Marketing Plan

The is the fifth article in a series of posts focused on deconstructing the essential elements of creating a Business Plan.

 

Business Planning Articles

 

Business Plan Introduction

The Executive Summary

General Company Description

Product & Services

Marketing Plan

Operational Plan

Management & Organization

Startup Expenses & Capitalization

Valuation & Ask

Financial Plan

Appendixes

Refining Your Plan

 

 

The Marketing Plan Deconstructed

 

The fifth part of the business plan is designed to prove to the reader of the market opportunity your company will take advantage of to promote and sell its solution. 

This part of your business plan should be thorough, between 2-4 pages in length.

The purpose of the marketing plan is to demonstrate that a substantial population is interested in your product or service, how you plan to target this population, and how confident you are of transforming the individuals within your target market into paying customers. 

The evidence you provide in your Marketing Plan should prove that the market is large enough to support the survival and growth of your business. 

To develop a good marketing plan, entrepreneurs should conduct a careful and systematic analysis of their market and industry. Although this portion of your business plan will likely be tedious and time-consuming, it represents a valuable effort which will yield important insights about your opportunity and how to best market it.

Entrepreneurs should avoid believing that they already know everything about their intended market. The more thorough your market analysis, the more believable your opportunity will be.   

 

Market Research

 

To produce an marketing plan that inspires confidence in your venture, consider analyzing as broad a variety of sources as possible. 

A thorough research analysis may include; examining past newspaper publications, statistical reviews, and university or industry reports, reaching out to prominent research institutions, and scanning the internet for data points, articles, infographics and PDFs. 

New ventures can also conduct surveys and organize focus groups to get detailed and personal insights and feedback about the business’s solution.

Broadly speaking, entrepreneurs can conduct two forms of market research; primary and secondary research. 

 

Primary Research:

Primary market research represents the analytical information gathered by doing your own analysis. This includes surveys, focus groups and interviews to gather valuable feedback from customers. Primary research also includes using public information to do a competitive analysis, for instance the yellow pages of the phone book. 

Hiring an outside firm to provide primary research can be effective, but is typically very costly. Entrepreneurs should examine the web for detailed explanations of how to conduct different forms of primary research. 

 

Secondary Research:

Secondary market research represents the analytical information gathered from using published information including; industry reports, trade journals, newspapers, magazines, census data, and demographic reports. This type of data can typically be found in public libraries, associations, research institutions, chambers of commerce, vendors within your industry, across the web, and various government agencies. 

Entrepreneurs should start by scanning the web for information, then consider local libraries, the chamber of commerce, trade associations and research institutions for industry specific data. 

 

It is important to be as specific as possible throughout your Marketing Plan and provide as many detailed statistics, key data points and sources as are relevant to your venture. 

This is the area of your business plan to explain your industry in depth to the reader, particularly if they are foreign to your sector. Conversely, well known industries require less explanation.

Entrepreneurs should also keep in mind that the marketing plan will become the basis, later on, of your sales projections. 

 

Economics

 

The first data points your marketing plan should provide to the reader are facts about your industry. 

Data points your analysis should include; 

 

A. What is the total size of your market?

 

B. What precent share of the market will your business have? 

 

C. What is the current demand in your target market for your solution?

 

D. What are the relevant trends in your market? 

Is it a growth market? 

What new technologies are being introduced?

What are the consumer preferences, and how are they evolving?

 

E. What is the growth potential for your business?

 

F. What barriers to entry do you face to enter or expand within your market?

    

Barriers might include:

High Capital Costs

High Production Costs

High Marketing Costs

Consumer Acceptance

Brand Recognition

Training & Skills

Unique Technology & Patents

Trade Unions

Shipping Costs

Tariffs & Taxes

 

G. How will your company overcome the barriers?

 

H. How will any of the following affect your company’s operations?

 

Changes might include:

Changes in Technology

Changes in Government Regulations

Changes in the Economy

Changes in your Industry

 

The economic analysis should provide the reader with an excellent perspective of your market, your company's position in the market, and how your industry is likely to change over the next 3,5 or10 years. 

 

Product

 

The second set of data points your marketing plan should provide center around the product or service your company offers to customers. The information in this section should detail all of the positive elements of your product or service, and should be described from the point of view of your customers. 

The goal of this data is to convince the reader of the viability of your product or service, as a solution that fulfills specific needs. 

This data set should include two categories:

 

Features:

List the most important features about every product or service your company offers, and describe what is special about your solution.  

 

Benefits:

Then, list the important benefits about every product or service your company offers, and desire what your solution achieves for the costumer. 

