The marketing plan is the second stage of preparing your business plan. This phase is highly critical because it provides the basis for the organizational, operational and financial plans. You will need to conduct a market research i.e., an in-depth analysis of your
intended market. This will enable you to describe your market opportunities and challenges. You can then develop the marketing strategies, tactics and policies required to exploit the market opportunities. You should note the sources of any market data you use
and present your facts convincingly.
2.1 Customers
- Describe your potential customers
- Classify your customers into groups
Conducting Market Research and Analysis
You need adequate information about your market so that you can have a good marketing plan. This information can be attained through marketing research. In this part of the marketing plan, you are required to gather information relating to the
following:
- Customer profiles.
- Market area, size and trend
- Competition.
You can then use the information gathered to estimate your market share and sales. Discussed below are the pertinent information that you will need in relation to the above (i.e. customer profiles, competition and market area, size and trend).
Customer profile
It is important to understand your potential or current customers because without customers, there is no business.
Steps in researching your customers
You can use the following steps when conducting research about your customers.
1. Determine who your customer are Customers can be:
- Wholesalers – businessman who buy the product to re-sell to retailers and sometimes to final customers.
- Retailers – businessman who buy the product and sell to the final consumers.
- Final consumers or end-users – Persons or groups of persons who use the products to sanctify their needs. Final consumers may be individuals, households and institutions such as schools, churches, hospitals, etc.
Determine the key characteristics of the potential customers
- Income
- Age
- Sex
- Education
- Occupation and any other relevant characteristics
- Characteristics of the customers, income and occupation – demographic and location of customers.
This information will be useful in determining the appropriate pricing, promotion and advertising strategies. Determine why customers buy certain products and/or services. Some of reasons could be Value propositions Businesses address needs by putting forth a value proposition i.e. a set of benefits they offer to customers to justify their needs e.g. the intangible value proposition is made physical by an offering that can be a combination of products s, services information and experience
A brand is also am offering and all businesses strife to build brand strength i.e. a strong favourable brand image, the offering will be successful if it delivers value and satisfaction to the target buyer. Customers buy products and/or services to satisfy various needs and determine the factors that influence the customers to buy or not buy products and/or service. Many factors influence the customers to buy product and/or service. Some of the factors you should investigate are
Product considerations
- Price
- Quality
- Appearance (colour, texture, shape, materials, etc.)
- Packaging
- Size (Weight and volume)
- Fragility, ease of handling, transportability
- Servicing, warranties, durability
- Operating characteristics (efficiency, adaptability, etc)
Business considerations
- Location and facilities
- Reputation of company
- Methods of selling
- Timing (hours of operation, delivery times)
- Credit facilities
- Advertising and promotion
- Variety of goods and/or services.
- Capability of employees
Other considerations
- Shift in income
- Seasonality, or weather changes
- Changing customers attitudes and lifestyles
- Changes in the economy (recession, depression, inflation, etc).
- When and why they purchase
2.2. Market Share
Market area size and trend
Market area : Specify your intended market. In what geographical area is your market to be located?
Market size: Once you have identified your market, determine the size of that market. This may be done in unit sales and in Kenya shillings. It is useful to have several years of sales figures so that comparisons can be made.
Market trends and outlook
While historical data in market size is important, it is not correct to merely project from that data into the future. Other factors may cause the market to change drastically. One way of estimating the outlook for the future is to analyse the trends that are occurring or
are expected to occur in the market. The analysis of these trends is important because it is not only used to determine the market size, but also to determine how best you can operate in the market. For example, if you intend to open up a food store, you may find that there is a definite trend of people eating away from home, particularly at fast food restaurants.
This trend, if it continues, will have a positive effect in the food stores. Knowing the trend tells you much about the expected size of your market and also points out questions that you will want to consider when deciding to operate your store, e.g.
- Will you want to locate your store in an area where there are many or few fast food outlets/
- Will you want to include fast food items in your stores?
