The Marketing Plan

Market Summary

As the title implies, the market summary summarizes what is known about the market in which a company competes, plans to compete, or both. This summary may be all that is read, so it must be short and concise. The market summary should include a description of the market and its attributes, market needs, market trends, and market growth. See Figure 8.3 “Market Summary”.

Competition

Every marketing plan should include an assessment of the competition: who they are, what they offer, their growth rates (if known), and their market share (if known). Market share is defined as the percentage of total sales volume in a market that is captured by a brand, a product, or a company.“Market Share,” BusinessDictionary.com, accessed December 1, 2011, www.businessdictionary.com/definition/market-share.html. Think of the market as a pie, with each slice being a “share” of that pie. The larger the slice, the larger the percentage of sales volume captured by a brand, a product, or a company. With all this knowledge, a business will be in the best position to differentiate itself in the marketplace. However, while the sales figures of a business are easily accessible, it is not likely that the owner will have either total market sales figures or growth rate, sales figures, and market share information for the competition. This information, if available at all, is usually available from trade associations and market research firms,“Market Share,” QuickMBA, accessed December 1, 2011, www.quickmba.com/marketing/market-share. with the likelihood being even less if the information desired is about other small businesses. Competitor websites and Internet searches may prove helpful, but because most small businesses are privately held, the information available online will be limited. As a result, you will be restricted in the information that you can collect about the competition to things that can easily be observed in person or are available on company websites. Examples include product selection, price points, service quality, and product quality.

Competition should be addressed in terms of being direct or indirect. Direct competition refers to competition from similar businesses or products, whereas indirect competition refers to competition from alternative, substitutable businesses or products. In the case of Sigmund’s Gourmet Pasta, direct competition would come from other restaurants that serve pasta. Indirect competition would come from other types of full-service restaurants, fast food, the freezer- or prepared-foods areas in the grocery store, delis, preparation services that target the home, and even online businesses that sell prepared foods (DineWise). Many if not most small business marketing plans address only direct competition.

Product or Service Offering

The marketing plan must be very clear about the product or the service that is being offered to the marketplace because the product drives the creation of the marketing mix and the marketing strategy. An error in product identification and definition can wreak havoc in the company and in the marketplace because misdirected marketing actions can occur. The responsibility for the product definitions rests squarely with the owner. For example, if a business is a live theater that features very sophisticated plays, would you define the product as entertainment or art? The answer to this question will have major implications for a company’s marketing strategy.

The product or the service offering must also consider a company’s website because a web presence will be an important part of what is offered to customers.

SWOT Analysis

A SWOT analysis combines the key strengths and weaknesses within a company with an assessment of the opportunities and threats that are external to the company. This analysis can provide powerful insights into the potential and critical issues affecting a business.Tim Berry, “How to Perform a SWOT Analysis,” MPlans.com, accessed December 2, 2011, articles.mplans.com/how-to-perform-a-swot-analysis. A strength is an asset or a resource, tangible or intangible, internal to a company that is within its control. What does the company do well? What advantages does the company have over its competition? You should look to identify the positive aspects internal to a business that add value or offer a competitive advantage.“How to Write a Marketing Plan,” Arizona Office of Tourism, accessed December 1, 2011, www.azot.gov/documents/Marketing_Tool_Kit.pdf; Tim Berry, “How to Perform a SWOT Analysis,” MPlans.com, accessed December 2, 2011, articles.mplans.com/how-to-perform-a-swot-analysis. Examples of strengths are the quality of employees, company reputation, available capital and credit, established customers, unique channels of distribution, intellectual property, location, and facilities.

A weakness is a factor internal to a company that may cause it to have a less competitive position in the marketplace. A company can have control over this factor and should look to improve or remove it to successfully accomplish its marketing objectives. Weaknesses detract from the value of a business. Examples of weaknesses are lack of expertise, limited resources, bad location, poor facilities, inferior customer service and customer experience, difficulty in hiring and retaining good people, and weak brand recognition.

