A lot of entrepreneurs are often confused when formulating a marketing plan. This article wants to provide an overview into 1) what marketing is, 2) the importance of a marketing plan, 3) the components of a marketing plan, and 4) common frameworks used when writing a marketing plan.
A basic definition of marketing will be really helpful for understanding the usefulness and need of marketing plan. According to Philip Kolter, “Marketing is a social and managerial procedure by which individual groups obtain what they need and what they want through creating, offering and exchanging product and value with other”.
This definition lays emphasis on two very important things:
- Needs and wants – Entrepreneur have to identify a gap in market
- They have to create, communicate and exchange an offering to fill in the gap
Thus, marketing is a function which is either going to make or break your business even before it starts.
THE IMPORTANCE OF A MARKETING PLAN
A marketing plan is a document which records the activities carried out by the marketing team. These activities are decided by keeping in mind three basic things: 1) Objective/goals of a firm, 2) the external and internal business environment, and 3) the availability of resources.
The benefits of preparing a marketing plan can be summarized as follows:
- Ground work for extension of marketing strategy
- Helps the operating team in proper execution by assigning responsibilities
- Increase the chances of funding
- Saves time and effort on ineffective marketing activities
- Helps plan finances and effective budgeting
- New insights can be generated
The marketing plan forms an important part of any business plan though its importance can’t be ignored even for established firm. A marketing plan is also a necessary effort to start with before any marketing effort.
COMPONENTS OF A MARKETING PLAN
A good marketing plan should include the following components.
A) EXECUTIVE SUMMARY
Usually the last part to write, this component of your report will contain a summary of all the other sections. This section is really important, as it is the first thing to be read by senior management/investors. If this section fails to convey the true potential or gives a really haphazard view, there is a very slim chance of further interest.
B) COMPANY INFORMATION AND BACKGROUND
This part gives the entrepreneur/manager a chance of make their case further. Describe your company and your relevant experience if any. Also mention any resources/prototypes which are already available. This will help in strengthening the case further.
C) MISSION AND VISION
Stating your mission and vision forms a very important part for established firms. In this part you have to mention financial and non-financial goals of your marketing plan. In this section, you have to justify how your product/service is in line with the mission and vision of your company. This section sets the goals of a marketing plan and hence sets the tone of rest of the marketing plan. For example, if you are a startup looking for series A funding, this section will be more concerned to increase sales and increase the trial of product whereas companies looking for series B funding will speak more about branding and so on.
D) CORE COMPETENCIES
Core competencies are the combination of pooled knowledge and technical capacities that allow a business to be competitive in the marketplace. In other words, that is what a company is best at doing. Focusing on core competencies can help a firm better align its resources and efforts and thus increase the value creation. A company should usually outsource all the non-core activities if economically feasible.
E) SITUATIONAL ANALYSIS
Explain the core need/want your product is solving. What was the source of this hunch or inspiration? How do you establish that this need is something, which will have a sizable market? This is the section to mention all the effort you have put into market research. This section is used to present the methodology and findings of your market research. Appropriate emphasis should be given on this part as it basically sets the direction of the product development process as well as tone or theme of marketing communication a firm is sending out.
F) ENVIRONMENTAL ANALYSIS
While preparing for a marketing plan, it is very important to study the external and internal business environment. This ensures that the management and execution team is aware of various factors which are going to determine the amount of resources and efforts in successfully executing the marketing plan.
G) TARGET MARKET AND SEGMENTATION
Not everyone and anyone is your potential customer. If you are going to target everyone, then your precious marketing dollar is going down the drains. Target market is defined as a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise towards.
A startup should always concentrate on customers who are ready to adopt the product easily. Going for the total market will take a lot of resources and thereby is not advisable for the initial go-to-market strategy.
Furthermore it is important to include the market segment which you are going to serve and in what fashion. Segmentation can be done along the following dimensions:
- Demographics – Age, sex, educational qualifications, income, occupation, household size etc.
