Marketing your business 9781422229125, 1422229122, 9781422229194, 142222919X, 9781422229835, 1422229831

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NHMC13_10HBK_SmllBizFinance_NHMC13_SmallBizFinance 5/5/13 10:00 AM Page 8

Are you interested in having your own business? Today, young people have never had more opportunities to build new and exciting businesses. Before you start your business, you’ll need to know the basics, though. Once you’ve started your business, it’s not enough to wait for customers to come to you. You’ve got to get the word out so that people know your company. In Marketing Your Business, you’ll learn the importance of marketing, and find out how your company can succeed with the right marketing.

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Cover images: Shutterstock.com

ISBN 978-1-4222-2919-4

EAN

90000

9 781422 229194

Marketing Your Business

Young Adult Library of Small Business and Finance Marketing Your Business Business & Ethics Business & the Government: Law and Taxes Business Funding & Finances Keeping Your Business Organized: Time Management & Workflow Managing Employees Marketing Your Business Starting a Business: Creating a Plan Understanding Business Math & Budgets What Does It Mean to Be an Entrepreneur?

Yo u n g Adult Library of S ma l l B u s i n ess and Financ e

Marketing Your Business C.F. Earl

Mason Crest

Mason Crest 450 Parkway Drive, Suite D Broomall, PA 19008 www.masoncrest.com Copyright © 2014 by Mason Crest, an imprint of National Highlights, Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, taping or any information storage and retrieval system, without permission from the publisher. Printed in the United States of America. First printing 987654321 Series ISBN: 978-1-4222-2912-5 Hardcover ISBN: 978-1-4222-2919-4 Paperback ISBN: 978-1-4222-2983-5 ebook ISBN: 978-1-4222-8909-9 The Library of Congress has cataloged the hardcopy format(s) as follows: Library of Congress Cataloging-in-Publication Data Earl, C. F. Marketing your business / C.F. Earl. pages cm. – (Young adult library of small business and finance) Audience: Grade 7 to 8. ISBN 978-1-4222-2919-4 (hardcover) – ISBN 978-1-4222-2912-5 (series) – ISBN 978-1-4222-8909-9 (ebook) – ISBN 978-1-4222-2983-5 (paperback) 1. Small business–Marketing–Juvenile literature. 2. Marketing–Juvenile literature. I. Title. HF5415.13.E23 2014 658.8–dc23 2013015652 Produced by Vestal Creative Services. www.vestalcreative.com

Contents Introduction 6 1. What Is Marketing? 11 2. How to Do Market Research 25 3. What About the Competition? 35 4. How Much Money Can You Spend on Marketing? 43 5. Make a Marketing Plan 49 Find Out More 60 Vocabulary 61 Index 62 About the Author and Consultant 63 Picture Credits 64

Introduction

Brigitte Madrian, PhD

S

mall businesses serve a dual role in our economy. They are the bedrock of community life in the United States, providing goods and services that we rely on day in and day out. Restaurants, dry cleaners, car repair shops, plumbers, painters, landscapers, hair salons, dance studios, and veterinary clinics are only a few of the many different types

of local small business that are part of our daily lives. Small businesses are also important contributors to the engines of economic growth and innovation. Many of the successful companies that we admire today started as small businesses run out of bedrooms and garages, including Microsoft, Apple, Dell, and Facebook, to name only a few. Moreover, the founders of these companies were all very young when they started their firms. Great business ideas can come from people of any age. If you have a great idea, perhaps you would like to start your own small business. If so, you may be wondering: What does it take to start a business? And how can I make my business succeed? A successful small business rests first and foremost on a great idea—a product or service that other people or businesses want and are willing to pay for. But a good idea is not enough. Successful businesses start with a plan. A business plan defines what the business will do, who its customers will be, where the firm will be located, how the firm will market the company’s product, who the firm will hire, how the business will be financed, and what, if any, are the firm’s plans for future growth. If a firm needs a loan from a bank in order to start up, the bank will mostly likely want to see a written business plan. Writing a business plan helps an entrepreneur think

Introduction

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through all the possible road blocks that could keep a business from succeeding and can help convince a bank to make a loan to the firm. Once a firm has the funding in place to open shop, the next challenge is to connect with the firm’s potential customers. How will potential customers know that the company exists? And how will the firm convince these customers to purchase the company’s product? In addition to finding customers, most successful businesses, even small ones, must also find employees. What types of employees should a firm hire? And how much should they be paid? How do you motivate employees to do their jobs well? And what do you do if employees don’t get along? Managing employees is an important skill in running almost any successful small business. Finally, firms must also understand the rules and regulations that govern how they operate their business. Some rules, like paying taxes, apply to all businesses. Other rules apply to only certain types of firms. Does the firm need a license to operate? Are there restrictions on where the firm can locate or when it can be open? What other regulations must the firm comply with? Starting up a small business is a lot of work. But despite the hard work, most small business owners find their jobs

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rewarding. While many small business owners are happy to have their business stay small, some go on to grow their firms into more than they ever imagined, big companies that service customers throughout the world. What will your small business do?

Brigitte Madrian, PhD Aetna Professor of Public Policy and Corporate Management Harvard Kennedy School

Introduction

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ONE

What Is Marketing?

