Industrial Marketing Services.
Helping organizations grow! .
Marketing Guide for Small & Medium
Business.
Optimizing the limited resources.
by Sanjay Limaye.
Principal Consultant.
Consulting | Executive Education | Research
19 Meghana Housing Soc, Parvati, Pune 411 009. INDIA.
www.inmas.com
Industrial Marketing Services.
www.inmas.com
The Challenges & Limitations.
There is no doubt that marketing can present significant challenges for the
Small & Medium Sized businesses (SMB). The limited human and financial
resources forces practical constraints on what marketing activity can be carried
out.
While in theory, the marketing principles are applicable to all the organizations
irrespective of their sizes, the ability to apply and implement many of these
principles depends on the availability & willingness to deploy the resources.
This guide will suggest; how to take into account the constraints facing Small
& Medium businesses and suggest marketing strategies to optimize limited
resources.
The most critical areas which you should target are;
A. Know your Strengths and Weaknesses.
B. Adopt a focused strategy.
C. Adopt low risk strategies.
D. Retaining and developing existing customers.
E. Retaining employees.
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Know your Strengths and Weaknesses.
To utilize resources optimally, you need to use your strengths and minimize
your weaknesses.
Some of the typical strengths and weaknesses of small businesses are:
Strengths.
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Flexibility.
Reactive.
Knowledge of local market.
Credible as specialists.
Entrepreneurial spirit.
Strong reliance on passive word of mouth for sales.
Responsive.
Focus on developing sales through new customers.
Innovative.
Weakness.
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Tendency to 'shot gun' promotional activity.
Too many eggs in one basket/ too few customers.
Limited market intelligence.
Limited planning. Short-term view.
Erratic oscillation from extremely active to passive marketing.
Limited resources/Lack economies of scale.
Limited awareness of what marketing really is…
As businesses pass through the transitions from a small to medium size, there
will be a tendency for some of these strengths and weaknesses to diminish.
Even if you are at the upper end of the medium size, still make a self study to
know whether any of these weaknesses still apply to your business?
The following pages suggest strategies to address the weakness & optimize
limited resources.
i. List your own business' strengths and weaknesses
Make a list of your own business' strengths and weaknesses, getting input
from your management team and as many of your employees as possible.
Compare your strengths and weaknesses with those of your main
competitor/s. Check whether you need to take corrective action to minimize
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weaknesses and identify where you can exploit strengths that you competitors
lack.
ii. Short-term versus flexibility
Marketing activities at Small & Medium organizations’ is mostly a short term
affair, an ad-hoc. It is also at times to be reactive leading to a fire-fighting
culture. This costs money and time. The limited resources don’t get deployed
optimally considering long term picture.
Ability of the smaller business to be flexible and respond rapidly to market
changes is a major strength in the right context. This is particularly the case in
fast moving markets and when in competition with larger businesses who are
far less likely to be able to respond as quickly.
In order to avoid such a 'short-term behavior', while maintaining flexibility,
you need an overall strategy for your activities to fit into. If you check whether
your response to market situations is consistent with your overall strategy you
can decide whether a particular course of action is appropriate.
Before you can develop a strategy, you need to identify the objectives, i.e.
what you want to achieve in a particular market. Once you are clear on the
objectives and a strategy, you are well on the way to having a marketing plan.
I am sure you have it very much in your ‘head’, but it's better to write it down
so that you have something to keep you on track and to show to others in
your business. Writing makes thinking clear…!!
Your notes:
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B. Adopt a focused strategy.
Refrain from targeting too wide market with your marketing activities, because
your resources will be spread far too thinly to be effective.
The word ‘NICHE’ should be the key word for small businesses.
i. Segment the potential market.
All your customers within your market don’t have the same needs. Carry out a
survey to identify your customers’ needs. Group your customers according to
their needs. These groups are your main market segments.
Don't treat all of your market segments the same. You need to customize your
product/service offering (& your communication) to be appropriate to each
segment needs. Focus on a manageable number of segments to avoid
overstretching your resources.
You can use a 'rolling' promotional cycle, where, for example, you concentrate
your promotional activity on a different segment every three or six months.
