales promotion techniques. Sales promotion refers to the variety of short-term incentives to encourage trial or purchase of a product or a service. Examples of commonly used sales promotions include contests, sweepstakes, coupons, premiums and gifts, product samples, rebates, low-interest financing, price discounting, point-of-sale displays, and frequent user or loyalty programs.[177] These promotions can be used by and offer several advantages to small businesses:[178]

  • Attracting new customers with price. A reduced price could lure customers away from the competition. For example, a small electronics store that is competing with a large retailer could offer a discounted price on a popular cell phone for a limited time.
  • Gain community favor. By offering a promotion that helps a worthy cause, you can create a good name for the business. Donate a portion of sales to the local food bank, buy clothing for the homeless, or donate to the local animal shelter to help pay veterinarian bills.
  • Encourage repeat purchases. Rewards and loyalty programs can be very successful for small businesses. Coffee clubs are popular (buy so many coffees at the regular price and you get one cup free), but this approach can work for sandwiches at a deli, bags of bird food or dog food at the local pet store, shoe repairs at the local cobbler, dry cleaning services, and virtually any other kind of business.
  • Entice reluctant customers. Giving away a free product or service is usually a good way to get people to try a product or a service for the first time, the hope being that it will lead to a purchase. However, the product or the service has to be good enough to stand on its own so that when the “free” unit is gone, the person will come back to buy.
  • Providing information. It can be very effective if you run a promotion that helps provide information to potential customers to help them make a decision. This works especially well for products or services that are complicated or unfamiliar to customers, for example, software or product usage (particularly for business-to-business [B2B] customers), financial services, investment services, or estate planning. Free onground seminars or webinars or webcasts (seminars or presentations that are delivered online and that are typically an hour in length) can be very effective at gaining new customers or clients.

Sales promotions can be delivered to the customer in a variety of ways, such as snail mail (US Postal Service), in person, in local new newspapers and regional editions of national magazines, on television and radio, in e-mail, on websites, and in electronic coupons that are sent to a customer’s mobile device. Groupon, which is described as the hottest thing in retail marketing right now, offers customers coupons at local businesses: everything from restaurants to spas to painting lessons to sleigh rides.

Events and Experiences

Events and experiences are “company-sponsored activities and programs designed to create daily or special brand interactions.”[179] A small business could choose to sponsor a Halloween costume event for pets[180] or an entertainment event, such as a battle of the bands, to raise money for local scholarships. Participation in a local business fair could provide exposure for a product or a service and the opportunity to experience the product if that is possible. A local restaurant could participate in a chili competition. Factory tours and company museums, both of which can also be virtual, can offer great experiences for customers.

There are several advantages to events and experiences:[181] (1) A well-chosen event or experience can be very effective because the consumer gets personally involved. (2) Experiences are more actively involving for consumers because they are real time. (3) Events are not hard sell, and most consumers will appreciate the softer sell situation.

Events and experiences also tap into the importance of the customer experience, discussed in Chapter 6 “Marketing Basics”. Today, customers “want products, communications, and marketing campaigns to deliver experiences. The degree to which a company is able to deliver a desirable customer experience—and to use information technology, brands, and integrated communications and entertainment to do so—will largely determine its success.”[182] By having special events, a small business will stand out from the rest,[183] and they will create desirable publicity for the company.

Public Relations and Publicity

Public relations (PR) and publicity are designed to promote a company’s image or its individual products.[184] A small business can also use PR to clarify information in response to negative publicity. (Publicity usually being “an outcome of PR that is produced by the news media and is not paid for or sponsored by the business involved.”)[185] Traditional PR tools include press releases and press kits that are sent to the media to generate positive press on behalf of the business. A press kit, the most widely used PR tool, pulls together company and product information to make a good, solid first impression.[186] (Be sure to print the company’s website address on everything.) A press kit can be particularly useful for small businesses, although the smallest of businesses may not see the need. Other common platforms include speeches, seminars (online and offline), brochures, newsletters, annual reports, charitable donations, community relations, and company magazines.[187] Increasingly, companies are using the Internet: interactive social media, such as blogs, Twitter, and Facebook; home-page announcements for specific occasions (e.g., messages of sympathy for the victims of a disaster); and e-mail.

