Chapter 4

Marketing

No one came to the banquet; no one ate the delectable food; for, to not come when not invited, simply can never be construed as rude.

—© 2013 Sage Sayings™

Introduction to Effective Marketing of Your Small Business

You can have the best product ever made, but if no one knows that you have it or how it can be obtained, it will simply set on your shelves and accumulate dust. Developing and implementing marketing strategy is not only needed but it is also a must for all businesses (large and small). It is a critical process for the survival of all organizations (profit, not-for-profit, private, or government) competing in the domestic and global business (and nonbusiness) environments. Marketing strategy is also applicable to: people (ranging from political candidates to athletes); places (tourism: I love New York); causes (do not drink and drive); events (from sports events to the American Cancer Society’s Relay for Life); and, organizations (United Way, U.S. Postal Service). Hence, small business is no exception.

In this introduction, the aim is to provide a basic framework that will help you to understand: (1) what marketing is; (2) the importance of the marketing concept or philosophy; (3) what key factors are fundamental components of marketing; and, (4) how those key factors relate to the development of marketing strategy.

Marketing—Defined

Marketing in simple terms can be explained as an exchange process between two or more people or organizations where each has something to offer that the other needs. A more formal definition of marketing is: “Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”1 See Figure 4.1.

Marketing Concept or Philosophy

The marketing philosophy (concept) emerged over nearly 100 years, from the initial preoccupation with production and sales, to increased appreciation of marketing as a more comprehensive concept, and to the current importance of relationship marketing. Marketing strategy has, thus, evolved from sellers’s markets (with shortages of goods), to buyers’s ­markets (with excesses of goods that buyers need or want), to, finally, relationship marketing, where the emphasis is on building lifetime relationships with customers.2

The marketing concept calls for

• a company-wide consumer orientation which focuses on needs and wants of target customers;

• a coordinated effort within the organizations; and,

• profit in the long run with sustained customer satisfaction.

The company-wide orientation means that everyone in your organization understands and recognizes that your company exists to satisfy your customers. Coordinated effort means that all departments, from your credit office (accounting), to engineering, to production—all play an important role in meeting the needs of your customers, as well as keeping your customers satisfied. Of course, ultimately, developing and maintaining a base of satisfied customers will lead to profits for your business over the long term.

The Marketing Mix

The modern marketing tool that you will need to use to achieve your marketing objectives is called the Marketing Mix or Four P’s. The four essential elements of the marketing mix are product, price, promotion, and place (distribution). A contemporary addition to this concept is the fifth P, or people (see Figure 4.2).

Addressing first the most recent of the P’s, People refer to the customers of your business, and more specifically are called your target market. A target market is further understood to be a group of customers with similar characteristics, needs, and preferences. Product means goods (tangible) and services (intangible) or any combinations of these that are offered to the target customers. An example would be a cable TV service. It comes with a cable box, DVR, remote control, and a promise or warranty to provide uninterruptible television programming service. It should be noted that, even though there is a tangible product being offered to customers, it is always combined with service; and, ultimately, all businesses are in the service business. Price means what your customers are prepared to pay in monetary terms for the product or service that you provide. This, in turn, represents the value that a customer receives. Promotion refers to the process that marketers use to communicate with your target customers about your offerings to persuade those customers to buy your product. For example, a small business selling food from a truck would be able to persuade customers through signs on the truck, display of different menus and pricing, and by parking the truck in a strategic location with maximum foot traffic. The business owner’s task would then be to convert potential customers to paying customers. Place refers to where marketers make goods and services available to target customers. The place can be retail (e.g., Nordstrom), or cable service provided in your home, or, these days, it can be virtual or online (e.g., Amazon.com), or place can be at both ­brick-and-mortar locations and online, worldwide (e.g., many educational degree programs).

Marketing Process and Strategy

Strategy refers to the course of action you take in order to achieve your objectives. Effective marketing requires a coherent strategy. In addition to the marketing mix variables, you should take into consideration environmental variables, like the economy, laws, regulations (rules), competition, technology, and social or cultural factors and associated probable effects in designing a marketing strategy. Marketing strategy, therefore, involves anticipating future events and situations in order to design the best way to achieve your business goals and objectives within the context of the available opportunities in the marketplace. Thus, although the marketing mix variables were defined and briefly illustrated earlier, the focus will now shift to a more detailed exploration of how each variable can be applied in the context of strategy.

