Copyright © 2006 Thomson Business

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 7–1

What is Small Business Marketing?What is Small Business Marketing?What is Small Business Marketing?What is Small Business Marketing?

• What is marketing?

–simply selling a product or service?

–activities that direct the flow of goods and services from producer to consumer or user?

• Small business marketing consists of business activities that:

–Identify a target market

–Determine target market potential

–Prepare, communicate, and deliver a bundle of satisfaction to the target market (customers or users)


Strategic Marketing Research ActivitiesStrategic Marketing Research ActivitiesStrategic Marketing Research ActivitiesStrategic Marketing Research Activities

Market Analysis–Activities which locate and describe potential

customers.–An evaluation process that encompasses market

segmentation, marketing research, and sales forecasting

Developing the Marketing Mix (The Four “P’s”)

–The specific product or service, price, promotional approach, and distribution (place) channel(s) to be used for each target market (customer group).


Exhibit 7.1

The Marketing Plan The Marketing Plan and Supporting and Supporting

Marketing ActivitiesMarketing Activities

The Marketing Plan The Marketing Plan and Supporting and Supporting

Marketing ActivitiesMarketing Activities


The Formal Marketing PlanThe Formal Marketing PlanThe Formal Marketing PlanThe Formal Marketing Plan

• Market Analysis–Customer profile

•A description of potential customers in a target market

–Sales forecasts•Outlook: “most likely,” “pessimistic,” and “optimistic”

• The Competition–Profile of key management personnel–Overall strengths and weaknesses–Related products being marketed or tested–Likelihood of competitors’ entry into target market


The Formal Marketing Plan (cont’d.)The Formal Marketing Plan (cont’d.)The Formal Marketing Plan (cont’d.)The Formal Marketing Plan (cont’d.)

• Marketing Strategy (4 “P’s” for each segment)

–Product and/or service section

•Decisions affecting the total product

–Distribution section (Place)

•Decisions regarding product delivery to customers

–Pricing section

•Setting an acceptable value on the product

–Promotional section

•Communicating information to the target market


Analyzing the CompetitionAnalyzing the Competitionwww.sba.gov/starting_business/marketing/analysis.htmlwww.sba.gov/starting_business/marketing/analysis.html

Analyzing the CompetitionAnalyzing the Competitionwww.sba.gov/starting_business/marketing/analysis.htmlwww.sba.gov/starting_business/marketing/analysis.html

• COMPETITOR ANALYSIS– Who are your five nearest direct competitors?– Who are your indirect competitors?– Is their business growing, steady, or declining?– What can you learn from their operations or from their advertising?– What are their strengths and weaknesses?– How does their product or service differ from yours?

• Gathering information about competitors…– Internet (…what is on their website?)– Personal visits (…what do the premises look like? …how are the

products displayed and priced?)– What do your customers say about your competitors? (…ask them!)– Competitor advertisements– Trade shows and industry association publications– Industry surveys and computer databases


Understanding Potential Target MarketsUnderstanding Potential Target MarketsUnderstanding Potential Target MarketsUnderstanding Potential Target Markets

• Market–A group of customers or potential customers who

have purchasing power and unsatisfied needs

• Market Segmentation–The division of a market into several smaller groups

with similar needs

• Focus strategy–A type of competitive strategy in which cost and

marketing strategies are achieved within narrow market segments


Ingredients of a MarketIngredients of a MarketIngredients of a MarketIngredients of a Market

Ingredient 1Customers:People or

businesses

Ingredient 2Purchasing

power: Money/credit

Ingredient 3Unsatisfied

needs


Types of Market Segmentation StrategiesTypes of Market Segmentation StrategiesTypes of Market Segmentation StrategiesTypes of Market Segmentation Strategies

• Unsegmented Strategy (Mass Marketing)–A strategy that defines the total market as the target

market

• Multisegment Strategy–A strategy that recognizes different preferences of

individual market segments and develops a unique marketing mix for each

• Single-Segment Strategy–A strategy that recognizes the existence of several

distinct segments but only focuses on the most profitable segment

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 7–10Exhibit 7.3

An Unsegmented An Unsegmented Market StrategyMarket Strategy

An Unsegmented An Unsegmented Market StrategyMarket Strategy

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 7–11Exhibit 7.4

A Multisegment A Multisegment Market StrategyMarket Strategy

A Multisegment A Multisegment Market StrategyMarket Strategy


Exhibit 7.5

A Single-A Single-Segmentation Segmentation

Market StrategyMarket Strategy

A Single-A Single-Segmentation Segmentation

Market StrategyMarket Strategy


Estimating Market PotentialEstimating Market PotentialEstimating Market PotentialEstimating Market Potential