Choose a time period for the 'cycle' appropriate to your business. In this way
you can still cover several market segments but you will achieve a greater
return on effort by focusing on one segment at a time.
Focus your marketing attention on those customer segments where your main
strengths have the best fit.
ii. Focus on a niche.
Focusing on a market niche is an ideal competitive marketing strategy for
small businesses.
If you face heavy competition in a mass market, particularly from larger
businesses, it will take a lot of resources just to make your presence felt, & for
smaller businesses, their size also make them less credible.
Take a look at your market and identify whether there are any market
segments that are not being adequately served. Look at ways in which you can
make an offering to fit their particular needs. There is no guarantee that larger
business won't enter in your niche once it starts looking profitable. You always
need to monitor the market and be prepared to move to another niche or
create a niche strategy if necessary.
iii. Focus on a particular offering.
If you are a smaller business, you may find it beneficial to consider focusing
even further within a niche or market segment to become a specialist. Small
businesses have greater credibility as specialists and there is the advantage
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that you will develop a very deep knowledge and expertise within your market
as you pursue this route.
The disadvantage of this strategy is the risk associated with total reliance on a
small market sub-segment. You will need to monitor the market regularly so
that you can be ready to target an alternative market if necessary.
The narrow ‘Niche’ can be focusing in a Specific geography, Unique Product
feature, a Unique product performance, Service offering etc.
Your notes:
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C. Adopt & implement low risk strategies.
When you are operating with limited resources, it always makes sense to look
at lower risk strategies first.
i. Avoid moving into new markets too fast.
Many small businesses get carried away with the excitement of new market
opportunities and forget to fully exploit their existing markets before moving
on. You may have a very good reason for looking at new markets if your
existing market has dried up or has undergone a down-turn, but one should
not forget, the further you move away from your existing market, the risk and
cost of marketing increases. This is because you know far more about your
existing market and have far more information upon which to base your
decisions. Your production, systems and procedures are also geared up to your
existing market.
This is explained by these simple growth strategies that increase in risk as you
go down the list:
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Selling more of your existing products to existing markets.
Selling modifications of your existing products/services to existing markets.
Selling new products to existing markets (totally new products or
associated with existing products).
Selling your existing products/services to new markets.
Moving into completely different markets with different products.
ii. Study the need to increase your customer base.
In many cases, Small and some medium businesses are operating with a
customer base that is far too small. This imposes undue risk, because the
sales from just a few customers can contribute to a major portion of the total
business. Consequently, the loss of a customer could have a major impact on
your business, and in some cases result in closure.
Ask yourself, whether you are in such a high-risk situation. Take a common
sense view by calculating the percentage of your total revenue accounted for
by each customer, and for each, ask yourself what will be the impact on your
business, if you lost that customer and whether you would survive. If the
answer is no to any of them, then you need to take immediate steps to
increase your customer base.
Make an estimate of how many customers you need in order to reduce to an
acceptable level the percentage of your total revenue accounted for by each
customer.
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Set this number of customers as your target. Then identify how you are going
to obtain these extra customers and over what time period. Prepare a plan for
this. You are unlikely to be able to develop new customers overnight, and so
the sooner you start planning to do this the better, but remember it should not
be at the cost of existing customers.
iii. Actively seek referrals.
Recommendations and referrals from existing customers can contribute
substantially to identify new customers. This has the advantage of being
almost free. The only risk is; over-reliance on this passive phenomenon that is
uncontrollable.
You can reduce this risk and take control by actively stimulating referrals. Here
are some tips for doing this:
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Not all of your customers will know everything about your
products/services. Regularly provide them with information sheets
summarizing your offerings. This is a good thing to do anyway, because
it is likely to generate more sales from the customers themselves.
Ask them if they can identify anyone who could use your
products/services and encourage them to pass on the information to
others.
Make a judgment as to whether you need to provide an incentive for
them to do this; in some cases it may not be appropriate.
Personally thank your customers for their referral, and make a point of
asking them to pass on your name to others.