Product or service refers to both physical or tangible products and intangible services that an organization offers to the market or that the market selects. An example would be the iPhone 5 by Apple. It should be noted again that ultimately all offerings (tangible and intangible) are service-based. Almost all products are offered with a warranty or guarantee of performance, without which customers will be very hesitant to buy. A service warranty or guarantee is also used as a tool to create ­differentiation—a discernible difference compared with offerings of competitors. General Motors (GM) got back into the market with full force after its bailout by offering warranties of 10 years or 100,000 miles. Initially, GM offered cars with a provision that buyers could return cars within 60 days if the buyer was not satisfied. Both Hyundai and BMW reestablished footholds in the U.S. market by offering consumers warranties covering 10 years or 100,000 miles. BMW even offered to provide free oil changes for 10 years.

Besides having a strong branding strategy, it is worthwhile to consider cobranding, brand extension, and brand licensing. An example of cobranding would be the Eddie Bauer edition of the Ford Explorer; also, Subaru is an official car of L.L. Bean. Nike or Reebok logos on college campus jerseys or scoreboards represent forms of brand licensing.

Price refers to the amount that buyers are willing and able to pay for the products and services offered for sale. Price is also the yardstick of value that customers expect to receive from the product or service. The price, then, should be an indicator of value that customers are likely to get in exchange for goods or services. Therefore, price level can be adjusted (increased or reduced) depending on the actions of competitors and can be seasonally adjusted for market conditions like low or high demand, high or low unemployment, recessionary versus inflationary economic conditions, or new and innovative versus out-of-style products, and so forth.

Promotion refers to communication activities that you or your marketers use to inform and persuade targeted customers to buy your products and services. Promotion methods such as advertising, public relations, publicity, personal selling, sales promotions, direct marketing, and use of the Internet for e-mails and various social media (Facebook, YouTube, Twitter, etc.) are very effective tools to communicate with customers of the 21st century. Your promotional objective, like that of any and all entrepreneurs, should have several goals. A major goal should be to provide information not only to currently targeted customers but also to the general public (or relevant others if you offer a specialized product or service), as these are the people who might eventually become your customers. A second goal should be to create a positive image of your company and its brand. Thirdly, you should be striving to accentuate value due to the differences or uniqueness of your offerings. Finally, your ultimate goal should be to increase or stabilize sales over the long term.

In seeking to accomplish your goals, you must make an attempt to blend various promotional mixes, such as advertising and personal selling, with sales promotions, like coupons, free samples, trinkets, displays, trade shows, premiums, and so forth. Any of these methods may be used to reach out to customers on a recurring or nonrecurring basis. Besides, you always have the option of using public relations and publicity to place your company’s brand before readers of newspapers and magazines, and viewers of televisions (e.g., to note your contributions to the community or social causes). This type of nonpersonal presentation creates much more positive impact on the targeted audience than any commercial. The 2012 campaign of President Obama used these media most effectively and in very sophisticated ways to communicate with the voting public, not only to vote for brand “Obama,” but also to urge the sharing of Obama campaign messages with family members, friends, and other known groups. Regardless of your political persuasion, the success of this strategy provides a glaring example of how social media can be used to reach a target audience—an example that can be very useful to you as you strive to promote your own business’s products and services.

Place or distribution refers to the choices that you select to make your products or services available to customers based on the what, when, where, and how of customer needs. Place strategy provides time, ownership, convenience, possession, and utilities for customers. For example, marketers provide winter clothing during winter months, spring clothing during spring, and summer clothing during summertime. If you are in the clothing business, you will also offer services like returns or exchanges; while those in the home appliance industry will offer service warranties and home delivery. Thus, in the above campaign example, voters were given the opportunity to go and vote in polling places located within a very reasonable distance from personal residences; and, in many cases were allowed to vote by mail, or even the Internet in New York and New Jersey, due to Hurricane Sandy. Integrating the four P’s in designing marketing strategy, therefore, is critical for all business marketing efforts (i.e., for both small and large businesses).