• The Sales Forecast–A prediction of how much (in units and/or dollars) of a

product or service will be purchased within a market during a specified period of time

•Assesses the new venture’s feasibility•Assists in planning for product scheduling, setting

inventory levels, and personnel decisions

• Limitations to Forecasting (for Entrepreneurs)–New business circumstances are unique–Lack of familiarity with quantitative methods–Lack of familiarity with the forecasting process


The Forecasting Process:The Forecasting Process:Two Dimensions of ForecastingTwo Dimensions of Forecasting

The Forecasting Process:The Forecasting Process:Two Dimensions of ForecastingTwo Dimensions of Forecasting

• The Starting Point–Breakdown process (chain-ratio method)

•Forecasting begins with macro-level variable and works down to the sales forecast (top-down).

–Buildup process•All potential buyers in various

submarkets are identified, and then the estimated demand is added up (bottom-up).


Sales Forecasting with the Breakdown MethodSales Forecasting with the Breakdown MethodSales Forecasting with the Breakdown MethodSales Forecasting with the Breakdown Method

*Figures in this column, for variables 2–7, are derived by multiplying the percentage or number in the Estimating Value column by the amount on the previous line of the Market Potential column.

Exhibit 7.7


SALES FORECASTSALES FORECASTSOAPY RIDES CAR WASH POPULATION ESTIMATESSOAPY RIDES CAR WASH POPULATION ESTIMATES

SALES FORECASTSALES FORECASTSOAPY RIDES CAR WASH POPULATION ESTIMATESSOAPY RIDES CAR WASH POPULATION ESTIMATES

Data from the 2000 Census Report for East Meadow, New York

Population = 160,000Car owner population = 100,000

Market Segmentation Data

• Potential Customers % Population Estimated Car Owners– New Car Owners 7.2 % 7,200– Older Luxury Car Owners 12.5 % 12,500– Sports Car Owners 6.5 % 6,500– Lifetime Owners 17.0 % 17,000TOTAL NUMBER OF CAR OWNERS 43,200

New and Used Car Dealerships (<7 miles) 15Businesses w/Fleet Cars/Vans (<5 miles) 10


SALES FORECASTSALES FORECASTSOAPY RIDES CAR WASH ASSUMPTIONSSOAPY RIDES CAR WASH ASSUMPTIONS

SALES FORECASTSALES FORECASTSOAPY RIDES CAR WASH ASSUMPTIONSSOAPY RIDES CAR WASH ASSUMPTIONS

Car Wash Assumptions (by retail customer segment) :

We hope to attract...

10-15% of new car owners8-10% of older luxury car15-20% of sports car owners6-10% of lifetime owners

Furthermore, we assume that...

New car owners will wash their car 5-6 times a year at our facilityOlder luxury car owners will wash 4-5 times a year at our washSports car owners will wash 8-10 times a year at our car washLifetime owners will wash their car 3-4 times a year at our facility


SALES FORECASTSALES FORECASTESTIMATED RETAIL WASHES PER YEARESTIMATED RETAIL WASHES PER YEAR

SALES FORECASTSALES FORECASTESTIMATED RETAIL WASHES PER YEARESTIMATED RETAIL WASHES PER YEAR

POTENTIAL CAR WASH CUSTOMERS AND TOTAL EXPECTED WASHES

• Population Segments Optimistic Pessimistic Most Likely– New Car Owners 1080 (15%) 720 (10%) 864 (12%)

– Older Luxury Cars 1250 (10%) 1000 (8%) 1125 (9%)

– Sports Car Owners 1300 (20%) 975 (15%) 1105 (17%)

– Lifetime Owners 1700 (10%) 1020 (6%) 1360 (8%)

• Estimated Car Washes– New Car Owners 6x1080=6480 5x720=3600 5x864=4320

– Older Luxury Cars 5x1250=6250 4x1000=4000 5x1125=5625

– Sports Car Owners 10x1300=13000 8x975=7800 9x1105=9945

– Lifetime Owners 4x1700=6800 3x1020=3060 4x1360=5440

Estim Retail Washes/Year 32530 18460 25330


SALES FORECASTSALES FORECASTDEALER AND FLEET ASSUMPTIONSDEALER AND FLEET ASSUMPTIONS

SALES FORECASTSALES FORECASTDEALER AND FLEET ASSUMPTIONSDEALER AND FLEET ASSUMPTIONS

New and Used Car Dealerships within 7 miles = 15Businesses with Fleet Cars/Vans within 5 miles = 10All fleets and dealerships will receive ~30% discount off the regular price

Dealer and Business Fleet Car Wash Assumptions

We hope to attract...

