Things to consider
a) Assess demand
The first step in starting a business is to identify a need in the community. Establishing the size of that need is called assessing demand. It is a waste of time to jump into developing a business plan before undergoing a thorough and proper demand assessment first.
Demand refers to the willingness to go out and buy a certain product/service. Hence, market demand is the total of what everybody in the market wants.
How can an entrepreneur assess demand of a product/services?
There are several ways to assess the demand of a product / service in the community. Some of the most common ways include;
- Listening to peoples’ complaints about a specific need in the community
- Conducting informal survey especially at the market place
- Sending out questionnaires to sample population
- Scoping by reading and listening for highlights of needs in local newspapers or radio programs as well as other sources of information.
- Complaints or demands highlighted on social platforms.
Accessing demand is amongst the biggest milestone you will make before establishing your business. This will help you establish the right business for the right people.
Assessing your target market
Before you are able to sell anything, you have to understand who you are selling to. You have to create a complete portrait of your customer and know why they want your product and how they will use it. By determining who will buy your products, you can fine tune the various aspects of your marketing message to appeal to this group and to avoid wasting time, money and other resources on non-customers. One needs to assess the kind of customer attracted in buying their products /service and from which demographic segment they come from such as their age, gender, occupation, education level, location and socio-economic status amongst others.
Assess your market size
The starting point for estimating the market size is to understand the problem you solve for customers and the potential value your product generates for them . You need to analyze whether the market is growing in numbers or declining and how to reach them? In addition to this you need to examine trends which are relevant to the target market.
You need to demonstrate how your product/service differs from that of your competitors. Here you may try to ensure that the quality of your products is superior to that of your competitors. You may also want to package your goods in a more attractive package and brand it better than your competitors.
b) Sizing up the market
Sizing the market is a necessary task for business planning and budgeting for all start ups. If you wish to invest in a certain business then you need to understand the potential market size. In order to determine the market size for your start up, you need to ask yourself the following questions.
- What problem are you solving?
- Who is your target customer?
- What competitors’ products/services exist in your space? And
- What is the estimate number of target customers?
Customers must be made aware of availability of a new product or service and should be able to obtain it. Helping customers to understand the product and service and how they can obtain it is referred to as a marketing strategy. It is very crucial for any business to have an effective marketing strategy.
Any marketing strategy must take into consideration the following factors:
The location of the business – The business must be located at a place easy to reach, it must have enough space to accommodate many customers at once, and with enough car parking lots.
Advertising – A special budget can be set aside for advertising your new business. The advertisement can be done through social media, blogs, local newspapers or placing posters to road junctions and at areas where people meet.
Packaging – Make sure that your products are well packaged and branded. The package must make it comfortable for customers to carry and needs to be neat and attractive.
The need for good relationship with other businesses – Establishing your business doesn’t mean that you don’t talk with your competitors. You need to be close to them and have a good relationship, competitors are members of your community hence having a good relationship is key for your social wellbeing.
Reputation in the community (word of mouth) – In normal circumstances it is not easy to please everyone, but try as much as you can to be close to members of your community. Talk nicely and set time to participate in social activities.
Competitor’s price – You need to examine clearly prices for the same goods as yours, which are present in the market. This will guide you to set competitive prices for your products.
All in all any entrepreneur should be willing to adapt products or services to customer preference, taking into consideration local safety and security regulations. A new product may have an initial period of high demand. However, a saturation point may be reached and demand may stay stable or even decrease. A sustainable market is one in which demand price keeps on increasing or stays stable with a steady rate of replacement
c) Estimating cost and setting a price
A product or service may be exchanged for money or for another product or service. Most businesses will want to make profit on product or services sold. Profit is the difference between cost price and selling price. A part of the profit can be reinvested or used for expansion of the business. A reasonable margin of profit enables the business to continue and even expand.
Definition of “Costs”
An amount that has to be paid or given up in order to get something. All expenses are costs, but not all costs are expenses.
