Tuesday, October 8, 2013
Set an Objective
The marketing effort begins with an objective. This objective can be to create a new business to serve a specific market, launch a new product for an existing business, develop a new market with existing products and so on.
After establishing the objective it is important to take a hard look at the business you are in or are hoping to start. This exercise will help to better understand your current position in the industry and possible avenues for growth. For example, if owning a cup cake specialty shop, you should determine if you are in the cup cake business, confectionary business, restaurant business, or bakery business and so on. The choice will affect the strategy that might be employed to achieve the objective.
Identify a Customer Base
Also considering the business, it is important to identify the potential customer base (key customers) you will be serving and your business capabilities. For example if you are entering an established market but have limited resources you may be forced to serve the least profitable customer. In other words, the market leaders will have developed products and services that serve the most profitable customers and your limited resources will put you at a disadvantage when competing for those customers.
This exercise may also uncover other customer segments that may offer opportunities but may not represent the key customer category. If you , for example, served the least profitable customer you might also find some of the industry’s more profitable customers might have a reason to choose your product or service.
Going after the least profitable customers may be an advantage since the market leaders are not likely to focus on customers that would require resources to be taken from efforts to serve their more profitable clients. This approach would make you a disruptor and you product a disruptive innovation since you would be starting with the least profitable customer and work to create ways to “move up the customer chain” in this market.
On the other hand if you have a new idea or innovation and want to compete for the very profitable customers then you must consider ways of protecting your market position. Since this innovation can likely be duplicated in some fashion by the competition it will be important to choose a marketing strategy that makes duplication by competitors more difficult. If this innovation or approach allows the best customers in the market to be served better then your introduction would be considered a sustaining innovation.
Set a Strategy
Strategy is WHAT you will do as a business.
As an example, if you had some basic equipment and could perform basic pressure washing of concrete, your customers would likely be individuals that could not afford or perhaps didn’t need the range of services offered by the more established pressure washing services. A careful look at the type of business, the customer segment and the resources might be helpful in developing a marketing strategy. In this case the strategic statement might be: “To enter the maintenance service business by providing basic pressure washing services to homeowners with a plan to expand service offerings to homeowners and businesses in Texas”.
In this case you are a potential market disruptor (trying to make a profit serving the least profitable customer) that will be part of the maintenance service industry and will start with a pressure washing service.
Understand that being a disruptor is not defined by the amount of resources or how long the entrant has been in business. A disruptor is defined by the position of the customer on the profit scale in the market that is being entered.
Develop the Tactics
Tactics are HOW you will successfully execute the strategy.
Tactics will require attention to the Price, Place, Product and Promotion components of marketing and the Planning, Organizing, Directing and Controlling principles of management. Additionally the tactics will have to consider how the marketing components and management principles fit with the Workforce, Financial requirements/capabilities, Capital equipment needs and Operational procedures.
The more the marketing, management and operational plans are in concert, the better the chances of achieving the strategic goal. This set of exercises is critical in the sense that they are focused on creating the most efficient, objective driven organization possible.
Considering the pressure washing service the tactics might involve the following:
1) PRODUCT – power washing home decks, driveways and sidewalks expanding to gutter cleaning, window cleaning and pool service then moving into commercial maintenance (This approach provides the ability to grow horizontally and vertically – (gateway capacity).
2) PRICING – Start with simple low level pricing moving to a bundling approach as more services are added.
3) PLACE – begin in an area easily served by limited manpower and resources with a plan to expand to adjacent areas so supply chain and resources are not strained.
4) PROMOTION – limit promotion to grow business within the ability to serve the demand. Begin with very targeted, low cost promotion and expand as territory is increased.
5) WORKFORCE – contract labor that can be quickly assigned to complete jobs. As the business grows evaluate the need for permanent employees with specialized expertise.
6) FINANCIAL REQUIREMENTS – small amount of start up cash, initial payment from customers should be enough to cover the cost of completing the job. Consider half payment at sale and half at completion. Put aside 20% of each job for investment into company growth and new equipment. Assume 10% of each job will be used for repair and maintenance.
7) OPERATIONAL PROCEDURES – utilize contract labor at negotiated and contracted rates that allow easy determination and maintenance of profit margins. Require bonding of contractors to provide assurance the job will be completed and allow some level of comfort to the customer when requiring half of the job cost be paid in advance.
8) CAPITAL EQUIPMENT – basic, rugged pressure washing equipment. Expand the inventory of equipment as business increases.
This is a simple example but illustrates that there is a sequence that should be followed for the best results. If you start with tactical measures or with a strategy that hasn’t identified the industry or customer base a great deal of time will be spent course correcting to develop a successful model.
Every time you reevaluate and change direction requires internal changes that can be costly in that each of the tactical categories listed above will likely be impacted.
This process works for established businesses, new businesses and businesses that have had a significant change in their industry.