Enterprise and Small Business Principles

Marketing and the small business

David Stokes

17.1 Introduction

This chapter considers the role that marketing plays in the fortunes of small businesses and their owners. Although marketing is a key factor in their survival and development, small firms share a number of characteristics that cause marketing problems. These include a restricted customer base, limited marketing expertise and impact, variable, unplanned effort and over-reliance on the owner-manager’s marketing competency. However, entrepreneurs and small business owners interpret marketing in ways that do not conform to standard textbook theory and practice. This chapter presents evid­ence suggesting that they tend to be more ‘innovation-oriented’ than customer-oriented. They target markets through ‘bottom-up’ self-selection and recommendations of cus­tomers. They shy away from formalised research, relying more on informal networking. They prefer interactive marketing methods to the mass communications strategies of larger companies. In summary, it is more useful to characterise ‘entrepreneurial mar­keting’ using ‘I’s’ rather than the ‘P’s’ of traditional marketing models. As a strategic process it involves innovation, identification of target markets, informal information gathering and interactive marketing methods - methods that can be summarised as a marketing mix of influence (word-of-mouth communications), image building, incen­tives and involvement (‘four + four I’s’ rather than ‘four P’s’ of the conventional mar­keting mix).

17.2 Learning objectives

This chapter has four learning objectives:

1 To understand the importance of marketing to small firms and their owners.

2 To appreciate the typical marketing problems that small firms face.

3 To gain insight into how entrepreneurs and owner-managers interpret the market­ing function.

4 To understand the characteristics of entrepreneurial marketing and the processes and methods that are typical of its implementation.

Key concepts

■ entrepreneurial marketing ■ marketing competencies ■ networking

17.3 Marketing and the small firm

There has been a tendency among both marketing theorists and small business owners to associate marketing with large, rather than small, organisations. Marketing theory was developed from studies of large corporations, and most textbooks (e. g. Kotler,

1997) still reflect these origins in the concepts and case studies that they present. Even owner-managers of small firms seem to give marketing a low priority compared with the other functions of their business, often regarding marketing as ‘something that larger firms do’ (Stokes et al., 1997). Yet there is considerable evidence that marketing is crucial to the survival and development of small firms. Research findings are summarised below indicating that marketing is particularly important to smaller organisations because it represents a) a vital interface between a small firm and an uncertain, fast changing external environment, and b) a key internal management skill that differen­tiates between surviving and failing firms.

17.3.1 Marketing as the interface between a small firm and the external environment

A key feature that distinguishes small from large firms is the much higher closure rates of small firms (Storey, 1994). Businesses are at their most vulnerable when they are very young and very small. Only a small percentage stay in business in the long term; over two-thirds close in the decade in which they opened. Businesses exist in fast - changing environments, and the youngest and smallest are particularly exposed in this unpredictable world (Hall, 1995). Their lack of market power and dependency on a relatively small customer base make their environments more uncontrollable and more uncertain than that of larger organisations (Wynarczyk et al., 1993).

How can small firms best cope in this hostile business environment? Marketing is certainly important in the early, vulnerable years, because it provides a vital interface between the organisation and its external environment. Research involving case studies of surviving and non-surviving small manufacturing firms by Smallbone et al. (1993) indicated that adjustment is the key. The most important adjustment both for survival and growth was active market development - a continuous search for new market opportunities and a broadening of the customer base of the business. Those firms that are most active in making adjustments in what they do, and how they do it, particu­larly in relation to the market-place, seem to have a greater chance of survival than those who carry on as before. As the function that supplies the necessary information and direction to guide such adjustments, marketing provides a key interface between a small business and its external environment.