An opportunity is an attractive external factor that represents the reason a business exists and prospers. You have no control over opportunities, but you can take advantage of them to benefit the business. Opportunities will come from the market, the environment, or the competition, and they reflect the potential that can be realized through marketing strategies.Tim Berry, “How to Perform a SWOT Analysis,” MPlans.com, accessed December 2, 2011, articles.mplans.com/how-to-perform-a-swot-analysis. Examples of opportunities include market growth, a competitor going out of business, lifestyle changes, demographic changes, and an increased demand for a product or a service.

A threat is an external factor beyond a company’s control that could place a marketing strategy, or the business itself, at risk. Threats come from an unfavorable trend or development that could lead to deteriorating revenues or profits (such as high gasoline prices); a new competitor that enters the market; a public relations (PR) nightmare that leads to devastating media coverage; a gender discrimination lawsuit; a shift in consumer tastes and behavior that reduces sales; government regulation; an economic slump; or the introduction of a “leap frog” technology that may make a company’s products, equipment, or services obsolete.Tim Berry, “How to Perform a SWOT Analysis,” MPlans.com, accessed December 2, 2011, articles.mplans.com/how-to-perform-a-swot-analysis.Threats can come from anywhere and at any time, and a small business may be particularly vulnerable because of its size. At the same time, a small business may be nimble enough to effectively deal with threats because of its small size.

Performing a SWOT analysis is a valuable exercise. It might help an owner identify the most promising customers, perhaps even the ideal customer. The analysis is meant to improve a customer’s experience with a company, so the person who will benefit most from a SWOT analysis is the customer.Corte Swearingen, “Marketing SWOT Analysis,” SmallBiz Marketing Tips, accessed December 2, 2011, www.small-biz-marketing-tips.com/marketing-swot-analysis .html.

Keys to Success and Critical Issues

The keys to success are those factors that, if achieved, will lead to a profitable and a sustainable business. Identifying these factors should be based on an understanding of the industry or the market in which a small business is competing because these things play a critical role in success and failure.

Focusing on three to five of the most important success factors makes sense for a small business. However, the actual number will be a function of the business. Whatever the number, the keys to success may change from time to time or year to year as the industry or the market changes.Kris Bovay, “Build a Successful Marketing Plan—15 Key Business Success Factors,” eZine @rticles, accessed December 2, 2011, ezinearticles.com/?Build-a -Successful-Marketing-Plan—15-Key-Business-Success-Factors&id=2156709. Examples of key success factors include the hiring and retention of excellent employees, successful new product introductions, a strong supplier network, a low-cost structure, retaining existing customers, a strong distribution network or channel,Kris Bovay, “Build a Successful Marketing Plan—15 Key Business Success Factors,” eZine @rticles, accessed December 2, 2011, ezinearticles.com/?Build-a -Successful-Marketing-Plan—15-Key-Business-Success-Factors&id=2156709. a cutting edge manufacturing process, and customer service.

Marketing Objectives

Marketing objectives are what a company wants to accomplish with its marketing strategy. They lay the groundwork for formulating the marketing strategy, and although formulated in a variety of ways, their achievement should lead to sales. The creation of marketing objectives is one of the most critical steps a business will take. Both online and onground objectives must be included. A business must know, as precisely as possible, what it wants to achieve before allocating any resources to the marketing effort.

You should note that the first and third objectives in this sample marketing plan do not meet some of the SMART criteria—specific, measurable, achievable, realistic, and time-based (a stated time frame for achievement). These two objectives are not specific enough to be measurable, and they may not be realistic. This will make it difficult to determine the extent to which they have been or can be accomplished.

Target Market

The target market is the segment that has been identified as having the greatest potential for a business. A segment is a relatively homogeneous subgroup that behaves much the same way in the marketplace. The identification of segments is a necessary precursor to selecting a target market. The more precise the target market is, the easier it will be to create a marketing mix that will appeal to the target market.

