There are four important components of marketing. They are called the 4 Ps – product, price, place and promotion.
Marketing decisions are centered on these variables, which are known as the marketing mix. Poor decisions regarding even one of the 4 Ps can lead to business failure. A more thorough discussion of the Marketing Mix follows.
Product (or Service) Strategy
Looking to the customer for guidance is particularly important when deciding upon the specific product/service to be provided. The product or service offered by the company must be one that meets the needs of the customers, not one that satisfies only the producer. For instance, you may be a lover of blueberry-flavoured milk, but that does not necessarily mean that you should sell it in your store. There may not be a demand for such a product.
Be aware of the “total product concept” or the idea that you are selling more than just a physical product or service. Successful firms sell bundles of benefits, not just products or services. For example, a car dealer does not sell automobiles; the company sells reliable, individual transportation. Anti-lock brakes are a feature of an automobile; but the benefit, the reason that motivates people to buy anti-lock brakes, is safety. Similarly, toothpaste that removes stains (a feature) offers the benefit of white teeth.
The product or service includes offering a wide array of options to meet varying tastes, and often includes after-sales service. An entrepreneur’s approach to offering a “total” product to his/her customers should provide and advantage over the competitors.
The total product concept may be described as follows:
- Core product – This is the benefit provided.
- Actual products – This includes the tangible features of the product such as quality, styling, brand name, packaging, optional features.
- Augmented product – This includes additional services and benefits beyond the physical (such as delivery and credit, installation, after sale service, warranty).
For example, consider the core product for a restaurant that prepares markets and delivers home-cooked meals. The core products (benefits) are taste and convenience. The actual products (tangible features) are home cooked, prepared meals with wholesome ingredients, packaged in a re-usable, microwave able casserole dish. The augmented products (additional services) are speedy delivery, acceptance of major credit cards upon delivery, and a guarantee the food will satisfy the customer or their money is refunded.
Different aspects of the “total product concept” can be emphasized to differentiate an entrepreneur’s product or service from the competition. Products can be differentiated from competitors by quality and durability, colour, odour/flavour, and by the level and type of service. For example, the five basic selling propositions for toothpaste are: taste, whitener, breath freshener, fluoride and price. All competitors advertise at least one of these features, sometimes more than one, to differentiate their product or service from others.
Types of Consumer Products
There are differing classification schemes that companies may use to help develop a product strategy. Non-durable goods are goods normally consumed fairly quickly such as soap, toothpaste and juice. Durable goods normally survive many uses, such as clothing, automobiles and camping equipment. Services are intangibles and include haircuts, tours and automobile repair shops.
Consumer products can also be classified according to how people buy them. There are four classifications generally used:
- Convenience products Consumers want these products to be readily available, and will not spend time searching for them. Examples are cigarettes, soft drinks and milk.
- Shopping products These are products that consumers are willing to spend time shopping for, in order to get the exact product they want. Examples are televisions, cars, and clothing.
- Specialty products Consumers make special efforts to obtain these products and will not accept substitutes. An example is Christian Dior fashions or Cuban cigars.
- Unsought products These goods are either new products which the consumer is not yet aware of or is not specifically shopping for at the time. Such products usually require a special kind of promotion to generate sales. An example is a set of encyclopaedias.
The classification of a particular product varies from person to person. What may be a convenience good to a wealthy person could easily be a shopping good to someone with less expendable income.
Understanding what type of product or service you have will assist in making decisions on how to market. For example, if you are selling a specialty good or service, your location may not be as important as other factors in your marketing mix. Why? Because, people will invest the time to obtain the good. However, you will need to let them know about you and where you are!
Packaging and Labelling
The packaging of products has grown in importance over the past decade. Packaging is part of the actual product. Besides being able to differentiate your products from your competitors by using different types of packaging, it is important to be aware of some of the packaging trends that can affect the demand for the products you offer. Due to advancing packaging practices, consumers are demanding more from packaging. Packaging trends include:
- recycled materials used to create the package, e.g. recycled paper;
- packages that are recyclable e.g. bottles, cans;
- more information (demanded by the consumer and government) on the labels; and,
- larger print on the labels, due to aging of some consumer markets.
The two latter trends have become an issue for some food processors. The more information they have to put on the label, the less room the have for design and displaying the product. In addition, changes require more investment and expertise to assist in the process.
Sometimes by changing the size, shape, colour, labelling and/or texture of a product’s package, new or bigger markets can be identified for an existing product. For example, regular-sized juice boxes have also been made available in a junior-size, to fit in children’s school lunch bags. BIC packages its disposable lighters in the different solid colours to appeal to consumers’ various preferences. As a variation, one of BIC’s competitors has chosen to package its disposable lighters in translucent coloured plastic instead, so that the amount of fluid remaining is evident to users.
Product and Service Life Cycle
Similar to people, products and services have life cycles. They move from birth, through a period of growth, to maturity, and then level off somewhat before declining toward their demise. The decision on whether or not to produce or provide a particular product or service should depend, in part, on what stage of the life cycle the product or service is in. Some products or services have a short life cycle (pet rocks), while others enjoy more prolonged lives (picture frames).
It is important to understand the life cycle concept, so the proper form of advertising and promotion can be used. Knowing the life cycle of your product or service can also help you determine if you need to redesign or drop a product line. There are four stages in the product or service life cycle:
- Introduction – In this stage, the new product or service is launched. The first barrier to overcome is customer lack of awareness of the product or service. Because people are unaware of the product or service, sales may rise very slowly, and promotional costs will probably be high. Promotional emphasis is on introducing the product or service to your customer and attempting to have people try the product for the first time.
- Growth – In this stage, sales start climbing. Presumably you are beginning to make a profit. This may attract new competitors to enter the market bringing new product or service features. The market will expand as more people buy the product, profits rise and prices remain stable.
- Maturity – In this stage, sales peak to create high profits. However, an over abundance of suppliers leads to greater competition. Weaker competitors start dropping out.
- Decline – In this stage, sales decline and more firms withdraw from the market. Prices are reduced; profits decline and weaker products and services are phased out.
Interestingly, a new innovation can take a declining product or service life cycle and generate a whole new life cycle. For instance, Dentifrice at one point was only available as a powder, and then toothpaste was developed to rejuvenate a whole industry. When you hear the claim “new” or “improved” the advertiser is trying to rejuvenate the product or service life cycle.
People are also marketable. Politicians, entertainers, sports figures and professional; such as lawyers, accountants and architects; market themselves. The objective of persona marketing is to get your customers to view the person being marketed as a celebrity or expert. Marketing people is similar to marketing other products/services. Through market research and analysis you discover the customers’ needs, segment the market, develop the product/service then develop programs to value, promote and deliver the celebrity or expert.
Social marketing is generally used to seek the acceptance of a social cause or idea such as public health campaigns. The objectives may differ from the ordinary business, i.e. to make a profit, to ones focused on social change, which encourage understanding or trigger an action (write to your Member of Parliament). To promote social change, social marketers, follow the same approach as those marketing products, services, ideas, people or places.
Since each interaction with the customer is unique, service marketing requires more than the traditional 4 Ps of marketing. It also involves ensuring that employees in the company are all customer oriented. Employees must be trained and motivated to always ensure customer satisfaction. Interacting with the customer is key to good service. The customer will measure the quality of the service based on the quality of the interaction. For example, sales or service staff may have a strong customer orientation and desire to serve the customer, but they are held back by administrative nightmares that slow the service delivery, which decreases customer satisfaction. All employees must be committed to providing the marketing services which result in satisfied customers.
Since offering a service is mostly intangible, you cannot see touch or taste the service, the physical evidence that supports the service is important. For example, if you are providing expert, professional business advice, then your surroundings must reflect this type of service. The customer will look to the physical environment to provide some sort of tangible evidence. If your receptionist allows the phone to ring while she chats with a co-worker, your customer sees lack of customer service. On the other hand, if your office is neat, clean and tastefully decorated, your customer sees the professionalism you have promoted.
Price is a very important factor in the marketing mix. It affects sales volume, profits, the actions of competitors, and the image of the product/service or store. Proper pricing is a prerequisite of success.
Pricing has two basic functions: (1) to enable a business to cover costs and make a profit, and (2) to motivate customers to purchase products or services. The marketing function with regard to pricing is to use a marketing mix so the product or service can command the best possible price. The business must be able to prosper and customers must perceive they have received value for their money.
Key Pricing Factors
The importance of pricing cannot be underestimated as incorrect pricing can often result in the failure of a business. New businesses often make the mistake of either charging too little or too much for their product pr service. To help you avoid making a pricing mistake, the following section outlines some of the guiding principles for determining price.
- Perceived value – The customer’s ability and willingness to buy strongly influences the price charged for your product or service. Ability to pay is determined by the customer’s income level and where your product/service ranks on each customer’s level of importance. A customer’s willingness to buy is determined by taste, need and perceived value.
The customer may also have a perception of your product or service that may largely be attributed to its price. Test yourself: What is your perception of a diamond ring that sells for $100 versus one that sells for $1000? What is your perception of a meal that is $50 versus one that is $10?
You can determine the perceived value of your product or service by asking your customer how much they would be willing to pay for the same service in different surroundings. Or if you are contemplating adding a benefit to your product or service, ask them how much they would be willing to pay with the improvement. Restaurants can charge higher prices if they provide an atmosphere of elegance versus a fast food outlet. In any business, it is perceived value that decides the price customers are willing to pay.
- Competition – Some business owners use the competition’s prices as starting points for their own. If your product or service is an improvement, you can sometimes price it above the competition, as long as you communicate to your customers the reasons for the higher price (improved service, choice of colour). For example, some convenience stores generally charge higher prices than do large grocery store or retailers. They can do so because the benefit of convenience is valuable to their customers.
Caution must be exercised when attempting to price below the competition. This strategy could lead to a “price war,” which could be hazardous if the competition has more financial resources to withstand a “price war” than you have.
If you do not have direct competition, you may be able to charge higher prices than you could otherwise. However, if the prices you charge are too high and your profits are exorbitant, competitors may be attracted to enter the market. Instead, keeping profits and prices at a reasonable level may discourage the entry of other businesses.
- Costs – Your price must cover all costs of goods/services sold, including production costs of supplies, materials, fixed overhead, time/labour, and generate a profit.
Use this simple formula in setting a price (per unit):
Total Cost of Production per Unit + Desired Dollar Profit per Unit = Price per Unit
Businesses can set varying profit rates, for example 15 per cent profit on supplies and materials, 20 per cent profit on labour/time, and 25 per cent profit on overhead. These more complicated approaches to pricing usually emerge in response to the special needs of a particular business.
If your research reveals that similar products or services are available on the market at a cost much lower than what you could offer, you may have to either adjust your profit margin, the return you expect, or decide to provide enough specialized service or selection that the market will pay extra money for the additional service. Alternatively, you may be forced to conclude that you cannot afford to make this item or provide this service; and, look for something else with a better rate of return.
NOTE: Remember to document cost materials at their replacement prices, NOT at their original prices; include salaries as a business expense; include interest in your business cost calculations-interest that could have accrued had the money used for the company been invested elsewhere (i.e. a bank)-make allowances for future refunds, servicing, bad debts, amortization of capital costs of equipment or machinery.
Many retail stores use a simple mark-up system to price their products or services; using the cost of the product or service and adding a predetermined mark-up to this base. Mark-ups vary by product or service, determined largely by the sales volume of the product. The mark-up on large, low volume items (autos, appliances) is generally higher than on high volume goods (food items).
There may be situations when it is advantageous to set prices below cost. For example, stores lower prices drastically to clear space for new products or services or simply to move out products or services that are not selling. But, these are situational and happen under specific circumstances.
Break even pricing involves the firm determining at which price they will cover their business costs. The break-even point is where the price at a certain sales volume covers both variable and fixed costs.
