The Foundations of Marketing

Marketing is an important aspect of business that is important but challenging to implement effectively. 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 can be evaluated and improved.

1. Customers and market knowledge

This addresses how the company understands the needs of customers and marketplace. High-performing companies target specific groups of customers or markets, learn everything possible about what is important to those groups of customers and measure their satisfaction. Companies may enter a market and never proactively seek those customers that contribute the greatest to their success Without understanding the needs of each customer group limits the company's ability to respond to the buying decision these people make.

Far too often companies state that service is what separates them from their competition. This blanket statement 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 they began to target other potential customers with similar traits. Their new focus allowed them to better understand their customer buying decision and more precisely target similar customers in the 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 your target customers, customer groups and/or market segments?
• How do you listen and learn to determine key customer requirements and their relative importance to the customers' purchasing decisions?
• If determination methods vary for different groups, what are the key differences?

2. The competition

Understanding your customers 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, the next step is to develop strategies that build customer loyalty. Part of building loyalty is to understand what drives buying behaviors and consistently delivering on those requirements.

Here are three areas in which to develop processes to enhance customer relations:

• Customer contact requirements. This requires your company to determine its key customer contact requirements and how they vary for different modes of customer access. 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 to 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 are just throwing money out the window. With the knowledge gathered from the previous four steps, your promotional message will appeal to the needs of your selected market segment(s) and attract more customers.

• Whom do you want to hear your message?
• Where are 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 and Technology Development Centers offer seminars based on these concepts. 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 MO SBTDC at (573) 884-1555.

- Chris Bouchard, associate state director, MO SBTDC state office.
Date reviewed: 3/11/08