Positioning

The positioning section of the marketing plan reflects the decisions that have been made about how a company plans to “place” its business in a consumer’s mind in relation to the competition. Is a particular business seen as a high-priced or a low-priced alternative? Is a business considered a high-quality or a medium-quality alternative? Is the delivery time to customers better, worse, or the same as that of the competition? There are many different approaches to positioning that the small business owner should consider, but the selected approach should be the one that puts the company or the brand in the best light. Keep in mind that a good positioning strategy will come from a solid understanding of the market, the customer, and the competition because this knowledge will provide a basis for comparing one business with others.

Marketing Strategy Pyramid

The marketing strategy pyramid assumes that the marketing strategy is built on concrete tactics that are built on specific, measurable marketing programs—activities with budgeted expenses, well-defined responsibilities, deadlines, and measurable results.Tim Berry, “What Is the Marketing Strategy Pyramid, Where Did It Come From?,” BPlans, accessed June 1, 2012, http://www.bplans.com/ask-bplans/640/what-is-the -marketing-strategy-pyramid-where-did-it-come-from.

The strategy at the top of Figure 8.5 “Marketing Strategy Pyramid” focuses on well-defined markets and user needs. The second level consists of the tactics that you use to satisfy user needs and communicate with the target market. The third level is where specific programs are defined.Tim Berry, “What Is the Marketing Strategy Pyramid, Where Did It Come From?,” BPlans, accessed June 1, 2012, http://www.bplans.com/ask-bplans/640/what-is-the -marketing-strategy-pyramid-where-did-it-come-from. It is this framework that is built into the sample marketing plans that are available through Palo Alto Software in Sales and Marketing Pro and at www.mplans.com. However, it is a solid approach that can be used in any marketing planning situation.

Marketing Mix

A company’s marketing mix is its unique approach to product, price, promotion, and place (distribution)—the four Ps. The marketing mix is the central activity in the implementation of a company’s marketing strategy, so the decisions must be made carefully. It is through the marketing mix that marketing objectives will be achieved. The final determination of the marketing mix requires inputs from other areas, such as purchasing, manufacturing, sales, human resources, and finance.Philip Kotler and Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 57.

Marketing Research

Marketing research is about gathering the information that is needed to make business decisions, which should be an ongoing process. A marketing plan should be based on marketing research. The research can range from something very simple conducted by the owner or an employee to a more sophisticated study that is prepared by a marketing research firm. The overall goal of the research, however, is to help a company offer products that people will want, at an appealing price, in the place where they want to buy them. The research should also help a company decide how to promote its products so that people will be aware of them. People cannot buy what they do not know about.

Breakeven Analysis

A breakeven analysis is used to determine the amount of sales volume a company needs to start making a profit.Susan Ward, “Breakeven Analysis,” About.com, accessed December 1, 2011, sbinfocanada.about.com/cs/startup/g/breakevenanal.htm. A company has broken even when its total sales or revenues equal its total expenses. However, a breakeven analysis is not a predictor of demand, so if a company goes into the marketplace with the wrong product or the wrong price, it may never reach the break-even point.Daniel Richards, “How to Do a Breakeven Analysis,” About.com, accessed December 1, 2011, entrepreneurs.about.com/od/businessplan/a/breakeven.htm.

The most relevant types of costs that must be considered when preparing a breakeven analysis are fixed costs and variable costs. Fixed costs are costs that must be paid whether or not any units are produced or any services are delivered. They are “fixed” over a specified period of time or range of production. Rent, insurance, and computers would be considered fixed costs because they are outlays that must occur before a company makes its first sale.Daniel Richards, “How to Do a Breakeven Analysis,” About.com, accessed December 1, 2011, entrepreneurs.about.com/od/businessplan/a/breakeven.htm; Susan Ward, “Breakeven Analysis,” About.com, accessed December 1, 2011, sbinfocanada.about.com/cs/startup/g/breakevenanal.htm.

Variable costs are recurring costs that must be absorbed with each unit or service sold. These costs vary directly with the number of units of product or the amount of service provided.Daniel Richards, “How to Do a Breakeven Analysis,” About.com, accessed December 1, 2011, entrepreneurs.about.com/od/businessplan/a/breakeven.htm; Susan Ward, “Breakeven Analysis,” About.com, accessed December 1, 2011, sbinfocanada.about.com/cs/startup/g/breakevenanal.htm.Labor costs and the cost of materials are examples of variable costs.

