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References
Hisrich, R.D., Peters, M.P., & Shepherd, D.A. (2013). Entrepreneurship (Laureate Custom
Education). New York: McGraw-Hill Irwin.
Custom Create Edition LAUREATE EDUCATION INC
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THE MARKETING PLAN
[?Z '· = · .. ,, . ft. ~[m~1n~i (+)1;J][ICS'iiti\W0 .. · - i D>-~~il
1 To understand the relevance of industry and competitive
analysis to the market planning process.
2 To describe the role of marketing research in determining
marketing strategy for the marketing plan .
3 To illustrate an effective and feasib le procedure for the entrepreneur
to follow in engaging in a market research study.
4 To define the steps in preparing the marketing plan.
5 To explain the marketing system and its key components.
6 To illustrate different creative strategies that may be used to differentiate
or position the new venture's products or services.
Entrepreneurship, Eighth Edition 233
OPENING PROFILE
WARREN G. JACKSON
Some experts argue that organizing and launching a business is the easiest part of
getting started, while sustaining the business is the most difficult and challenging part.
As we've seen in earlier chapters, businesses fail at an alarming rate, yet too often we
blame lack of finances or poor management for the demise . A closer look often reveals
that the real problems re late to marketing issues such as
identifying the customer, defining the right product or
service to meet customer needs, pricing, distribution, and
promotion.
As technology continues to change, providing easier access to extended interna-
tional markets, it is significantly more important that today's entrepreneur become
more focused on developing a comp rehensive and detailed marketing plan. Markets
are much more dynamic than ever before, making it necessary to anticipate changes in
consumer needs and make the necessary changes in marketing actions. Planning, as
discussed in Chapter 7, spans a wide range of activities and is intended to formally de-
tail the business activities, strategies, responsibilities, budgets, and controls to meet
specific, designated goals. The marketing plan is a tool that can assist the entrepreneur
in monitoring critical short-term goals and objectives and marketing strategies, as well
as a tool that can alert the entrepreneur to make necessary changes in those strategies
to avoid long-term failure.
One of the most important marketing challenges facing the entrepreneur is to effec-
tively position the venture's products or services in a highly competitive envi ronment.
Most markets already contain major players that may dominate the market and have
significant resources to defend against any new venture. However, within many of
these large markets there are customers who are not completely satisfied with the
existing offerings. Effective marketing planning that targets and positions the new ven-
ture's products or services can meet the needs of these customers, leading to opportu-
nity and long-term success. Such an approach was taken by Circulation Expertf, Ltd.
This family-run company is a wholly black-owned public relations, advertising, mar-
keting, and consulting firm. It officially began in 1968 as the brainstorm of Warren
G. Jackson, who recognized that major newspapers were not effectively reaching the
African American community.
223
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224 PART 3 FROMTHEOPPORTUNITYTOTHEBUSINESSPLAN
Warren Jackson entered the newspaper business at The New York Times in 1952,
where he eventually became an assistant manager in the circulation department. Later
working for the Amsterdam News, he was asked by Time, Inc., to assist that firm in the
circulation and distribution of a new general market daily afternoon publication.
Although it was never published, Warren realized that his newspaper knowledge and
expertise could be beneficial to media and major corporations all across the country.
With this knowledge and a $12,500 contract from Tuesday magazine, he then started
Circulation Expert! out of his home. Within a year of this beginning, Expertl's contract
volume reached $200,000, leading Warren to move the business out of his home to a
new small office in Hartsdale, New York. Although he was not armed with a formal
marketing plan, Warren's understanding and recognition of the unmet needs of a sig-
nificant and growing consumer target market led Expert! to become the largest and
most prominent minority-owned public relations agency in the United States.
This successful company is unique-not only in the growth it has experienced over the
years but also because the firm has remained a family-owned organization involving
Warren's wife, Tena, who came on as CFO in 1972, and their three children, Ten ley-Ann,
Terrance, and Garrison. Warren and Ten a have since given up the reins of the day-to-day
activities, with Garrison now assuming the position of president and CEO.
Over the years the company has added an advertising division (1978) and a Hispanic
division (1988). Both new divisions have allowed the company to offer one-stop
shopping to clients looking for African American and Hispanic marketing. This effort
has provided opportunities to add major clients to an already noteworthy list. The
company has serviced many major Fortune 500 clients such as JPMorgan Chase, Colgate-
Palmolive, IBM, Miller Brewing, Seven-Up, Kraft, General Motors, Reebok, Sears, Ryder
Systems, Unilever, and General Mills, to name a few. Billings have also grown, from
around $1 to $2 million in the early years to $20 million in more recent years. The com-
pany has positioned itself well to withstand the current economic downturn. Anticipat-
ing minimal growth in 2009 from large multinational clients, the company has shifted
its primary focus toward midsize companies and well-funded start-ups that can benefit
from Expertf's marketing and multicultural experience. The agency will continue to
manage several company-owned initiatives launched in 2006 as well.
The Jacksons represent a unique success story dating back to Warren's recognition of a
need that he felt he could meet with a marketing plan. This firm's success is not notable
for its client base alone but also because of the significant amount of charity and philan-
thropic work in which all members of the family are actively engaged. For its success in ·ousmess ana re"tatea p·nnanmroplc endeavors me company "nas "oeen recogn"tzed w"tt"n nu-
merous awards from PRWeek, Black Enterprise magazine, National Association of Market
Developers~ Public Relations Society of America, and Family Digest magazine, in addition
to receiving numerous awards from major corporations and the New York City Depart-
ment of Health. The firm was inducted into the Business Council of Westchester's Cham-
ber of Commerce Hall of Fame in 2006. Under the direction of Garrison and his brother
and sister, and with Warren and Tena always there for support, the firm's outlook is ex-
tremely favorable. Today the company plans and sets clear goals and objectives and con-
tinues to evaluate market opportunities to sustain successful long-term growth. 1
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CHAPTER 8 THE MARKETING PLAN 225
As we can see from the example of Circulation Expertf, many opportunities exist in
a competitive environment. Warren's efforts in creating the venture began with an
understanding and assessment of the needs of a particular segment of the market.
Developing an appropriate strategy to meet those needs includes an understanding
and assessment of the industry, which is where we will begin our discussion in this
chapter.
INDUSTRY ANALYSIS Prior to the preparation of the marketing plan the entrepreneur will need to complete the industry analysis section of the business plan. The primary focus of the industry analysis is to provide sufficient knowledge of the environment (national and local market) that can affect marketing strategy decision making. In Chapter 7 we described this information- seeking process as an upside-down pyramid (see Figure 7.1). It begins with the broadest- based assessment of environmental and industry trends. Then it proceeds to more local market environmental and industry trends, including competition. The entrepreneur should review this section of Chapter 7 to understand what information is included and how it can be obtained.
Secondary sources can provide much of the information needed on each of these issues. Sample sources along with an appropriate example are also identified in Chapter 7. In ad- dition to the secondary sources, the entrepreneur may also decide that a market research initiative is needed to secure more specific information on such variables as customer needs, competitive strengths and weaknesses, price, promotion, distribution, and product or service benefits. This market research project may add important valuable insights that can assist the entrepreneur in determining the most effective market position, setting mar- ket goals and objectives, and determining what action programs are necessary to meet those goals and objectives. The steps in the market research process and the avenues avail- able to the entrepreneur for obtaining assistance in this process are discussed later in this chapter.
One of the important benefits of the upside-down pyramid approach to industry analysis is that the entrepreneur can begin to understand competitors' strengths and weaknesses, which may provide valuable insight into how to position the products or services of the new venture. Techniques for recording and evaluating this information on the competitive environment are discussed in the following section.
Competitor Analysis The entrepreneur should begin this step by first documenting the current strategy of each primary competitor. This can be organized by using the model in Table 8.1. The informa- tion on competitors can be gathered initially by using as much public information as possi- ble and then complementing this with a marketing research project. Newspaper articles, Web sites, catalogs, promotions, interviews with distributors and customers, and any other marketing strategy or company information available should be reviewed. A simple Google, Yahoo!, or MSN search can link the entrepreneur to many good sources of infor- mation on competitors . A library search using such databases as Business Source Com- plete, LexisNexis, Factiva, or Hoover 's can also provide access to any newsworthy articles on specific competitors. These articles should be scanned for information on competitor
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226 PART 3 FROM THE OPPORTUNilY TO THE BUSINESS PLAN
TABLE 8.1 An Assessment of Competitor Marketing Strategies and Strengths and Weaknesses
Competitor A Competitor 8 Competitor C i
Product or service ' strategies I I Pricing
!
strategies
Distribution strateg ies
Promotion strategies
Strengths and weaknesses
--------- - - - -- - -- - -- - -· ---- -- -
strategies and should identify the names of individuals who were interviewed, referenced, or even mentioned in the article. Any of these individuals as well as the author of the arti- cle can then be contacted to obtain further information. All the information can then be summarized in the model provided in Table 8.1. Once the strategy has been summarized, the entrepreneur should begin to identify the strengths and weaknesses of each competitor. as shown in the table.
All the information included in Table 8.1 can then be utilized to formulate the market positioning strategy of the new venture . Will the new venture imitate a particular com- petitor or will it try to satisfy needs in the market that are not being filled by any other company? This analysis will enlighten the entrepreneur and provide a solid basis for any marketing decision making discussed in the marketing plan. If a more formal data collec- tion process is being considered, the following paragraphs will help explain the steps in gathering primary data as well as some of the secondary sources that can provide data to the entrepreneur.
MARKETING RESEARCH FOR THE NEW VENTURE Information for developing the marketing plan may necessitate conducting some market- ing research. Marketing research involves the gathering of data to determine such informa- tion as who will buy the product or service, what is the size of the potential market, what price should be charged, what is the most appropriate distribution channel, and what is the most effective promotion strategy to inform and reach potential customers. Since market- ing research costs vary significantly, the entrepreneur will need to assess available resources and the information needed. There are also some research techniques that are not costly and can provide, at least initially, significant evidence to support the market potential for the new venture. One of these techniques is the focus group, which is discussed later in this section.
Marketing research may be conducted by the entrepreneur or by an external supplier or consultant. There are also opportunities for entrepreneurs to contact their local colleges or universities to identify faculty who teach marketing and are willing to have external clients for student research projects. Suggestions on how to conduct market research are discussed next.