Up to 20% of the new and used car dealers within a seven mile radiusUp to 20% of the business fleets of cars and vans within a five mile radius

Furthermore, we assume that...

New and used car dealers will cycle their car inventory through our car wash between four and twelve times a year

The average car dealership maintains an average inventory of about 60 carsBusiness fleets will cycle through the wash about four to eight times a yearThe average business fleet consists of about 50 vehicles


SALES FORECASTSALES FORECASTESTIMATED DEALER AND FLEET WASHES PER YEARESTIMATED DEALER AND FLEET WASHES PER YEAR

SALES FORECASTSALES FORECASTESTIMATED DEALER AND FLEET WASHES PER YEARESTIMATED DEALER AND FLEET WASHES PER YEAR

Dealer and Business Fleet Car Wash Estimates

• Dealer Segment Optimistic Pessimistic Most Likely– Subscribed Dealers 3 1 2– Avg # of Cars/Dealer 60 60 60– Avg # washes/Year 12 4 8– Washes per Dealer 720 240 480

Est Dealer Washes/Year 2160 240 960

• Business Fleets Optimistic Pessimistic Most Likely

– Subscribed Fleets 2 0 1– Avg # Cars/Fleet 50 50 50– Avg # washes/Year 8 4 6 – Washes per Fleet 400 0 300

Est Fleet Washes/Year 800 0 300


SALES FORECASTSALES FORECASTCOMBINED CAR WASH ESTIMATES COMBINED CAR WASH ESTIMATES

SALES FORECASTSALES FORECASTCOMBINED CAR WASH ESTIMATES COMBINED CAR WASH ESTIMATES

OPTIMISTIC PESSIMISTIC MOST LIKELY

Regular Washes/Year 32530 18460 25330

Dealer Washes/Year 2160 240 960

Fleet Washes/Year 800 0 300

EST TOTAL WASHES/YR 35490 18700 26590


SOAPY RIDES CAR WASH REVENUE ASSUMPTIONSSOAPY RIDES CAR WASH REVENUE ASSUMPTIONSSOAPY RIDES CAR WASH REVENUE ASSUMPTIONSSOAPY RIDES CAR WASH REVENUE ASSUMPTIONS


Regular Washes/Year 32530 18460 25330Est Dealer Washes/Yr 2160 240 960Est Fleet Washes/Yr 800 0 300

EST TOTAL WASHES/YR 35490 18700 26590

Assumptions About Regular WashesExterior Wash Only 60% 90% 75%Full Wash (inside & out) 40% 10% 25%

Assumptions About Fleet/Dealer WashesExterior Wash Only 80% 100% 90%Full Wash (inside & out) 20% 0 % 10%

Exterior wash = $10.00 Fleet/Dealer Exterior Wash = $7.00Full wash = $15.00 Fleet/Dealer Full Wash = $10.50


SOAPY RIDES CAR WASH REVENUE ESTIMATESSOAPY RIDES CAR WASH REVENUE ESTIMATESSOAPY RIDES CAR WASH REVENUE ESTIMATESSOAPY RIDES CAR WASH REVENUE ESTIMATES


Regular Exterior Wash 19518 16614 18998Revenue x $10 $195180 $166140 $189980

Regular Full Wash 13012 1846 6332Revenue x $15 $195180 $ 27690 $ 94980

Fleet/Dealer Exterior Wash 2368 240 1134 Revenue x $7 $ 16576 $ 1680 $ 7938

Fleet/Dealer Full Wash 592 0 126 Revenue x $10.50 $ 6216 $ 0 $ 1323

TOTAL REVENUE/YR $413152 $195510 $294221


SOAPY RIDES CAR WASH EXPENSE ASSUMPTIONS SOAPY RIDES CAR WASH EXPENSE ASSUMPTIONS SOAPY RIDES CAR WASH EXPENSE ASSUMPTIONS SOAPY RIDES CAR WASH EXPENSE ASSUMPTIONS

DIRECT LABOR ASSUMPTIONS:Workers paid $10/hr x 40 hours x 48 weeks/year plus benefit costs = 40%Number of car wash workers needed (5 optimistic /4 most likely /3 pessimistic) Cost of 1 car wash worker $2240/mo, $ 26880/yr