17.3.2 Marketing management and small firm survival

It is not surprising therefore that research has identified marketing management as a key internal function that influences survival (Berryman, 1993). The judgement of indi­vidual investors in small business, or so-called ‘business angels’, is interesting in that it indicates what they have discovered to be critical factors that make a venture more likely to succeed or fail (see Chapter 19). According to Harris (1993) the principal rea­sons given by business angels for not investing are:

■ lack of relevant experience of entrepreneur and any associates;

■ deficiencies in marketing;

■ flawed, incomplete or unrealistic financial projections.

Cromie (1990) interviewed 35 manufacturing and 33 service firms, which had been trading for four to five years, and asked each of them open-ended questions on the major problems they had encountered and the mistakes they had made. His overall conclusion was that: ‘Small, young organisations experience problems particularly in the areas of accounting and finance, marketing and the management of people’ (Cromie, 1990: 58-9). Hills and Hultman (2005) cite a survey of venture capitalists who rated marketing management as important to the success of new ventures at 6.7 on a seven - point scale.

There is some consensus in this literature on why firms close that indicates the centrality of what has been referred to as the ‘three Ms’ of ‘Marketing, Money and Management of people’ (Stokes, 1998a). Marketing represents a key management dis­cipline, which differentiates between survival and failure of small firms.

17.4 Characteristics of small firms and marketing problems

However, small organisations tend to suffer from a number of distinctive marketing pro­blems. Certain characteristics, which differentiate small from large organisations, lead to marketing issues that are especially challenging for small business owner-managers.

17.4.1 Limited customer base

A number of studies have shown a relationship between size of firm and number of customers, with a high percentage of small businesses dependent on less than ten cus­tomers and some on only one buyer (Storey, 1982; Hall, 1995). As well as depending on a small number of customers, small businesses tend to trade only in a limited geograph­ical area (Curran and Blackburn, 1990). This ties their fortunes closely to the cycles of the local economy, with limited opportunities to compensate for any downturn.

17.4.2 Limited activity

Lack of access to financial and human resources restricts marketing in small firms. A small enterprise has less to spend on marketing as a percentage of income because of the impact of fixed costs which take up a higher proportion of revenues; financial constraints also restrict their ability to employ marketing specialists (Weinrauch et al., 1991). Carson (1985) concluded that the marketing constraints on small firms took the form of restricted resources, lack of specialist expertise and limited impact.

17.4.3 Lack of formalised planning and evolutionary marketing

As we have already discussed, small firms have to cope with an ever-changing envir­onment, meaning they have to continually adapt and adjust as a business to survive (see Chapter 16). It would seem that those firms that do survive adjust to the new con­ditions in a continual process of evolution (Smallbone et al., 1992). The marketing implication is that short-term considerations take priority over longer-term planning. Research has confirmed that planning is a problem for small firm management, which tends to be reactive in style (Fuller, 1994). Cromie (1990) characterised this as an opera­tional, as opposed to a strategic, orientation. However, just as the firm must evolve to survive, so marketing evolves to reflect the owner-manager experience and the needs of the firm. Carson (1985) has suggested four stages in the evolution of marketing in small firms:

■ initial marketing activity in the set-up stages;

■ reactive selling as demand grows;

■ a DIY marketing approach under the direction of the owner-manager as the firm realises the need for a more positive marketing stance; and finally

■ integrated, proactive marketing as the firm adopts longer-term marketing strategies usually involving the recruitment of specialist marketing management.

17.4.4 Innovation, niches and gaps

Small firms today are often seen as playing a key role in the innovation of new pro­ducts and processes because of their flexibility and willingness to try new approaches. However, innovation is neither a unique nor a universal characteristic of small firms; large organisations are also important innovators and not all small firms can be con­sidered innovative. Nevertheless, innovation is an important characteristic of small firms in certain industry sectors (Rothwell, 1986).

