Four The Marketing Plan

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FourThe Marketing Plan

• Ian Harris
• Entrepreneurial Champion

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Objectives

• What do you need to know about the market
• Setting your sales proposition
• How much will they buy
• Setting the selling Price
• A brief outline of how this would be done in
  practice

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Recap on Research
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How to do the research

• Several Components
• Desk Research, Studying Directories and Other
  Literature
  
• Interviews with Customers, Suppliers,
  Competitors, Distributors, Ex-Employees of
  Competitors
  
• Test Trials

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Desk Research

• Directories
• Kompass UK Key British Enterprises
• Business Pages UK Trade Names
• Kellys Municipal Year Book
• Yellow Pages Thomson Local Directory
• Government Information
• DTI Business Briefing Business Monitor
• Labour Market Trends Regional Trends
• General Household Survey Social Trends
• Any other department specific to your business
  area
  

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Desk Research

• The Internet (just dont get sidelined!)
• Google Yahoo Lycos Yell.Co.uk
• Excite MSN User Groups
• Trade Associations
• Trade Press
• Special Features in the Press
• Competitors Literature
• Published Statistics and Reports
• Former Colleagues

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Interviews

• Not necessarily in the Jeremy Paxman mould
• These range from informal chats to fully
  structured and quantified activities
  
• Face to Face (detailed), Telephone (quick and
  dirty), Email (brief) are all good try to
  read between the lines
  
• If you are selling to the public you MUST speak
  to distributors, retailers and if you know the
  end customer, those too
  
• Selling to the wholesale trade, interview
  extensively at Trade Fairs
  
• Dont forget to interview competitors too if
  youve got the nerve
  
• Ex-employees of competitors are good, just ensure
  the information is current

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1. So who will buy..?

• Unless you do the analysis, youll never know who
  your customers are!
  
• Loads of companys start up without knowing this
  core intelligence
  
• You do NOT have an equal chance to sell to
  everyone in the market
  
• Unless you can cut prices to the volume market
• Think carefully about entering this type of market

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Who will buyniche

• So you cant compete in a volume market yet
• But a niche may allow you traction in the market.
  Niches allow reasonable prices to be charged
  which mean reasonable profit margins
  
• To do this, the product or service needs to be
  distinguishable from the competition
  
• Marketing Term Product Differentiation
• Looking for that niche is termed
• Marketing Term Market Segmentation
• Group of customers with similar characteristics,
  tastes, features
  
• Finding such a group allows you to tailor your
  product or service

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Niche found

• If youve found a niche, its probably not
  confined to the UK (local area) but Europe too
  
• Whats the competitive position of the
  marketspace youve found how are you going to
  value add
  
• If you find the right niche, a small company can
  achieve a dominant position (i.e. sell more at a
  higher price)
  

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2. Segmenting a Market

• Consumer, Industrial, Professional market?
• Would sex, age, social class (income), size
  differentiate the market?
  
• Is geographical location important or can your
  product/service cross boundaries?
  
• Will the product/service allow customers to
  better themselves, or does it have snob appeal?
  
• Is there an element of price sensitivity bleach
  is bleach but Domestos is 10 more expensive than
  normal bleach!
  
• How do potential customers buy whats the
  channel, Supermarket, Local Shop, Internet, Mail
  Order, Trade Fair, Channel Partner?
  
• Will you horizontally or vertically supply your
  marketspace?
  
• Printer Inks example
• What is your likely delivery frequency/usage
  frequency
  
• Will there be lots of on-sales..?
• When you know the generic characteristics dont
  forget that your Market may have some specialised
  characteristics that need to be addressed but
  you know more about these than most people

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Know the market, but what about your customers..?

• Differs whether its end customers or industry
  customers
  
• Do your research on your customer base,
  understand what their pain is, and what you can
  do to ameliorate that pain
  
• When you know their needs you can improve your
  value proposition
  
• There are numerous ways to tailor your value
  proposition

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• Product/Service Appearance
• Do not underestimate this one take a look at Ty
  Nant (Water) or Halen Mon (Salt)!
  
• Do you play in different market spaces, if so,
  tailor your appearances
  
• Do you buy on appearance..?
• www.halenmon.co.uk
• http//www.tynant.co.uk/tytimes.htm
• Delivery
• Maintenance
• Service Level Agreements
• Updates/Revisions
• Performance
• Speed, effectiveness, efficiency
• Do you buy on the basis of performance..?
• Quality
• Think about a product that you think has
  quality..?

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Customer Profile

• What does your typical customer look like
• Think about what your profile would be if you
  were setting up a surf shop in Aberystwyth
  
• Age
• Location
• Sex
• Income
• Ethnicity
• How often contacted
• In what ways should they be contacted

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• If you get those components right, you will sell
  to your target market
  
• But ensure that your competitors dont already do
  this
  
• If you are still having problems with this
  concept, think about Soft Drinks, Fizzys,
  Stills, Juice, Youth, Children's etc. etc.

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3. How much will they buy..?