W

hen you run a small business, you have a lot going on. You have to buy materials, make your products (like baked goods), or perform the service you provide (like lawn mowing). But if that’s all you got, something is missing—the customers! Besides getting your products and services ready, you have to sell them to customers. Plus, you have to find customers in the first place—and then convince them to buy from you. And then give them a really good-quality product.

Speaking to people who buy your products is part of marketing, but it’s not the only way to get people to keep coming back. Treating customers well is a great first step in making sure people see your business positively.

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The bridge between what goes on behind the scenes in a business and the customers is called marketing. Marketing has a lot of different parts. Sales is part of marketing. So is advertising. And pricing, packaging, and distribution, which is how your product gets to customers, are also part of marketing. If you don’t pay any attention to marketing, you won’t have any customers. If you already run a business, you might be marketing and not even know it. Do you post ads around town? Do you ever talk to people about your business? Or have you created a website to spread the word? If you’ve done any of these things, you’ve already started marketing.

What Does It Take to Be a Marketer?

Most big companies have their own marketing department, where people work only on marketing. Employees might specialize in advertising or sales or another part of marketing. To work in the marketing department, you have to be a good communicator, so you can convince people your product is the best. Plus, you may have to interact with a lot of people to figure out what they want from your company. You also have to be a good listener, to figure out what people want and what you should be selling them. Marketing people should be good problem solvers. You have to be creative to figure out how to match your products with what people will buy.

What Is Marketing?

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The more you learn about marketing, the more customers you have and the happier they’ll be. And then your business will keep growing! Marketing is a great business tool.

Marketing vs. Sales Sometimes people think marketing is just about getting individual people to buy a product. They’re really thinking of sales, though. Sales is all about direct interactions with customers, or people who might become customers. When you talk to someone to convince them to buy from you, that is sales. Sales is a part of marketing, but that isn’t all there is to marketing.

Ads in a Day

People have done a lot of research into how many advertisements we see every day, and whether they work or not. Some studies say that we see up to 5,000 ad messages a day! You’ll find ads on billboards, TV, buses, websites, subways, magazines, and more. One of the more creative ads recently involved stamps on eggs at the supermarket! A lot of the time, we don’t even know we’re seeing ads, but our brains remember and tell us to buy what the ad was selling later. What does all this mean to you? You want to make your ads stand out from all the other ads out there, so people will see them and pay attention. However, you also don’t want to go overboard and annoy people with ads. They might remember your business if they see fifty ads for it every day, but they might end up angry or annoyed enough to want to avoid it altogether!

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Marketing is bigger than just sales. Marketing is the big picture that will get your product to customers. You figure out what your potential customers want and how you can give them what they want. Another way to look at sales and marketing is to say that sales is the end result of marketing. After you’ve spent a lot of time figuring out who will want to buy your product and why, and for how much, you can finally sell it to them. Let’s say you have started a business selling baked goods. You go to a farmers’ market and sell your baked goods to customers who come up and visit your table. Talking to people at the market is an example of sales. You are interacting with individual people and selling them your products. Marketing is a little more complicated. Talking to customers and collecting their money is just one part of your whole marketing strategy. You also put up posters to advertise your baked goods, which is another part of marketing. And you might go talk to stores that sell locally made foods to see if they will sell your products. That’s another kind of marketing. Just the fact that you chose to sell at a farmers’ market is even a part of marketing.

Advertising Advertising is a big part of marketing. Advertising is made up of all the ways you communicate to people about whatever you’re selling, with the goal of getting them to buy something. Advertising is aimed at lots of people all at once, not individual people one at a time. You probably are already familiar with lots of forms of advertising. TV commercials, ads online, billboards, posters on the sides of buses, and magazine ads are just a few of the main kinds of advertisements.

What Is Marketing?

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From billboards to Internet ads, advertising is a big part of marketing your business. Deciding how much you want to spend on advertising and choosing the best way to reach your customers are part of any marketing plan.

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Advertising is pretty important because it’s often the main way people even know about your business. They can’t buy something from you if they’ve never heard of your business. Advertising changes all that. As a small business owner, you have lots of ad options. Some will cost you more money than others. You could put posters up all over town. You could put fliers in people’s doors. They’ll be free to deliver (it will just take some time and legwork), but you have to pay for the printing. You might also consider buying ad space in newspapers or local magazines. You could air a radio ad. The more you get your business’s name out there, the more customers you’ll get!

Public Relations Public relations is another part of marketing. Public relations has to do with managing how people see your business. You want your business to look good so people will feel good about buying from you. And ideally, you want your business to actually be a good business. All you’ll have to do is show other people how great you are. Good public relations work involves getting your business’s name in the news for doing good things. You could get interviewed on the news or in the local paper. Public relations involves treating customers well so they spread the word about your business. You might also volunteer at a local charity to show that your business cares about the community.

What Is Marketing?

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Sales are a good way to attract customers to your business. Advertising your discounts is an important part of seeing more profits from sales.

