CHAPTER 10

MARKETING THE
SMALL BUSINESS

Reporters: Darlina Pangan

Angelika Reyes
Cassandra
Marketing is that function concerned
with planning and implementing the
conception, pricing, promotion, and
distribution of products or services
that will satisfy the firm’s objectives.
Small Business and the Marketing Concept

The marketing concept provides a guide to small business. It

indicates that a match must be made between its intended
customers and the firm’s product or service offerings. To
achieve the desired match, the following questions must be
answered:
1. Who are my customers?
2. What products or services are needed by my customers?
3. At what price are the products or services required?
4. At what place are the identified
products or services required?

5. At what time are the identified products

or services required?

6. At what mode of delivery are the

identified products or services required?
To provide answers to the questions, the
firm must undertake the following:

[Link] a marketing strategy;

[Link] in marketing research;
[Link] a marketing mix; and
[Link] the size of the target market.
Devising a Marketing Strategy

Marketing strategy is the general guide the SBO will

use to achieve the firm’s marketing goal. It is a plan for
getting products and services into the hands of customers
in a timely, cost-effective, and appropriate manner.

Market Strategy Planning

Market strategy planning is a small business

activity which seeks to find attractive opportunities
and develop profitable marketing strategies.
The output of market strategy
planning is the firm’s marketing
strategy and it contains the following:

[Link] market;
[Link] marketing mix; and
[Link] of the market area
Identify strengths and weaknesses of the firm

Analyze external environment

Identify attractive market opportunities

Identify target market

Determine applicable marketing mix

Determine size of market area

The Market Strategy Planning Process

Target Marketing

Target marketing refers to the activity of selecting

well-defined groups of potential customers and tailoring
a marketing mix to their needs and preferences.

In target marketing the following steps are undertaken:

1. identification of the target market;

2. identification of the characteristics of the target
market; and
3. measurement of the size of the target market area.
Identification of the Target Market

A target market is defined as the particular market segment

the firm wishes to serve.

Before Deciding on the Target Market. Before the market

segment to be served is identified, the SBO must first decide on
the number of segments he wishes to serve. As such, the firm
could be any of the following:

1. Mass market company- sells goods and services to a broad

spectrum of buyers;
2. Market-segment company- aims to sell to a single market
segment; or
3. Multi-segment company- aims to sell at two or more distinct
market segments.
Choosing the Target Market. When deciding on which market
segment to reach, it is necessary for the SBO to consider the
following:

1. the good or service category of the firm;

2. the firm’s goals;
3. what competitors are doing;
4. the size of the various segments;
5. the relative efficiency of each segment to the firm;
6. the resources required; and
7. other factors.

A prospective SBO considering education as his business choice may

be considered as an example of one who is identifying his target
market. The education market may be segmented into the following:
preschool, elementary, high school, college, and vocational.
Identifying the Characteristics of the Target Market

To effectively serve the target market, its

characteristics must be known to the SBO. Relevant
characteristics will refer to any of the following: age,
sex, family size, family life cycle, income, occupation,
religion, race, and nationality.

An educational institution, for instance, must have

some information about the income of the prospective
students’ family. This is important in devising an
appropriate marketing mix.
 Preschool identified with highly
desirable characteristics
The
Target
Market Elementary identified with moderately
desirable characteristics

identified with less

High School
desirable characteristics

identified with less

College desirable characteristics

identified with the least

Vocational desirable characteristics

Identifying a Target Market

Measuring the Size of the Target Market Area

In the attempt to make a match between the firm and the

target market, the SBO must be provided with information
about the following:

1. number of potential customers; and

2. population growth trend of the target market area.

Knowing the number of potential target customers will

provide the means for ascertaining the most economical
approach to reach them.

Information about the growth trend of the target market

area is very important for the firm.
The Marketing Mix

Marketing mix refers to the set of

marketing tools that the firm uses
to pursue its marketing objectives
in the target market.
 The marketing tools are the controllable variables that when
properly blended constitute the marketing mix.

The controllable variables are the following:

1. product offering (including the breadth of the product line,

quality levels, and customer services);

2. price;

3. promotion (advertising, sales promotion and salesforce

decision); and

4. place (or distribution).

 The marketing mix is intended to assist or influence the
customer in his purchasing decision. Each of the four variables,
separately or jointly, attract the buyer.

There are many combinations of variables that could be listed

and the SBO can choose which one is appropriate for the firm.

The small business firm may manipulate any or all of the

variables in its attempt to attain its sales revenue target. For
instance, an adapted mix may give more emphasis to product
quality than promotional efforts.

The intensities applied to the variables may change from time

to time but there is still “a mix” at any given time.
Product Offering

The tangible commodity or the intangible

service that the small business firm offers for
sale to prospective customers is referred to as
product.

Other examples are the postgraduate courses

offered by University of Santo Tomas and the
passenger paid trip from Cabanatuan Bus
Terminal to Burgos Extension, Cabanatuan of
Sangitan East tricycle with body number 798.
Price

The amount of money paid by the customer to the small

business firm so the customer can use the product is called price.

Promotion

The provision of required information to prospective

customers so that they are persuaded to buy is called promotion.
It involves any or all of the following:

1. personal selling;
2. mass selling; and
3. sales promotion.
 Personal selling involves the use of the services of
salesmen to influence the prospective buyer’s purchasing
decision.

Mass selling involves the simultaneous persuading of

large numbers of prospects to buy the firms products.
When mass selling is in paid form, it is called advertising;
when in unpaid form, it is called publicity.