 

Entrepreneurs should be careful not to confuse features with benefits. Features are elements which differentiate your solution among others, while benefits represent the affect each feature has on the customers.

In all cases and purposes, businesses develop new features that enhance their products in order to produce and market specific benefits.  

 

Be sure to include any after sale services, for instance:

Delivery

Warranty

Service Contracts

Support Benefits

Refund Policy

 

The goal of the product section within your marketing plan is to provide a clear picture of the essential competitive advantages of your solution. The data should offer confidence that your product has been well designed, well executed, and has taken into account the demands of the market. 

 

Customers

 

The following section of your marketing plan should describe who your targeted customers are. Details about your customer profile, common characteristics, geographic location as well as other relevant demographics should be included. 

This section will vary greatly depending on what type of business your venture is, and whether you plan to sell your solution to other businesses (B2B) or directly to customers (B2C). If your business sells it’s solution through a channel of distributers, wholesalers, and retailers, clearly analyze the value chain between your middle businesses and the end customer. 

If your business has more than one customer group, identify the most valuable customer groups and create a demographic profile for each group. 

 

Business To Consumer

 

If your business provides a B2C solution, the group customer profile should include the following information:

 

Who is your customer?

    Age

    Gender

    Income Level

    Family Status

    Social Class / Occupation

    Education

    Etc… (depending on industry)

 

Where is the customer? 

    Location

    Region

    City/State

 

When do they buy?

    Seasonal

    One Time

    Year Round

 

What do they buy?

    Necessity

    Luxury Item

    Event/Experience

    Low Cost Consumable

    

How much do they buy?

    Average spent on your product by customers?

 

Business To Business

 

If your business provides a B2B solution, then include the following data points in your analysis:

 

Who is the customer?

Industry Type

Size of customers

Annual Sales 

Size of Company 

Quality, Technology & Pricing preferences

 

Where is the Customer?

Location

Geography

Market

 

When do they buy?

Seasonal

One Time

Year Round

 

What do they buy?

Inventory Item

Capital Item

Consumable Item

Technology

 

Why do they buy?

Necessity

Business Performance Enhancement

 

How much do they buy?

Average commercial expenditure of your product

 

 

The goal of the customer section is to demonstrate to the reader your clear understanding of who is buying your solution, or who your business aims to target with marketing campaigns. More specificity is better than less. 

The more detailed your customer analysis is, the more confident the reader will be in your ability to target potential customers and budget the appropriate capital to reach them. 

 

Competition

 

Next, entrepreneurs should detail what products and which companies are positioned to compete with your business. 

Begin by listing your major direct competitors. These are the companies that offer almost the exact solution that your business offers. Include their name and addresses, and explain whether the businesses compete with you at every level, or just within certain product categories, specific customer groups, or in individual locations. 

Then, list any possible indirect competitors. These are business that provide a different solution, but who are close enough to affect your industry. For instance local video game stores are indirect competitors to video game arcades. 

For each direct or indirect competition, briefly explain how your product/service compares with the competition. 

In addition, carefully analyze any past competitors who have gone out of business and describe how and why they failed, followed by describing how your business uses a different approach and why it will succeed. 

To facilitate your efforts to objectively analyze your business’s competitors consider creating a Competitive Analysis Table. 

 

Competitive Analysis Table

 
 

 

The Competitive Analysis Table clearly illustrates the major differences between your solution and the product/service of your closest competitors. The first column displays your key competitive factors, which can vary depending on the industry your business operates in. 

The column labeled ME, describe in simple terms what the factor is from the perspective of your customers. Then, determine wether or not the factor represents a competitive weakness or strength. To ensure your analysis is objective, consider asking a few disinterested strangers to provide insights about your solution that fit into the table. 

It is very important to be honest about your company’s competitive strengths and weaknesses. A clear perspective about your strong and weak points allows for a realistic and reasonable marketing strategy. 

Lastly, analyze the factor as they relate to your competitors and briefly explain how you think they compare to your solution. 

In the last column, estimate how important each competitive factor is to customers. 1 being critical and 5 being not critically important. 

Another valuable visual chart to illustrate competitor strengths and weaknesses is the compass chart. 

 

Compass Chart

 

Here, the objective is to create a visual representation of how similar different competitors are to your company. First place your company at the center, and then establish 4 broad factors that represent strengths about your business. 

 

 
 

 

Then, place your closest competitors in the areas where their business and/or solution is more or less aligned to one of your company strengths.

The closer a competitor is placed to the center the more strengths they share with your company.

The further away a competitor is placed from the center the more focused they may be on one of your core strengths, and the more different they are to your business. 

