Chapter 7 Entrepreneurship by Zubair A Khan.

Chapter 7 – Building a Guerrilla Marketing PlanCustomer satisfaction is when you sell something that does not return to someone who does.

-- Stanley Marcus, co-founder, Neiman Marcus

There is less to fear from outside competition than from inside inefficiency, discourtesy, and bad service.-- Anonymous

Learning ObjectivesStudents will be able to:1. Describe the components of a guerrilla marketing plan and explain the benefits of preparing one.2. Explain how small businesses can pinpoint their target markets. 3. Explain how to determine customer needs through market research and the steps in the market

research process. 4. Describe the guerrilla marketing strategies on which a small business can build a competitive edge in

the marketplace. 5. Discuss marketing opportunities the World Wide Web offers and how entrepreneurs can take

advantage of them. 6. Discuss the “four Ps” of marketing--product, place, price, and promotion--and their role in building a

successful marketing strategy.

Instructor’s OutlineI. Introduction

A. The challenges in creating the business plan.1. Entrepreneurs often create business plans with great detail on the entrepreneur's

intentions.2. But neglect the strategies to achieve those intentions.3. Sometimes entrepreneur's fail to adequately identify and research their target markets.4. And, sometimes entrepreneurs forget to create any business plan at all.

B. An effective business plan1. Contains both a financial plan and a marketing plan. 2. Like the financial plan, an effective marketing plan projects numbers and analyzes them,

but from a different perspective. Rather than focus on cash flow, net profits, and owner's equity, the marketing plan concentrates on the customer.

II. Creating a Guerrilla Marketing Plan A. Described

1. Marketing is the process of creating and delivering goods and services to customers.2. It involves all of the activities associated with winning and retaining loyal customers. 3. The secrets to successful marketing

a) Understand the company's target customers' needs, demands, and wants before competitors.

b) Offer them the products and services that will satisfy those needs, demands, and wants.

c) Provide those customers with quality, service, convenience, and value so that they will keep coming back.

4. The marketing function influences every aspect of its operation from finance and production to hiring and purchasing.

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141 Section III - Building the Business Plan: Marketing & Financial Considerations

B. Small business owners must understand the importance of developing relevant marketing strategies.1. While small with correspondingly small marketing budgets, entrepreneurial companies

can develop effective marketing strategies. 2. Using "guerrilla marketing strategies"-unconventional, low-cost, creative techniques-

small companies can wring as much or more "bang" from their marketing bucks.

C. Winning marketing strategies are built on three vital resources: people, information, and technology. 1. The entrepreneur needs to be able to recruit people with talent and form them into a

team. 2. Second, successful marketing relies on a company's ability to capture data and transform

them into useful, meaningful information. a) Collecting more data than competitors.b) Putting it into a meaningful form faster.c) Disseminating the information to everyone in the business.

3. Finally, technology has proved to be a powerful marketing weapon, but one easily matched by competitors.

D. The Marketing Plan 1. Focuses on the customer.2. It builds a strategy of success for a business from the customer's point of view.

a) Theodore Levitt, the primary purpose of a business is not to earn a profit; instead, it is "to create and keep a customer.

3. A guerrilla marketing plan should accomplish four objectives:a) pinpoint the target markets the small company will serveb) determine customer needs, wants, and characteristics through market researchc) analyze a company’s competitive advantages and build a marketing strategy around

them d) create a marketing mix that meets customer needs and wants

III. Market Diversity: Pinpointing the Target MarketA. One of the first steps in building a marketing plan is identifying a small company's target

market.1. the group of customers at whom the company aims its products and services.2. The more a business learns from market research about its local markets, its customers

and their buying habits and preferences, the more precisely it can focus its marketing efforts on the group(s) of prospective and existing customers who are most likely to buy its products or services. a) See example of Blane Nordahl.

3. Most marketing experts contend that the greatest marketing mistake small businesses make is failing to define clearly the target market to be served. a) Most small businesses follow a “shotgun approach” to marketing

(1) firing marketing blasts at every customer they see, hoping to capture just some of them.

b) These small businesses develop new products that do not sell because(1) they failed to target them at a specific audience's needs(2) they broadcast ads that attempt to reach everyone and end up reaching no one(3) they spend precious resources trying to reach customer who are not the most

profitable

Chapter 7 Building a Guerrilla Marketing Plan 142

(4) many of the customers they manage to attract leave because they don't know what the company stands for.

B. Failing to pinpoint their target markets is especially ironic since small firms are ideally suited to reaching market segments that their larger rivals overlook or consider too small to be profitable1. The problem is that the shotgun approach is a sales-driven rather than a customer-driven

strategy. 2. To be customer driven, an effective marketing program must be based on a clear, concise

definition of the firm's targeted customers. a) Example of Harina Kapoor.

C. A “one-size-fits-all” approach to marketing no longer works because the mass market is rapidly disappearing. 1. An increasingly fragmented market of multicultural has replaced the mass market that

dominated the business world of 25 years ago.2. In fact, by 2010, Hispanics, African-Americans, Asian Americans, and other minorities

will account for one-third of the nation’s population. 3. Small businesses that take the time to recognize, understand, and cater to the unique

needs, experiences, and preferences of these multicultural markets (and their sub-markets) will reap immense rewards.

D. The nation's increasingly diverse population offers businesses of all sizes tremendous marketing opportunities. 1. The key to success is of have an understanding of those target customers' unique, needs,

wants, and preferences. 2. The fastest growing sector in the U.S. today is the Hispanic population, an increase of 60

percent from 1990 to 2000. 3. Hispanic Americans now comprise the nation’s single largest minority group, edging out

African-Americans. 4. With $400 billion in purchasing power, the Hispanic-American population is an

extremely attractive target market for many entrepreneurs.a) Example of Ruben and Rosalinda Montalvo.