Designing Your Marketing Strategy

In designing and implementing marketing strategy, the important first step is to answer the question, “What business are you in or what does your business do?” That is, you must define your business. This preliminary step is the same as defining the mission of your business, as discussed in Chapter 2. However, this step is very important here because it helps you to identify your target market, competition, and, above all, it helps you to effectively design the current and future direction of your business. For example, originally, railroad companies had defined the companies in the industry as railroad businesses (moving by railroad) rather than transportation businesses (which serve the purpose of moving people, products or goods from one place to another, regardless of the mode). Had railroad companies not focused only on the railroad business, obvious competitors (airlines, trucks, cars, barges, ships, etc.) would have been recognized as such. Look where the airline industry is today versus the railroad industry. When someone in New York makes plans to go to Los Angeles, it is automatically presumed that a flight will be booked.

Another way to define your business is to focus on what the customers are buying from you. Customers in the marketplace are not buying computers but problem-solving and communication machines. Hollywood studios are not in the business of making movies, but are in the entertainment business. Cosmetics manufacturers are not in the business of marketing cosmetics, but instead are marketing hope of fulfilling dreams of people who want to be seen as having a very good physical appearance or look.

It is now time to focus on putting into action what has been discussed, thus far. You should now set aside some time to develop your own marketing strategy. As can be seen in Figure 4.3, there are four steps in the process of designing your marketing strategy. Each of these steps will now be addressed.

Step 1: Segmenting the Market

Since you cannot effectively serve all customers (mass marketing), it is a good strategy to segment the market. Segmentation involves dividing the total market into smaller parts (segments) based on homogeneous needs and preferences of customers. Additionally, customers in each segment have different resources, wants or needs, lifestyles, attitudes, buying habits, cultures, and neighborhoods. For example, the automobile market is divided into luxury, economy, family, sports, and trucks (to name a few).

Each segment has uniquely different needs and preferences. As an example, consider a food truck (otherwise referred to as a Grab & Go) lunch market. Assume that the total downtown Washington, DC luncheon market is $1 million per month. In this scenario, it is also reasonable to assume that many customers will eat lunch at restaurants, clubs, office cafeterias, and so forth, leaving only about $200,000 per month in purchases from customers who will buy directly from trucks. A truck owner will be very lucky to receive even 1% of this market initially, given that there are competitors, as well as considerations related to the location of the truck and volume of foot traffic. Therefore, as the truck owner, you should try to create initial demand by offering value: making it clear why customers should buy from you rather than your competitors. The initial offerings should not only be to satisfy customers, but to also claim each patron as a loyal customer who will sing the praises of your business, spreading the word for you and bringing in other loyal customers. This process is called viral marketing, which is a very efficient and cost-effective way of marketing your business. Clearly, your segment here is economically focused, seeking value, and likely wanting a lunch that will be available within a matter of minutes and cost no more than $10. If you have a beneficial or well-liked product, the local newspaper and maybe even television station will sometimes do a story spotlighting your offerings and why people like or see your products or services as special. Depending upon the market and your position in it, this strategy alone can be worth several hundred thousand dollars of publicity.

Yet another example of segmentation would be categories of ­Hollywood movies such as family-oriented (G and PG), thriller, western, classics, romance, cartoons, action, and so forth—each designed to appeal to a different group or population.

Step 2: Targeting Your Market

Once a decision has been made as to what segments of the market you want to serve, those segments become your target market. This means that you perceive that the segments have significant enough attractiveness and potential to be profitable in the long run. As an example, Japanese auto manufacturers initially had targeted the economy segment of the market in the United States, with Toyota offering the Toyota Tercel and Honda offering the Honda Civic. However, with the passage of time, these companies have successfully transitioned to targeting all segments of the automobile market. By contrast, Volkswagen has yet to enter the luxury segment of the U.S. market, instead opting to focus on economy and mid-size (sedan) target markets. Thus, as a business owner, you can decide to enter and serve only one segment of the market or multiple segments of the market.

