For marketing purposes, the product or service should be thought of as a bundle of benefits to the customer. These benefits include a wide variety of features: attractiveness, distinctive characteristics, quality, options, warranties, service contracts, delivery, and so forth. Perhaps more important for the customer are the intangible benefits such as savings in time, convenience, money, or improved health. To feel comfortable about buying a product or service, customers must know about and understand these benefits.
In a customer focused marketing plan, it is assumed that the customer has played a part in the design and development of the product or service. In other words, the product or service has been customized to meet the needs of the individual customer. Part of the marketing strategy as it relates to the product or service, then, is to involve customers in the product development phase so that the ultimate product or service meets their exact needs. It is also important to focus on the intangible aspects of the product or service. Intangibles are those things that are difficult to measure: quality, innovative technology, service, and reliability. They are the key to differentiation in a market where products, services, and technology quickly become commodities in the eyes of the customer.
Product or Service Positioning Product or service positioning is the way that customers view the product or service in relation to competitors’ offerings: Is the product of higher quality, less expensive, more attractive, and so forth? In short, product positioning defines the product by its benefits to the customer. Consequently, products are typically repositioned several times during the product life cycle as customer tastes and preferences change. Not only is the product or service positioned but also the company.
Savvy customers today are concerned more and more about the reputations of the companies that they deal with. If, for example, a company associates with distributors whose level of service is not up to its standards, this reflects negatively on the entrepreneur’s company. Precious marketing dollars are wasted if the company fails to respond to customers’ perceptions. Using a onetoone relationship marketing approach means that the company communicates with the customer enough to know how he or she perceives the product or service. A statement of the product’s position relative to competitors’ products should be written from the customer’s point of view. For example, The customer will see FZAlert as a highquality, stateoftheart security device for parents who want to keep track of their children in public situations.
The positioning of a product or service should be tested in the market prior to doing a full product launch. Several methods can be used; each varies in the time and cost involved:
■ In a peer review, the entrepreneur or management team asks friends to give an opinion on the positioning statement for the product and on how the product performs in this position.
■ In a distribution channel review, salespeople, distributors, and retailers are asked what they think of the position statement. Typically they have a good sense of where the company and its products might fit in the industry.
■ With focus groups, the company brings together a group of potential customers to get their feedback and to undertake blind product reviews. Focus groups consist of people who have not participated in the design and development of product, so their opinions are unbiased.
■ Test marketing involves producing a limited amount of product and a defined geographic region to determine if the product positioning is cost of this approach must be weighed against getting the product into ket as quickly as possible, particularly where there is a first-mover adv gained. Time to market is becoming more important in light of rapidly technology and markets. However, having the customer involved at every product development shortens that time significantly and makes it more the product does not experience problems after the launch. The final statement should be communicated to everyone in the company so that an common philosophy and communicate a consistent message to the customer
Building brand loyalty in a time of rapid change, when to created new media markets, is challenging at best. Today, branding must the qualities and philosophy of the company as much as the product, but far consumer product and service companies, building a brand name becomes a images. An ad featuring a young, slim, athletic-looking woman drinking a beer seems to be an oxymoron, but subliminally it hits the mark. In such an ad, ing light beer is touted as healthy and youthful. Whether or not it is true is the image remains. For companies that participate in the war of the images, the battle is In many television ads today, viewers don’t even know which brand is bras moted; often the name appears only briefly at the end of the ad. Such is the some Calvin Klein and Nike ads.
The strategy of these companies is not to sell products with these ads but to get people to pay attention to advertising once again_ customers are so bombarded by advertising that they have almost become to its influences, so companies are taking drastic measures to regain their A counter movement, however, has begun to occur among some en companies. A number of very successful companies, such as Ben & Jerry’s Homemade, Smith and Hawkens, and Starbucks Coffee are resisting image positioning as the way to communicate their message. Instead of promoting brand names, they choose to communicate the philosophy of their company, which is at the core of all their prod-ucts and by its very nature differentiates these companies from others in the market. They do not go head to head with their competitors in a war of images; they create their own niche in marketing strategy by seeking ways to increase pride and loyalty in not only their customers but also their employees. They break with tradition to make themselves stand out. The differences in products that these new marketing strategists promote are real and measurable. These real distinctions not only separate them from the false reality of their competitors’ images but also expose those images for what they are.