- Will you want to advertise the advantages of eating at home and the disadvantages of eating out?
- To determine your research may require primary and secondary data sources.
- To determine the trends in the market you have to identified the trends that are relevant and of interest to you;
Marketing analysis
One of the greatest needs of the owners of small businesses is to understand and develop marketing programmes for their products and services. Small business success is based on the ability to build a growing body of satisfied customers. Modern marketing programmes are built around “the marketing concept” and performance, which directs the owners to focus their efforts to identifying, satisfying and following the customer’s needs all at a profit.
The marketing concept
The marketing concept rests on the importance of customers to a business and states that: all business policies and activities should be aimed at satisfying customer needs, profitable sales volume is a better company goal than maximum sales volume
When applying the marketing concept, a small business should:
1. Determine the needs of their customers (market research)
2. Analyze their competitive advantages (market strategy)
3. Select specific markets to serve ( target marketing )
4. Determine how to satisfy those needs ( market mix)
Market research
In order to manage the marketing functions successfully, information about the market is necessary. Frequently a small market research program, based on a questionnaire presented to present customers and or prospective customers, can disclose problems and
areas of dissatisfaction that can be easily remedied, or new products or services that could be offered successfully.
Market research should also encompass and identify trends that may affect sale profitability levels. Population shifts legal developments, and the local economic situation should be monitored to enable early identification of problems and opportunities.
Competitor activity also should be monitored; competitors may be entering or leaving the market. For example it is very useful to know your competitors strategies are (i.e , how do they compete?).
Marketing strategy
Marketing strategy includes identifying customer groups (target markets ) , which a small business can serve than its large competitors , and tailoring its product offerings prices , distribution, promotion al efforts and services towards that particular market segment ( managing the market mix). Ideally the strategy should try and address customer needs which currently are not been met in the market place and which represent adequate potential size and profitability. A good strategy implies that a small business cannot be all things to all people and must analyze its market and it’s on capabilities and so as to focus on a target market.
Target marketing
Owners of small businesses have limited resources to spend on marketing activities. Concentrating their marketing efforts in one or two key segments is the basics of target marketing. Market segmentation is the process of dividing the total market for a product
or service into groups with similar needs, such that each group is likely to respond favorably to a specific marketing strategy in order to divide the total market into appropriate segments an entrepreneur must consider segmentation variable which are parameters that identify the particular dimensions that distinguish one form of business behavior from another The major ways to segment a market are:
1. Geographical segmentation: specializing in serving the needs of customers in a particular geographical are. (for example a neighborhood shop may send advertisements only to people living one half kilometers of the shop)
2. Customer segmentation: identifying and promoting to those group of people who are most likely to buy the product. In other words, selling to heavy users before developing new users
3. Demographic segmentation: these refer to certain characteristics that describe customers and their purchasing power for example age, marital status, gender, sex and income.
Managing the market mix
There are four key marketing decisions areas in a marketing program. They are:
- Product and services: product decisions will transform the basic product or service idea into a bundle of satisfaction. Effective product strategies for a small business may include concentrating in a narrow product line developing a highly specialized product or service or providing a product –service e package containing unusual amount of service.
- Promotion: promotion activities will communicate the necessary information to target markets this marketing decision area includes advertising, salesmanship and other promotional activities in general. High quality salesmanship is a must for small businesses because of their limited ability to advertise heavily.
- Price: pricing declensions will set an acceptable exchange value on the total product or service determining price levels and/ pricing policies (including credit policy)is the major factor affecting total revenue . Generally, higher prices mean lower
volumes and vice versa; however small businesses can often command higher prices because of the personalized service they can offer. - Distribution: these are distribution activities regarding the delivering of the products to the customers. The manufacturer and wholesaler must decide how to distribute their products. working through established distributors or manufacturers ‘ agents generally is most visible for small manufacturers small retailers should consider cost and traffic flow as two major factors in location and site selection , especially advertising rent can be reciprocal. In other words, lowcost, low-traffic, location means you must spend more in advertising to build traffic. The marketing mix is used to describe how owners can combine these four areas into an overall marketing program.