IV. Determining Customer Needs and Wants Through Market Research A. Change in the U.S. population is a potent force altering the business environment.

1. Market research is particularly valuable in tracking demographic trends in the population.2. The vehicle for gathering information for the marketing plan.3. An entrepreneur’s goal should be to align her business with as many demographic,

social, and cultural trends as possible. 4. The more trends a business converges with, the more likely it is to be successful.

B. Trends are powerful forces and can be a business owner's greatest friend or greatest enemy. a) See example of Arthur Landry.

C. By performing some basic market research, entrepreneurs can detect key demographic, social, and cultural trends and zero in on the needs, wants, preferences, and desires of its target customers.1. Market research is the vehicle for gathering the information that serves as the foundation

for the marketing plan.


a) It involves collecting, analyzing, and interpreting data about the company's market, customers, and competitors.

b) Market research allows entrepreneurs answer such questions as:(1) Who are my customers and potential customers?(2) What is their gender? (3) To which age group(s) do they belong? (4) What is their income level? (5) What kind of people are they? (6) Where do they live? (7) Do they rent or own their own homes? (8) What are they looking for in the products or services I sell? (9) How often do they buy these products or services? (10) What models, styles, colors, or flavors do they prefer? (11) Why do or don't they buy from my store? (12) How do the strengths of my product or service serve their needs and wants? (13) What hours do they prefer to shop? (14) How do they perceive my business? (15) Which advertising media are most likely to reach them?(16) How do customers perceive my business versus competitors?

D. When marketing goods and services, a small company must avoid mistakes because there is no margin for error when funds are scarce and budgets are tight1. Small businesses cannot afford to miss their target markets. 2. That usually requires conducting market research up front, before launching a company. 3. One of the worst – and most common – mistakes is assuming that a market exists for

their products or services. 4. Entrepreneurs can learn a great deal by actually observing, mingling with, and

interviewing customers as they shop.

E. Many entrepreneurs are discovering the speed, the convenience, and the low cost of conducting market research over the World Wide Web. 1. Online surveys, customer opinion polls, and other research projects are easy to conduct,

cost virtually nothing, and help companies connect with their customers. 2. Market research for a small business can be informal.

V. How to Conduct Market ResearchA. The goal

1. To reduce the risks inherent to business decisions.

B. Step 1: Define the problem1. The critical step in the process is being clear and concise about what the problem is.

a) It is common to confuse the symptom and the problem.b) Example--declining sales is a symptom not a problem. To properly research it the

owner must consider the factors that could cause it and then focus on investigating the most likely ones.

2. This process can also uncover potential market opportunities.

C. Step 2: Collect the data1. The market research is individualized marketing, increasing the importance of market

research.


2. The goal is to treat each customer as an individual.

D. Individualized marketing requires business owners to gather and assimilate detailed information about their customers.

a) Owners of even the smallest companies businesses now have access to affordable technology that creates and manages computerized databases.

b) Collecting useful information about the customers and potential new products and markets is simply a matter of sorting and organizing data.

c) Data mining is a process in which computer software uses statistical analysis, database technology, and artificial intelligence to find hidden patterns, trends, and connections in data. (1) Finding relationships among the many components of a data set, identifying

clusters of customers with similar buying habits, and predicting customers’ buying patterns, data mining gives entrepreneurs incredible marketing power.

(2) Popular data mining software packages include ACT!, Clementine, DataScope Pro, GoldMine, MineSet, Nuggets, and many others.

E. There are three types of data the owner must collect:a) Geographic - Where are customers?b) Demographic - Customer characteristics.c) Psychographic - What drives customer-buying behavior?

2. Figure 7.1 - How to Become an Effective One-to-One Marketer, outlines the process for developing customer relation marketing.

GAINING THE COMPETITIVE EDGEKnowing…Really Knowing…Your Customers

Green Hills Farms, a small 67-year-old grocery store in Syracuse, New York has created one of the best customer retention programs in the entire industry. Green Hills Farms not only earns above-average profits but also beats its much larger, wealthier rivals, one of which is located at the other end of the parking lot.

CEO Gary Hawkins began by giving away free Thanksgiving turkeys to customers who spent a certain amount in the store in the weeks before the holidays. He launched frequent buyer program using the bar-coded cards that gave customers discounts and produced reams of data about each customer’s purchasing patterns. Within two years, 70 percent of the store’s customers were using the cards. Managers began to drill into the company’s database to identify the store’s best customers, and the results were surprising.

They discovered that of their roughly 15,000 customers only about 300 customers are those spending at least $100 a week, and about 1,000 customers spending on average $50 to $99 a week. Green Hills Farms has revamped its program to reflect the value of each level of customer to the store. When customers join, they get $15 back for spending $100 and a personalized tour of the store with their “new customer manager.”

Green Hills Farms retains more than 96 percent of its Diamond customers each year, and the company boasts an overall customer retention rate of 80 percent, much higher than the industry average. Also, because the store no longer wastes time and money chasing customers who are looking only for a good deal, its profit margins have climbed. “At the end of the day,” says Hawkins, “the goal of any loyalty program is to improve the bottom line.”

