3. Marketing Plan
A marketing plan is an overall company program for selecting a particular market segment and then satisfying that segment through the best marketing mix. A marketing plan requires that all aspects of the marketing mix be considered including the product planning, pricing, distribution and promotion.
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.
A firm’s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:
- Strong brand names
- Good reputation among customers
- Cost advantages from proprietary know-how
- Exclusive access to high grade natural resources
- Favourable access to distribution networks
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:
- Lack of patent protection
- A weak brand name
- Poor reputation among customers
- High cost structure
- Lack of access to the best natural resources
- Lack of access to key distribution channels
In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.
The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:
- An unfulfilled customer need
- Arrival of new technologies
- Loosening of regulations
- Removal of international trade barriers
- Changes in the external environmental also may present threats to the firm. Some examples of such threats include:
- Shifts in consumer tastes away from the firm’s products
- Emergence of substitute products
- New regulations
- Increased trade barriers
Refer back to section 2d. to ensure that no issues arising from your SWOT analysis have been overlooked.
Industry and Market Analysis
This section of the business plan will analyze the environment in which your business will compete.
Many people find the market analysis section the most difficult to complete. However, it is absolutely essential that you understand the market in which you will sell your product.
Market analysis should first be done before business start up, and should be ongoing throughout the life of the operation.
The market analysis will demonstrate that there is a market for your product and that this market is large enough for your business to earn a reasonable profit (now and in the future). Financial investors will want assurance that you have realistically considered all the potential opportunities and threats relating to your business.
Consider how long the industry has been in existence, major changes that have taken place, and situations that have affected this industry.
What is the size of the entire “target market” – number of consumers, geographic area?
Defining the size of your target market will assist you in calculating the required level of production, distribution channels, promotion strategy and other marketing decisions. Information can be gathered from a number of different sources including industry/trade associations and journals, Statistics Canada publications, producers and suppliers, university libraries and business resource centres and Government business or agricultural advisory services.
What percent of the market do you expect to capture (initially and in the long term)?
Consider how your company plans to grow. Do you plan to develop new customers or win customers away from your competitors? Be realistic in terms of how many competitors’ customers can be convinced to purchase your product in the short term, as customers may be loyal to existing brands.
Are any future short and long term trends evident?
Based on history and recent developments, consider what the outlook is for the industry. Trends may include changes in:
- Consumer preferences
- Product supply and demand
- Production practices and technology
- Traditional payment arrangements
A very important trend is the market growth potential. You will want to be entering a market that is growing. You can identify these trends by reading industry journals or asking suppliers or customers what changes they foresee. Once these trends have been identified, you should decide how your business will accommodate them.
Entrepreneurs tend to be quick to minimize the significance of competitors. They often believe that competitors offer inferior products or services. However, it is important to understand why customers buy from other producers and to learn from this.
You must be sure to evaluate each competitor objectively in order for your plan to have credibility in the eyes of investors.
To easily show the competitors and the associated strengths and weaknesses of each, display in a competitor analysis table.
How many competitors are there and who are they?
Establish which competitors are the largest and/or the fastest growing in order to appreciate where the strongest competition may come from. Small, recent entries are of importance since they may have an advantage, which will help them quickly become market leaders. State the percentage of market share each competitor controls in terms of revenues and volume sold.
What are the competitors’ strengths and weaknesses?
Why do people currently buy from your competitors? What are they not doing well that will cause their customers to buy from you? Strengths and weaknesses may involve areas such as:
- Consumer and supplier loyalty
- Payment arrangements
- Customer service
- Warranty / return policy
- Financial stability
- Other related areas
Be realistic and try to back up your claims where possible.
How will the competition react to your entry?
- Will competitors:
- Decrease their prices?
- Increase promotional efforts?
- Develop new technology?
- Adapt the quality of their products?
Competitor reaction is of critical importance – especially if the competitors are financially stable and are therefore able to decrease prices and/or increase promotion. By anticipating their reaction, you can develop an action plan of your own.
Are there any barriers, which may discourage additional competitors from entering the market?
Examples of barriers may be
- High start-up costs
- Skilled labour
- Brand loyalty
- Established contracts with suppliers or middlemen
Discuss if and how your company will overcome these barriers.
Is there any indirect competition in the form of a substitute for this product?
Substitute products refer to those that are different from your product, but have potential to serve as a partial replacement (i.e. popcorn or another snack food may serve as a substitute for potato chips).
What is your “Competitive Advantage” with respect to the competition?
This is one of the most important questions you will have to answer. Your business must have a competitive advantage in order to be successful. Consider areas where your product and/or services differ from the competition. Also, examine competitor weaknesses (question H-2) and your company’s strengths. It may not be enough to just say that your product and/or service is different, or even better. You must show that the customer actually wants or needs this different or improved product.
Is this advantage sustainable in the long term?
You will want to demonstrate that your product is not only different from the competitors’, but that it will not be quickly duplicated. Consider the barriers to entry (questions H-4). The greater the barriers, the easier it will be to sustain your advantage. A competitive advantage can also be sustained with continuous product developments through research and development.
What is your product offering?
Are there product segments within your product offering? For instance you may sell men’s clothes. The segments may include shirts, pants, shoes, and accessories. The product offering directly ties back to the target market.
What is the nature of your product and how is it unique?
Describe the features, functions, warranties and any other benefits to the consumer of your product. Demonstrate how your product meets the needs of the customer (discussed earlier in the Industry and Market Analysis section).
What steps in the product/technology development process have been completed?
In this process, each step of product/technology development is linked with a marketing step and is then evaluated to decide if the process should be continued, stopped, or modified. Comment on test marketing results, product/technology modifications and the projected launch date of the product/technology.