Entrepreneurship and Small Business Management, 2e

(Mariotti)
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Chapter 7 Developing the Right Marketing Mix and Plan

Chapter 7 Content
This chapter focuses on clearly identifying your product and identifying it as a brand.
Introduction to not-for-profit organizations and charitable contributions is introduced as
cause-related marketing that can attract additional customers to your cause and product.
Breakeven analysis is introduced and the importance of knowing your fixed costs is
covered in order to find a profit.

The Four Marketing Factors

Product: What Are You Selling?
Create Your Total Product or Service Concept
Focus Your Brand
Ford’s Costly Failure: The Edsel
Ford’s Focus on Success: The Mustang
How to Build Your Brand
Price: What it Says About Your Product
Place: Location, Location, Location!
Promotion: Advertising + Publicity
The Fifth P: Philanthropy
Cause-related Marketing
Gaining Goodwill
Not-for-profit Organizations
Teach for America and Upromise
What Entrepreneurs Have Built
You Have Something to Contribute
Developing a Marketing Plan

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 Marketing Analysis
Marketing as a Fixed Cost
Calculate Your Breakeven Point
Breakeven Analysis of a Restaurant

LEARNING OBJECTIVES
1. Combine the four P’s-product, price, place, and promotion-into a marketing mix.
2. Choose the attributes of your product or service.
3. Determine the mix of promotion to use for your business.
4. Find a way to add the fifth P, philanthropy, to your business.
5. Understand the importance of a marketing plan.
6. Identify the critical components of a marketing plan.
7. Use breakeven analysis to evaluate your marketing plan.

Chapter 7 Outline
Learning Objective 1. Combine the “Four P’s”—product, price, place, and
promotion—into a marketing mix.
I. The Four Marketing Factors
 Product
 Price
 Place
 Promotion

Learning Objective 2. Choose the attributes of your product or services.

II. Product: What Are You Selling?
A. Focus Your Brand
B. Ford’s Costly Failure: The Edsel
C. Ford’s Focus on Success: The Mustang
D. How to Build Your Brand
 Choose a business name that is easy to remember, describes your business,
and helps establish mindshare.
 Create a logo that symbolizes your business to the customer.
 Develop a good reputation.
 Create a brand personality.
 Communicate your brand personality to your target market.
E. Price: What It Says about Your Product
F. Place: Location, Location, Location!

Learning Objective 3. Determine the mix of promotion to use for your business
Choose where and how to advertise your business.

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 Promotion is the use of advertising and publicity to get your marketing message
out to your customers.
Publicity is free mention of your business in newspapers or magazines or on radio
and TV stations.
An advertisement is a paid announcement that a product or service is for sale.
Examples of advertising include television commercials, billboards, and magazine
ads.

Learning Objective 4. Find a way to add the fifth P, philanthropy, to your business.
Decide how your business will help your community philanthropically.
Philanthropy is the giving of money, time, or advice in an effort to help solve a
social or environmental problem, such as homelessness, pollution, or cruelty to
animals.
You can be philanthropic even if you have very little or no money to donate. You
can donate your time by volunteering for an organization that is doing work you
want to support.
A. Cause-Related Marketing
Cause-related marketing—marketing inspired by a commitment to a
social, environmental, or political cause—is an easy way to work
philanthropy into your business.
B. Gaining Goodwill
C. Not-for-Profit Organizations
D. Teach for America and Upromise
E. What Entrepreneurs Have Built
F. You Have Something to Contribute

Learning Objective 5: Understand the importance of a marketing plan.

III. Developing a Marketing Plan
 Convincing skeptical investors that your plan has merit,
 Using and disclosing market studies,
 Identifying the target market for the organization,
 Evaluating the competition,
 Demonstrating the pricing strategy, and
 Detailing the advertising plan.

Learning Objective 6. Identify the critical components of a marketing plan.

Learning Objective 7. Use breakeven analysis to evaluate your marketing plan.
Breakeven is the point at which a business sells enough units to cover its costs.
Breakeven analysis tells you if your marketing plan is viable. It shows whether or
not you can cover your fixed costs with the amount of units you plan to sell. If
not, the one place you can cut costs is your marketing plan.

