In a competitive economy marketing is the most important activity a business can partake in. It is the one area that directly affects whether a potential customer finds your business and therefore affect the level of sales and profits your business will achieve. If you are marketing your business well, it will make profits but if you are not then you will be in trouble.
Your marketing summary must be a specific, defined series of activities promoting your product or service using marketing channels and methods. A marketing campaign is a coordinated series of steps that can include promotion of a product through different mediums (television, radio, print, online) using a variety of different types of advertisements. The campaign doesn't have to rely solely on advertising, and can also include demonstrations, word of mouth and other interactive techniques.
The marketing planning process means creating a plan for your marketing activities. A marketing plan can also pertain to a specific product, as well as to an organization's overall marketing strategy. Generally speaking, a marketing planning process is derived from its overall business strategy. Thus, when you are devising the businesses strategic direction or mission, the intended marketing activities are incorporated into this plan. There are several levels of marketing objectives but the general business strategy must be interpreted and implemented dependent on the context.
Marketing is the process of communicating the value of a product or service to customers, for the purpose of selling that product or service. It is the management process responsible for identifying, anticipating and satisfying customer requirements profitably
There is no longer any doubt that to survive in the present market you need to plan; so why do so many businesses race towards failure without bothering?
- Identify the total market for your product or service.
- To whom are you targeting your product or service?
- Identify your competition detailing the strengths and weaknesses and your advantages relative to them.
- How will your competition react to you entering the market?
- What are your past sales (if applicable) and future projections?
- What price (manufacture, wholesale, retail, etc.) do you intend to charge for you product/service and how does it compare to the competition?
- What are your selling terms (cash or credit)?
The target market section of your business plan must clearly identify the current and prospective buyers of your Company’s products and/or services. Your goal in preparing the target market section is to demonstrate to readers that you clearly understand who your customers are and how your products/services directly meet the needs of the marketplace. Properly identifying your potential customer base also helps to drive overall marketing and sales strategies that you will include within other sections of your business plan.
Although your product or service may meet the needs of a large constituency of potential customers, the goal is to define your customer base as specifically as possible – both quantitatively and qualitatively. Consider the follow types of characteristics for inclusion in the target market section of your business plan:
How large is your target market? Are there 1,000 business buyers? 10 million potential consumers ready to purchase your product? Or a small handful of very large target customers?
The demographic traits of your customers often vary based on whether you are focused on serving the consumer or business markets:
- Consumer - Income, Occupation, Gender, Single / Married, Ethnic Group, Education
- Business - Industry, Product / Service, Years in Business, Revenue, Employee Size, Private / Public
Where are your customers located? While technology has made location less of an issue for many companies, it doesn’t mean you should overlook the importance of defining the geographic location of your customers. Clarifying these issues also helps to ensure that your marketing and sales strategies/budgets properly match your goals to capture market share.
What are some of the more subjective traits that define your customers? This might include things such as current buying motivations, perceived shortcomings of other solutions in the market, and trends/purchasing shifts likely to occur within your target market.
Naturally, the more you understand your customers, the better your chances of success. Many times the best approach to answer the target market question: “Who is our customer?” is to invest time and resources in primary market research. Conduct simple surveys or focus groups. And if feasible, work with a reputable market research firm to guide you through the process.
At the very least, use the Internet and industry groups to locate market research studies and statistics for your business plan. These resources can range from free information available on websites to expensive professional market research studies prepared by experts in the field.
Performing primary research enables you to gather and document the quantitative and qualitative information needed to prepare a solid target market section for your business plan.
- Do not assume that everyone is a buyer of your product/service.
- Do not be unclear about the characteristics that define who your target customers are.
- Do not assume you must have a "huge" target market - a large and well-defined target market that your company can serve is far better.
- Do not jump to conclusions about why your target market needs you - instead explain how you meet their needs.
- Do not underestimate the value of focus - sell a specific product/service to a specific group.
- Do not try to attack too many markets at once - particularly if you are a start-up.