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CHAPTER 8 THE MARKETING PLAN 227
Market research begins with a definition of objectives or purpose. This is often the most difficult step since many entrepreneurs lack knowledge or experience in marketing and of- ten don't even know what they want to accomplish from a research study. This, however, is the very reason why marketing research can be so meaningful to the entrepreneur.2
Step One: Defining the Purpose or Objectives The most effective way to begin is for the entrepreneur to sit down and make a list of the information that will be needed to prepare the marketing plan. For example, the entrepre- neur may think there is a market for his or her product but not be sure who the customers will be or even whether the product is appropriate in its present form. Thus, one objective would be to ask people what they think of the product or service and whether they would buy it, and to collect some background demographics and attitudes of these individuals. This would satisfy the objective or problem that the entrepreneur defined earlier. Other objectives may be to determine the following:
• How much would potential customers be willing to pay for the product or service?
• Where would potential customers prefer to purchase the product or service?
• Where would the customer expect to hear about or leam about such a product or service?
Step Two: Gathering Data from Secondary Sources Secondary sources, discussed earlier in this chapter and in Chapter 7, offer a means of gathering information for the industry analysis section of the business plan. There are many other market research secondary sources that may be used to address the specific objectives of the project identified in step one. As mentioned, trade magazines, newspaper articles, libraries, government agencies, and the Internet can provide much information on the industry market and competitors. The Internet can even be used to gather informal primary data through chat groups.
Commercial data may also be available, but the cost may be prohibitive to the entre- preneur. However, business libraries may subscribe to some of these commercial services such as Nielsen Indexes, Audits and Surveys' National Market Indexes, and Information Resources, Inc.
Before considering either primary sources or commercial sources of information, the entrepreneur should exhaust all free secondary sources . At the federal level, the U.S Cen- sus Bureau publishes a wide range of census reports, as does the Department of Com- merce. Other excellent sources at the state and local levels are the State Department of Commerce, chambers of commerce, local banks, state departments of labor and industry, and local media. A comprehensive list of Web sites (some are fee based and others are free) as well as a number of excellent databases can be found in Table 8.2. Some of the fee -based sources may actually be accessible through a local university or community library. In addition to all the sources of data described in Table 8.2, the entrepreneur should also review any possible sources of research data at the Small Business Admin- istration Web site (www.sba.gov).
The most important purpose of reviewing secondary sources is to obtain information that will assist the entrepreneur in making the best decisions regarding the marketing of a product or service. Improvements in information technology today make this a very effec- tive source in gathering information on customers, competitors, and market trends. Com- pletion of this task will also determine if more data are needed, in which case a primary data gathering will then need to be planned.
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228 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
TABLE 8.2 Sources of Secondary Market Research Data
Commercial Sources
Each of these sources provides a wide range of research support and data on industries, consumer behavior, products, and technology. Some of these firms publish reports that may be accessible at a university library or online. The fees range from free to very expensive, but many of these are worth a look.
The Nielsen Company (www.nielsen.com) Audits and Surveys (www.gfkauditsandsurveys.com)
Hoover's (www.hoovers.com)
IRI (www.us.infores.com)
TableBase (www.gale.cengage.com)
iMarketlnc (www.imarketinc.com)
IDC (www.idc.com)
Harris Poll (www.harrispollonline.com)
Web-Related DemographidConsumer Research Information
These sites are typically free online or accessible at a local university library.
American Consumer Satisfaction (www.bus.mich.edu/research). Maintained and produced by the University of Michigan, it provides an index of satisfaction toward a wide range of products and services.
Bureau of Labor Statistics (www.stats.bls.gov). Provides information on consumer buying habits related to different consumer and household characteristics.
Click.Z (www.clickz.com/stats). Provides news-related statistical information on digital marketing issues such as advertising and consumer behavior.
Statistical Abstracts of the United States (www.census.gov/compendia/statabl). Guide to summary statistics on a wide range of social, political, and economic variables. Available on state and county levels.
U.S. Census Bureau (www.census.gov). Contains demographic data in tables from the U.S. Census Bureau.
Free Internet Marketing Resources
Marketing for Success (www.marketingforsuccess.com/free-stuff.html). This site provides articles, data on how much to spend on marketing, audio answers, profit calculators, networking guide, and advertising analysis, as well as a free newsletter.
Free Demographics (www.freedemographics.com). This site allows you to analyze and compare any demographic variable by geographic area using census data.
Info Trends (www.infotrends.com/freedemo.html). Allows you to search one year of market data free. Provides data on sales, shipments, market share, and other important market statistics on the information technology industry.
MarketingSherpa (www.marketingsherpa.com). Publishes many free reports with tips, benchmark guides, and marketing ideas. Provides advice on how to improve any fee-related searches.
Other Library Databases
Bloomberg. Provides real-time integrated market data and news for all market sectors.
Business Source Complete. Contains more than 3,000 full-text articles covering a wide range of topics in economics, finance, accounting, marketing, and general management.
Forrester. In-depth marketing research reports in emerging technologies and their impact on business.
LexisNexis. Covers a wide range of industry news topics such as market trends, finance, technology, accounting, tax information, and law reviews.
Mediamark Research (MRI). Published survey of product usage and media exposure of all persons 18 years and older in a wide range of markets.
Mintel Reports. Provides market research reports on U.S. and European marketplace on such sectors as consumer goods, travel, tourism, finance, Internet, retail, and food and drink. The focus is on market size and trends in these sectors.
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AS SEEN IN BUSINESSWEEK
HOW TO EXPAND YOUR CUSTOMER BASE
Q: I've been hired by a small company to sell low- cost, lightweight stainless steel tubing and to license its proprietary technology. We have been under ex- clusive contract with Ford Motor, but that contract expired in 2009. We need additional sales reps that are very well connected with buyers. How would I find them, and what else can I do to increase our cor- porate profile?-D.G., Escondido, Calif.
A: Small companies that rely on long-term, exclusive contracts often find themselves in difficult straits when those contracts expire. They can have the best products and the most innovative technology, but without a coherent marketing strategy, sales infrastructure, and customer relationships, they won't succeed.
Before you hire additional sales staff, build a brief but concise go-to-market strategy, says Joanne Black, a speaker, sales trainer, and founder of NoMoreCold- Calling. While automakers struggle, for instance, can you find applications for your products and technol- ogy in other markets? Should you think about start- ing a government division that supplies federal or state agencies with stainless steel tubing? Evaluate your technology's bottom-line value and find a way to demonstrate it to customers.
Next, redefine the profile of your ideal customer and identify half a dozen new industry segments. Rather than bringing in commission-based sales reps who don't know your product or how best to sell it, "your money will be better spent hiring someone who does strategic planning or marketing plans and can help you devise a strategy and implement it," she says.
Barry Trailer, founder of CSO Insights, a research f irm that studies sales effectiveness, agrees. "The notion of investing in infrastructure in sales and
marketing is not what first comes to mind for small companies, but it is one of the first things they need to address," he says.
Make sure anyone you hire is tech-savvy, so they can take advantage of software that has made cus- tomer relations and sales management easier and more affordable for small companies. "Bring automa- tion into your business and start leveraging technol- ogy" by using software that is sold as a service and can help you educate, train, and manage your sales team, says Trailer. "The bad news is that in a crowded marketplace you must market even the most incredi- ble technology-but the good news is that small companies can compete on the Internet with much larger players."
Once you've defined your target customers and new markets, you'll know whether you can handle sales in-house, or whether you should expand your sales team with independent reps. You can find them through associations such as the Manufacturers' Agents National Association and Web sites such as RepHunter.net.*
After reading the above article how would you respond to the following questions?
1. Once you have developed the marketing strategy, are you better off hiring your own sales staff or using independent reps or both?
2. What if your company has both exclusive con- tracts and open contracts. Do you still need to develop a marketing strategy first?
*Source: Reprinted from August 28,2009 issue ofBusinessWeek by special permission, copyright © 2009 by The McGraw-Hill Companies, Inc., "How to Expand Your Customer Base." by Karen E. Klein, www.businessweek.com.
Step Three: Gathering Information from Primary Sources Information that is new is primary data. Gathering primary data involves a data col- lection procedure-such as observation, networking, interviewing, focus groups, or experimentation-and usually a data collection instrument, such as a questionnaire.
Observation is the simplest approach. The entrepreneur might observe potential cus- tomers and record some aspect of their buying behavior. Networking, which is more of an informal method to gather primary data from experts in the field, can also be a valu- able low-cost method to learn about the marketplace. One study of new ventures found that
229
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230 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
the most successful ventures (based on growth rate) were focused on information about competitors, the customer, and the industry, using networking, trade associations, and re- cent publications. Less successful ventures were more focused on gathering information on general economic and demographic trends and hence had less of a sense of what was happening in their specific target market. 3
Interviewing or surveying is the most common approach used to gather market informa- tion. It is more expensive than observation but is more likely to generate more meaningful information. Interviews may be conducted in person, by telephone, through the mail, or on- line, an approach growing in popularity, particularly for firms with an existing customer base. Each of these methods offers advantages and disadvantages to the entrepreneur and should be evaluated accordingly. 4 Table 8.3 provides comparisons of each of these three methods of data collection.
The questionnaire, or data collection instrument, used by the entrepreneur should include questions specifically designed to fulfill one or more of the objectives the entrepre- neur listed earlier. Questions should be designed so they are clear and concise, do not bias the respondent, and are easy to answer. Table 8.4 illustrates a sample questionnaire employed by an entrepreneur trying to assess the need for a personal errand service, such as the venture Gopher It, whose business plan is used as an example in Chapter 7. The questions are designed to satisfy the objectives of the entrepreneur, which are to ascertain the need,
TABLE 8.3 A Comparison of Survey Methods
Characteristics of Methods
Method Costs Flexibility Response Rate Speed Depth
Telephone Can be Some flexibility; Good response Fastest method Least detailed inexpensive, possible to rate possible of obtaining because of 8- to depending on clarify or explain (possible 80%) information. Can 10-minute time telephone questions. depending on contact many limitation. distance and not-at-homes or respondents in a length of refusals. short period. interview.
