Republic of the Philippines

OCCIDENTAL MINDORO STATE COLLEGE

Labangan, San Jose, Occidental Mindoro
website: www.omsc.edu.ph email address: omsc_9747@yahoo.com
Tele/Fax: (043) 457-0231 CERTIFIED TO ISO 9001:2015
CERT. NO.: 50500643 QM15

Learning Module
in
Entrepreneurial Management

Prepared by:
LIANA LIZETTE C. MARTIZANO
MARIMAR C. MARANAN
ROBELLE P. SUMUGAT
VIRGINIA M. LEIDO, DBM-HM

The compiler does not own any of the contents of this learning module. Due credits and
acknowledgements are given to the authors, internet sources, and researchers listed on the
reference page. Such sources are reserved to further explain concepts and cannot be credited to
the compiler and the school. All diagrams, charts, and images are used for educational purposes
only. The sole objective of this instructional material is to facilitate independent learning and
not for monetary gain because this is NOT FOR SALE.

2020 Revision
 LESSON 4
Marketing the Small Business

TOPICS
 Determining the Right Location
 Promoting the Small Business

LEARNING OUTCOMES
At the end of the lesson, you should be able to:
1. enumerate the factors and other necessities on how to manage and start a
business successfully;
2. apply the guidelines in starting up business;
3. explain the responsibilities of the marketing manager that is included in
production and pricing; and
4. explain how E-commerce is implemented.

Marketing is that function concerned with planning and implementing the

conception, pricing, promotion, and distribution of products and services that will satisfy
the firm’s objectives.

Small Business and the Marketing Concept

The marketing concept provides a guide to small business. it indicates that a
match must be made between its intended customers and the firm’s product or service
offerings. To achieve the desired match, the following question must be answered:
1. Who are my customers?
2. What products or services are needed by my customers?
3. At what price are products or services required?
4. At what place are the identified products or services required?
5. At what time are the identified products or services required?
6. At what mode of delivery are he identified products or services required?
To provide answers to the questions cited above, the firm must undertake the
following:
1. devise a marketing strategy;
2. engage in marketing research;
3. develop a marketing mix; and
4. identify the size of the target market.

Devising a Marketing Strategy

Marketing strategy is the general guide the SBO will use to achieve the firm’s
marketing goal. It is a plan for getting products and services into the hands of customers
in a timely, cost-effective, and appropriate manner. An applicable marketing strategy
can be devised after a systematic market strategy planning is undertaken.

Market Strategy Planning

Market strategy planning is a small business activity which seek to find attractive
opportunities and develop profitable marketing strategies. The strengths and
weaknesses of the firm are recognized in strategy planning. This is followed by an
analysis of the external environment which is useful in identifying attractive market

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opportunities. The output of marketing strategy planning is the firm’s marketing
strategy and it contains the following:
1. target market;
2. applicable marketing mix;
3. size of the market area (Figure 14).
Identify strengths and weaknesses of the firm

Analyze external environment

Identify attractive market opportunities

Identify target market

Determine applicable marketing mix

Determine size of market area

Figure 14. The Market Strategy Planning Process

Target Marketing
Target marketing refers to the activity of selecting well-defined groups of
potential customers and tailoring marketing mix to their needs and preferences. In
target marketing, the following steps are undertaken:
1. identification of the target market;
2. identification of the characteristics of the target market; and
3. measurement of the size of the target market area.
Identification of the Target Market
A target market is defined as the particular market segment the firm wishes to
serve. This segment is singled out from an array of market segments the firm has
chosen to serve.
Before Deciding on the Target Market. Before the market segment to be
served is identified, the SBO must first decide on the number of segments he
wishes to serve. As such, the firm could be any of the following:
a. Mass market company – sells goods and services to a broad spectrum of
buyers;
b. Market-segment company – aims to sell to a s ingle market segment; or
c. Multi-segment company – aims to sell two or more distinct market
segments.
Choosing the Target Market. When deciding on which market segment to
reach, it is necessary for the BO to consider the following:
a. the goods or service category of the firm;
b. the firm’s goals;
c. what competitors are doing;
d. the size of the various segments;
e. the relative efficiency of each segment to the firm;
f. the resources required; and
g. other factors.

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 A prospective SBO considering education as his business choice may be
considered as an example of one who is identifying his target market. The
education market may be segmented into the following: preschool, elementary,
high school, college, and vocational. If after due consideration, the SBO chooses to
serve preschool learners, this group becomes the target market. All the resources
of the firm will be used primarily to operate schools for preschool pupils. The
allocation of the firm’s resources will be different, however, if the SBO decides to
make his firm a mass market company or a multi-segment company.
Identifying the Characteristics of the Target Market
To effectively serve the target market, its characteristics must be known to the
SBO. Relevant characteristics will refer to any of the following: age, sex, family
size, family life cycle, income, occupation, religion, race, and nationality.
An educational institution, for instance, must have some information about the
income of the prospective student’s family. This is important in devising an
appropriate marketing mix.
Measuring the Size of the Target Market Area
In an attempt to make a match between the firm and the target market, the
SBO must be provided with information about the following:
a. number of the potential customers; and
b. population growth trend of the market area.
Knowing the number of potential target customers will provide the means for
ascertaining the most economical approach to reach them. This will even help in
deciding whether or not to continue adapting to the target market.
Information about the growth trend of the target market area is very important
for the firm. To most companies, growing markets offer several advantages. One
of them is expanding sales potential.
The Marketing Mix
Marketing mix refers to the set of marketing tools that the firm uses to pursue its
marketing objectives in the target market. The marketing tools are the controllable
variables that when properly blended constitute the marketing mix. The controllable
variables are the following:
1. product offering (including the breadth of the product line, quality levels, and
customer services);
2. price;
3. promotion (advertising, sales promotion and salesforce decision); and
4. place (or distribution).
The marketing mix is intended to assist or influence the customer in his purchasing
decision. Each of the four variables, separately or jointly, attract the buyer. The job of
the SBO is to provide a blending of the variables that will lead the customer to make a
purchasing decision favorable to the company. The blending could be that one of the
variables will be used as the main competitive tool and the other variables will be used
to support the main variable.
The intensities applied to the variables may change from time to time but there is
still “a mix” at any given time. Industry practices and budget limitations, however, affect
the discretion of the firm in allocating financial and nonfinancial resources to all of the
variables.