A popular and critical question posed to business owners and entrepreneurs by lenders and investors is "Who is your customer?" It's such a simple question, yet the inability to answer it has possibly caused more ‘going out of business' sales than any other.
Why can failing to answer such a simple question have such a devastating impact on your business? Unfortunately, because many business owners place too much emphasis on their products and services, and too little on what the customer truly wants and needs. You may have a great product, with more neat gadgets, features, and benefits that your competition offers, but does your customer care? And how do you know they care?
The first place to start is by defining exactly who would be interested in buying your product or service. This is your target market, defined as the group of the population sharing a common set of traits, which distinguish them from everyone else.
For example, a children's clothing store located in the mall might have a customer profile like this: Children between the ages of 3 to 8 years old, 65% female and 35% male, located within 10 miles of the mall, and whose parents earn over $40,000 a year. These characteristics define a target market - and a central set of characteristics for potential customers for children's clothing. If you're in the start-up phase, your target market may be less tangible than the target market for a company with years of operational history and customer files. But as you gain experience running your business, and you maintain accurate records of who actually purchases your product or service, your understanding of your ideal customer will improve.
Marketing Summary - Target Customer
Why focus on your target customer?
First, if you do not understand who they are, how can you tailor your product or service to best meet their needs? One key to business success is the ability to provide products and services that meet the needs and wants of your customers. If your customers want to purchase red shoes, and all you sell are blue shoes, how many do you suspect you will sell? If your customer believes that the speed of your service is more important than its quality, isn't that information you need to know?
Second, when you understand who your customers is, you can determine with more accuracy which marketing mediums and channels will be most effective in reaching them. If your potential customer only listens to FM stations, and you advertise on an AM station, your marketing efforts will be unsuccessful. The more narrowly you can define your customer, the more focused your marketing efforts become, and the more your marketing dollars will work for you.
For example, if you want to sell print shop owners a product, then advertising in a print industry magazine is a far more effective use of marketing dollars than placing an ad in USA Today or Time. This doesn't mean that your customer won't read USA Today or TIME, just that you won't be advertising to all the millions of people who clearly have no interest in your product. .
Here are suggestions on how to breakdown your customer profile, on both the business and consumer level.
Demographic characteristics are specific, objective, and observable characteristics that your target customers share. Most marketing mediums, such as newspapers, magazines, radio stations and television stations can provide excellent demographic characteristics on their audience. General demographic characteristics include:
- Income Level
- Family Life Cycle
- Race/Ethnic Group
- Social Class
- Product/Service Sold
- SIC Code
- Years in Business
- Number of Employees
Geographic characteristics are based on the location(s) where your target customer can be reached. Are they in the urban areas or do they reside in the rural areas? Are they in Montana or New York? Correctly deciding whether to run an advertisement in the New York Times or the Los Angeles Times, will save you money, and help you generate more effective marketing results. Try to identify your customer based on the following geographic characteristics:
- Country / Region
- City / Town
- Size of Population
- Population Density
Psychographic characteristics, though less tangible, are still important to identify and understand. These traits have more to do with a person's psychological characteristics such as attitudes, beliefs, hopes, fears, prejudices, needs or desires, and are highly dependent on your customers' self-image and their perceptions of your industry or product. Psychographic traits include such things as:
- Social Class
- Leader / Follower
- Extrovert / Introvert
- Independent / Dependent
- Conservative / Liberal
- Traditional / Experimental
- Socially conscious / Self-centered
Consumer / Behavioral characteristics are those relating to the purchasing and usage traits of your customers. Do they use similar products such as yours, and how often do they use them? What are the benefits people desire in your service, and how does this translate into sales? Consider these consumer / behavioral traits for your target customer:
- Usage Ratio
- Benefits Sought
- Method of Usage
- Frequency of Usage
- Frequency of Purchase
Once you determine who your customer is, it's important to identify the size of your customer base. Is it large or is it small? If it's too large, consider narrowing it down and focusing on a particular niche. Trying to reach and sell a large target market is difficult and costly, especially if it's populated by well-financed competitors who will force you to incur significant costs to achieve a sizable market share. If too small, will you be able to capture enough customers to make a sufficient profit?
