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How Marketing Plans Work (part 2)   06/06/2005 - 08:53:43

The Marketing Plan Outline
Just as you discovered if you've ever written a business plan, there are many, many variations in the format and outlines for marketing plans. Study examples you see on the Internet and from other sources, and modify this outline as you see fit. Typically, however, your written marketing plan should include the following sections:

  1. Executive Overview

  2. Market Review
    • Trends overview
    • Market segments
    • Target market
      • primary
      • secondary

  3. Competitive Review

  4. Product and Business Review

  5. Strength, Weaknesses, Opportunities, Threats

  6. Goals and Objectives
    • Sales objectives
    • Marketing objectives

  7. Strategies
    • Positioning
    • Product
    • Pricing
    • Distribution
    • Communications/Promotion

  8. Action Plan and Implementation
    • Media plan
    • Budget
    • Schedule
    • Assignments
  9. Evaluation
    • Lead tracking systems
    • Sales reviews

We'll discuss all of these different parts in the following sections.

Executive Overview
Usually, the first section of a marketing plan is the Executive Overview. The executive overview summarizes your plan for a quick review by your executives. Although it comes first in the marketing plan, the executive summary is usually written last, after you have analyzed, wordsmithed, and ironed out the details of your plan. So, once you have the meat of your plan written, come back to this section and write your executive summary.

The executive summary should briefly cover:

  1. Market Overview
  2. Competitive Overview
  3. Product Overview
  4. SWOT (Strengths, Weaknesses, Opportunities and Threats)
  5. Goals and Objectives
  6. Strategies
  7. Action Plan and Implementation Schedule
  8. Evaluation Methods

Market Overview
In the research phase of this exercise, you did the legwork necessary for the first few sections of your business plan. Now you just need to get the information compiled in a clear and concise document so you can make use of it and others can read and understand (and support) it.

With that end in mind, go through the piles of market research and worksheets you've completed and start making some sense of everything. Once you have a handle on it, begin by writing a good overview of the market. You can actually pull some information from your business plan as long as the market information there is current and specific to the products you're planning for. If you don't have a business plan, or access to it, then the questions you need to answer in this overview are:

  • How big is the potential market?
  • Is the market growing, flat, or shrinking? What changes do you see happening?
  • Is the market segmented by pricing, quality, age, income, or product usage?
  • Who is your target audience?
  • Who are your competitors?

Just as with all of the other sections of your marketing plan, there is no absolute for organizing your plan. Organize the market overview section in the way that seems most logical and will best illustrate your product's market.

Market Segmentation
Because it is hard (and expensive) to be all things to all people (or markets), it is wise to target specific segments of your market, particularly if you are in a smaller business. Not only will this allow your to reach more of the people who will ultimately buy your product, but targeting segments may also reduce the competition you face. Finding your niche is often the key to success for small and medium and even large businesses.

Your market may naturally be segmented by price, quality, region, customer age, income, buying behavior, industry or anything else. Typically, price and quality are the most evident, followed by product use and the benefits consumers get from using the product. Some segments will be very distinct, and some will be more subtle.

The best example of market segmenting is illustrated in the auto industry. They're all cars; but they come in all levels of luxury and utility, price and quality, etc. Some may even cross over into more than one segment, or move from one to the next.

Determine the segments of your market and describe the ones you are going to target. Keep in mind that your product might cross into several market segments. Finally, remember to address each of these segments when you are planning your marketing activities.

Target Audience
Determining the right target audience is probably the most important part of your marketing efforts, because it doesn't matter what you're saying if you're not saying it to the right people.

Demographics
In this section of your marketing plan, go into as much detail as possible about who your market is. Describe your typical customer in detail. What is the age group, gender, education level, family size, income level, and geographic location. For business-to-business markets, make sure you include the industry type (or SIC/NAICS), company size, job titles/departments, annual revenue, and geographic areas. Have a general picture of who your market is, then back up that information with concrete numbers and statistics about the size of your market.

Determining the size of your market really requires that you already have a good profile of your typical customer. Once you know "whom" you're looking for, you need to take into consideration things like the aging of the population, and regional variations in income levels and education levels.

Your product offering will also require that you consider not only income levels, but also disposable and discretionary income levels. The former refers to income after taxes that is used to pay for daily living expenses, and the latter refers to income that is left over after those necessities are paid for and can be earmarked for luxuries.

Getting to this level of demographic data will probably require market research. Look for data about the regions where higher densities of these specific groups can be found. The Bureau of Labor Statistics and the U.S. Census Bureau have information about annual spending levels in the major categories of expenditures. You can also find data about age group concentrations in specific regions.