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Pricing and Distribution Another big part of marketing is figuring out how to get the products to your customers. First you’ll need to decide on pricing. You want to charge enough so that you make a profit and cover the costs of making or providing your product. But you don’t want to charge so much that people end up not buying it because it’s so expensive. For your baked goods, you add up how much all the ingredients to make a batch of muffins cost, which is $6.50. Then you divide that by 12, which is how many muffins are in one batch. Each muffin costs $.54 to make. As soon as you charge $.55 or more, you’re making a profit, but not a very big one. You think people will be willing to pay at least $2 for each muffin, so you start charging $2. But you realize you’re not selling as many muffins as you’d like, so you adjust the price a little, making it $1.50 instead. Now lots of people are buying your muffins! You’re making almost a dollar in profit on every muffin, and people are happy enough with the price that they will pay for your muffins. Marketing at this stage also involves distribution. Distribution is how you actually reach customers and get the products to them. Going to a few farmers’ markets to sell your baked goods is an example of distribution. You could also sell online, to reach more people, and offer to ship your product to people around the country or world. Storefronts are another example of distribution.

Marketing in Action One young businessperson who knows a lot about marketing is Leanna Archer. Leanna started a hair-product business when she

What Is Marketing?

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Leanna Archer understands that being young is only a disadvantage in business if you let it be. Much of her success is a result of her using her age as part of her marketing strategy.

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was only nine years old. She has built up her business so that by the time she was a teenager, she was making $100,000 or more a year. Part of how she got to that point was by using marketing. When she first started out, she gave her friends little samples of the hair product she made. “The next thing you know,” Leanna says, “we had checks coming in the mail, people at our doorstep with $20.00 asking how much of this product can I get for $20.00?” Since then, she has used other marketing techniques to get her product to customers. For example, she has a unique distribution model. Young people around the country can sign up to sell her hair-care products. When they sell enough, they place the order and get a percentage of the sales. Leanna gets her products all around the country, and the people who sell for her earn a little money. Leanna has been featured in lots of interviews in magazines, online, and on TV. Some of the magazines she’s been in include Forbes, Ebony, and Success. On TV she has been on NBC, ABC, BET, and FOX. She started reaching out to the media when she was young and eventually got her first interview. After that, more magazines started contacting her, and more people read about her business. Sales really picked up! The young entrepreneur isn’t afraid to market herself and her business. She gives an example: “One of my most recent experiences was, a global entrepreneurs’ award . . . for college students only. But you enter the contest and after choosing out a handful of CEOs and company owners, they would fly you out there and give out awards and give you mentors and people to talk to in how to improve your business. And I knew that it was for college students only but of course I filled out the application anyway and sent it in. And because of that, since I was in high

What Is Marketing?

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Interacting with customers online through social media like Facebook, Twitter, Google Plus, and other services can be a great way to keep people thinking about your company.

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Marketing Your Business

school, the company that’s been around for a couple of decades now, they decided to start a high school global entrepreneurial award just because of that.” Leanna has also mastered public relations. She regularly uses some of her business profits to volunteer. She set up the Leanna Archer Education Foundation. With the money she sets aside, she builds schools in Haiti, where her family is from. Leanna does good work because she wants to. And when people read about her good works, they want to become customers! As a businessperson, like Leanna, you should think about all these parts of marketing. If you leave one out, you’re potentially leaving out customers who would love to buy your product. The better you are at marketing, and the more attention you pay to it, the more your business will grow!

What Is Marketing?

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Two

How to Do Market Research

M

arketing might seem a little overwhelming at first. You have to figure out what customers want, how much they will pay, and how they will buy from you. Then you have to convince them to buy your product. Successful businesses don’t just jump into marketing right away. They do market research first. Market research tells you if there are enough customers to buy your product, or if you should change your product a little to fit what people want and need. Market research also gives you a good idea of how you should sell and for how much you should sell. A little market research can go a long way.

Reaching out to potential customers is only one part of marketing your business. Market research will let you know what the sorts of people who are most likely to buy your product and how best to reach them.

Gathering Data You can choose between two main kinds of market research— primary research and secondary research. Primary research is information you get by talking to customers and other people who interact with your business. You find out what’s going on in their heads, and whether they’re happy or would be happy with your business. Primary research can look different, depending on how you gather data.

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You can do interviews with individual customers. Ask customers to sign up for interviews either by telephone or face-to-face. Don’t force anyone to talk to you, but give your customers (or potential customers) the opportunity to tell you what they do and don’t like about your business. You can also hand out surveys to people. Hand them out to people in person, or even mail them or email them if you have people’s contacts.

Marketing Research Mistakes

New businesses don’t always do the best market research. Learn from others’ mistakes and do the best market research you can! Here are a few of the most common mistakes. 1. Not doing any market research. The only way of knowing who is buying your products, what they think of your products, and how much they will pay for them is to do market research. 2. Only doing secondary research. Primary research can be harder and takes more time, but it’s worthwhile to talk to customers who already know what your business is all about. 3. Limiting primary research to people you know. You might find interviewing friends and family a lot easier than interviewing strangers. But friends and family might tell you only what you want to hear, not what they really think. Strangers are more likely to give you the whole picture. Besides, strangers are probably making up a big part of your group of customers.

How to Do Market Research

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Larger companies often run focus groups, which are like group interviews. A bunch of people meet in a room and just talk about the business. Usually bigger companies with a lot of money run focus groups, and give participants some money, but smaller businesses can do focus groups too.

Google Trends

Google Trends is a great tool for doing market research. Google Trends shows you how often people all over the world search for keywords. The program also gives you searches that are related to the first keyword. You’ll be able to see what potential customers are interested in, and what they might buy. If you want to start a lawn care business and type “lawn care” into Google Trends, you’ll see people search for that keyword a lot more during the summer. And people have been searching for “lawn care” less and less over the last few years. Maybe a lawn care business won’t be as easy to start as you thought. Plus, you’ll only have business in the summer. However, one of the related key words is “green lawn care” which actually has more searches than just plain “lawn care.” Google Trends helps give you the idea that you could start a chemicalfree lawn care business, which might be more successful.