Marketing Summary - Market Trends
Once you define your customer, and determine their total numbers in the population, it's a good idea to research the trends of your market. Over the next few years, what growth rate can be expected for your target market? What changes are taking place in the makeup of your market, and how will they change in the future? How are, and how will, customers change their use of your product or service?
So you ask, "How do I find all this information?"
First, talk to as many of the people in your target market as possible. Seriously - just talk to them and ask questions. Conduct surveys. Discover what they like and dislike, and what they want and need. What is the most important factor in their purchase decision? Facilitate a focus group, or if you have the money, consider working with a market research firm.
Second, Do not forget the local library. It's rich with books, magazines, research journals, reference guides, and computer databases to help you find the information you need. Ask the librarian for help, we always find them extremely helpful in locating specific sources quickly.
Lastly, use your own eyes and ears to discover valuable details about your target market and their buying habits. Visit your competitors disguised as a consumer. Hang out in a store related to the product or service you sell and take it all in. Request annual reports and marketing information to find out about the financial, operational, and marketing factors that are important in your industry. Essentially, look around, collect information, get organized, and figure out who your target customer is, and how you will reach them effectively.
Every business operates within the larger classification of an industry. Your business plan must address the forces at work in your industry, the basic trends and growth over time, and where your company fits in. Demonstrating to outsiders that you understand and have anticipated the important factors of your industry builds a case for your company's success.
Think of your industry as those companies providing products and services similar to yours. This includes those companies selling similar products and services, as well as complementary or supplementary products or services. Any business that falls between the supplier of raw materials to the end of the distribution channel for your type of product or service are part of your industry.
In the industry section of your business plan, provide answers to the following types of questions. Organize your facts, thoughts, and insights into a well-written and succinct summary.
- What is the size of your industry by both revenue and number of firms?
- Discuss the characteristics of this industry such as growth trends, units sold, or employment.
- What factors are influencing growth or decline in your industry?
- What have been the trends in previous years?
- What trends are expected in the coming years? (include supporting research)
- What are the barriers of entry for your industry?
- How many companies are expected to enter your industry in the future?
- What government regulations effect your industry and your business?
- Is your industry highly regulated or does it fall below the government's radar?
- Provide a general explanation of the distribution system for products and services in your industry.
- Is it difficult to gain distribution access to your industry? Explain.
- What role does technology play in the growth and future of your industry?
The following are the some of the most common mistakes found in the industry analysis section:
- Not demonstrating a solid understanding of how your industry functions.
- Appearing unaware about the companies that form your industry.
- Lacking understanding as to where your business fits into the distribution channel of your industry.
- Omitting growth trends, revenue size, and significant statistics for your industry
No company operates in a vacuum. Every business is part of a larger, overall industry; the forces that affect your industry as a whole will inevitably affect your business as well. Evaluating your industry increases your own knowledge of the factors that contribute to your company's success and shows potential investors that you understand external business conditions.
An industry consists of all companies supplying a similar product or service, other businesses closely related to that product or service, and supply and distribution systems supporting such companies. For example, the apparel industry comprises companies making finished clothing, including the fabric suppliers, independent sales representatives and clothing marts, trade publications, and retail outlets.
Marketing Summary - Competition
The competitive analysis section of your business plan is an objective overview and comparison between your company and your competitors. Begin by identifying your direct and indirect competitors, what and how much they sell (in units and sales dollars), the number of years they have been in business, and their specific market niche. Outline the strengths and weaknesses of each of your competitors from an unbiased perspective.
It is advisable to include a chart or pie-graph showing what share of the market each of your competitors commands, the trends and changes over time. Explain the percentage of the market you intend to capture, and from whom or how you will achieve this market penetration.
