Saturday, March 22, 2008

Marketing and The Marketing Plan

Marketing is a very important function of business, but many people and business owners seem to misunderstand what marketing is. The academic definition of marketing is "A social and managerial process whereby individuals and groups obtain what they need and want through creating and exchanging products and value with others. " Let's take this definition and begin to define some basic marketing terms.

Need: A state of felt deprivation.

Want: The form taken by a human need as shaped by culture and individual personality.

Demands: Human wants that are backed by buying power.

Product: Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organizations, and ideas.

Service: Any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.

Customer Value: The difference between the values the customer gains from owning and using a product and the costs of obtaining the product.

Customer Satisfaction: The extend to which a product's perceived performance matches a buyer's expectations. If the product's performance falls short of expectations, the buyer is dissatisfied. If performance matches or exceeds expectations, the buyer is satisfied or delighted.

Exchange: The act of obtaining a desired object from someone by offering something in return.

Transaction: A trade between two parties that involves at least two things of value, agreed upon conditions, a time of agreement, and a place of agreement.

Relationship Marketing: The process of creating, maintaining, and enhancing strong, value laden relationships with customers and other stakeholders.

Demography: The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics.

Psychographic segmentation: Dividing a market into different groups based on social class, lifestyle, or personality characteristics.

So far we can see that Marketing has to do a lot with people and YOU as the business owner need to connect your products or services to these potential clients. There are several potential channels to connect buyers to the products and services. You can use Advertising(radio, TV, Internet), you can create Blogs, you can connect them using Public Relations and/or many other ways, but before you decide to spend money in order to attract these customers you need to understand YOUR MARKET. Who is your client? define your client so that you can better understand what he/she does, how they shop and why they shop.

There are three important components to marketing: Research, Analysis & Strategies and Tactics.

Research: You will need to spend a significant amount of time researching about your business. Study the industry, study your future customer, your competition and the area where you want to do business.

Analysis: After you have completed the research, you need to analyze it, does your research show that there is a market for your product or service? Who will be your customers? How much do you need to invest in your business to begin operations? how long will it take for you to break even and how long will it take to become profitable? How many competitors will be going against you? Analyze your research about the industry, customer, competition and location. Analyze your competitive advantage. At this point you may find that maybe your business will not be viable or you can find that it will be a very good business.

Strategies and Tactics: Determine the best method of getting your product or service to your clients, based on your analysis. Within these section you want to answer three main points: What are your objectives? What is (are) your strategy(ies)? What tactics will you use?

Objectives: these are the actions that will support your business's goals within your market.

Strategies: These are the plans for achieving your objectives. Think of the big picture for your business. Ex: going after a segment of the population within an age group, income group, etc.

Tactics: are the actions dictated by your strategies.

Contents of the Marketing Plan

Three areas that you want to focus are: Product, Market Analysis and T.O.S.(Tactics, Objectives & Strategies)

Product Description

Features and benefits (what makes it different or better?) My advice is to focus on the benefits. People buy based on benefits.

Design and material choices

Life cycle and seasonality

Market Analysis

How big is your target market?

Who are your customers? (Demographics and psychographics)

Who are your competitors? What are their strengths and weaknesses?

What are the political, economic, social and technological trends in your market?

Marketing Objectives, Strategies & Tactics

What are your business's objectives? How will you achieve them?

What is your business niche? (In today's economy the more specialize your business is the more successful you will be).

Sales Forecasting Methods
In business if you do not bring in the sales which turns to revenue and then into profits, your business will not last long. It is for this reason that Sales Forecasting is very important, but when doing the sales forecasting you need to keep it achievable and realistic. If you set unrealistic goals you may get discourage and your business will suffer. The sales forecasts predicts how much of your product you will sell over a specific period of time (per week, per month, quarter, yearly, etc.). It will also show when you will breakeven and when you will become profitable.

There are three Sales Forecasting Methods:

Breakdown Forecasting: Start with the largest population and break it down to estimate sales from target customers.

Buildup Forecasting: Estimate the size of each market segment, and add them to get a total.

Indirect Forecasting: Find possible indicators of sales when specific market data are missing.

Where to find the information?

Information comes from two types of sources: Primary and Secondary Sources. The Primary information comes from primary data such as: surveys, interviewing people: face to face, by phone, via email, regular mail, etc and conducting focus groups, these are a few of the different methods use by other companies to gather information from primary sources, some of these companies that do a great job are: Procter and Gamble and 3M Corporation Obtaining primary information is very expensive and time consuming so most mid size companies or small businesses will focus on Secondary information because most of this information is widely available and most of it is FREE.

Secondary Information: This information has been published by other companies, experts, trade associations, etc. The library and the Internet can both provide you with lots of secondary information. Once you find the information, you will need to analyze it and decide on the information.

Here are some sources where you can find Secondary Data

Government (Federal, State, Local)

Small Business Development Centers

Women's Business Centers

U.S. Small Business Administration

Trade and industry associations

Chambers of Commerce

Local newspapers and magazines

Census data

Business Magazines

Libraries (Public, University/College, Private)


Business Periodicals

Professional Research Companies

Studying the Competition

Analyzing Your Research

Now that you have spent HOURS doing your research and you have the information you were looking for, it is time to analyze it. Before you make a conclusion, check your findings for accuracy and completeness. Be objective when analyzing the information, have someone else review the information with you. Some of the questions you may ask are:

How has the industry developed?

How do small businesses operate within this industry?

what are the current growth patterns in the industry?

What is the industry's size at present? What's projected a year from now? Five years from now?

Are there any niche markets that are hot?

How does international trade affect your industry?

How will current and new government regulations affect your industry?

How will technology affect your industry and the small businesses within it?