1. What benefits does increased customer retention offer a small business?


Answer: A retention of just 5% more customers would raise profits 25%. Increasing a company’s retention rate by just 2 percent has the same impact as cutting expenses by 10 percent. Because about 20 to 30 percent of a typical companies' customers account for about 70 to 80 percent of its sales

2. Does size matter when it comes to customer loyalty and retention? Explain.Answer: It makes more sense to focus resources on keeping the best (and most profitable) customers than to spend them trying to chase “fair weather” customers who will defect to any better deal that comes along.

3. What lessons could other businesses, including those in other industries, learn from Green Hills Farms philosophy of customer retention?Answer: Students’ answer may vary.

F. Step 3: Analyze and interpret the data1. Market research does not provide solutions to the problems; the owner must decide what

the information means.

G. Step 4: Draw conclusions1. Decide how to use the information, what changes need to be made?

VI. Plotting a Guerrilla Marketing Strategy: Building a Competitive EdgeA. A small business has a competitive edge when customers perceive that the company and its

products or services are superior to those of its competitors. 1. The right marketing strategy is a key determinant of how successful a business.2. The best way to gain a competitive advantage is to create value by giving customers

what they really want that they cannot get elsewhere.

B. Successful businesses use the special advantages they have to build a competitive edge over their larger rivals by:1. close contact with the customer2. personal attention3. focus on service4. organizational and managerial flexibility

C. Small companies become more effective at relationship marketing or customer relationship management (CRM) by:1. Developing, maintaining, and managing long-term relationships with customers for

repeat purchases.2. CRM puts the customer at the center of a company’s thinking, planning, and action.3. It shifts the focus from a product or service to customers and their needs and wants. 4. CRM requires business owners to take the following steps:

a) Collect meaningful information about existing customers and compile it in a database.

b) Mine the database to identify the company’s best and most profitable customers, their needs, and their buying habits.

c) Focus on developing lasting relationships with these customersd) Attract more customers that fit the profile of the company’s best customers.


D. Small businesses rely on ten guerrilla marketing strategies to develop a competitive edge: 1. niche-picking 2. entertailing3. emphasizing their uniqueness4. connecting with their customers5. focusing on customers’ needs6. emphasizing quality7. paying attention to convenience8. concentrating on innovation9. dedicating themselves to service10. emphasizing on speed.

E. Guerrilla Marketing Principles1. Find a niche and fill it.

a) Many successful small companies choose their niches carefully and defend them fiercely rather than compete head-to-head with larger rivals.

b) A niche strategy allows a small company to maximize the advantages of its smallness and to compete effectively even in industries dominated by giants.

c) Focusing on niches that are too small to be attractive to large companies is a common recipe for success among thriving small companies.

2. Don’t just sell; entertain. a) Consumers are bored with shopping and that they are less inclined to spend their

scarce leisure time shopping than ever before.b) Winning customers today requires more than low prices and wide merchandise

selection.c) Increasingly, businesses are adopting strategies based on entertailing

(1) the notion of drawing customers into a store by creating a kaleidoscope of sights, sounds, smells, and activities, all designed to entertain

(2) The primary goal of entertailing is to catch customers’ attention and engage them in some kind of entertaining experience so that they shop longer and buy more goods or services.

(3) Entertailing involves making [shopping] more fun, more educational, more interactive.

3. Strive to be unique. a) To create an image of uniqueness for your business by:

(1) Including through the products and services they offer(2) The marketing and promotional campaigns they use(3) The store layouts they design(4) The business strategies they employ

b) The goal is to stand out from the crowd. 4. Connect with customers on an emotional level.

a) Have a clear sense of who they are, what they stand for, and why they exist. b) Defining the vision in a meaningful way.

(1) Vision is a crucial ingredient in a successful guerrilla marketing campaign. c) Companies connect with their customers emotionally by supporting causes that are

important to their customer base, taking exceptional care of their customers, and making it fun and enjoyable to do business with them.

5. Focus on the Customer. a) Too many companies have lost sight of the customer.


b) Average American company loses about ½ of its customer base every five years. c) Businesses are just beginning to discover the true costs of poor customer relations.

For instance:(1) 67% of customers who stop patronizing a particular store do so because an

indifferent employee treated them poorly.(2) Customers are five times more likely to leave because of poor service than they

are for product quality or price.(3) 96% percent of dissatisfied customers never complain about rude or discourteous

service, but ...(4) 91% percent will not buy from the business again. (5) 100% of those unhappy customers will tell their "horror stories" to at least nine

other people.(6) 13% of those unhappy customers will tell their stories to at least twenty other

people. d) 70% of company sales come from present customers.e) The typical business loses 20% of its customers each year.f) A retention of just 5% more customers would raise profits 25%. g) Increasing a company’s retention rate by just 2 percent has the same impact as

cutting expenses by 10 percent.h) Because about 20 to 30 percent of a typical companies' customers account for about

70 to 80 percent of its sales.(1) It makes more sense to focus resources on keeping the best (and most profitable)

customers than to spend them trying to chase “fair weather” customers who will defect to any better deal that comes along.

i) Shrewd entrepreneurs recognize that the greatest opportunity for new business often comes from existing customers.

j) Attracting a new customer actually costs five times as much as keeping an existing one. (1) Table 7.1 shows the high cost of lost customers.

k) The most successful small businesses have developed a customer orientation and have instilled a customer satisfaction attitude throughout the company.

l) Principles for developing and maintaining a customer orientation:(1) When you create a dissatisfied customer, fix the problem fast. (2) Encourage customer complaints.(3) Ask employees for feedback on improving customer service.(4) Get total commitment to superior customer service from top managers – and

allocate resources appropriately. (5) Allow managers to wait on customers occasionally. (6) Develop a service theme that communicates your attitude toward customers. (7) Reward employees “caught” providing exceptional service to customers. (8) Carefully select and train everyone who will deal with customers.