The nature of the product or service also is important in location-al decisions. in purchases are made largely on impulse (e.g. . , soda or candy )then high traffic and visibility are critical on the other hand , location is less a concern for products or /-services that customers are willing to go out of their way to find ( e.g. hotel supplies).
Evaluating marketing performance after marketing programme decisions are made, owners need to evaluate how well decisions have turned out. Standards of performance \ need to be established so that results can be evaluated against them sound data on
industry norms and past performance provide the basis for comparing against present performance. Owners should evaluate their business performance at least quarterly.
The key questions to ask are:
1. Is the business doing all it can to be customer –oriented?
2. Do the employees make sure the customer’s needs are truly satisfied and leave the customers with a feeling that they would enjoy coming back?
3. Is it easy for the customer to find what he or she wants and at a competitive price?
Technology
Sometimes, technology can be vital to a service company, such as the case of the Internet provider that uses wireless connections as a competitive edge, or the local company that offers conference rooms for video conferencing. An accounting practice might gain a
competitive advantage from proprietary software or wide-area network connections to its clients. A medical laboratory might depend completely on certain expensive technologies for medical diagnostics. A travel agency might depend on its connection to an airline
reservation system.
Technology can be critical to a manufacturing business in at least two ways: first, the technology involved in assembly or manufacturing, such as in the manufacture of computer chips; and second, the technology incorporated in your product, such as
proprietary technology that enhances the value of the product. In either case, technology can be a critical competitive edge. If you are writing a plan for outsiders, then you need to describe the technology and how well or thoroughly you have the technology protected in
your business, through contracts, patents, and other protection.
Technology might be a negative factor, something to be included in a plan because a threat should be dealt with. For example, that same travel agency that depends on a computerized reservation system might also note growing competition from Internet
reservations systems available to consumers who prefer to buy direct. Not all businesses depend on technology. Technology might also be irrelevant for your business. If so, you can delete this topic if it doesn’t seem important.
Future products
Now you want to present your outlook for future products or services. Do you have a long-term product strategy? How are products developed? Is there a relationship between market segments, market demand, market needs, and product development?
Here again, what you include depends on the nature of your plan. In some cases future products are the most important point for investors looking to buy into your company’s future. On the other hand, a bank is not going to lend you money for product development or hopes for future products; so in a plan accompanying a Loan Application, there would probably be much less stress on this point. You may also need to deal with the issue of confidentiality. When a business plan includes sensitive information on future products, then it should be carefully monitored, with good documentation of who receives copies of the plan. Recipients might reasonably be asked to sign non-disclosure statements and those statements should be kept on file.
Sales literature
It is generally a good idea to include specific pieces of sales literature and collateral as attachments or appendices to your plan. Examples would be copies of advertisements, brochures, direct mail pieces, catalogs, and technical specifications. When a plan is
presented to someone outside the company, sales literature is a practical way to both explain your services and present the look and feel of the company. If it is relevant for your business, you should also use this topic to discuss your present situation regarding company literature and your future plans. Is your sales literature a good match to your services and the image your company wants to present? How is it designed and produced? Could you improve it significantly, or cut the cost, or add additional benefits?
Depending on the purpose of your plan, you should provide good, practical information on the products or services you sell. Give your plan readers what they will need to evaluate the plan. Make sure they understand the need you serve, how well you satisfy that need, and why your customers buy from you instead of somebody else. Ideally, the descriptions in this chapter make your sales forecast seem realistic. Your point of view may change, but if you start with a well thought out point of view at least you will have the
perspective and data to make considered changes.
Milestones are simply interim way points or goals. They should be constructed so that the completion of a milestone provides a powerful indicator that you are on the right course. Missing a milestone requires that you consider the reasons for failure, rethink the
ultimate goals of the company, or both.