No matter how you get your primary research data, you want to ask really good questions. Ask things like, “What do you like or dislike about the products my business offers?” “How much would you be willing to pay for this particular product?” “Where would you buy my products?” “What goes through your head

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when you decide to buy something from my business?” Your goal is to understand why customers want to buy from you, and how you could convince them to buy more. At your baked goods table, for example, you have a survey ready to hand out to people who stop by the table. The survey has questions customers can answer to tell about their experience with your company. Mention the survey to the people who stop by your table, even if they don’t buy anything. You also tell them they’ll get a free cookie if they participate, and that it will only take ten minutes. By the end of the day, you have twenty-five surveys. Now you can start to get a better idea of what people think about your products. You can also do secondary market research. Secondary research is finding and analyzing data that already exists. Instead of talking to people, you do online research and find out what people have already said or what scientists have discovered by looking at lots and lots of data. Secondary research won’t get you really specific data about what your customers think about your business. But secondary research will get you a lot of good information in a short amount of time. You’ll find out what’s going on in the economy in general, and in your industry. The government has a lot of information about marketing and who is buying what. Check out the U.S. Bureau of Labor Statistics for information about employment and for information on how well the economy is doing. Other organizations’ websites will have more information. The Small Business Bureau, universities, academic journals, and trade groups might all have the information you need. For specific help, you can head to your local library, where a librarian can help you get started on your research. For your baked goods business, you check out several websites online. You find market research information on the

How to Do Market Research

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After doing market research, you have to turn that data into useful information on your customers. Raw data may be interesting, but you have to make sense of that information for market research to be useful to your business. American Bakers Association, the Retail Bakers of America, and the U.S. Bureau of Labor Statistics. You see that people are buying more whole-grain baked goods, you find the prices people are willing to pay for baked goods, and you see that people are generally buying more baked goods recently. Now you have some important information. You could add more whole-grain products to your line of baked goods. And you know good prices for baked

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goods. All your research can help you make products that customers will buy and decide how much to charge them for those products.

Before Starting a Business Doing market research before you even start your business is a good idea. You can start selling without doing any research, but you might not get your products just right immediately. You might charge too much or sell something not enough people want to buy. Or you might sell in the wrong places. Part of the fun of starting a business is figuring it all out. Don’t be afraid of making mistakes—but you don’t want to make so many mistakes that you go out of business! Doing a little market research before you start selling will help you get it right, and still have room to improve things along the way. Think about your imaginary baked goods business again. Before you started your business, you did a little market research. You interviewed a few bakers and people who loved baked goods around town, to see what selling and buying baked goods was like. You also did some secondary research online. All that helped you figure out exactly what kinds of baked goods customers liked best, where they liked to buy them, and how much they would pay for them. Leanna Archer believes that market research is a big part of starting a business. She says, “Find out what exactly do you want to do as in starting a company. What do you want to market or what kind of industry you’re interested in entering? Learn everything you can about it.” She suggests, “Go online, learn about it, read books so that you know what you’re getting into before

How to Do Market Research

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Large companies often use focus groups in their market research. Companies gather groups of people who might be interested in their product and ask them questions. Focus groups may get to see or test products before they come out and give their opinions on the product. Talking to a group of potential customers about what they want is a good idea no matter how large your company is!

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you start. Because I know that helped me a lot when starting my company.”

After Starting a Business Just because you already have a business up and running doesn’t mean you don’t have to do market research anymore. You can research how well you are currently marketing your products, and whether customers are happy with your product and how much it costs. By doing market research even after your business is already set up, you can make it even better. After you started your business, you did the primary research at the farmers’ market. You found out customers really liked your muffins, but they didn’t like your cookies as much. You noticed they often bought cookies from other bakers instead. But your customers said they would pay more for the muffins than they already do, and that they would order them online for you. Now you have some choices. You could change the way you make cookies and see if people will like them better. Or you could stop making cookies altogether and instead focus on making your muffins even better. You could bake more muffins and start selling a lot of them online. Market research can lead to big changes in your business!

How to Do Market Research

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Three

What About the Competition?

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arketing is all about connecting customers to your company. But marketing isn’t complete if you don’t think about someone else—your competition. Chances are, you’re not the only one selling your product or service in town. Your competitors are all the businesses who are selling similar things to you. Any business that sells similar things and might have the same customers as you is competition. Your competition is often local, in the same town or city. But with the

Internet, your competition is also worldwide, because people can choose to buy things online from anywhere in the world. Figuring out your competition is a good marketing step. You can stay a step ahead of your competition, but only if you know who your competitors are!

Who’s Your Competition? Just as you can do market research by learning about your customers, you can do some research on your competition. The more you do, the more you’ll know what is going on. First, figure out if there are businesses like yours close by. Do a quick search online. Keep your eyes open as you’re walking or driving down the street. Look at advertisements in the newspaper and on community bulletin boards. Check the yellow pages. Unless your business is completely unique, someone else probably has a similar business. That doesn’t mean their business is exactly like yours. Chances are, actually, the other businesses will be a little different from yours. And that’s where you come in. You’re going to sell something a little differently, and attract customers who might be unhappy with the other businesses, or who haven’t even thought about buying from those other businesses. Leanna Archer has some advice for other young businesspeople. She says, “It makes all the difference to know about your company and what you’re getting into and how to deal with other companies.” Don’t ignore your competition, she advises. “You’re not the only company out there, you have competitors.”