6. Devotion to qualitya) Quality goods and services are a prerequisite for success.b) Those businesses that provide them consistently have a distinct competitive

advantage.c) World-class companies treat quality as a strategic objective – an integral part of the

company culture.d) Total Quality Management (TQM)

(1) Quality not just in the product or service itself but in every aspect of the business


(2) Its relationship with the customer and continuous improvement in the quality delivered to customers.

(3) Companies achieve continuous improvement by using statistical techniques to discover problems, determine their causes, and solve them.

(4) It is a never-ending system of improvement that relies on the “DMAIC” process shown in Figure 7.2.

e) Manufacturers were the first to apply TQM techniques, but retail, wholesale, and service organizations have seen the benefits of becoming champions of quality.(1) Tracking customer complaints.(2) Contacting "lost" customers.(3) Finding new ways to track the cost of quality and the return on quality (ROQ).

f) The ROQ measure recognizes that although any improvement in quality may improve a company's competitive ability, only the improvements that produce a reasonable rate of return are worthwhile.

g) The key to developing a successful TQM philosophy is seeing the world from the customer's point of view. How do customers define quality?(1) Quality in products:

(a) reliability (average time between failures)(b) durability (how long it lasts)(c) ease of use, a known or trusted brand name(d) a low price.

(2) Quality in services:(a) tangibles (equipment, facilities and people)(b) reliability (doing what you say you will do)(c) responsiveness promptness in helping customers)(d) assurance and empathy (conveying a caring attitude)

h) Guidelines used by world-class companies to "get it right the first time."(1) Build quality into the process; don't rely on inspection to obtain quality.(2) Emphasize simplicity in the design of products and processes; it reduces the

opportunity for errors to sneak in. (3) Foster teamwork and dismantle the barriers that divide disparate departments.(4) Establish long-term ties with select suppliers; don't award contracts on low price

alone.(5) Provide managers and employees the training needed to participate fully in the

quality improvement program.(6) Empower workers at all levels of the organization; give them authority and

responsibility for making decisions that determine quality.(7) Get managers' commitment to the quality philosophy. Otherwise, the program is

doomed.(8) Rethink the processes the company uses now to get its products or services to its

customers. (9) Reward employees for quality work. Link workers' compensation clearly and

directly to key measures of quality and customer satisfaction.(10) Develop a companywide strategy for constant improvement of product and

service quality.i) The goal is to achieve 100 percent quality. Table 7.3 shows the consequences of

99.9% quality.7. Attention to convenience


a) Convenience is now critical in our busy, fast-paced world of dual-career couples and lengthy commutes to and from work; customers increasingly are looking for convenience.

b) Customers rank easy access to goods and services at the top of their purchase criteria. c) Successful companies go out of their way to make sure that it is easy for customers

to do business with them. d) The business owner can increase the convenience level of his/her business by

conducting a "convenience audit" from the customer's point of view to get an idea of its ETDBW ("Easy To Do Business With") index:(1) Is your business located near your customers? Does it provide easy access?(2) Are your business hours suitable to your customers? Should you be open

evenings and weekends to serve them better?(3) Would customers appreciate pickup and delivery service?(4) Does your company make it easy for customers to purchase on credit or with

credit cards?(5) Are your employees trained to handle business transactions quickly, efficiently,

and politely?(6) Does your company handle telephone calls quickly and efficiently?

8. Concentration on innovationa) Innovation is the key to future success. Markets change too quickly and competitors

move too fast for a small company to stand still and remain competitive. b) Small business, because of its inherent organizational and managerial flexibility,

often detects and acts on new opportunities faster than large companies. Despite financial constraints, small businesses frequently are leaders in innovation. For example:(1) microcomputers (Apple Computer)(2) minicomputers (Digital)(3) supercomputers (Cray Research)(4) pharmaceutical industry, the dominant drugs in most markets were discovered by

small companiesc) Companies of all sizes are feeling the pressure to develop new products and get them

to market faster than ever before. More intense competition, often from across the globe, as well as rapid changes in technology and improvements in communication have made innovation crucial to business success.(1) One survey of U.S. companies found that executives expected new products to

account for 39 percent of profits in the next five years compared with just 25 percent in the previous five.

d) Small businesses manage to maintain their leadership role in innovating new products and services by using their size to their advantage and maintaining their speed and flexibility much as a martial arts expert does against a larger opponent.

e) Their closeness to their customers enables them to read subtle shifts in the market and to anticipate trends as they unfold.

f) The ability to concentrate their efforts and attention in one area also gives small businesses an edge in innovation.

g) The small companies have an advantage: a dedicated management team totally focused on a new product or market.

h) To be an effective innovator, an entrepreneur should:(1) Make innovation a priority in the company by devoting management time and

energy to it.


(2) Measure the company's innovative ability. The number of new products or services introduced and the proportion of sales generated by products less than five years old can be useful measures of a company's ability to innovate.

(3) Set goals and objectives for innovation. Establishing targets and rewarding employees for achieving them can produce amazing results.

(4) Encourage new product and service ideas among employees.(5) Always be on the lookout for new product and service ideas.(6) Keep a steady stream of new products and services coming.