Mail Can be No flexibility Poorest response Slowest method Some depth inexpensive, since rate since because of time possible since depending on questionnaire respondent has required t o mail respondent number of units is self- choice of and wait for completes mailed and administered. whether to respondents to questionnaire at weight. Instrument complete complete and his or her
needs to be self- questionnaire. return leisure. explanatory. questionnaire.
Personal Most expensive Most flexible of The most Somewhat slow Most detailed technique. all methods effective because of dead because of open- Requires face-to- because of face - response rate time needed for ended questions. face contact. to-face contact. because of face- travel.
to-face contact.
Internet Inexpensive. No flexibility Good response Very fast Some depth since self- rate with method since possible since administered. incentives, but questionnaire respondent
still relatively is sent completes new method. electronically. questionnaire
at his or her leisure.
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CHAPTER 8 THE MARKETING PLAN 231
TABLE 8.4 Sample Questionnaire for Personal Errand Service
1. Of the following, please check the three most frequent errands that you are likely to carry out during the workweek. __ Dry cleaners . Post office __ Drugstore Bank __ Shopping for clothing items __ Shopping for nonclothing and nongrocery items __ Buying a gift __ Automotive service or repair
Other Other ____ _ Please specify Please specify
2. Of the following, please indicate which items you would be willing to pay for someone to carry out for you . __ Dry cleaners Post office __ Drugstore Bank __ Shopping for clothing items __ Shopping for nonclothing and nongrocery items __ Buying a gift __ Automotive service or repair
Other Other ____ _ Please specify PI ease specify
3. What do you consider the two most important reasons for having someone else complete an errand? (Check only two.) __ Waiting in lines
Inconvenient location __ Imposes on my relaxation time
Difficult work schedule Traffic Other ____ _
Please specify Other ____ _
Please specify
4. If an errand service was conveniently available to you, how much would you be willing to pay for a standard errand such as delivering or picking up dry cleaning, going to the post office, or picking up a prescription? -- $3.00 -- $4.00 -- $5.00 --$6.00 -- $7.00 -- $8.00 __ $9.00 __ $10.00 __ More than $10.00
5. Please indicate by rank ordering (1 being highest rank, 2 being second highest rank, and so on) your preference for t he most convenient location for a personal errand service.
__ In my building __ Near my office
Near the train station __ Prefer to have item(s) delivered to my office
~ The following information is needed for categorizing the results of the survey. Please check the appropriate box. Sex: Male Female Marital/household status: Bachelor
Age: Under 25 25-34 35-44 45-54 55 and over
__ Single parent __ Married, both spouses working __ Married, one spouse working
Household income: __ Under $40,000
__ $40,000-$54,000
__ $55,000-$69,000
__ $70,000-$84,000
__ $85,000-$99,000
__ $100,000 and above
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232 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
location, and determination of the most important services to offer and price. Support in the design of questionnaires can often be attained through small-business development centers, members of the Service Corps of Retired Executives (SCORE), or students in marketing research classes at a local college or university. Since the instrument is important in the re- search process, it is recommended that entrepreneurs seek assistance if they have no expe- rience in designing questionnaires .
Focus groups are a more informal method for gathering in-depth information. A focus group is a sample of 10 to 12 potential customers who are invited to participate in a discus - sion relating to the entrepreneur's research objectives. The focus group discusses issues in an informal, open format, enabling the entrepreneur to ascertain certain information.
For example, two entrepreneurs were considering a chain of hair salons that would spe- cialize in hair styling and hair care services for African Americans. To understand the hair care needs and most effective marketing strategy for this market, focus groups of a cross section of African American women were organized. The focus groups were designed to ascertain what services should be offered, the demand for these services, pricing strategy, and the most effective advertising/promotion strategy. The information gathered was then used in the preparation of the marketing plan.
Someone other than the entrepreneur should lead the focus groups. Often this is a good project for students at a college or university in a marketing research class.
Step Four: Analyzing and Interpreting the Results Depending on the size of the sample, the entrepreneur can hand-tabulate the results or en- ter them on a computer. In either case, the results should be evaluated and interpreted in response to the research objectives that were specified in the first step of the research process. Often, summarizing the answers to questions will give some preliminary insights. Then data can be cross-tabulated to provide more focused results. For example, the entre- preneur may want to compare the results to questions by different age groups, sex, occupation, location, and so on. Continuing this fine-tuning can provide valuable insights, particularly regarding the segmentation of the market, which is discussed later in this chapter.
UNDERSTANDING THE MARKETING PLAN Once the entrepreneur has gathered all the necessary information, he or she can sit down to prepare the marketing plan. The marketing plan represents a significant element in the business plan for a new venture. It serves a number of important functions or purposes. Primarily the marketing plan establishes how the entrepreneur will effectively compete and operate in the marketplace and thus meet the business goals and objectives of the new venture. Once the strategies of how the business will operate have been established, the entrepreneur can assign costs to these strategies, which then serves the important pur- pose of establishing budgets and making financial projections. The marketing plan, like any other type of plan, may be compared to a road map used to guide a traveler. It is designed to provide answers to three basic questions: 5
1. Where have we been? When used as a stand-alone document (operational plan), this would imply some background on the company, its strengths and weaknesses, some background on the competition, and a discussion of the opportunities and threats in the marketplace. When the marketing plan is integrated as part of the business plan, this segment would focus on some history of the marketplace, marketing strengths and weaknesses of the firm, and market opportunities and threats .
TABLE 8.5 Outline for a Marketing Plan
Situation analysis
Background of venture
Strengths and weaknesses of venture
Market opportunities and threats
Competitor analysis
Marketing objectives and goals
Marketing strategy and action programs
Budgets
Contro ls
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Entrepreneurship, Eighth Edition I 243 ----·---- ---- ------ -- ---+------
CHAPTER 8 THE MARKETING PLAN 233
2. Where do we want to go (in the short term)? This question primarily addresses the marketing objectives and goals of the new venture in the next 12 months. In the initial business plan, the objectives and goals often go beyond the first year because of the need to project profits and cash needs for the first three years.
3. How do we get there? This question discusses the specific marketing strategy that will be implemented, when it will occur, and who will be responsible for the monitoring of activities. The answers to these questions are generally determined from the marketing research carried out before the planning process is begun. Budgets will also be deter- mined and used in the income and cash flow projections.
Management should understand that the marketing plan is a guide for implementing marketing decision making and not a generalized, superficial document. The mere or- ganization of the thinking process involved in preparing a marketing plan can be help- ful to the entrepreneur because to develop the plan, it is necessary to formally document and describe as many marketing details as possible that will be part of the decision process during the next year. This process will enable the entrepreneur not only to understand and recognize the critical issues but also to be prepared in the event that any change in the environment occurs.
Each year the entrepreneur should prepare an annual marketing plan before any decisions are made regarding production or manufacturing, personnel changes, or financial resources needed. This annual plan becomes the basis for planning other aspects of the business and for developing budgets for the year. Table 8.5 provides a suggested outline for the marketing plan. Variations of this outline will depend on the market and nature of the product or service, as well as the general company mission. The remainder of this chapter focuses on the short- term aspects of the marketing plan, while not ignoring the fact that the entrepreneur will also need to provide market projections for years 2 and 3 as part of the business plan.
CHARACTERISTICS OF A MARKETING PLAN The marketing plan should be designed to meet certain criteria. Some important character- istics that must be incorporated in an effective marketing plan are as follows:
• It should provide a strategy for accomplishing the company mission or goal.
• It should be based on facts and valid assumptions. Some of the facts needed are illustrated in Table 8.6. It must provide for the use of existing resources.
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234 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
marketing plan Written
statement of marketing
objectives, strategies, and
activities to be followed
in business plan
marketing system
Interacting internal and
external factors that affect
venture 's ability to provide
goods and services to
meet customer needs
TABLE 8.6 Facts Needed for Market Planning
• Who are the users, where are they located, how much do they buy, from whom do they buy, and why?
• How have promotion and advertising been employed and which approach has been most effective?
• What are the pricing changes in the market, who has initiated these changes, and why?
• What are the market's attitudes concerning competitive products?
• What channels of distribution supply consumers, and how do they function?
• Who are the competitors, where are they located, and what advantages/disadvantages do they have?
• What marketing techniques are used by the most successful competitors? By the least successful?
• What are the overall objectives of the company for the next year and five years hence?
• What are the company's strengths? Weaknesses?
• What are one's production capabilities by product?
Allocation of all equipment, financial resources, and human resources must be described.
• An appropriate organization must be described to implement the marketing plan.
• It should provide for continuity so that each annual marketing plan can build on it, successfully meeting longer-term goals and objectives.
• It should be simple and short. A voluminous plan will be placed in a desk drawer and likely never used. However, the plan should not be so short that details on how to accomplish a goal are excluded.
• The success of the plan may depend on its flexibility. Changes, if necessary, should be incorporated by including what-if scenarios and appropriate responding strategies.
• It should specify performance criteria that will be monitored and controlled. For example, the entrepreneur may establish an annual performance criterion of 10 percent of market share in a designated geographic area. To attain this goal, certain expectations should be made at given time periods (e.g., at the end of three months we should have a 5 percent share of market). If not attained, then new strategy or performance standards may be established.
It is clear from the preceding discussion that the market plan is not intended to be writ- ten and then put aside. It is intended to be a valuable document that is referred to often and a guideline for the entrepreneur during the next time period.
Since the term marketing plan denotes the significance of marketing, it is important to understand the marketing system. The marketing system identifies the major interacting components, both internal and external to the firm, that enable the firm to successfully pro- vide products and/or services to the marketplace. Figure 8.1 provides a summary of the components that constitute the marketing system. 6
As can be seen from Figure 8.1, the environment (external and internal) plays a very important role in developing the market plan. These factors should be identified and discussed in the industry analysis section of the business plan discussed earlier in this
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CHAPTER 8 THE MARKETING PLAN 235
FIGURE 8.1 The Marketing System
External environment
Economy Culture Feedback Technology 1-
Demand Legal considerations Raw materials Competition
Marketing-mix decisions
Market- Marketing strategies Purchase decisions Entrepreneur 4 planning r- directed to ~---~ of customers I-decisions customers
Internal environment
Financial resources Suppliers
- Goals and objectives Management team
chapter. It should also be noted that these factors are typically uncontrollable but need to be recognized as part of the marketing plan.