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Teaching Notes
Class Discussion Ideas:
1. Write on the board or share verbally the Mark Twain quote in the text and ask
students to interpret what he meant: “Many a small thing has been made large by
the right kind of advertising.”
2. Discuss the fact that Internet marketing is one of the fastest-growing mediums for
companies to inform customers about their products. Ask students to think of the
most popular or well-known ways the Internet is used to market.
3. Define “breakeven point” from the text: when sales and total costs are equal and
the income statement shows neither net profit nor loss. Usually a breakeven point
is given in breakeven units. Review the definition of unit of sale. Ask: Why is the
breakeven point important to know? (It’s the minimum number of units the
business must sell to cover fixed operating costs; it indicates that units sold above
this point will create profit; it helps entrepreneurs plan their time and resources by
giving them a minimum sales goal; it helps “red flag” a problem if costs are too
high or prices too low.) Write the breakeven point formula on the board:
Breakeven = Monthly Fixed Costs/Gross Profit per Unit
Explain to students why we use fixed operating costs and gross profit per unit
rather than sales revenue and a sum of COGS/COSS, variable costs, and fixed
operating costs in this equation. (Because the gross profit per unit amount already
accounts for sales revenue and COGS/COSS and variable costs paid.) Breakeven
analysis focuses on how much an entrepreneur needs to bring in above and
beyond the costs of each sale, as described in the economics of one unit, to
contribute to the general operations of the business.
4. Focus on logos. Have students hold up their business logos or display them so that
everyone can see them. Ask the class what aspects of these logos are original
(design, color combination, motto, the way the name is depicted/displayed).
Pretend to like one logo in particular and announce that you are going to copy it
for your own business. Ask the student to whom the logo belongs: What should
you do to protect your logo? Transition into a discussion that defines intellectual
property and the three main ways the government protects different forms of
intellectual property: patents, trademarks, and copyrights. Establish that
“intellectual or artistic property” is an end product that gives form to an idea; it
has value for its creator or inventor. For example, book pages by themselves are
not intellectual property, but the ideas and the arrangement of the words on them
are. A CD is not artistic property, but the music and lyrics contained on it are.
Elicit other examples from the students, such as a car-engine design, a company
slogan or logo, the seasoning recipe for KFC, a T-shirt design, a movie (what’s on
the DVD, not the DVD itself), and a new digital process for making movies.
5. Discuss pricing. Emphasize that pricing not only affects marketing but also
directly impacts income and profit: if a company does not price effectively, it may
be difficult to be profitable. Discuss the different pricing strategies given in the
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 text, and either provide examples or have students suggest some (e.g., keystoning
is a cost-plus strategy; a 20 percent markup on a printing order is cost-plus; new
discount airlines that provide deep discounts for new routes is market penetration;
prescription drugs, computers, and other technology products such as plasma TVs
use skimming; pizza parlor discount wars or “match any price” promotions or “we
accept competitors’ coupons” policies are beat-the-competition strategies).

Lecture Enhancers
PPT Lecture Slides for Chapter 7
Outside the Classroom:
www.loc.gov/copyright: If you create any art, music, or literary works that are important
to your business, copyright them through the U.S. Copyright Office.

www.download.com: Download.com offers a lot of free software. Be sure to run all

software through your virus detection program before installing it on your hard drive.

www.ecommerce-guide.com: The E-Commerce Guide reviews the latest products for e-

commerce Web sites, keeps track of industry statistics, and encourages networking
among online entrepreneurs.

BusinessWeek
Subscriptions:
www.businessweek.com

Guerrilla Marketing for Free: Dozens of No-Cost Tactics to Promote Your Business and
Energize Your Profits by Jay Conrad Levinson (Houghton Mifflin 2003).

Search Engine Marketing, Inc.: Driving Search Traffic to Your Company’s Web Site by
Mike Moran, Bill Hunt (IBM Press, 2005).
www.mbda.gov: The Minority Business Development Agency (MBDA) is a federal
agency that fosters the establishment and growth of minority-owned businesses. MBDA
provides funding for a network of Minority Business Development Centers (MBDCs),
Native American Business Development Centers (NABDCs), and Business Resource
Centers (BRCs). The Centers provide minority entrepreneurs with one-on-one assistance
in writing business plans, marketing, management and technical assistance, and financial
planning to support viable start-up business ventures.

www.score.org: The Service Core of Retired Executives (SCORE) is a group of retired

businesspeople who volunteer as counselors and mentors to entrepreneurs.

www.nawbo.org: The National Association of Women Business Owners helps female

entrepreneurs network. You can join a chapter of female entrepreneurs in your area.