Psychographics
Even though you may have determined your demographic group, people within that group still have very different perceptions about the benefits or value of your product and will be motivated for different reasons. These differences are known as psychographics. To further target your efforts, you've got to determine not only who buys (or will buy) your product, but what makes them want to buy it. Include as much psychographic information as you can dig up, such as what their spending patterns are, whether they are brand conscious when it comes to your product type, what influences their buying behavior, what promotional efforts they respond to most often, etc. You also want to know how they go about buying it and what you can do to encourage them to buy more. You need this information so you can, in effect, clone your best customers. It is important to really pick apart what motivates them to buy.

The information you glean from a journey into your target audience's brain is often key to your marketing efforts, particularly the positioning of your product. It includes the audience's activities, interests, and opinions. You have to work through behavioral factors, economic factors, and even interpersonal factors to get to the root of purchasing behavior. Answer these questions in your overview:

  • What do they like about your product?
  • What do they like about your competitor's product?
  • What made them decide to buy your product?
  • Did they know which brand they were buying before they purchased it?
  • What advertising messages had they seen prior to buying?
  • How much disposable or discretionary income is available for this type of purchase?
  • What are their hobbies?
  • What emotional aspects impact their purchase?
  • What is their social class or status?
  • Who is the actual decision-maker for this type of purchase?
  • What values and attitudes play a part in this type of purchase?
  • Who do they look to when making purchasing decisions?

Now that you know your target market and market segments, define your market using concrete numbers and percentages. In other words, how many users do you currently have and how many potential users exist for your product or service? If you are offering a regional service and have found that there are 80,000 potential customers in your geographic area, then this is where you put that information.

Explain the growth and other changes you see in the market and how the competition is failing, flailing or flourishing as a result. Include some market history if it applies to your product and market. Refer to the statistics and data you've discovered through your market research and be sure to quote the source and date.

This is where you would include the PEST (Political, Economic, Social, and Technology) information you gathered about outside influences on the market (i.e. government regulations, union activities, social changes, etc.). Also, don't forget the seasonality of the market, and the typical product life cycle.

Competitive Overview
Give a complete and thorough overview of the competitive market. Cover not only the directly competing companies you face (those who offer a very similar product with similar attributes), but also other product variations you may be competing with. For example, if you're selling herbal teas, are you also competing with regular teas? Instant teas? Canned teas? The drink market in general? Review these types of competitors as well as your direct competitors.

Describe all of the heavy hitters and answer the following questions:

  • What are their product's strengths and weaknesses?
  • What are their strengths and weaknesses as a company (financial strength, reputation, etc.)?
  • Are there weaknesses you can exploit?
  • What are the differences between your product features and theirs?
  • What were their sales for last year?
  • What is their pricing structure?
  • In what media vehicles do they promote their products?
  • What is their advertising message?
  • Where else do they promote their products?
  • What were their total advertising expenditures for last year?
  • What is their overall goal (profitability, market share, leadership)?
  • How are they trying to meet their goals (low prices, better quality, lower overhead)?
  • What were their responses to changes you made in your product pricing or promotions?

Information is often the key to a strong competitive advantage. If you've had difficulty digging up information about your competitors, try your suppliers. They can be good sources of information. Visit your competitors' locations, Web sites, exhibit booths; sample their products. You can also gather a wealth of media and advertising information about your competitors on the Internet through companies like Competitive Media Reporting and USAData. These firms and many others provide access to databases covering many areas of industry, media, advertising, and competitive information.

Product Overview
Use this section of your marketing plan to fully describe:

  • your product and its purpose
  • its features
  • its current pricing structure
  • its current distribution channels
  • its positioning within the market
  • its current promotions and advertising
  • its current packaging

Make sure the information is specific and accurate. If your product is new, simply describe your product and its features... But wait!

This section of your marketing plan should be a piece of cake. You know your product, right? You know its features, right? Do you know the benefits your customers get from your product, though? You had better, because that's what's going to sell it.

Features vs. Benefits
This has probably been hammered into your head if you've been in marketing or advertising, but what does it mean? Don't your customers make the connection that if the box says "batteries included" that means they won't have to take those extra steps of buying and installing them? Sure, they might, but if you say "Batteries Included: Ready to use right out of the box!" you'll get their attention more quickly and perhaps give your product the slight edge that will convince the customer to pick up your product rather than your competition's.

In a nutshell, you have to make very clear the end result that is ultimately the reason why someone should purchase your product. Connect the dots for them, and you'll have a much better chance of having a successful product. Add to the list above a big "benefits" category, especially if your product is new.

When you get to Strategies and Action Plan, use the benefits information you come up with here to make your creative efforts and positioning work for you.

Writing SWOT
The content that this section of your plan communicates is some of the most important. Up until now, you've been talking about the past, so to speak. From this point on, you're moving into the future and ultimately the meat of your marketing plan.

With that in mind, write this section of the plan with particular clarity and substance. Pull out those lists of strengths, weaknesses, opportunities and threats that you came up with during the research phase and put them in order of importance within each category.

Remember, these should include anything that might affect sales of the product. Make it detailed enough to fully explain each strength, opportunity, etc., but keep the format clean and graphically easy to read.