Step 3: Differentiating Your Products and Services

Once you have made your target market selection, you then need to distinguish your products from those of your competitors in that target market. This is known as differentiation. There are countless ways that you can differentiate your offerings and provide great value to your customers, thereby creating and sustaining a competitive advantage in the market. Additionally, differentiation can be created by way of service, style, design, performance, price, delivery, and many other methods. For example, a gas station owner or attendant might get to know and greet each regular customer by name; or, in self-serve gas stations, the owner might decide that the female customers will not have to get out of cars and will be served by attendants at the same price as self-serve. This is the way to create customers’s favorable or positive perceptions of your products or offerings. Differentiation is the strategy you use to create a specific mindset among your customers regarding your products.

Step 4: Positioning Your Offerings in the Market

Positioning refers to the creation of an image in the minds of customers. It is always in reference to competition and does not exist in a vacuum. For example, the name, Nordstrom, brings to mind a distinct image of prestige, quality, and a high level of customer service. Conversely, K-Mart or Wal-Mart stimulates different kinds of images such as inexpensive, not high-quality merchandise, and not very customer service-oriented stores. Customers would make an effort to be seen by neighbors if shopping at Nordstrom, but would try to hide or make sure not to be seen by neighbors, acquaintances, or friends while at K-Mart or Wal-Mart. Thus, positioning refers to creating an image in the minds of your targeted customers. Your strategy defines what kind of product image customers are likely to have; and, ultimately, through expression of tastes and preferences, customers are the ones who define the offerings of your company.

Remember that the marketing mix (product or service, price, promotion, and place or distribution) plays a very important role in creating the image of your offerings. You need to follow through on the promise of being really customer service-oriented or customer-focused and not make hollow promises. Thus, your sales staff and delivery people have to be trained well to deal with customers in a business where you are trying to create differentiation by promising high-level customer satisfaction.

Finally, strategy is nothing unless it is successfully implemented. In today’s marketplace (both domestically and globally), you, as the chief marketer of your business, need to be carefully watching and accurately keeping pace with the nature and speed of changes taking place in the market. This is critical in areas such as technology, innovation, population structure, and cultural changes; and, you must adjust your marketing strategy, accordingly, to retain your competitive advantage or else your business could become extinct. For example, remember the “Kodak moment,” when everyone thought of Kodak as being synonymous with photography. Now Kodak is in bankruptcy. Yet another example of keeping up with the changes in the marketplace is the McDonald’s hamburger. As the customers’s preference for nutritional food increased, McDonald’s began creating new menus with higher nutritional values, giving information on calories for each menu item and thereby keeping competitive advantage. Yet another good example is use of Blackberry cellular phones. At one time, Blackberry had a monopoly in the market, including the government market. Now the phones are struggling to be competitive in the market because of innovative phones by Apple and Samsung. These examples illustrate that you need to remain very vigilant as to what is happening in the marketplace. Also, in order to stay ahead of your competition, you need to invest in marketing research to gather information on a continuing basis about changing market conditions, competition, regulations, and the opening of opportunities to market abroad.

A Note on the Internet and Social Media Marketing

Today, all marketers (especially small business owners) need to work very closely with the Internet and social media, as there is no escape from these growing methods of communication. A small business with limited budget, a small staff, and so forth, might not see the relevance of using either the Internet or social media to reach customers; rather, such a business might simply resort to reliance on word-of-mouth. Yet, utilization of some of the Internet and social media as a tool to reach and communicate with customers is likely to reap a lot of benefits. An example of a small business start-up that should be cited here is 800razors.com. The company’s business is generated strictly online and is designed to meet the needs of customers who are looking for inexpensive but performing razors or blades instead of well-known (more expensive) brands like ­Gillette. The company did just under $1 million in business in less than six months.3 An additional example of a successful small business is Morris Spanner’s initiative to work with DICOM to transmit X-ray images of a person’s body from one hospital to another, or one doctor to another, quickly via computers. The company has developed software that easily moves images among hospitals and doctors. To market the service, the company used marketing channels not traditionally used by the medical profession. These channels included Twitter, LinkedIn, Facebook, and use of other social networks, such as buying Google ad words to reach out to doctors and hospitals. The strategy finally landed a contract with the Mayo Clinic for an imaging project.4

In 2012 alone, each month some 191 million people conducted 17 to 18 billion searches using various Internet search engines. In addition, 184 million people spent an average of 22.25 hours watching videos online, and 72 million people read blogs.

