|Owners of small businesses usually
have limited resources to spend on marketing. Concentrating their
efforts on one or a few key market segments - target marketing -
gets the most return from small investments. There are two methods
used to segment a market:
1. Geographical segmentation - Specializing in serving the needs
of customers in a particular geographical area. For example, a neighborhood
convenience store may send advertisements only to people living
within one-half mile of the store.
2. Customer segmentation - Identifying those people most likely
to buy the product or service and targeting those groups.
Managing the Market Mix
Every marketing program contains four key components:
- Products and Services
These are combined into an overall marketing program.
Products and Services - Product strategies may
include concentrating on a narrow product line, developing a highly
specialized product or service, or providing a product-service package
containing unusually high-quality service.
Promotion - Promotion strategies include advertising
and direct customer interaction. Good salesmanship is essential
for small businesses because of their limited ability to spend on
advertising. Good telphone book advertising is also important. Direct
mail is an effective, low-cost medium available to small business.
Price - The right price is crucial for maximizing
total revenue. Generally, higher prices mean lower volume and vice-versa;
however, small businesses can often command higher prices because
of their personalized service.
Distribution - The manufacturer and wholesaler
must decide how to distribute their products. Working through established
distributors or manufacturers' agents generally is easiest for small
manufacturers. Small retailers should consider cost and traffic
flow in site selection, especially since advertising and rent can
be reciprocal: A low-cost, low-traffic location means spending more
on advertising to build traffic.
The nature of the product or service is also important in siting
decisions. If purchases are based largely on impulse, then high
traffic and visibility are critical. On the other hand, location
is less a concern for products or services that customers are willing
to go out of their way to find. The recent availability of highly
segmented mailing lists, purchased from list brokers, magazines,
or other companies, has enabled certain small businesses to operate
from any location yet serve national or international markets.