In addition to the external environmental factors, there are internal environmental fac- tors which, although more controllable by the entrepreneur, can also affect the preparation of the marketing plan and implementation of an effective marketing strategy. Some of the major internal variables are as follows:
• Financial resources. The financial plan, discussed in Chapter 10, should outline the financial needs for the new venture. Any marketing plan or strategy should consider the availability of financial resources as well as the amount of funds needed to meet the goals and objectives stated in the plan.
• Management team. It is extremely important in any organization to make appropriate assignments of responsibility for the implementation of the marketing plan. In some cases the availability of a certain expertise may be uncontrollable (e.g., a shortage of certain types of technical managers). In any event, the entrepreneur must build an effective management team and assign the responsibilities to implement the marketing plan.
• Suppliers. The suppliers used are generally based on a number of factors such as price, delivery time, quality, and management assistance. In some cases, where raw materials are scarce or there are only a few suppliers of a particular raw material or part, the entrepreneur has little control over the decision. Since the price of supplies, delivery time, and so on, are likely to impact many marketing decisions, it is important to incorporate these factors into the marketing plan.
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$ ETHICS
DEVIL'S ADVOCATE
Do your sales reps know how far is too far when it comes to landing that sale? Ethics in sales may not be the quickest route to success-cutting corners is al- most always a more expeditious, if short-lived, route to riches. But, in addition to the morality of adhering to ethical business practices, entrepreneurs know that selling with a conscience makes good balance- sheet sense over time. Here are a few reasons to en- courage your sales force to behave honorably in a frequently shameful world:
• Reputation rules. Every business owner under- stands that an impaired reputation is death to trade. Selling ethically translates into treating customers, suppliers, and employees with integrity.
• Reps are your brand's emissaries. If a salesperson crosses the ethical line-whether by lowballing a price or by making unrealizable promises-the client will not trust your product or service in the future.
• Cynicism is nipped in the bud. Having been burned by companies ranging from telecommuni- cations to financial services, consumers are warier than ever. Working with clients in an aboveboard way helps you surpass less trustworthy competi- tors and make your company a safe place to do business.
• Repeat customers are a bargain. Smart entrepre- neurs know that honorable and ethical business practices not only boost your reputation, but also act as affordable advertising vehicles.
• A culture that rewards doing the right thing is good for business. Dell Computer, for instance, encourages its employees to report integrity is- sues. It thus sets high standards for employee conduct and gives employees a forum for report- ing unethical behavior.
• In establishing your ethics parameters, be clear about which behaviors are acceptable and which cross the line, and then hold your employees ac- countable . There will be times when an employee will need to be disciplined or even fired.
• You must practice what you preach. Keep tabs on employees by investigating credible ethics viola- tions claims from co-workers and customers. The problem may be easily corrected by a sit-down with the employee and by taking time to reiter- ate company ethics policies.
By requiring your reps to sell with class, you'll prove to your staff you do more than just lip-sync empty dogmas about values.
Source: Adapted from Kimberly L. McCall, "Devil's Advocate," Entrepreneur magazine (May 3, 2003), p. 75.
• Company mission. As indicated in Chapter 7, every new venture should define the nature of its business. This statement helps to define the company's mission and basically describes the nature of the business and what the entrepreneur hopes to accomplish with that business. This mission statement or business definition will guide the firm through long-term decision making.
marketing mix
Combination of product,
price, promotion, and
distribution and other
marketing activities
needed to meet marketing
objectives
236
THE MARKETING MIX The preceding environmental variables will provide much important information in deciding what will be the most effective marketing strategy to be outlined in the marketing plan. The actual short-term marketing decisions in the marketing plan will consist of four important marketing variables: product or service, pricing, distribution, and promotion. These four factors are referred to as the marketing mix. Each variable will be described in detail in the strategy or action plan section of the marketing plan discussed later in this chapter. Although flexibility may be an important consideration, the entrepreneur needs a strong
situation analysis
Describes past and present
business achievements of
new venture
.:uget market Specific
gro up of potential
customers toward
which venture aims its
marketing plan
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CHAPTER 8 THE MARKETING PLAN 237
TABLE 8.7 Critical Decisions for Marketing Mix
Marketing Mix Variable Critical Decisions
Product Quality of components or materials, style, features, options, brand name, packaging, sizes, service availability, and warranties
Price Quality image, list price, quantity, discounts, allowances for quick payment, credit terms, and payment period
Channels of distribution Use of wholesalers and/or retailers, type of wholesalers or retailers, how many, length of channel, geographic coverage, inventory, and transportation
Promotion Media alternatives, message, media budget, role of personal selling, sales promotion (displays, coupons, etc.), and media interest in publicity
base to provide direction for the day-to-day marketing decisions. Some of the critical decisions in each area are described in Table 8.7.
STEPS IN PREPARING THE MARKETING PLAN Figure 8.2 illustrates the various stages involved in preparing the marketing plan. Each of these stages, when completed, will provide the necessary information to formally pre- pare the marketing plan. Each of the steps is outlined and discussed, using examples to assist the reader in fully understanding the necessary information and procedure for preparing the marketing plan. 7
Defining the Business Situation
The situation analysis is a review of where we have been, lt responds to the first of the three questions mentioned earlier in this chapter. It also considers many of the factors that were defined in both the environmental analysis section of the business plan (see Chap- ter 7) and the industry analysis section discussed earlier in this chapter.
To fully respond to this question, the entrepreneur should provide a review of past performance of the product and the company. If this is a new venture, the background will be more personal, describing how the product or service was developed and why it was de- veloped (e.g., to satisfy consumer needs) . If the plan is being written after the new venture has started up, it would contain information on present market conditions and performance of the company's goods and services. Any future opportunities or prospects should also be iN ... \.1.*& J.\~ &'lis secti& at are pYa:rr.
The industry and competitive environment has already been discussed in an earlier sec- tion of the business plan. Thus, at this point the entrepreneur should simply review some of the key elements of this section to help provide a context for the marketing segmentation and actions that will be stated in this section of the business plan.
Defining the Target Market: Opportunities and Threats
Either from the industry analysis or from the marketing research done earlier, the entrepre- neur should have a good idea of who the customer or target market will be. Knowledge of the target market provides a basis for determining the appropriate marketing action strategy that will effectively meet its needs. The defined target market will usually represent one or more
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238 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
market segme11tation Process of dividing a
market into definable and
measurable groups for
purposes of targeting
marketing strategy
FIGURE 8.2 Sample Flowchart of a Marketing Plan
Critically examine present and prospective product/ market situation
... Take into account company goals and restraints
.. Set marketing objectives that are specific and measurable
.. Determine marketing strategies and prepare action programs with assigned responsibilities and dates for accomplishment
.. Reevaluate programs against objectives
.. .. Objectives II Objectives I attainable not attainable I
• Draft marketing plan, with steps to monitor progress of programs
... Match feasibility of programs against available resources or restraints
_t _i Feasible II Not feasible
• Submit marketing plan for approval
Source: Adapted from DavidS. Hopkins, The Marketing Plan (New York: The Conference Board, 1981), p. 17.
segments of the entire market. Thus, it is important even before beginning the research to un- derstand what market segmentation is before determining the appropriate target market.
Market segmentation is the process of dividing the market into small homogeneous groups. Market segmentation allows the entrepreneur to more effectively respond to the needs of more homogeneous consumers. Otherwise the entrepreneur would have to iden- tify a product or service that would meet the needs of everyone in the marketplace.
Henry Ford's vision was to manufacture a single product (one color, one style, one size, etc.) for the mass market. His Model T was produced in large numbers on assembly lines, enabling the firm to reduce costs through specialization of labor and materials. Although
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CHAPTER 8 THE MARKETING PLAN 239
his strategy was unique, any successful mass-market strategy employed today would be unlikely.
In 1986, Paul Firestone of Reebok discovered that many consumers who bought running shoes were not athletes . They bought the shoes for comfort and style. Firestone then devel- oped a marketing plan that was targeted directly to this segment.
The process of segmenting and targeting customers by the entrepreneur should proceed as follows: 8
I. Decide what general market or industry you wish to pursue. II. Divide the market into smaller groups based on characteristics of the customer or
buying situations. A. Characteristics of the customet_
1. Geographic (e.g., state, country, city, region) 2. Demographic (e.g., age, sex, occupation, education, income, and race) 3. Psychographic (e.g., personality and lifestyle)
B . Buying situation 1. Desired benefits (e.g. , product features) 2. Usage (e.g., rate of use) 3. Buying conditions (e.g., time available and product purpose) 4 . Awareness of buying intention (e.g., familiarity of product and willingness
to buy) III. Select segment or segments to target. IV. Develop a marketing plan integrating product, price, distribution, and promotion.
Let's assume that an entrepreneur is considering offering an after-school student shuttle service in a local community in the suburbs of Boston. The service will be marketed to households that have high income, both spouses working (most likely professionals), and young children typically between 10 and 15 years old. The shuttle service is designed to taxi children (10 to 15 years old) using a minivan or similar vehicle to medical or other related appointments and after-school activities. These activities would be non-school-related activities since schools would most likely offer bus service for their students.
The first decision to be made,. >~.ce we_kww .tbe .t.2rg.e.t .marxe.t, is .to ~*~'"-WJ' .::a._rxJ,'dcrc+e communities that would match the user profile. Town census research and any other available secondary sources are a logical starting place and will reveal demographic data on income, ages of children, and employment. Once this step is complete and a few towns have been identified, the entrepreneur can then conduct marketing research in the identified towns that seem to match the target market profile. This would help the entrepreneur understand the needs and buying intentions of any potential target market. The analysis from this research would then assist the entrepreneur in selecting the community in which to launch the service.
The buying situation is dependent on the venture ' s establishing credibility in the com- munity. Even if specific households can be targeted, the marketing strategy (particularly sales strategy) will need to concentrate on first establishing credibility and community trust. This can be accomplished in a number of ways but will likely begin with an effort to gain the support of the key townspeople, such as school administrators, PTA members , or other local agencies. In addition, marketing actions will need to focus on getting the target market's attention and creating an awareness of the benefits that this service can provide. For example, the venture might choose to sponsor school events and activities, appoint local respected community members to its board, place advertisements in local newspapers, or send company information through direct mail .