Social media services such as Google Alerts can be very helpful for managing a company’s reputation. Reputation management “is the process of tracking other’s opinions and comments about a company’s actions and products, and reacting to those opinions and comments to protect and enhance the company’s reputation.”[188] Both services notify the business when the company name is mentioned. Addressing extremely negative comments immediately is very important for any small business with a web presence.

Most small businesses are not likely to have PR departments. Instead, there will be one person whose job includes—among many other things—PR and publicity. The key is for PR and marketing to work closely together so that “every piece of communication produced by the company speaks with one voice.”[189]

Getting publicity for a small business is usually free. Stories about events and experiences might be of interest to the media. One great idea is to have a group of people outside the business with positive picketing, holding signs such as “Low prices” or “Beware of friendly employees.” This was actually done by a small business, and it resulted in the business being on the front page of the local paper.[190]

PR and publicity tend to be underused by all businesses. However, PR and publicity should be particularly appealing to the small business because of the following three distinct qualities:[191]

  • High credibility. News stories and features are more authentic and credible to readers.
  • Ability to catch buyers off guard. PR can reach prospects who prefer to avoid salespeople and advertisements.
  • Dramatization. PR has the potential for dramatizing a company or a product.

Direct Marketing

Direct marketing is the “promotion of a product from the producer directly to the consumer or business user without the use of any type of channel members.”[192] Common direct marketing platforms include catalogs; direct mailing; telemarketing; television shopping; electronic shopping; fax mail; voice mail; blogs; websites;[193] e-mail; direct response radio, television, and Internet;[194] social media, such as Facebook and Twitter; and mobile devices. Because channel members are bypassed, direct marketing normally allows for greater profitability; perhaps more importantly, however, it can develop stronger brand loyalty with customers.[195]

Direct marketing is about using information to educate, establish trust, and build a company (or someone in it) as an authority. This can be accomplished in multiple ways, such as website copy, a one-time piece of direct mail, a series of articles that build on one another,[196] a webcast or webinar, or a blog. There is no one more qualified to educate the market about a need than a small business owner: “They’re the ones who will know their audience and what they’ll find unique, irresistible and compelling. They’re the best people to craft the message. Everything else in the organization can be outsourced, but the knowledge that a small business owner has about the people they serve, that can’t be replicated.”[197]

Direct marketing offers several advantages to both the business-to-consumer (B2C) and B2B small businesses:[198]

  • Flexible targeting. A business can identify, isolate, and “talk” with well-defined target markets. This can translate into a higher conversion and success rate than if you tried to communicate with everyone in the mass market.
  • Customized messages. Can be prepared to appeal to the addressed individual.
  • Up-to-date. Messages can be prepared quickly.
  • Multiple uses. Direct marketing can be used to sell, but it can also be used to test new markets, trial new products or customers, reward existing customers to reward loyalty, collect information for future campaigns, or segment a customer base.
  • Lower cost per customer acquisition. The cost can be significantly less than other marketing methods.
  • Control and accountability. Direct marketing offers great control and accountability than other marketing methods.
  • Swift and flexible. Direct marketing is swift and flexible in achieving results.

Interactive Marketing

Interactive marketing refers to “online activities and programs designed to engage customers or prospects and directly or indirectly raise awareness, improve image, or elicit sales of products and services.”[199] Everything is personalized and individualized—from the website content to the products being promoted.[200] The audience is engaged with the brand, with customers getting the chance to reshape and market it in their own unique way.[201] Forrester Research forecasts that interactive marketing expenditures will reach $55 billion by 2015, accounting for 21 percent of all expenditures on marketing. The greatest growth is projected to come from social media, with the next biggest growth sector being mobile marketing.[202]

Common interactive marketing tools include e-mail, websites, online shopping, videos, webinars and webcasts, blogs, and social media such as Facebook and Twitter. Because e-mail, websites, online shopping, webinars and webcasts have been mentioned previously, the focus here will be on videos, blogs, and social media. Using online videos has become an increasingly popular strategy in small business marketing. Consumers are much more likely to visit a company after viewing its video, and they can be up to 40 percent more likely to make some sort of contact.[203] Online video content is becoming increasingly popular with avid Internet users, so a small business should consider creating a video for its website. The content can be created easily, and it can be posted on the company’s website as well as in other locations on the Internet (YouTube or on the company’s blog, for instance) to get more page views.[204] According to Ad-ology’s 2011 Small Business Marketing Forecast, 45 percent of US small businesses with fewer than 100 employees plan to use online video. This reflects the fact that small businesses are becoming increasingly savvy about how to use the Internet to market their products and services.[205] Paul Bond Boots, a small US maker of custom-made cowboy boots that are individually handmade to fit, features five really cool videos on its website. Recently, the company has turned to the Internet for most of its sales.