Inc. Magazine
Subscriptions: http://www.inc.com

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Entrepreneurship.com by Tim Burns (Upstart Publishing, 2000)

The Little Book of Business Wisdom by Peter Krass (Wiley, 2000)

Guerrilla Marketing by Jay Conrad Levinson (Houghton Mifflin, 1998).

The 22 Immutable Laws of Marketing by Al Ries, Jack Trout (Collins, 1994).

The 22 Immutable Laws of Branding, by Al Reis and Laura Reis (HarperBusiness; 1st
edition, 2002).

Key Terms
cause-related marketing 208
foundation 207
goodwill 208
logo 204
not-for-profit organization 207
philanthropy 207
trademark 205

Class Activity Ideas and Group Exercises

1. Ask the students to think of two or three well-known companies, draw their
logos, and write their slogans.
2. Ask the students to name the two best commercials they’ve seen on TV or
heard on the radio lately. What makes them so effective? How might they
improve on them?
3. Distribute copies of newspaper and magazine ads with instructions to label
the five parts of each ad. Ask students to label their ads as primarily
product/service, institutional, or cause-related.
4. Challenge the students with this instruction: List the parts of your business
that are unique, unlike any other. Think about your name, products,
business operations, marketing materials, etc. Which of these assets could
be protected by patent, copyright, or trademark? Discuss the results and
list examples on the board.
5. Use a guest speaker. Invite a local inventor, artist, or corporate lawyer to
discuss with your class the purposes and processes of protecting
intellectual property from his/her point of view. Alternatively, assemble a
panel of people with different points of view on a common topic (e.g., the
designer, the inventor, the licensed manufacturer, and the intellectual
property lawyer for a particular product). Suggest that the speaker bring
samples of relevant documents for students to see and analyze. Have the
class prepare questions before the speaker arrives.

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 6. Many philanthropic organizations in the United States were established by
entrepreneurs. Chefs and restaurant owners tend to be entrepreneurs.
Have the students research some local and/or famous chefs and restaurant
owners and list their connections and contributions to charity.

7. Assign the students to read the following article written by an experienced

graphics designer. Have them do some research on the websites
referenced in the article. Have them find examples on different websites
of poorly constructed logos and well constructed logos. They should
explain their reasons for both conclusions.

Designing a Logo
By Dana James
There is plenty of information on the internet about what makes a good logo. But beyond
the actual look, the three most important are:

1. Effective without color: will it reproduce in black and white and still be readable?

2. It's scalable: can the logo shrink to the size of a pen imprint and still be legible? If you
blow it up to use on a billboard, does it hold up?

3. Relevant to the industry: does the logo stand on it's own, without looking out of place
among its industry brethren?

I'm a designer, so I strongly recommending letting a designer, design a logo. Then again,
there are a lot of bad designers out there who have no conception of how to distinguish
between what looks good and what is effective for a business. If you want to see just how
bad some so called designers are, go to a web site that works as a graphic design clearing
house, that allows businesses to post their jobs online and have several designers then do
up logos for them to choose from for a set price. The range is remarkable.

But that is an option, using such a site. A business or entrepreneur can post online their
business name and the basic idea for their logo, set a price and have a hundred designers
upload potential logos to choose from. There are pros and cons for this option:

PRO: can be cheaper, many options to choose from

CON: cheaper can cost you in the long run; more options do not translate into better
options

The only way an entrepreneur should be using such a site is if THEY know what a good
logo actually is. Otherwise, they may end up with a logo that doesn't fit the main criteria
mentioned above.

My suggestion is to look around your community or online or wherever, and find logos
that you like, that are relevant to your industry, so you can compare apples to apples.

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Then call the business and ask who did their logo. (obviously, don't call a franchise, you
want small business) Then contact the designer who did the logo, ask to see other
samples, and find out the range they charge for doing not just the logo, but an identity
package, which is the logo plus a letterhead system at the minimum. Expect a range, not a
hard figure as to cost.