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Searching the field that your business specializes in will begin to give you an idea of what other businesses offer the same products or services as your business.

What About the Competition?

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Staying up-to-date on your competition’s use of social media can give you insight into what they are doing well and what they are not.

Researching Competition Now it’s time to get to work researching your competition, after you’ve figured out who your competitors are. You could use social media sites like Facebook and Twitter. Check out the pages for your competition. What are people saying? Why do they seem to like the business so much? Websites like Yelp that rate businesses are really great for doing competition research. You can check out what customers like about other businesses, and what they don’t like. Then you can try to offer customers what your competition is lacking. Maybe

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customers don’t like the customer service at the other businesses. You can make a point of advertising that your business treats its customers well. Also watch for advertisements your competitors put out. Check for deals and sales they offer that might be attracting customers away from you. You could even sign up for your competitors’ newsletters, so you get news and advertisements right away. You could also just visit your competitors. There are no laws against doing some spy work! Go as an ordinary customer and see what your experience is like. If you enjoy it, ask yourself what you liked and whether you can do the same thing with your business. If you don’t like your experience, figure out why and avoid doing the same things at your business. Visiting competitors as a customer is especially good before you start your business. You don’t want to steal another business’s ideas, but you can get inspiration from them. You could also go visit your competitors and tell them what you’re doing. Most places have more than enough room and customers for competing businesses, especially now that businesses can use the Internet to sell. So your competition might be perfectly happy to talk to you and give you some tips. Try to treat your competitors like colleagues, not enemies. Then you can work together and solve problems together. You’ve been selling your baked goods for a few weeks now, but business isn’t quite as busy as you want it to be. You decide to check out your competition. At the farmers’ markets you sell at, there is one other baker. Plus, there are two bakeries in town that sell baked goods similar to yours. First, you look at their websites and their Facebook pages. People seem to really like all three businesses. In fact, some of the same people like all three! They all offer discounts sometimes, which you think is a good idea.

What About the Competition?

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Each one is a little different. One has a café right in the store and sells sandwiches and soups along with baked goods. One sells only chocolate-flavored baked goods. And one focuses on selling lots of baked goods at once for birthday parties, weddings, and other celebrations. You go visit and buy baked goods from each baker. You want to see how they taste compared to your own, and also how much they cost. All the bakers are friendly. The baker at the farmers’ market even recognizes you and gives you some advice. After visiting all the bakeries, you realize there isn’t anyone who sells healthy versions of desserts. You don’t want your business to be exactly like any of the three you visited. You’re already making your baked goods with whole-wheat flour, but you could go even farther. You could use less sugar, put more dried fruit in, and use oats. And you could advertise yourself as selling healthier alternatives to customers. You probably won’t just steal customers from the other bakeries. You might convince some of their customers to buy your stuff too. And you might convince a lot of people who never bought baked goods to start buying from you. You might never have come up with this idea if you hadn’t researched your competition.

Competition Is Good Competition isn’t a bad thing. Think about it from the point of view of a consumer. If you wanted to buy a cupcake, you might go to the grocery store where they sell different brands or the local bakery. You see all different kinds—chocolate, vanilla, small, large, strawberry frosting. You have a lot of choices, all made by different people.

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Now imagine you only had once choice. You could only buy a chocolate cupcake. You don’t really want chocolate though, but you have to buy it if you want any cupcakes at all. Plus, the cupcake is really expensive. The company that makes the cupcake can charge as much as it wants, because people have to buy it. The company doesn’t have any competition in cupcakes. From a customer’s point of view, competition is a great thing. It means we have more choices to choose from. It also means that we may be able to buy things more cheaply sometimes. Now think about the same situation in terms of your business. You are the one baking the cupcakes, and you want customers to buy from you. The trouble is, there are four other cupcake makers in town. Instead of grumbling about it, think about it as a good thing. You can learn from your competition. You can also make new cupcakes that no one else makes. For example, you could invent new flavors none of the other companies make. You’ll get customers who love the new flavors to buy from you because you’re providing more choices for them. Competition can even lead to new inventions!

What About the Competition?

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Four

How Much Money Can You Spend on Marketing?

B

y now you hopefully realize marketing is important. Unfortunately, marketing isn’t free. Doing market research, advertising, getting products to customers—none of that is free, at least most of the time. But spending money on marketing is a good business move and will make you more money in the long run.

Guidelines Lots of businesses, big and small, have figured out how to market over the years. Today, businesspeople have come up with some general guidelines about how much to spend on marketing. Spending too much will cost you a lot of money. And spending too little won’t get you enough customers. Marketing guidelines find the right amount of money to spend to grow your business.

Free Marketing

You can do marketing for free, if you’re creative. You can set up a website or blog for free, for example, and then send out the link to everyone you know. Eventually new customers will come across it, and might end up buying from you. Do market research online whenever you have some spare time. You have to pay for some market research services, but not if you do a good online search. Get more customers to come in by offering sales online. Then there is some of the best marketing of all—word of mouth. Tell everyone you know about your business. You can even tell strangers! Then those people will tell other people they know, and so on. You still have to convince all those people to buy from your business, but you just got a lot of free advertising.