Of course, developing a sound company philosophy or culture is not an overnight achievement. It takes time, and while the company is working at building that philosophy, the image builders probably receive the bulk of the attention. Nevertheless, persistence pays off when the company delivers precisely what it said it would deliver. Brand-name recognition, when achieved, must be protected from inferior prod-ucts that might attempt to secure a competitive advantage by trading on a name or slogan that is associated with a successful brand. For example, McWilliams Wines, an Australian company, used the slogan “Big Mac” to promote a 2-liter wine bottle. McDonald’s, the famous American fast-food chain, took McWilliams to court, saying that its use of the Big Mac slogan would mislead the public into thinking a relation-ship existed. The court concluded that confusion might occur, but the slogan was not misleading because the term “Big Mac” is descriptive. Therefore, McWilliams had not infringed on McDonald’s rights.’ In her book Defending Your Brand against Imitation, Judith Zaichowsky suggests several actions that a company can do to protect a brand name:
1. Use the trademark as an adjective in the name of the product, for example, Sanka Brand Decaffeinated Coffee.
2. Make sure that the media use the trademark correctly. Check ads and articles writ-ten about the company and report any errors for immediate correction.
3. Use a specific typographical treatment. For example, EZ-Alert
4. Be careful in the selection of a brand name. Test it thoroughly and look to avoid names already in use or covered by copyrights, names too similar to existing trade names and those already in use with unrelated products.
Packaging and Labeling
The packaging and labeling of products should reflect the philosophy of the company and the type of business. For consumer products, pack-aging actually becomes another form of advertising and promotion. Packaging has to grab the consumer’s attention as it sits among many competing products on crowded shelves. Industrial products generally require packaging that is more utilitarian. The design doesn’t need to attract attention because the packaging merely makes it more convenient to transport the product. Consequently, industrial packaging typically consists of brown boxes with bold, colored lettering to identify the contents and the manufacturer. With products that are marketed globally, packaging may be even more important, not for shipping purposes but because in some countries—notably Japan—a premium is placed on the artistic design of the package, and customers are even wiling to pay more for a beautiful box.
Just like the product, the packaging must be designed and tested for consumer response and distribution channel response. It should serve the functions for which it was designed. In general, packaging should:
■ Tell what the product is. This description can range from product features t
directions for use, ingredients, remedies for misuse, level of quality, and warrant
■ Describe its key benefits to the customer, such as convenience, price, quality, an
■ Highlight the company philosophy. It could state, for example, “Our customs
come first with us.”
■ Be distinctive and attractive enough that customers can recognize the company’
products from the package design alone without having to read anything.
■ Use safe and recyclable materials wherever possible.
Package design is something that requires the services of a professional, which i
not an inexpensive undertaking. However, many business owners can testify to the
fact that good packaging sells product. Good design is rewarded by increased sale
and also by the industry. Likewise, poor design receives its share of attention in tilt
press as well. A classic example is L’eggs pantyhose, which received much criticism a
its nonenvironmentally friendly plastic egg container. Nevertheless, the manufacture’
refused to change the package by which it was recognized everywhere. By contrast
the original packaging of audio CDs (the plastic jewel box in a cardboard contains
twice the size of the CD) was changed due to consumer and distributor protest ova
Building Relationships and Repeat Sales Through Promotion
The promotional plan establishes the identity and vision of the company that will be
conveyed through all of its marketing efforts from advertising to public relations.
Identity is how the company sees itself and how it wants customers to see the com-
pany. Recall that vision is the fundamental belief in what the company aspires to do
and is composed of the company’s core values, mission, and purpose.
Identity and vision are quite different from image. An image is what the company wants the public to perceive it as being, whereas the company’s identity and vision define what it is in reality.
A company that hopes to build lifelong customer relationships will stagy
away from image creating techniques and focus instead on vision-conveying tech-
niques. With this in mind, the promotional plan for growing the business is one the
company implements and uses consistently for the long term. It is the plan in which
the company invests to build a strong and loyal customer base.
The promotion function of the marketing strategy is the creative one, for this is
where guerrilla advertising, publicity, sales promotion, and personal selling tactics in
short, the promotional mix is decided Not every company has the
same promotional mix; it is a function of the type of business, the mission, the target
market, and, of course, the budget. For entrepreneurs with new or growing ventures,
the last item, the budget, dictates that they must be highly creative in their promotional
mix and strategy because, normally, resources are very limited.