The more effort the entrepreneur puts into the front end of the logo design, the better the
result. Not knowing what you want going in leaves you open to guesswork by the
designer, added cost, and unknown results.

Another consideration is what you really expect out of your logo. Basic and cheap is fine,
as long as it fits the top 3 criteria. If you want a logo that you plan to feature on sellable
merchandise, like for a restaurant, you want to go the extra mile and dollar to be sure you
have something marketable. If you are primarily service oriented and plan on having
uniforms that feature embroidery, make sure the logo is tailored to that function.

To sum up:

1) Your logo should meet the top 3 criteria.

2) Do your homework before you even begin your search for a logo designer. Know the
difference between different styles of logos.

3) Be prepared for mixed results if you use a graphic design online service for logo
design.

4) Don't let a friend, a cousin, or a student design your logo. Let someone else be their
guinea pig.

5) Make sure your contract with the designer provides you will all necessary formats of
the logo, from a simple .jpeg to an .eps file. (and your logo should almost always be
provided in that format because .eps enables wide scalability.

6) Maybe most important, you should LOVE your logo. You should be able to defend it
against all who would question its greatness. And your designer should be able to explain
the logo to you, so you understand what makes it great.

Suggested Answers for Critical Thinking Exercises 7-1 – 7-6

1. Describe how a product or service will fit into, and complement, your marketing
mix.
Example: My service, Oldies but Goodies DJ Service, provides exactly the
type of music my target market most wants to hear at parties.
(Learning Objective 2 – AACSB –Application of knowledge)

2. Explain how pricing tells a story about your product.

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 Students should pick a product or service and set a price and tell why they
set that price and what that price means, i.e., it’s affordable, difficult to
obtain, etc. (Learning Objective 2 – AACSB –Application of knowledge)
3. Where do you plan to locate your business? Explain.
Example: Oldies but Goodies will have an office at my home because much of
the work will need to be done after the nine-to-five workday.
(Learning Objective 2 – AACSB –Application of knowledge)

4. How do you plan to incorporate philanthropy in your marketing mix?

Example: I can offer my DJ services for free at local charity events. I will also
consider throwing an annual Motown dance party for seniors in my
community. I will offer DJ classes to young people at my local YMCA. I plan
to donate at least 5 percent of my net profits to local charities each year.
(Learning Objective 4 – AACSB –Application of knowledge)

5. Use the chart below to describe your marketing mix.

(Learning Objective 2 – AACSB –Application of knowledge)

Marketing Mix Chart (Business Plan Practice)

My Market Segment: _______________________________________________
Marketing Mix Decision Explanation
Product/Service DJ service specializing in My service provides my target
Motown-era music market the music it most wants
to hear at parties.
Price $150 for three hours of If customers want to hire me
service; $50 for every for more than three hours, they
additional hour will pay an additional $50 per
hour. I wanted to set up my
pricing so that each gig is
worth my time and effort.
Place We bring our services to I will also set up a home office
the customer. so that customers can reach me
at their convenience in the
evenings and on weekends.
Promotion Promo cards, business I will focus on radio stations
cards, press releases, radio that my target audience listens
ads to and will leave cards at places
they frequent.
Philanthropy Offering in-kind DJ I plan to highlight my
services at local events, business’s contributions to the
teaching DJ classes at the community in my promotional
YMCA, contributing materials and when I meet with
money to local charities customers directly. I want my

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 customers to feel good about
supporting a business that gives
back to our community.

6. Use computer software to create a logo for your business. Do you intend to
trademark your logo? Explain.
Answers will vary but should include understanding of trademark concept.
(Learning Objective 2 – AACSB –Application of knowledge and Information
technology)

Key Concept Questions 7 – 7 – 7 - 9

7. Brainstorm five creative ways for a small business with a very low budget to
advertise and promote its products or services using the latest developments in
communications and Internet technology. (Learning Objective 2 – AACSB –
Application of knowledge)

A. Use local cable TV ads.

B. Use Internet radio ads.
C. Trade Web links with other related but not competing businesses (each
business places a small banner ad from another business on its Web site).
D. Send an e-mail newsletter once a month to customers who have agreed to
accept it.
E. Offer fun, free ring tones that can be downloaded from its Web site, changing
them frequently so that customers have a reason to return to the site.