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 Product Offering
The tangible commodity or the intangible service that the small business firm
offers for sale to prospective customers is referred to as product. It includes the
warranties and other conditions attached to the product.
Price
The amount of money paid y the customer to the small business firm so the
customer can use the product is called price. The transaction could mean either as
an absolute transfer of ownership or a rent or lease agreement. The price is set to
attract prospective customers to buy. Considerations regarding retail and
wholesale prices, discount and allowances and credit terms must be taken care of.
Promotion
The provision of required information to prospective customers so that they
are persuaded to buy is called promotion. It involves any or all of the following:
a. Personal selling – involves the use of the services of salesmen to influence
the prospective buyer’s purchasing decision. This approach requires fac-to-
face contact between the firm’s salesman and the prospective customer.
b. Mass selling – involves the simultaneous persuading of large numbers of
prospects to buy the firms products. In contrast with personal selling, the
firm’s products are presented on a nonpersonal basis. When mass selling is
in paid form, it is called advertising; when in unpaid form, it is called
publicity.
c. Sales promotion – refers to promotion activities other than personal selling,
advertising, and publicity. It is a sort-term inducement of value offered to
prospective customers to arouse interest in buying a good or service.
Coupon, raffle stubs, and free samples are some of the ways used in sales
promotion.
Place
When the firm wants to emphasize the place variable, it makes its products or
services available in the location and time required by buyers. The channel of
distribution helps implement the firm’s concern about the place variable. An
example of improving the place variable is the opening of new branch.

The Importance of Market Research

Knowing the needs of the target customers will be very helpful in designing the
right marketing mix.to describe the customer, market research is the right tool to use.
Types of Market Research
The two basic types of market research are the following:
1. primary research; and
2. secondary research.
Primary Research. The firm could obtain primary data about potential customers
and competitors through any of the following methods:
a. observation;
b. survey; and
c. experimentation.
The observation method involves collecting data by observing the actions of a
person or a group of persons. If, for instance, the SBO wants to make an intelligent
decision about locating his shop, he would observe the flow of traffic and identify
the routes where most people pass.

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 The survey method consists of gathering data by interviewing people. This may
be undertaken through any of the following techniques: personal interview,
telephone survey, by mail, or by the Internet.
The personal interview is the most expensive and time consuming. As face-to-
face communication is required, arrangements must be made fore respondents to
appear on some appointed dates. Costly as it is, the personal interview is superior
to the other techniques when in depth opinions are required.
Information can be collected quickly and at the least cost through telephone
surveys. However, this technique is applicable mostly in urban areas where
telephones are highly concentrated. This advantage, however, is offset by the use
of cellphones, but this is more costly. When applicable, the telephone survey will
require only the following: a sound questionnaire, a representative sample group,
and courteous telephone interviewers.
When telephone surveys are not feasible, sending questionnaires through the
mail may be resorted too. The mail offers an advantage of convenience on the
part of the respondent, i.e., he or she can accomplish the questionnaire at a
convenient time. The advantage of mail surveys, however, can be presumed only if
the post office is performing its functions effectively.
In an Internet survey, questionnaires can be posted on a firm’s website or sent
by e-mail to a sample group of individuals. The Internet offers the advantages of
quick replies from respondents and lower cost of data collection. It main
disadvantage, however, is the reliability of the survey results. This is because of
the difficulty of verifying the identity of the respondents.
The experimental method of gathering primary data involves in observing the
results of changing one variable in situation while holding all other conditions
constant. For example, a small business owner operating a record bar for the first
time would want o know the quality o merchandise stocks he must carry t achieve
his sales goal. Before starting full operation, he conducted an experiment. On the
first week, his merchandise stock on display was 1,000 recorded CDs of different
labels and artists. He was able to sell an average of 50 discs per day. When he
doubled his stock on the second week, he found out that he was able to sell an
average of 125 discs per day.
Secondary Research. There are excellent sources of secondary information
available to the SBO. The information provided by secondary sources are those
previously gathered by other persons or institutions to satisfy their own specific
requirements. For instance, replicating the moves of successful entrepreneurs
starts with knowing who they are and what they did. Information about them,
most often, comes from secondary sources. The possible sources of secondary
data are the following:
a. the company’s records;
the company’s internal records are important sources of information. Sales
reports, for instance, may provide some clues on customer behavior. For example,
when a company opened a branch in a nearby town, majority of its customer
began transacting business with the new branch. This behavior could be
interpreted as “customers want to patronize a company nearest their residences’
or “customers are more at ease dealing with the company’s new set of
employees.”

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 b. libraries; and
Good libraries provide information that may be useful to the SBO. The vast
collections of original studies kept by some libraries include those that refer to
small business. among the more useful sources of secondary data found in many
libraries are the following:
 The Philippine Yearbook;
 The Top 1,000 Corporations; and
 Profile of Philippine Industries.
c. government agencies.
There are government agencies that generate information intended to assist
various users. For would-be entrepreneurs of educational institutions, the CHED
and the DepEd provide basic data on the umber of schools opening in specific
areas, the courses offered, the number of students, and others.
Data provided by the DTI are also useful to many SBO. Among the information
made available are the number of enterprises existing in specific regions and
provinces, programs and services offered by government regions and private
organizations, and financing programs of the government and private institutions.
Local governments are also useful sources of records summary listing of busines
establishments by the area and by type of business.