Niches or market focus can help small firms overcome their inherently lower profit­ability compared with larger firms. But the marketing problem that arises for smaller firms is not only how to develop innovative products and services, but also how to defend their competitive advantage and exploit innovations to the full with limited resources. Cannon (1992) saw this as important weaknesses of small firms because of their lack of access to the resources to realise fully the potential of the gaps in the mar­ket they identify. He warned of what he called ‘poisoned apple marketing’ in which it is not unusual for large firms to wait for smaller enterprises to open up markets and make the mistakes before they use their resource base to capitalise on the opportunity (Cannon, 1992: 473). Exploiting niche markets to the full can be as big an issue as developing them in the first place.

Figure 17.1 Small organisations: characteristics and marketing issues

17.4.5 The owner-managers' marketing competency

Scholhammer and Kuriloff (1979) recognised a personalised management style as a distinguishing feature of small enterprises. This is typified as personal knowledge of all employees, involvement in all aspects of management and lack of sharing of key decisions. The dominant influence of the owner-manager has led to a large literature that seeks to establish relationships between the psychology, type and background of owners and the performance of their firms (Chell et al., 1991).

If the personal characteristics of the owner-manager are the dominant internal man­agement influence, then the marketing management of a small enterprise will be much affected by the marketing competency of the owner. Carson et al. (1995) describe entre­preneurial marketing in terms of the experience, knowledge, communication abilities and judgement of the owner-manager, key competencies on which marketing effective­ness depend. As the competency of SME owners varies widely in these areas, so does the marketing performance of their firms (Carson et al., 1995: 12-13). These charac­teristics of small organisations and the marketing issues and problems that typically arise are summarised in Figure 17.1.

17.5 Is marketing different in small organisations?

Advisors, educators and policy makers attempting to overcome these marketing prob­lems have met with little success. Curran and Blackburn (1990) concluded that small business owners are not ‘joiners’, with only a minority having contact with Training and Enterprise Councils (TECs) and Business Links, and they often reject approaches from advisers and consultants because of a ‘fortress enterprise’ mentality. But there is also a danger that notions of best practice among larger firms are automatically assumed to be appropriate for small businesses providing they can be given the resources to adopt them. For example, there is evidence that SMEs implement the concept of mar­ket orientation less fully than larger companies (Brooksbank et al., 1992; Liu, 1995). However, there is little to suggest that traditional marketing concepts such as this are relevant to smaller firms. Too often, marketing as practised by larger firms is automat­ically assumed to be what is required for smaller businesses, providing they can be given the necessary resources.

17.5.1 Marketing defined

One of the problems in investigating small business marketing is the lack of clarity over what ‘marketing’ actually means in any context. Even marketing in larger firms is not clearly defined; for example Crosier (1975) compiled a list of 50 different definitions of marketing in the literature, an indication of the difficulties marketers have had in defining their own discipline. In order to investigate and describe marketing in smaller organisations we will adopt Webster’s (1992) classification of marketing into three dis­tinct elements: as an organisational philosophy or culture, as a strategic process, and as a series of tactical functions or methods.

■ Marketing as an organisational philosophy - This relates to a set of values and beliefs concerning the central importance of the customer to the success of the organisation. This has been refined as the concept of market or customer orienta­tion, which requires that an understanding of customer needs should precede and inform the development and marketing of products and services (Kotler, 1997). Most definitions of marketing relate mainly to this level of meaning; for example the definition of the (UK) Institute of Marketing states that marketing is ‘the man­agement process responsible for identifying, anticipating and satisfying customer requirements profitably’.

■ Marketing as a strategy - This defines how an organisation is to compete and survive in the market-place. Most marketing textbooks (e. g. Kotler, 1997) review marketing strategy through the stages of market segmentation, targeting and posi­tioning. This involves: first, research and analysis of the market-place in order to divide it into meaningful groups or segments of buyer-types; second, one or more segments are chosen as the most appropriate targets for marketing activities; third, an appeal is made to this target group through an appropriately positioned product or service.

■ Marketing tactics - These use specific activities and techniques, such as market research, product development and advertising to implement the strategy. These are referred to as elements in the ‘marketing mix’, commonly summarised as the four ‘Ps’ of product, pricing, promotion and place.