The major issues initially involve careful targeting, using the approach mentioned ear- lier, as well as understanding the needs of this target market. With a clear understanding of
I
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240 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
marketing goals a11d
objectives Statements of level of performance
desired by new venture
marketi11g strategy and actio11 pla11 Specific activities outlined to meet
the venture's business
plan goals and objectives
who the customer is and a combined sales effort and marketing program, the entrepreneur can be more assured of sales growth and increased revenue. A continued presence in the community may also allow the entrepreneur to expand this shuttle service to include other segments of the market, such as senior citizens. Once credibility has been established in one community, it will be easier to expand to other communities .
Considering Strengths and Weaknesses It is important for the entrepreneur to consider strengths and weaknesses in the target mar- ket. For example, to refer back to the student shuttle service venture, its primary strengths in its market are: there is no existing competition, the company has the support of local schools, and its usage base in the selected community is an excellent match for the pro- jected target market. In addition, the experience gained from initiating this service in one community will be a major factor in soliciting new business in other communities.
Weaknesses could relate to the venture's inability to gain complete credibility in the town- given such widespread concern regarding the abduction and molestation of children. Credibility could be easily- and negatively-affected by any bad publicity. Also the success of the venture will depend heavily on the reliability of its drivers, who may not be sensitive to consumer needs. Thus, it will be important to carefully select and train all drivers .
Establishing Goals and Objectives Before any marketing strategy decisions can be outlined, the entrepreneur must establish re- alistic and specific goals and objectives. These marketing goals and objectives respond to the question: "Where do we want to go?" and should specify things such as market share, profits, sales (by territory and region), market penetration, number of distributors, awareness level, new product launching, pricing policy, sales promotion, and advertising support.
For example, the entrepreneur of a new frozen diet product may determine the following objectives for the first year: 10 percent market penetration, 60 percent of market sampled, distribution in 75 percent of the market. All these objectives must be considered reasonable and feasible given the business situation described earlier.
All the preceding goals and objectives are quantifiable and can be measured for control purposes. However, not all goals and objectives must be quantified. It is possible for a firm to establish such goals or objectives as: research customer attitudes toward a product, set up a sales training program, improve packaging, change name of product, or find new dis- tributor. It is a good idea to limit the number of goals or objectives to between six and eight. Too many goals make control and monitoring difficult. Obviously, these goals should rep- resent key areas to ensure marketing success.
Defining Marketing Strategy and Action Programs Once the marketing goals and objectives have been established, the entrepreneur can begin to develop the marketing strategy and action plan to achieve them. These strategy and action decisions respond to the question: "How do we get there?" As indicated earlier, these decisions reflect on the marketing mix variables. Some possible decisions that might be made for each variable are discussed next.
Product or Service This element of the marketing mix indicates a description of the product or service to be marketed in the new venture. This product or service definition may consider more than the physical characteristics. For example, Dell Computer' s
CHAPTER 8 THE MARKETING PLAN 241
product is computers, which is not distinctive from many other existing competitors. What makes the products distinctive is the fact that they are assembled from off-the- shelf components and are marketed with direct-marketing and Internet techniques prom- ising quick delivery and low prices. Dell also provides extensive customer service with e-mail and telephone available to the customer to ask technical or nontechnical ques- tions. Thus, the product is more than its physical components. It involves packaging, the brand name, price, warranty, image, service, delivery time, features, style, and even the Web site that will be seen by most customers. When considering market strategy, the en- trepreneur will need to consider all or some of these issues, keeping in mind the goal of satisfying customer needs.
Pricing Prior to setting the price, the entrepreneur, in the majority of situations, will need to consider three important elements: costs, margins or markups, and competition. There are some exceptions, which are discussed at the end of this section on pricing. Also explained is the interaction of these elements in the pricing process. Appropriate examples involving the use of each element are also discussed in the next few paragraphs.
Costs. One of the important initial considerations in any pricing decision is to ascertain the costs directly related to the product or service. For a manufacturer this would involve determining the material and labor costs inherent in the production of the product. For a nonmanufacturer, such as a clothing retailer, this would involve determining the cost of the goods from the suppliers. For a service venture, such as our student shuttle service, there are no manufacturing costs or costs of goods such as those that exist for a clothing retailer. Instead, the service venture's costs relate entirely to labor and overhead expenses.
Whether a manufacturer, retailer, or service venture, the entrepreneur would need to ascer- tain the approximate costs for overhead (some examples would be utilities, rent, promotion, insurance, and salaries). Let's assume a manufacturer of a special oxygen-based rug cleaner incurs a materials and labor cost of $2.20 per unit (24 ounces). Estimated sales are 500,000 units, with overhead at this level of sales at $1 million or $2.00 per unit. Total costs would add to $4.20, and a unit profit of 30 percent of cost or $1.26 would mean a final price of $5.46.
For a retail example of pricing let's consider a clothing store that sells T-shirts. Let's assume the company buys the T-shirts for $5.00 (cost of goods) from a supplier. Overhead costs are estimated to be $10,000, and the entrepreneur expects to sell5,000 units for a unit overhead cost of $2.00 per shirt. An additional $2.00 is added for profit, resulting in a final price of $9.00.
For our shuttle service example, the entrepreneur estimates that the cost per mile is ap- proximately $6.00. This includes the depreciation of the vehicle, insurance, driver salary, utilities, advertising, and all other operating costs. Each vehicle is expected to travel about 60 miles per day and service about 30 students. Thus total cost per day would be $360, or $12 per student. Adding a profit of $3.00 would set the final price for this service at $15.00 per student or ride.
In each of these examples the entrepreneur may find it necessary to consider the role of competition and markups (discussed later) as well as an overall positioning strategy before finalizing price.
Markups or margins. In many industries, such as jewelry, beauty supplies, furniture, and clothing, the retailers of the products use a standard markup to price goods in their stores. For example, a standard markup for beauty supplies is 100 percent on cost. Thus, if the retailer buys nail polish for $1.50 per unit, the markup would be $1.50 and
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242 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
the final price to the consumer would be $3.00. Given that the retailer maintains costs equivalent to the industry standards, this markup would be expected to cover overhead costs and some profit. Standard markups can be ascertained from trade publications or by asking suppliers . A retailer may look at the $3.00 price and decide that, since competition offers the same product for $2.99, he or she would like to offer the item at $2.89. The lower markup and hence lower profit accepted by the entrepreneur in this case is a strategy used to increase demand in the short term (market penetration strategy) but could influence the competition to also lower its price, thus eventually reducing the profit margins for everyone.
Competition. Often, when products cannot be easily differentiated (see the earlier T-shirt example), the entrepreneur is forced to charge the same price as the competition. For the oxygen-based rug cleaner, the entrepreneur may find it possible to justify a higher price (say $6.50) than the competition's price of $5.75 because the product has unique benefits (oxygen and other ingredients). The clothing retailer may be able to charge more than $9 .00 for the T-shirt if it is unique enough. If competitors' T-shirts are $9.00 but the quality of our clothing retailer's shirts is graphically superior, then a higher than $9.00 price may be charged. Otherwise, if consumers are unable to discern any difference, the price will need to be equivalent to that of the competition. In our student shuttle example, it is more difficult to compare prices with competitors since the competition is more indirect. Here we might compare taxicab prices or bus prices. However, this service is more likely to be considered a convenience by the target market, and as such, price may not be a concern. The target market is also in the upper-income category, and therefore convenience may be more important than the cost of the service.
A higher price may also be supported by market research data. Innovations such as technology products (LCD televisions or interactive games such as those for the Wii) or new drug products may warrant a higher price or skimming strategy for the new venture to recover some of its high development costs. In a nondifferentiated product market (such as clothing or a portable radio), marketing research may reveal that consumers are willing to pay more if you offer service benefits such as free home delivery, guarantees on the life of the item, or free long-term repair. Although these services would increase the costs to the entrepreneur, they would establish a distinctive image for the product in a nondifferentiated product category, allowing a higher price and, potentially, a higher quality image than that of the competition.
Generally, in a nondifferentiated product market there is little room for price variations from the competition. Any attempt to increase profits in this situation would have to come from reduced costs. For those situations where the product or service is unique in the mar- ketplace, the entrepreneur has more flexibility and should have a clear understanding of the inherent costs. The important thing to remember is that there is a total cost and profit mar- gin to get to the final price. Changing one of these items will impact the other two factors in some manner.
Distribution This factor provides utility to the consumer; that is, it makes a product con- venient to purchase when it is needed. This variable must also be consistent with other mar- keting mix variables . Thus, a high-quality product will not only carry a high price but should also be distributed in outlets that have a quality image.
Channel of distribution strategy considerations are summarized in Table 8.8. If the market for a new venture is highly concentrated, such as a major metropolitan area, the entrepreneur may consider direct sales to the customer or to a retailer rather than using a wholesaler. If the
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CHAPTER 8 THE MARKETING PLAN 243
TABLE 8.8 Major Considerations in Channel Selection
Degree of Directness of Channel
• Market conditions-Concerned whether end users are concentrated (direct) or dispersed (indirect) in market.
• Product attributes-Concerned with whether product is large (direct) or small (indirect), bulky (direct), perishable (direct), hazardous (direct), expensive (direct).
• Cost benefits-Considers the cost benefits in selection of channel members; many benefits (indirect) minimal or no benefit (direct).
• Venture attributes-Considers financial strength, size, channel experience, and marketing strategy of venture.
Number of Channel Members
• Intensive-Selection of as many retailers and/or wholesalers as possible.
• Selective-Choose only small number of channel members based on some set of criteria or requirements.
• Exclusive-Select only one wholesaler and/or retailer.
Criteria in Selection of Channel Members
• Reputation
• Services provided
Number of Channels
• One channel for one target market or multiple target markets.
• Multiple channels for one target market or multiple target markets.
market is dispersed across a wide geographic area, the cost of direct sales may be prohibitive and the use of a longer channel with wholesalers and retailers may be necessary.
Attributes of the product also affect the channel decision. If the product is very expen- sive, perishable, or bulky, a more direct channel would make sense because the costs of handling and shipping would drive the costs up to a prohibitive level.