Sales Forecast

A company’s sales forecast is the level of sales that a company expects based on a chosen marketing plan and an assumed marketing environment. The sales forecast does not establish a basis on which to decide how much should be spent on marketing. Rather, it is the result of an assumed marketing expenditure plan.Philip Kotler and Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 112. A sales forecast can be very helpful in creating important milestones for a business. However, it is still an educated guess. No matter what a company forecasts, it will typically make less than expected.“Expense and Sales Forecasting,” Chic-CEO.com, accessed December 2, 2011, www.chic-ceo.com/expense-and-sales-forecasting.

Expense Forecast

A company’s expense forecast is a tool that can be used to keep its operations on target. The forecast will provide indicators when corrections or modifications are needed for the proper implementation of the marketing plan. An expense forecast is vital for a company and its sales goals because it will keep the company on track and keep costs down; however, a company will typically spend much more than expected.“Expense and Sales Forecasting,” Chic-CEO.com, accessed December 2, 2011, www.chic-ceo.com/expense-and-sales-forecasting. If a company is not sure what to include in its expense forecast, there are online templates that can provide assistance (see www.chic-ceo.com/userfiles/ExpenseForecast.pdf for sample templates).

Implementation

Implementation is about the day-to-day activities that effectively put a marketing plan into action and focuses on who, where, when, and how: Who will do that? Where to start and when? When to do that? How to do that?Steve Arun, “How to Successfully Implement Your Marketing Plan,” VA4Business, March 14, 2010, accessed December 2, 2011, www.va4business.com/business/428/how-to-successfully-implement-your-marketing-plan. Effective implementation can give a business the edge in a market with similar marketing plans simply because any company that is better and faster at execution is sure to have the advantage in terms of market share.“Implementing Your Marketing Plan,” Marketing Plan Success, accessed December 2, 2011, www.marketing-plan-success.com/articles/controls-implementation.php. This will be true for a small business of any size. There is, however, no such thing as a one-time implementation of a marketing plan. Rather, it is a process that evolves with the product or the service.Steve Arun, “How to Successfully Implement Your Marketing Plan,” VA4Business, March 14, 2010, accessed December 2, 2011, www.va4business.com/business/428/how-to-successfully-implement-your-marketing-plan.

Several steps are recommended for the proper implementation of a marketing plan. Examples include the following:“Implementing Your Marketing Plan,” Marketing Plan Success, accessed December 2, 2011, www.marketing-plan-success.com/articles/controls-implementation.php; Steve Arun, “How to Successfully Implement Your Marketing Plan,” VA4Business, March 14, 2010, accessed December 2, 2011, www.va4business.com/business/428/how-to-successfully-implement-your-marketing-plan.

1. Be sure to always check progress. Know what is working and what is not working. Doing so will help you stay on top of programs that need work and can build on programs that are working.
2. Be sure to reward employees for jobs well done. When goals are met, deadlines are met, and so forth, make sure to congratulate the people responsible for these goals and deadlines.
3. Always try new things. A company should never sit on its hands. The market is always changing, so a company should also change. Learn to adapt.
4. Don’t jump ship too soon. Give the plan time to work. If it is not working, do not give up. Work with the team. Let them help the company succeed.
5. Be open to ideas. Some employees may have a better idea about the reality of the market than the owner has. Listen to them. Hear what they have to say.

Evaluation

The evaluation section of the marketing plan is about assessing the strengths and weaknesses of a marketing plan to improve its effectiveness.“About Us,” American Evaluation Association, accessed December 2, 2011, www.eval.org/aboutus/organization/aboutus.asp. Without an evaluation process, a company will not know whether its marketing campaign is effective or whether it is spending too much or too little money to achieve its goals. The evaluation process, if done correctly, will allow a company to continually improve its tactics and assess the results of its marketing efforts. Thus it is important to set up a timely process to track, capture, and analyze collected data as it is collected. If this is done on a regular basis, a marketing activity (e.g., banner advertising) that doesn’t work can be changed to more effective tactics (e.g., advertising in the local paper) that do work.“Marketing Plan: Evaluation,” Will It Fly, accessed December 1, 2011, www.willitfly.com/wif/educelbrief.jsp?briefId=93&sponsorId=61&modId=241& modNm=Marketing%2BPlan&sectionNm=Evaluation.

