How to Understand Products and Planning in Small Business


The firm’s product or process lies at the centre of most small firm managers’ thinking about their companies. The ability to make some item well, to offer a special service or to meet requests to supply particular components or materials was probably the main reason for starting up the firm.

The commitment, flexibility and creativity applied to the product, service or process has a direct effect on the firm’s ability to survive and prosper. In this it is increasingly important to recognise that the company’s offering goes far beyond the indi­vidual, physical product offered.

The customer will order a particular item of equipment, specific tooling or moulding, a meal or a holiday, but will assume that a host of other things are included. He may expect free instal­lation, regular maintenance of the tools, specific quality levels on the mouldings, quick service with the meal. All these affect his evaluation of the firm’s offering, the prices he will willingly pay and the likelihood of repeat business. The close links be­tween supplier and customer in small firms give managers the chance to understand these needs and design offerings capable of meeting them.

The starting point might simply be the division of the firm’s customers into groups buying, roughly, the same items but wanting different things associated with them. Moulded Plastics Ltd produce a wide assortment of lines for the building indus­try ranging from clips and fasteners through to complex moulded fittings. Some customers such as large builders or local authorities had extensive warehousing, professional buyers projects under construction and skilled workers. Their need was for large consignments of standardised items at low prices. In contrast the DIY enthusiast needed items for a specific small job, available locally, simple to fit with clear instructions, all far more important than price.

Moulded Plastics eventually subdivided their clients and their needs into five groups or segments: architects, large build­ers, jobbing builders, local authorities and DIY. The item bought or specified was roughly the same, but there were pro­nounced differences in requirements for other aspects of the total product. These centred on the product itself: its colours, quality, robustness and, very important, ease of use. It quickly became apparent that serious attention had to be given to the range of associated items. Contact customers wanted consider­able depth in product offering with, for example, many different pipe clips.

As the DIY business grew the width of their range expanded as wholesalers and end customers called for lines associated with the initial product. Controlling these extensions of the product became more important than spotting new opportunities.

Many firms find that the range of spares, service levels, instal­lation, replacement and warranty policies are more important to some customers than the product. Dividing the market up provides the opportunity for this, as the customer wanting low prices may not want a high service level but others will be will­ing to pay more for associated services. This lesson came home very clearly to Moulded Plastics with a particular retail line which eventually required expensive packaging and branding to provide the buyer with reassurance about quality and reliability-Innovation and new product development are increasingly important in ensuring the long-term profitability of smaller firms. Large companies often envy the creativity, speed of re­sponse and flexibility that smaller firms can apply to this process.

Successful innovation comes from the combination of a good array of new product opportunities and rigorous selection of a small number of ideas for development. Access to new product opportunities is often easier than expected. Internal sources can be salesmen, production and research and development staff. Other fertile sources are research organisations, government dissemination programmes, new product directories, foreign markets and suppliers. Probably most important is a willingness continually to search outside, perhaps through journals and magazines.

For a country with a long history of innovation we show a surprising reluctance to look outside ourselves for licensing and other forms of technology acquisition. Both Germany and Japan ‘buy in’ innovation at a far higher rate than the UK. Innovation is often far cheaper than managers expect.

The innovative ideas, new products and developments need to be carefully screened before introduction if they are to avoid joining the large pool of failed products. The first step is to evalu­ate all the ideas for their practicality and appropriateness to the firm. The market potential of those left can then be evaluated, with only the best progressing. Development of the remainder will probably eliminate others, leaving only a few for tests, per­haps involving selected customers. Full introduction is only worthwhile with those products successfully getting through all these stages.

Many companies embarking on a product management programme find that they are forced to think hard about mar­keting planning. Unfortunately, the relatively simple process of planning is saddled with an elaborate mythology which deters many firms. A good plan is a simple, practical set of guidelines for the firm’s future development based on a proper understanding of its potential.

The main elements are an audit of resources and potential and a set of simple, concise and practicable objectives, perhaps noting major alternatives. Implementation can be seen in terms of a basic strategy backed up by specific tactics, both judged in terms of their relevance to objectives. Evaluation will provide an ongoing basis for learning and modification geared to control and costs. Medical Engineering Ltd draw up their marketing plan every year under these headings, revising it as necessary throughout the year. Actually writing it down is seen as an import­ant discipline in itself, forcing managers rigorously to appraise their ideas and beliefs about the direction the firm will take.

They are in an area where expenditure and technology are moving at an increasing rate. Their products must compete Wrth larger rivals while remaining competitively priced and efficiently produced. In this, they share the problems of most small firms whose products, the bedrock of their operations are continually under challenge from changes internally’ among customers, among rivals, and in technology. Successful management here is vital to survival.

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About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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