When I help companies construct milestones I usually like to bucket them into three categories: Technology, Market and People. I also like to consider what stage the company is in, again I usually like to bucket stages into three categories – Proof of Concept, Going to
Market and Scaling to Profitability. Different milestones are appropriate for each stage but in general you want to pick things that are pivot points for both risk and opportunity.
In the proof of concept stage technology milestones should focus on proving the feasibility of the core technology. For example, in a software or Internet company, there are often key algorithms that need to be developed. What milestones need to be achieved so that these algorithms provide compelling results to justify the essence of your company’s value proposition? Market milestones should be chosen so that completion provides substantial proof that a large enough market exists to continue to the next stage. For example, you might complete a compellation of published market research on existing and related markets, gather market sizing information for your target market and conduct primary research and interviews with a representative set of your target customer base.
With Milestones, you can:
Plan your PR and advertising campaigns.
Track sales and see if your efforts are paying off.
Relate sales trends to marketing activities.
Present implementation schedules to your customers.
Plan and track all of your marketing and sales projects.
Keep lines of communications open on team projects.
In addition to storing, maintaining and ordering your inventory, we have trained and qualified team of agents available to quickly pick, pack, label and ship your products within minutes, not days. A complete business plan describes what you sell: either products, services, or both. This part of the plan is mainly description. Sometimes it will include tables that provide more details, such as a bill of materials or detailed price lists. More frequently, however, this section is mainly text. It normally appears in the plan, after the company description, but before the market analysis.
The most important marketing milestones will provide further validation of the market and identify missing elements of the product through feedback from broad cross sections of target customers. It’s equally important to have milestones around developing a product specification based on that feedback as well as a marketing plan that includes initial sales or customer acquisition targets. Choose milestones and market metrics that prove to you and your Board the company is establishing market traction.
In the go-to market stage the company will hopefully be scaling quickly, requiring people to do a variety of jobs and exercise additional skills. Implement the milestone process deeper into the company will allow you to develop a broader evaluation process for more
people than you put in place in the proof of concept phase.
Once you have firmly established yourself in the market (good initial customer base, broadly used by consumers etc.), the next stage is scaling to profitability. For technology milestones you will want to consider milestones around product cycle times, cost to deliver
and other goals that will allow you to deliver a cost and feature competitive product.
Marketing milestones will largely revolve around scaling the sales or customer acquisition process economically. If you are an Internet company you should carefully monitor customer acquisition costs against lifetime value of the customer and drive towards
making the customer profitable. In a more traditional software or hardware company, focus on milestones that guide you to a set of customers and sales processes that are repeatable.
2.3 The Competition
A very important part of your market research is the investigation of your potential competitors. When doing this investigation, don’t think of your competitors as ‘enemies’, consider them as a source of information. Look at what your would be competitors are
doing, analyse the factors that have contributed to their success or failure. Determine if there are any gaps to be filled. Capitalise on these gaps and areas of weaknesses. The following are some of the items that are included in this section:
Competitive comparison
Use this topic for a general comparison of your offering as one of several choices a potential buyer can make. Use a separate topic, in the market analysis section, for detailed comparison of strengths and weaknesses of your specific competitors. You should discuss how your product lines and retail offering compare in general to the others. For example, your outdoor store might offer better ski equipment than others, or perhaps it is located next to the slopes and caters to rental needs. Your jewelry store might be mid-range in price but well known for proficiency in appraisals, remounts, and renovation. Your hobby shop has by far the largest selection of model trains and airplanes.
In other words, in this topic you want to discuss how you are positioned in the market. Why do people buy from your business instead of from others in the same market? What do you offer, at what price, to whom, and how does your mix compare to others?
Think about specific kinds of benefits, features, and market groups, comparing where you think you can show the difference. Describe the important competitive features of your products and/or services. Do you sell better features, better price, better quality, better
service, or some other factor?