Entrepreneurs have used several strategies to estimate how much money they need to set aside in their budgets
for promoting their businesses. These include the following:
■ Use a percentage of sales. If the companies in an industry typically spend about
5 percent of their sales on the promotion effort, that percentage becomes a
benchmark figure for the entrepreneur’s company.
■ Keep up with the competitors. Entrepreneurs may decide to mimic the promotional
mix of their competitors and spend what they spend. This is not necessary if the
entrepreneur has defined a niche that is not being served.
■ Calculate what is needed to achieve the company’s goals. Some products and services
require more promotion than others to create awareness. For example, a brand
new product with which customers have no experience requires a lot more pro-
motional effort to create awareness and educate customers.
Promotional creativity begins with a clear understanding of the customer, the
economy, current trends, and even the daily news because a creative idea for promo-
tion can come from anywhere, including a current event. Today, social responsibility
is a big issue—hence the proliferation of ads, such as those of Mobil Oil, depicting a
company that cares about people and natural resources. In fact, the ad may never
mention the product it is trying to sell. Tying a marketing strategy to current trends
such as social responsibility means that the company must remain flexible and willing
to change the strategy if the current trend changes. Customers are fickle, and no
matter how sound or beneficial a trend may be, they eventually tire of it, and a new
strategy must be employed.
Promotion is also the way that entrepreneurs convey their dedication to total
quality and the highest levels of customer satisfaction. A good promotional mix
incorporates the input of everyone in the organization to create an integrated plan.
Advertising to Reach Customers Companies advertise to create product aware-
ness or company awareness. It is impossible for a small business owner to escape
advertising because it is present everywhere, from the sign announcing a store or
office to the salesperson or receptionist who greets the customer. Good advertising
attracts the right customers and builds an excellent company image. If done effec-
tively, it also increases sales. But advertising alone cannot guarantee sales if the prod-
uct/service doesn’t provide value for the customer or create continued sales if the
company doesn’t follow up with customers to ensure that they are satisfied.
To be successful, advertising must accomplish four things:
1. Target the correct audience.
2. Present a positive picture.
3. Reflect the vision and culture of the company.
4. Ask for the sale.
There are three general choices of media for advertising: print media, broadcast
media, and miscellaneous media. The choice of which to use depends on the type of
business and what is typically done in the industry. Advertising should target where
the customer expects to find it. The media comparison chart displays the
options available to a small business.
This section has provided just a few of the hundreds of tips and techniques avail-
able to entrepreneurs who wish to advertise products or services in the most efficient
and effective ways while the new venture is growing. The series of books on guerrilla
marketing by Jay Conrad Levinson is highly recommended for its marketing sugges-
tions geared specifically to young, growing companies.
Publicity and Public Relations Publicity is essentially free advertising for a product
or business through newspaper articles and radio and television stories, and talk
shows. Public relations, however, is the strategy for presenting the company and its
philosophy to the public. Publicity is one of the best entrepreneurial marketing tools
there is because it gets attention and it is free.
The key to successful publicity is having a product or business that is newsworthy.
For example, the product may be environmentally friendly, or the way the company
was founded may be unique. Companies such as Ben & Jerry’s Homemade and Body
Shop International have received millions of dollars’ worth of free publicity because
they have interesting stories and socially responsible messages. There are several ways
to get some publicity. The business owner can get in touch with a reporter to test an
idea, and, if the reporter is interested in writing a story, the owner should send along
a press kit containing a press release, biographies and photos of key people, any nec-
essary background information, and copies of any other articles written about the
company. Whenever possible, the management team should get to know people in
the media on a first-name basis. This gives the company instant clout when it needs
free publicity. The media are always looking for news and appreciate the effort to give
them something newsworthy.
A rich source of data for publicity and public relations are the customer stories
that exist everywhere in an organization. These have the side benefit of attracting new
customers who tend to place more credence on what other customers say.