More than anything else, it is important to be straightforward and honest about your competitors and their strengths and weaknesses. Many first time business plan writers Do not realize that investors want to see that other businesses are profitable and successful in your chosen market. If you fail to present your competitors, or claim you have no competition, why should investors assume that a market even exists from your product or service. Instead, present comprehensive information and point out how your unique strengths and tight market niche will result in your success.
The following are several common mistakes that can decrease the effectiveness of your business plan:
- ASSUMING YOU HAVE NO COMPETITION! – Demonstrates inexperience and minimal understanding of your business.
- Failing to identify both direct and indirect competitors.
- Underestimating the power and strength of competitors.
- Omitting the specific competitive advantages you hold over your competition.
- Demonstrating a lack of knowledge or strategy to combat changing competitive conditions.
- Failing to define and clarify your position, strength, and market niche focus.
There might be a planet somewhere in the universe where products and services have no competition. However, on this planet, that's not the case. Many entrepreneurs make a critical mistake in their business plans - they claim they have no competitors. A plan stating that no competition exists, quickly loses credibility with bankers, investors, and experienced business people. Do not make this mistake yourself. Unless you're a government entity, public utility, or communist country - you have competition. And even these monstrous organizations are realizing that competition exists for everyone.
But competition isn't necessarily bad. Coke has Pepsi. Nike has Reebok. Wal-Mart has K-Mart. And the list goes on. The value of competition is that it forces you to analyze who you're up against and what it takes to achieve success in your industry, market, and business. Competitors actually help you clarify your selling position and determine how to best distinguish yourself from the crowd.
Nike makes billions and so does Reebok. But, everyday they wake up with the desire to compete against each other and win. At one point in time, Nike even adopted the mission statement, "Crush Reebok", signifying how a competitive rivalry can drive companies to greater heights.
Investors will read your business plan and expect to see your competitors identified - Do not disappoint them. Keep in mind that most investors ARE investors because they successfully dealt with business competition in the past. With that in mind, never even imply the following ideas in the competition section of your plan: "XYZ Corp has no competition", "XYZ Corp's product is so superior that we have no competitors", or "XYZ Corp's service is so different and unique that we have no competition". Your reader will disagree, wonder why you can't see that you operate in a competitive environment, and assume you're a business dunce. This is clearly not the goal of your business plan.
Instead, your business plan should honestly and intelligently outline how your business fits into the big picture of your area, market, and industry. If you do this concisely but thoroughly, and pinpoint factors that separate you from your competition, it will go a long way in the eyes of the investors reading your plan.
So exactly how do you identify your competitors? Sometimes it's easy to determine and sometimes it is not. If you intend to open a donut shop, then all the other donut shops within perhaps a 10 mile radius would be considered competition. But what about supermarkets that serve donuts? And what about bakeries that sell donuts and other baked goods? These are pretty obvious, and most people would consider them when starting a company and writing a business plan.
This section should outline the basic characteristics of your competition. Discuss the key features of competitors' products or services such as: purchase price, peripheral costs, quality, durability, and maintenance needs. What is the perceived value of their product? Is the image or name brand a factor? Where are they located? What are their credit policies and delivery terms? How does their customer service stack up?
Also consider the financial strength, marketing savvy, and technological advantages of your competitors. How solid is their access to suppliers, wholesalers, distributors and retailers? Do they have any strategic partnerships or patents, which could cause problems for your company? Do they have economies of scale in place that make it difficult for your company and others to compete.
In this section, provide a breakdown of your competitors by percentage of market. If possible, try to analyze and present this information from both a revenue and units sold perspective. This gives you insight into your market, who the big players are, and where you can fit in and begin to take market share from. Consider preparing a five year analysis showing how market share has changed and shifted over time.
Your company's ability to focus on a market niche can help you gain market share. Pick a niche and make it yours. It can establish your products and reputation, and will help you gain loyal customers and market share as your company grows.
Comparison of strengths and weaknesses
Clearly present and compare your strengths with that of your competitors in this section. Do not forget to present your weaknesses. Every company has them. Be honest and logical about the comparisons you make. Consider product superiority, price advantages, market advantages, management strengths and weaknesses, and more.