Sourcing and fulfillment
Explain your product sourcing and the cost of fulfilling your service. Manufacturers and assemblers should present spreadsheet output showing standard costs and overhead. Distributors should present discount and margin structures. Service companies should
present costs of fulfilling service obligations. For example, sourcing is extremely important to a manufacturing company. Your vendors
determine your standard costs and hold the key to continued operation. Analyze your standard costs and the materials or services you purchase as part of your manufacturing operation. Look for strengths and weaknesses.
Manufacturing companies want to have ample information about resource planning and sourcing of vital materials, especially if you are preparing a plan for outsiders, such as bankers or investors, or for business valuation. In this case, you may have additional documentation you can copy and attach as appendices, perhaps even contracts with important suppliers, standard cost breakdowns, bills of materials, and other information. Where materials are particularly vital to your manufacturing, you might discuss whether
second sources or alternative sources are available, and whether or not you use them or maintain relationships with them. This is also a good time to look at your sourcing strategy, and whether or not you can improve your business by improving your product sourcing.
But sourcing is not just for product-based companies. For example, a professional service company, such as an accounting practice, medical practice, law practice, management consulting firm, or graphic design firm, is normally going to provide the service by
employing professionals. In this case, the cost is mainly the salaries of those professionals. Other service businesses are quite different. The travel agency provides a service through a combination of knowledge, rights, and infrastructure, including computer systems and databases. The Internet provider or telephone company provides a service by owning and maintaining a network of communications infrastructure. A restaurant is a service business whose costs are a combination of salaries (for kitchen and table waiting) and food costs.
- Description of competitors
- Size of competitors.
- Profitability of competitors
- Operating methods
Description of competitors
Identify those businesses which will be competing with yours
Size of competition
Determine the assets, sales volume and market share of the major competitors
Profitability of competitors
Try to determine how profitable the business is for those businesses already in the field.
Determine:
- Which business are making profits
- Which ones are making losses and
- How much (profit or loss).
Operating methods
For each of the major competitors, try to identify the relevant operating methods. Consider the following.
- Price of the product and/or service
- Quality of the product and/or service
- Hours of operation; ability of personnel
- Servicing, warranties and packaging
- Methods of selling; distribution channels
- Credit terms; volume, discounts.
- Location, advertising and sales promotion
- Reputation of the business, etc
Once you have identified your competitors you need to further classify these as
- Primary
- Secondary
- Potential
This is because:-
- The classification makes your research easier
- Your marketing strategy may be different for each group.
How can you find out the size and profitability of your competitors’ businesses? You may use the following tips: - Read the publications that cover the business scenes, e.g. annual reports.
- Conduct primary research by contacting business directly. This may not be very useful.
- Contact the firm’s suppliers or other individuals who are in a position to know or estimate the position.
- Make a reasonable estimate from the bits and pieces of information you have collected.
List the changes that will improve your competitive position.
- Identify your competitors, strengths, weaknesses and their market share.
- What advantages do you have over your competitors?
- What advantages do your product/services have
- Compare your products with those of competitors
- What is your overall strengths, weaknesses and how will it be easy to compete effectively.
- What is your unique selling point?
2.4 Pricing Strategy
In order to achieve the targeted sales, the way you price your products and/or services matter a lot.
Examples of overall marketing strategies include:
- Market penetration
- Product development strategy
When developing pricing strategy, you have to consider the following factors:- - Methods of calculating the selling price of your products and/or services.
- Factors which will influence your price setting e.g. competitors’ price, demand for the product, production costs.
- Actual selling prices of your products and/or services.
- Credit terms to be offered.
- Discounts, e.g. trade discount, cash discount.
- Any after-sales services and relevant costs.
Justify your prices, particularly if they are substantially above or below the prices of similar products and/or services in the market place. Demonstrate that your pricing decision is based on your company’s ability to make a profit. - Show calculations for determining your selling price (methods of coming up with price)
- How does this compare with the price charged by each of your competitors – impact of products/services
- Cost price reduction approach
- What is your gross profit margin
- What price structures have you in place to cover quantity discounts – structure
- What credit terms will you offer to your customers?
