|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
If your customers are members of the general public, the following identification of characteristics may be helpful.
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
There are five questions that should be answered for every business: