Most people view marketing as selling and advertising. We often think of marketers as people in checked jackets, flashy shoes and always saying ‘Have I got a deal for you!’ Those who know about marketing know that it is much broader than this and involves identifying potential customers, understanding their requirements and developing ways to satisfy customers in a profitable way.
Understand Your Customers
After many years of assisting people in starting up a new business or growing an existing business, the single, most glaring failure by business operators is not knowing who their customers are and, what their customers require. Without customers we do not have a business. Despite this, many new and existing business operators believe that their product or service is so good, so unique or so new that customers will ‘beat a path to their door’ in order buy their product or service – this is rarely, if ever – the case.
The golden, unbreakable rule of business is that before you commit serious resources to your business, such as re-mortgaging your house, you must identify your potential customers and systematically talk to them about you, your business and your product or service. Most people don’t do this because they don’t like talking to people they don’t know; they don’t want to take the risk that potential customers may know more about their product they do or, they don’t want someone to tell them that, in reality, their dream is exactly that – a dream.
The Role of Market Research
As well as talking to our customers, we should undertake some basic market research to determine; who our potential customers might be; how many of them are there; who your competition is and why your customers will buy from you rather than them; how many customers you can confidently supply; how our customers buy their products and how they find out about us.
Sources of information include the Australian Bureau of Statistics; Industry Associations; the Web; suppliers; consultants; government departments and potential customers. Sources of information do not include mates at the pub or friends at a barbecue. Market research can often sort out the difference between good business or, just a good idea. It is something that you can do, something that you need to do and need not cost a lot of money.
Market Positioning and the Marketing Mix
Our market research will also help us determine how to position our product or service in our selected markets. We can position our product or service by using the marketing mix. The marketing mix includes the price we are charging (high, low); the nature and characteristics of our product or service (basic, high quality, high functionality, unique features); how we promote our product or service (advertising, public relations, sales promotions, personal selling) and how our customers can access our product or service (distribution).
Many new business operators believe that their only basis for competition is price. That is, they believe that customers will only purchase from them if they are the cheapest. Most successful businesses realise that competing on price (and not product, promotion and distribution) is not sustainable because profit margins are too low. This is particularly true for Tasmania because a
low price - high volume pricing strategy requires high volume sales to generate sufficient profits. Tasmania is a very small market hence it is unlikely that this pricing strategy can develop sufficient sales volumes to produce sustainable profit margins. Most successful business operators in Tasmania operate in niche markets and adopt a high price - low volume pricing strategy by producing high quality, highly unique products and services that a small number of customers are prepared to pay high prices for.
This pricing strategy requires business operators to have a detailed understanding of their customer’s requirements. It also requires business operators to have a clear understanding of how their customer buys their products and services. This gives the business operator a clear idea as to the best way to promote to their customers. Many small business operators approach promotion like rendering a wall – if you throw enough mud at it, some of will stick – very expensive way to promote. For operators of small businesses, particularly on the north west coast of Tasmania, promotion through personal selling (you talking to customers) and word-of-mouth are the most effective methods – both methods involve you, selling yourself and ‘wearing out shoe leather’. Successful business operators realise that there is no ‘quick and easy’ way to promote their business. It happens over time and involves producing high quality products and services and also continually ‘going the extra mile’.