Business Plan - Marketing Plan (Cont'd)
Components of the Business Plan
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- Accounting, Taxation, and Reporting
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Marketing, Advertising, Sales & PR
- Business Management & Operations
- Economics, Finance, & Analytics
- Professionalism & Career Development
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.
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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.