17.5.2 Marketing defined by small business owners

Entrepreneurs and owner-managers of small businesses tend not to see marketing this way. They define marketing in terms of tactics to attract new business - in other words, at the third level of meaning in the definitions list above. They are less aware of the other, philosophical and strategic meanings of the term. Research by Kingston University’s Small Business Research Centre (Stokes et al., 1997) indicated that most small business owners equated marketing with selling and promoting only. Unprompted definitions of marketing focused on customer acquisition and promotions whilst iden­tifying customer needs, and other non-promotional aspects of marketing, such as product development, pricing and distribution, were largely ignored. Many owners suggested that their business was reliant on word-of-mouth recommendations and therefore ‘they did not have to do any marketing’.

This does not necessarily mean that they overlooked other aspects of marketing, only that they were unaware of the terminology. The business owners’ narrow view of mar­keting was not borne out by what they actually did. Their activities indicated a strategic marketing awareness, particularly in areas such as monitoring the market-place, tar­geting individual market segments and emphasising customer service and relationships. When asked to rank their most important marketing activities, ‘recommendations from customers’ was first in all sectors and sizes of small firms. However, this reliance on recommendations was not necessarily an indication of minimal marketing effort, as such recommendations were often hard won. To an outside observer, it is all too easy to accept the owner-manager’s comment that they ‘do not have the time or resources for marketing’, when those same owners do indeed devote much of their time to build­ing relationships with satisfied customers who then recommend the business to others. In other words, they spend considerable time and resources on marketing, but they call it by another name.

17.6 Entrepreneurial interpretations of marketing

Marketing in small firms is not the simplistic, promotional activity that it appears at first sight; nor is it marketing according to the textbook. If we examine each of the three elements in the definitions of marketing as described earlier, we discover distinct variations between what successful small business owners actually do and what mar­keting theory would have them do.

17.6.1 Customer orientation versus 'innovation orientation'

Marketing as an organisational philosophy indicates that an assessment of market needs comes before new product development. Entrepreneurial business owners frequently do it the other way round. They start with an idea, and then try to find a market for it. Creativity and innovation in product or service development are the hallmarks of successful entrepreneurship (Drucker, 1985), not careful research into customer needs. Well-known entrepreneurs such as Roddick and Branson did not found their early businesses on market analysis, but on an intuitive feel for what was required. Innova­tion is a key entrepreneurial activity, taking new ideas and turning them into useful pro­ducts or services that customers need (Adair, 1990). But often this is achieved through a zeal for the development of new concepts and ideas - an ‘innovation orientation’ - rather than through a dedication to the principles of customer orientation. Accord­ing to Hill and Hultman (2005), growth entrepreneurs place a strategic emphasis on exceptionally high-quality products and services, and pursue a balance between product orientation and market orientation. Entrepreneurs have a propensity to act on poten­tial opportunities rather than evaluating them thoroughly.

17.6.2 'Top-down' versus 'bottom-up' strategies

Marketing as a strategy involves the processes of segmentation, targeting and positioning, so that products and services are focused on appropriate buyer groups. Entrepreneurial owner-managers identify closely with a specific group of customers whose needs are well known to them, in accordance with these theories of strategic marketing (Hill and Hultman, 2005). However, most marketing textbooks advocate a ‘top-down’ approach to the market in which the strategy process develops in the following order:

■ The profiles of market segments are developed first using demographic, psycholo­gical and other buyer-behaviour variables.

■ An evaluation of the attractiveness of each segment concludes with the selection of the target segment.

■ Finally, the selection and communication of a market position differentiates the product or service from competitive offerings.

This process implies that an organisation is able to take an objective overview of the markets it serves before selecting those on which it wishes to concentrate. This usually involves both secondary and primary market research with evaluation by specialists in each of the three stages.