To keep your marketing going and to keep your number of customers where it is, you should spend about 5 percent of the money you make. If you spend less, you might end up losing

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some customers or not replacing customers you lose. Then your business will start to suffer. If you want to grow your business and get more customers, you will have to spend more on marketing. Spend 10 percent of the money you make. You’ll reach more people with more money. What do you actually spend all that money on? Everything that has to do with marketing! Marketing money goes to printing fliers, buying ads in the newspaper, giving customers things for giving interviews or taking surveys, and paying any employees you have who work on marketing. Pick one or two ways to market at first. Businesses just starting out don’t always have much money to spend on marketing. But you should be spending something. The more money you make, the more you can dedicate to marketing. And then the more money you’ll make. Marketing is like a big cycle that keeps growing!

What’s Right for Your Business? However, guidelines aren’t rules. You can use them to start thinking about how much you should be spending on marketing for your business. In the end, though, you have to decide how much to spend based on what your company is like and what you need. You might spend more than the guidelines or less. You can break down marketing into individual products. If you’ve just started selling a brand new product, you might want to spend more money on marketing it than older products customers already know. If your business is brand new, you might also want to spend more money on marketing. No one knows who you are or what

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your business does yet. To get your name out there, and figure out what your potential customers want, you’ll have to spend a little more money. Then as your business grows, you can spend a little less. More people have heard of you. You still want to work on getting new customers, but it’s a lot easier and cheaper once you have at least a few.

Some Marketing Math

To figure out how much you money you should spend to market your business, figure out what 5 percent of the money you make is. Also figure out what 10 percent is. Then pick an amount somewhere in the middle, based on how much you want your business to grow. For example, maybe you make $600 a month mowing lawns. You calculate that 5 percent of $600 is $30, and 10 percent is $60. You want a lot more customers, so you think you should spend closer to 10 percent. You can afford to spend $60 a month, so you take that money and print lots of posters to hand out around the community.

If you’re going to spend a lot of money on marketing, you want to be sure you get something in return! That something is more customers and more money. You have to spend money to make money. You won’t find an exact equation that will tell you how much you will definitely make by spending money on marketing. You should already be keeping track of your sales, though. Keep an eye on them after you spend a big chunk of money on marketing.

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Your sales should go up, if you’ve spent money on the right marketing strategy. They might not go up right away, though. Keep watching for a few weeks afterward, and see what happens. If sales don’t improve, you’ll know your marketing didn’t work and you should try something else.

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Five

Make a Marketing Plan

O

nce you realize you need to market your business, you have to start organizing yourself. Instead of just throwing money at advertising and market research, you need to make a marketing plan. Marketing plans can be long and very detailed, or they can be short and simple. Very large companies might choose to create very long plans that are hundreds of pages long, but it’s fine to create a shorter one for a business you’re just starting.

Organizing Your Plan You’re free to organize your marketing plan however you want, but no matter what it looks like or how long it is, it should be clear

Business and marketing plans help keep your business on track and moving toward meeting your goals.

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and to the point. You want to be able to look at your marketing plan a few months from now, and see what you were thinking, and whether you’ve been following the plan or not. Your plan should cover a year. You don’t want to get too far ahead, because you don’t know how successful your current plan will be. If you’re really successful, you might want to change your marketing plan for the next year. And if your plan isn’t successful, you’ll want to change it in other ways.

Business Plan

You might have already created (or are thinking of creating) a business plan. Business plans are a little different from marketing plans. Business plans say what your business does and what your business goals are. They contain a lot more than just marketing, including who will work for your business, how you will make money, and how you will get supplies. Your marketing plan is a lot more focused on just one part of your business.

This is where all your market research comes in. At school, you do research and write a report. Writing a marketing plan is very similar, because you’re doing research and then writing your plan. Your marketing plan should have a few key points, outlined below. Print out your marketing plan and put it in a binder. You’ll be able to add other material later on if you need to. Just make sure you don’t lose the binder! Keep it somewhere safe and handy so you can look at it again and again in the future.

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Defining Your Customer

Think about who you want to sell to. Is your business going to sell to young people? Adults who own homes? You can’t realistically sell to everyone. Some people just won’t be interested. For example, if you decided to babysit, you would only be looking for customers with young kids. Marketing your business to people without kids wouldn’t make much sense!

Your Competition

What makes your business different from your competition? Marketing yourself differently from your competitors is called differentiation. In this section, you want to outline who your competition is and how you are different from them. How will you stand out from the crowd?

Marketing Goals

You need to have a good idea of where you’re going with your marketing. Ask yourself what you want to achieve and set real goals. Don’t just say you want to increase the number of customers you have. How many more do you want? Ten? Two hundred? Other goals could include customer satisfaction or increasing profits. You can have more than one goal, but the more you have, the more complicated marketing will get during the year. Consider focusing on one or two big goals and putting a lot of money and energy toward them. As your business grows, you’ll be able to focus on your other goals later on.

Marketing Strategy

In this section, think about how you will achieve your goals. In here, add information about how you will tell people about your business. You can include how you will package and distribute

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your product, and how you’ll advertise your business. Get specific. If you’re planning on redesigning your website, advertising on the radio, getting a Twitter account, or repackaging your products, write it here. If you have employees, include which employees will do which marketing tasks. The marketing strategy section is the action-oriented part.