A blog “is a web page made up of usually short, frequently updated posts that are arranged chronologically—like a what’s new page or a journal.” Business blogs, as opposed to personal blogs, are used as a company communication tool to share a company’s knowledge and expertise, build additional web traffic, connect with potential customers, develop niche markets, give the business a human face, help reputation management, and provide a free avenue for press releases.[206]

Blogs are fairly simple to set up, and they are a great way to keep website content fresh. However, even though small businesses hear much about blogs these days, creating one must be considered carefully. Blogs today “have evolved into multimedia communities where bloggers (and the blogging community) have grown in size, stature, and impact to eclipse all but the largest media outlets.”[207] But this does not mean that it is essential for every small business to have a blog. Maintaining a blog takes a lot of time and energy—and then there need to be people to read it. After careful consideration, it may be better to focus a company’s promotional efforts elsewhere.

Social media “generally refers to websites featuring user-generated content or material created by visitors rather than the website publishers. In turn, these sites encourage visitors to read and respond to that material.”[208] Social media is changing the way that people communicate and behave. Social media outlets such as Facebook, LinkedIn, and Twitter are, among other things, driving purchases—and they should be seen “like a virtual cocktail party where all attendees can discuss [a company’s] products, services, experiences, and new ideas.”[209]

The top four social media networks are Twitter, Facebook, LinkedIn, and YouTube. This is true in general and for small businesses in particular.[210] Overall, small businesses use social media sites for lead generation, monitoring what is being said about their businesses, keeping up with the industry, improving the customer experience, and competitive intelligence.[211] Many small businesses in the B2B sector are already using social media for business as a resource, to engage in initiatives, or both. However, companies with more than one hundred employees are more active than smaller companies.[212]

Despite the hype surrounding social media, and the fact that many small businesses are already connected, small businesses must still consider the use of social media just as carefully as the other modes of marketing communications. Social media has not worked out well for some small businesses that have used it, so each business must decide what social media is expected to do for the company, and then it must be used well and strategically. When considering whether or how to factor social media into an IMC strategy, consider these words from Lisa Barone, cofounder and chief branding officer at Outspoken Media, “In 2011, if you’re not using social media to gain attention over your competitors, you can bet they’re using it to gain attention over you.”[213] This will undoubtedly continue to be the case.

Personal Selling

A small business owner needs to connect with customers before a sale can take place. Sometimes personal selling is the best way to do that. Personal selling, “the process of communicating with a potential buyer (or buyers) face-to-face with the purpose of selling a product or service,”- is absolutely essential in the marketing communications mix of a small business. History has shown that the most successful entrepreneurs have been skilled salespeople who were able to represent and promote their companies and products in the marketplace.[214]– It stands to reason that successful small business owners should have the same sales skills.

Although personal selling plays an important role in the sale of consumer products, it is even more important in the sale of industrial and business products. More than four times as many personal selling activities are directed toward industrial and business customers than toward consumers.[215] Regardless of the type of customer or consumer, however, the objectives of personal selling are the same:-[216]–

  • Building product awareness. A salesperson should educate customers and consumers on new product offerings.
  • Creating interest. Because personal selling is a person-to-person, and often a face-to-face, communication, it is a natural way for getting customers and consumers to experience a product for the first time. Creating interest goes hand-in-hand with building product awareness.
  • Providing information. A large part of the conversation with the customer focuses on product information.
  • Stimulating demand. The most important objective of personal selling by far is persuading customers and consumers to make a purchase.
  • Reinforcing the brand. Most personal selling focuses on building long-term relationships with customers and consumers. However, strong relationships can be built only over time, and they require regular communication.