In the following example, the only figure that changes is the price. It is determined that at a price of $18.00, selling ten units, the company will break even.
Alternatively, the price may be determined for a service organization, such as bookkeeping. The break-even may look as follows.
The only variable that changes in this example is the number of hours.
When using this method, you must consider the impact that price has on sales volume to realize the target profits and the likelihood that you will achieve that sales volume based on that price.
Introducing a NEW product or service
When introducing a new product or service, two approaches could be followed: price skimming and penetration pricing. Price skimming is setting a high price to skim maximum revenues for people willing to pay. The result is fewer but more profitable sales. As sales slow and competitors enter the market, price is lowered to draw in the next price sensitive buyers. Personal computer manufacturers used this method when first introducing the PC to the general population.
Penetration pricing is the setting of low initial prices to achieve sales quickly and to attract a large number of buyers. This is used when the market is price sensitive or where a low price might keep out the competition.
Image and psychological pricing
As previously mentioned, the prices charged for products or services convey images to the customer. Many consumers equate price and quality and, in some cases, can be enticed into buying at higher rather than lower prices. Thus, a prestigious jewellery store can sell items at a higher price than a department store jewellery counter. Stores following low price policies may not attract some people. These consumers will not buy low price products or services, as they may equate low price with low quality and/or lack of service components they value.
Other elements of psychological pricing include multiple pricing and odd pricing. Items will generally sell better if offered in multiple units (3 for 99¢) rather than in single units (30 cents each) and odd pricing, $49.95 instead of $50. However, some stores do not adjust prices in this manner; as they feel it contributes to a low quality “bargain” image.
Loss leader pricing
Supermarkets and department stores often use this pricing strategy. It involves selling a few items at low prices (even at a loss) in order to attract customers to the store. This strategy presumes consumers will purchase not only the loss leader items but other products and services as well.
Moving a food from manufacturers to consumer is sometimes a costly task. It is critical that the proper channels are utilized and that the small business owner is able to manage the various middlemen appropriately. Selling a food product to the consumer with the use of a food broker, warehouse and retail chain is much different than selling the services of a financial planner where the product is direct. The following section reviews the place strategy with particular emphasis on the retailer.
Location for the retailer is a critical factor. It should preferably be in an easily accessible, high traffic area. For a retailer, the first decision is the choice of the town/city. Certain businesses (golf courses, service stations, motels) can be located along highways, but generally retail outlets are located within concentrated population areas.
Most people starting a small business are probably more concerned with choosing a site within a certain town or city. There are a number of location choices that may be available to the prospective retailer. Obviously, larger centres have more choices in terms of location than do smaller communities. These choices consist of:
- Shopping centres Shopping centres are relatively expensive per square foot, but offer traffic flow, parking, extended business hours and accessibility.
- Central business district Generally found in the older sections of towns/cities, these areas have good pedestrian traffic, and are well serviced by transit; however, parking may be a problem.
- Commercial strip Retail outlets located on a street running into a business district, its advantages are high vehicle traffic and is usually well suited for restaurants, service stations and hotels.
- Store clusters In many neighbourhoods, small groups of stores can be found. Types vary, but usually they include shoe stores, drug stores, convenience stores, banks, hairdressers and sometimes bakeries.
In choosing a location, considerations include:
- Cost Locations with high traffic volumes and other advantages are generally the most expensive (shopping centres and downtown core). Choosing the proper location is crucial to most retailers; however, cost should not be the only determining factor in choosing a location.
- History of the location If moving into a formerly occupied location, questions should be asked about its ex-occupants. What type of store was it? Why did they vacate? Were they successful?
- Traffic flow The number of potential customers passing by a location is important for many types of retail businesses. Traffic flow in shopping centres is higher than in smaller malls, largely due to the drawing power of the larger number of stores and larger retailers. Some streets have a higher traffic volume than do others, either in pedestrian or vehicular form. Research the traffic flow to assure a high proportion of your target market shop at this location. Proximity to your target market is an important consideration, as the location chosen should be one that offers the greatest accessibility to that target market. If you sell clothing for teenagers, you would not want to locate in an area of town largely populated by elderly people without children. Thus, the site and characteristics of the area population are key considerations.