Market Share Forecasting

One of the most important estimates an SBO has to know is the forecast o how
much sales the company will make for a given period. The purpose of market research
as to determine the quality of sales the company can generate if it will concentrate on a
certain market segment.
In preparing the marketing plan, the forecast of the company’s market share is an
important input. Market share refers to the individual firm’s sales as a percentage of the
total sales in a specific market. To determine the probable market share of the
company, the following must be undertaken:
1. Define the physical limits of the target market area.
2. Determine the potential sales of the target market considering its demographic
characteristics.
3. Determine the purchasing power of the target market.
4. Determine the total sales revenue of the industry in the target market area.
5. Determine the percentage of the total sales that can be effectively served by the
company.
The company’s market share can e computed by using the formula:
CS
CMS =
TIS
where, CMS = company’s market share
CS = company’s sales
TIS = total industry sales
The potential sales of the target market refers to the total sales volume that all
competitors could achieve in that particular market segment. The sales potential of the
company refers to the portion of the market potential that the company could expect to
achieve under ideal conditions. Company sales refers to the actual sales made by the
company as opposed to the potential sales of the company. Also, company sales is
different from forecasted company sales.

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Forecasting Company Sales
A requisite to the market share forecast of the company is the sales forecast of the
company. There are various methods of forecasting company sales. They are the
following:
1. Market-factor analysis – assumes the future demand for a product is related to
the behavior of certain market factors and, as a result, involves determining what
theses factors are and then measuring their relationships to sales activity.
2. Survey of buyer intentions – in which the company asks a sample of current or
potential customers how much of a particular product they would buy at a given
price during a specified period of time.
3. Test marketing – in which the company markets its new product in a limited
geographic area, measures the sales, and then from this sample, a projection I
made for the company’s sale over a larger area.
4. Past sales analysis – applies a flat percentage increase to the average volume
achieved last year or to the average volume of the past few years.
5. Trend analysis – is a statistical method of forecasting sales over the long term by
using regression analysis or over the short term using a seasonal index of sales.
6. Sales-force composite – consists of collecting from all sales people estimate of
sales for territories assigned to them during the future period of interest.
7. Executive judgment – consists of obtaining opinions regarding future sales volume
from one or more executives.

TOPIC 1: DETERMINING THE RIGHT LOCATION

One of the most important decisions the SBO has to make is choosing the right
location for his business. the location decision must be made before actual operations
begin. The wrong location will make it very difficult for the SBO to achieve his business
objectives. The right location is a prerequisite to business success.

What is the Right Location

In any given area, there are many possible locations the SBO can consider as his
business location. Plotting the different location in a spectrum, one will be situated on
the extreme side of the “right location”. Another will be on the extreme side of the
“wrong location”. Those in-between the extremes may be classified as “nearly right” or
“nearly wrong”.
The right location refers to that one which will bring the highest possible benefits
to the firm. The wrong location is one which will bring the most disadvantages to the
small business.
The right location for one firm, however, may be wrong location for another firm
and vice versa. A particular site where a restaurant is successfully operating, for
instance, may not be suitable for a men’s apparel business. this does not mean,
however, that a succession of successful business of different types is not possible on a
single site. The message is that thew SBO should be very careful in choosing his business
location.

General Criteria for Selecting a Busines Location

Different types of small business need to use different sets of criteria in
determining the right business location. Some of the factors in the criteria set, however,

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are generally applicable to all types of small business. these refer to those which
concern the region, the province, and the city or town.
Selecting the Region
A mere look at the statistical reports on the growth patterns and economic
performance of the nation’s different regions will reveal information that some regions
are more desirable areas of investment than others. Some regions like Metro manila,
Central Luzon, and Southern Luzon have higher rates of population growth and average
family income. Most prospective investors consider such information as plus factors.
Selecting the Province
In a given region, a province may be identified as more promising for a small
business than other provinces. The following factors must be considered when
identifying which province the small business will be located:
1. Proximity to Markets. Small business must be as near to their markets as
possible. This is most especially true if the cost of moving the products from the
firm to its customers is high in relation to their value. An example of a small
business where proximity to its market is very crucial is the bakery firm. Service
and retailing firms need to be situated in sites with the areas of their respective
target markets.
2. Proximity to Supply of Raw Materials. When the raw material requirements of
a small firm are voluminous and frequent acquisitions are made, the company
must consider locating in the province where the raw material are sourced. This
will provide the firm with the advantage of reducing considerably its raw
material acquisition costs.
For food service establishments, for instance, they will have better chances
of succeeding in densely populated areas. The provinces compromising a
particular region different in terms of population density. If population density
is the only deciding factor, the prospective investor should choose the province
with the highest density.
3. Labor Supply. The small business must be located in the province where its
labor requirements will be supplied sufficiently. The labor requirements that
are classified as (1) managerial, (2) specialists, and (3) skilled laborers, must be
available.
There are certain provinces where there is a dearth of certain classes of
manpower. For example, if the prospective small business investor is
considering putting up an advertising firm, he will have to locate in a province
where there is a sufficient supply of labor with skills in advertising.
4. Business Climate. Small businesses are expected to thrive in places where they
transact business more efficiently. Some provinces are more business friendly
than others. They are so because they provide certain incentives for small
business like tax holidays, lower fees, minimum restrictions, and others. In
choosing the province where to locate one’s business, a comparison of the
business climate offered by each province must be made.
Selecting the City or Town
After identifying the province where the small business will be located, the
specific city or town within the province must be selected. In choosing a specific city or
ton, the following must be considered:
1. Population Trends. In a given province, some towns grow faster than others, in
terms of population and income. One or two of these towns may be more
appropriate as location for small business especially when any or all of the
following are considered:
a. Population size and density. Towns or cities with large populations are likely
candidates for locating many types of small businesses.

