Bank Alfalah | SME Toolkit

Low Cost Market Research

Adapted from content excerpted from the American Express® OPEN Small Business Network

To run a successful business, you must know your market thoroughly. Strong market research can provide you with a range of information about your customers, your industry, and your competitors. In your start-up phase, it will help you determine how feasible a business idea is. As your business expands, you can use research to hone your marketing program, target and differentiate your product or service, look for new growth opportunities, etc.

The challenge for many small business owners is to do your research on a tight budget. Here are five cost-effective methods you can try:

Speak directly to customers and prospects

While direct mail questionnaires, in-depth telemarketing campaigns, focus groups, and other techniques are effective methods of surveying your customers and prospects, they can also be quite costly. Instead, you might want to try some informal versions of these methods.

For example, instead of holding a formal focus group to evaluate how your customers might respond to a new product or service, you can hold an informal meeting to gather data. Invite 5-10 of your customers to lunch, and tell them that you’re looking for an off-the-record, informal appraisal of a new product or service. Then give them a presentation and ask for their input. Similarly, you can have someone in your office phone 15 or 20 customers and ask them the same survey questions. While you won’t get scientific results, you will get some input on general trends and may even get some new customer-driven ideas

Use students

Get in touch with the marketing department of your local college or university and ask if there are marketing classes or individual students who might be interested in working on a market research project. These projects are often welcomed by students as a way of gaining experience or special course credits. In addition to saving you money, working with students could also net you fresh ideas about ways to design and conduct your market research. When contacting the college or university, direct your request to the university administration or the marketing/management studies department.

Take advantage of your library

Reference librarians are one of the great untapped resources for small business owners. Your public library has a wealth of facts and figures available through various industry directories, government abstracts, and other reference guides. Visit the reference section and speak with the librarian. Explain as precisely as possible what you’re looking for, and this person will be able to direct you to the appropriate resources.

Some local public libraries will not have the depth and breadth of business information you’re looking for. If that’s the case in your area, try the library of your local college or university, which tend to have this type of data.

Finally, Small Business Development Centers also tend to have research libraries focused specifically on the needs of small businesses.

Call your trade association

Trade associations regularly gather information about their respective industries and make it available to association members. These surveys often cover issues like typical company operating costs, industry growth trends, new market opportunities, etc.

These research reports are often available only to association members, so you may have to join to get access. To locate the trade association for your industry, look in the “Gale Encyclopedia of Business and Professional Associations” (Gale Research), available at your library reference desk.

Read trade publications

Reading trade journals, magazines, newspapers, and industry newsletters is an excellent way to learn about trends in your industry and keep ahead of the curve. They often report on industry trends and other key issues before they’re picked up by the general press. You also will find a wide array of information about your competitors. In addition, trade publications also commonly write articles about recent research data (for getting trend figures) or may even conduct proprietary market research.

You can look up the names of relevant trade and business publications in directories such as “Bacon’s Guide to Periodicals” or “Standard Rate & Data” (available at most libraries). Call the publication and ask for a subscription form — many are free to qualified companies in the industry. You can also often find subscription forms and recent articles at these publications’ Web sites.

Copyright © 1995-2016, American Express Company. All Rights Reserved.

Your Marketing Budget

Subsection of: Create Your Marketing Plan

Adapted from content excerpted from the American Express® OPEN Small Business Network

Briefly discuss how much money you intend to invest in marketing as percentage of your projected gross sales. You can break it down on a monthly, quarterly or annual basis. Ideally, you will have already determined the amount of your marketing budget when you created your business’ various financial statements. The figure you choose will depend greatly on your type of business and your goals. It can be anywhere from 5% to 50% or more. If you’re a heavily marketing driven venture – a company selling products through direct mail and direct response advertising, for instance – then you will likely allocate more than a company that will build its client base through networking and relationship marketing.

Here are a couple of other things to consider when you’re creating your budget:

  • By putting down a figure, you are committing yourself to supporting your marketing program. You will know how much you can afford to spend on different forms of advertising, PR, and other tactics
  • Be sure to keep track of how effective each marketing tactic is. You want to get the maximum return on your marketing investments

Copyright © 1995-2016, American Express Company. All Rights Reserved.

Your Marketing Tactics

Subsection of: Create Your Marketing Plan

Adapted from content excerpted from the American Express® OPEN Small Business Network

Describe the specific marketing tactics you intend to use to reach your target customers – advertising, public relations, or sales promotions, for example. These are the weapons of your marketing strategy. Choose them wisely. Make sure that they agree and support your positioning and your benefits.