Through the art of promotion and selling, prospects are turned into first-time customers, those customers who have
engaged in a single transaction with the company. First-time customers then become
part of the company’s segmentation, targeting, and personalization process in an
attempt to move them to the repeat customer rung. At this point, it is important to
use stickiness tactics that increase switching costs for the customer and tie them
exclusively to the entrepreneur’s product or service. Examples of stickiness tactics
are VIP clubs, frequency programs, and special discounts. Assuring that customers
on this rung are completely satisfied is essential to edging them into the evangelism
category where they become a real promotional arm of the company.
If the entrepreneur wants to successfully move more customers to the top rungs
of the ladder, she or he must adhere to a number of principles. Table 13.2 presents
nine principles for increasing customer value.
The Customer Loyalty Ladder
For relationship marketing to work, the company needs individual information from
transaction data. Instead of mass surveys, entrepreneurial companies need to run exper-
iments.5 For example, an e-commerce company may be looking to find out:
1. Whether a $19.95 price point is more effective in terms of number of sales than
a $29.95 price point.
2. What the “look” of the e-commerce site should be full color? A mix? A lot of
information? A minimal amount of informaton?
3. Who responds best to online marketing: current customers? New customers?
By testing several versions of the site on various types of customers and measur
ing the results, the company can learn a lot about who its longterm customers will
be. The secret to success is longterm tracking of individual customer preferences and
buying habits so that future promotional efforts can be better aligned to that customer’s needs. This tracking is accomplished through segmentation (dividing customers into distinct groups with similar needs), targeting (delivering relevant messages to customers based on their needs), and personalization (tailoring messages
to specific individuals). Amazon built an incredibly valuable online asset in its cus
tomer database that enabled the company to deliver targeted and personalized mes
sages to its audience who appreciated it.
The expectation is to increase the value of the overall customer base
because it is not realistic to expect that the value of eachcustomer can be increased. To increase overall value, decisions must be made about which customer segments have the potential to become more valuable and which do
not and should be avoided. Sometimes companies invest in future value—for exam
ple, credit card companies who set up booths the first week of classes in the fall at col
leges and universities. They give away gifts and encourage students to sign up for
their credit cards, not because the companies believe that these students are profitable
customers in the short term, but because they have a long life expectancy and the
credit card companies are looking to acquire customers for longterm relationships.
Business owners should not rely solely on customer data and formal CRM systems
to predict behavior. Instead, wise entrepreneurs know that they must spend a lot of time
talking to customers. Paul Orfalea, founder of Kinko’s, enjoyed spending his days wan
dering around the Kinko’s stores talking with customers and employees to gauge the
heartbeat of the business and to find ways to improve products and service. He always
learned more about what made each Kinko’s store tick and what was not working by
walking around than he ever learned from management reports. But some companies
become concerned when their customer service people spend too much time handling
customers or providing support. Their CRM tools help them decide that they could be
more efficient if the customer service person spent x amount of time less with the customer; however, what the CRM tool does not tell them is whether that extra time spent results in additional sales or higher customer satisfaction in other words, effectiveness.?
In traditional marketing, customer feedback is commonly obtained through war
ranty registration, service plans, and company questionnaires. But to successfully
implement relationship marketing requires a dialogue with the customer over time.
It cannot be a one shot deal because customers basically see marketers as adversaries.
Customers don’t believe marketers have their best interests at heart and they are probably right when it comes to traditional marketing. Furthermore, customers have endured this type of marketing for so long that they are typically resistant and suspicious of a company’s initial efforts to establish a “relationship.”
The Customer Scorecard
Businesses typically score customer relationships on three major factors:
1. Recency: When did the customer 1pt make a purchase?
2. Frequency: How often does the customer purchase?
3. Monetary value: How much does the customer spend on average per purchase,and how much has she or he spent over the last six months or one year?
Of course, a company wants to collect other information that is particular to its business and that helps it segment its customers. For example, a company wants to know the number of new customers it adds each month, the percentage of customers who actually purchase, customer satisfaction, existing customer revenue, and average customer lifetime value (how to calculate this value is discussed in a later section).
Getting Feedback from Customers
Achieving a sale in durable goods—cars, appliances, major electronics—involves more
time on the part of the customer and the salesperson, so there is more opportunity to
gather valuable personal information on the customer’s requirements during the sale
and at the point of sale. In addition, these products normally carry a warranty and/or
service agreement, a club membership, or an application, all of which set up another
opportunity to get input from the customer. The important point to remember is that
multiple chances for contact with the customer always produces better information
because the customer is less suspicious of the company’s motives and more likely to be
agreeable to building a relationship with the company based on trust.