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 b. Growth trends. Population growth trends indicate whether the city or town
is growing or dying. A declining population will surely affect demand for
products or services. Growth trends are useful in determining the ranks of
the cities or towns in terms of growth.
c. Family size. Big families have some needs that are different from those of
small families. Double-deck beds, for instance, are more appealing to big
then small families. Date on family size, therefore, will be very important to
small business dealing with products or services with significance like those
of double-deck beds.
d. Age breakdowns. Age breakdowns provide better insights to the small
business investor in making location decisions. If his product offerings are for
elderly, he will prefer a city or town with sufficient number of elderly people.
e. Education. The level of education of a city or town’s population will be
relevant factor for small business producing or selling books, magazines,
newspapers, calculators, computers, and the like.
f. Income levels. A population with high income levels will tend to have a
higher purchasing power.
g. Sex. Although the population of most cities and towns are more or less
evenly distributed between the sexes, it is sometimes important for some
small businesses to be assured that this is so. This concern is made more
important with the emergence of the idea that the third sex has needs that
could be served. Knowing the exact number of target customers in a given
area, whether they are men, women, or gay, is an advantage to the
prospective SBO, especially selecting suitable location for business.
h. Religion. The religious beliefs of a city’s population sometimes affect the way
a small business operates. Some of the needs of a Muslim-dominated town,
for instance, will be different from the needs of a Christian-dominated town.
i. Ethnic groups. Some prefer to spend more on glamorous products like make-
up kits and sunglasses, while some are more concerned with saving money.
These needs will dictate which type of small business will survive in a city or
town. It will be wise or the small business investor to know about such
peculiarities in the behavior of some groups of people. This will help him
choose a good location for his business.
2. Local Laws and Regulations. The small business investor must compare the
local laws and regulations of the different towns within the province of his
choice. He will find out that some towns provide a climate conducive o small
business operation. Some towns, for instance, impose lower business taxes.
3. Competition. Some towns or cities are already saturated with certain types of
business. if the small business investor finds a town under consideration with
too much competition in his line of business, he should shift his attention to
another town.
4. Compatibility with the Community. The small business will be compatible with
the community where it will be located. A city where people care about their
health would be a good place to locate a small business selling health foods.
5. Transportation. The cost of moving the firm’s products contributes to the
overall costs of operating the business. it is, therefore, very important that the
firm should be located in a town with adequate and reasonably priced
transportation services.
6. Public Services. Towns or cities which provide adequate services like those on
water and sewerage, trash and garbage collection, among others, must be
regarded as plus factors in choosing a location. These will be added to the cost
of operation if these are not provided by the chosen city or town.

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 7. Police and Fire Protection. Towns or cities that do not provide adequate police
and fire protection should be ruled out in choosing a location. Any business that
will provide itself with such protection will be able to do so at a cost, and this
will jack up the cost of operation which may result to a decline in profits.
8. Reputation of the Location. However, cities like Makati, Cebu, or Davao lend
their reputations to businesses located in their areas. In a way, prospective
customers are easily swayed to pay attention to whatever message small
businesses would want to convey to them.

Steps in Selecting a Business Location for Retailers

Some location criteria are uniquely applicable to retailers. They may be derived
through three major business location selection steps. The steps are classified as
follows:
1. choosing a viable community;
2. selecting the trading area; and
3. evaluating the specific site.
Choosing a Viable Community
A viable community is one that has the capacity to provide an adequate and
profitable sales volume for the small business. in terms of viability, there are three
general factors used to determine the best geographic area or city for the
business. they are the following:
a. Economics. Areas with a stable economic base must be chosen by the SBO
rather than those without a stable economic base. An economically stable area
is one which has a balanced mix of business establishments. Areas with few
types of businesses must be viewed with some concern.
b. Population. Information about the characteristics of the population relevant
to the location decision must be obtained. The following are important
population aspects that must be reviewed:
 size of population of the area under consideration;
 growth trend of the population;
 average income of the population;
 population changes in recent years.
c. Competition. No matter how large the area is, it can only support a certain
number of competing firms. The small business owner should know if the area
under study can no longer support another business. it will be different,
however, if the prospective small business will have a very unique advantage
over its prospective competitors. An excellent location is an example of unique
advantage.
Selecting the Trading Area
The trading area is the geographic area from which a business draws its
customers. In choosing a business location, several trading areas must be
considered and evaluated. The following aspects must be considered in trading
area analysis:
1. demographic and socioeconomic characteristics of consumers;
2. focus of promotional activities;
3. determination of whether the proposed location will service new customers
or take away business from existing competitors;
4. determination of the number of outlets that can be operated; the
geographic weaknesses of the proposed trading area; and
5. other factors like competition, availability of financial firms, availability of
labor, location of suppliers, legal restrictions, and the like.

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 Composition of the Trading Area. The trading area consist of the following parts:
1. Primary trading area – is where 50 to 60 percent of retailer’s customers come
from. It is the closest to where the retailing firm is located and possesses the
highest density of customers of the firm.
2. Secondary trading area – is where 20 to 25pecent of the firm’s customers
come from.
3. Fringe trading area – is where the remining customers of the firm come from.
Types of Location. Locations are of various types and it is to the best interest of
the retailer to determine which type is best suited for his or her product or service
offerings. Location may be classified as follows:
1. central business district;
2. shopping center; and
3. free-standing retailer.
Central Business District

