Marketing Plan Parts 1 and 2

“Determining a Pricing Strategy

Armed with information about costs and product break-even levels, the marketer needs to determine the company’s overall pricing strategy. There are essentially two main strategies: profit maximization and sales maximization.

Profit maximization suggests that the company is willing to give up sales in order to generate the greatest amount of revenue possible per sale. For this strategy, higher prices result in lower sales. Fewer people will be willing to pay a high price, but those that do will be contributing a greater amount of profits over costs.

Sales maximization typically sacrifices revenues in order to increase sales – the number of consumers buying the product. The prices are lower, but the number of customers is greater.

These two strategies assume that demand is elastic. In its simplest terms, demand is elastic when an increase in price means a decrease in demand, but when price decreases demand goes up. This is the driving force behind sales – the sale increases the number of customer sales, attracted by the lower prices, but the amount earned per sale goes down because of the lower price.

Closely related to the two strategies above are market penetration pricing and market skimming pricing. These strategies are often employed when launching new products.

The marketer’s ability to manipulate price is to a large degree determined by the consumer’s concern with price and the degree of product differentiation. For example, if a consumer has a high level of concern for price and the product differentiation is low, then the marketer’s flexibility to manipulate price is also low.

Market Penetration Pricing

Sometimes an organization wants to achieve the largest market share possible, even if it means sacrificing profits, because the marketer believes that once a satisfied customer is acquired, the more difficult it will be for competitors to steal the customer away. Over time the company may plan to cross-sell other, more profitable products, or gradually increase prices once the market has stabilized. Obviously, this strategy requires the financial resources to accept reduced revenues and the service and product quality needed to satisfy the customer. That can be difficult to do with lower revenues.

Market Skimming Pricing

A profit maximization strategy means the company is willing to accept a lower level of sales in order to achieve a higher price per product from those who do purchase. This strategy works best when a relatively large number of consumers are willing to pay a high price to have the newest, best, and most advanced product in a specific category. These are often the opinion leaders in their market area. The company may intend to roll out similar mid-level products at a later point to develop market share, relying on opinion leaders to generate interest in their new products. Profit maximization allows the company to recoup its product development costs more quickly.”

Other Pricing Strategies

While firms must make strategic decisions about their overall pricing strategies, other pricing strategies and tactics are often used to create a competitive advantage. Here are some of the more frequently used tactics:

Quantity discounts – Firms often reward buyers by lowering per unit pricing for large orders.

Price promotions – As one of several promotion strategies, firms will lower prices or offer discounts for a limited time to induce sales from consumers and channel intermediaries.

Product bundling – Firms often combine products and offer consumers a lower total price when multiple products are purchased. Banks, for example, sometimes offer a lower rate on car loans if the consumer also has a checking or savings account.

Value-added pricing – Similar to bundling, this approach offers option packages at reduced rates. It allows manufacturers to reduce production costs.

Product line pricing – Firms with extensive product lines will often develop pricing schedules that allow the firm to meet consumer demand at different price points, from low cost products to higher cost, better quality products.” (Module 7 Lecture Notes)

VII. Channels of Distribution

When describing your channels of distribution structure, be sure to identify:

· The rationale for the structure that you have selected

· How you will work with your channel members to help them promote your product to the ultimate consumer. This may include PUSH and PULL promotional strategies. How will you manufacture your product, warehouse it, and move the product to the next channel level?

· What should your channel members expect from you, the manufacturer (marketer) of your product? How will your organization be structured to accomplish this?

As you will have a sales force (or someone who assumes the selling function), discuss the selection, compensation, training, and management of your sales staff. If, on the other hand, you are selling directly to the end-used (direct channel), discuss this here.

If you are providing a service to your target market, you fulfill the responsibilities of a direct channel service provider. You will not use intermediaries (i.e., wholesalers, brokers, retailers, etc.). Instead, describe HOW you will provide the services that you will offer your target market (Note: The Product Description section describes WHAT you will provide). As a service provider, describe your physical facility, how you will deliver your service, and other aspects that suggest you are taking that which is intangible and making it tangible.