Goals and Objectives
Your goals and objectives are simply the hard facts describing where you want to be a year from now, or five years from now, or whatever your time frame may be.

Sales Goals
Start with your sales goals. In this section, you should include goals that are:

  • concrete and measurable (in terms of dollars and units)
  • set at a level that is challenging but not impossible to reach
  • set on a specific timetable for measuring success
  • linked to projected profits (which should also be estimated in the marketing plan)

To do this, you have to accurately estimate the market and what you can expect to get from it for your piece of the pie. There are several methods for doing this. Go through each one and compare your results in order to come up with your sales goals.

  • The first method requires that you look at total industry sales over the past five years for your product category. From that information, estimate total industry sales for the next three years for your product category. From that number, figure your market share and extrapolate your annual sales estimates for those years.

  • The second method is more limited to your business itself. Basically, you go through the same procedure, but you use your own product's sales figures instead of the total product category for the market. You can further break this information down by the specific distribution channel from which the sale came.

  • The third method is important because it is based on the sales levels you need in order to meet your expenses and product costs and make a profit. After all, that is the ultimate goal, right?
    1. Estimate your overhead expenses for the year.
    2. From your expected Gross Margin percentage, subtract your expected profit percentage. This will give you an estimated expense percentage.
    3. Divide the estimated overhead expense dollars by the estimated expense percent to arrive at the magic number of sales dollars necessary to cover your expenses and make a profit.

If you have a new product or business, you'll need to use the industry information to estimate your sales. This analysis should include the average cost of goods, operating margins, overhead expenses, and profit levels for businesses that are similar to yours.

To come up with your final sales goals, you can either average the numbers you came up with using for the three methods we just covered, or you might see a need to weight one method's results more than another. Look at your market data and your opportunities and threats data to determine if the actual potential should be estimated to be higher or lower than your numbers are stating, and then work from there to arrive at your final sales goals.

Marketing Objectives
Your marketing objectives should be the means to achieve your sales objectives. By working through your target market data and your market segment data, you should come up with marketing objectives that address every group. Your marketing objectives should follow the same rules as the sales objectives, and be measurable, quantifiable (meaning there is a specific number of some sort assigned to each one), and time specific.

You should have a marketing objective that addresses each group in your target market. For this reason, you need to have good data about the sizes of your market, potential market, and your current customer base. To this data, add information such as recognized opportunities, your customers' buying rates, and other behavioral issues. This information will help you estimate the numbers you need to attach to your marketing objectives.

For example, imagine this scenario:

  1. You know your 2,500 customers each bought an average of 2.5 of your widgets last year.
  2. You've also identified a new market of 3,500 potential customers (at your current market share percentage) that you're estimating will buy an average of 2 widgets each for the year.
  3. In addition, you've identified an opportunity to add a service contract for customers that would cost 10% of the product cost.

Your marketing objective for existing customers could then be: To increase your current customers' buying rate by 20% and sell service contracts to 50% of those customers.

Your marketing objective for new customers could then be: Sell your widgets to 50% of the new market, create a buying rate within that group of 2 units per year, and sell service contracts to 50% of that group.

Keep in mind that your current customer base may not all buy again, so you should probably account for the drop in that group's purchases by also adding a goal to retain a specific percentage of your existing customers. Set objectives like these for every segment of your market, based on your data. Then, set up a chart to show the math involved in how your marketing objectives meet your sales objectives. Plug in numbers for your percentages and product prices to show that the totals add up.

Strategies
Okay, so you know where you want to go. Now, you just have to determine which roads you're going to take to get there. These are the strategies you'll use in your marketing mix. Your marketing mix is the combination of elements that make up the entire marketing process. By using a variety of modes to reach your goal, you have a better chance of actually doing it. It requires the right combination, however, so be careful when putting it together.

Traditionally, the marketing mix refers to the four P's: product, price, place, and promotion. There are folks who will tell you that those are old-fashioned, and that there are new hip terms to use, but they really all boil back down to... product, price, place and promotion.

We'll go through each of the Ps and talk about the inherent elements in each that can be strategically modeled to help you meet your goals. In addition to the traditional Ps, and probably the most important when it comes to your marketing communications, is positioning. Let's begin there.
Brainstorming In this section, you really need to put on your creative helmet and think outside of the box. Have a brainstorming session to generate ideas. Here are a few tips to get you started:
  • Have a good variety of people involved; include people who know your product, as well as those who know absolutely nothing about it.
  • Don't shoot down any ideas until after the session is over. Even bad ideas can beget further good ideas.
  • Conduct the session in an exciting and creative environment.
  • Start by exhausting all initial ideas and listing them out.
  • Use toys, gadgets, photographs, puzzles and other items to stimulate creative thoughts and ideas.
  • Encourage outrageous thoughts and bizarre ideas.
  • Use your competition by tearing its product apart and thinking about how you can steal their customers away.


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