The central business district (CBD) refers to an unplanned shopping area around
the geographic point at which all public transportation systems converge. In a typical
provincial city, the center of the CBD is the public market which surrounded by bus and
jeepney stations. Adjacent to these stations are the traditional department stores,
grocery stores, minimarts, and some specialty shops.
The advantages of locating in the CBD are the following:
a. easy access to public transportation;
b. wide product assortment;
c. variety in images, prices, and services; and
d. proximity to commercial activities.
The disadvantages of locating in the CBD are the following:
a. inadequate parking;
b. older stores;
c. high rents and taxes;
d. traffic and delivery congestion;
e. potentially high crime rate; and
f. the generally decaying conditions of CBD in many cities.
Apart from the CBD, larger cities have developed secondary business districts
(SBDs) and neighborhood business districts (NBDs). An SBD is a shopping area smaller
than CBD and which revolves around at least one department or variety stores at a
major street intersection. An NBD is a shopping area that evolves to satisfy the
convenience-oriented shopping needs of a neighborhood.
Shopping Center
A shopping center refers to a centrally owned and/or managed shopping district
which is planned, has balanced tenancy, and is surrounded by parking facilities.
The shopping center offers the following advantages to the retailers:
a. heavy customer traffic resulting from the wide range of product offerings;
b. nearness to population;
c. cooperative planning and sharing of common costs;
d. access to highway and availability of parking;
e. lower crime rate;
f. clean, neat environment; and
g. more than adequate parking space.
The disadvantages of the shopping center are the following:
a. inflexible store hours;
b. high rents;

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 c. restrictions as to the merchandise the retailer may carry;
d. inflexible operations;
e. possibility of too much competition; and
f. dominance of smaller store by the lead store.
Free-standing Retailer
A free-standing retailer is generally located along major traffic arteries without any
adjacent retailers selling competing products to share traffic.
The following advantages are inherent to free-standing retailers:
a. lack of direct competition;
b. generally lower rents;
c. freedom in operation and hours;
d. facilities that can be adapted to individual needs of retailers; and
e. inexpensive parking.
Free-standing retailers have the following disadvantages:
a. lack of drawing power of complementary stores;
b. difficulties in attracting customers for the initial visit;
c. higher advertising and promotional costs;
d. operating cost that cannot be shared with others;
e. possible cash outlays in constructing the store instead of renting; and
f. zoning ordinances that may restrict some activities.
Evaluating the Specific Site
After determining the trading area where the small retail business will be
located, the specific site must be pinpointed. But first, a listing of possible specific
sites must be made. This will be followed by evaluation of the listed sites
considering the following: pedestrian traffic, vehicular traffic, parking facilities,
transportation, store composition, internal characteristics of the specific sites, and
terms of occupancy.
A site that has more people passing by is preferable over one with less
pedestrian traffic. Certain types of business like car parts retailing are more
appropriate in sites with heavy vehicular traffic. Parking facilities provide
convenience to customers and should be regarded as a plus factor in the selection
of a site. The availability of mass transportation, access from major highways and
ease of deliveries, are desirable characteristics of a site. As some stores
complement each other in a given area, the composition of stores long the same
area must be analyzed.
The internal characteristics of the proposed site must be evaluated. Among
those that must be considered are: (1) visibility of the site, (2) placement in the
location, (3) size and shape of the lot, (4) size and shape of the building, and (5)
condition of the lot and building.
The terms of occupancy of the site must be evaluated. The following must be
scrutinized: (1) ownership and lease options, (2) operations and maintenance
costs, (3) taxes, (4) zoning restrictions, and (5) voluntary restrictions like uniform
store hours and cooperative security forces.

Locating the Small Manufacturing Firm

The small manufacturing firm is saddled with certain limitations in choosing a
location. Big cities are desirable locations because of proximity to a bigger percentage of
the population. However, zoning laws implemented in big cities are more restrictive
than those imposed by small towns. To avoid the said difficulty, some manufacturing
firms locate in a small town just outside the boundary of the city. This makes the

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manufacturing firms very near the market but out of reach of the restrictive ordinance
of the city.
Even if some manufacturing firms wanted to be near their market, they cannot
afford to be situated away from the source of their raw materials. This may be because
of the following:
1. the factory produces mush waste in processing the materials;
2. the raw materials are perishable and so the factory should be situated close to the
source of raw materials;
3. the raw materials such as iron and stone are very bulky; and
4. distribution methods or expenses make one site more cost-effective than another.
When proper evaluation is made, the least expensive site can be identified. One of
the important factors in evaluation is the acquisition cost of the land.

Procedure in Locating a Small Manufacturing Firm

In locating a small manufacturing firm, the following specific steps are
recommended:
1. Determine if the proposed area allows the type of manufacturing under
consideration.
2. Determine the following:
a. adequacy of shipping facilities;
b. types of building available for lease or rent; and
c. distance from factory to market and resulting shipping costs.
3. Determine the availability of the following:
a. cheap fuel;
b. power and water;
c. skilled labor (if required); and
d. financing facilities.

Locating the Service Firm

Service firms are those specifically sought by customers. If the customers are
satisfied with the services they provide, they will be continuously patronized even if a
competitor is more accessible. The choice of location for service firms will depend on
the traits of the target customer. Information where the target customers want to be
served may be determined through market research.
Schools may be located at the peripheral section of urban areas where they can be
easily reached by students from nearby districts and towns. Motels depend upon some
types of travelers, so they must be located along the highway, not necessarily in the
center of the town. Shoe repair shops, barber shops, and appliance repair shops are
better located at or near residential areas. Roads that are traversed by vehicles of
various types are good sites for car maintenance and repair shops.

Task/Activity

Read carefully and answer the case study given below.

Case 2: Marilu Food Manufacturing: Three Coins in the Fountain
Mr. Marcelino Ilustre was a product of the public school system. From elementary
to college, the schools he attended were owned and controlled by the government.
Most of the students enrolled in public schools including Marcelino come from poor
families.