Consumer goods is the more difficult arena in which to capture customer infor-
mation because buying decisions are often made quickly and without a lot of careful
thought or attention. Some techniques that have worked well for growing companies
are the following:
■ Asking customers to put a name and address on a coupon that they are redeeming
for a purchase discount gives the company a way to contact the customer in the
future with additional offers and also starts a file of the customer’s preferences and
buying habits. It’s important that the company use a coupon clearinghouse that val-
idates the coupons and returns them to the company to be entered into the database.
■ Affinity merchandise are items imprinted with the company’s name, logo, and
perhaps advertising, such as caps, T-shirts, pens, and so forth. These items serve
as an endorsement of the product that the company is selling.
■ Contest applications provide an opportunity to get more information from a
willing customer who hopes that such cooperation increases his or her chances of
winning the contest.
■ Store credit cards and membership clubs provide an easy way to gather valuable
customer information, again from a willing customer.
In collecting data from customers, it is important to identify the key points in the
process where satisfaction of the customer is affected. These may be points of inter-
action with the customer or points where delays or problems could affect the quality
of the outcome for the customer. Three such points are the following:
■ How the company handled a failure in the system
■ How the company handled a customer’s special request
■ How employees responded under a variety of conditions
Identifying and Rewarding the Best Customers
It is unrealistic to think that a company can build long-term relationships with all of
its customers, especially if the number of those customers is into the thousands and
beyond. It is realistic, however, to search the company’s customer base for the most
valuable customers, those that warrant in-depth relationships. Who are those cus-
tomers? Simply stated, they are the customers who account for the biggest percent-
age of the company’s revenues. It is not uncommon for a company to find that as few
as 24 percent of its customers account for 95 percent of its revenues. These are the
customers who the company needs to know well, and these are the customers who it
needs to keep happy. By the same token, the company should also identify the worst
customers and jettison them because they are wasting the company’s time and
After a company has been in business awhile, it becomes easier to identify the
most valuable customers. One way is to calculate the lifetime customer value based
on viewing the customer as a series of transactions over the life of the relationship. A
statistical method for doing this involves calculating the present value of projected
future purchases using an appropriate discount rate and period of time for the rela-
tionship. Add to that the value of customer referrals and subtract the cost of main-
taining the relationship (advertising, promotions, letters, questionnaires, 800
numbers.) The result is the customer’s lifetime value. Another nonstatistical method
is to simply talk with the customer and ask what his or her intentions are. The better
the company knows the customer, the more valuable and reliable the information is.
Companies can do a variety of things to provide special programs, incentives, and
rewards for their best customers. The following sections discuss some of these
Frequency Programs The airlines have used frequency programs with great suc-
cess. Those who fly the most frequently with the airlines receive the most benefits in
terms of free tickets, VIP service, and upgrades. Rewards increase with use; therefore,
the customer has a vested interest in using that airline for all of his or her traveling.
However, frequency programs have also been used successfully with all types of busi-
nesses. Cosmetic companies, for example, have issued cards to customers that give
them a free product after a certain number of product purchases. Similarly, small
entertainment centers such as miniature golf facilities and water parks often offer dis-
counts for season passes to customers who use the service the most. Frequency pro-
grams derive their benefit from repeat purchases. The more a customer buys from a
company (assuming satisfaction), the higher the probability they will buy repeatedly
and the lower the cost to the company of each repeat purchase. In a one-to-one rela-
tionship approach, it is vital to single out the best customers for special treatment.