Although successful entrepreneurs do seem adept at carefully targeting certain cus­tomers, the processes they use in order to achieve this do not seem to conform to the three stages described above. Evidence suggests that successful smaller firms practise a ‘bottom-up’ targeting process in which the organisation begins by serving the needs of a few customers and then expands the base gradually as experience and resources allow. Research into ‘niche marketing’ approaches indicates that targeting is achieved by attracting an initial customer base and then looking for more of the same (Dalgic and Leeuw, 1994). The stages of entrepreneurial targeting are as follows:

■ Identification of market opportunities - matching innovative ideas to the resources of a small enterprise identifies possible opportunities. These opportunities are tested through trial and error in the market-place, based on the entrepreneur’s intuitive expectations that are sometimes, but not often, backed up by more formal research.

■ Attraction of an initial customer base - certain customers, who may or may not con­form to the profile anticipated by the entrepreneur, are attracted to the service or product. However, as the entrepreneur is in regular contact with these customers, she gets to know their preferences and needs.

■ Expansion through more of the same - the entrepreneur expands the initial customer base by looking for more customers of the same profile. In many cases, this is not a deliberate process as it is left to the initial customers who recommend the business to others with similar needs to their own. A target customer group emerges and grows, but more through a process of self-selection and some encour­agement from the entrepreneur, rather than through formal research and proactive marketing.

This bottom-up process has advantages over the top-down approach. It requires fewer resources and is more flexible and adaptable to implement - attributes that play to small business strengths. It has corresponding disadvantages. It is less certain of suc­cess and takes longer to penetrate the market to full potential - weaknesses that char­acterise many small firms.

17.6.3 Four P's versus one-to-one marketing tactics

Marketing strategies are implemented through marketing activities of various types, which have been summarised as the marketing mix - the set of tools at the marketer’s disposal. As these tools are numerous, various attempts have been made to categorise them into a manageable form, including the four-P’s, as discussed earlier. Entrepre­neurial marketing activities do not fit easily into these existing models of the market­ing mix. Owner-managers do not define their own marketing mix in terms of product, pricing and place decisions, although they usually include promotions.

Instead, a different theme seems to run through the marketing methods preferred by entrepreneurs: they involve direct interchanges and the building of personal rela­tionships. Entrepreneurs prefer interactive marketing. They specialise in interactions with their target markets because they have strong preferences for personal contact with customers rather than impersonal marketing through mass promotions. They seek conversational relationships in which they can listen, and respond, to the voice of the customer, rather than undertake formal market research to understand the market­place. Interactive marketing methods imply one-to-one contact through personal or telephone selling and perhaps direct or electronic mail. In smaller firms, the ability of the owner-manager to have meaningful dialogues with customers is often the unique selling point of the business.

17.6.4 Market research versus networking

In each stage of the traditional marketing process, whether strategic or tactical, formal market research plays an important part. Market orientation relies on research to deter­mine customer needs. Strategic segmentation and targeting is determined by market research. The success of adjustments to the marketing mix is tracked by consumer research. Successful entrepreneurs shy away from such formal research methods (Hill and Hultman, 2005), instead preferring more informal methods of gathering market information, usually through networks of contacts involved in the industry or trade (Carson et al., 1995).

17.7 Entrepreneurial marketing

So what does entrepreneurial marketing consist of? We have described a marketing pro­cess common among entrepreneurs and successful small business owners that encom­passes innovation, identification of a target market, interactive marketing methods and informal information gathering. We will examine each of these further to uncover more about how a typical entrepreneur carries out this marketing process.

17.7.1 Innovation

We have already echoed the views of several commentators who have stressed the importance of innovation to entrepreneurship (Drucker, 1985; Adair, 1990). However, we should not assume that entrepreneurial innovation consists of major breakthroughs and inventions. It is more likely to consist of incremental adjustments to existing pro­ducts and services or market approaches, rather than larger-scale developments (Henry and Walker, 1991). Whilst a few small firms may make the big innovative breakthrough and grow rapidly as a result, the majority that survive do so by growing more slowly through making small but regular improvements to the way in which they do business. This may mean stocking new lines, approaching a new market segment with a particu­lar service, or improving services to existing customers - in other words incremental, innovative adjustments that together create a competitive edge.