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 It was inevitable that many of the students became regular customers of the
school canteen where soft drinks and a variety of food in small packets are sold. In most
public elementary schools, popcorn, salted peanuts, dried squid, and cheap cookies
were popular choices. It was while Marcelino was in the elementary grades where he
became familiar with these types of merienda fare. He strongly felt that one day he
would be involved in producing better food for students.
After graduating from college, Marcelino attempted to look for a job, but nobody
was interested to hire him. After month of deep thinking, he resolved to operate his
own business, even if it is only a small one.
Marcelino considered his boyhood dream of manufacturing food for students. His
customers will be the school canteens of public schools in his town and probably later
those in other towns. He believes he could offer food products which are better in terms
of quality and taste, packing, and priced just like the competition.
He drew up a list of prospective sites for his factory. The list contains of the
following information:
SITE LOCATION FEATURES
A - 1 km. from public - 300-square meter vacant
market lot owned by Marcelino
- 200 meters from national - lot inside subdivision
highway
B - 4 kms. from public - 600-square meter vacant
market lot owned by Marcelino’s
parents
- 50 meters from national - surrounding lots are
highway residential
C - 8 kms. away from public - 5,000-square meter vacant
market lot owned by Marcelino’s
parents
- Along city road 3 kms. - surrounding lots are
away from national agricultural
highway
A person who reside at the town proper and with three years experience as
supervisor in manufacturing food for students’ merienda has agreed to work for
Marcelino.
Guide Questions
1. What is the best site for Marcelino’s business?
2. What additional information would be useful before Marcelino makes a decision?

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 Case study will be graded according to the following criteria:
CRITERIA PERCENTAGE
Content 40%
Spelling Grammar 20%
Timeliness 20%
Overall Impression 20%

TOPIC 2: PROMOTING THE SMALL BUSINESS

After the small business operator has identified his target market, the product or
service he will offer, and the right location for his business, he still has to make some
effort to finally realize his aim of producing a profitable sales volume. This can be
achieved if he makes concrete moves to convince the prospective customers to
purchase what he is selling.

What is Promotion
It is not surprising for someone to find out that promotion is an activity
undertaken by successful companies. In terms of using promotion as a tool, firms differ
on the intensity of usage. Some firms use it extensively, while others only superficially.
Some firms use a single method of promotion, while others use a variety of methods. In
any case, the SBO must know what promotion is and how it can help him achieve his
sales and profit objectives.
Promotion Defined
Promotion may be defined as activities, including advertising, personal selling,
sales promotions, public relations, and direct marketing, used by SBOs to persuade
prospective customers to buy the company’s products or services.
Promotion and Customer Demand
Promotion and customer demand are related in some ways. There are instances
when promotion increases the total customer demand for the firm’s products or
services. In some cases, a little promotional effort brings large increase in customer
demand. Sometimes, however, promotion does little to improve the company’s total
revenues. These results will depend on the nature of the product or service, the stage of
the firm’s development, and the nature of competition. It will be very useful to the SBO
to know he can use the various methods of promotion to his advantage.
Types of Customer Demand
To understand the value of promotion, it is important for the SBO to know the
types of customer demand. They are the following:
1. Established Demand. This refers to purchases made by people from a certain
firm as a result of any or all of the following:
a. positive experience with the firm’s products;
b. the convenient location of the firm; and
c. the attractive appearance of the firm.
Even without the use of promotion, established demand will materialize.
2. Newly Created Demand. When the firm engages I activities designed to attract
people to buy from the firm, the resulting demand is called newly created
demand. This is also sometimes referred to as “promoted demand”. Successful
promotional activities made by some firms are able to create new demand.

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Methods of Promotion
Promoting the small business may be undertaken by using any or all of the
following methods:
1. advertising;
2. personal selling;
3. publicity;
4. sales promotion; and
5. word-of-mouth.
Advertising
Advertising is any paid form of nonpersonal presentation and promotion of
ideas, goods, and services by an identified sponsor. The great number of product or
service endorsements, we see, hear, or read on television, newspapers, or radio are
advertising efforts designed to motivate prospective customers to patronize certain
products, services, or companies.
Types of Advertising
a. Retail advertising – is made by various retail stores such as grocery stores and
bakeries to attract customers.
b. Service advertising – is made by various establishments such as transportation,
recreation, and insurance.
c. Trade advertising – is made by the manufacturers to motivate wholesalers and
retailers to carry their products.
d. Industrial advertising – is made by manufacturers to motivate other
manufacturers to use their products or services.
e. Institutional advertising – is designed to create a favorable image for a firm.
Types of Advertising Media
a. Television. Television is a medium that is expensive but it has a wide area of
coverage, mostly nationwide. Local television networks are now able to air local
programs in foreign countries where substantial numbers of Filipinos are
residing. Recent developments, however, show that television can be a useful
means to advertise the products and services of small businesses.
b. Radio. Radio stations may be classified into two: (1) those that cover the entire
country and (2) those that cover a smaller area. Local radio stations, especially
those outside of Metro Manila, are appropriate for a small business located
within their area of coverage. The limited area serviced by local radio stations
justify the much reduced advertising rates charged to local advertisers.
c. Newspapers. Newspaper may be classified according to area circulation (1)
national, (2) regional, and (3) provincial or local. Newspapers of nationwide
circulation are oftentimes inappropriate for small business, especially if its
target customers are situated in their respective local areas. Even if the
advertising rates of regional and local newspapers are low, their very limited
circulation makes them impractical for the advertising needs of small business.
d. Magazines. Are of nationwide circulation and are mostly inappropriate for
small business advertising.
e. Outdoor billboards. An outdoor billboard can be a little discriminating as a form
of advertising. It can be placed where most of the target customers pas by. It is
less costly and is often appropriate for small business advertising.
f. Specialty advertising. Specialty advertising is more discriminating and a more
direct way of convincing prospective customers to buy. Once a target customer
is spotted near or at the firm’s [remises, he or she is handed items with
advertising messages imprinted. Examples of specialty advertising tools are
pencils, calendars, shopping bags, and keychains.