In almost every corner of the globe today, the social networks are abundant (for example, Facebook, YouTube, Flickr, Twitter, LinkedIn, blogs), as are mobile phones (text messaging, e-mail, and so on). These are now very important marketing tools that all entrepreneurs—big and small—must accept and appropriately utilize in order to survive in today’s highly competitive markets that increasingly have very well-informed consumers.5 Think about the power of six billion consumers with cell phones worldwide who are in a position to keep up with events (and products) and spread information through, say, text messaging alone. In the United States, there are well over 200 million Internet users who visit different social networks for close to an hour every day. Similarly, nearly 60% of the customers of today are using mobile devices to access the Web and also are using mobile apps to conduct personal and business transactions. Furthermore, research results by eMarketer indicate that, during the second quarter of 2012, business-to-consumers (B2C) mobile sales accounted for about 15.1% of Internet sales.6

Since today’s customers are everywhere, you are better off designing your marketing strategy to reach those customers through as many different types of media as you can afford, thus providing the maximum exposure of your offerings and resultant opportunities for the digital customers to buy. However, it is important for you to note that content marketing remains a very effective tool for communication with your selected target audiences. This works because consumers are now sophisticated enough to detect or filter information that is valuable and enhances intelligence, and therefore contributes to development of better buyers. Eventually, the consumers, in turn, are likely to reward you with loyalty or business.

The different options described earlier are available, either alone or in combination, to all entrepreneurs. Small business owners with limited resources need to pay more attention to these avenues of communication to keep in touch with targeted customers. The initial investment of time and resources might be somewhat painful for you, but the ultimate rewards should make it worthwhile. For example, you can use LinkedIn for personal branding. You can also utilize Twitter.com or search to keep following conversations about your industry, company, brand, or generic or specific product, and then decide to open a Twitter account to communicate with the followers. Additionally, a company can arrange social media events, which can generate positive word-of-mouth conversations that could eventually result in long-term sales as well as building a brand, company image, or both. You can also sign up with Google Alerts to keep up with what population in general is talking about you, your brand, company, competitors, and so forth.

Among social media, Facebook deserves special mention: All entrepreneurs must become knowledgeable about the value of Facebook in making direct contact with customers. This is the most dominant of all social networking sites or services. Nearly 58% of the population uses Facebook to communicate among themselves and have also posted personal profiles. A large majority of Facebook users (62%) interact with different brands on their news feeds and not the brand’s Facebook page. In a worldwide survey, nearly 60% of those who responded expressed expectations that brands provide responses to comments made in social media. You need to be mindful that both the comments made by social media users and responses provided by the company help to shape perceptions of the brand and company.7 Clearly, this offers a great challenge to all marketers desiring to interact with customers. Nonetheless, with advantages to be gained by doing so, the effort is certainly worth expending.

Despite the popularity of Facebook, e-mail is likely the most recognized means of communicating through the Internet. Thus, e-mail ­marketing has become more common. E-mail marketing is a low-cost, direct way to communicate with a large number of customers and it has a usually high response rate from people who have a desire to do business with the organization. Even among those who have not given permission to receive your e-mails, you can send e-mails with options to unsubscribe so that your e-mails do not become annoying and create negative comments among friends and neighbors. You can direct recipients to visit your website to place or review orders or review offers, request information, or you can invite comments.

The social media options that have been described provide some examples of the usefulness of these contemporary means of communicating with your customers or prospective customers. If you are interested in further details on any of these media, you are encouraged to research specific topics on the Internet or in books devoted to the topics.

The Federal Government Market

The federal government is one of the country’s largest buyers of goods and services.8 Its different departments, agencies, and commissions send out “requests for proposals” every year soliciting contractors to provide consulting services. The services include energy and defense consultation, environmental assessment, financial advisement, communication and information technology, and logistics. In one word, the government is omnivorous. Many government contracts, such as those offered by the Department of Defense (DOD), Homeland Security, and the Department of the Treasury are characteristically so broad and complex that some small businesses are unable to compete. By contrast, large companies like Lockheed-Martin, Boeing, Northrop Grumman, and General Dynamics dominate in such a competitive arena and are usually awarded government contracts—particularly the large ones.