9. Dedication to service and customer satisfactiona) Successful companies go beyond customer satisfaction, striving for customer

astonishment.b) In the new economy, companies are discovering that unexpected innovative,

customized service can be a powerful strategic weapon. c) Small companies that lack the financial resources of their larger rivals have

discovered that offering exceptional customer service is one of the most effective ways to differentiate themselves and to attract and maintain a growing customer base.

d) Most Americans still rate U.S. companies low on customer service.e) Successful businesses seek to go beyond customer satisfaction, striving for customer

astonishment! f) They concentrate on providing customers with quality, convenience, and service as

their customers define those terms. g) The most important element of service is “the personal touch.”

(1) Calling customers by name(2) Making attentive(3) Friendly contact(4) Truly caring about customers' needs and wants

h) Stellar superior customer service is characterized by the following.(1) Listen to customers.(2) Define superior service.(3) Set standards and measure performance.(4) Examine your company’s service cycle.(5) Hire the right employees.(6) Train employees to deliver superior service.(7) Empower employees to offer superior service.(8) Use technology to provide superior service.(9) Reward superior service.(10) Get top manager's support.

10. Emphasis on speeda) Today's world is one of instantaneous expectations. Customers now expect an

immediate response from companies, whatever products or services they may be buying.(1) McKinsey and Company found that high-tech products that come to market on

budget but six months late would earn 33 percent less profit over five years than products that are on schedule.

(2) Bringing the product out on time but 50 percent over budget cuts profits just 4 percent!

b) Service companies also know that they must build speed into their business systems if they are to satisfy their impatient, time-sensitive customers.


c) This philosophy of speed is called time compression management (TCM), and it involves three aspects:(1) speeding new products to market.(2) shortening customer response time in manufacturing and delivery.(3) reducing the administrative time required to fill an order.

d) Most businesses waste 85 to 99 percent of the time it takes to produce products or services without ever realizing it!

e) Companies relying on TCM need to:(1) reengineer the entire production and delivery process rather than attempt to do

the same things in the same way only faster.(2) create cross-functional teams of workers and give them the power to attack and

solve problems.(3) Share information and ideas across the company. (4) set aggressive goals for time reduction and stick to the schedule.(5) instill speed in the culture.(6) use technology to find shortcuts wherever possible.

IN THE FOOTSTEPS OF AN ENTREPRENEUR…Taking on the Giants

Amilya Antonetti’s business, Soapworks, was born from a labor of love. When her infant son became ill, she traced her son’s health problems to the chemicals in the household cleaning products she used every day. She found out from her grandmother that many of the products used in her grandmother’s day were all natural, often relying on citrus products and other natural cleaning agents. Antonetti conducted much of her market research in the aisles of grocery stores, talking with shoppers. But landing her products on some store shelves proved to be a daunting task. Store buyers laughed at her initially, pointing out powerful brands such as Tide and Clorox.

Antonetti has positioned Soapworks’ products as empowering, all-natural, safe alternatives aimed at female shoppers who are tired of the advertising hype pushed on them by large companies. Soapworks’ advertising budget is miniscule, just $60,000 a year, compared to the millions of dollars her larger rivals spend, so Antonetti counts on guerrilla marketing techniques to succeed. She also relies on the power of publicity. Soapworks has doubled its sales every year since its launch, and like the owner of any fast-growing business, Antonetti constantly struggles with cash flow problems. She and her husband have decided that the business must bring in outside investors, but they have to be the right investors, and Antonetti has not yet found them.

1. Which of the guerrilla marketing strategies discussed in this chapter is Amilya Antonetti using in her business?Answer: Student’s answers may vary. However most common answers are: finding a niche and filling it; entertaining; focusing on customers; striving to be unique; connecting with customers on an emotional level; devoting to quality; concentrating on innovation; and dedicating to customer service and satisfaction.

2. Form a team with a few of your classmates to brainstorm ways that Antonetti can market her business.Answer: Student’s answers may vary.


VII. Marketing on the World Wide WebA. The hope

1. The World Wide Web promises to become a revolutionary business tool. 2. Most entrepreneurs are still struggling to understand what it is, how it can work for them,

and how they can establish a presence on it.a) By establishing a creative, attractive Web site, the "electronic storefront' for a

company on the Web, even the smallest companies can market their products and services to customers across the globe.

b) Although small companies cannot match the marketing efforts of their larger competitors, a creative Web page can be "the Great Equalizer" in a small company's marketing program, giving it access to markets all across the globe.

c) The Web gives small businesses the power to broaden their scope to unbelievable proportions.

B. The Web’s has become a mainstream marketing medium because of its impressive power as a marketing tool.1. In 1999, 45 percent of all U.S. households were online2. By 2005, experts estimate that 74 percent of all U.S. households will be online.3. Unfortunately, most small businesses are not taking advantage of this marketing

potential.a) 43% of small companies are not online at allb) Only about 35 percent have Websites.c) The most common reasons small business owners cite for not creating a Web

presence are:(1) business security concerns(2) the inability to support a site(3) the fear that the site would not draw customers.

d) According to Forrester Research, although small businesses make nearly 50 percent of all retail sales in the United States, they account for just 6 percent of all online sales!

C. Small companies that have established well-designed Web sites understand the Web’s power as a marketing tool and the benefits of e-commerce. 1. Small companies have been successful using marketing strategies that emphasize their

existing strengths and core competencies.a) Their Web marketing strategies reflect their “brick-and-mortar” marketing strategies,

focusing on building relationships with their customers rather than merely scouting for a sale.

b) These companies understand their target customers and know how to reach them using the Web.

c) They create Web sites that:(1) provide meaningful information to their customers(2) customize themselves based on each customer’s interests(3) make it easy for customers to find what they want.