17.7.2 Identification of target markets

We have described how the identification of a market for new products often comes after the development of the idea, when customers are found through a bottom-up pro­cess of self-selection and recommendation. In this way, many successful small firms occupy ‘niche’ markets in which they supply specialised products or services to a clearly identified group of customers. Others find a gap in a particular market-place for the provision of more general services. Either way, success is dependent on identi­fying a particular group of customers who need the product or service on offer.

However, target markets need not be solely concerned with customers in the con­ventional sense of the term. Small businesses survive in their changeable environment not only by successfully marketing to those who buy their products or services, but also by developing important relationships with other individuals and organisations. Suppliers, bank mangers, investors, advisors, trade associations, local government and public authorities may be as vital as customers to a small business’s success. Entre­preneurs may target marketing strategies at these other markets that go beyond con­ventional definitions of the term ‘customer’. In this sense, entrepreneurial marketing resembles relationship marketing, which defines the need to develop a supportive frame­work around the organisation: ‘Marketing can be seen as relationship management: creating, developing and maintaining a network in which the firm thrives’ (Gummesson, 1987). In other words, entrepreneurial marketing can target any organisation or indi­vidual, which can have a positive or negative effect on the small firm.

17.7.3 Interactive marketing methods

A selling point for a small business often lies in its ability to stay in touch with cus­tomers. Owner-managers themselves usually spend a considerable part of their work­ing day in contact with customers (Orr, 1995). This allows them to interact with their customer base in a way which large firms, even with the latest technological advances, struggle to match.

Interactive marketing for small firms implies responsiveness - the ability to com­municate and respond rapidly to individual customers. Entrepreneurs interact with individual customers through personal selling and relationship-building approaches, which not only secure orders but recommendations to potential customers as well. These interactive marketing methods have some common themes too. They rely on the influence of word-of-mouth marketing, which can be stimulated by image building, involvement and incentives, as discussed below.

The influence of word-of-mouth marketing

Entrepreneurial marketing relies heavily on word-of-mouth marketing to develop the customer base through recommendations. Research studies inevitably cite recommenda­tions as the number one source of new customers for small firms. Such recommenda­tions may come from customers, suppliers or other referral groups. Word-of-mouth marketing has been defined (Arnt, 1967) as: ‘Oral, person-to-person communication between a perceived non-commercial communicator and a receiver concerning a brand, a product or a service offered for sale.’ This definition makes two crucial distinctions between word-of-mouth and other forms of marketing activity:

■ it involves face-to-face, direct contact between a communicator and a receiver; and

■ the communicator is perceived to be independent of the product or service under discussion.

The importance of such communications is well documented in the marketing litera­ture, which suggests that word of mouth is often crucial to purchase decisions in many consumer and business-to-business markets. For many small firms, reliance on recom­mendations is no bad thing as it is more suited to the resources of their business. Referrals incur few, if any, additional direct costs; most owner-mangers prefer the slow build-up of new business that word-of-mouth marketing implies because they would be unable to cope with large increases in demand for their services. Word-of-mouth marketing has two major disadvantages:

■ It is self-limiting: reliance on networks of informal communications restricts organ­isational growth to the limits of those networks. If a small business is dependent on recommendations for new customers, its growth is limited to those market areas in which its sources of recommendations operate.

■ It is non-controllable: owners cannot control word-of-mouth communications about their firms. As a result, some perceive there to be few opportunities to influence recom­mendations other than providing the best possible service.

In practice, however, successful entrepreneurs find ways of encouraging referrals and recommendations by more proactive methods.