Small businesses interested in competing for government contracts should understand the procedures and cultures of the government’s procurement and contracting systems in order to be successful in the bidding process. The Small Business Act stipulates that small businesses must be afforded the maximum practicable opportunity to participate and to provide goods and services to the government.9

There are over 50 agencies and departments within the federal government. These organizational units have a statutory obligation to contract out to designated types of businesses at least 20% of everything purchased. The statutory goals include the following guidelines for involvement of various groups in government contracting:

• Small businesses—23% of prime contracts

• Small and disadvantaged businesses (SDB)—5% of prime contracts

• Women-owned small businesses (WOSB)—5% of prime and subcontracts

• HUBZones—3%

• Service-disabled veteran-owned small businesses (SDVOSB)—3% of prime and subcontracts

Government departments and agencies are required to submit annual reports indicating that these requirements have been fulfilled. Several programs have been designed to increase contracting opportunities for small businesses. For example, the Mentor-Protégé (MP) Program and Small Business Innovation Research (SBIR) Program are available to small businesses interested in participating in government contracts.10 Furthermore, many contracts are set aside to attract the interest and participation of small businesses. Other programs designed for small business participation are identified as: Small & Disadvantaged Business, Certified Small Business, Small Women-Owned, Small Disabled Veteran-Owned, ­HUBZone, Alaska Native-, and American Indian-Owned Businesses.

However, you need to be aware that there are distinct differences between government and private-sector procurements. Unlike private procurements with limited regulations and vague transparency, governmental contracting and procurements are strictly regulated by Federal Acquisition Regulations (FAR). While this standardizes the contracting process and also makes it transparent and fair, it creates a process that is also cumbersome, slow, complicated, and subject to varied interpretations of rules (FAR sections). Furthermore, the process is characterized by longer decision times, longer payment cycles, and budgetary allocation adjustments by Congress (which can often be difficult to predict). ­Nonetheless, resources have been put in place to help you navigate your way through what might initially appear to be a contracting process maze. A systematic approach to successfully marketing to the federal government is described in the sections that follow.

Identifying Available Marketing Assistance Resources

Before attempting to market to the federal government, it is, obviously, important for you to first learn what resources are available to assist you. With this knowledge, you can plan to utilize those resources to your advantage. Following are some of the resources.

1. Small Business Administration (SBA): www.sba.gov

SBA provides

• counseling services both in person and via e-mail;

• training of various types (most are free or minimum cost);

• financial assistance (loan guarantees and counseling); and,

• small business certifications, such as 8(a).

2. Small Business Development Centers (SBDC’s): www.sba.gov/sbdc

SBDC’s provide

• counseling;

• management assistance; and,

• training (free or minimum cost).

3. Procurement Technical Assistance Centers (PTAC’s): www.dia.mil/db/procurem.htm

PTAC’s provide

• counseling (either in person or via e-mail);

• training (free or minimum cost) in person or in classroom, some online; and,

• registration and bid-matching assistance.

4. Small Business Program Offices are located in almost all government departments and agencies. These Office of Small and Disadvantaged Business Utilization offices are often referred to by the OSDBU (and sometimes SADBU) acronym. The Department of Defense OSDBU is listed at www.acq.osd.mil/osbp11

Reexamining Your Business Definition

After having identified relevant resources, the next step is to take a fresh look at and redefine the nature of your business, if necessary. A narrow definition will limit your opportunities. For instance, recall the Railroad example in a previous section of this chapter, in which it was emphasized how beneficial it would have been had the company defined its business as Transportation and not Railroad. By providing a clear and appropriately expansive definition of the business, the company could have attracted the intended market (future travelers). Had the narrower Railroad definition been employed, someone traveling from Washington, DC to Los Angeles would never be thought of in the context of the train, but would automatically be assumed nowadays to be traveling by plane. Hence, the Railroad company would be summarily dismissed from consideration, because the company incorrectly defined its purpose. Similarly, when the federal government announces that it is buying computers, it is actually buying “problem-solving and communication.” Thus, you must recognize that you are now in the problem-solving and communication business and not in the business of simply supplying computers.