It is not necessary to spell out in your marketing plan exactly how you will use each tool. You might want to discuss briefly the purpose and the tone of the various tactics. For example, an Internet consultant might write: “Press releases will focus on our Internet expertise”; “Top management will speak at computer trade shows”; “Print advertising will focus on classifieds in The News’ weekly computer section.” Remember that your marketing plan is your guide – you don’t want to get enmeshed in details.

Here is a list of tools that you might be using. Of course, there are many other marketing weapons you can choose.

  • Advertising (print, radio, television)
  • Brochures
  • Circulars
  • Classified ads
  • Community service
  • Contests
  • Coupons
  • Direct mail
  • Events
  • Flyers
  • Free samples
  • Frequent buyer programs
  • Give-aways (T-shirts, pens, other ad specialties)
  • In-store signage/displays
  • Networking
  • Newsletters
  • Outdoor signage/billboards
  • Personal contact
  • Personal letters
  • Product packaging
  • Point-of-purchase displays
  • Premiums
  • Public relations
  • Publicity
  • Relationship selling
  • Sales
  • Seminars
  • Sponsorships
  • Stunts
  • Telemarketing
  • Trade shows
  • Yellow Pages

Copyright © 1995-2016, American Express Company. All Rights Reserved.

Your Positioning

Subsection of: Create Your Marketing Plan

Adapted from content excerpted from the American Express® OPEN Small Business Network

Position is your identity in the marketplace; how you want the market and your competitors to view your product or service. Your positioning will have an impact on every segment of your marketing.

Base your positioning on the benefits you offer, who your customers are, and how your competitors are positioned. Keep your positioning statement highly focused and succinct. For example, Acme Movers could be positioned as “the most dependable moving company in the Tri-City region.” Two architects who specialize in kitchens could have totally different positions – one could be “the most innovative designer of modern kitchen environments,” while the other could be “the most cost-effective designer of traditional kitchens.” Whose kitchen do you think you’d see in Metropolitan Home and whose do you think is targeted at the average buyer?

Some positioning tips:

  • When creating your positioning statement, think in terms of extremes – the “most,” the “best,” the “fastest,” the “cheapest,” the “only,” etc
  • If there’s not much difference between you and your competitors, look for a meaningful customer want or need that has not yet been filled
  • Don’t position directly against a competitor, if possible. If you do, you may be caught without a position should your customer change its focus. Instead, focus more on your product’s or service’s strengths
  • Be very careful if you position solely on price, since that position can be very easily pre-empted
  • Don’t position just on image. You need to back up your positioning with substance. If you can’t, it’s a recipe for disaster

Copyright © 1995-2016, American Express Company. All Rights Reserved.

The Benefits of Your Product or Service

Subsection of: Create Your Marketing Plan

Adapted from content excerpted from the American Express® OPEN Small Business Network

You don’t market a product, and you don’t market a service. You market benefits. Describe them here. Think in terms of the distinctive features of your product or service that set you apart from your competition. This is also known as your Unique Selling Proposition, or USP. It could be the design of your product, your knowledge of the market, a new technology, a special service, a singular talent, or something else. For example, the USP of a Sony television is the superior picture of the Trinitron tube. Burger King’s USP is that its burgers are flame broiled.

Think about these points when you’re developing your USP:

  • You might want to consider your weaknesses as well as your strengths. Once you know what they are, you can use marketing to maximize your strengths and minimize your weaknesses
  • Also consider your competitors’ strengths and weaknesses – so you can minimize their strengths and take advantage of their weaknesses

Copyright © 1995-2016, American Express Company. All Rights Reserved.

Your Target Customers

Subsection of: Create Your Marketing Plan

Adapted from content excerpted from the American Express® OPEN Small Business Network

In order to reach your target customers, you’ve got to know who they are. Look for common identifiable characteristics. Are they companies or individuals? Do they fall into a certain age, geographic or income demographic? How do they buy your type of products or services? How often do they buy them? What features do they look for?

Don’t use general terms – instead of “people who want to buy a dress for an infant” use something like “grandparents and other gift givers who are looking for a special outfit for a newborn.”