The compass chart demonstrates how your close competitors compare to your business in a variety of different ways. If appropriate, create additional cardinal points to illustrate more strengths about your company and how they compare to your competition. 

This diagram is a very simple way to illustrate how a large number of competitors compare to your company. 

 

Pricing

 

Next, entrepreneurs should explain the rational behind how the business solution is priced. For many start-ups it is not advantageous to have the lowest prices in a specific category because it limits the profit margin. 

Depending on your type of business and the industry you operate in, customers may not care as much as you think about the price of your solution. Plus, larger and more established competitors will always be better positioned to under price your business. Start-ups are will reap greater benefits from adopting an average pricing scheme for their solution. Early on, the focus should be quality and service rather than quantity.

A sound pricing scheme should include the following points:

 

A. What is your pricing scheme?

 

B. How does your pricing scheme fit in your market and among competitors?

 

C. Are your prices lower, higher or the same compared to the competition and why?

 

D. How important is pricing as a competitive factor for your business?

 

E. Do your customers make purchasing decisions solely based on price?

 

F. What are, or will you have, a customer service and credit policy?

 

The pricing section is an important indicator of how financially sophisticated the founders or leaders of the company are. Always provide a detailed yet simple pricing analysis with clear descriptions that defend the reasoning behind your pricing scheme. 

Comparing your pricing model against a few competitors is a good way to offer perspective to the reader about your market and the pricing expectations of customers.

 

Niche Market

 

After completing your industry, product, customer and competitive analysis, a clear picture should develop about where your company fits into the broad economy. 

The next element of your Marketing Plan is to briefly describe whether or not your solution serves a mass market or niche market. A mass market represents the broad and international economy, while a niche market represents a smaller segment of the economy. 

Whether your solution serves a niche or mass market will dramatically impact how attractive your venture is to potential investors. Typically, investors favor ventures with mass market potential. 

 

Location

 

If your business is directly impacted by the location of your operations, briefly describe how and why your location is important for your promotional efforts and customers.

Entrepreneurs should consider describing the following points:

 

A. Whether a physical location is important for their customers and why?

 

B. What type of location your business will require? 

 

C. How convenient is it for customers to travel to your location? 

 

D. Does your business require outdoor space? Interior space? And, how much? 

 

E. Is your location consistent with your brand’s image?

 

F. What do your customers expect from your location? 

 

G. Where are your competitors located? Is it better to be closer or further from them? 

 

Explaining the impact your location has on the economic performance of your business demonstrates to the reader your broad market understanding of how the economy is structured and why businesses choose certain locations over others. 

A poor location can dramatically damage even the best managed businesses, while a great location can prop-up a poorly managed business. Entrepreneurs should not underestimate the value of a good location, and should do everything to seek out the best possible locations for their business. 

Many early stage business operate from home, however after a certain milestones are reached a dedicated professional location will become required. If you business still lacks a dedicated commercial office, explain what your start-up will need to attract customers.

 

Strategy

 

The following element of your Marketing Plan is to define the strategy your business will adopt to reach out and market your solution to potential customers. 

Marketing is commonly misunderstood to represent sales and promotion. Marketing is a brand concept within which are the elements of sales and promotion. 

Other important elements within marketing include; design, product development, packaging, pricing and discounting strategies, customer analysis and support, and market research. A good marketing strategy should balance all of these important elements. 

Broadly speaking, your Marketing Strategy should comprise of 3 distinct sections. 

 

1. Advertising Plan

Describes the methods you will use to market your solution to customers. A monthly advertising schedule with budgeted amounts, and any promotional examples can be included. 

 

2. Public Relations Plan

Describes the established media sources you plan to use to promote your business, and how you plan to describe your brand and define your message. This may include contacting famous individuals, celebrities, talk shows, video bloggers, influencers, etc… to advocate for your business. Larger business typically employ an outside public relations firm to handle their public relations needs.

 

3. Personal Selling Plan

Describes how you will prospect and discover new customers, provide them with information, and the form of contract you plan to offer customers. 

A good Marketing Strategy should cover the following key points:

 

A. How will you get the work out to customers? 

 

Advertising channels you may adopt include:

 

TV

Radio

Online

Newspaper

Magazine

Billboards

Public Transportation

Yellow Pages

Etc…

 

B. How often you will reach out to customers on each channel?

 

C. How much you will budget to each channel?

 

D. What mix of media channels you will use?

 

E. What low cost methods you have identified to reach customers, and make the most of your promotional budget?

 

F. Will you use promotional methods beyond paid advertising such as trade shows, catalogs, and/or word of mouth? And, how you will leverage the opportunities?

