- Who
do I sell to?
- What
price should I set?
- Advertising:
Should I do it and how much?
- Service
- Loans
Who
do I sell to?
When you are choosing to whom to sell your product
(target marketing), you must take care to make an informed choice.
A mistake in targeting can be costly or even the downfall of your
business. If you target the wrong buyers, admit your mistake and spend
the time and money on researching who the right buyers are, where
they live, what they can afford to pay and what kind of quality they
are looking for. You have to ask yourself, "Who needs my product the
most?" How do we find this out? Research research research! There
are two types of research that the marketing manager of every successful
business employs: primary and secondary.
Primary research is first-hand, new research done
for your specific business. In Dollar Bay, we can do this by getting
out on the street! Go to your competitor's stores and see what kind
of shoppers comes in there. Visit the map of Dollar Bay to learn about
the neighborhoods and what type of consumers lives in each one. Demographics
are important because if your store is located in a high income neighborhood,
you probably will not do well selling low price, low quality
merchandise. Lastly, use the "Market Targeting" tool under the "Research"
button on your control panel. It can give you a breakdown of the various
neighborhoods in Dollar Bay.
Secondary research is research done by someone else,
for a different purpose than yours but can be applied to your company.
For example, much of the demographic data in the US originates from
the US government's ten-year censuses. To do secondary research in
Dollar Bay use the "Market Reporting" tool under the "Research" button
on your control panel. This will allow you to take a look at a broad
view of the local markets in town and compare them to your company.
Outside Dollar Bay, in your everyday life, you can find secondary
research in your local library in magazines like "Consumer Reports"
and "Advertising Age".
As a final note, remember that demographics, while
a useful tool, are not the only tools used in deciding on a target market.
Too many times businesses fail to listen to their customers and fail
because they use only demographics without paying attention to buying
patterns. The customer is the ultimate factor in deciding what to
sell.
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What
to sell?
Wow! You have your own store, now what do you want
to sell??? Unless you are selling highly complex items like computers
it is not necessary to be an expert in a product to sell it in your
store. Look around Dollar Bay and see what other people are selling.
If everyone is selling cows, you sell chickens. It is usually better
to have a bigger niche in a small market than to be a small fish in
a big pond. If you do decide to sell cows in a large cow market, then
you have to differentiate yourself in some way. Usually this means
offering better service or setting better prices. Advertise in different
ways than your competition and through different channels. Offer a
wider variety. Essentially, make your store a destination store: one people
will travel across town to visit.
To decide what to sell in Dollar Bay, visit your competition
and see what niches need to be filled. If you pick the wrong item
remember that to sell your inventory at a loss is better than having
it gather dust on your shelves. Then change your core business or
your advertising and try again with new merchandise. Avoid selling
too many different types of products, though. While cows and horses
are probably okay to sell together, your customers might get confused
if you start selling cows and convertibles.
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What
price should I set?
When you order products from suppliers in Dollar Bay
they are automatically marked up to the Manufacturers Suggested Retail
Price (MSRP). In a highly competitive market this just won't cut it.
Your customers will go elsewhere to pay less for the exact same product.
Buyers are no longer price takers, and you have no room to bargain.
In Dollar Bay if your competition is matching or beating your price,
you should know! There are three ways of checking your competition's
prices in Dollar Bay.
-
Go to their stores and ask their employees
the price of the product you are price checking.
-
Check the local newspaper by clicking on the "Newspaper" button on your
control panel. Often times price wars will be reported there.
-
Use the "Market Reporting" tool under the "Research" button on your control panel
to research competitor's prices on a particular item.
-
Cover your expenses - You have bills to pay every week! Employees and
advertising are not free. You have to balance your prices with
your expenses. Click on the "Ledger" button on your control panel
to see how much you have been paying in expenses each week.
-
Don't be a loss leader - A loss leader is someone who sells one product
at a loss to make money on a related, more expensive item. In Dollar Bay,
this strategy will not be effective.
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Advertising:
Should I do it and how much?
You have to advertise! There is absolutely no way
to survive in any market without getting the word out to your customers.
Walt Disney Corporation matches every dollar that it puts into its
business with a dollar of advertising! While this could get a little
expensive for a small business owner, it demonstrates the importance
of advertising. Keep the following in mind while determining how you
are going to advertise:
- Use only one medium for the highest cost
effectiveness. Just because you can advertise on TV and on the
radio and through the mail and in the newspaper does not mean that
you should.
- TV is not necessary! It's an expensive
way to advertise and there is no way to control who sees your
ads and measure their effectiveness.
- If you have a product that needs a lot
of explanation, like computers, use print advertising. Print advertising,
like in a newspaper, is a more efficient use of your money and
a great way to get the word out if you are a new business!
- Like TV, it is hard to control who sees
your radio ads and if they are even effective. If you have a radio
station that targets specific demographics then it will be useful.
- Make sure that you are targeting your
ads to make them the most cost effective. Advertising is expensive
so you do not want to waste your money on consumers who would never
be interested in your product. General advertising does not work
at all for some businesses and many business owners do not
grasp this.
- It is hard to measure the results of any
advertising campaign. Just remember that without advertising your
business will suffer.
- Do not mix your messages. Consumers get
confused when you emphasize high quality and free parking. And
if you say that you have low prices and high service, then you
should have the low prices with high service!
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Service
More often than not, service can be the determining
factor for repeat business. This is especially true if you are selling
highly complex or expensive products like computers that need greater
explanation. In Dollar Bay you can increase your service level by
- having an employee (people will not shop at your store
unless you do).
-
paying your employee a higher salary. More highly paid employees are happier
and more helpful employees. In real life training also adds a great deal to
your employees ability to give high service.
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Loans
So you are thinking about getting a loan? There are
several factors to keep in mind when making this decision. First of
all, what is your current financial situation? Experts say that the
best time for a business loan is when you do not even need one! When
a business is in a financial crunch the bank may deny a loan request
because of the increased risk of the business defaulting on the loan.
The more you owe others and the lower your net worth, the greater
the chances that the bank will not grant you a loan. On the other
hand, if a business is in good financial shape the bank will be more
than happy to grant your loan request and you will have extra money
to fall back on in a time of increased demand or unexpected expenses.
Okay so you decide to get a loan and the bank has
approved. What are the risks now? Well, the first, and most obvious,
risk is default. If you default on paying back your loan, the
bank will be forced to take drastic measures to ensure that they get
their money back. Unfortunately this may ultimately result in your
business going bankrupt with your standing in the unemployment line.
The second big risk to getting a loan is the hidden cost of interest.
On some loans, like mortgage loans, the interest you pay could be
more than the total value of your loan. Luckily, here in Dollar Bay
we do not have to worry about interest on bank loans, but it's something
to keep in mind if you ever move out of the city.
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