OVERHEAD ASSUMPTIONS:Building rent $4000/mo, $48000/yrGas/electricity for dryers/heating $2000/mo, $24000/yrWater/sewer $1500/mo, $18000/yrAdvertising $ 200/mo, $ 2400/yrInsurance $ 500/mo, $ 6000/yrOffice expenses/phone $ 300/mo, $ 3600/yrManager (25k+44% benefits) $ 3000/mo, $36000/yr

TOTAL OVERHEAD EXPENSES $11500/MO, $138000/yr


SOAPY RIDES SOAPY RIDES CAR WASH ONLYCAR WASH ONLY GAIN/(LOSS) ESTIMATES GAIN/(LOSS) ESTIMATES SOAPY RIDES SOAPY RIDES CAR WASH ONLYCAR WASH ONLY GAIN/(LOSS) ESTIMATES GAIN/(LOSS) ESTIMATES


REVENUESRegular Washes $ 390360 $ 193830 $ 284960Dealer Washes 16576 1680 7938Fleet Washes 6216 0 1323

TOTAL REVENUES $ 413152 $195510 $ 294221EXPENSES

Car Wash Labor Expense $ 130670 $ 64394 $ 94752Car Wash Soap/Cleaners 9553 4768 6970Car Wash Overhead Expenses 138000 138000 138000

TOTAL EXPENSES $ 278223 $ 207162 $ 239722Less: Interest 1500 1500 1500Less: Depreciation 5300 5300 5300

EARNINGS BEFORE TAXES $ 128129 $-18452 $ 47699Less: Taxes (25%) 32032 -0- 11925

TOTAL GAIN/(LOSS) Car Wash $ 96097 $-18452 $ 35774

ESTIMATED TOTAL WASHES/YR 35490 18700 26590


SOAPY RIDES DETAILING ASSUMPTIONS SOAPY RIDES DETAILING ASSUMPTIONS SOAPY RIDES DETAILING ASSUMPTIONS SOAPY RIDES DETAILING ASSUMPTIONS

Serve both the public and new/used car dealerships with quality detailing (cleaning) services.

There are fifteen new/used car dealerships within 7 miles of our facility

ASSUMPTIONS: OPTIMISTIC PESSIMISTIC MOST LIKELY

Dealers we have agreements with 3 0 2Number of cars detailed/dealer/yr 100 0 50Total Dealer cars detailed per yr 300 0 100Dealer rate = $70 per car

Regular detailing requests/week 8 2 5Regular detailed cars per year 384 96 240Regular rate = $100 per car

Detailing takes 3 hours per carWorkers are paid $12/hr and benefit costs average 40%Supplies used = $10 per car


DETAILING REVENUE AND EXPENSE ESTIMATESDETAILING REVENUE AND EXPENSE ESTIMATESDETAILING REVENUE AND EXPENSE ESTIMATESDETAILING REVENUE AND EXPENSE ESTIMATES


Dealer cars detailed per year 300 0 100Dealer revenue (x $70) $21000 $ 0 $ 7000Detailing cost (3x$12+40%) - 15120 -- -5040 Supplies used (cars x $10) - 3000 -- -1000

NET GAIN – Dealer Detailing $ 2880 $ 0 $ 960

Regular detailing requests/week 8 2 5Regular cars detailed per year (x48) 384 96 240

Regular revenue (x $100) $38400 $ 9600 $24000Detailing cost (3x$12x40%) - 19354 - 4838 -12096Supplies used (cars x $10) - 3840 - 960 - 2400

NET GAIN – Regular Detailing $15206 $ 3802 $ 9504

NET GAIN – TOTAL DETAILING $18086 $ 3802 $10464


SOAPY RIDES COMBINED GAIN/(LOSS) ESTIMATESSOAPY RIDES COMBINED GAIN/(LOSS) ESTIMATESSOAPY RIDES COMBINED GAIN/(LOSS) ESTIMATESSOAPY RIDES COMBINED GAIN/(LOSS) ESTIMATES


REVENUESCar Washing $ 413152 $ 195510 $ 294221Detailing 59400 9600 31000

TOTAL REVENUES $ 472552 $205110 $ 325221

EXPENSESDirect Car Washing Expense $ 140223 $ 69162 $ 101722Car Wash Overhead Expenses 138000 138000 138000Dealer Detailing Expenses 18120 0 6040Regular Detailing Expenses 23194 5798 14496

Total Expenses $ 319537 $ 212960 $ 260258EBITDA 153015 -7850 64963

Interest 1500 1500 1500Depreciation 5300 5300 5300

Earnings Before Taxes 146215 -14650 58163Taxes (25%) 36554 -0- 14541

NET GAIN/(LOSS) – Year 1 $ 109661 - $ 14650 $ 43622

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