There are many ways to evaluate how well a company is doing. The following are some of the ways:Adapted from Stuart Ayling, “7 Ways to Evaluate Your Marketing Plan,” WebSiteMarketingPlan.com, accessed December 2, 2011, www.websitemarketingplan.com/mplan/evaluateplan.htm.

1. Look at sales (or fee) income. Sales or fee income should be increasing. However, some small businesses will have longer sales cycles than others, so it might be better to measure the number of new leads generated, or the number of appointments, or the number of billable hours achieved. Also remember that discounts, variances in fees, and promotional pricing will affect total sales volume. If a company is selling online and onground, look at the path of both income streams.
2. Ask clients or customers. Find out where and how clients and customers heard about the business. Most businesses never ask this question, so they miss out on valuable insights into how clients and customers pick a product or a service.
3. Does advertising and/or promotional activity produce direct responses? It should. If not, a company should work to find out why not. This is also relevant for a web presence. A company should want to know how site visitors found out about the company.
4. Check the conversion rate. How successful is a business at closing the sale? Has it improved? If a company is selling online, how many site visitors are actually buying something?
5. Does the plan have a positive return on investment (ROI)? Does it bring in enough new or repeat business to justify the expense? A company should evaluate the cost-effectiveness of each specific online and onground marketing activity so that it can change or eliminate unproductive activities. There are online tools available to help companies with this evaluation. As an example, a free ROI calculator is available at www.cymbic.com/tools/roi_calc.php.

To best evaluate the effectiveness of a marketing plan, it will be necessary to track each type of marketing activity in the plan. The data and techniques will vary widely depending on product type and market—and whether a company has an online presence only or both an onground presence and an online presence. However, most small businesses should select the simplest route possible because of the lower costs and the limited need for very sophisticated tracking. The following are some common and very doable tracking techniques for the small business:

• Advertising efficiency. The number of inquiries generated by an advertisement and the cost per inquiry. This applies to both online and traditional advertising.John Vencil, “The Marketing Plan VII—Evaluation,” VPI Strategies, 2003, accessed December 2, 2011, www.vpistrategies.com/articles_pdf/Mktg7_Eval.pdf.
• Sales promotion efficiency. The number of inquiries generated by a promotion (e.g., a coupon or a banner ad) and the percentage of coupons or vouchers redeemed. This also applies to online and traditional sales promotion activities.John Vencil, “The Marketing Plan VII—Evaluation,” VPI Strategies, 2003, accessed December 2, 2011, www.vpistrategies.com/articles_pdf/Mktg7_Eval.pdf.
• Sales closure rate. The number of sales closed compared to sales leads. Collect data for both online and onground sales.
• Direct marketing. The number of inquiries or customers generated by a direct marketing activity. Direct marketing uses a variety of channels, such as direct mail, telemarketing, e-mail, interactive television, websites, mobile devices, door-to-door leaflet marketing, broadcast faxing, voicemail marketing, and coupons.
• Web analytics. One of the big benefits of having a web presence is that there is a vast amount of tracking and statistics available to the site owner. Small-business owners will want to know things such as where site traffic comes from, how they got to the site, what search words or phrases were used, how many people are viewing the site, how many people are buying if you are selling something, the geographic location of site visitors, and the time each visitor spends on the site. Website analysis tools can track the ways people use a website while helping the owner make sense of the mountain of data that a site generates.Justin Whitney, “What Is Web Analytics,” AllBusiness.com, accessed December 2, 2011, www.allbusiness.com/marketing-advertising/marketing-advertising/11382028 -1.html.

Small-business owners may choose to have the web analytics performed by an outside vendor or use inexpensive analytics tools such as Google Analytics.