Sales promotion refers to promotion activities other than

personal selling, advertising, and publicity. It is a short-term
inducement of value offered to prospective customers to
arouse interest in buying a good or service. Coupons, raffle
stubs, and free samples are some of the ways used in sales
promotion.
Place

When the firm wants to emphasize

the place variable, it makes its
products or services available in the
location and time required by buyers.
The Importance of Market Research

Knowing the needs of the target customers will be very

helpful in designing the right marketing mix. To describe
the customer, market research is the right tool to use.

Types of Market Research

The two basic types of market research are the

following:

1. primary research; and

2. secondary research
Primary Research. The firm could obtain primary data about
potential customers and competitors through any of the
following methods:

1. observation;
2. survey; and
3. experimentation.

The observation method involves collecting data by

observing the actions of a person or a group of persons.

The survey method consists of gathering data by

interviewing people. This may be undertaken through any of the
following techniques: personal interview, telephone survey,
by mail, or by the Internet.
 Among the four data gathering techniques, the
personal interview is the most expensive and time
consuming.

Information can be collected quickly and at the least

cost through telephone surveys.

When applicable, the telephone survey will require

only the following:

1. a sound questionnaire;
2. a representative sample group; and
3. courteous telephone interviews.
 When telephone surveys are not feasible,
sending questionnaires through the mail may be
resorted to.

In an Internet survey, questionnaires can be

posted on a firm’s website or sent by e-mail to a
sample group of individuals.

The experimental method of gathering primary

data involves observing the results of changing one
variable in a situation while holding all other
conditions constant.
Secondary Research. There are excellent sources of secondary
information available to the SBO. The information provided by
secondary sources are those previously gathered by other
persons or institutions to satisfy their own specific
requirements. Nevertheless, some of this information could be
useful to the SBO. For instance, replicating the moves of
successful entrepreneurs starts with knowing who they are and
what they did. Information about them, most often, comes from
secondary sources.

The possible sources of secondary data are the following:

1. the company’s records;

2. libraries; and
3. government agencies.
 The company’s internal records are important
sources of information. Sales reports, for instance,
may provide some clues on customer behavior.

Good libraries provide information that may be

useful to the small business operator.

Some libraries maintain valuable sources of

information like trade journals, business magazines,
graduate theses, and the like. Even government
reports like those produced by the National Census
and Statistics Office (NCSO) are in the files of most
libraries.
 Among the more useful sources of
secondary data found in many libraries are
the following:

1. The Philippine Yearbook;

2. The Top 1,000 Corporations; and
3. Profile of Philippine Industries.
 The major libraries which may be useful to the small
business owner are the following:

1. National Library at Ermita, Manila;

2. University of the Philippines – Institute of Small
Scale Industries Library;
3. Development Academy of the Philippines Libraries at
Pasig City;
4. Asian Institute of Management Library at Makati
City; and
5. Polytechnic University of the Philippine Library at
Sta. Mesa, Manila.
 There are government agencies that generate information intended
to assist various users. For would-be entrepreneurs of educational
institutions, the Commission on Higher Education and the Department
of Education provide basic data on the number of schools operating in
specific areas, the courses offered, the number of students, and
others.

Data provided by the Department of Trade and Industry are also

useful to many small business operators. Among the information made
available are the number of enterprises existing in specific regions and
provinces, programs and services offered by government regions and
private organizations, and financing programs of the government and
private institutions.

Local governments are also useful sources of records and summary

listings of business establishments by area and by type of business.
Would-be entrepreneurs may find some of the data useful for their own
particular purposes.
Market Share Forecasting

One of the most important estimates a

small business operator has to know is the
forecast of how much sales the company
will make for a given period.

Market share refers to the individual

firm’s sales as a percentage of the total
sales in a specific market.
 To determine the probable market share of the company, the
following must be undertaken:

1. Define the physical limits of the target market area.

2. Determine the potential sales of the target market considering

its demographic characteristics.

3. Determine the purchasing power of the target market.

4. Determine the total sales revenue of the industry in the

target market area.

5. Determine the percentage of the total sales that can be

effectively served by the company.
The company’s market share can be computed
by using the formula

CMS= CS/TIS
where CMS= company’s market share
CS= company’s sales
TIS= total industry sales

The potential sales of the target market refers

to the total sales volume that all competitors
could achieve in that particular market segment.
 The sales potential of the company
refers to the portion of the market
potential that the company could expect
to achieve under ideal conditions.

Company sales refers to the actual

sales made by the company as opposed
to the potential sales of the company.
Forecasting Company Sales

A requisite to the market share forecast of the company is

the sales forecast of the company. There are various methods of
forecasting company sales. They are the following:

1. Market-factor analysis- is a sales forecasting method that

assumes the future demand for a product is related to the
behavior of certain market factors and, as a result, involves
determining what these factors are and then measuring their
relationships to sales activity.

2. Survey of buyer intentions- is a sales forecasting method in

which a company asks a sample of current or potential
customers how much of a particular product they would buy
at a given price during a specified period of time.
3. Test marketing- is a method of sales forecasting in
which a company markets its new product in a limited
geographic area, measures the sales, and then from this
sample, a projection is made for the company’s sales
over a larger area.

4. Past sales analysis- is a method of sales forecasting

that applies a flat percentage increase to the average
volume achieved last year or to the average volume of
the past few years.

5. Trend analysis- is a statistical method of forecasting

sales over the long term by using regression analysis or
over the short term using a seasonal index of sales.
6. Sales-force composite- is a method of
forecasting sales that consists of collecting
from all sales people estimates of sales for
territories assigned to them during the
future period of interest.

7. Executive judgment- is a method of

forecasting sales that consists of obtaining
opinions regarding future sales volume
from one or more executives.
Thank You For
Listening!