D. Using the Web as a marketing tool allows entrepreneurs to provide meaningful information in an interactive rather than a passive setting. 1. Well-designed Web sites include:

a) interactive features that allow customers to access information about a companyb) its products and services


c) its historyd) question-and-answer sessions with experts e) ability to conduct e-mail or on-line conversations with company officials.

E. The Web allows business owners to link their companies’ home pages to other related Web sites, something advertisements in other media cannot offer.1. This allows small business owners to engage in cross marketing with companies on the

Web selling complementary products or services.2. The Web also magnifies a company’s ability to provide superior customer service at

minimal cost. 3. An innovative Web site allows customers:

a) gather information about a product or serviceb) have their questions answeredc) download diagrams and photographsd) track the progress of their orders.

F. The key to successful marketing on the World Wide Web is selling the right product or service at the right price to the right target audience. 1. Entrepreneurs on the Web have two additional challenges:

a) attracting Web users to their Websitesb) converting them into paying customers

2. That requires setting up an electronic storefront that is:a) invitingb) easy to navigatec) interactived) offers more than a monotonous laundry list of items.

VIII. The Marketing MixA. The major elements of marketing are product, place, pricing, and promotion.

1. These four elements are self-reinforcing and, when coordinated, they increase the salability of the product or service.

2. All four Ps must reinforce the image of the product or service the company presents to the potential customer.

B. Product1. Any good or service that satisfies the need of a consumer. The product must be viewed

from the point of view of the consumer. 2. The product life cycle (See Figure 7.3) measures these stages of growth, and these

measurements enable the company's management to make decisions about whether to continue selling the product and when to introduce new follow-up products.a) Introductory stage--Product "breaks into" the market; marketing is intensive and

costs are high; profits are very low or, more likely, negative. Advertising and promotion help the new product gain recognition. Potential customers must get information about the product and the needs it can satisfy.

b) Growth and Acceptance stage--consumers begin to experiment with the product, if successful, sales and profits continue to rise; otherwise, product disappears. Products that reach this stage, however, do not necessarily become successful. For successful products, sales and profit margins continue to rise through the growth stage.


c) Maturity and Competition stage--sales volume continues to rise, but profit margins peak and then begin to fall as competitors enter the market. Normally, the selling price is lowered to meet competition and to hold its share of the market.

d) Market Saturation stage--sales peak and give the marketer fair warning that it is time to begin product innovation.

e) Product decline stage is the final stage. Sales continue to drop, and profit margins fall drastically. A product does not have to eventually fail. Products that have remained popular are always being revised.

3. The time span of the stages in the product life cycle depends on the type of products involved. a) High-fashion and fad clothing have a short product life cycle, lasting for only four to

six weeks. b) Products that are more stable may take years to complete a life cycle. c) Products that are more stable may take years to complete a life cycle.

4. Understanding the product life cycle can help a business owner plan the introduction of new products to the company's product line. a) Often, companies wait too late into the life cycle of one product to introduce another. b) The result, they are totally unprepared for a competitor's innovation.c) The ideal time to develop new products is early on in the life cycle of the current

product (See Figure 7.4).

C. Place1. The method of distribution.2. The channel of distribution is the path that goods or services and their titles take in

moving from producer to consumer.3. "Middlemen" perform valuable services, providing:

a) time utility.b) place utility.

4. Four channels of distribution for consumer goods (see Figure 7.5).a) Manufacturer to consumer.b) Manufacturer to retailer to consumer.c) Manufacturer to wholesaler to retailer to consumer.d) Manufacturer to wholesaler to wholesaler to retailer to consumer.

5. 5. Two channels of distribution for industrial goods (see Figure 7.6).a) Manufacturer to industrial user.b) Manufacturer to wholesaler to industrial user.

D. Price1. Price is a key factor affecting both sales volume and profits.2. The right price for a product or service depends on three factors.

a) the company's cost structure.b) an assessment of what the market will bear.c) the desired image the company wants to create in its customers' minds.

3. Many small companies need to focus on non-price competition because it is more effective against larger competitors. Such as:a) free trial offersb) free deliveryc) lengthy warrantiesd) money-back guarantees


4. Non-price competition plays down the product's price and stresses its durability, quality, reputation, or special features.

E. Promotion1. Informing and persuading consumers is the role of promotion. Promotion is divided into

advertising and personal selling.2. The goals of a small company's promotional efforts are:

a) to create a brand imageb) to persuade customers to buyc) to develop brand loyalty


Chapter Summary1. Describe the components of a guerrilla marketing plan and explain the benefits of preparing one.

A major part of the entrepreneur's business plan is the marketing plan, which focuses on a company's target customers and how best to satisfy their needs and wants. A solid marketing plan should pinpoint the specific target markets the company will serve; determine customer needs and wants through market research; analyze the firm's competitive advantages and build a marketing strategy around them; create a marketing mix that meets customer needs and wants.

2. Explain how small businesses can pinpoint their target markets. Sound market research helps the owner pinpoint his target market. The most successful

businesses have well-defined portraits of the customers they are seeking to attract.

3. Explain how to determine customer needs through market research and the steps in the market research process. Market research is the vehicle for gathering the information that serves as the foundation of the

marketing plan. Good research does not have to be complex and expensive to be useful. The steps in conducting market research include: defining the problem - "What do you want to know?" collecting the data from either primary or secondary sources analyzing and interpreting the data drawing conclusions and acting on them

4. Describe the guerrilla marketing strategies on which a small business can build competitive edge in the marketplace. When plotting a marketing strategy, owners must strive to achieve a competitive advantage,

some way to make their companies different from and better than the competition. Successful small businesses rely on ten guerrilla marketing strategies to develop a competitive edge: niche-picking, entertailing, emphasizing their uniqueness, connecting with their customers, focusing on customers’ needs, emphasizing quality; paying attention to convenience, concentrating on innovation; dedicating themselves to service; and emphasizing on speed.