Pricing

You need to decide how much your products or services will cost. You’ve hopefully done some market research about how much people would be willing to pay, so you can make it part of your marketing plan here.

Costs

No marketing plan is complete without mentioning how much your marketing will cost. Make a budget, which is a plan of how much you can spend, and how much you’d like to spend on which parts of marketing.

Timeline

The best plans have a timeline for making everything happen. You don’t have to have very specific dates, but at least guess how much time each part of your strategy will take. You have a year to make everything in your plan happen, but you can break down each part month by month.

Your Business Plan What does all this look in terms of a business you might run? Let’s take a look at how each part would look if you decided to really run a baked good business.

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A Marketing Plan Example

The Small Business Trends website gives good examples of very short marketing plans. It’s a good place to start when you’re thinking about what you want your marketing plan to look like. Here is an example of a marketing plan for a pet daycare business. On the left are the big ideas, and on the right is how this person plans on making the big ideas happen.

Category 1. My reason for existence:

Strategy 1. To provide pet owners within the city of Springfield a safe and fun place for their pets. 2. What sets my business apart 2. An indoor pet park and play from the rest: land. 3. My ideal customer is:

3. Springfield professionals working in the 10-mile radius. 4. What’s most important to my 4. That their pets are safe; Pets can ideal customer when they are buy- have fun in any weather; Exercise. ing what I’m selling: 5. What I want to accomplish this 5. Lease a building; Recruit year: customers.

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6. The top 3 things that are going 6. Lease a building; Recruit custo get me there: tomers. Direct mail in nearby developments; Drop-offs in office parks; Open house events. 7. How much will each pro- 7. Mail—60%; Drop-offs—15%; gram contribute to my revenue/ Open house—25%. profitability? 8. What will trigger my ideal cus- 8. Being stuck at work and pet tomer to think of me: needs to be let out. 9. Programs I am running to reach 9. Radio advertising. my goal: 10. How much money will I need 10. $50,000 to get it done?

Defining Your Customer

You have decided to focus on healthier versions of regular baked goods. You want to target customers who like dessert, but want to be healthy about it. Your ideal customers right now are healthconscious adults.

Your Competition

You have three other bakeries as competitors in your town. However, you are differentiating yourself by offering healthy baked good options, which the other three bakeries don’t have.

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Marketing Goals

You don’t have many customers right now, so you’d like to triple your customers in the next year. Overall, you might end up with 300 customers.

Marketing Strategy

To get more customers, you will be redesigning your website and taking orders online. You’ll also add another farmers’ market in the next town over from yours, so you will be selling at two markets and increasing the number of customers you could have. You also want to make it into the local media, so your marketing plan includes giving an interview to the local newspaper.

Pricing

You found that people were willing to pay $1.50 for your cupcakes, but you think you can charge a little more now that you’re branding yourself as a healthy baked goods business. Market research also shows people are willing to pay more too. To start, your marketing plan says you will charge $2 for a muffin, and $3 for everything else you make.

Cost

You really want to get more customers, so you’re prepared to spend a lot of money on marketing. You are going to spend 20 percent of the money you make each month on marketing.

Timeline

You have a year to make your goals happen, before you have to write a new market plan. For the first four months, you’re going to focus on selling at the new farmers’ market, and making that a good experience. The next four months, you’ll focus on your

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website and starting to sell orders online. And in the last four months, you’ll try to get an interview with the paper.

Following Up Once you’ve created your market plan, you have to follow up. If you don’t keep track of your marketing, you’ll never know if your plan was successful! You will need to take a look at your goals and figure out how you are going to measure your success. Using numbers of some sort is usually a good way to measure your success. The number of people who signed up for your newsletter, the number of people visiting your website, or how much money you make can all be good measures of marketing success. Record how far along you are toward your goals every month or so. As a good businessperson, you should keep records. Somewhere, you should have a chart or notebook that records how many customers you have and how much they have spent, along with how much you’re spending to keep your business going. Add these records to your marketing plan binder or computer folder. Every month, take a new measurement from your records and add it to the binder. At the end of a year, you’ll have a binder full of information about your plan and whether or not you were successful. Do some more market research too. You can ask new customers how they heard of you, to see if your advertisements or media appearances worked. Ask them what they think of your business, to see if most people have a positive experience. Market research never ends, because your customers are always changing. If your marketing plan doesn’t seem to be working, take another look at it. Give your plan a few months to work first, though.

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Then, if nothing is happening with your customers, you can revise your plan. It’s okay if you’re not being as successful as you’d like. Starting and running a business means experimenting with things, and almost every businessperson doesn’t get it right all the time. You are in charge of your business, so that means you are free to change your marketing plan when you need to. Learn from your mistakes, and try new things.

Marketing Your Age Your marketing plan is entirely up to you. If you’re creative enough, you can sell anything! You just need some good ideas and a good marketing plan. Leanna Archer used her age when it came to marketing. She could have found it hard to sell her hair products to people because she was a little girl. Sometimes people wouldn’t take her seriously because she was so young when she started her business. Her parents were even doubtful. However, she turned her marketing around and included her age as part of her marketing plan. “Well, the pros of my age throughout the past couple of years,” Leanna says, “were when people heard that there was a hair and body care product company run by a nine-year-old; that alone caught people’s attention. It made the community interested in what I was doing because entrepreneurship in young ages is pretty rare.” Leanna figured out what made her business unique, which was partly her age. Then she used her age to market her products. You can find tons of hair care products on shelves, but not too many made and sold by a teenager!