Be careful not to spread yourself too thin. Not everyone is your target customer. Don’t sell to everyone – segment your markets. If you are selling home heating oil in a specific region, you could target your marketing at every household in that region. But would that be an efficient use of your time and money? Probably not. You’d want to narrow your focus. Is your target customer existing users of home heating oil or is it people who use gas heat but are thinking of converting to oil? Or are you looking for people who’ve just bought a house and haven’t decided who they will buy their oil from? Are you selling to residential customers or to local businesses?

Some other things to look out for:

  • Be sure your target market is large enough to support your sales objectives
  • Don’t guess who your target market is. When possible, quantify by numbers through research. Call trade associations; go to your research library and look up market data; use demographic information from the census; etc
  • The purchaser of your product or service may not necessarily be the user
  • If you’re selling business-to-business, remember that your product or service is bought by a person, not by a company

Copyright © 1995-2016, American Express Company. All Rights Reserved.

The Purpose

Subsection of: Create Your Marketing Plan

Adapted from content excerpted from the American Express® OPEN Small Business Network

The general purpose of any marketing plan is to maximize your business’ profits. But what does that mean for your business? Spell it out here. If you’re a children’s clothing designer, your purpose might be “To sell the greatest number of infant dresses at the lowest cost per dress”. If you’re a self-employed computer consultant who helps companies utilize the Internet, your purpose might be “To book my time completely by getting the greatest number of clients at the lowest possible cost.”

Some things to think about when you’re writing this section:

  • Your marketing plan’s purpose may seem obvious to you. But by putting it up front and in writing, you will stay focused on your intent
  • Many businesses think their marketing plan is about increased exposure, getting press, writing cool ads, and the like. These are not purposes, they are tactics. The end result of any of these is to increase your profits
  • If you’re having trouble answering “what is the purpose of your marketing plan,” you might want to think “why are you marketing?” Your answers to these questions should be the same

Copyright © 1995-2016, American Express Company. All Rights Reserved.

Create Your Marketing Plan

Adapted from content excerpted from the American Express® OPEN Small Business Network

Your marketing plan should be a clear, concise, and well thought out document that guides you through your marketing program. Using a marketing plan template will help you focus on the objective of your marketing and how you intend to accomplish that objective. Whether your company provides products or services, your marketing plan is essential to your success.

The six major elements to creating a successful marketing plan are listed below. Creating a marketing plan template from these points can help you stay on track. You may only need only a sentence or two per section… or you might want to break each down into a few succinct bullet points.

As you go through each section, keep the following tips and hints in mind:

Keep your marketing plan simple.

Many small business owners get so involved in details that they lose sight of their goals. By keeping your plan simple, you will create a clear roadmap that focuses on what you need to accomplish.

Write your marketing plan down (as opposed to thinking about it and keeping it in your head).

It is important to have a document that will remind you what you are trying to accomplish. A marketing plan template is an excellent place to start.

Be direct and be clear.

If you’re not sure, ask a friend, relative, colleague or employee to read your plan. They should immediately grasp your goals.

Don’t build in too much flexibility.

You may be tempted to plan for various market contingencies. If your market changes that quickly, then you should incorporate that into your plan. But create a strategy you can keep to – that’s the purpose of having a plan in the first place.

Review your marketing plan often – quarterly or even monthly.

That doesn’t mean you have to revise it every month. But take some time to evaluate it and make sure you’re on track.

Finally….never stop marketing!

Once you have your plan in place, you need to take action. Commit yourself to your marketing program. Don’t let yourself stagnate. Keep at it, and you’ll be giving your business the opportunity to flourish.

Copyright © 1995-2016, American Express Company. All Rights Reserved.

Top Six Pricing Mistakes

Adapted from content excerpted from the American Express® OPEN Small Business Network

A sound pricing structure helps companies generate sales and build customer loyalty. The wrong pricing structure can leave businesses struggling to service customers and reach profitability. When you need to determine what to charge for your products and services, steer clear of these common pricing mistakes.

Underselling

To set realistic prices, you need to be aware of all costs involved in producing your product or service. This includes easy to track costs such as the price of parts and supplies, as well as less tangible costs associated with the skills and knowledge you bring to the table. Some entrepreneurs set prices that do not account for all of these expenses. They may forget to add in overhead such as utilities or rent, or have difficulty putting a price tag on the value of their time. One approach service-based businesses use to determine a fair rate for their offerings is to set an hourly wage to charge for services. They then multiply this figure by the total number of hours it takes to complete a job to determine a project’s overall price.

