Effective marketing is the hallmark of a successful business. Its absence means the business will fail. If it is that important, you cannot leave it to chance. You must plan how to do marketing effectively.
How Marketing Fits Into Your Business Plan
Your Business Plan is the first place you actually write down those random thoughts about marketing, so you and others can see the logic and the holes. Once you figure out the marketing, then you can estimate its cost, and include that in your financial section.
Describing “The Market”: Section 3.0
To describe the Market, you first talk about industry (i.e. all your competitors), sales volume in units and dollars for your target area. Include the sales growth rate. Describe the customer groups (segments) who make those purchases: their demographics, any other characteristics such as interests or how often they buy, and how many there are in the area. Seasonal ups and downs are also mentioned here.
For some sources to measure the size of market segments, see Target Market: “Who Are My Customers?”.
Next you discuss trends that might change those industry sales figures, or change the ways customers are solving the problem that your product addresses. The acronym DPEST reminds you what trends to think about: Demographic, Political/regulatory, Economic, Socio-cultural, Technological. When you mention a relevant trend, you will of course say why it is relevant – how it is affecting the current or future market for your product. Your goal is to show that the trend is helping your success – you are consistent with it, not fighting it.
Then you choose the primary segment you will be selling to, and up to two secondary segments. This is your target market. Describe your typical customer in each of your target segments. Example: “he or she is (how) old, has x education and y income, family status is z, lived in the area for a years, is interested in b, c, and d, and values e, f, and g enough to spend q dollars on them annually.” Now estimate how many of those target customers live in your selling area, using the sources in the reference above.
Why bother to identify a target market? Why not sell to all? Effective communications and economical generation of “sales leads” both depend on targeting an audience that has some specific characteristics. These audience characteristics drive the design of your communications plan, and also the features of your product, your price, and where you sell. You want to spend marketing money reaching those most likely to buy, and buy a lot, and often, not the long shots! So targeting is critical to controlling the marketing budget. It is also critical to crafting a message that is effective by speaking directly to the needs of a specific group of customers.
In the organization of your business plan, industry definition would be 3.1, market trends is 3.2, and target market and its size are 3.3.
Competitive Analysis is Crucial!
Now you move on to a crucial issue for your business: Competitive Analysis (section 3.4). First, describe your competitors with a paragraph for each. If there are too many, group them into types of competitors so there are no more than 3 to 5. In this description, consider how they are perceived by customers (their “positioning”), and how well they satisfy the customer’s buying criteria – those 5 to 7 things a customer weighs when choosing a vendor for your product.
After this description of the competitive landscape, summarize it in a table as described in Competitive Analysis and Differentiation. The table shows how well each competitor meets each of the buying criteria (High, Medium, Low, or Not at all).
Then use the table to evaluate your own offering the same way. Where you are High in satisfying customer buying criteria and others are not, this becomes your differentiation – the reason for your business to exist. If there isn’t any, don’t launch the business! If your differentiation is only price attractiveness, find some extra value to offer that will help you keep customers when competitors lower their prices to match yours.
Now you know who you are selling to, and what advantages you offer to them compared to their alternatives, which include your competitors. Your headings look like this: 2.0 Business and Product Description
- 2.1 Business Description
- 2.2 Product Description and Need Met
3.0 The Market
- 3.1 Industry Definition
- 3.2 Trends in the Market
- 3.3 Target Market and Size
- 3.4 Competitive Analysis and Differentiation
Once you know this, you are ready to work on your strategy and tactics for capturing a share of this market. Check back this Friday when we explore this next section of your business plan.