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Leanna and other young entrepreneurs have learned the value of marketing their businesses. Without marketing, they probably wouldn’t even have businesses! From market research to a marketing plan, spending time on marketing will pay off. Try it yourself, and see how far marketing takes you and your business.

Business Ideas

Young people can start up a lot of different businesses. You probably don’t have time to run a full-time business, so the trick is to choose something you can do when you have time after school, on the weekends, or during school vacations. Here are some ideas: • • • • • • • • •

babysitting pet care, including dog walking, pet sitting, and dog grooming. odd jobs (fixing things around the house) lawn care, including mowing lawns, raking leaves, snow shoveling, and gardening tutoring in school subjects you’re good at giving music lessons on an instrument or in singing blogging, which can earn money through advertisements selling vegetables, herbs, prepared foods, or crafts at a farmers’ market or at craft fairs website design for individuals and companies

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Find Out More BizKids www.bizkids.com

Online

The Kids’ Guide to Business www.teachingkidsbusiness.com/TheKidsGuideToBusiness.htm Marketing Basics www.entrepreneur.com/marketing/marketingbasics/index.html Small Business Administration www.sba.gov Small Business Marketing Hub www.hubspot.com/small-business-marketing-hub

In Books

Bateman, Katherine R. The Young Investor: Projects and Activities for Making Your Money Grow. Chicago, Ill.: Chicago Review Press, 2010. Daniels, Kathryn. Common Sense Business for Kids. Placerville, Calif.: Bluestocking Press, 2006. Nicholas, Jimmy. Small Business Marketing: Your Ultimate Guide. Waterford, Conn.: JE2000, 2013.

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Vocabulary Analyzing: looking at data and drawing conclusions from it. Colleagues: people with whom you work. Consumer: a person who buys something; a customer. Customer service: the way in which a business interacts with customers; how businesses provide products and support for customers. Data: information, especially in number form. Economy: a country or area’s way of producing, distributing, and consuming goods and services; how it makes money. Employment: having a job. Entrepreneur: a businessperson who takes a lot of risks when starting a business. Industry: a particular kind of business, and all the individual people who own businesses in that category. Model: a system or things used as an example to follow. Profit: money made beyond what has been spent to make the money in the first place; extra money made after accounting for paying employees, renting a store, etc. Recruit: to persuade someone to do something. Revenue: the entire amount of money a business makes. Strategy: a plan of action. Trade groups: organizations made up of similar businesses who communicate about experiences they have in common.

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Index advertising 13, 15–18, 39, 43–44, interviews 21, 27–28, 45 49, 53, 55 Archer, Leanna 19–20, 23, 31, 36 mistakes 27, 31 money 15, 17, 21, 23, 28, 43–47, baked goods 11, 15, 19, 29–31, 49, 51–52, 55–57 39–40, 55–56 budget 53 newsletters 39 business plan 7, 51 packaging 13 competition 5, 35–36, 38–41, 52 price 19 cost 17, 19, 40, 44, 53 profit 19 customers 7–9, 11–19, 21–23, public relations 17, 23 25–33, 35–36, 38–41, 43–46, 52, 54–57 records 57 customer service 39, 61 research 14, 25–33, 36, 38, 43– 44, 49, 51, 53, 56–57 data 26, 28–30 differentiation 52 sales 13–15, 18, 21, 39, 44, 46–47 discounts 18, 39 social media 22, 38 distribution 13, 19, 21 strategy 15, 20, 47, 53–54 surveys 27, 29, 45 entrepreneurs 21 timeline 53 farmers’ market 15, 33, 40, 56 U.S. Bureau of Labor Statistics goals 50–52, 56–57 29–30 guidelines 44–45 websites 14, 29, 38–39 industry 29, 31, 61

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About the Author and Consultant C.F. Earl is a writer living and working in Binghamton, New York. Earl writes mostly on social and historical topics, including health, the military, and finances. Brigitte Madrian is the Aetna Professor of Public Policy and Corporate Management at the Harvard Kennedy School. Before coming to Harvard in 2006, she was on the faculty at the University of Pennsylvania Wharton School (2003–2006), the University of Chicago Graduate School of Business (1995–2003) and the Harvard University Economics Department (1993–1995). She is also a research associate and co-director of the Household Finance working group at the National Bureau of Economic Research. Dr. Madrian received her PhD in economics from the Massachusetts Institute of Technology and studied economics as an undergraduate at Brigham Young University. She is the recipient of the National Academy of Social Insurance Dissertation Prize (first place, 1994) and a two-time recipient of the TIAA-CREF Paul A. Samuelson Award for Scholarly Research on Lifelong Financial Security (2002 and 2011).

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Picture Credits Alfred Edmond Jr.: p. 20 Dreamstime.com: Sue Harper: p. 26 Minifini: p. 30 Alain Lacroix: p. 48 Dmitriy Shironosov: p. 12, 18, 34 Amy Walters: p. 16 18percentgrey: p. 50 Oleksiy Mark: p. 42 Orlando Florin Rosu: p. 10 Asterixvs: p. 32 Pressureua: p. 38 Ryan Jorgensen: p. 24

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