8. Visit Yahoo Small Business or another provider of online storefronts. List three
advantages and three disadvantages of opening a Web site for your business through
such a service. (Learning Objective 4 – AACSB –Application of knowledge and
Information technology)
Advantages:
1. I can sell to my customers around the world.
2. I can sell online and save money by not having to rent a physical store.
3. I can network online to meet new suppliers and customers.
Disadvantages:
1. I may wind up spending a lot of time online, pehaps more than is
productive.
2. I may neglect my local customer base.
3. Setting up an online store can be expensive.

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9. Explain why breakeven is such a critical concept for any organization.
(Learning Objective 7 – AACSB –Application of knowledge)
Breakeven calculation will tell you if your marketing plan is viable. Your
revenues must exceed your fixed costs. To do this, you must always be aware
of your breakeven point and your revenues.
Application Exercises 7 – 10 – 7 - 12
10. Visit a library (public or university) and locate its reference section. What resources
can help you to open a business like Honest Tea? Identify at least six such resources.
Students should visit a library and ask the librarian for various reference and text
books that can help with information gathering and how-to guides for business
start-up. They will be able to get more specific references if they pick a business
and a desired location.

11. Use the following chart to describe the basics of your marketing plan section.
Answers will vary widely. (Learning Objective 6 – AACSB –Application of
knowledge)

Component What Will You Include?

OPPORTUNITY ANALYSIS
Industry Analysis
SWOT Analysis
Environmental Analysis
Competitive Analysis
MARKETING ANALYSIS
Overall Market and Target
Goals and Objectives
Marketing Strategy
Product/Service
Pricing Strategy
Promotion Strategy/Plan
Place/Distribution
Philanthropic Plan
Future and Contingency Plans
FINANCIAL PROJECTIONS
IMPLEMENTATION TIME LINE

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MEASUREMENT
SUPPLEMENTAL MEASUREMENT

12. Visit three independently owned businesses (in the same industry) in person. Identify
the target market for each (demographic, geographic, psychographic, and behavioral).
Note the various advertising and promotional methods in use for each location.
Search online for company Web sites. Ask the store owner or manager where the
business advertises and whether it creates press releases. Report back on the results.

Answers will vary but should indicate significant research. (Learning

Objective 2 – AACSB –Application of knowledge)

Exploring Online
13. Find out and list how much it would cost to run a banner ad on three Web sites. What
are the pricing options? Are they listed on the companies’ Web sites? Where did you find
the information?
Answers will vary. (Learning Objective 6 – AACSB –Application of knowledge)

BizBuilder Business Plan Questions (AACSB –Application of knowledge, Analytical

thinking, Written communication, and Information technology)
After studying this chapter, you should be able to answer the following Business Plan
Questions. The entire outline for the Business Plan is found in Appendix 2.

5.0 Marketing Strategy and Plan

A. Explain how your marketing plan targets your market segment.
B. What percentage of the market do you feel you need to capture for your business
to be profitable? Explain this.
C. Write a positioning statement for your business.
D. How do you plan to grow the organization (self-generated, franchising,
acquisition)?
5.1 Products/Services
A. What products/services do you intend to market?
B. Explain how your product will satisfy customer needs and wants.
C. Where is your product/service in the product life cycle and where in its industry?
D. How will your organization help others? List all the organizations to which you
plan to contribute. (Your contribution may be time, money, your product, or
something else.)
E. Do you intend to publicize your philanthropy? Why or why not? If you do, explain
how you will work your philanthropy into your marketing.
5.2 Pricing
A. Describe your pricing strategy (value, prestige, cost-plus, penetration, skimming,
meet-or-beat, follow-the-leader, personalized, variable, or price lining) and structure
and the gross margins you expect to generate.

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 B. What will your discount structure, if any, be? How will it impact your average
price (your pocket price)?
C. Will you extend credit to customers? On what terms? If doing retail sales, what
forms of payment will you accept?
5.3 Promotion
A. What is your business slogan?
B. Do you have a logo for your business? How do you intend to protect it?
C. Where do you intend to advertise? (be specific, including identifying reach and
frequency)
D. How do you plan to get publicity for your organization?
5.4 Place
A. Where do you intend to sell your product (physical and/or virtual locations)?
Describe the advantages and disadvantages of your location(s). If you have a specific
site, provide detailed information about it.