- Legal restrictions Some locations are not available to the retailer due to zoning regulations. Information can be obtained from city planning and township offices.
- Services available Depending on the type of business being established, required services may not be available.
- Parking accessibility/facilities The accessibility of the location must match the needs of your target market. If customers will be arriving by car, parking facilities need to be available. If customers walk, sidewalks should be in good condition. Proximity to transit service would be a factor in larger centres, especially if the target market generally travels by transit or if parking facilities are poor/ inadequate.
- Outlook for the area Some assessment of future trends for the area should be made. Are people moving away, or are they moving in? Are any other stores being considered for construction? Are there new highways or bridges being build which will affect the traffic flow positively or negatively?
- Psychological barriers Some areas may suffer from a poor reputation such as high crime or undesirable neighbourhood, thus severely restricting traffic flow.
Manufacturers are concerned with physically distributing their products to ultimate users, whether those users are consumer or industrial. There are a number of different methods of distribution or channels that can be used:
- Direct channel This method moves goods directly from the manufacturer to the consumer, usually either on a door-to-door or mail order basis.
- One-stage channel This method moves products from the manufacturer, through retail outlets, to the customer. In some cases, the retail outlets are fully owned by the manufacturer, although this is generally uncommon.
- Traditional channel This most common method of distribution is from manufacturer, to wholesaler, to retailer, to consumer.
- All-aboard channel This method includes an agent acting as an intermediary between the manufacturer and wholesale outlets.
Middlemen are often used by manufacturers, because of their expertise in marketing and distribution. The advantage is that manufacturers do not have to establish their own sales force, network of contacts and specialty areas. Instead, they can take advantage of the existing channels of distribution. The middlemen often perform marketing tasks and functions more efficiently than a manufacturer who lacks the resources.
There are a number of guidelines for choosing a method of distributing your product.
- Begin with the customer and work back to the producer. Determine the most efficient and effective method of distribution, keeping the customer in mind.
- There should not be weak links. Weaknesses in the process will result in customer dissatisfaction, i.e. late shipments, unreliable product quality.
- The cost of distribution must be considered. The more levels involved in the channel, the higher the potential cost to the consumer, since each agent will take a profit.
- Control over the product will be lessened when there are more links between the manufacturer and retailers.
- The nature of the market: type (consumer goods vs. industrial goods), size, location, volume, customer habits.
- The product’s characteristics are important (shelf life, durability).
The physical distribution of the product involves five basic decisions:
- Inventory locations – The number and locations of warehouses must be determined on the basis of cost, the nature of the market and the nature of the product. A centralized system may be better controlled and may be more efficient in materials handling.
- Maintain an inventory control system – When deciding how much inventory to stock, the cost of warehousing inventory has to be weighed against the cost of lost sales. The cost of keeping an inventory is usually high in terms of financing costs and storage space.
- Establish a materials handling system – The warehouse and equipment should be carefully selected, to minimize handling costs, which can be quite substantial.
- Establish procedures to process orders – Such procedures include setting policies about credit, invoice preparation and collections. Service could be the determining factor for retaining customers in a competitive situation, so mistakes and slowness should be avoided.
- Select a mode of transportation – In general, the basic transportation modes are air, highways, rail, water and pipeline. In many remote areas, moving goods by highway is the only alternative. However, as the distance products are shipped increases, the greater the likelihood that more than one transportation method may be necessary.
The choice of an appropriate channel for distribution is dependent on a number of factors, ranging from the capability of the manufacturer, to the nature of the product, to the characteristics of the market. Convenience goods (cigarettes, candy, magazines) must have wide distribution, since consumers will not go out of their way to buy them. However, specialty goods may have a more limited distribution (one retail outlet) as people may be more willing to make an effort to obtain the product.
The key is to have products in the right places; so, they are conveniently available to your target market. If you are selling granola bars, you probably should not be distributing them through only one retail outlet. If you are selling Lada automobiles however, you do not have to sell them on the street corner. Sometimes the consumer will demand a product be made available. Do you know of a food store that could afford not to stock Campbell’s soups?