Like all other forms of marketing communications, personal selling offers both advantages and disadvantages. On the plus side, personal selling is flexible and dynamic, providing companies with the best opportunity to tailor a message to satisfy customers’ needs. Personal selling’s interactive nature also makes it the most effective promotional method for building relationships with customers, particularly in the B2B market, and it is the most practical promotional method for reaching customers who are not easily reached through other methods.[217] Personal selling can help a small business build strong, loyal relationships with customers and consumers.

On the minus side, the biggest disadvantage may be the negative perceptions that many people have of salespeople: pushy, annoying, slippery, and willing to do anything for the sale—whether legal or not. The reality, of course, is that most salespeople (unfortunately, not all) do not fit this stereotype. The successful salesperson is the person who focuses his or her efforts on satisfying customers over the long term as opposed to his or her own selfish interests. Also on the negative side is the high cost of personal selling. Personal sales contacts are very expensive, with the costs incurred (compensation plus sales support) whether the sale is made or not.[218] Then there are the costs of training the sales staff on product knowledge, industry information, and perhaps selling skills.[219] Depending on the size of the company, small businesses will have varying numbers of salespeople, so some of the costs will vary as well.

The traditional sales process is typically seen as a series of six steps:[220]

  1. Prospecting and qualifying. Locating potential customers who have a need for a product and the ability to pay for it. For example, prospects for a small electric motor company would be all the businesses that use small electric motors. Prospects can be found through a variety of sources, including current customers, trade directories, business associates, and newspaper or magazine articles.
  2. Preapproach. It is important to learn as much about a prospect as you can. For example, you want to know about the prospect’s needs, attitudes about available products and brands, critical product attributes and benefits desired, and current vendor(s).
  3. Presentation and demonstration. This is where the salesperson tells the product “story” to the buyer: the product’s features, advantages, benefits, and value. It is important not to spend too much time on product features because benefits and value will most directly influence the purchase decision. It is also important to ask questions and listen carefully to a prospect’s answers because they will provide valuable insights into the prospect’s needs.
  4. Overcoming objections. You should expect customers to pose objections. The key to overcoming these objections is to maintain a positive approach, ask the prospect to clarify the objections, and respond to the objections by reiterating the major benefits of the product or the service and pointing out additional features, guarantees, service, and anything else that would address the objections.
  5. Closing. This is when the salesperson asks the prospect to buy the product. The request can be direct, or the salesperson can encourage the purchase by using a trial closing approach like asking, “Would you like us to finance product A for you?” Closing the sale is understandably the most difficult step for many salespeople because of the fear that the prospect will say no.
  6. Follow-up and maintenance. These activities are necessary for customer satisfaction and repeat business. They are key to establishing the strong long-term relationships that every small business desires and needs. The salesperson should schedule a follow-up call to ensure proper installation, instruction, servicing, and troubleshooting and resolution should any problems be detected. Always remember that unhappy customers will defect to competition—and they will spread negative comments about the company. Because it is much cheaper to retain an old customer than to obtain new ones, it is in a company’s best interests to provide good follow-up and maintenance services.

Although these steps are helpful as a way to summarize the kinds of things that are relevant to personal selling, the Internet has revolutionized the selling process.[221] The traditional process just described has become largely obsolete, with roles changing. Web searches and online content help prospective customers or clients do their own prospecting and qualifying. This eliminates the most time-consuming part of the traditional sales process. A company’s website becomes the first sales presentation and, as a result, is critical in moving a prospect toward a sale. In short, all employees must be fully integrated into web marketing because web marketing is the primary driver of the sales process. The more web-savvy you are, the greater the chances that your selling will beat the competition.[222]

Key Takeaways

  • Promotion and marketing communications are relatively synonymous terms.
  • IMC is about pulling all the marketing communications together to convey a consistent message.
  • Small-business owners should be familiar and comfortable with the terms promotion, marketing communications, and integrated marketing communications (IMC).
  • There are multiple categories of IMC objectives.
  • The marketing communications mix for a small business will consist of some combination of advertising, sales promotion, events and experiences, PR and publicity, direct marketing, interactive marketing, and personal selling. This mix is applicable to both pure-play and brick-and-click businesses.
  • There is a lot of hype about blogs and social media. They can be very effective, but they have not worked well for all small businesses that have used them. They should be considered carefully before inclusion in a company’s IMC strategy.
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