Marketing Basics | Print |

Many people consider marketing to be promotion, advertising and all the selling techniques used to get someone to buy a product. However marketing is much more. A marketing approach to business begins with the customers needs and involves designing the entire enterprise around fulfilling those needs. Decisions about the product's design, sales outlets, the price, the service level and where to advertise are made with a solid understanding of who the customer is and what they are looking for.

Looking at Your Market

Your "market" is made up of your customers and prospective customers. You must understand who they are, how many there are, and how your business will serve them. Many new businesses will have multiple markets. Go through this exercise for each one, determining sales volume for each. This is an extremely important exercise, since you cannot calculate your income if you cannot calculate the size of your market!

Step 1: Describe your customer

Commercial Markets:
If your customers are other businesses, identify the characteristics of your typical business customer.

  • Industry
  • Key Reasons for Buying (Hint: the two primary reasons business buys from business is profitability (or the promise of it) and delivery when they need it.)
  • Age of Business
  • Minimum purchase amount
Consumer Markets:
If your customers are members of the general public, the following identification of characteristics may be helpful.
  • Demographics
  • Gender
  • Income level
  • Education
  • Age range
  • Occupation
  • Marital status
  • Family status
  • Lifestyle
  • Buying Behaviour - What needs/wants will your product/service meet?
  • Buying Occasion - Gifts, daily consumption, long term purchase, etc.

Step 2: Determine the location of customers

Think about the customers you described in Step 1. Where are large numbers of them located? What distance are customers willing to travel to buy from you? What distance will you travel to sell to your customers?

Step 3: Determine the number of potential customers

How many of the customers you described reside within the geographical limits you have determined? This step requires doing quite a bit of homework. If selling to the general public, you need to look at some census data. If selling to other businesses, there are many potential sources of information. One of the best is trade associations. If you have done an Industry Analysis, that should have given you some idea already.

Step 4: Determine the number that will purchase from you

This is a very tough question! You need to consider your competition, both in numbers and quality. You also need to realize that some potential customers will not purchase the product or service from you or a competitor. To come up with an estimated customer base: Estimate a number of potential customers that will purchase the products or services you offer, either from you or a competitor. Estimate what percentage of those who do make a purchase, will choose your business. Multiply the above number and percentage together to determine number of potential customers that will purchase from your business.

Step 5: Determine average sales per year per customer

Use your industry research to answer the following questions: How many purchases will the average customer make during a month? How much will the average customer spend for each purchase? Multiply these two figures together to determine the amount an average customer will spend each month. You can now determine your annual sales estimate per customer.

Step 6: Determine your annual sales volume

You now know the number of customers and the average amount each customer will spend per year. Multiply these two figures together to calculate your expected annual sales volume.

Step 7: Evaluate the annual sales volume figure Does the number you calculated in the previous step make sense? If not, go back to the first step and try again.

The Marketing Challenge
What do we really mean by "marketing?" To many time-starved business owners, marketing means two things: advertising and selling. However, we think that ultimately you'll be more successful if, every so often, you try to look at the "big picture" by taking the time to thoughtfully analyse your products or services and your business as a whole in relation to your competition, your customers, and to societal and regional trends and conditions. We might say that the key to successful marketing is answering the following question for your business: How will you communicate a meaningful difference about your business idea (product or service) to the people who might be most interested in buying it?

There are five questions that should be answered for every business:

  • What's unique about your business idea?
  • Who is your target buyer? Who buys your product or service now, and whom do you really want to sell to?
  • Who are your competitors? As a small business, can you effectively compete in your chosen market?
  • What positioning message do you want to communicate to your target buyers? How can you position your business or product to let people know they are special, in ways that are important to these buyers?
  • What's your distribution strategy? How will you get your product or service in the hands of your customers? Often your distribution method will provide an additional marketing channel, or give you the opportunity to promote more products as you provide the first one.


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