5. Discuss the marketing opportunities the World Wide Web (WWW) offers and how entrepreneurs can best take advantage of them. The Web offers small business owners tremendous marketing potential on par with their larger

rivals. Entrepreneurs are just beginning to uncover the Web's profit potential, which is growing rapidly. Successful Websites are attractive, inviting, easy to navigate, interactive, and offers users something of value.

6. Explain the "four Ps" of marketing - product, place, price, and promotion - and their role in building a successful marketing strategy. The marketing mix consists of the "4 Ps":

Product. Entrepreneurs should understand where in the product life cycle their products are. Place. The focus here is on choosing the appropriate channel of distribution and using it

most efficiently. Price. Price is an important factor in customers’ purchase decisions, but many small

businesses find that non-price competition can be profitable. Promotion. Promotion involves both advertising and personal selling.


Discussion Questions1. What is a marketing plan. What lies at its center?

Answer - The marketing plan is a subset of the business plan; it complements the financial section of the plan. While the financial plan focuses on cash flow and profits. The center of the marketing plan is the customer.

2. What objectives should a marketing plan accomplish?Answer - An effective marketing plan should accomplish four objectives. 1) Determine customer needs and wants through market research. 2) Pinpoint the specific target markets the company will serve. 3) Analyze the firm's competitive advantages and build a marketing strategy around them. 4) Create a marketing mix to meet customer needs and wants.

3. How can market research benefit a small business owner? List some possible sources of market information.Answer - Market research is the tool that aids management in determining who potential customers might be, what they need and want, and how much they are willing to pay. It helps the small business owner track demographic trends. Sources include a wide range of census data from the government, plus publications such as the "Survey of Buying Power," trade association data, and Chambers of Commerce data.

4. Does market research have to be expensive and sophisticated to be valuable? Explain.Answer - Market research does not have to be time consuming, complex, or expensive to be effective. Many entrepreneurs are discovering the speed, the convenience, and the low cost of conducting market research over the World Wide Web. Online surveys, customer opinion polls, and other research projects are easy to conduct, cost virtually nothing, and help companies connect with their customers. With Web-based surveys, businesses can get real-time feedback from customers, often using surveys they have designed themselves.

5. Why is it important for small business owners to define their target markets as part of their marketing strategies?Answer - The most successful businesses have well-defined portraits of their target customers. They know their customers’ income, lifestyle, buying patterns, likes and dislikes, etc. Growing diversity in the population is offering tremendous marketing opportunities, but small business owners need to know where those markets are in order to exploit them.

6. What is a competitive edge? How might a small company gain a competitive edge?Answer - Competitive edge is the customer's perception that the products or services of a business are superior to those of its competitors. Successful entrepreneurs use their special advantages to build a competitive edge over larger rivals. 1) Closer to the customer. 2) Personal attention. 3) Focus on service. 4) Organizational and managerial flexibility. A key competitive edge for small businesses is relationship marketing--developing a long-term relationship with customers so they will keep coming back.

7. Describe how a small business owner could use the following sources of a competitive advantage: niche-picking, entertailing, emphasizing their uniqueness, connecting with their customers, focusing on customers’ needs, emphasizing quality; paying attention to convenience, concentrating on innovation; dedicating themselves to service; and emphasizing on speed.


Answer: Find a niche and fill it - A niche strategy allows a small company to maximize the advantages of its smallness and to compete effectively even in industries dominated by giants. Focusing on niches that are too small to be attractive to large companies is a common recipe for success among thriving small companies.D on’t just sell; entertain - Consumers are bored with shopping and that they are less inclined to spend their scarce leisure time shopping than ever before. Winning customers today requires more than low prices and wide merchandise selection. Increasingly, businesses are adopting strategies based on entertailing: the notion of drawing customers into a store by creating a kaleidoscope of sights, sounds, smells, and activities, all designed to entertain.Strive to be unique - Create an image of uniqueness for your business by including through the products and services they offer; the marketing and promotional campaigns they use; the store layouts they design; and the business strategies they employ. Connect with customers on an emotional level - Have a clear sense of who they are, what they stand for, and why they exist by defining the vision in a meaningful way. Companies connect with their customers emotionally by supporting causes that are important to their customer base, taking exceptional care of their customers, and making it fun and enjoyable to do business with them. Focus on the Customer - Too many companies have lost sight of the customer. Average American company loses about ½ of its customer base every five years. Businesses are just beginning to discover the true costs of poor customer relations. Increasing a company’s retention rate by just 2 percent has the same impact as cutting expenses by 10 percent. About 20 to 30 percent of a typical companies' customers account for about 70 to 80 percent of its sales. Shrewd entrepreneurs recognize that the greatest opportunity for new business often comes from existing customers. The most successful small businesses have developed a customer orientation and have instilled a customer satisfaction attitude throughout the company.Devotion to quality - Manufacturers were the first to apply TQM techniques, but retail, wholesale, and service organizations have seen the benefits of becoming champions of quality. The ROQ measure recognizes that although any improvement in quality may improve a company's competitive ability, only the improvements that produce a reasonable rate of return are worthwhile. The key to developing a successful TQM philosophy is seeing the world from the customer's point of view. How do customers define quality?Attention to convenience - Customers rank easy access to goods and services at the top of their purchase criteria. The business owner can increase the convenience level of his/her business by conducting a "convenience audit" from the customer's point of view to get an idea of its ETDBW ("Easy To Do Business With") index. Concentration on innovation - Innovation is the key to future success. Markets change too quickly and competitors move too fast for a small company to stand still and remain competitive. Dedication to service and customer satisfaction – Successful companies go beyond customer satisfaction, striving for customer astonishment. In the new economy, companies are discovering that unexpected innovative, customized service can be a powerful strategic weapon. Small companies that lack the financial resources of their larger rivals have discovered that offering exceptional customer service is one of the most effective ways to differentiate themselves and to attract and maintain a growing customer base. Most Americans still rate U.S. companies low on customer service. Successful businesses seek to go beyond customer satisfaction, striving for customer astonishment! Emphasis on speed - Customers now expect an immediate response from companies, whatever products or services they may be buying. Service companies also know that they must build speed into their business systems if they are to satisfy their impatient, time-sensitive customers. This philosophy of speed is called time compression management (TCM), and it involves three aspects.