Image building

Successful owner-managers recognise the importance of building favourable images of their business in the market-place in order to encourage the influence of positive word - of-mouth marketing. Image building is particularly important for the great majority of small businesses, which are involved in selling services rather than tangible products. Prospective buyers cannot easily test or sample services so their perceptions of the sell­ing organisation become even more important in the purchase decision. A number of factors influence such perceptions including the ethos or atmosphere of the place of work, the physical appearance of anything associated with the business from letter­heads to lorries, and the attitudes of people who have customer contact - which is usually everyone in a small firm. As a result, growth entrepreneurs more often possess an excellent reputation compared with non-growth entrepreneurs (Hills and Hultman, 2005).

Incentives

Like most organisations, owner-managers promote their business by offering a variety of incentives including reduced prices and promotional offers. However, some incen­tives can be used not only to generate immediate business but also to encourage the development of supportive networks in which the business owner can operate. For example, Shaw (1997) demonstrated that small graphic designers used bartering, hos­pitality, flexible pricing and differential handling of work to help in the development of their networks. Entrepreneurs use such incentives not only to encourage existing customers but also to develop new markets by expanding their networks.

Involvement

A feeling of involvement or participation with a small business can also encourage customer loyalty and recommendations. From a study of lawyers’ practices in the US, File et al. (1992) suggested that the intensity and variety of client participation during the service delivery process was predictive of positive word-of-mouth and referrals. Stokes (1997) found that the more parents became involved with their children’s school, through helping in class or fund-raising activities, the more they were likely to become strong advocates of the school. This reinforces the need for owners who wish to improve word-of-mouth communications to adopt interactive marketing practices that encourage involvement of some sort with the business, so that customers feel an added sense of commitment to it.

17.7.4 Informal information gathering

Successful entrepreneurs maintain an external focus to their activities, which alerts them to opportunities and threats in their environment. Their informal information-gathering techniques allow them to monitor their own performance in relation to competitors and react to competitive threats. They are also open to new ideas and opportunities through a network of personal and inter-organisational contacts. This process restarts the marketing cycle by forming the basis for further innovative adjustments to the activities of the enterprise. The four main elements of entrepreneurial marketing, together with the four types of interactive marketing methods, can be conceptualised as the ‘four + four I’s’ of entrepreneurial marketing, as shown in Figure 17.2.

17.8 Chapter summary

This chapter has shown that marketing is particularly important to very small, young firms as it represents the interface between a small firm and its external environment. In particular, the marketing competency of owner-managers is a key discriminator between survival and failure of small firms. It has also been demonstrated that the inherent characteristics of small firms lead to distinctive marketing problems, although this can be due to the owner-managers’ conceptualisation of marketing being narrow and concentrating largely on promotions. Successful owner-managers and entrepreneurs are active in marketing, although they may not call it that. Indeed, entrepreneurial

marketing is innovation-oriented, rather than customer-oriented, and entrepreneurs target customers through bottom-up rather than top-down approaches. They also gather information informally through networks of contacts and prefer interactive marketing methods, relying on the influence of word-of-mouth communications, supported by image building, incentives and the involvement of customers. Therefore entrepreneurial marketing can thus be simplified as four process stages - innovation, identification of markets, information gathering and interactive methods - and four elements of the marketing mix - influence, image building, incentives and involvement (four + four I’s rather than four P’s).

In summary, entrepreneurial marketing can be conceptualised as a process and as specific activities typical of entrepreneurial business owners. Innovative developments and adjustments to products and services are targeted at identified customer and other influential groups. Interactive marketing methods work through the influence of word - of-mouth communications, stimulated by image building, incentives and involvement. Information gathering through informal networks monitors the market-place and evalu­ates new opportunities, which may, in turn, lead to further innovations, to begin the entrepreneurial marketing process over again. In this way successful owner-managers have overcome the inherent marketing problems in running a small business.