Topic 1.4 Making The Start Up Effective Unit 19

Topic Overview This topic considers the practicalities of making a business idea happen. What are the objectives in setting up? What are the qualities of a successful entrepreneur? How will estimates of revenue, costs, profit and cash flow fit into the business plan? And what sources of finance are available to a start up business?

Objectives Understand that any business needs customers to survive, Appreciate that knowing who and how many customers might be interested in buying a product from the business is important, Understand that a business must anticipate, identify and meet customers needs if it is to be successful. Understand that a business will have to consider its the product itself, the price, the, and how to make customers aware of the product (promotion) and how to get the product to the customer (place) as important elements in meeting customer needs, Understand that different businesses will place different emphasis on the elements of the ‘marketing mix’ and that the mix can be amended to meet changing customer needs.

Key Terms The Marketing Mix – the combination of factors which will be taken into account when selling a product to its customers. A mix of Product, Price, Place and Promotion. Price – the amount of money the customers have to pay to acquire a product. Place – the way in which the product is distributed – how it gets to the customer. Product – the good or service that the business is providing to the customer. Promotion – communication between the business and the customer, making the customer aware of where the product is for sale, explaining what the product is and making the customer aware of how the product will meet their needs.

Customer Focus and the Marketing Mix Unit 19

Customer Focus A business can only survive if it has customers. The customers must be willing to pay a high enough price to cover the costs and make a profit. Focussing on what the customer wants is essential and a successful business can anticipate changes in customer needs. For a small start up business customer focus is essential if it want to make the business a success. Entrepreneurs may have good ideas but they also have to have enough customers willing to pay for the product or service

Identifying Customer Needs Businesses must understand what their customers want from a product or service. Customers may have different needs from the same product or service. EG Jewellery – some businesses make jewellery for fun, or impulse (spur of the moment) purchase – this tends to cheep and colourful, while other businesses may make expensive jewellery for one off purchases like engagement rings. This sort of jewellery satisfies completely different customer needs.

Anticipating Needs A successful business must understand what its customers want in advance. Businesses need to be at the forefront of their field, they must be able to try to understand who the market and customers needs will change Can you think of any business that has done this? Apple – iPod, iPod

Meeting Customer Needs Identifying and anticipating customer needs is not enough, businesses then need to MEET their customers needs. If the market wants ‘smart and inexpensive’, then the business will have to supply products to match. EG. If you buy a £2.00 necklace – what do you expect? If you buy a £ necklace – what do you expect?

The Marketing Mix Any business must consider the marketing mix. This is the combination of factors that helps a business to sell its products. There are 4 parts to the marketing mix, Price, Product, Promotion, and Place. There are often called the 4 ‘P’s’ of marketing

The Marketing Mix PRICE – the price of a product must reflect the value that its’ customers place on that product. Price, quality and how the customers perceive the product are all interlinked. Price is also important because it will affect how much a business earns from its work. What products can you name that you perceive to be of value? Eg Cars, Bikes, Clothes

The Marketing Mix PRODUCT – the product sold must meet the customers needs, This means identifying in to which segment of the market you need to sell, will it be a cheep products aimed at ‘mass’ market or expensive products aimed at a ‘niche’ market? Once the product is in production it needs to be attractive and well made for the price. Businesses have to make sure that the product meets the customers needs by doing what it says it will or having appropriate technical specifications. The look and design of the product may be important factors in the customers decision about buying it.

The Marketing Mix PROMOTION – Customers need to know that a product exists and is available for purchase. Promotion is partly about giving them knowledge about the product and making them aware it exists. It is also about persuading them that they want to buy the product. Promotion includes; advertising, printed brochures, mailing leaflets (direct mailing), sales promotions and sponsorship. What other forms of advertising do you know?

The Marketing Mix PALCE – The place is about having the product available for the customers where they want it, when they want it! Having turkeys on sale in Scotland in July for sale to customers in London for Christmas is bad marketing – the place is all sorts of wrong! How to get the product to the customers?, Should you sell to specialist shops?, Should you sell to supermarkets?, Should you sell only on the internet? Is it like many products whose sales peek at certain times of the year? What places can you think of to sell products?

Differences in the Marketing Mix. The marketing mix is different for each business and for each industry. The marketing mix is different for cornflakes and cars, for jewellery and jeans! Advertising has different costs, TV advertising costs hundreds of thousands of pounds. Advertising to sell on Ebay does not cost a lot. The marketing mix will also depend on the quality of the product to be sold like Dolce& Gabbana or M&S compared to Primark or TopShop The place that the product is advertised will either reach a large or small audience, therefore, reaching a large or small audience

The Marketing Mix Task There is a new chocolate bar ready to launch called (the name of the chocolate bar you made) You need to decide on the marketing mix to promote the new chocolate bar. The Price, of the product, The Product, quality The Promotion, where and how will you advertise it, and The Place, where does the product need to be. Write in detail and explain what you have chosen

Exam Top Tip PLACE - is much more than about where a product is sold (like a shop for example). It is about how the business gets its product to the customers when they want it. PLACE is, therefore also about distribution methods. In different industries the customer needs change quickly or slowly – when you answer a question relate it to the industry you are talking about – eg clothing = quick changing, farming = slow change

Homework Unit 19 Homework