VIII. Integrated Marketing Communications (IMC) Promotion Plan

Your marketing plan should demonstrate a promotional approach that embraces integrated marketing communications (IMC). This includes a clearly-stated MESSAGE that is consistently communicated to your stakeholders.

Your promotional effort should:

· Demonstrate an appropriate mix of advertising, public relations, sales promotion, direct marketing, and personal selling. You should include the Internet and social media, too, as appropriate to your promotional effort.

· Describe your primary objective for your promotional approach. Outline this in terms of measurable tasks that you want to accomplish. What is your advertising goal to which you will measure success for your advertising expenditures? This is a complete description of your proposed promotion plan.

· Describe each of your promotional activities that you envision as essential to ensure an integrated approach to promoting your product or your service. Describe your execution (i.e., your rollout plan), in accordance with the following format for any and all expenditures (The dollar figures will go into the IMC Promotion Budget):

1) Weekly 1/4-page ads in the Sunday Ledger @$5,100 for each edition.

Ads run each Sunday for two months, followed by publication during alternate weeks for Week 52. Total Cost $147,900

2) 30-second radio spots on WBAL-AM, with two ads during morning drive time and one during evening drive time; ads to run five days each week for first month and alternate every other week for five months; ads to run once each morning every other day during months Six through Twelve. Total Cost: $117,451

Consider what constitutes the most appropriate promotional mix of advertising, sales promotion, public relations, direct marketing and personal selling, that gains you the most “bang for the buck.” Who is your target market and what do you see as the cost per customer to reach them and to have them contract with you (i.e., purchase) your product or service?

If you plan to use personal selling or direct marketing and have previously discussed these in your Channels of Distribution section, reference that here and be sure you’ve fully covered the communication aspects of these tools.

You must show a clear understanding of what you want your IMC promotional strategy to do for you in terms of measurable outcomes. Ensure your IMC approach makes sense, given that you could easily spend millions of dollars (in theory) to promote your product or service.

When all is done, your IMC Strategy will provide an executable promotional plan that indicates the what, where, when, and how much.

IX. Integrated Marketing Communications (IMC) Budget

Tally up your projected IMC budget for your FIRST Year. You should include your costs for any and all advertising, public relations, sales promotion, direct marketing programs, and personal selling. Remember to include benefits (35%) for sales personnel, should this be part of your plan.

To gain a clear and accurate understanding, your research will be important. You are expected to contact an appropriate radio station, newspaper, etc., to determine the actual cost to advertise in that media. This is not a “guesstimate,” but an actual budget that is based on your projected promotional plan and an income stream that will support it.

Include in your Promotion Budget your projected dollar costs for promotion for your first year of business. This should be based on your having made a diligent effort to understand approximate expenses for advertising/media and other promotional venues.

Your evaluation for this section is based, in part, on demonstrated diligence that allows you to communicate to your instructor your thorough understanding of the realities of promotion.

Consider your costs for the following possible promotional costs:

· Television

· Radio

· Magazines

· Newspaper

· Internet

· Outdoor Advertising

· Yellow Pages

· Miscellaneous other advertising

· Social Media

· Advertising Agency services

· Public Relations services (publicity, etc.)

· Sales Promotion (what you have created, e.g., magnets, coffee mugs; trade show participation)

· Direct Marketing program (Direct Mail, "Permission Marketing," etc.)

· Personal Selling (salary and 35% benefits, plus expenses)

X. Executive Summary

Your Executive Summary is a one to two-page synopsis of your entire marketing plan. It is an abstract of what the reader is about to read. Key elements include:

· A measurable goal for your marketing plan and how your marketing plan’s success will be evaluated in quantitative outcomes.

· A good mission statement that is a standalone paragraph. It should state the business or industry your company finds itself

· One or two of your goals and values

· A brief paragraph that shares specifics about each of the sections that follows. Remember that this is a 50,000-foot document.

When one is done reading the Executive Summary, one should be able to say, “Ah, now I know what this company does.”

Be sure to also include your financial highlights such as sales and revenue forecasts, projected growth and market share, and expected profitability. Briefly reference the current market situation as it relates to your product/service and company and outlines the opportunity. Point out key success factors and/or major pitfalls you plan to avoid. Reference major actions, changes or trends you anticipate over the next three years, and how these will impact your marketing strategy.