Types of Costs
There are two types of costs;
Direct costs: These are costs directly related to the product or services that business produce or sell. E.g. the money we pay people who work in making or selling product; transport of materials or product; and consumable bills.
Indirect costs: These are all other costs for running the business. They include; rent, license, security, utility among others. Indirect costs are also known as overhead costs as they are paid whether the business is producing or not.
Factors to consider in setting a price and formulating an effective price strategy
When setting a price for product or service one needs to consider the following:
- Total production cost (direct and indirect)
- How much customers are willing to pay
- Competitors price
- Short supply of product /service “Scarcity”
- Product/ service demand
- Government policies
It is therefore important to accurately calculate each of these, so that the ﬁnal selling price is realistic. Selling price can be established using the below formula
Cost of production + overheads + profits = selling price
The entrepreneur should be careful in setting the level of proﬁt intended to be made on the sale of a product or service, by also taking into account the relationship between demand of the product and the available supply. If demand is higher than the available supply, the price (and thus the proﬁt) may be increased. If there is a large supply, but few people want to buy, then prices may drop. An excessively high price due to a big margin of proﬁt will dissuade customers. When sales increase, proﬁt margins may be reduced. This can enable the entrepreneur to lower the selling price, therefore allowing the business to ‘capture’ the market and even expand it.
Mass marketing is no longer considered effective for most businesses in today’s world of differentiated consumer marketplace. Therefore, most companies no longer tend to generalize the market, but instead they slice it into a number of different, narrowly-defined groups, and then choose the groups to which they aim to sell their products or services.
Definition of Market targeting
A target market or target audience is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise. A well-defined target market is the first element to a marketing strategy that helps to determine the success of a product in a marketplace.
Target markets are groups of people separated by distinguishable and noticeable aspects. Example; for energy sector, a target market could be users of renewable energy sources like solar for lighting, heating and cooking.
Each company may have a different viewpoint on how to reach its market. One company may believe that if they produce on a large scale and keep the cost low, they can easily sell more products. Another company may think that it will be easier to sell more products if they improve its quality and make it more attractive to customers.
Marketing activities around the world are guided by certain philosophies that determine how companies market their goods to customers. These are called Marketing Concepts. Over time, five concepts have emerged to fit the market demand at a given period. As markets and human needs evolved, so have the concepts of marketing.
- The Production Concept
- The Product Concept
- The Selling Concept
- The Marketing Concept (The Customer Approach)
- The Hollistic Marketing Concept
The Selling, Product and Production Concepts focus on existing products and building sales volume as the source of profits. This may get short-term sales, but there is little concern here about who the customer is and what his/her preferences or reasons for buying might be.
On the other hand, the Marketing Concept focuses on identifying and satisfying customer needs as the source of profits. The Holistic Marketing Concept has an all-inclusive approach to marketing, suggesting that goods or services that guarantee success are a product of interrelated marketing activities.
Marketers operate consistent with one of the above concepts depending on the type of product they offer and/or their geographic location. However, the Holistic Marketing Concept is increasingly becoming the go-to approach for marketers around the world.
The following are factors that determine Market Targeting
Geographic segmentations (i.e. their location). Rural areas could benefit from solar installation and therefore form a market segment
Demographic/socio-economic segmentation (gender, age, income occupation, education, sexual orientation, household size, and stage in the family life cycle). For example, low income groups could be targeted with improved cooking stoves that uses cheaper source of fuel and readily available but more efficient.
Psychographic segmentation (i.e. similar attitudes, values, and lifestyles). The higher income group could be sensitized to the concept of green energy and be targeted solar solutions instead of using charcoal which is not user friendly to environmental conservation that could include changing the construction of their houses and appliances they use.
Behavioral segmentation (i.e. occasions, degree of loyalty),
Product-related segmentation (relationship to a product). Dairy farmers could easily be linked to biogas digesters that utilize animal waste to give them fuel for cooking and lighting as well as fertilizer.
