Did you know that in the United States there are about 400,000 business start-ups every year? Did you know that 470,000 small businesses shut their doors in that same period of time? While one of the greatest characteristics of our capitalist economy is the spirit of entrepreneurship, unfortunately, many of us leap before we look.
I reflected on this after speaking to a class of 5th grade students studying advertising. As part of a class assignment, the students will soon form a marketing plan complete with the product or service of their choice to be marketed.
What was interesting to me was their understanding of principles basic to marketing. For the students’ benefits, I referred to the oldie, but goodie rules of marketing the 6 P’s: product, people, pricing, place, positioning, and promotion.
Once I explained each ‘P’ and what was important to consider, the students were able to grasp on quickly. This became especially apparent to me when we discussed the place (location or distribution stream) for their products, people (the target customer) and promotion (advertising).
The students displayed a keen understanding of the importance of “traffic” either literal or virtual when it came to their location. When we discussed physical store locations, one student stated that an urban environment with “lots of people around” would be a good idea. They jumped right over the concept of a website for the individual business and went straight for commonly known e-commerce sites such as eBay, and Amazon. Inherently they understood that a business needs to sell their products or services, however they can. They got it!
In fact they got it much better than some businesses I have observed make businesses make a poor choice in location for their business. In their excitement to start a business, or relocate or expand, it is not uncommon to see a customer not think things through, or base their decision on a factor without hard data to back it up. In the case of an online presence, which is essential today, often the location choice is no location, meaning no web or online presence at all for a business. In fact, a recent survey by The Score Association, the nonprofit organization of small business counselors, revealed that only 51 percent of small businesses have a website, despite the fact that 97 percent of consumers search online for products and services.
We had a lively discussion about the people in their marketing plan. Once I explained that it is important to reach not only the people who would use the product or service, but also those that influenced the decision, or who have the ultimate buying power they understood sometimes there is more than one target market. The example young students can easily comprehend is walking down the cereal aisle at the grocery store with their mom. The cereal we selected for the point of discussion was Lucky Charms. While they were the likely users of the cereal and may influence the purchase of a cereal, they knew ultimately, Mom was the decision maker and thus also the target market.
At the very core of successfully marketing a business, is an understanding of the target market or markets. Unfortunately, not enough businesses truly take the time to really think this through. The downside of this is wasting a lot of time, and probably spending a lot of money trying to send an advertising message to the wrong people.
The class of 5th graders also understood which advertising mediums might work, and which ones probably would not. One student’s idea for a business was to offer a dog walking service. Once we worked through where her customers were likely located (within two miles of her home, so she could bike to them) the whole class quickly came to the conclusion that media choices with a large reach, such as television or radio advertising were probably not going to work due to the expense of reaching customers out of her target area. But, what they did identify as a good idea were door hangers, the dog-walking student could put out herself. Brilliant!
The conversation about actual promotion is where I learned some lessons. We were identifying possible media to use to promote, and they identified television, online, posters, and magazines. I was maneuvering the conversation for someone to suggest radio. We never got there, at least not free airwaves radio. What they did suggest was iTunes, Pandora, YouTube, etc. That was where I learned an valuable lesson. The world keeps changing and if you are in business, you have to keep up. This class of 5th graders evidently doesn’t listen to radio like many of us have or do.
So, is it possible that of the 470,000 businesses that shut their doors, there was a percentage that did not understand these basic marketing principles as well as a 5th grade class? Probably.