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 g. Public transportation. Advertising messages installed in public conveyances
provide a more permanent and mobile advertising for small business. It is less
expensive than television advertising.
h. Yellow pages. The yellow pages provide the small business advertiser with
some advertising exposure. Its coverage, however, is limited to persons with
telephones.
i. Direct mail. Is less expensive and most discriminating. Its main drawback,
however, is the difficulty of obtaining a credible listing of potential customers.
Most advertising sent through the mail end up in wastebaskets.
j. Local cable TV. Local cable TV which has come of age as an advertising medium
has a captive audience. If the target customers of a small business are apart of
that audience, then advertising through it may be practical.
k. Cinema. Moviehouses provide an alternative form of advertising. It is less costly
but the audience is limited to a particular class of people. Moviehouses may be
useful as an advertising medium for certain business like local restaurants and
car parts dealers.
l. Other means such as catalogs, samples, handouts, and the like. Catalogs,
samples, handouts, and leaflets also form of an alternative means of
advertising. However, it requires a certain amount of time to prepare them.
The use of text messages through the cellphone has recently been tried by
financing firms in advertising their products. It still remains to be seen whether or
not this particular medium will be useful to the small business advertiser.
From among the various media available, the SBO will have to determine which
is most appropriate for his needs.
Personal Selling
Personal selling is that method of promotion that is direct, personal, and often
a face-to-face interchange between the company’s salesperson and the consumer.
Personal selling is a very important complement of the other methods of promotion.
When a potential customer cannot be motivated to make a final purchasing decision
with the use of other promotional methods, personal selling may be able to finally clinch
a sale. Many small businesses rely on a personal selling as a means of promoting their
products and services.
Types of Salespersons. To effectively attain the sales goals, the company hires
salespersons. There are various types of salespersons and the firm must take a decision
on which type is appropriate for its needs. The types of salespersons are the following:
a. Order getters. The task of the order getters is to increase the firm’s sales by
selling to new customers and by increasing sales to present customers. Order
getters may be classified as follows:
 Current customer salespersons – concentrates on current customers and
seeks mores sales from them.
 New-business salespersons – locates prospects and converts them to
buyers.
b. Order takers. The responsibility of the order taker is to seek repeat sales from
current customers by making sure that product quantities are there where and
when they are needed. Order takers are classified as follows:
 Inside order taker – stays inside the sales office and from there receives
orders by mail, telephone, or directly from persons coming in.
 Field order taker – travels to customers and from their places, orders are
taken.
c. Support personnel. The job of support personnel is to facilitate the selling
function. Their functions include locating prospects, educating customers,

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 building goodwill, and providing service for sale. Support personnel may be
classified as follows:
 Missionary salespersons – is usually employed by a manufacturer who
wants to establish presence in a certain area. He assists the producer’s
customers in selling their own customers.
 Trade salespersons – helps the company’s customers, especially retail
stores, promote the product. His activities consist of restocking shelves,
obtaining more shelf space, setting up displays, providing in-store
demonstrations, and distributing samples to store customers.
 Technical salespersons – gives technical assistance to the firm’s current
customers in the form of advice on product characteristics and
applications, systems designs, and installation procedures.
The Selling Process. Selling is process consist of the following major steps:
a. Prospecting and Qualifying.
Prospecting involves researching potential buyers. The list of prospects may
be derived from a variety of sources. Qualifying means selecting from among
the prospects those most likely to buy. To qualify prospects, the following must
be considered: (1) ability to pay; and (2) willingness to listen to a sales message.
b. Preapproach.
After shortlisting qualified prospects, further research must be made about
them. A mental picture of the qualified prospects must be drawn indicating
their needs and wants. This will guide the salespersons on the right moves to
make in the subsequent steps.
c. Approach.
After completing the requirements of the preapproach, an actual, face-to-
face communication with the prospect follows. The timing of the approach and
the personal appearance of the salespersons are very important factors that
must be considered. The actual product or service needs of the prospect will be
verified at this stage.
d. Presentation and Demonstration.
After the requirements of the approach stage has been made, the
salespersons will proceed to the presentation of the product or service. If the
product is portable, presentation may be done at the prospect’s residence or
place of business.
e. Handling Objections.
Most often, customers have some lingering doubts about their needs or
about the products and services presented to them. These will effectively
prevent the closing of a sale. Most of the doubts and objections, however, can
be cleared when the salesperson provides more explanations about specific
concerns.
f. Closing.
In the two stages, the salespersons must be on the alert to “discern” signals
that the prospect has already made up his mind. To find out, the salespersons
must attempt to “close a sale”. Test question like “which of the two models
would you prefer?” are useful. If the reply is positive, the next statement to the
salespersons would be “if you will please sign this form so I will have this unit
delivered immediately.”
g. Follow-up.
After the sale is made and the product is delivered or the service is
rendered, the work of the salespersons is not yet over. He will have to make
some follow-up calls to be sure that the customer is happy. If this is so, the next

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 sale with the same customer will be easier. In addition, a satisfied customer,
oftentimes, influences the purchasing decisions of other prospects.
Publicity
Publicity is a method of promotion where news is generated about the firm or
its products or services and appearing in print, broadcast, or electronic media and not
paid for by the firm. Publicity is one of the promotional methods which can be tapped
by the cash-strapped small businessman. The only requirement is a prepared publicity
release describing any of the following:
a. existence of the firm and the products or services offered;
b. unique characteristics of the new products or services of the firm; and
c. firm’s unique method of doing business.
The publicity release will be published free by the various media if they are
found to be interesting or newsworthy. Criterion must then be the guide of those
preparing publicity releases.
Types of Publicity
a. News publicity – deals with events of national, regional, or local interest. Kinds
of news publicity are:
 Spontaneous news publicity – one made as a result of fire, union strike,
lahar onslaught, bank holdups, and other major occurrences; and
 Planned news publicity – one based on news releases prepared and
distributed by the small business on a regular basis.
b. Business feature articles – refer to detailed stories about the firm or its
offerings, most often appearing in business magazines.
c. Service features articles – refer to lighter stories focusing on personal care,
household items, and recipes which find their way in the pages of newspapers
and magazines.
d. Finance releases – are stories that are targeted to appear in the business
sections of newspaper and magazines.
e. Product releases – refer to new products and products improvements and
aimed at all forms of media of publicity.
f. Pictorial releases – refer to illustrations or pictures distributed to media.
g. Background editorial releases – refer to extra information (such as the
biography of the firm’s general manger) given to media writers and editors.
h. Emergency publicity – refers to special media releases regarding disasters or
serious problems like the 2009 swine flu threat.
Sales Promotion
Sales promotion is a method of promotion other than advertising, personal
selling, and publicity that increase sale through temporary sales incentives. Sales
promotion enhances and supplements the other forms of promotion. The major tools of
sales promotion are the following:
a. Point-of-purchase Display.
These are items used by sellers to attract attention, inform, and persuade
prospective customers to buy. They consist of items such as signs, window
banners, display racks, and self-service containers.
b. Premium.
A premium is a special incentive in the form of a gift that is made available
to customers who buy certain products of the firm. An example is the free small
size bath soap attached to a box of a large toothpaste.