Market Target Selection
Target marketing contrasts with mass marketing, which offers a single product to the entire market. Many MSMEs who deal with processing products also deal with other products and are tempted to use mass marketing. This affects the size market for processing products and eventually limits the income that could have been generated from sales of such products.
Two important factors to consider when selecting a target market segment are
- The attractiveness of the segment and the fit between the segment,
- The enterprise’s objectives, resources and capabilities.
1) Attractiveness of a market segment:
The following are some examples of aspects that should be considered when evaluating the attractiveness of a market segment:
- Size of the segment (number of customers and/or number of units)
- Growth rate of the segment
- Competition in the segment
- Brand loyalty of existing customers in the segment
- Attainable market share given promotional budget and competitors’ expenditure
- Required market share to break even
- Sales potential for the firm in the segment
- Expected profit margins in the segment
Market research and analysis is instrumental in obtaining this information. For example, buyer’s intentions, failing to obtain intended income, test marketing, and statistical demand analysis are useful for determining sales potential.
2) Enterprise objectives, resources and capabilities.
Market segments also should be evaluated according to how they fit the SMEs objectives, resources and capabilities. Some aspects of fit include:
- Whether the firm can offer superior value to the customers in the segment
- The impact of serving the segment on the firm’s image
- Access to distribution channels required to serve the segment
- The firm’s resources vs. capital investment required to serve the segment
The better the SMEs fit to a market segment and the more attractive the market segment, the greater the profit potential to the SME. Therefore the entrepreneur in the business sector should identify and choose those products whose market is attractive and best suits his/her business objectives.
The below targeting approaches are typically used to select target markets:
1) Undifferentiated Targeting; looks at the entire market as one instead of choosing segments, and employs one-fits-all marketing strategy.
Despite the belief that this approach may be ineffective for most companies or products out there, it is often used by businesses which have very little competition, therefore they rule out the need for spending great amount of resources to adapt their strategies for various audiences.
2) Concentrated Targeting; aims its efforts at selling to a well-defined, specific consumer segment by developing a marketing mix appropriate for the given audience.
Companies justify the extra effort and resources spent on a Concentrated Targeting strategy, as they are more likely to directly reach their specific, marketing-savvy consumers by handpicking them out of larger groups.
3) Multi-Segment Targeting; while advantageous requires greater research efforts and more resources. Companies which employ this strategy target more than one of the above mentioned narrowly-defined segments by crafting different strategies for each one of them. Nonetheless, the Multi-Segment Targeting approach offers a number of benefits to the company such as larger sales volume and bigger market share.
Prepared by Veneranda Sumila with assistance from the internet.
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Product Positioning & Supervisor roles
Last week we discussed about Market targeting. We saw that mass marketing is no longer considered effective for most businesses in today’s world of differentiated consumer marketplace. Therefore, most companies no longer tend to generalize the market, but instead they slice it into a number of different, narrowly-defined groups, and then choose the groups to which they aim to sell their products or services.
In today’s topic we are going to discuss about Product positioning. In general, product positioning is defined as the process marketers use to determine how to best communicate their products’ attributes to their target customers based on customer needs, competitive pressures, available communication channels and carefully crafted key messages. Effective product positioning ensures that marketing messages resonate with target consumers and compel them to take action.
Product positioning therefore, involves efforts to influence consumer perception of a brand or product relative to the perception of competing brands or products, it helps to create a positive perception and preferred position in the eyes of the public towards that product.
If a product is well positioned, it will have strong sales, and may become the go-to brand for people who need that particular product. Poor positioning, on the other hand, can lead to bad sales and a dubious reputation.
Product positioning process
Product positioning is a tricky process. It is a continuous process requiring constant observation. MSMEs adopting product positioning strategies need to see how consumers perceive their product, and how differences in presentation can impact perception.