Following the competition

Basing your pricing structure on the competition’s can be dangerous because the costs competitors use to calculate prices may have little relation to your own. They may pay suppliers less or more than you do, buy different technology, and have larger or smaller marketing budgets. That said, it does pay to know how much competitors charge so you can confirm that your prices are realistic for the market. If you notice your figures are much lower than competitors’, check to be sure you haven’t left something out of the pricing equation.

Competing on price

Setting prices solely to beat the competition is a shaky proposition. You’re bound to attract buyers this way, but they are unlikely to be loyal customers. If low cost attracted them to your business, they may abandon your company when a less expensive option comes along. A better approach is to differentiate your business from competitors in other ways, such as superior customer service, enhanced product features, or finer quality.

Waiting too long to raise prices

Increased demand or the rising cost of supplies may put you in the position of having to decide whether or not to raise prices. Some business owners avoid increases because they fear customers will react negatively. In many cases it’s a better strategy to make regular, small price increases than to hit customers with one large increase. In other words, a 10 percent price increase is likely to draw more negative attention than two 5 percent increases.

Dropping prices without changing delivery

Some clients may try to finagle a better deal from your company. This can put you in a difficult position, especially if you run a service-based business. Delivering an agreed-upon order for a lower price can inadvertently send the message that your initial prices were too high, and all future business is open to price negotiation. A better approach is to agree to a lower price, but change the delivery terms slightly. For example, if you’re negotiating the price for a three-month long technical installation, you might agree to a lower project cost if the number of weekly meetings is reduced or monthly reports are streamlined. Another option that makes sense for large orders is to position lower rates as volume discounts.

Setting random prices

Some customers may insist upon having an understanding of how your pricing structure is designed, so it is critical to be able to justify the prices you charge. In addition, unless you have a clear sense of how costs relate to your prices, it will be difficult for you to identify when the right time is to adjust the amount you charge.

Copyright © 1995-2016, American Express Company. All Rights Reserved.

Segment Your Audience

Adapted from content excerpted from the American Express® OPEN Small Business Network

Customer segmentation is understanding your customers’ unique characteristics and behaviors so you can come up with a marketing message that communicates with them effectively. It also helps you to spend your marketing dollars wisely, using only those vehicles that can reach your identified segments.

Evaluate your customers against these five criteria to ensure that you have clearly segmented your audience.

1. Type of customer

Perhaps the most basic way to segment your audience is to decide whether you plan to target consumers or other businesses. Few small companies can successfully target both, and while there may be some overlap, you will more than likely need to create a firm distinction to hone your marketing message.

2. Geography

The geographic location of your customer base is crucial to determining the marketing methods your business will employ. Customers can be local, regional, national, or international. For some businesses, the target will be obvious – a dry cleaning store’s target audience may only be within a few miles of its location. In cases such as these, it may be a good idea to break down geographic location even further – by postal code or neighborhood, for example. Similarly, national or international sellers might want to track the cities or countries where the majority of their customers are located to help them sharpen their focus.

3. Demographics

Demographics are the basic “vital statistics” of your customer base. By segmenting on demographics, you can determine the specific statistical characteristics that set your customers apart.

If your business is targeting consumers, demographic segmentation might cover characteristics such as age, gender, level of education, job classification (blue vs. white collar), income, marital status, and ethnic or religious background. It may not be necessary to use all of these criteria; rather, you want to focus your research on those that are most appropriate to your product or service.

Business demographics, on the other hand, break down differently. Start by looking at what industry your target customers are in. You can also segment your targets by size of business based on number of employees or total sales. Finally, consider who makes the buying decision for a product or service such as yours – what is this person’s job title and what department does this person work in?

4. Psychographics

Psychographics refer to personality and emotional behavior that influences purchasing. In other words, what are the buying habits of your customers? For example, is the customer impulsive or risk averse? There are a broad range of variables you can consider and they often play against each other, but some of the most common psychographic components include:
The customer’s predisposition to purchasing a new product or service vs. another

  • Influences on the customers’ purchasing habits (such as peer pressure or education)
  • Attributes of a product or service that may be important to the customer
  • Brand loyalty or reputation
  • Buying decision criteria, such as whether the purchase will be based on price or value

5. Beliefs and lifestyle

These areas generally refer to ways that consumers look at themselves. Beliefs may include religious, political, nationalistic, or cultural values and attitudes. Lifestyle segments may relate to ways customers use their non-work time for things such as hobbies, recreation, entertainment and other pursuits. These segments may be important, since these variables can often be used to predict future purchasing behavior.

Copyright © 1995-2016, American Express Company. All Rights Reserved.