Find out how satisfied they are with your offering and take corrective
action where necessary. Dissatisfied customers will not make
recommendations. "If you like what we do tell others; if you don’t like it,
then tell us."
Take the opportunity to enclose a referral slip with any communication
or delivery documents.
Your notes:
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D. Retaining and developing existing customers.
Once you have achieved a reasonable number of customers, be careful not to
focus only on developing new customers as a means of growing sales. This
runs the risk of neglecting your existing customers. Clearly you need to look
for opportunities to develop new customers, but a balanced approach is
needed.
Retaining and developing more sales from existing customers should be the
first priority, because this strategy has major benefits:
It is the least risky growth strategy.
Developing more sales from existing customers is less costly than obtaining
new customers.
The existing customers are:
 Foundations of your business.
 Generally less price sensitive.
 Likely to offer more opportunity for repeat business.
 Likely to be the potential for recommendations and referrals.
 Generally more loyal.
In order to develop a strategy for retaining customers and developing more
sales from them you need to carry out some analyses:
i. Analyze your customer base
80:20-customer ratio:
It is likely that 80% of your revenue is accounted for by only 20% of your
customers. The 80% of your customers with small sales probably fall into two
categories. Either they will never have the potential for increased sales, or,
given some work, they could be developed. Identify which are which and take
steps to sell more to those with sales potential.
Customer profitability:
Analyze the profitability of each of your main customers, i.e. the top 20%. You
may be surprised to find how unprofitable some of them are. Look at ways of
increasing the profitability of these or consider 'losing' them. Focus on the
more profitable ones; check their needs and identify ways to sell more to each
of them.
ii. Make the potential customer database work for you.
Many small businesses operate with inadequate & inefficient customer
databases because it is not considered to be a priority to invest in them. If you
don't have the means of storing and manipulating data on your customers you
can't hope to fully exploit this gold mine of an asset.
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Many of the strategies discussed in this article require the ability to analyze
your customer/contacts database in order to obtain the information needed.
Ask yourself these questions:
1. Is your database just a list of customers and contacts?
2. Can your database be manipulated with ease to group customers
according to:
 Sales.
 Profitability.
 Needs.
 Main product/services purchased.
 Location.
 Frequency of purchase.
 Average size of purchase, etc
3. Is your database fully integrated with your other software programs
e.g. ERP, Financial?
4. Was your database design based on an audit of your business needs?
5. Does your database allow you to keep additional information on your
customers other than contact details etc?
If the answer is yes to 1 and no to 2-5 then you need to take an urgent look at
upgrading your database, but take expert advice on this.
iii. Satisfaction through innovation.
In order to retain and develop existing customers you will clearly need to
ensure their satisfaction. This process can stimulate innovation, because you
may need to modify existing products and services or develop new ones in
order to continue to satisfy their needs.
Find out from your customers what their needs are now and in the future in
order to achieve this.
Will you need to modify products/services or develop new ones to satisfy these
needs?
Your notes:
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E. Retaining employees.
There is a distinct cost advantage to retain an employee as it costs a lot to
recruit and train a new employee, and in the early days they are less
productive.
As with customers, you need to make sure that your employees are satisfied in
order to retain them. You are also unlikely to have satisfied customers if your
employees aren't satisfied.
These are two good reasons for making sure that you keep your employees,
but how good are you at this?
a. Do you have an employee satisfaction program?
b. Do you know what your employees' needs are in order to ensure that
they are satisfied?
c. Have you taken steps to find out what motivates each of them?
d. Is your selection process and training program adequate for each
employee role?
Your notes:
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By, Sanjay Limaye.
Principal Consultant.
About Sanjay Limaye:
As a consultant with over two decades of experience in Sales, Sales
management, Marketing and Corporate management, Sanjay brings rich
expertise to successfully run an organization in a competitive & global
economy.
What’s next? If you find this write up valuable, then:
Print It – YES, you are free to print and freely distribute this write-up as long
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Stay Informed – Subscribe to monthly e-mail newsletter Business Insight
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Learn More – Contact me at sanjaylimaye@inmas.com to find out more how
we can help you improve business.
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