As defined above, positioning is the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. Then re-positioning involves changing that identity of a product, relative to the identity of competing products, in the collective minds of the target market.
Effective product positioning requires a clear understanding of customer needs so that the right communication channels are selected and key messages will resonate with customers. Product positioning starts with identifying specific, niche market segments to target — not just women over 25 but women from 25 to 30 who work in senior-level management positions, who make X Shs per year, who are single and enjoy sporting activities. The more specific, the better.
In addition to identifying the customer based on demographic and psychographic (personality/lifestyle) attributes, marketers need to understand customer needs, especially relative to the products and services they have to offer, to clearly convey value as part of their marketing plan.
Generally, the product positioning process involves:
- Defining the market in which the product or brand will compete (who the relevant buyers are)
- Identifying the attributes (also called dimensions) that define the business product ‘space’.
- Collecting information from a sample of customers about their perceptions of each business product on the relevant attributes
- Determine each business product’s share of mind
- Determine each product’s current location in the business product space
- Determine the target market’s preferred combination of attributes
- Examine the fit between:
- The position of your product
- The position of the target market’s preferred combination of attributes
It is important to note that for the MSME to achieve sustained growth there is need to create an impact in the target market. Creating an image in the minds of customers helps in creating loyalty to products or services being offered.
Product positioning helps marketers consider how their offerings are different from others that consumers have to choose from. But it is not enough to know this from an internal perspective — marketers must communicate this to the target audiences. To do this effectively, they must choose communication channels that are designed to connect with their identified target audiences at times when they will be most receptive to these messages.
Conveying the differentiating, value-added aspects of your product or service to your target audience through the communication channels you have selected is also another key element to consider. These messages are designed to convey how your product is different (and better) than competitive offerings, as well as to address the value-added attributes that are important to your audience. Product positioning is at the foundation of any effective marketing plan because it impacts the ultimate purchase decision.
Who is a supervisor?
Supervisor is a manager at the first level of management, which means the employees reporting to the supervisors are not managers. Operational Supervisor is tasked to ensure that the business is meeting its’ goals. He/she also ensures that employees are performing their jobs so they will contribute a share of the accomplishment of goals. Operational Supervisor oversees daily business problems and goals.
Supervisor should possess the following skills:
- Management Skills
- Technical Skills
- Human Relation Skills
- Idea developing Skills
- Decision Making Skills
General Function of a supervisor includes the following
Planning – this involves drawing up plans of actions that combine unity, continuity, flexibility and accuracy given the organization’s resources.
Staffing – it is performed by all managers depending upon the nature of business, size of the company, qualifications and skills of managers. In small companies, the top management generally performs this function. In medium and small scale enterprise, it is performed especially by the personnel department of that concern. Staffing helps in recruitment, selection, placement, training and development, providing remuneration.
Leading – this involves the social and informal sources of influence that you use to inspire action taken by others. It helps supervisors understand their subordinates’ personalities, values, attitudes, and emotions.
Controlling – this involves identifying performance weaknesses and errors by controlling feedback, and conforming activities to plans and instructions.
Responsibilities of a supervisor
Supervisor must be prepared for change as fast as their employees do. Supervisor must be accountable to business practice by imposing penalties for employees who fail to adequately carry out responsibilities and provide rewards for meeting expectations.
Tips for supervisors
Supervisor must be prepared for change as fast as their employees do.
Supervisor must be accountable to business practice by imposing penalties for employees who fail to adequately carry out responsibilities and provide rewards for meeting expectations.
Set limits on your behavior! No gossip participation.
Do not be a “rescuer”. Train employees to improve performance, do not do it for them.
Figure out how to measure success. Know when people are not on track to meet goals.
Communicate with everyone. Talk with each subordinate regularly.
Be firm. You will be tested on rules and standards.
Learn from others. Find other bosses who will share their wisdom. Seek people inside and outside the organization. Create a business network.
Prepared by Veneranda Sumila
Tanzania Private Sector Foundation (TPSF)
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