Before starting up a business, a prospective entrepreneur needs to develop a marketing plan. What is marketing? Loosely defined, marketing is the process of conceiving and developing a product or service, then pricing, distributing, promoting, and selling it to the end customer. For large corporations, this is a long and complicated process, generally orchestrated by a senior executive. For the local business owner, however, it follows five basic steps:
- Product and service development
Product and Service Development
For many (if not most) business owners, product and service development is the reason they went into business. Many well-known corporations started out as a brilliant concept for a product or service that no one else was offering, or something that was somehow unique and different and better than the rest. Before making the leap to developing a whole business around a product or service, however, it should be carefully evaluated and test marketed to see if there is an appropriate level of demand for it at a price that will allow for sufficient profit.
Pricing a product or service involves walking a very fine line between achieving profitability and overpricing the product. Business owners need to develop a pricing strategy based on overall marketing objectives, whether they are to offer the lowest prices, introduce a new product, gain market share, or move old inventory. Ideally, a business owner wants to get the highest price possible for a particular product or service, but there are times when marketing strategy may dictate foregoing profit in order to price the competition out of the market or get rid of slow-moving inventory. A premium pricing strategy, on the other hand, appeals to consumers who are willing to pay a higher price for a greater perceived value, and may make up for reduced sales with higher profit margin. Local business owners need to have a clear understanding of their profit margin and do a careful evaluation of the market before developing a pricing strategy.
While there are many forms of distribution for retail products, business owners generally deal in direct distribution, as in one-on-one sales, to their customers, especially in a service-based business. Although the costs of maintaining a brick-and-mortar retail location are high, business owners who engage in direct distribution retain all of the profit margin from their sales. In addition to in-store sales, an increasing number of business owners also distribute products through e-commerce, catalog sales, and events.
Promotion is often used interchangeably with marketing, and involves advertising your product or service through a variety of methods, including word-of-mouth, networking, email and SMS marketing, social media, online marketing, and various forms of paid advertising. Every form of promotion has a cost, in terms of time and/or money, and small business owners must weigh these costs against their projected return on investment. Promotion costs can significantly reduce profit margin if not carefully managed.
Sales are critical to the success of a small business, and are the end goal of every entrepreneur. No matter how great your product or service and how successful your promotion strategies, once the customer enters your store you still have to sell them the product. If you hire a sales force that is lazy and disinterested, all of your efforts will be for naught. Yelp reviews are full of complaints from customers who were treated rudely, made to wait, or worse, arrived at their appointed time to find the establishment closed. You may be the greatest massage therapist in the world, but if your clients keep getting rescheduled they won’t stick around long enough to find out. From receptionist to scheduling service to sales force, everyone should be working to give the customer what they came for and close the sale.
Every business plan should address these five aspects of marketing in detail to determine how realistic a proposed venture may be. Each step is equally important in the success or failure of a local business, and should be carefully considered before any investment is made.