Middlemen such as wholesalers and retailers can add important value to the product. Their costs for providing these benefits are much lower than the costs for a small, single- product start-up because they operate with economies of scale by representing many other businesses. They can provide functions such as storage, delivery, a sales staff, promotion or advertising, and maintenance that would not be feasible for a start-up venture. Middlemen also have important experience in the marketplace that can support and assist the entrepre- neur in his or her marketing strategy.
Environmental issues may also be important in channel strategy. Special considerations and regulations regarding such products as chemicals or food and drug products, to name a few, are too costly for a small start-up to absorb. Competitor strategy is also important to consider since alternative choices may help to differentiate the product. For example, Dell Computer initially chose to use direct mail and the Internet to distribute its products, creat- ing a major differentiation from its direct competitors. Once it became established in the market, it then sought other channels such as electronics retailers.
A new venture may also consider brokers' or manufacturers' representatives to reach re- tailers or end users. Manufacturers' representatives do not take title or physical possession of any products. Their role is to act on behalf of a number of noncompeting companies that will share the cost of their services. In our oxygen-based rug cleaner example, the entrepreneur
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244 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
may consider contracting with manufacturers' representatives that sell commercial products (such as cleaning supplies, furniture, or carpeting) that would add the rug cleaner as a com- plement to their other products. They would be paid a commission only when a product was sold (usually 6 to 8 percent depending on the product). Manufacturers' representatives could also be used to market to the consumer or household market. In this case the entrepreneur may look for those representatives that are presently marketing household cleaners or other similar products to retail outlets. Orders then would be sent directly to the new venture and would be shipped from there to the end user. This saves on the costs of a sales staff, storage, and multiple shipping points. Brokers are similar to manufacturers' representatives and are common in food or dry goods businesses.
In selecting the channel, the entrepreneur should look at all the preceding factors. In some instances it may be necessary to use more than one channel to service customers more efficiently as well as increase sales potential. Clothing retailers such as Sports Au- thority, L. L. Bean, Macy's, Wal-Mart, and Target, to name a few, all sell their products using multiple channels such as retail stores, Web sites, catalogs, and newspapers. Each of these may require a different communications channel to enable the customer to buy the desired products. Channel decisions will also change over time. As the venture grows , the entrepreneur may find that hiring its own sales force is more efficient and is no longer cost prohibitive.
Promotion It is usually necessary for the entrepreneur to inform potential consumers about the product's availability or to educate the consumer, using advertising media such as print, radio, or television. Usually television is too expensive unless the entre- preneur considers cable television a viable outlet. A local service or retail company such as a pet store may find that using community cable stations is the most cost-effective method to reach customers. Larger markets can be reached using the Internet, direct mail, trade magazines, or newspapers. The entrepreneur should carefully evaluate each alternative medium, considering not just costs but the effectiveness of the medium in meeting the market objectives mentioned earlier in the marketing plan. As stated earlier, a Web site may also be valuable to create awareness and to promote the products and services of the new venture.
Sometimes the entrepreneur has to be creative with the existing budget and costs of buy- ing major media space or time.
Tom First is not new to being creative, as he learned as one of the founders of Nantucket Nectars. Tom recently launched a new venture Owater, a nutrient-enhanced water. Not able to compete with larger companies in this market, Tom has chosen to promote his product through an intensive sampling campaign. Owater may do as many as six or seven sam- pling events a day in key markets such as Boston, Chicago, Denver, Los Angeles, New York, and Philadelphia. The ability to focus on specific large markets has enhanced sales at a rate that would have been much more costly using more traditional mass media. 9
Marketing Strategy: Consumer versus Business-to-Busmess Markets Marketing strategy decisions for a consumer product may be very different from the deci- sions for a business-to-business product. In business-to-business markets the entrepreneur sells the product or service to another business that uses the product or service as part of its operations. Dell Computer markets its products to both consumers and businesses. In marketing to consumers, the company uses direct mail and the Internet, and to businesses it uses its own sales force. This sales force calls on businesses with the intent of selling a iarge vofume of PCs or accessories in one traa~actian. The consumer marketing effort,
I Entrepreneurship, Eighth Edition I ----·- ··- -·· --- -~ --- --------·--· ·---r- 255
AS SEEN IN ENTREPRENEUR MAGAZINE
PROVIDE ADVICE TO AN ENTREPRENEUR ABOUT WEB SITES
It's easy to educate prospects about your product or service once they're on your Web site, but how do you get them there? One way is by getting your com- pany's name and URL out on the Web. You can do hat by writing content for online newsletters, trad-
ing links, and posting messages on chat sites. Com- unicating through other Web sites attracts quality
isitors to your site-and it can be done for free. Content may still be king, but it's an expensive
·ngdom to maintain. Many organizations can't af- "ord webmasters whose only job is to develop new s· e content. But because you're an expert in your - eld, many companies will be more than thrilled if
u give them content in exchange for a link to your · e. Your content can be posted on Web sites or sent
in their e-mail. The "publisher" benefits by offer- g relevant information to its site visitors. When you
:?ach these visitors something new, you also create a • soft sell" marketing opportunity. Don't pitch your :; siness. Rather, share some educational information - establish trust and brand awareness.
Just what is "educational information"? It's content at addresses your prospects' problems. For example,
-:: our company sells exercise equipment, you can pro- e tips, case studies, or statistics about fitness. Your
-=aders will want to know how you, the fitness expert, help them achieve their goals. With a simple click
- your URL, prospects can travel to your site and dis- er your company's line of fitness products. Of course, you aren't limited to providing articles
- Neb sites. Try asking for a link to your site or a link ::r e. Just don't put someone else's link on your
- - e page-that encourages people to leave your .e as soon as they arrive! Links from sites related to -~rs provide another benefit: They boost your site's
position in search engines that rank sites according to "link popularity." If you would like feedback in addi- tion to getting free exposure, try hanging out in chat rooms. As a fitness expert, for example, you can ask people what prevents them from exercising consis- tently. Let people know you are doing market re- search. Chat room participants may happily share their thoughts with you online.
Find your target audience by starting with the in- dustry Web sites you frequent. Also, run a keyword query in search engines. Tell Web site managers what your company does and how your information can help their visitors. You may be offered a link or a writing opportunity. In addition, try posting chat room messages that reveal valuable information. You'll be greatly rewarded with free PR opportunities that can lead to immediate and long-term sales.
ADVICE TO AN ENTREPRENEUR An entrepreneur who has a Web site for his business has read the above article and comes to you for advice:
1. Seems like a lot of work in writing articles and spending time in chat rooms . Although it might be a way of getting people to my Web site with only a small expense, do you think that this ap- proach is worth the investment of time?
2. What are the other benefits of this approach over and above simply a cost saving?
3. Are there particular businesses and products more suitable for this approach?
Source: Reprinted with permission of Entrepreneur Media, Inc., "Attention, Please. Yell Out 'Look at Me! ' for Free by Using Other Websites to Your Advantage," by Catherine Seda, March 2003, Entrepreneur magazine: www.entrepreneur.com.
however, does support the business marketing effort since the advertising and promotions will be seen or read by both markets. Consumer markets involve sales to households for personal consumption. Food, beverages, household products, furniture, and computers would be a few examples.
Usually business-to-business marketing strategy involves a more direct channel of distribu- tion because of the volume of each transaction and the need to relate product knowledge to the business buyers. Advertising and promotion for the business-to-business market involve more trade magazine advertising, direct sales, and trade shows. For a start-up venture, attendance at a trade show can be one of the most effective means to reach many potential buyers in one location. At trade shows it is important to distribute material on the venture's products and services and to keep a log of all interested visitors to the trade show booth.
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246 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
Have visitors sign in or leave their business cards. From the log or business cards, a list can then be prepared and used as a prospect list for sales reps . It is also important that, right after the trade show, a follow-up letter be sent to all visitors thanking them for their interest and explaining how they might be contacted.
Overall, the marketing mix for the consumer or business markets is the same. However, the techniques and strategies within the mix of these factors will often vary significantly.
All these marketing mix variables will be described in detail in the marketing strategy or action plan section of the marketing plan. As indicated earlier, it is important that the marketing strategy and action programs be specific and detailed enough to guide the entre- preneur through the next year.
Budgeting the Marketing Strategy Effective planning decisions must also consider the costs involved in the implementation of these decisions. If the entrepreneur has followed the procedure of detailing the strategy and action programs to meet the desired goals and objectives, costs should be reasonably clear. If assumptions are necessary, they should be clearly stated so that anyone else who reviews the written marketing plan (e.g., a venture-capital firm) will understand these implications.
This budgeting of marketing action and strategy decisions will also be useful in preparing the financial plan. Details of how to develop a financial plan are discussed in Chapter 10.
Implementation of the Market Plan The marketing plan is meant to be a commitment by the entrepreneur to a specific strategy. It is not a formality that serves as a superficial document to outside financial supporters or suppliers. It is meant to be a formal vehicle for answering the three questions posed earlier in this chapter and a commitment to make adjustments as needed or dictated by market conditions. Someone in the venture should be assigned the responsibility of coordinating and implementing the plan.
Monitoring the Progress of Marketing Actions Generally, monitoring of the plan involves tracking specific results of the marketing effort. Sales data by product, territory, sales rep, and outlet are a few of the specific results that should be monitored. What is monitored is dependent on the specific goals and objectives outlined earlier in the marketing plan. Any "weak" signals from the monitoring process will provide the entrepreneur with the opportunity to redirect or modify the existing marketing effort to allow the firm to achieve its initial goals and objectives.
In addition to monitoring the progress of the existing plan, the entrepreneur should also be prepared for contingencies. For example, reliance on a single supplier in a geographic area that is vulnerable to hurricanes could be disastrous if that supplier were to be shut down as a result of a hurricane. Adjustments in marketing actions are usually minor if the plan has been effectively developed and implemented. If the entrepreneur is constantly faced with significant changes in the marketing strategy, then it is likely that the plan was not prepared properly. Weaknesses in market planning are usually the result of poor analy- sis of the market and competitive strategy, unrealistic goals and objectives, or poor imple- mentation of the outlined plan actions. There are also acts of God- such as weather or war-that can affect a marketing plan. These are usually difficult to predict but may be considered in a contingency plan.