 

G. What image does your company or brand aim to project? 

 

H. What emotions do you aim to evoke? 

 

I. How do you want customers to see your company and mission? 

 

J. What visual elements are important for your brand? 

 

K. Will you use a mascot or a unrelated visual to represent your brand? And, why did you choose that element for marketing purposes? 

 

L. What will your your marketing materials look like, including; logo design, cards, letterheads, posters, brochures, signage, and interior design? 

 

M. How will your business sell it’s product or service? Through a retail location? Direct mail order, catalogue or over the internet? Or wholesale through distributers?

 

N. Will you need and/or have a sales force? Or will you employ independent representative and promotional agents?

 

O. What is your pricing scheme and how does it compare to competitors?

 

P. What is your price image? Bargain, average, high end, luxury?

 

Q. Will you run any promotions? What kinds?

 

R. Will you have a system to track and identify repeat customers to systematically contact them? 

 

 

All of these questions and their corresponding answers combine to construct a thorough marketing strategy. However, be sure to provide the necessary details without too much explanation. 

It is important that your marketing plan provides information that motivates the reader to act in a way that benefits your objective, and does not overwhelm.

Should your business require a system of distribution be sure to describe it in detail.

The different forms of distribution systems include;

 

Direct Distribution:

Your business sells it’s solution directly to the customer without an intermediary. 

 

Wholesale Distribution:

Your business sells it’s solution to a retailer who sells the product/service to the customer. 

 

Brokers & Agents:

Your business employs a third party service, typically on commission, to sell your product or service to customers. 

 

Hybrid Distribution:

Your business uses more than one of the listed methods.

 

Internet Sales:

Your business sells it’s solution on the web to customers.

Specifically, internet sales can be described in 4 ways:

 

Information Gathering: 

Customers discover about your solution through research and information  provided on the web, most importantly your website. 

 

Communication:

Customers interact with your staff through two-way conversation chats to ask for customer service or offer feedback. 

 

Entertainment:

Customers interact with your business through different forms of media advertisements including; pictures, animations, sound clips and videos.

 

Transactions:

Customers order and pay for your solution over the internet. 

 

Providing more detail in your promotional strategy will give confidence to potential investors about your ability to identify effective media channels and successfully market your solution. Lastly, do not forget to describe the budget you have allocated for your marketing efforts.

 

Budget

 

The final element of your marketing plan is to describe the budget you have allocated for your promotional efforts. It is important for entrepreneurs to demonstrate an ability to frugally lead their venture and make the most out of a limited budget.

Early on, marketing will be a significant line item because getting the word out about your solution is critical to it’s success. Therefore, always allocate more than the expected amount for your marketing budget. 

Your budget should outline the following details:

 

A. How much will you spend promoting your brand across all media channels?

 

B. Whether you have already spent a portion of the outlined promotional budget? 

 

Then, entrepreneurs should provide a sales forecast based on the outlined budget. Prepare the forecast as a monthly projection, and base the analysis on historical sales, already tried marketing strategies, and any market research or available industry data. 

A good sales forecast should provide two projections:

 

1. A best guess of the sales you expect to generate. 

 

2. A worst case scenario estimate that you are confident will be reached no matter the circumstances. 

 

For any economic projection, it is important to keep notes about the research conducted and the assumptions made about the potential economic performance of your business. 

The sales forecast will be incorporated into other parts of your business plan, especially your financial projections, and the figures your provide should be consistent across the entire business plan. 

An effective way to share a significant amount of information in a concise manner is to use a table, for instance with excel, that lists the various marketing channels you aim to employ and the budget you have allocated for each channel.

 

Conclusion

 

The Marketing Plan section of your business plan will be the most complicated and tedious section, but entrepreneurs should not discount its importance. 

As long as the information you provide is clearly organized and eloquently described, entrepreneurs should not be afraid to offer dense information and thorough analysis. 

Entrepreneurs should not shy away from using charts and diagrams to facilitate their explanations. Scattering visuals throughout your document is a great way to create structure, promote simplicity, and facilitate the reader’s effort to navigate your business plan. 

Images can often be more easily understood than text. 

More than any other part of your business plan, the Marketing Plan will offer the greatest degree of confidence in your venture and excitement about your company’s potential. 

Readers will gain confidence in your venture from the level of detail about your target market, and the proof you provide that customers want your solution. 

Excitement will come from the potential sales you believe your company can achieve with the right support and strategy. 

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Send me a question: moebius@zenofwuwei.com