Promotion is the activity of informing, persuading and influencing the consumers’ purchase decisions. There are four general types of promotion activities: (1) advertising, (2) sales promotion, (3) publicity and (4) personal selling.
The type and scope of promotional activities that you need to undertake will depend on what the promotion is intended to do. There are a number of reasons for promotional activities.
- Introduce a new product or service.
- Enter a new market.
- Obtain a new dealer outlet (for manufacturers or distributors)
- Increase or maintain sales.
- Build or maintain the image of the business and/or product.
- Support other selling efforts.
- Reach customers inaccessible by salespeople.
- Educate the public.
The choice of promotion activities used will be determined by a number of factors, including:
- product type
- market segment
- stage in the life cycle
- competitive activity
- distribution channels utilized
There are three general purposes for advertising:
If you are opening a new store or introducing a new product, you must build consumer awareness of your existence. Promotion of a new store(s) or products, which are early in their product life cycle, should be geared toward providing information.
Businesses attempt to persuade potential customers that they have a better product or service than the competition (for example, the Pepsi Challenge).
Businesses simply remind consumers that the product or service is still available, and where they can purchase it. Coca-Cola, long distance phone services and milk are three producers which basically use reminder advertising.
How much will you spend?
How much to spend depends on the stage of the product life cycle, market share, competition, required advertising frequency and product differentiation.
New products typically need a substantial budget to build awareness and influence consumers to try a new product. Building market share and taking share from competitors usually takes greater spending than simply maintaining market share. If there are a lot of competitors advertising, then more funds may be required “to be heard” in all the clutter, through increased frequency. The more often you need to repeat you message the more financial resources will be necessary. If your product is different from your competitors, but only slightly, more funds may be required to highlight the differences.
There are a number of ways to decide how much you should spend on your promotional budget. Commonly used methods include:
- Fixed percentage of sales – This is very simple method of determining promotional expenditures, but it is illogical. It makes promotion the result of sales, not the cause. Its simplicity, however, may make it appropriate for many small businesses.
- All you can afford – This “blind” approach may work in some case; but, it establishes benchmarks for the future that may be inaccurate. The position focuses solely on financial ability and not on best value.
- Matching the competition – Figures available in trade journals, etc. for a “typical” business in your industry can give you a useful starting point for judging the appropriateness of your spending. There are drawbacks to this approach, as each business has its peculiar needs which must be met, and to follow the industry average may be simplistic.
- Achieve sales objective – Promotion budgets for upcoming periods are decided according to the sales objectives. A promotion budget is set which will allow the desired sales level to be met.
The success of any advertising will depend to a large extent on the ability to identify the target group properly and to outline objectives clearly. In selecting an advertising medium, consideration must be given to exposure to your target market. In advertising, rarely, does the advertiser want to pay for the message to reach everyone. A store owner, targeting a particular market in his or her neighbourhood in The Pas, MB, would not want to advertise in MacLean’s. The message would reach only a small percentage of the store’s target market. It would be more logical, less expensive and more effective, in terms of reaching that market, to advertise in the neighbourhood newspaper. This assumes, of course, that the target market reads the newspaper!
Again, remember the target market. Sporting goods stores advertise in the sports section; because, their target market reads that section of the paper.
The following chart lists the various advertising mediums and briefly outlines their key advantages and disadvantages.
Radio and television advertising can be more costly than newspaper. Both mediums are monitored closely by the Bureau of Broadcast Measurement, so statistics are available on the audiences that are tuned into various programs. It is important to broadcast during times when it is most likely that members of your target market will be tuning in.
Direct mail advertising is costly on a per unit basis; but, it can be directed specifically toward your target market. Flyers can be distributed in neighbourhoods around the store, or brochures can be sent to potential retail outlets. It is a selective means of advertising, one that reaches the target market effectively.
