You’ve built and refined your business start up idea and turned it into a unique and exciting product that your target audience needs. In Element 3 you will use the marketing mix to develop a positioning strategy and begin to generate a loyal customer base for your start up business.
The Role of Marketing for a Business Start Up
Marketing is the process of introducing and promoting a product or service to potential customers. Most successful aspects of a business depend on its marketing, this can include advertising, PR, promotions and sales. Within any business, the role of marketing is to develop and maintain effective relationships with customers, it is the area where a business interacts most with the public and consequently, teaches the public all that they need to know.
Market orientation is a way of businesses developing new products based on reacting to the wants and needs of the customers, as opposed to a product orientated approach where a company focuses on developing products based on their own strengths.
A market orientated approach is becoming the most popular approach for businesses as they need to be sensitive to their target customers needs in order to remain competitive within the market.
Apple is predominantly a market-orientated company. They regularly collect market research to ensure that they are continually developing innovative products in line with the wants of their target market.
The company regularly updates its products and software by listening to the problems that customers are experiencing and reacting accordingly with updates and improvements. In recent years new iPhones have been launched with bigger screen sizes, differing shapes, the option to delete software that was previously permanent and the new addition of water resistant casing, all changes that have come about from listening to customer feedback.
As a result of their market-orientated approach, Apple has a huge, worldwide base of loyal customers. There are often crowds of hundreds of people outside their stores on the mornings of new product launches.
Customer Acquisition and Retention
Simply put, customer acquisition is gaining new customers by persuading those within your target market to purchase your product or service.
Customer acquisition strategies can be used to manage and encourage the process of gaining new customers, this can include customer referrals, loyalty schemes, and mailing lists.
There are 4 basic steps needed within a customer acquisition strategy:
- Identify potential customers
- Determine the customers that have an interest
- Qualify leads (the likelihood of the acquisition)
- Establish a relationship
For a start up business, customer acquisition is hugely important and even more so, is the use of target acquisition to ensure that you acquire the right customers for your product or service. As the start up becomes more established, the focus can shift towards customer retention and reducing customer defection.
Retaining existing companies can use similar strategies to customer acquisition, customer loyalty schemes are popular among businesses for ensuring that customers do not stray to competing brands.
Customer retention is effective and a relatively fool proof way of growing revenue for the business. It’s a cheaper alternative to customer acquisition, ThinkJar states that it is 6-7 times less expensive to retain a customer than to acquire a new one, as you do not have to invest in marketing to attract new customers and educating them on the benefits of your products or service.
Figures from studies carried out by the Harvard Business School show that just a 5% increase in customer retention can lead to an increase in profits of up to 95%.
Acquisition and retention can form a cycle that starts with the initial contact and continues for the entire lifetime of the customer relationship. Once a start up has become more established, the goal should be to attract, satisfy and then retain customers.
The Marketing Mix
The marketing mix is a tool that is used to determine a brand’s offering and has been used in marketing since 1960 when the ‘4P’s’ were developed by E. Jerome McCarthy. In the late 1970’s, it was decided that the marketing mix should be updated, leading to the addition of three more elements and the marketing mix that we use today.
- Product – The product or service should be exactly what the customer is expecting and should fit the purpose for which it will be purchased
- Price – The product should represent good value for money
- Place – The product needs to be available in the places where the target market shop be it in bricks and mortar stores, through e-commerce or both
- Promotion – The product or service should be promoted in ways that will reach the target market in a way that appeals to them
- People – Ensuring that your company has the right people working on their right jobs, are there any gaps in skills?
- Process – The systems and processes in place to effectively run the business, e.g. pay systems, distribution.
- Physical Evidence – Physical evidence of a business’s presence and establishment within the marketplace
Business Dictionary defines customer satisfactions as “The degree of satisfaction provided by the goods or services of a company as measured by the number of repeat customers”.
As the marketing mix is designed to establish the company’s total offering it should be continuously monitored by the business to ensure that it is satisfying the requirements of the target customer. Specific areas such as the price of the product or service or the promotional methods can be reviewed and changed if they are not satisfying the needs of the target customer, in order to increase the number of repeat customers.
Defining the Unique Selling Proposition
The Perceptual Map
The perceptual map is visual technique designed to show the positioning of competing products within the market, as understood by the target customer. It usually uses 2 determinant attributes for the axis’, allowing products to be plotted onto the graph depending on how the customer perceives them.
Perception can be developed through both personal experience with a brand or product or, from hearing about it from previous customers, either through reviews or word of mouth. Social media has changed how people build perception. Reviews on company websites and review sites mean that people have a perception of the brand, often before they have had any interaction with them.
Customer perception affects the likelihood of being able to influence a customer’s purchase decision if a customer has previously heard or read negative reviews of a company or its products, the likelihood of them purchasing is decreased. Opposed to this, if a potential customer reads or hears positive reviews of a brand and their offerings, their likelihood of purchasing is increased, particularly if they have never purchased from that company previously.
Customer perceptions are important to a brand, particularly in the start up phase. Figures from HelpScout show that news of a negative customer service experience reaches twice as many people as a positive experience. Addressing unhappy customers quickly and effectively is essential, especially in the early stages of a start up business to avoid any negative exposure. In the same article, HelpScout also stated that 91% of unhappy customers will not willingly do business with the same company again, this could be detrimental a start up business.
A product attribute is a characteristic that defines a particular product and will have a direct effect on a customer’s decision to purchase.
Attributes can be tangible, able to be touched, or intangible, unable to be touched.
