Developing a marketing strategy. (Nuts and Bolts of Business).

Marketing is the process of creating customers for your services in enough quantity and in a timely fashion to generate profits and be successful. The problem is that many small businesses, including medical practices, do not understand the basic principles of marketing, or somehow feel that cannot afford the "luxury" of marketing.

Yet, no matter how good your service is, how extensive your referral base or how great your location, to remain successful against your competitors you must develop a marketing strategy. Marketing is an investment in the future of your business.

There are three components to developing a marketing strategy:

* Segmentation or "Who can I sell my services to?"

* Targeting or "Who am I going to sell my services to?"

* Positioning or "How am I going to sell my services?"

By answering these "STP" (segmentation, targeting, positioning) questions you can develop a basic marketing strategy.

Segmentation

The first step in developing a marketing strategy is segmentation. In order to understand who you can market your services to you must understand and analyze your industry in your area of practice.

This begins with what Michael Porter of the Harvard School of Business describes as the "Five Basic Forces of Competition."

Let's use cosmetic plastic surgery to illustrate the analysis. The first competitive force is the "Threat of New Entrants" into the market. For our example, it asks the question: How easy is it for a plastic surgeon to start a cosmetic surgery practice?

Obviously, the answer to this question will depend on the training and expertise of the physician, special licensing or certification requirements, the location of the practice and the financial resources needed to start the practice.

In general, the higher the barriers to entry, the greater potential for profits, since you can exclude new individuals or companies from becoming your competitors.

The second competitive force is the "Threat of Substitute Services." In other words, are there other alternatives to choose from?

For our example, many different types of physicians may be involved in cosmetic surgery. One only needs to think of the number and types of physicians who are administering Botox (botulinum toxin) injections for cosmetic purposes in lieu of traditional "face lifts" to understand the concept of substitute services. In general, the greater the substitutes the more difficult it is to generate and sustain profits.

The third and fourth competitive forces are the "Bargaining Power of Buyers" and the "Bargaining Power of Suppliers." In our example, the bargaining power of patients as the direct purchasers of the cosmetic procedures determines how much leeway you have with your pricing.

If you are the only cosmetic surgeon in town, the bargaining power of the patients will be low compared to an area with an abundance of practitioners to choose from, Likewise, suppliers of services or materials you require may influence the market.

For example, if there is a shortage of anesthesia providers in your market for cosmetic surgery, these "suppliers" will have greater bargaining power and force up the price for their services. Again, the greater the power of buyers and suppliers, the more difficult it is to sustain a competitive advantage in that market.

The final competitive force deals with "Rivalry Between Competitors." Is the competition gentlemanly or vicious? Is the competition based on quality or price? Each of these factors will define the competition in your industry.

By examining the balance of these five forces, you can determine the profit potential in any industry. Fortunately, the balance of these forces is not all that determines your potential success or failure in an industry. The way in which you choose to compete may influence every one of the five forces.

Targeting, positioning

The second component of the marketing strategy, targeting, defines your competitive scope. Who will you sell your services to?

In our cosmetic surgery example, you may decide to target a broad general audience, offering a wide array of services and procedures or may limit your targeting to a smaller niche group, concentrating only on breast augmentation, for example.

The final component to a marketing strategy is positioning. This determines how you are going to sell your services. Positioning is the means by which you develop a sustainable competitive advantage.

For our cosmetic surgery example, positioning asks whether you will attempt to be the low price leader or the exclusive high-priced "artist" serving only an elite clientele. Whichever you choose, the worst positioning strategy is not to choose and to be stuck in the middle. Make a choice as you develop your strategy then dedicate every action to serving your target customers.

A marketing strategy is only as good as its execution. As you develop a strategy, it is important to avoid the common mistakes that can derail even the best marketing strategy.

The first mistake is to misread your industry and the services you will offer. The most attractive industries usually are not the fastest growing or those that use the latest technology.

A good example is laser eye surgery. Early on, profits were high as the new technology was exploited. Yet, as new competitors continued to enter the market, prices were driven down and profits decreased, Remember, the most attractive industries and services are those with the highest barriers to entry.

Two mistakes commonly seen relate to competitive advantage. The first is to have no true competitive advantage. You cannot merely imitate your competitors and expect to have long-term success. The second is to continue to pursue an advantage that is not sustainable.

New technology (e.g. laser eye surgery) is not sustainable, since competitors will obtain the technology and compete if barriers to entry are not high. Exemplary service and support, however, can be sustainable competitive advantages. Those laser eye centers with the best service and record of success continue to be profitable.

The final, and most critical, mistake is the failure to communicate your strategy to your employees and customers. As the saying goes, "First impressions last a lifetime." You must concentrate on your first impression encounter points and be sure they communicate your strategy effectively. These encounter points include:

* Word of mouth

* Telephone contact

* Employee contact

* External and internal signage

* External grounds

* The external and internal facility

* Advertising

* Web sites

Notice that advertising is fairly low on the list of encounter points. This is because advertising is nothing more than a tool to reach your target audience. If all other elements do not convey your position, your advertising will not have any long-term impact on improving your profits.

David P. Tarantino, MD, MBA, is the executive medical director of Shock Trauma Associates, .PA., a 50+ physician, multispecialty practice associated with the University of Maryland School of Medicine. In addition, he is the chief executive officer of The MD Consulting Group, HG, a health care management consulting firm in Baltimore, MD. Tarantino can be reached by phone at [phone] or by e-mail at tdoc5aol.com.