1. part 4 PowerPoint Presentation by Charlie Cook Copyright © 2003 South-Western College Publishing. All rights reserved. All rights reserved. Developing the Marketing Plan 9 The New Venture Business Plan 12e

2. Copyright © by South-Western College Publishing. All rights reserved. 9–29–2 Looking Ahead After studying this chapter, you should be able to: 1. Describe small business marketing 2. Discuss the nature of the marketing research process. 3. Define market segmentation and its related strategies. 4. Explain the different methods of forecasting sales. 5. Identify the components of a formal marketing plan.

3. Copyright © by South-Western College Publishing. All rights reserved. 9–39–3 What is Small Business Marketing? Marketing –Activities directing the flow of goods and services from producer to consumer or user. Small business marketing consists of those business activities that relate directly to: –Identifying a target market –Determining target market potential –Preparing, communicating, and delivering a bundle of satisfaction to the target market

4. Copyright © by South-Western College Publishing. All rights reserved. 9–49–4 Essential Marketing Activities Market Analysis –An evaluation process that encompasses market segmentation, marketing research, and sales forecasting Marketing Mix –The combination of product, pricing, promotion, and distribution activities.

5. Copyright © by South-Western College Publishing. All rights reserved. 9–59–5 Fig. 9-1 Core Marketing Activities for Small Business

6. Copyright © by South-Western College Publishing. All rights reserved. 9–69–6 Marketing Philosophies Make a Difference Production-Oriented –Emphasizes development of the product and production efficiencies over other activities Sales-Oriented –Favors product sales over production efficiencies and customer preferences Consumer-Oriented –All marketing efforts begin and end with the customer; focus is on the consumer’s needs— this philosophy is the most consistent with long- term success of the firm

7. Copyright © by South-Western College Publishing. All rights reserved. 9–79–7 Why Firms Fail to Adopt a Consumer Orientation The State of Competition –With no competition or high demand, firms focus on production. Production Focus of Small Business Managers –Small business managers tend to have strong production skills and weak marketing skills. Focus on the Present –Small business managers tend to focus on current success which is the result of an overemphasis on selling.

8. Copyright © by South-Western College Publishing. All rights reserved. 9–89–8 The Nature of Marketing Research Marketing Research –The gathering, processing, reporting, and interpreting of market information Secondary Data –Market information that has been previously compiled by others Primary Data –New market information that is gathered by the firm conducting the research

9. Copyright © by South-Western College Publishing. All rights reserved. 9–99–9 The Nature of Marketing Research Steps In the Marketing Research Process 1.Identifying the informational need Why do we need to know this? 2.Searching for secondary data Who has researched this topic already? 3.Collecting primary data Who do we ask and what do we ask them? 4.Interpreting the data Got the information, now what does it mean?

10. Copyright © by South-Western College Publishing. All rights reserved. 9–10 Methods for Collecting Primary Data Observational Methods –Human –Mechanical Questioning Methods –Surveys  Mail  Telephone –Personal interviews –Experiments

11. Copyright © by South-Western College Publishing. All rights reserved. 9–11 Understanding Potential Target Markets Market –A group of customers or potential customers who have purchasing power and unsatisfied needs Focus strategy –A type of competitive strategy in which cost and marketing strategies are achieved within narrow market segments Market Segmentation –The division of a market into several smaller groups with similar needs.

12. Copyright © by South-Western College Publishing. All rights reserved. 9–12 Ingredients of a Market Ingredient 1 Customers: People or businesses Ingredient 2 Purchasing power: Money/credit Ingredient 3 Unsatisfied needs

13. Copyright © by South-Western College Publishing. All rights reserved. 9–13 Market Segmentation Variables Segmentation Variables –The parameters used to distinguish one form of market behavior from another for the purpose of market segmentation Benefit Variables –Specific characteristics that distinguish market segments according to the benefit sought Demographic Variables –Specific characteristics that describe customers and their purchasing power