• Social media metrics. If social media is part of a company’s marketing plan, the owner will want to find out whether it is worth all the time and effort involved. The goal is to be able to draw lines and connect the dots between social media participation and sales or perhaps something else like brand recognition.Community eBook, Practical Social Media Measurement & Analysis(Fredericton, New Brunswick, Canada: Radian6, 2010), 9, accessed December 2, 2011, www.radian6.com/wp-content/uploads/2010/03/Radian6_eBook_March2010.pdf. Twitter metrics are fairly simple, beginning with the number of followers you have. However, it is the number of retweets you get that will be an indication of the messages that are actually resonating with customers. This is a measure of social influence. Klout is a free tool that measures your online influence on a scale of 1 to 100. This information can guide you to identifying strengths and weaknesses.Anoop George Joseph, “Twitter Metrics,” Web Technology and Softwares—A Technical Blog, December 16, 2011, accessed June 1, 2012, http://webtechsoftwares.wordpress.com/2011/12/16/twitter-metrics/; “The Klout Score,” accessed June 1, 2012, http://klout.com/understand/score. It is also important to tap into the analytics provided by LinkedIn and Facebook.Viveka Von Rosen, “ROI and Measuring your LinkedIn Presence,” #LinkedInChat, February 21, 2012, accessed May 30, 2012, http://linkedintobusiness.com/roi-and-measuring-your-linkedin-presence/; Jenn Deering Davis, Ph.D., “5 Most Essential Facebook Marketing Metrics,” AllFacebook, April 17, 2012, accessed May 30, 2012, http://allfacebook.com/facebook-metrics-essentials_b86156. Perhaps the best approach for a small business to measure its social media effectiveness is to choose an easy-to-understand and easy-to-use web analytics package. Google Analytics was mentioned previously. Another good choice would be the software available from HubSpot because this company focuses specifically on the needs of small and medium-sized businesses.

Marketing Calculators

The Internet is a wonderful place. You can find most anything there. The following are three free marketing calculators that you might find useful in measuring the effectiveness of marketing:These calculators were obtained from and self-described at www.mplans.com/marketing_calculators.

1. Pay-per-click ROI calculator. This calculator determines the ROI for pay-per-click advertising campaigns. Based on a campaign’s results and costs, the ROI can be calculated.
2. Conversion rate calculator. Even the most successful websites convert only a fraction of their visitors into paying customers. A company can increase its sales by upping its conversion rate, attracting more traffic to the site, or encouraging buyers to spend more money. This handy calculator experiments with these variables. Enter the number of visitors and total orders and see what an increase in conversion can do.
3. E-mail marketing ROI calculator. E-mail marketing campaigns to interested prospects who have opted to receive a company’s e-mail messages is a great way to increase direct sales. This simple calculator makes it easy to see the ROI from various campaigns, based on expected costs and response levels. It can be used to test different scenarios and test results.

Controls

There is no planning without control, the process of monitoring a proposed plan as it proceeds and adjusting it when necessary.“Marketing Controls,” MarketingTeacher.com, accessed December 2, 2011, www.marketingteacher.com/lesson-store/lesson-control.html. Every business needs someone to take responsibility for pushing things along. A good schedule and budget should make it easy to monitor progress, but when things fall behind schedule or there are cost overruns, you must be ready to do something about it and adapt the plan accordingly. From time to time, the owner must step back and ask whether the plan is working. What can you learn from mistakes, and how can you use what you know to make a better marketing plan for the future?“How to Write a Marketing Plan,” Arizona Office of Tourism, accessed December 1, 2011, www.azot.gov/documents/Marketing_Tool_Kit.pdf.

In addition to setting a schedule and measuring and evaluating the effectiveness of marketing activities, a marketing plan needs to say how it will be controlled. Although there are many approaches to control, the small business owner will likely look to activities such as sales analysis (monthly and annual revenue), expense analysis (monthly and annual expenses), feedback from customer satisfaction surveys, and the observation of competitor activities in response to the marketing plan (marketing research). The organization of the marketing function itself can also be seen as a means of control.