In their book Write Your Business Plan, the staff of Entrepreneur Media, Inc. offer an in-depth understanding of what’s essential to any business plan, what’s appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors discuss the information you should include in the marketing section of your business plan.
The marketing information you need to include in your business plan has to show that you know your target market and understand how to make sure those customers know where they can find you. You need to define what you're selling, at what price(s), from where, and how you're going to spread the word. To simplify, you can use the four Ps of marketing: product, price, place, and promotion.
Product, the first of the four Ps, refers to the features and benefits of what you have to sell (as usual, we’re using the term as shorthand for products and services). There are a number of issues you need to address in your product section. You need to first break out the core product from the actual product. Say you’re selling snow cones. A snow cone is your core product. But your actual product includes napkins, an air-conditioned seating area, parking spaces for customers and so forth.
In the product section, you need to define your target audience and talk about your ideal customer as if he or she is someone you know very well. For example, your ideal customer could be 25 to 29 years old, earning x amount of money, has no children yet and earned a college degree.
It's important to quantify your market’s size if possible. In addition, you may want to describe how you come up with ideas, screen them, test them, produce prototypes and so on.
You may need to discuss the life cycle of the product you’re selling. This may be crucial in the case of quickly consumed products such as corn chips and in longer-lasting items like household appliances. Understanding the product’s life cycle has a powerful effect on your marketing plan, as does knowing logical buying habits. For example, one popular department store was offering a buy-one-get-one-at-half-price deal on fine jewelry. The deal wasn't generating a strong response because most people don't shop for expensive jewelry in “bulk” quantities but instead take a personalized approach.
Other aspects of the product section may include a branding strategy, a plan for follow-up products or line extensions. Keeping these various angles on products in mind while writing this section will help you describe your product fully and persuasively.
One of the most important decisions you have to make in a business plan is what price to charge for what you’re selling. Pricing determines many things, from your profit margin per unit to your overall sales volume. It influences decisions in other areas, such as what level of service you will provide and how much you will spend on marketing. Pricing has to be a process you conduct concurrently with other jobs, including estimating sales volume, determining market trends and calculating costs.
Place refers to channels of distribution, or the means you'll use to put your product where people can buy it. This can be very simple: Retailers and many service businesses (restaurants, personal services, business services) rely primarily on location. For manufacturers, conventional distribution systems have three steps: producer, wholesaler and retailer. You may occupy or sell to members of any one of these steps.
Manufacturers require certain basic conditions for their sites, but retailers and some service firms are exquisitely sensitive to a wide variety of location factors. In some cases, a few feet can make the difference between a location that is viable and one that is not.
Site selection plans for retailers should include traffic data, demographics of nearby populations, estimated sales per square foot, rental rates, and other important economic indicators. Service firms such as restaurants will want many of the same things. Service firms such as pest control services and bookkeeping businesses will want to provide information about local income levels, housing, and business activity.
Store design also must be addressed. Retailing can be as much about entertaining shoppers as it is about displaying goods, so store design becomes very important. Retailers may want to include photos or illustrations of striking displays, in-store boutiques and the like.
Then there's the Internet and e-commerce, where physical location gives way to driving traffic to the site. For businesses that are strictly web driven, you’ll need to show how the site works and all that's set up behind the site for taking orders, shipping them and handling customer service, which is especially important for online businesses where buyers cannot walk in and return an item face to face. You'll also need to show how you'll drive traffic to the site.
Promotion is virtually everything you do to bring your company and your product in front of consumers. Promotional activities include picking your company name, going to trade shows, buying advertisements, making telemarketing calls, using billboards, arranging co-op marketing, offering free giveaways, building and maintaining your online presence, and more.
Not all promotions are suitable for all products, of course, so your plan should select the ones that will work best for you, explain why they were chosen, and tell how you’re going to use them. Promotion aims to inform, persuade, and remind customers to buy your products. It uses a mix that includes four elements: advertising, personal selling, sales promotion, and publicity or public relations.