- Psychographic – value, lifestyle and attitude
- Behavioural segmentation – degree of loyalty
- Product-related segmentation – relationship to a product
H) MARKETING STRATEGY AND MARKETING MIX
Now, you have to decide on which marketing strategy to use. This step is important as this has a big impact on marketing mix, which is covered thereafter. You need to pick one of the following marketing strategies:
- Mass marketing – This is a push market strategy in which segmentation is completely ignored and an attempt is made to reach the largest number of potential customers possible. This technique relies on the persuasion potential of communication. Traditional mass marketing method are radio, television, and print advertising
- Differentiated marketing - This marketing strategy is also known as multi segment marketing strategy. Each customer segment is handled uniquely so that you target different customer segments with different solutions. This strategy keeps your team more focused and is more efficient in spending your marketing dollars
- Concentrated marketing - This strategy targets a single well defined segment of the customer population. The marketing costs are low, but so is your sales potential. It is particularly effective for small companies with limited resources as it does not believe in the use of mass production, mass distribution and mass advertising.
- Direct marketing – Direct marketing techniques are ideally suited for selling complex products and services. In this method customer contact is done through personalized methods like Email, phone call or mails.
Next, you need to define the marketing mix for the marketing plan. It helps to determine your offering. One of the commonly accepted framework for defining a marketing mix is called 4P’s which stands for product, place, price and promotion.
1) Product – Here you define the nature of your product or service offering. Each product has different level of benefits and a good product is designed on multiple levels. This section should mention the specification of physical characteristics as well as the benefits provided by the product. A small list is given below:
- Product Features: Color, size, quality, hours of operation, warranties, delivery, and installation
- Packaging: the box, container, or wrapper in which the product is placed
- Label: information about the product on the package
2) Place – Mention what distribution channels (online delivery, retail distribution etc.) you are going to use. The following aspects need to be considered while deciding for the best place.
- Getting the product in a timely manner
- Channels of distribution which will usually result in lower costs or forms a competitive advantage
- Channels which save time for buyers and sellers
3) Pricing – Setting an effective pricing strategy is very important. Here you should mention things like discounts and allowances on your products as well as your general pricing strategy (e.g. low price when entering the market, followed by price increases once you are a market leader). A good pricing strategy helps you in obtaining one or more of below objective:
- Maximize sales
- Increase profits
- Discourage competition
- Attract customers
- Maintain an image
4) Promotion – This section should contain how you will communicate with your (potential) clients and what modes you want to use for spreading that messages. A business has to decide on various issues like which media (Video, audio, or pictures) to use. This section will also contain budgeting your promotion.
Now, let’s talk some numbers!:-) This section focuses on the financial implications of your marketing plan. This section usually contains the following subcomponents:
- Break even analysis – Breakeven analysis is a method for determining the sales a start-up needs to cover all its expenses and begin to make a profit. It is important to identify your start-up cost, which will help in determining the needed sales revenue for covering those expenses.
- Sales forecasting – Sales forecasting is a process which is aimed at providing accurate predictions of sales volume in the future. Sales forecasting is helpful in supply planning, allocation and production operations and make necessary changes to marketing mix. Various forecasting methods exist such as 1) Regression analysis, 2) time series analysis, 3) market test analysis, and 4) Delphi method.
- Expense forecasting- Expense forecasting is associated with your forecasted sales volume. Usually a business plan requires you to include a fully fledged income statement, but for a marketing plan it is sufficient to only have a detailed expense forecast.
POPULAR FRAMEWORKS FOR A MARKETING PLAN
Two popular frameworks which are typically used for environmental analysis are the SWOT analysis and the PESTEL analysis.
1) SWOT analysis – SWOT stands for Strengths, Weaknesses, Opportunities and Threats. It is a mode stating the present state of a business and helps to formulate a way forward for the future, one that employs the existing strengths, redresses existing weaknesses, exploits opportunities and defends against threats.
- Political environment of geography – Is a politically stable economy or not? Are policies by government helping the firm to establish a good business?
- Economic – Economic factor are interest rates, changes in taxation rates or policies, inflation and currency exchange rates are really important while deciding to establish a business and its policy
- Social – Acceptable social norms and social construct are especially important while deciding for product and communication development
- Technological – At what rate technological landscape is changing and how it is going to affect the business. How can it be helpful in various functions like sales and marketing, distribution etc?
- Environmental – What are the impact of product/ service on the environment.
- Legal -Awareness of consumer laws, health and safety regulations, employment law, competition laws, international law, electronic data laws and privacy laws is really necessary and should be mentioned.
However it should be kept in mind that not all the factor is applicable for each business.
This article provides you with a brief outline on how to write a successful marketing plan for both a start-up pitching for investment and for a successful company looking to improve their next marketing campaign. Not all the sections are equally important in both the cases. An entrepreneur should look out to a consultant in case they are finding it difficult to write the marketing plan.