Foundations to Marketing

Marketing is one aspect of running a business that companies know is important but find challenging to implement effectively. It is difficult to see results from the costs incurred for marketing. Even defining marketing is difficult. For purposes of this discussion, marketing is defined as the process of getting and keeping more of the right kind of customers. There are many components to this, so let's look at the marketing processes that are regularly evaluated and improved.

1. Customers and Market Knowledge
This addresses how the company understands the needs of customers and the marketplace. High-performing companies target specific groups of customers or markets, learn everything possible about what is important to those groups or customers and measure their satisfaction. Many companies tap into their market base accidentally and never proactively seek out those to whom they should be selling. Instead, they divide up their existing customers into groups. This approach causes the company to end up with the wrong customers.

Far too often I hear from companies that their service is what separates them from their competition. There is nothing wrong with this strategy, but applying it as a blanket policy for all customers can mean a death sentence to the company. You may find that your most satisfied customers are not paying enough to cover the cost of your services, and those who can pay for the service are not very satisfied.

After examining segments of its customer base, Customer Research, Inc., a small market research and consulting company, found that some customers took advantage of their excellent customer service policies, which used a lot of company resources. Through their analysis, they discovered that these clients had very similar characteristics and began to target other groups of customers. Their new focus allowed them to understand their customer needs better and more accurately target similar customers in their marketplace. By doing this, they were able to increase their profit margin, achieve higher satisfaction ratings from their customers and greatly increase their customer loyalty.

Here are some customer and market knowledge questions to answer:
- How do you determine or target customers, customer groups and/or market segments?
- How do you listen and learn to determine key customer requirements and their relative importance/value to customers' purchasing decisions?
- If determination methods vary for different groups, what are the key differences?

2. The Competition
Though understanding your customers is critical, this cannot be done without considering the strengths and weaknesses of your competition and how they satisfy the needs of their customers. This includes understanding the market niches they are pursuing and why their customers are choosing to buy from them. In a free market, people have choices, and companies that evaluate their products or services without considering those alternatives will find themselves falling behind in the race.

Here are some competition questions to answer:
- Who are your competitors?
- Why do people buy from them?
- What are the main strengths and weaknesses of your competition?
- What methods do you use to continually evaluate the competition?

3. Customer Relationships and Satisfaction
Now that customer groups and markets have been identified and you understand your market strategy in context with the competition, you should develop strategies to build customer loyalty. Part of loyalty is understanding what drives buying behaviors. The other part is consistently delivering on those requirements. Strategies in several areas will build strong customer relationships that lead to satisfaction and loyalty.

Here are three areas in which you should develop processes and measure your company's performance:
- Customer contact requirements. This requires your company to determine its key customer contact requirements and how they vary for different modes of customer access. For example, one mode of contact may be an 800 number; your customer requirement for this access point may be to promptly and efficiently handle these incoming calls. What are your customer contact requirements?
- Complaint management. Accumulating information from customer complaints can be invaluable in understanding customer needs. Your complaint management process should include how you ensure prompt and effective resolution and how complaints are aggregated and analyzed for use in improving your company.
- Customer follow-up. A strategy to follow-up with customers after recent transactions will build your relationship with customers, help you learn their level of satisfaction and provide you feedback that leads to improved product or service features. How do you acquire information from customers after a transaction?

4. Pricing
Products and services must be priced properly to keep the company profitable as well as to support your position in the market. Pricing must incorporate your true costs (which includes both direct and indirect costs), market factors, perceived value and customers' alternatives.

Here are questions to answer to develop a pricing strategy:
- What are the direct costs for your product/service?
- What are the variable costs or overhead costs for your product or service?
- What is your break-even point?
- What is the price of similar products/services in your marketplace?
- What are your prices?
- Why will people buy your product/service at the price you are charging?

5. Promotions
You can have the best product or service offered at a price that people are willing to pay, but if people don't know about it, you won't sell anything. If your message is off the mark and does not appeal to the needs of customers, you will just be throwing money out the window. If you have done a good job in the four areas above, you will know what your customers want. With that knowledge, your promotional message will appeal to those needs and attract more customers.
- Whom do you want to hear your message?
- Where is there a large number of them to whom you can direct your message?
- What are your strategies to reach those concentrated groupings of customers?

The goal of this article is to help companies systematize their marketing efforts. The Missouri Small Business Development Centers will offer seminars based on these concepts after February 2003. In those sessions, you will be asked to answer similar questions to these and then further develop them with the guidance of the seminar leader and content experts. For further information, contact Chris Bouchard at the Missouri Small Business Development Centers, at (573) 884-1555.

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Authored by: Chris Bouchard, Program Specialist, Missouri Small Business Development Centers
Source: Creating Quality Newsletter, Volume 12, Number 1, January 2003

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