Just-in-Time Marketing Keeping track of important dates for customers gives the
company an opportunity to contact the customer on a special occasion such as a
birthday, to remind the customer of his or her need to repurchase something, or to
notify a customer of an impending sale of an item that she or he typically buys. This
approach is known as just-in-time marketing. Chris Zane of Zane’s Cycles in New
Haven, Connecticut, became the most successful bicycle shop in the area and one of
the top ten in the United States by using one-to-one techniques. He availed himself
of just-in-time marketing when he heard that another local shop was going out of
business and the owner was leaving the area. He arranged with the phone company,
for a small fee, to forward all calls going to the defunct business to his shop. In that
way, the customers of the defunct business were directed to a new source for their
cycling needs. He also bets on customer relationships by offering lifetime service on
every bicycle that he sells
Complaint Marketing A dissatisfied customer typically tells at least nine other peo-
ple about the problem he or she faced with the company. And, of course, those nine
people tell their friends. It’s easy to see how quickly one dissatisfied customer can
destroy a company’s reputation. Consequently, any company ought to think of com-
plaints not as something to avoid dealing with but as opportunities for continual
improvement. It should be easy for customers to make a complaint, and they should
be able to carry on a dialogue with a human being who listens and attempts to under-
stand. Nothing is more frustrating than having to leave a complaint on a voice mail
Some companies have used bulletin board services on the Internet to let cus-
tomers communicate their complaints. Though effective, companies who do so
should be prepared to handle more complaints by this method than by other methods
because this system works almost too well. Customers communicating by computer
feel freer to vent their frustrations more vociferously than when they are greeted with
a soothing, caring voice on the other end of a phone line. And because anyone with
access to the Internet can read these diatribes, a strong complaint can build momen-
tum and create more problems than necessary for the company. One way to stem
complaints at the source is to provide satisfaction surveys at every point of contact
with the customer so that the company can find any problems quickly and early
before the customer becomes so angry that resolution and satisfaction is nearly
Maintaining Customer Relationships for Life
Customers stop buying from a company for a variety of reasons, including
(1) dissatisfaction with aspects of the product or service, (2) ineffective complaint han-
dling, (3) a more competitive offer from another company, or (4) changes in
product, service, or personnel that the customer doesn’t like. If a company that has
an annual defection rate of 10 percent cuts that rate in half, the average lifetime of
a customer relationship doubles from ten to twenty years, and profits on that cus-
tomer increases from $300 to $525. In her classic book Serving Them Right, Laura
Liswood calculated the cost of losing customers.9 Below is a scenario based on her
Losing customers is serious business for a company.
Retaining customers, by contrast, can be very profitable for two reasons. First, over time the operating costs
related to that customer decline in relation to increased purchasing on the cus-
tomer’s part. Second, in addition to base profit, the company earns profit from refer-
rals, larger and more frequent purchases, reduced servicing costs, and price
premiums. Just as in production where the goal is zero defects, in marketing the goal 0 loss
With industrial products and services, the focus is on letting the tar-
geted businesses know that the product or service is available and what it can do for
them. In general, industrial products and services do not use broadcast media or the
most popular print media. Instead, they rely heavily on direct mail, personal selling,
trade shows, and articles and advertisements in trade journals.
Because most industrial product manufacturers distribute their products through
wholesalers, it becomes the wholesalers’ job to market to and locate retail outlets. If the
small business is dealing with industrial customers, it is important to investigate how prod-
ucts are promoted in that industry. This provides a good idea of where customers typically
look when they are trying to find a product or service. Talking to customers about the
marketing strategies in the industry and how effective or ineffective they are is also an
important way to see if a new marketing strategy better serves the customers’ needs.
Selling to the Superstores For many consumer product companies, a substantial
portion of their revenues come from a few customers known as “superstores”: dis-
count outlets such as Target and Wal-Mart, category killers such as Home Depot and
Toys ‘IC Us, or warehouse clubs such as PriceCostco. These giant outlets have
enabled small manufacturers and others to market on a national and international
level, whereas without them, these same companies might have been forced to take a
more conservative regional approach. It is estimated that mass merchandisers account
for 40 percent of all U.S. retail sales.’° Despite the fact that they comprise less than
3 percent of all retail outlets, the very top discount chains—those with fifty or more
stores—account for 11 to 13 percent of all retail sales. It’s no wonder, then, that
attracting and keeping these valuable customers is important to the financial well-
being of small manufacturers. It affects product development, brand visibility, factory
efficiency, and the company’s ability to retain quality sales reps, not to mention the
ability to pay back lines of credit and maintain a positive cash flow.
If a company’s marketing strategy includes marketing to the mega-retailers, it’s
important that the right person is approached and presented with the company’s case;
usually, this is a buyer. It typically takes several phone calls before the buyer calls back.