Answers will vary based on the student’s type of business. The answers should
reflect significant research and analysis.

Suggested Answers for Chapter 7 Case Studies

Case Study Analysis: 23andMe 7 – 14 – 7 - 18
(Learning Objectives 2, 3, 6 – AACSB –Application of knowledge and Analytical
thinking)
14. What is the product/service offered by 23andMe?
A collection kit is first mailed to the customer. They then send a saliva sample
back to 23andMe and a lab tests are run. The results given to the customers
include data about their ancestry, including possible predispositions for dozens
of diseases and health conditions. Customers are also allowed to contribute this
information to companies studying genetic research to help advance answers to
genetic-risk problems.
15. What could 23andMe’s new pricing strategy structure suggest about its brand? In
other words, what risk(s) did 23andMe take when it cut its price in half?
That they’re not as thorough and accurate as the competitors charging a lot
more.
16. What role does company location likely play in 23andMe’s marketing strategy?
They will likely let the customer know that they are in this area since it’s known
for scientific research. They are also in close proximity to suppliers that can
help their business and venture capital firms than can financially assist them.
17. List factors to include in a breakeven analysis for 23andMe. Suggest the company’s
strategy for achieving a breakeven point.
23andMe must plan for the cost of the website, the collection kit, postage, and
the cost of analysis. In order to keep the breakeven point down to be able to
lower the service price and get more customers, they can supplement their

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 revenue with income from genetic researchers. The more customers they have,
the more attractive the information becomes to genetic researchers.
18. How has 23andMe woven philanthropic attitudes into its business? Name some
specific ways in which the company could incorporate philanthropy further into its
marketing mix.
By making lowering the cost of the service, they are making genetic information
accessible to more individuals and helping to find more answers to genetic-risk
problems.
They could offer further price reductions for individuals that agree to have their
information sent to the research companies.
They could have the research companies share their findings with the customers
that have contributed.
Case Study Analysis: Malia Mills Swimwear 7- 19 – 7- 25
(Learning Objectives 2, 3, 6 – AACSB –Application of knowledge and Analytical
thinking)
19. Describe the unique features of Malia Mill’s product.
The suits are not one size but rather the tops and bottoms of the suits are sized
separately and with more size dimensions that just small, medium, and large.
The fabrics are unique since they are purchased in small lots. The quality is
higher than most bathing suits.
20. Malia Mills Swimwear is not inexpensive. Why do you think customers are willing
to pay a premium for her suits?
She lets customers feel good about themselves as they are. She lets them know
that they are special as they are.
21. The case mentions that Malia Mills Swimwear is currently experimenting with paid
advertising. If you were in charge of marketing for the company, how would you
assess whether or not it was cost-effective to continue purchasing advertising?
I’d compare sales for same time of year last year when there was no advertising
and see if the incremental sales surpasses the cost of the advertising.
22. What kind of environment is Malia Mills trying to create in her stores? Why is this
important?
Comfortable, relaxed, warm. So the customers are happy and can realize all
that suits have to offer as an advantage.
23. Besides her own boutiques, specialty stores, and through the Internet, what might be
some additional sales venues for Malia Mills Swimwear to consider exploring?
Catalogs, door-to-door sales reps, At-home clothing parties.
24. Why was the “Polaroid project” a successful promotional venture?

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 It was something ordinary people could relate to. They weren’t looking at models
that represented something they couldn’t be. They saw real people looking good
and thought they might to!
25. Imagine a scenario in which Malia Mills Swimwear hired you as a media consultant.
Answer the following:
a. Come up with a cause-related marketing strategy for the company.
Answers could include the psychological advantages to letting people feel good
about themselves. Using local seamstresses to help the local economy.
b. Describe three strategies for the company to pursue in obtaining media coverage.
She might design a bathing suit for a celebrity that does not have a model’s body
and have pictures taken of how nice the suit makes the star look.
Write a press release about the suits and submit it to many different medias.
Come up with a clever name for the suits or the Polaroids, i.e. the Polaroid
Project, and get the attention of the media.

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