CONTENT/TEACHING OUTLINE
Unit D: Marketing a Small Business
COMPETENCY:
6.00
Explain the fundamentals of marketing in a small business.
OBJECTIVE:
6.02
Explain market identification.
A. Describe the concept of market and the process of dividing the market into
smaller, well-defined groups.
1. Market: The group of potential customers who have similar needs and
wants, sufficient buying power, and the willingness to give up a portion of
that buying power in order to obtain a product or service.
2. Market segmentation: Dividing the total market into smaller, well-defined
groups with similar wants and needs and similar key characteristics.
3. Target marketing: Identifying market segments with the greatest
potential for sales and focusing marketing decisions on satisfying the
individuals that make up these segments.
4. Target market: The group or groups of potential customers who have
been identified as those most likely to patronize the business and/or buy
the product.
B. Describe the methods of segmenting the market.
1. Geographic segmentation: Dividing markets by where customers are
located. For example: north or south, rural or urban, city or suburbs
2. Demographic segmentation: Dividing markets by characteristics people
have in common. For example: age, income, occupation, education,
ethnic background, or life stage
3. Psychographic segmentation: Dividing markets by identifying common
interests, attitudes, values, lifestyle, or personality traits among the
individuals that constitute that market. For example: people who like
camping, Nascar fans, hunters, or people who like to travel
4. Behavioral segmentation: Dividing markets by identifying common
responses to products and product features.
a. Rate-of-use
b. Occasion response
c. Loyalty response
d. Benefits derived
C. Describe the characteristics of a market segment. In order for a market
segment to be worth targeting, it should be:
1. Measurable: The potential sales/income from the segments must be
measurable.
2. Substantial: The measurable potential sales/income from the segment
must be substantial enough to warrant the investment required to reach
the segment.
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3. Reachable: The individuals in the segment must be reachable with
available promotional tools.
4. Responsive: The likelihood of the individuals responding positively to
promotional efforts must be high enough to justify the investment
required.
D. Describe the concepts of market potential, market share, and market
position.
1. Market potential: The total amount of revenue that can potentially be
generated in a specific industry or market. Competition, local income
levels, product and store image, location, pricing, traffic flow, population
density, and other factors are used to gauge the potential for success.
2. Market share: The percentage of the total sales revenue captured by a
firm within a market or industry.
3. Market position: The perceived standing of a business or a product in
the minds of its customers as compared to the competition. For
example, Ford seeks position based on “tough” trucks while BMW seeks
position based on luxury and performance. Volvo is positioned on
safety.
a. Methods used for positioning: While consumers will position
products and businesses based on their own experiences without the
help of marketers, it is in the best interest of decision-makers to plan
the position in the market.
(1) Play to the competition’s weaknesses.
(2) Lead with your strengths.
(3) Look for under-served markets.
(4) Target different market segments.
b. Selecting a positioning strategy:
(1) Choose the strategy offering the greatest chance of success.
(2) The chosen strategy should be easy to implement.
(3) The strategy must be one that can be supported with products.
(4) Regardless of the strategy chosen, a company must focus efforts
on communicating its position to its target market.
E. Calculate average market share. Average market share is calculated by
dividing total sales volume by the number of competitors in a given market.
F. Complete a competition analysis. A competition analysis is part of the
trading area analysis for a business plan. When developing a competition
analysis for your business plan, consider the following:
1. Who are your five nearest direct competitors?
2. Who are your indirect competitors?
3. How are their businesses performing? Steady? Increasing?
Decreasing?
4. What have you learned from their operations? From their advertising?
5. What are their strengths and weaknesses?
6. How does their product or service differ from yours?
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