• For the PL, Cash Flow Forecast etc. you need to
  know how much you are likely to sell, and when
  
• The level of sales depends upon
• Market Size
• Market Structure
• Market Share that can be established
• Market Trends (Growing, Static, Declining)
• Your Investment in Marketing

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Market Size

• Either number of units sold or monetary value
• What about a completely new product/service!
• Then you need to know the Market Potential (i.e.
  how much you are likely to engage with)
  
• Assess the size of the segment you are going to
  Niche
  
• There are general market statistics for this if
  you want to look
  
• DTI
• Labour Market Trends
• General Household Survey
• http//www.statistics.gov.uk/lib2001/resources/fil
  eAttachments/GHS2001.pdf

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Market Structure

• Direct to customer
• Via Wholesalers
• Intermediaries
• Complex or Simple, you need to know how you are
  going to distribute to your end users
  
• Direct selling allows you to quantify your
  returns, if you are intermediating, you need to
  factor downstream costs into your Business Plan
  
• In some cases, direct distribution is too
  expensive for SMEs ensure you do your sums
  properly
  
• Your dynamic analysis here will help you define
  your sales plan
  
• http//www.dti.gov.uk/aerospace/pdfs/volumebovervi
  ew.pdf

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Market Share

• Determine what share your competitors have
• Allows you to determine how successful they have
  been (mimicry)
  
• Know what products/services your competitors are
  offering so you can differentiate yours
  
• Frequently, the market is fragmented
• To gain market share you must
• Have consistent quality keep on marketing
  constantly innovate
  
• Look in detail at how your competitors
  statistics
  
• How much they sell, how well theyve done
  recently, how their companys are organised, how
  do they sell, who are their main customers, what
  their pricing policy is
• You do not need to re-invent the wheel

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Market Trends

• Very little is static in business
• Be aware of Macro as well as Micro economic
  changes
  
• You have to guess this, at the very best, with
  some market trend data that is available via your
  market research
  
• If you conduct research with competitors etc, ask
  them what they think is going to happen in the
  near future
  
• Check out the DTI

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Market Analysis - recap

• Not as bad as it sounds
• But does require work, and the work is necessary
  before writing the business plan/financial plan
  
• Dont underestimate this component

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Setting your selling price

• Your selling price has a dramatic effect on your
  profit
  
• Ideally, you will set your selling price to
  maximise your profit
  
• Frequently this is not possible
• You can establish your price by looking at the
  market and there are a myriad ways to do this
  just dont forget the effect your competitors
  response may have on yours

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The Price Range

• In your market analysis you will have determined
  the price range of your competitors
  
• Longer term you want to get your price near the
  high range
  
• In the short term if you go for the highest
  price, you are in the niche for snob value

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• High
• Low
• Profit Driven

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The Highest Price

• Skimming is great if you can differentiate your
  product/service
  
• If you can set the highest price, it means that
  you could reasonably expect to sell even more at
  a lower price
  
• But to sell more youd need to invest more in
  equipment/infrastructure
  
• Note, that high prices attract competitors,
  unless you can competitively position your
  technical advances ad infinitum

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The Lowest Price

• At what point do you lose money..?
• Direct and Indirect Costs raise their ugly head
  here
  
• Direct Costs are associated with premises,
  equipment, lease
  
• Indirect Costs costs of manufacture
• Try not to go here, customers talk to each other
  and if one has managed to cut you to the bone,
  others will soon follow
  
• Only go to the lowest price if you need to clear
  stocks
  
• How do you establish a true, sustainable selling
  price?

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Sustainable Selling Price
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To do this

• You need to have a handle on
• Forecast of Indirect and Overhead Costs
• A Forecast of how much you will sell over the
  year
  
• There will be ramifications if you get your
  forecast wrong, however, its always a dynamic
  system

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What are the influences on price setting?

• How competitive the product is
• How it looks, what it does, perception
• Where in the life-cycle the product sits
• New, Middle Aged or Old
• How price sensitive your customers are
• How they pay, delivery and other sensitivities,
  will they leave if you are not hyper competitive,
  Value for Money
  
• What position your product has in the market
• Availability of competition, value proposition of
  competition, where your product lies

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Confused..?

• Product
• Determine where in the market your
  product/service lies
  
• Place
• Analyse the product/service and determine where
  it will go
  
• Analyse the competition
• Decide the Pricing Strategy
• Price
• Choose specific prices estimate volume of
  sales, profit margin and costs to forecast the
  level of profits
  
• Choose your price
• Promotion
• Test market

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and dont forget

• There are a range of prices you can charge
• Determine the very lowest price you can charge
  and dont dip below this
  
• Determine what the customers will pay this may
  be more than you think
  
• If you charge the very highest possible price,
  you will limit sales
  
• Can you become market leader in a small enough
  niche
  
• Justify a higher price by value added services,
  quality, reliability
  
• Avoid pitching your price too low
• Market share acquisition through a price strategy
  is NOT a good idea
  
• If you have high competition stress product
  benefits not price

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Whats the framework for all this
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Where are we now?

• Observe the current situation

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Where are we going?

• SMART Objectives
• Quantitative
• Qualitative

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How will we get there?

• Customer Need/Product
• Cost/Price
• Convenience/Place
• Communication/Promotion

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Have we arrived?

• Measure progress
• Decision making tool to evaluate and plan

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Other Resources
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Bibliography

• Sara Williams, Small Business Guide, 12th
  Edition
  
• ISBN 0-14-027721-8
• Most of these notes are taken from this source
  its excellent for practical advice