Outdoor advertising (billboards, signs) is usually low cost per viewer and highly flexible. It is most suitable to those types of businesses which otherwise would have difficulty reaching potential customers and require large number of customers. Service stations, motels, hotels, which cater to highway traffic can benefit through outdoor ads.
Magazines may reach a wide market segment, but that may include an extended reach outside your area. Companies should advertise in national magazines only if they are trying to reach people across Canada with their message. Trade journals (i.e. Canadian Jeweler, Canadian Grocer) reach more specific groups, so manufacturers and wholesalers may want to advertise in them. Trade journals are read not by consumers but by those in the trade, so retailers would probably not advertise in these journals. However, retailers may find it beneficial to advertise in regional or provincial magazines, which are subscribed to by their target market (i.e. business magazine targeted to professional with incomes of >$50,000 annually).
You should consider more than one form of advertising, as research shows that combining different forms of advertising greatly increases it effectiveness.
Sales promotions are short-term incentives to encourage sales of a product or service. Consumer promotions include samples, coupons, rebates, contests and demonstrations. Trade promotions include buying allowances, free goods, and cooperative advertising and dealer sales contests. Sales force promotions include bonuses, contests and sales rallies.
Trade shows are also a sales promotion tool. Trade shows are an excellent means to show your product, meet new buyers, learn more about the competition, and monitor changes in your industry.
Publicity is public exposure of programs and activities of organizations. It can be purchased; however, most publicity is gleaned through news releases, feature stories and editorial comments. To obtain this exposure for your business, it can be helpful to research effective campaigns/events of others in a related industry.
Public Relations involves promotion of your corporate image and identity. This may include hosting events to promote your product/service. Good work or service provided by an organization goes a long way to increase one’s reputation. Remember, word-of-mouth from a satisfied customer is one of the most persuasive forms of promotion.
This type of promotion involves a direct, face-to-face relationship with the customer. It includes explaining the product or service, in an attempt to persuade the customer to buy. The degree of personal selling required varies from product to product, but is particularly applicable when the product or service:
- requires demonstration or is new and unfamiliar to the buyer (a new line of herbal remedies);
- involves a major expenditure and is purchased infrequently (windows, cars, furniture); and
- has a high unit price that requires security (jewellery).
Personal selling can be business to consumer or business to business. Customer service is a function of personal selling. Customers who have unpleasant experiences with sales staff, products or services are not only likely to stop patronizing the store; they are also likely to give the store/supplier adverse publicity. Customers are more likely to tell other people about a bad experience than about a good one.
Planning your Promotional Activities
Most businesses, regardless of whether they are large or small, typically try to get the attention of potential customer in a variety of ways.
The challenge of business owners is to determine what the most effective methods are for promoting their products and services. There is not a simple method for planning promotional activities. It varies by the newness of you company, industry, the strength of the competition, the characteristics of the product or service you are selling, and your available resources of money and time.
However, by having a clear understanding of the characteristics of your customers (where they live, their age categories, typical media listening or reading habits, etc.), this will guide you on where to reach your customers. The basic question to ask yourself is, “What promotional approaches, that I can afford, will reach the highest number of my customers?” This fundamental rule should help you to target your selection of appropriate promotional activities.
As a starting point, look at the promotional activities being practiced by your competitors. Chances are good they have learned from experience what works and what does not work for promoting themselves.
Monitor the sales results of every promotional activity you undertake; and, ask new customers how they heard about you. This will give you some insight into which of your promotional activities should be continued, discontinued or strengthened.
Some examples of small business promotional activities:
Specialty food store
A new, small specialty food store spends $3,000 per year on advertising activities. Also, the business owners spend time on a variety of promotional efforts. A typical year of promotional and advertising activities includes the following:
- appearances on local television cooking shows,
- direct mail package to neighbourhood with coupons as incentives to buy,
- food gift baskets as donations,
- food donations to local youth shelter,
- instruct food classes (demonstrations),
- personal sales calls to restaurants,
- radio advertising, and
- store tours for women’s groups and schools.
By monitoring their store’s sales results, the owners have found that the use of coupon books, direct mailings to their customer lists and store tours have been particularly useful for their type of business.