1) speeding new products to market, 2) shortening customer response time in manufacturing and delivery, and 3) reducing the administrative time required to fill an order.

8. What is the World Wide Web? Describe its marketing potential for small businesses.Answer - The World Wide Web promises to become a revolutionary business tool. The Web offers small business owners tremendous marketing potential on par with their larger rivals. Entrepreneurs are just beginning to uncover the Web's profit potential, which is growing rapidly. Successful Websites are attractive, inviting, easy to navigate, interactive, and offers users something of value. The Web allows business owners to link their companies’ home pages to other related Web sites, something advertisements in other media cannot offer. This allows small business owners to engage in cross marketing with companies on the Web selling complementary products or services. The Web also magnifies a company’s ability to provide superior customer service at minimal cost. An innovative Web site allows customers: gather information about a product or service; have their questions answered; download diagrams and photographs; track the progress of their orders.

9. Explain the concept of the marketing mix. What are the four Ps?Answer - The marketing mix consists of four elements; product, place, price, and promotion. Product - any good or service that satisfies the need of a consumer. It’s managed through a product life cycle.Place - the method of distribution. The channel of distribution is the path that goods or services and their titles take in moving from producer to consumer. Price - a key factor affecting both sales volume and profits. Price can be a powerful tool for changing a company’s image. But, most small companies need to focus on non-price competition because it is more effective against larger competitors. Promotion - informing and persuading consumers is the role of promotion. Promotion is divided into advertising and personal selling.

10. List and explain the stages in the product life cycle. How can a small firm extend its product's life?Answer - The product life cycle goes through four (five) stages. See Figures 7.3 and 7.4.1) Introductory stage - product "breaks into" the market; marketing is intensive and costs are high; profits are very low or, more likely, negative. 2) Growth and acceptance stage--consumers begin to experiment with the product; if successful, sales and profits continue to rise; otherwise, product disappears. 3) Maturity and competition stage--sales rise but profits begin to fall due to intense competition. 4) Market saturation--sales peak, profits drop, and the company must innovate. 5) Product decline stage--sales continue to fall and profits decline drastically. The time span in each stage varies by product and market. There is no set time cycle in any case.

11. With a 70 percent customer retention rate (average for most U.S. firms according to the American Management Association) -every $1 million of business in 1995 will grow to more than $4 million by the year 2005. If you retain 80 percent of your customers, the $1 million will grow to a little over $6 million. If you can keep 90 percent of your customers, that $1 million will grow to more than $9.5 million. What can the typical small business do to increase its customer retention rate?Answer - Businesses can--and should--boost their customer retention rates by: a) focusing on their customers' individual needs and wants, b) producing quality goods and services, c) offering customers greater convenience, d) introducing product and service innovations, e) dedicating themselves to customer service and satisfaction (or, better yet, customer astonishment), f) building an organization that responds quickly to customer needs, wants, and problems.


The steps are: When you create a dissatisfied customer, fix the problem fast; Encourage customer complaints; Ask employees for feedback on improving customer service; Get total commitment to superior customer service from top managers – and allocate resources appropriately; Allow managers to wait on customers occasionally; Develop a service theme that communicates your attitude toward customers; Reward employees “caught” providing exceptional service to customers; Carefully select and train everyone who will deal with customers.

Beyond the Classroom . . .1. Interview the owner of a local restaurant about its marketing strategy. From how large a geographic

region does the restaurant draw its clientele? What is the firm's target market? What are its characteristics? Does the restaurant have a competitive edge?

2. Select a local small manufacturing operation and evaluate its primary product. What stage of the product life cycle is it in? What channels of distribution does the product follow after leaving the manufacturer?

3. Research current business periodicals such as Inc., Inc. Technology, Fortune, Fortune Small Business, Forbes, and others to determine how small companies are using the World Wide Web to market their products and services more effectively. Find at least one example of a company effectively using the Web as a marketing tool and describe its approach.

4. Using one of the search engines on the World Wide Web, research the current demographic profile of Web users. What is the growth rate for Web users? Prepare a brief report on your findings. What implications do your conclusions have for entrepreneurs considering setting up Websites?

5. Contact three local small business owners and ask them about their marketing strategies. How have they achieved a competitive edge? Develop a series of questions to judge the sources of their competitive edge: niche-picking, entertailing, emphasizing their uniqueness, connecting with their customers, focusing on customers’ needs, emphasizing quality; paying attention to convenience, concentrating on innovation; dedicating themselves to service; and emphasizing on speed.. How do the businesses compare?

Chapter 7 Entrepreneurship by Zubair A Khan.

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