Business Plan - Marketing Plan
Marketing Plan Section of the Business Plan
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Marketing Section of the Business Plan
Begin by understanding your market, then arrange the tools to reach that market.
A marketing plan involves how you will make potential customers aware of your product or service. However, a marketing plan is more than simply determining what methods you will use to advertise your product or service. It involves an in-depth understanding of the market and how your product or service fits in that market. Below are some initial considerations in drafting your marketing plan.
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Place in the Market
How do you see your product/service? That is, how do you see your product/service being used by customers? Who do you see as your primary customers? Do you have any secondary customers? What function is your product/service serving for customers? Ask yourself, "why is this customer using my product/service, as opposed to another product/service?" All of these questions should help you understand what makes your product/service unique in the eyes of your prospective customer. This understanding is essential to developing a marketing strategy. In order to avoid your own perception biases, it's recommended that you seek the opinion of third parties. Do not focus solely on the individuals who you see as your target market. Get feedback from non-targer-market individuals as well. This will help you to expand your understanding of how your product is perceived by a variety of individuals in the market.
Once you feel that you fully understand your market (primary customer base, secondary customer base, how the customer will use your product, why the customer will use your product), you can begin outlining a marketing strategy. Marketing strategy, by definition, regards how you will employ certain tools and tactics to reach your customers. It is more than simply identifying your marketing tools or techniques for reaching customers. It involves a holistic approach regarding how you will address the market. Think of your product/service image and the brand that you want to build for your product/service. Do you want to be seen as the most innovative, the most affordable, the highest quality, the fastest or best service, the easiest to use, etc? Unfortunately, your product cannot be all things to all people. Concentrate on the primary and secondary customers that you hope to reach. You will develop a general strategy that has necessary modifications to reach each potential type of customer. Your strategy will involve the message (the value proposition) that you hope to transmit to your customers. If you understand your product and your customer, you will craft your product message(s) to support your product/service to those individuals. For example, you may use an environmentally-friendly, product message to reach young environmentally conscious customers. On the other hand, you may use product quality and ease of use to reach older, affluent customers. Be careful in developing multiple product messages. This can dilute your message and make your desired brand seem manufactured or disingenuous.Remember, there is no single guide for who is your customer and what that customer wants from your product. This is something you will figure out by fully understanding your product and your market. Once you have this understanding, you can employ the available tools and tactics to deliver that message.
Promotion involves how you reach your customers with your product/service message. Restated, promotion involves your advertising plan. What channels will you use?
- Traditional Marketing Tools: Will you employ traditional means, such as placing your messages and advertisements in trade shows, catalogs, television, radio, newspaper, yellow pages, signs/billboards, direct mail, brochure distribution, etc? Other traditional methods include usingword-of-mouth, sales representatives or agents, placing your product with retailers, etc.
- Emerging Marketing Tools: Will you use new media-based sources, such as pay-per-click advertising (Google's paid advertising), website development and search engine optimization, sales sites (amazon or professional service listing sites), social media marketing (Twitter, Facebook, etc.), etc?
The answer to the above questions should depend on how your customers are more likely to find you via tradition or new advertising methods. Perhaps you will use a hybrid of these approaches in order to maximize your reach given your available marketing budget. Remember, there will different costs associated with each type of advertising. You have to understand each of these
How much money are you setting aside for marketing? This question depends on the funds available in your budget after completing other essential activities in starting the business. Marketing and sales efforts are the life-blood of your business. When allocating funds for marketing, remember that great products/service businesses can fail without adequate sales. Even a mediocre business activity will be successful if it can generate sales. You have to understand your marketing activities well in order to understand the costs associated with each. Traditional marketing methods tend to be more expensive but can have better results for given customer markets. Emerging marketing methods can be far less expensive, but fail to reach large portions of the target or available markets. In either case, it is difficult to make adequate calculations. It is advisable to allocate more money than you initially believe will be required. You will use these numbers in creating your startup budget and initial financial projection.
What else should you consider in forming a marketing plan?
You will also need to consider pricing and sales tactics. Remember, you have to understand the customer and the product in order to put together a marketing plan. Previously we discussed strategy and marketing medium. In this section, we discuss some additional considerations that accompany your intended marketing strategy.
What price will you charge for your product? As part of your marketing strategy, you will determine whether you are the highest quality, lowest price, easiest to use, etc. Whichever of these competitive advantages that you hope to achieve and promote, you will need to price the product accordingly. Your first step in determining the price is to determine what customers are willing to pay for the product. Consistent with principles of supply and demand, customers have a given level of demand for a product at a given price. Your role is to determine the price that will maximize your profit. This could mean serving fewer customers or producing fewer products. Now that you understand this concept, you will have to figure out what your customers are willing to pay. This will involve some direct and secondary research. Secondary research will involve looking up the prices of similar products or services already in the market. Primary research will involve using questionnaires and surveys among potential or target customers to determine what they believe the price of the product would or should be. When drafting the marketing portion of the business plan, you will want to explain how you arrived at your product price. Further, you will want to explain how this price fits in your overall marketing strategy. Using the hard statistics from your primary and secondary research will help to satisfy the inquiries of future equity investors who question your pricing.
Sales Distribution Channels
How are you going to physically transfer value between you and the customers? That is, what channel will you use and providing your product or service to the customer? This decision will have to be consistent with your marketing strategy. Whoever your target customer, you will try to deliver the value through the means that is most likely to encourage the sale. Common methods of delivery include: internal sales force, outside sales agents or representatives, placement in retail stores, establish sales facilities in strategic locations, catalog, website, or telephone order, etc. Your distribution plan may involve multiple channels. As with your marketing efforts, you will want to employ a sales plan that maximizes the sales you achieve per dollar spent. As your revenue goes, you will begin employing less efficient/profitable sales channels in order to reach additional customers.
Now that you have a marketing plan, complete with the intended price, you can begin projecting your sales. Revenue depends upon your volume of sales at a given price. As your business grows you will be able to expand to additional markets and reach other customer segments. As such you will be able to use a sales forecast to project your rate of growth and expected future revenue. You will want to develop a sales worksheet where you outline your monthly, projected sales. Like your price, your sales estimates can be derived from primary and secondary research. Primary research involves sampling customer pools in an attempt to estimate the level of demand in given areas and among specific customer groups. Secondary research involves identifying the past sales figures and growth rates of similar or competitive products. You will want to document this research thoroughly in order to justify your projections to potential investors. You will want to develop three sets of sales forecasts: conservative, expected, and optimistic. While you will focus on the expected sales figures, your potential investors will focus on the conservative figures. This is an important strategic aspect to consider when preparing your business plan for presentation to investors. On a side note, any increase in sales will have to be accompanied by adjustment to other variables, such as cost of production, marketing costs, sales costs, etc. All of these calculations will go into projected revenue and costs that put in your business financials.
- Business Plan, Part 1 (Outline Overview)
- Business Plan, Part 2 (The Executive Summary)
- Business Plan, Part 3(General Description of Business)
- Business Plan, Part 4 (Market Analysis)
- Business Plan, Part 5 (Competitive Analysis)
- Business Plan, Part 6 (Marketing Plan)
- Business Plan, Part 7 (Operations)
- Business Plan, Part 8 (Management and Organization)
- Business Plan, Part 9 (Financial Projections)
- Business Plan, Part 10 (Appendices)
- Business Plan, (Final Modifications)