Understanding Your Customer and Product Fit

Your job now is to understand how your customers (or prospective customers) can benefit from your products and services. Before going forward, take a moment to really think about your company’s products and services. Get to know the agency and understand the context in which your product or service could be used. Think about whether existing products and services can meet those needs. Consider whether modifications would make your company more competitive and whether those modifications are feasible and potentially worth the effort. Obtain available information on past awards, quantities, and costs. Become known to potential purchasers. Take another close look at your company and ­consider what the government will look for when considering your company for a contract award. The FAR Part 9 clearly states the qualifications for organizations to do business with the federal government. Some of those qualifications are shown in Table 4.1.

Developing Your Strategic Marketing Plan

As a small business owner, the next step you can take to attract government contracts is to develop a strategic marketing plan. One popular approach that can deal with the vastness of big government is the segmentation, targeting, and positioning (STP) strategy, which was discussed in the earlier part of this chapter. The DOD offers a perfect opportunity to demonstrate how small businesses with limited resources can use the STP strategy to win government contracts (see Figure 4.4).

As shown in the following figure, the selection process for a small business requires that you first segment the market before identifying potential customers. Once you have identified the target market(s), study these prospective customers in detail, and get familiar with (know) the wants, desires, and habits of your future customers. While your goal is to develop business with sometimes very large government departments, it is important for you to remember that, ultimately, the face of these departments is a human one. Learn the names of and seek information from departmental personnel about key things that you need to know, such as:

• Buying habits (centralized or decentralized, regional or headquarters, and so forth)

• Department or agency business procedures

• OSDBU influence

• Record of accomplishment of small business goals (%)

• Past practices or awards to small businesses

• Aggressiveness in achieving small business goals

• Friendliness toward small businesses

• Transparency

Remember that this list is not exhaustive. Add to it, as necessary to fulfill your own unique information needs.

Searching for Contracting Opportunities

As indicated earlier, the federal government is the largest purchaser in the country. Therefore, you can expect that virtually every department and agency can be viewed as a source of contracting opportunities. While the DOD is frequently mentioned in this chapter due to its extensive budget and purchasing needs, on a government-wide basis, the General Services Administration (GSA) deserves separate mention and is, thus, discussed briefly here.

General Services Administration

With 10 regional offices located throughout the United States, the ­General Services Administration (GSA) is the main purchasing agent of the U.S. government. The agency also is responsible for managing the Federal ­Supply Schedule (FSS) Program. Through the FSS and Indefinite Delivery Indefinite Quantity (IDIQ) contracts, different federal agencies can order commercial products and services from the preapproved list of vendors. Once on the list, departments and agencies can quickly make purchases from your company within certain dollar limits. For more information on the GSA Federal Supply Schedule, please visit www.fss.gsa.gov.

Subcontracting and Teaming Opportunities

The federal government, and DOD particularly, encourage setting aside a portion of procurements that would otherwise be too large for small business. The vehicle often employed is called subcontracting. Major contractors (e.g., Boeing, Lockheed-Martin, General Dynamics, Raytheon, and Northrop Grumman, etc.) with large federal government contracts are required to provide small businesses the opportunity to receive subcontracts. These large businesses serving as principal contract-holders (prime contractors) get credit for small business participation as well as preference in the evaluation of contract proposals and determination of subsequent awards. In fact, Section 8(d) of the Small Business Act and FAR 19.7 go so far as to require prime contractors having large prime contracts with the department or agency to provide maximum possible subcontracting plans indicating how minority-owned businesses (MBE’s) will be utilized.

In addition, the subcontracting or teaming agreement is an opportunity for small businesses to both grow and have an opportunity to gain real-life experience from writing proposals to government agencies. This experience can later be translated into prime contracts and can be strategically used as a reference for you to show that your company has experience that differentiates it from other small business contractors.

The DOD’s prime contractors and subcontracting reporting system, which is generated electronically, contains the names and addresses of companies, categories of products and services provided to DOD, subcontracting plans, and names and addresses of company officials who administer the subcontracting plans. Additionally, the websites list more information about subcontracting, prime contracts, and the like, so that you can search for and market your offerings to prime contractors for subcontracting opportunities. Also see the discussion of the MP Program in a later section of this chapter.