Barriers to entry:
Think about the factors that make it difficult for you to enter and compete against established companies - these are called barriers to entry. The following list of barriers should be addressed in your business plan, considering both the positive and negative issues related to your business and your industry.
Patents / Proprietary product differences
- High-start-up costs / Capital requirements
- Substantial expertise required
- Manufacturing or engineering difficulties
- Market saturation – no room within market for new competitors
- Economies of Scale
- Brand Identity
- Access to distribution
- Government policy
Marketing Summary - Market Analysis
The Market Analysis delves into the market in which the business operates to extract the market characteristics. Whereas the Industry Analysis concentrates on the bigger picture of the whole Industry, the Market Analysis focuses on the market itself. The Market Analysis generally encompasses the ‘demographic’ data of the market.
Points to cover
- Market profile (oligopoly etc)
- Market size.
- Market trends
- Segmentation analysis
- Market characteristics – seasonal fluctuates
- Positioning map.
- Pie chart of market segment
- Chart of trends
- Fluctuation charts
- Market profile (oligopoly etc)
- Market size.
- Market trends
- Segmentation analysis
- Market characteristics
A good place to start in building the Market Profile is to define the market and the broader market and highlight exactly where you sit in the scheme of things.
Marketing your website offline should go without saying. However, to spur your thinking here are 35 places where your website address should be seen or heard.
- Answering Machine
- Newspaper Inserts
- On hold messages
- Promo materials
- Packing material
- Address labels
- Christmas cards
- Fax sheets
- Media kits
- Classified ads
- Company cars
- Reorder forms
- Business cards
- Trade shows
- Print ads
- Press releases
- Yellow pages
- Bathroom stalls
- Radio Spots
- Sales letters
- Television ads
Marketing Summary - Market Techniques
There are successful marketing techniques you can use to
increase your sales. All of them are simple to use. And they are
effective for building any businesses.
Every time you add something new to your business you create an
opportunity to get more sales. For example, something as simple
as adding new information on your web site creates another
selling opportunity when prospects and customers visit your site
to see the new information.
Adding a new product or service to the list of those you already
offer usually produces a big increase in sales. The added
product increases your sales in 3 different ways:
- It attracts new customers who were not interested in your current products and services.
- It generates repeat sales from existing customers who also want to have your new product.
- It enables you to get bigger sales by combining 2 or more items into special package offers.
Look for ways you can be a resource for your prospects and
customers. Supply them with free information. Help them do
things faster, easier, less expensively. You get another
opportunity to sell something every time they come back to you
Find or create a reason for customers to do business with you
instead of with someone else offering the same or similar
products. For example, do you provide faster results, easier
procedures, personal attention or a better guarantee?
Determine the unique advantage you offer to customers that your
competitors do not offer. Promote that advantage in all of your
advertising. Give your prospects a reason to do business with
you instead of with your competition and you'll automatically
get more sales.
Your customers don't really want your product or service. They
want the benefit produced by using it.
For example, car buyers want convenient transportation with a
certain image. Dental patients want healthy and good-looking
teeth without suffering any pain. Business opportunity seekers
want personal and financial freedom for themselves and their
Make sure your web pages, sales letters and other sales messages
are promoting the end result your customers want.
Change is the biggest challenge to your business success. The
days are gone when a business could constantly grow by simply
repeating what it did successfully in the past ...or even
recently. Aggressive, innovative competitors and rapidly
changing technology make it impossible.
Expect change and prepare for it. Don't wait until your income
declines to take action. Develop the habit of looking for early
signs that something is changing. Then confront it before you
start to lose business.
Insulate yourself against the impact of change by
increasing the number of products and services you offer and by
using a variety of different marketing methods. Only a small
portion of your total business will be affected if the sales of
one product decline or the response to one marketing method
A strong Business Plan may not guarantee success; but it could certainly prevent failure!
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