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IN REVIEW
SUMMARY
CHAPTER 8 THE MARKETING PLAN 247
Before beginning the marketing plan section of the business plan, the entrepreneur should provide a comprehensive review and assessment of the industry and market trends at the national and local levels. In addition, a comprehensive assessment of competitor strategies and their strengths and weaknesses should be documented . From this analysis the entrepreneur can begin to formulate the marketing plan section of the business plan. The marketing plan designates the response to three questions: Where have we been? Where are we going? and How do we get there?
To be able to respond effectively to these questions, it is generally necessary for the entrepreneur to conduct some marketing research . This research may involve second- ary sources or a primary data collection process. Information from the research will be very important in determining the marketing mix factors or the marketing strategy to be implemented in the marketing p lan.
The marketing plan entails a number of major steps. First, it is important to conduct a situation analysis to assess the question, "Where have we been?" Market segments must be defined and opportunities identified. This will he lp the entrepreneur deter- mine a profile of the customer. Goals and objectives must be establ ished. These goals and objectives must be realistic and detailed (quantified if possible). Next, the market- ing strategy and action programs must be defined. Again, these should be detailed so that the entrepreneur clearly understands how the venture is going to get where it wants to go.
The marketing strategy section or action p lan describes how to achieve the goals and objectives already defined. There may be alternative marketing approaches that could be used to achieve these defined goals. The use of creative strategies such as In- ternet marketing may give the entrepreneur a more effective entry into the market.
The action programs should also be assigned to someone to ensure their implemen- tation. If the plan has been detailed, the entrepreneur should be able to assign some costs and budgets for implementing the marketing plan. During the year, the market- ing plan will be monitored to discern the success of the action programs. Any "weak" signals will provide the entrepreneur with the opportunity to modify the plan and/or develop a contingency plan.
Careful scrutiny of the marketing plan can enhance its success. However, many plans fail, not because of poor management or a poor product but because the plan was not specific or had an inadequate situation analysis, unrealistic goals, or did not anticipate competitive moves, product deficiencies, and acts of God.
RESEARCH TASKS
1. Participate in an online focus group. Then conduct research on the advantages and disadvantages of conducting a focus group online versus a "face-to-face" focus group.
2. Choose an industry and then use the library or the Internet to find data from secondary sources that will be highly useful in developing a marketing plan.
3. Find five examples of product advertising (e .g., advertisements cut out of a magazine or recorded on videotape). Bring them to class and be prepared to
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248 PART 3 FROMTHEOPPORTUNITYTOTHEBUSINESSPLAN
explain how they fit in with the rest of the marketing mix and which group of customers is being targeted.
4. Find a marketing strategy that is being used now that you believe will be ineffective. Be prepared to justify your answer.
CLASS DISCUSSION
fljlff 1. What are the three most effective advertisements on television? Why are they
effective? What are the three least effective advertisements on television? Why are they ineffective? Are they really ineffective if you have been able to recall them?
2. Define a customer group and then invent a product and come up with a price, promotion, and distribution strategy. Have some fun in coming up with a particularly creative marketing mix.
3. Segment the class into groups, label those groups, and determine a specific demand that is unique to each group. You may be asked to reveal your market (class) segmentation to the rest of the class, and people will have a chance to respond to your classification.
4. Is market segmentation just a nice way of using "stereotypes" to sell your products? Can people really be classified so easily into groups that share common needs, wants, and demands?
SELECTED READINGS
Baker, Stephen. (February 16, 2009). Will Work for Praise. BusinessWeek, Issue 4119, pp. 46-49 .
This article illustrates how an online social Web site, ThisNext, allows entrepreneurs to build their image and enhance sales through social interaction. Customers log their satisfactions or experience with a product on this platform that is seen by other interested shoppers. The site attracts advertisers and with increased popular- ity provides a means of enhancing the reputation of firms that have satisfied cus- tomers willing to praise their transactions.
Cardamone, Joseph R. (January 26, 2009). Open a New Business Now. Accounting To- day. vol. 23, no. 2, pp. 10-11.
The author offers tips for entrepreneurs who are trying to start a business during an economic crisis. Emphasis is placed on launching businesses with products and services that are needed or a necessity during economic decline. Guerrilla marketing techniques are also mentioned as strategies to keep costs at a minimum.
Cooper, Marjorie J.; Nancy Upton; and Samuel Seaman. (July 2005). Customer Relation- ship Management: A Comparative Analysis of Family and Nonfamily Business Practices. Journal of Small Business Management, vol. 43, no. 3, pp. 242-56.
The importance of customer relationship management implementation among family and nonfamily businesses is analyzed. Results indicate that both types of organiza- tions show similar attitudes toward the implementation of customer relationship management. However, the study found that actual implementation strategies differ significantly between these two types of firms.
Dibb, Sally. (2002). Marketing Planning Best Practice. The Marketing Review, Summer 2002, vol. 2, no. 4, p. 1.
This paper explains the role that marketing planning plays and shows how it is used by organizations. Each stage of the marketing planning process is described in
Entrepreneurship, Eighth Edition 259 -- ---------- - - - - --- -- - ------ - -- ------- - --~--
CHAPTER 8 THE MARKETING PLAN 249
detail, and the role and format of the marketing plan document are explored. The marketing planning process is then illustrated using a detailed case example from the construction equipment industry, and guidance on best marketing planning practice is offered.
Goldsborough, Reid. (November 2008). Social Networks vs. Blogs vs. Discussion Groups. Tech Directions, vol. 68, no . 4, pp . 14-15.
This article presents an excellent explanation of the differences between the three main Internet-based media: social networks, discussion groups, and blogs. These di- alog Internet-based media have become important tools for entrepreneurs.
Gupta, Sumeet; Xu Heng; and Vimal Sahu. (February 2009). Impact of Store Size on Im- pulse Purchase. ICFAI Journal of Marketing Management, vol. 8, no. 1, pp . 7- 22.
This article reports on a study comparing the effect of the size of a store on im - pulse purchases. Since stores spend money on in-store stimuli such as d isplays, price discounts, variety, and other variables, it is significant to understand their implication on impulse buying. Research indicates that the impulse purchase as a ratio of total spending is high for midsized stores when compared to small- and large-sized stores.
Lehmann, Donald R.; and Russell S. Winer. (2008). Analysis for Marketing Planning, 7th ed . (Burr Ridge, IL: McGraw-Hill/Irwin).
This paperback book focuses on the process of developing a marketing plan. In particular, it discusses the analysis of information pertaining to a product or ser- vice's environment, customers, and competitors. The first chapter is particularly relevant to an entrepreneur as it provides a good overview of an operating mar- keting plan.
Lerch, Renata l. (January/February 2009) . International Marketing Planning for Home Bus iness Entrepreneurs. Home Business Magazine, vol. 16, no . 1, pp. 36-39.
In an economic crisis it is very important for the entrepreneur to focus on market planning. The author advises the entrepreneur to deve lop marketing objectives that are examined regularly and to adjust these objectives if necessary. Diversification during economic downturns is usually necessary to maintain some success in inter- national markets.
Pilmar, John. (July 2005). Small Business? Small Budget? How to Measure for Success. Public Relations Tactics, vol. 12, no. 7, p. 23.
This article suggests that public relations is one of the most effective means that small businesses can use to gain a strong foothold in their industry and also become more competitive with much larger firms. It describes the public relations process of research, planning, implementation, and measurement.
Schindehutte, Minet; Michael Morris; and Akin Kocak. (January 2008) . Understanding Market-Driving Behavior: The Role of Entrepreneurship. Journal of Small Business Management, vol. 46, no. 1, pp. 4-26.
Marketing literature has long maintained the importance of market-driven behav- ior. These authors contend that market-driving behavior is distinct from a firm's market orientation and instead is the essence of entrepreneurial action that deter- mines how strategic actions are manifested. An integrative model illustrates the dy- namics of the interface between marketing and entrepreneurship. Two case studies provide good illustrations.
Song, Jaeki; and Fatemeh Mariam Zahedi. (2006). Internet Market Strategies: An- tecedents and Implications. Information & Management, vol. 43, no. 2, pp. 222-38.
In this paper the authors differentiate between the Internet and traditional market channels and define two fundamental strategies for operating on the Internet. They develop a conceptual model for selection of the appropriate channel.
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250 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
END NOTES
Taylor, Steven A.; Stephen Goodwin; and Kevin Celuch. (2005). An Exploratory Investi- gation into the Question of Direct Selling via the Internet in Industrial Equipment Mar- kets. Journal of Business-to-Business Marketing, vol. 12, no. 2, pp. 37-70.
This study seeks to provide exploratory insight into considerations of Internet-based direct marketing strategies aimed at industrial consumers. The research provides managerial and research implications regarding the use of the Internet in industria l markets.
Williams, David . (2001). Writing a Marketing Report. The Marketing Review, vol. 1, pp. 363-72.
This article looks at the process of constructing a basic marketing report, an area where there has hitherto been very little written guidance. Although often taken for granted, constructing the marketing report can consume a substantial amount of the marketer's time and effort.
1. "Making It," Black Enterprise (July 1975), p. 6; Wendy Beech, "Keeping It in the Family," Black Enterprise (November 1998), pp. 98-104: Agency Profile, Circula- tion Expert{, Ltd. (2005), pp. 1-16; and www.experti.com. Discussions with Garrison Jackson, president and CEO, also contributed to this profile .
2. Joseph F. Hair, Jr., Robert P. Bush, and David J. Ortinau, Marketing Research, 4th ed. (Burr Ridge, IL: McGraw-Hill/Irwin, 2009), pp. 42-51.
3. M. P. Peters and C. Brush, "Market Information Scanning Activities and Growth in New Ventures: A Comparison of Service and Manufacturing Businesses," Journal of Business Research (May 1996), pp. 81-89.
4. Hair et al., Marketing Research, pp. 236-66. 5. R. D. Hisrich and M.P. Peters, Marketing Decisions for New and Mature
Products, 2nd ed. (Upper Saddle River, NJ: Prentice-Hall, 1991), pp. 63-78. 6. R. Kerin, S. Hartley, and W. Rudelius, Marketing, 9th ed . (Burr Ridge, IL:
McGraw-Hill/Irwin, 2009), pp. 5-50. 7. D. R. Lehman and R. S. Winer, Analysis for Marketing Planning, 7th ed . (Burr
Ridge, IL: McGraw-Hill/Irwin, 2008), pp. 10-11. 8. Kerin et al., Marketing, pp. 230-42. 9. Gwen Moran, "Try Sampling," Entrepreneur (October 2008), p. 84.