Customers will compare the physical and immaterial attributes of a product with that of competitors before making a decision to purchase. In order to fully satisfy a customer and turn them from a potential customer into a conversion, the product must have a number of attributes that answer their wants and need.
Developing a Sales Pitch
What is an Elevator Pitch?
An elevator pitch is brief and persuasive. It is an ice breaker with the hope of a deeper conversation to follow. They should be used to create an interest in a project, idea or product and in yourself, as the entrepreneur.
This short, sharp style of pitch should be no longer than 20 – 30 seconds and should leave the listener wanting more. There should be a call to action, are you trying to sell something, if so, what is it? If the pitch is to an investor, be clear about how much capital you require.
Preparing a Successful Elevator Pitch
- Identify the end goal – what is the objective of the whole pitch?
- Make sure you explain, briefly, who and what the company does
- It is essential that you communicate your USP
- Engage the audience with a question – involve them and encourage them to continue the conversation after your pitch
- Put it all together – cut out anything irrelevant or unimportant
- Practice – use a stopwatch to ensure that you don’t go over 30 seconds
Communicating the USP
In a recent study, a team from Target Training International analysed a group of ‘serial entrepreneurs’ looking for skills that are essential to entrepreneurship. They came up with 5 key attributes:
- Personal Accountability
- Goal orientation
- Interpersonal skills
Persuasion topped the list as the most important skill, but what does it really mean?
Persuasion: the art of persuading (or attempting to persuade); communication intended to induce belief or action.
The Importance of Persuasion to the Entrepreneur
As an entrepreneur, you are your products number one fan and you should believe in it wholeheartedly. Convincing your others to feel the same way, however, can be difficult. Enter persuasion, your new best friend.
You need to be able to convince investors that your product will be the next big thing and that investing in your business will not be a mistake. You also need to influence customers, helping them to see why they should purchase your product over that of a competitor.
Persuasion is a skill that you will need to master. Author and marketing specialist Vinh Ly discusses his top tips for using persuasion as an entrepreneur through under30ceo.com.
Put yourself in your customer’s shoes
When you’re trying to persuade a customer that they should buy your product, it’s important to remember that they too are a human being. Customers can often be treated just as a cash cow, a provider of money when their feelings and needs should be taken into consideration
You cannot offer your product as a solution for a customer when you have not taken the time to listen to them and fully understand their problem.
Be ready to adapt
Vinh Ly states that when it comes to start up businesses “in order to survive you have to adapt”. If you attend a meeting only with the intention of selling, you may well sell, but you may also miss out on a whole host of other opportunities. Listen, be adaptable and be open to any unexpected ideas that may arise.
Often, the hardest person to persuade is yourself. If there is a task that you don’t particularly enjoy doing, you will come up with one hundred excuses not to do so but as an entrepreneur, that gets you nowhere. Pick up the phone, send the email, start persuading!
The use of Effective Words, Voice and Non-Verbal Language
“Words can inspire and words can destroy. Choose yours wisely” – Robin Sharma
The language used in your sales pitch can make or break it. Different words trigger different behaviours. Some words encourage listeners to let down their guard, others will have the opposite effect and will cause your audience to be on the defensive. Every word will trigger an emotion and so must be carefully selected to maximise the effect of your sales pitch.
As with the words that you choose, your tone of voice is a key factor in the success of your sales pitch. Does your tone reflect the confidence that you have in your product? Does is bore people, or does it sound immature?
You might be pitching the most exciting product that the audience has ever heard of, but, if your sales pitch lacks energy and enthusiasm, the initial excitement will soon be overlooked. Perfect your tone of voice simply by practicing. Recording and listening to yourself speak enables you to pick up on where you may sound boring or uncertain and ensures that you are placing emphasis on all of the most important parts of your sales pitch.
When you are giving a sales pitch, your audience will not just listen to your words, they will be analysing your non-verbal communication such as facial expressions and body language. You may have a confident tone of voice but if your posture doesn’t reflect this, your confidence may not be believed.
In order to persuade investors and customers to give your product a chance, you must be confident. As well as your tone of voice confidence can be portrayed through non-verbal language in the following ways:
Posture: standing tall with your shoulders back, presenting yourself as ‘open’ to those that are listening to your pitch
Eye contact: making direct eye contact with people in the room rather than avoiding their eyes and starting behind them
Gestures: purposeful and deliberate gestures with your arms and hands can relax the audience and help your sales pitch to flow more fluidly
Photographer Elizabeth Halford states on her blog “the number one rule in marketing is decide what you’re going to say and keep saying it”. Weave your USP into as many communication methods as possible to reach the maximum amount of people. The product or services’ unique selling proposition is what persuades people to buy the product, promote this widely and thoroughly.
You may have posted about your USP on your Facebook page today, however not all of your customers have been online today, and some of them use Twitter or respond more to the blog posts on your website. Your target customers will interact with you in different ways so it’s important to constantly communicate your USP across all of your marketing campaigns, whether they’re on or offline.
The Next Step…
You should now be at a stage where you are ready to create the marketing plan for your start up business. You have further defined your business idea by using the marketing mix, you have a clear understanding of the position of your product within the marketplace and you know how to communicate your USP’s to your target customer. In Element 4 we plan the actions that are needed to get the start up business up and running. You will explore the operational needs as well as the regulations and legislations that should be abided by to ensure that the company operates within the law.
If you’ve completed Element 3, you’re half way through our ABE Level 3 Certificate in Business Start up. If you’re interested in starting your own business get in contact with us today and speak to one of our advisors about this course.