Professor Tim Mazzarol –UWA Business School SBM MGMT5601 ... · Marketing • “Marketing...

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Small Business Management MGMT5601

Topic 5: Creating Customers

Professor Tim Mazzarol – UWA Business School

UWA Business School MBA Program [email protected] MGMT5601



• Understand and apply the concepts used in marketing, sales and service.

• Identify customer needs and wants to create customer delight.

• Develop a market segmentation strategy.

• Understand the sales process and sales cycle.

• Develop a marketing strategy.

Learning outcomes


In this topic you should learn how to:


Small Business Marketing



Discussion

Small Business Marketing Video

• What were the key lessons from the small business owners in relation to marketing their firms?

• What was their approach to marketing different from larger firms?

• How did they create and retain customers?


Marketing

• “Marketing encompasses the entire business. It is the whole business seen from the point of view of the final result, that is, the customer’s point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise”

– Peter Drucker

Identifying and satisfying customer needs for mutual benefit


A small business marketing framework

Source: DUBS 1992

Marketing Strategy

Customer Needs

Market Performance

Environmental AwarenessSelling

Marketing Mix


#1 Customer Needs

• What are your key customer needs?

• How are these segmented?• Which needs are best served

by your firm?• Can you develop Unique

Selling Points (USP)?

Identifying customer needs & segmenting the market


Market segmentation

• Definition– The process of breaking down a

market using a range of variables into groups of customers with common requirements.

• Benefits– Better understanding of customer

needs– Better targeting of resources– Better opportunity for competitive

advantage over less focused competitors

• A segment needs to be– Measurable– Substantial (enough)– Accessible– Actionable


Market segmentation criteria

CHARACTERISTICS

1. Demographic

2. Geographic

3. Response

4. Psychographic


Australia’s generations


BUIL

DER

S Born before 19463.02 million14% of population2% of workforce today0% of workforce 2020

BABY

BO

OM

ERS Born 1946-1964

5.28 million24% of population36% of workforce today15% of workforce 2020

GEN

ERAT

ION

X Born 1965-19794.64 million21% of population44% of workforce today36% of workforce 2020

GEN

ERAT

ION

Y Born 1980-19944.65 million21% of population18% of workforce today35% of workforce 2020

GEN

ERAT

ION

Z Born 1995-20094.22 million19% of population0% of workforce today12% of workforce 2020

Source: McCrindle Research (2010)

Values:• strong work ethic• conservatism• respect of authority• reliability• commitment

Values:• desire for freedom• of choice• of individualism• optimistic outlook• socially conscious

Values:• cynical• self-contained• desire for career flexibility• don’t value experts• value friendships

Values:• independent• aspire for success• skeptical of power• seek freedom of lifestyle• Tech-savvy• avoid commitments

Values:• highly tech-focused• Web 2.0 linked• impatient• seek instant response


Customerising


• Therefore:– Focus on the customer not

the product.– Research the customer’s

needs & wants.– Segment the market.– Adapt the product or service

to the customer.– Seek competitive advantage

via value adding not cost cutting.

• Customerising:– Customer commitment – what

is the customer impact of any decision?

– Networking – working with those who can assist you.

– Problem Seeking / Problem Solving – customer problems are opportunities.

– Customer Delight – exceeding customer expectations.

– Market Development – the core competencies for future growth?

“Customers buy hopeful expectations not actual things”Theodore Levitt


Customer Delight


• What % of customers are repeat?• What is the customer’s buying

cycle?• How much is a loyal customer

worth to the business?• How much time do you spend

winning new customers versus nurturing existing ones?

Customer delight is being able to consistently exceed the industry benchmarks for speed, quality or performance.

Customer delight is measured in terms of the level of unsolicited repeat business and word of mouth referrals that the business receives.