Additional Important Electronic Searches

Review the Federal Procurement Data System (www.fpds.gov) for contract opportunities by the Simplified Acquisition Threshold (SAT), for awards in the $3K to $150K range. Also, regularly search www.fedbizopps.gov for active federal contracting opportunities. This website will also provide information on posted contracts during the last 90 to 365 days, by set-aside code, place of performance, type of contracts, and by agency. Also, look into the website of the Minority Business Development Agency—MBDA (www.mbda.gov) for both government as well as global business opportunities. Other important sources are also available.

Other Federal Programs

Three major programs that have been particularly helpful to some small businesses are the Mentor-Protégé (MP) Program, the Small Business Innovation Research (SBIR) Program, and the Small Business Technology Transfer (STTR) Program. You should spend the time to familiarize yourself with these programs and decide whether your company could benefit from participation in any of these programs. Following are brief descriptions of each program.

Mentor-Protégé Program

The MP Program affords small businesses the opportunity to pursue and secure procurements with the federal government as a joint venture with experienced and already established large or small businesses. This program was established in 1991 under Section 831 of Public Law 101-510. Under this arrangement, the established business ­(Mentor) provides ­developmental assistance (technical, managerial, financial, ­proposal preparation, etc.) to a small business (Protégé) to facilitate the Protégé’s enhanced ability to successfully compete for prime contracts and subcontracts.

There are two types of MP Programs that are available for the DOD. The first is the SBA-sponsored MP program and the other is the ­DOD-sponsored MP program. Under the SBA program, a certified small and disadvantaged business (Protégé) forms a joint venture with the Mentor firm to seek government contracts. On the other hand, the DOD offers two options for participation in the MP program: (1) the Direct Reimbursement Agreement, which reimburses the Mentor for all costs; and, (2) the Credit Agreement, which allows the Mentor firm to receive credit toward the subcontracting goals set forth in the Mentor’s prime contract. DOD and its agencies are the only departments that offer direct reimbursement. All other departments and agencies within the federal government offer only credit agreements.

Small Business Innovation Research Program

The purpose of the SBIR program is to encourage scientific research and development (R&D) among small technology companies for development of new products, services, software, instruments, and robotics. The SBIR program was established in 1982 and is designed to assist in early-stage funding of the most attractive projects for small technology-oriented businesses, while removing the obstacles due to lack of funds for continued innovation. The small business science and engineering projects that are funded by this program are those that offer tremendous potential for not only giving some added advantage to government, but also having the eventual potential for commercialization in the private sector. With annual funding of nearly $2 billion, the SBIR program is administered by the SBA through 11 different federal agencies. However, more than 50% of this funding is used by the DOD SBIR Program.

The ultimate goal of the SBIR project is commercialization. This is one of the most successful programs ever developed and implemented by the federal government to assist small businesses. [Emphasis added]

Small Business Technology Transfer Program

The STTR Program was established by Congress in 1992. STTR is similar to SBIR, except that STTR encourages small technology companies to work on R&D projects. A comparison of the SBIR and STTR Programs is provided in Table 4.2.12

Final Steps

Please review and procure the NAICS code(s) that may be applicable or ­relevant to your offerings and register your company on SBA’s Pro-Net database and all of the pertinent departments’s or agencies’s OSDBU databases. Also, look into the System for Award Management (SAM)—https://governmentcontractorregistration.org, which provides an avenue for: (1) registering to conduct business with government; (2) seeking federal business opportunities; and, (3) opportunity to self-certify as a small business.

Additionally, to locate DOD opportunities, refer to siadapp.dmdc.osd.mil/procurement/historical_reports/statistics/procstat.html, and scroll down to ST28. Every fiscal year, this site provides detailed reports on various products and services purchased by the DOD. It provides procurement classification codes, number of contracts, and dollars, including the names and locations of buying offices.

It Really Is Possible

By now, you might be wondering whether all of this effort will pay off for you. While no one can honestly promise that it will, what you are being told in this chapter is based on the best academic guidance combined with the author’s practical experience in working with the federal ­government. On that basis, the following testimonial is provided for your consideration.

Key Tips

• Define what business you are in.

• Identify your market.

• Determine needs and wants of your target market.

• Build long-term customer relationships.

• Utilize a customer-centered approach.

• Anticipate customer reactions.

• Measure consumer expectations.

• Make required changes to fit customer needs and enhance customer satisfaction.

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