14. Copyright © by South-Western College Publishing. All rights reserved. 9–14 Types of Market Segmentation Strategies Unsegmented Strategy (Mass Marketing) –A strategy that defines the total market as the target market Multisegmented Strategy –A strategy that recognizes different preferences of individual market segments and develops a unique marketing mix for each Single-Segmentation Strategy –A strategy that recognizes the existence of several distinct segments but focuses on only the most profitable segment

15. Copyright © by South-Western College Publishing. All rights reserved. 9–15 Fig. 9.3 Marketing Mix 1 Product:Lead Pencil Price:$0.79 Promotion:Television Distribution:Extensive Small Business (Community Writing Company) Market All Potential Users of a Writing Instrument An Unsegmented Market

16. Copyright © by South-Western College Publishing. All rights reserved. 9–16 Fig. 9.4 A Multisegmentation Market Strategy

17. Copyright © by South-Western College Publishing. All rights reserved. 9–17 Marketing Mix 1 Product:Felt-Tip Pen Price:$0.49 Promotion:Campus Newspapers Distribution:Bookstores Small Business (Community Writing Company) Market Segment A Students Market Segment C Executives Market Segment B Professors Fig. 9.5 A Single- Segmentation Market Strategy

18. Copyright © by South-Western College Publishing. All rights reserved. 9–18 Estimating Market Potential The Sales Forecast –A prediction of how much (in units and/or dollars) of a product or service will be purchased within a market during a specified period of time –An essential component of a business plan that:  Assesses the new venture’s feasibility.  Assists in planning for product scheduling, setting inventory levels, and personnel decisions

19. Copyright © by South-Western College Publishing. All rights reserved. 9–19 Fig. 9.6 Dimensions of Forecasting Difficulty

20. Copyright © by South-Western College Publishing. All rights reserved. 9–20 The Forecasting Process: Two Dimensions of Forecasting The Starting Point –Breakdown process (chain-ratio method)  Forecasting begins with macro-level variable and works down to the sales forecast (top-down). –Buildup process  All potential buyers in various submarkets are identified and then the estimated demand is added up (bottom-up).

21. Copyright © by South-Western College Publishing. All rights reserved. 9–21 The Forecasting Process: Two Dimensions of Forecasting (cont’d) The Predicting Variable –Direct forecasting  The use of sales as the predicting variable –Indirect forecasting  Variables related to sales are used as proxies to project future sales

22. Copyright © by South-Western College Publishing. All rights reserved. 9–22 EstimatingMarket Linking VariableSource ValuePotential* 1. Idaho state U.S. census of 100%1,000,000 populationpopulation 2.State population inSales & Marketing 12% 120,000 target age Management categorySurvey of Buying Power 3.Target age enrolled in colleges Idaho Department30% 36,000 and universities of Education 4.Target age college students Student survey in a preferring convenience over price marketing research class 50%18,000 5.Convenience-oriented students Personal telephone likely to purchase new felt-tip pen interview by within next monthentrepreneur75% 13,500 6.People who say they are likely to Article in Journal purchase who actually buyof Consumer Research35% 4,725 7.Average number of pens bought Personal experience of per year entrepreneur4 18,900 SALES FORECAST FOR IDAHO * Figures in this column, for variables 2-7, are derived by multiplying the percentage or number in the Estimating Value column times the amount on the previous line of the Market Potential column. Sales Forecasting with the Breakdown Method

23. Copyright © by South-Western College Publishing. All rights reserved. 9–23 The Formal Marketing Plan Market Analysis –Customer profile  A description of potential customers in a target market –Sales forecasts  “most likely,” “pessimistic,” and “optimistic The Competition –Profile of key management personnel –Overall strengths and weaknesses –Related products being marketed or tested –Likelihood of competitors’ entry into target market

24. Copyright © by South-Western College Publishing. All rights reserved. 9–24 The Formal Marketing Plan (cont’d) Marketing Strategy –Total product and/or service plan  Decisions affecting the total product –Distribution plan  Decisions regarding product delivery to customers –Pricing plan  Setting an acceptable value on the product –Promotional plan  Communicating information to the target market