Key data awareness


• Successful Small Business Owners:– Know:

• Who buys• Why they buy• How they buy

– Possess key data on:• Customer satisfaction• Customer complaints


#2 Market performance

• Sales and profit performance• Sales and profit margin for each

product group• Sales and profit margin for each

area or segment• Sales by customer

– 80/20 ratio– growth/decline– potential

• Sales by channel of distribution

Tracking sales & profitability across product & market segments


Marketing KPIs


Key Questions: Key Performance Indicators

What have been the sales and profit performances of the business?

• Number of sales over past 3 years.• Average gross profit over past 3 years.• Average net profit over past 3 years.

What have been the sales and profit margins for each product group?

• Gross profit contribution for each individual product (express as a % of total sales).• Average annual growth performance for each product group.

What have been the sales and profit margins for each customer or market segment?

• Gross profit contribution for each individual customer or market segment (expressed as a % of total sales).• Average annual growth performance for each customer or market segment.

Who are the leading customers? • Customer’s sales, profitability and growth.• 80/20 ratio measures to rank customers.

What are the most important distribution channels?(used where multiple channels exist)

• Gross profit contribution for each sales channel (expressed as a % of total sales).• Average annual growth performance for each sales channel.


Marketing KPIs (continued)


Key Questions: Key Performance Indicators

How much does it cost in time and money to attract a new customer?

• Promotional costs as a % of sales.• Average time taken from initial customer contact to sales closure.

How much does it cost to produce and deliver the product?

• Production costs as a % of sales.• Distribution costs as a % of sales.

How much does it cost to support each customer?

• After sales service costs as a % of sales.• 80/20 ratio measures to rank customers.

How long does it take to get the customer’s payment?

• Debtor matrix listing each customer by days payable (e.g. 30, 60, 90, 120 days).

How much capital expenditure is required to support a dollar of sales?

• Capital expenditure costs as a % of sales.


#3 Environmental awareness

• Key competitors– Strengths & Weaknesses

• Key market changes– Trends– Opportunities & Threats

• How change is monitored– Through Associations– Exhibitions– Market Research– Media (e.g. newspapers)

Monitoring your Strategic Environment for Opportunities & Threats


Finding a competitive advantage

• Competitive Advantage is developed from the skills, resources and assts found within the firm.

• These are your Distinctive Competencies

• They should be:– VALUABLE – able to reduce costs or add

commercial value.– RARE – not possessed by your competitors.– DIFFICULT TO COPY – unable to be easily

copied.– NO STRATEGICALLY EQUIVALENT

SUBSTITUTES – customers should not be able to find alternatives easily.

• Also of importance is how long it will take for a competitor match these competencies?

Developing a Unique Selling Proposition (USP)


How do you retain your customers?

• Faster, more reliable service• Innovative product• Longer opening hours• Reputation and branding• Strong after sales service• Good location• Image and personality• Higher quality product or service• Expertise and knowledge

Source: Naylor & Greco (2002)

The Process of Adding Value:


#4 Selling


• Who does the selling?• How well are they organised

and briefed to sell the benefits (USP) and project the company image?

• How effective the feedback is– on customers, competitors

and other influences?• Conversion rates from sales

efforts?

Creating a Business Generating System


Sales platforms and business generating systems


• Basic Principles:– No Customers No Business– It is easier to sell to existing

customers than new ones• Key Indicators:

– How many sales needed to break even?

– What is the average order size?– Conversion rates: quotes to sales– Conversion rates: leads to quotes


Business generating systems


• What motivates customers to buy the product or service?

• What search process do they go through to find a supplier?

• How do they chose to buy from you?

• What is their satisfaction before and after purchase?

• What has made them buy again if they are repeat customers?


Where do you find your customers?


The Top of Mind Marketing & Sales Approach

Source: Naylor & Greco (2002)

Traditional Marketing Top of Mind Marketing

Current Customers

Prospects

Mass Market

10%

10%

10%

80%

60%

30%

10/30/60 Formula


Relationship selling


• Relationships selling:– Selling is no longer a struggle

that you must win– Selling is about building trust

between buyer and seller• Key Outcomes:

– Loyalty from customers– Non-price competition– Word of mouth referrals

Small businesses depend on relationship selling to find and maintain loyal customers.