- What discounts will you offer your agents, distributors
- What pricing policies do you have for after sales services?
- Describe the size of your competitors. Are they small, medium, or large in relation to your business. (Consider assets, sales volumes, number of employees, and number of brands).
2.5 Sales Tactics
Describe the methods you will use to make sales
- These selling techniques, including:
- Personal selling
- Selling indirectly e.g. use of agents
- Getting orders
- Satisfying customer needs
- Customer interviews
- Sales appeals
- Recruitment and retention of the sales force
- Ways of selecting and motivating distributors/agents and/or sales people
2.6 Servicing, Warranties And Packaging
In this part of a business plan, you are required to:-
- Discuss the types of packaging that you will use.
- The policies that you set regarding servicing and warranties
- Discuss the purpose of the packaging, servicing and warranties
- Explain how they fit in your overall marketing approach
- Explain why you feel that they will increase sales and profits.
1. For packaging,
Explain what features will be responsible for sales, it is
- The appearance of the packaging
- Colour
- Texture or
- Design
Is there something other than the sensory appeal of the package?
For example: - The packaging may make it easier for the customer to carry
- It may reduce the chances of breakage
Discuss the cost of the packaging
2. For servicing:
Describe your servicing programme.
What features are included in this programme?
Explain your purpose for each of these services
- Are they additional sources of income?
- Do they result in future sales by increasing customer satisfaction or by enhancing your reputation?
Explain who will provide the services and under what arrangements:
- Do you intend to continue the servicing without additional change?
- If not, will the customer be able to buy a service contract or will he/she merely pay cash for each servicing?
- What will you charge for the servicing and what will your costs be?
2.7 Advertising And Promotion
Making your products and services known to your potential customers is essential in increasing sales. In this part of your business plan you should discuss your planed advertising and promotion programme.
When setting an advertising and promotion programme, consider the following:
1. Decide on the purpose of the programme
For example:
Are you try to generate immediate profit and trying to build up your business mage?
Are you trying to create awareness of your products?
2. Identify the advertising and promotion target.
Will your advertising and promotion be directed toward the general population, your entire market or a portion of the market?
3. Determine what media to be used. Use most appropriate media for your target market.
4. Determine the amount to be spent, the frequency of the advertisement and the content of the advertisement.
5. Decide in advance how you will measure the effectiveness of the advertising programme.
6. Determine the plans for initial promotional campaign and plans for regular promotional methods.
7. Determine the cost for each promotional event.
8. Determine how you will measure the promotional effectiveness.
For your business plan, include as much information as you have.
- What will be the frequency of your advertising?
- How do you intend to promote each product/service?
- What promotional activities do your competitors use?
- What is your advertising and promotional budget?
- How will you measure the effectiveness of each promotional activity?
2.8 Distribution Strategy
Reaching the market: Marketing channels
These refer to how goods reach the market place. For a business there are two choice of channels:
1. To distribute to end users
2. through intermediaries
Multi- level marketing these is used to describe a variety of ways of reaching consumers: by a chain of direct selling agents this includes pyramid selling which is legally regulated as many self employed people were duped into buying a stock of product which was being sold to fill up the distribution lines and rarely to end users. Multi-level or network marketing involves setting up a pyramid structure of sales agent, who earn commission on their sales to consumers and to other agents and both on their sales to consumers and to other agents the agent does not need to buy stock in order to make a sale, other than for demonstration purposes thus if final users are not buying the product the system breaks down
In describing the channels distribution you tend to use. Consider the following:
- Types of channels of distribution available
- Nature and channels you will utilize
- Location/premises improvement resources
- Outline your distribution channels geographical area you intend to serve
- What means of transport will you use and how much will it cost?
- What problems do you anticipate in your distribution network?
- Indicate methods of solving the problem