APPENDIX SA: MARKETING PLAN OUTLINES
Exhibit 1. Marketing Plan for a Consumer Products Company.
Exhibit 2. Marketing Plan for a Business-to-Business Company.
Exhibit 3. Marketing Plan for a Service Company.
Entrepreneurship, Eighth Edition
EXHIBIT 1 Marketing Plan for a Consumer Products Company
I. ANALYZE AND DEFINE THE BUSINESS SITUATION-past, present, and future An analysis of where we are, perhaps how we got there. Data and trend lines should go back three to five years. Suggested items to cover: A. The scope of the market (class of trade) B. Sales history by products, by class of trade, by regions C. Market potential, major trends anticipated D. Distribution channels
1. Identification of principal channels (dealer or class of trade), sales history through each type 2. Buying habits and attitudes of these channels 3. Our selling policies and practices
E. The customer or end user 1. Identification of customers making t he buying decision, classified by age, income level, occupation, geographical
location, etc. 2. Customer attitudes on product or services, quality, price, etc. Purchase or use habits that contribute to attitudes 3. Advertising history: expenditures, media and copy strategy, measurements of effectiveness 4. Publicity and other educational influences
F. The product or services: 1. Story of the product line, quality development, delivery and service 2. Comparison with other approaches to serve the customers' needs 3. Product research; product improvements planned
II. IDENTIFY PROBLEMS AND OPPORTUNITIES A. In view of the facts cited in (I) above, what are the major problems that are restricting or impeding our growth? B. What opportunit ies do we have for
-Overcoming the above problems? -Modifying or improving the product line or adding new products? -Serving the needs of more customers in our market or developing new markets? - Improving the efficiency of our operation?
Ill. DEFINE SPECIFIC AND REALISTIC BUSINESS OBJECTIVES A. Assumptions regarding future conditions
-Level of economic activity -Level of industry activity -Changes in customer needs -Changes in distribution channels -Changes beyond our control, increased costs, etc.
B. Primary marketing objectives (the establishment of aim points and goals). Consider where you are going and how you will get there. Objectives are the necessary base of any plan since a plan must have precise direction.
C. Overall strategy for achievement of primary objectives. The division's overall strategy to accomplish its primary objective- sample: shifting of sales emphasis, products, or classes of trade; changes for improvement of sales coverage, etc.
D. Functional (departmental) objectives. (In this section "explode" your primary objectives into subobjectives, or goals, for each department. Show the interrelation vertically, by marketing project. Show time schedule on objectives below.) 1. Advertising and promotion objectives 2. Customer service objectives 3. Product modification objectives 4. New product objectives 5. Expense control objectives 6. Workforce objectives 7. Personnel training objectives 8. Market research objectives
IV. DEFINE MARKETING STRATEGY AND ACTION PROGRAMs-to accomplish the objectives A. Here, detail the action steps, priorities, and schedules relating to each of the functional objectives above. If, for
example, one of your estimates was "an increase in sales of product X from 10,000 to 20,000 units," now is the time to pinpoint specific customers. In order to explain who must do what, and when, you can show the interaction of the departments listed above (Ill-D) and how their objectives serve to meet this increased demand.
B. If one of your objectives was to introduce a new product by "x" date, now show the details and deadlines, production schedule, market introduction plans, advertising and merchandising support, sales and service training needed, etc. Define r esponsibility and dates for each step.
C. Alternatives-In the event of a delay in a project or program, what alternative plans are available? V. CONTROL AND REVIEW PROCEDURES
How will the execution of the plan be monitored? A. What kinds of "feedback" information will be needed? B. When and how will reviews be scheduled (departments, regions, etc.)? C. Date for full-scale review of progress vs. plan.
Source: David S. Hopkins, The Marketing Plan (New York: The Conference Board, 1981). Reprinted with permission of The Conference Board.
251
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252 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN
EXHIBIT 2 Marketing Plan for a Business-to-Business Company
Marketing Plan Outline
For each major product/product category: Time Period-One, Three, and Five-Plus Years
I. MANAGEMENT SUMMARY What is our marketing plan for this product in brief?
This is a one-page summary of the basic factors involving the marketing of the product in the plan period, along with the results expected from implementing the plan. It is intended as a brief guide for management.
II. ECONOMIC OUTLOOK What factors in the overall economy and industry will affect the marketing of the product in the plan period, and how?
This section will contain a summary of the specific economic and industry factors that will affect the marketing of this product during the plan period.
Ill. THE MARKET-qualitative Who or what kinds of market segments constitute the major prospects for this product?
This section will define the qualitative nature of our market segments. It will include definitive descriptions and profiles of major distributors, specifiers, users, and/or consumers of the product.
IV. THE MARKET-quantitative What is the potential market for this product?
This section will apply specific quantitative measures to this product. Here we want to include numbers of potential customers, dollar volume of business, our current share of the market-any specific measures that will outline our total target for the product and where we stand competitively now.
V. TREND ANALYSIS Based on the history of this product, where do we appear to be headed?
This section is a review of the past history of this product. Ideally, we should include annual figures for the last five years showing dollar volume, accounts opened, accounts closed, share of market, and all other applicable historical data.
VI. COMPETITION Who are our competitors for this product, and how do we stand competitively?
This section should define our current competition. It should be a thoughtful analysis outlining who our competitors are, how successful they are, and what actions they might be expected to take regarding this product during the coming year.
VII. PROBLEMS AND OPPORTUNITIES Internally and externally, are there problems inh ibiting the marketing of this product, or are there opportunities we have not taken advantage of?
This section will include a frank commentary on both inhibiting problems and unrealized opportunities. It should include a discussion of the internal and external problems we can control, for example, by changes in policies or operational programs. It should also point to areas of opportunity regarding this product that we are not now exploring.
VIII. OBJECTIVES AND GOALS Where do we want to go with this product?
This section will outline the immediate short- and long-range objectives for this product. Short-range goals should be specific and will apply to next year. Intermediate to long-range goals will necessarily be less specific and should project for the next three to five years and beyond. Objectives shou ld be stated in two forms . (1) Qualitative-reasoning behind the offering of this product and what modifications or other changes we
expect to make. (2) Quantitative-number of accounts, dollar volume, share of market, and profit goals.
IX. ACTION PROGRAMS Given past history, the economy, the market, competition, etc., what must we do to reach the goals we have set for this product or service?
This section will be a description of the specific actions we plan to take during the coming plan period to ensure reaching the objectives we have set for the product in VIII. These would include the full range of factors comprising our marketing mix. The discussion should cover what is to be done, schedules for completion, methods of evaluation, and assignment of accountability for executing the program and measuring results.
Source: DavidS . Hopkins, The Marketing Plan (New York: The Conference Board, 1981). Reprinted with permission of The Conference Board.
II
!
CHAPTER 8 THE MARKETING PLAN 253
EXHIBIT 3 Marketing Plan for a Service Company I !M arketing Plan Outline
N:>r each major bank service:
I. MANAGEMENT SUMMARY What is our marketing plan for this service in brief? This is a one-page summary of the basic factors involving the marketing of the service next year along with the results expected from implementing the plan. It is intended as a brief guide for management.
I' II. ECONOMIC PROJECTIONS What factors in the overall economy will affect the marketing of this service next year, and how?
This section will include a summary of the specific economic factors that will affect the marketing of this service during the coming year. These might include employment, personal income, business expectations, inflationary (or deflationary) pressures, etc.
Ill. THE MARKET-quantitative Who or what kinds of organizations could conceivably be considered prospects for this service?
This section will define the qualitative nature of our market. It will include demographic information, industrial profiles, business profiles, and so on, fo r all people or organizations that could be customers for this service.
N. THE MARKET-quantitative What is the potential market for this service? This section will apply specific quantitative measures to this bank service. Here we want to include numbers of potential customers, dollar volume of business, our curren't 5'nan: l)l "\n<c Wia~'f:.-e\.-<.<;'.'§ ">~~'-~~~'- me.a.'i.lJ.CEl.!i tnat wlll out\ine our "'l.ota\ tar<~e"'l. 1or "'1.\\e -:.et\J\c.e and 'N\\e(e 'Ne -:.tand c.om\)et\t\velv now.
V. TREND ANALYSIS Based on the history of this service, where do we appear to be headed?
This section is a review of the past history of this service. Ideally, we should include quarterly figures for the last five years showing dollar volume, accounts opened, accounts closed, share of market, and all other applicable historical data.
VI. COMPETITION Who are our competitors for this service, and how do we stand competitively?
This section should define our current competition, both bank and nonbank. It should be a thoughtful analysis outlining who our competitors are, how successful they are, why they have (or have not) been successful, and what actions they might be expected to take regarding this service during the coming year.
VII. PROBLEMS AND OPPORTUNITIES Internally and externally, are there problems inh ibiting the marketing of this service, or are there opportunities we have not taken advantage of?
This section will contain a frank commentary on both inhibiting problems and unrealized opportunities. It should include a discussion of the interna l and external problems we can control, for example, changes in policies or operational procedures. It should also point to areas of opportunity regarding this service that we are not now exploiting.
VIII. OBJECTIVES AND GOALS Where do we want to go with this service?
This section will outline the immediate short- and long-range objectives for this service. Short-range goals should be specific and will apply to next year. Long-range goals will necessarily be less specific and should project for the next five years. Objectives should be stated in two forms: (1) Qualitative-reasoning behind the offering of this service and what modifications or other changes we expect
to make. (2) Quantitative-number of accounts, dollar volume, share of market, profit goals.
IX. ACTION PROGRAMS Given past history, the economy, the market, competition, and so on, what must we do to reach the goals we have set for this service?
This section will be a description of the specific actions we plan to take during the coming year to ensure reaching the objectives we have set for the service in VIII. These would include advertising and promotion, direct mail, and brochure development. It would also include programs to be designed and implemented by line officers. The discussion should cover what is to be done, schedules for completion, methods of evaluation, and officers in charge of executing the program and measuring results.
Source: DavidS. Hopkins, The Marketing Plan (New York: The Conference Board, 1981). Reprinted with permission of The Conference Board.