Source: Foster & Cardogan (2000)


Relationship selling


• Effect of the Salesperson:– Trust in the salesperson– Satisfaction with the

salesperson– Anticipated future relationship

with the salesperson• Effect of the Supplier Firm

– Trust in the supplier firm– Loyalty to supplier firm/brand

• Service Quality– Moment of truth– Customer delight

Key Factors Influencing the Sales Relationship

Source: Foster & Cardogan (2000)


Customer contact matrix


Clean Slate Brand Switching

Supplementary Sales Resupply

None

Extensive

Expe

rienc

e w

ith th

e sa

les

pers

onExperience with the product


Develop a sales track


• Sales Track Principles:– Focus on customer needs & wants NOT

products/services.– Use Q&A techniques to guide the discussion.– Get customer saying “YES” as often as

possible.– Keep message simple & focused on BENEFITS

to customer.• AIDAS Model:

– Attention – Why should you listen?– Interest – What are you offering?– Desire – What problems solved?– Action – How can they buy it?– Satisfaction – After sales backup.

Systematic Approach to your Sales Relationship


Professional selling framework


OPENTHE

CASE

COMMUNICATETHE CONCEPT

MAKETHE

APPROACH

THESALE

FINDTHE

PREMIUM

PROFILEOF A

PROSPECT

ABILITY TO OBTAINREFERRED LEADS

Source: Cotton (1995)


Small business marketing



Discussion

Small Business Marketing Video

• What were the key lessons from the owners of Emma & Tom’s Juice in relation to distribution of their product?

• What was their approach to selling the product?

• How did they create and retain customers?


Develop a sales platform


Step Item Measure Information Source

1 Annual sales target $72,000 Business plan target

2 Average order size $2,000 Previous experience

3 Orders needed each year 36 Step 1 divided by Step 2

4 Orders needed each month 3 Step 3 divided by 12

5 “Conversion Rate” of quotes to sales 1 in 3 Market research / experience

6 Number of quotes needed each month 9 Step 4 x Step 5

7 “Conversion Rate” leads to quotes 1 in 6 Market research / experience

8 Leads required each month 54 Step 6 x Step 7

The sales platform provides an indication of the number of leads required each month in order to generate sufficient quotes and subsequent sales to meet the budget target.


#5 Marketing Mix

Marketing Strategy

Products

Pricing

Promotion

PlacementPeople

Process

Physical Evidence

CustomerNeeds & Wants

CustomerPrice sensitivity

Communicate & Educate

CustomerConvenience &Control

Responsiveness& Empathy

Reliability &Assurance

CredenceQualities


Service quality applied

Service Quality

People

Empathy Do you understand my needs & wants?

Responsiveness Do you respond to me in a timely manner?

Process

ReliabilityDo you faithfully deliver on your

promises?

Assurance Can you be trusted & error free?

Physical Evidence

Tangibles What are the physical facilities like?

Credence QualitiesDo your tangibles

engender a sense of confidence?

Parasuraman, Berry & Zeithaml, 1990

Key factors Key questionsKey service elements


The building blocks of increased business

Service Quality Customer Satisfaction Perceived Value

Customer Loyalty & Repeat Business

Positive Word of Mouth

Increased Business


Case study – Malrica International


• What lessons can Malrica learn from its past marketing efforts about what not to do in the future?

• If Malrica wants to develop an effective marketing strategy what advice would you give them? Consider the following things when making your answer:

– Their positioning in the market.– Their pricing strategies.– Their use of promotion (advertising, selling,

publicity, sales promotion).

– Their distribution strategies.– Their need for market research information.

End of Presentation

Professor Tim Mazzarol –UWA Business School SBM MGMT5601 ... · Marketing • “Marketing...

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