Purchasing has four Os, marketing is blessed with four Ps -Product, Price, Promotion and Place. To these can be added two other Ps - People and Processes. The most difficult and contentious is price. For the small business man or woman finding the right price is notoriously taxing. If you are making a physical product it is comparatively straightforward - you can work out costs and production times so you have an accurate idea of your profit margins. For service businesses it is a little more difficult. You are selling your expertise, experience and time. In such cases there are a number of helpful rules of thumb.
- Learn from others: you may be able to find out how much competitors charge. This should help you gauge how much you can afford to charge.
- There may be accepted or set pricing structures: for example, there may be a union rate which can be taken as a minimum.
- Do not undercharge in the expectation of future work. If you set a price which is relatively low for your first piece of work, the customer's expectations will be set. If you double the price for the next job, they are unlikely to be pleased. It is better to set a realistic and fair figure and attempt to stick to it. Undercharging can also send the wrong messages - if everyone else is charging £500 a day and you quote a figure of £100 a day, you are running the risk of looking amateurish. However, this does not mean that you should quote astronomical figures in order to give the impression of professionalism.
- The most important thing is to have thought carefully about how much you want to charge and what your lowest possible figure for the work could be. Do not go below this figure.
In other aspects of marketing, small businesses are confronted with their limitations - and their potential. First the limitations. Small businesses can rarely find the money necessary to indulge in expensive marketing campaigns. Nor can they change direction as quickly as large companies. They are less likely to have the necessary in-house knowledge and expertise. If the market fundamentally shifts, smaller companies can be left high and dry. Alternatively, smaller companies are often competing with firms of a similar size. Their competitiveness is built around sound long-term relationships with customers. If new competitors appear they can more easily innovate or target small parts of a particular market, niches.
Niche strategies target, or create, gaps in the market which larger firms find unsuitable or simply too small to bother with. If a small business is concentrating on a niche market its marketing strategy may emphasize quality and meeting the specialized needs of customers rather than price.
Despite the competitive advantage of their marketing operations in terms of flexibility, innovation and personalized service, small businesses have to be on their guard. They have to develop sales continually, know the market and be proactive.
Develop sales continually
If a small business discovers a lucrative niche in a market it will enjoy initial success. The trouble is that niche markets can be too localized or specialized - to expand elsewhere becomes a huge and expensive risk. For small companies developing new markets is costly and risky. The only way forward is to return to the basics and carefully consider another market which fits the business's skills and experience.
Know the market
You may not have the time, skills or the energy to monitor and utilise market information. Market research to establish the customer profile, source and form of competition and identify market trends is often beyond the financial and administrative base of small firms. Even so, it is still essential. There is an array of publicly available sources of information -libraries are a rich source of information and data. You may also find useful information and assistance from trade associations, unions, the Chamber of Commerce, professional bodies, small business campaigning groups and national organizations.
Be proactive
Small firms often lack the qualified technical specialists and financial resources to support a formal research and development program to produce innovative products. In response to competitive pressure from mainly larger counterparts, often backed by costly advertising campaigns, small firms target localized and specialized markets with high quality, customized products/services.