As in everything else business owners do, the pitch is crucial, and a superstore should
see that the company understands who the consumer is, who the competition is, and
how the company’s product will sell. A large chain should never be approached with-
out being prepared to deliver when that first order materializes. Usually, if the chain
likes the product, it will place an initial order to test it in a few of its stores before
rolling it out nationally. It’s important to remember that these chains, if they do take
the product to all their stores, order tremendous quantities, and the small business
must have the infrastructure in place to handle the volume. It may also be required
to invest in enterprise software systems to manage supply levels for the superstore.
Selling a Commodity High quality and service have become the standard in many
industries; therefore, the only differentiating factor among companies’ products is
price. The company sees its sales increase but profits decline along with margins; so
essentially, the owners are working harder and making less money. The phenomenon
is known as commoditization, and it is something that can happen almost overnight.
Here are some signs that portend this problem:
1. Customers begin treating the company as just a bid, and face-to-face contact
decreases. This is typical in the construction industry where a low bid often wins
over quality because the product, a building, is perceived as a commodity.
Other factors come into play as well. A company attempting to expand its market
boundaries domestically and globally must be well grounded in the fundamental mar-
ket trends that affect any marketing strategy to one degree or another. With 95 per-
cent of the world’s population and two-thirds of its purchasing power found outside
the United States, it’s no wonder that so many businesses are planning to market
their products and services in the international arena. The U.S. Department of
Commerce reports that small- and medium-sized companies (fewer than 500
employees) accounted for just less than 30 percent of the value of all U.S. exports in
2002 but represented 97 percent of all exporting companies.12 There are many com-
pelling reasons for a small business to consider the global market, and the following
are five of them:
1. It can achieve a broader marketing base, which will minimize any adverse eco-
nomic conditions that may be occurring in the home country.
2. It may be able to reduce the effects of seasonality by going into complementary
3. It can more fully employ any excess capacity when dealing in the domestic mar-
4. It may be able to increase the product’s life.
5. It may be able to lower production costs by establishing foreign production
The decision to market goods and services globally can come at the start of the
new venture or several years down the road after the company has established a strong
domestic market. Often, small businesses choose to perfect their products, processes,
and services in domestic markets before they tackle the cultural, political, legal, and
general differences in doing business in other parts of the world. That is what Allegro
Fine Foods of Paris, Tennessee, did with their homegrown marinades, which are now
distributed in Asia, Mexico, Canada, and various European countries. “The exporting
business is time-consuming and requires a lot of effort,” claims International
Marketing Director Rick Horiuchi, so small businesses need to be committed and
focused in their efforts.13
Global marketing is much more than simply taking the company’s domestic mar-
keting strategies abroad. Global marketing is about finding new markets and niches,
developing buying and selling opportunities, marketing goods and services, and
researching international markets.
Global researcher Douglas Lamont has suggested that global market research
should answer four basic questions about a particular country or a particular region
of the world:
1. Who uses the product? How are these buyers similar to or different from U.S.
buyers? How are U.S. products incorporated into the country’s lifestyle?
2. How do the people of that country define value? Is value based on timeliness,
quality, service, or price? How do products and services need to be changed to
meet customer needs?
3. What signals will indicate change in the market? Does the country accept foreign
ideas? Are there cross-cultural trends?
4. How can the company increase market share? Who are the local competitors? Are
any of them foreign companies? How much disposable income do consumers
How does a small business get started in the global marketplace? It is important
to begin by identifying a single region that seems most compatible with the small
business’s products. For example, when ETI, a developer of customized software for
enterprise computer systems, decided to market internationally, it chose Europe as its
first target because of its technological sophistication and then assigned one person
to be in charge of that effort. ETI also acquired a local manager who could maneu-
ver the differences in each country and who could help the company with such things
as where to record revenue. U.S. companies marketing in Europe typically transfer
revenues to the United States where the tax rate is lower.”
Next, the small business must decide whether to sell directly or use a distributor.
ETI’s product required technical support, so it decided to sell direct, but in some
countries like Japan, it is more common to use a trading company. Whichever strat-
egy is used, it is critical to secure the first customers as quickly as possible because
they become references for additional customers. Then use revenues from interna-
tional sales to fund further growth in that country.
Marketing strategy is a vital part of any business that wants to grow domestically and
globally. The key to a successful strategy is understanding the needs of the customer
and addressing those needs in value-creating products and services.