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 c. Trading Stamp.
Trading stamps are sales promotion tools in which customers are given in
relation to the amount of their purchase. These stamps can be redeemed later for
merchandise or cash. A variation of the trading stamps as incentives is the
Customer Value Card. Cardholders are entitled to discounts, promotional items,
and other privileges. Points are accumulated by the cardholder when he makes
purchases which can be used later as payment discounts.
d. Sampling.
Sampling refers to the process by which manufacturers give away free
samples to introduce a new product. Customers are given the opportunity to use
the product on a limited basis before purchasing. The use of samples a s a
promotional tool is very popular with companies selling cigarettes, soaps,
toothpaste, soft drinks, shampoo, and the like.
e. Product Demonstration.
In product demonstration, customers are given the opportunity to observe
the product benefits and performance before purchasing. Music stores effectively
demonstrate the sound clarity of the electronic organ and the electric guitar by
allowing qualified employees to paly them in full view of passers-by.
f. Retailer Coupons.
A coupon is a sales promotion device that motivates consumers to buy from
the retailer. The coupon entitles the buyer to a discount. Coupons are distributed
in packages, mailings, print ads, or at the store.
g. Consumer Contests.
This is a type of sales promotion where customers compete for prizes by
completing a contest such as supplying a missing word in a phrase or sentence, or
describing a positive attribute of the product or service. Customers joining the
contest usually send in their entries accompanied by some proof of product
purchases like labels, caps, or a part of the product’s packaging.
h. Sweepstakes.
These are sales promotion tools which require the participants o submit
some kind of entry form but are purely games of chance noa analytical or creative
effort by the consumer. Small businesses can use this promotional tool to attract
attention from passers-by.
i. Rebates.
A rebate offers the return of money based on proof of purchase. Rebates are
very useful promotional tools because the benefits derived are direct and
immediate.
j. Trade Shows.
These are temporary exhibitions of products and services. It is where direct
purchases are made. It is also in trade shows where salespersons get leads on
potential customers.
Word-of-Mouth
Word-of-mouth is a method of promotion wherein people are encouraged to
tell other people products or services they have enjoyed. When people have positive
experiences about a product or service, they have a tendency to relate these to other
people. Positive word-of-mouth attracts new customers and retains existing ones. If the
SBO wants to reap the benefits of positive word-of-mouth, the following must be
maintained:
a. competent employees;
b. proper treatment of people;
c. not overcharging;
d. not using false claims in advertising;
e. keeping promises to customers;

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 f. having a good product or service; and
g. keeping customers happy.

ASSESSMENT: CHAPTER QUIZ

EXERCISE NO. 3
I. MULTIPLE CHOICE. Choose and encircle the correct letter of your answer.

1. It is the general guide the SBO will use to achieve the firm’s marketing goal.
a. Marketing c. Market Strategy Planning
b. Marketing Strategy d. Target Marketing
2. Sells goods and services to a broad spectrum of buyers.
a. Target Market c. Market-segment Company
b. Mass Market Company d. Multi-segment Company
3. It refers to the set of marketing tools that the firm uses to pursue its marketing
objectives in the target market.
a. Marketing Mix c. Price
b. Product Offering d. Promotion
4. It consists of gathering data by interviewing people.
a. Telephone Survey c. Survey Method
b. Observation Method d. Experimental Method
5. It refers to the individual firm’s sales as a percentage of the total sales in specific
market.
a. Market Share c. Sales Potential
b. Potential Sales d. Company Sales
6. It refers to that one which will bring the highest possible benefits to the firm.
a. Right Location c. Nearly Right
b. Wrong Location d. Nearly Wrong
7. It is where 20 to 25 percent of the firm’s customers come from.
a. Viable Community c. Secondary Trading Area
b. Primary Trading Area d. Fringe Trading Area
8. It is generally located along major traffic arteries without any adjacent retailers
selling competing products to share traffic.
a. Central Business District c. Shopping Center
b. Secondary Business District d. Free-standing Retailer
9. It is one that has the capacity to provide an adequate and profitable sales volume
for the small business.
a. Viable Community c. Secondary Trading Area
b. Primary Trading Area d. Fringe Trading Area
10. It is one which will bring the most disadvantages to the small business.
a. Right Location c. Nearly Right
b. Wrong Location d. Nearly Wrong

II. IDENTIFICATION. Write your correct answer on the space provided.

1. It is made by various retail stores such as grocery stores and bakeries

to attract customers.
2. It is made by various service establishments such as transportation,
recreation, and insurance.
3. He locates prospects and converts them to buyers.
4. It deals with events of national, regional, or local interest.
5. It offers the return of money based on proof of purchase.

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III. ESSAY. 5 points.
What products or service offerings will give the business a better chance of
success in your area?

Essay will be graded according to the following criteria:

CRITERIA PERCENTAGE
Content 40%
Spelling Grammar 20%
Timeliness 20%
Overall Impression 20%

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