During a small business’ formative stages, the marketing plan can easily be incorporated into the business plan, as the same basic information will need to be gathered and included in both. As the company grows and offers new products or services, however, the marketing plan becomes a very important and separate tool.
It addresses how these new products or services fit into the existing business, and what strategies the company will use to sell them.
Ideally, the business and marketing plans will complement each other. Since a marketing plan documents how a new product or service will help a company to meet its goals, you can readily transfer that information to the business plan to revise it, or to any future business plan you create. In fact, the structure of the marketing plan is fairly similar to that of a business plan.
The marketing plan forces you to do the following:
- Chart industry growth.
- Define the market(s) to address.
- Determine the strengths and weaknesses of the competition.
- Choose the marketing strategies to use to achieve sales goals.
- Identify capital equipment requirements.
- Determine investment requirements.
- Provide direction for the assignment of responsibilities.
- Produce financial projections.
Marketing plan structure
The structure of a marketing plan will usually vary according to the business, its product or service, and the objectives of the marketing plan. Generally, however, a marketing plan will include the following sections:
- Executive Summary
- Product Description
- Market Analysis
- Competitive Analysis
- Product Development
- Operations
- Goals & Objectives
- Marketing Tactics
- Financial Projections
- Summary
Keep in mind that this outline is just an example. Determine which topics will be appropriate for your own marketing plan. You’ll find that some of the items listed above will not be relevant to your own marketing requirements, or that you might need to address some topics not listed above.
To help you determine just what you do need to include in your marketing plan, let’s take a look at each topic and its significance to the overall plan.
Executive summary
The first item listed above is the executive summary of the marketing plan. The executive summary is a brief synopsis of the entire marketing plan. It provides the reader with the following information:
A short description of your product or service, explaining why it is different from your competitors.
Your objectives and goals.
The competitive advantage your product or service has over your competitors.
The amount of expansion capital needed to meet your objectives.
A solid, hard-hitting executive summary is an important element of a marketing plan, especially if you are trying to raise capital to fund the product. It provides busy investors and lenders with a quick glance at your proposed idea. It can be a few paragraphs, but should be no more than one and a half pages.
The idea is to present a succinct summary that will grab the reader’s attention in the few minutes they will spend looking at it. It must convey the impression that you are a responsible individual who can get things done, and that your plan has a good chance to succeed.
Although the executive summary is usually prepared after the plan has been drafted, we include it at the beginning because that is where it will appear in the plan. You will need to prepare your executive summary after completing the plan, because it is impossible to summarise a plan if you haven’t formed it.
You can develop an executive summary by reading through your marketing plan after it is completed and extracting certain vital information. Start your summary with an attention-grabbing statement that describes your market, product, and any currently unmet customer needs. Follow this up with a clear description of your marketing strategy. What are you trying to accomplish?
Product description
Unlike the executive summary, the product description is not a synopsis of the overall plan, but a detailed outline of your proposed product. In the product description, you need to explain what your product or service is, the thrust of your plan, and the main strategies that you will use to accomplish your objectives.
Like the executive summary, the product description can be a few paragraphs to a few pages in length, depending on the complexity of your plan. If your plan is not too complicated, keep your product description short, describing your product or service in one paragraph and your objectives and strategies in another.
While you may need to have a lengthy product description in some cases, it is our opinion that a short product description that conveys the required information succinctly is most effective. If your product description is too long, you will lose the reader’s attention, and lower your chances of receiving the necessary funding for the project.
When writing your product description, you should use any supporting statistics from the body of your plan. Make sure that you credit any secondary or primary sources so the reader knows where you found your statistics.
Market analysis
Within the market analysis section, you need to define the market toward which the product will be targeted. The market definition will start with a broad overview of the industry and conclude with a definition of the market share which the product can reasonably sustain.
This information will be drawn from your market research. The market analysis should chart items like sales history, current demand and future trends for your product or service based on the customer base you have targeted.
In addition to demand, you will also have to define the decision-makers who will buy your product or service. For instance, in the case of disposable nappies, the mother of the child is often the decision-maker as well as the buyer. You also need to address motivating factors behind a purchase.
1. Why do these potential customers buy this type of product or service?
2. How do they buy the products currently available?
3. When do they buy them?
4. Where do they buy them?
5. And what brands do they buy?
With these questions answered, you need to include information about the demographic characteristics of your market. It may help to answer the following questions before proceeding with a segmentation of the industry:
1. What is the geographic location of the target market?
2. Is the geographic location subject to any climatic changes?
3. What is the prominent cultural, ethnic, religious and racial background of your target customers?
4. What is the social class of your target customers?
5. How does your target customer base break down by gender?
6. What is the age range of your target customer base?
7. What is the education of your target customer base?
8. What is the income range of your target customer base?
9. What is the marital status of your target customer base?
10. What is the average household size of your target customer base?
11. What is the work status of individuals within the household?
12. What are their occupations?
13. What member of the household is the decision maker for buying your particular product or service?
14. What member of the household does the actual buying for your particular product or service?
15. How much disposable income is available to the average household?
16. What are the wants and needs of the target market?
17. What are the key traits of your product of service?
18. How frequently is your product or service used?
19. What is the size of the market?
20. What are the growth trends of the market?
21. What is the technological status of your product or service?
22. Are new products introduced frequently in this industry?
23. Are there any laws or regulations that will affect the marketing of the product or service?
Confining the description of your target market to that segment of the market which holds the highest sales potential for your proposed product or service will allow you to use your resources more effectively. If you try to market your product or service to too many market segments, you might not succeed at reaching any of the segments.
The industry discussion should also cover the technological status of your product within the industry. Is your product high-tech, low-tech or no-tech? If it is high-tech, how often are new products introduced? This will have a direct bearing on the product life-cycle, which you also need to cover in this section of the marketing plan.
In general, you want to provide a clear idea of just how technology affects the product or service and its marketability.
The distribution channels used in the industry should also be described in detail, along with any applicable laws and regulations.
The competitive analysis
The purpose of the competitive analysis section is to identify your competitors, to evaluate their strategies, and to determine their strengths and weaknesses in comparison to your product.
By performing this evaluation of your competitors and their products, you will be able to develop an idea of what makes your product unique. This is important because in this section of the marketing plan you want to illustrate the distinct competitive advantage your product will have over the competitors you have identified.
You can evaluate your competitors by placing them in strategic groups according to how directly they compete against you for a share of the customer’s dollar. Under each competitor or strategic group list their product or service, size, profitability, growth pattern, objectives, assumptions of the market, current and past strategies, organisational and cost structure, and their strengths and weaknesses.
Product development
The purpose of the product development section is to detail the development of the product or service. This requires placing that development in the context of charting development goals, placing timelines upon those goals, and determining development costs.
This section also defines the expertise required to develop the product or service and specifies whether it is currently available on staff or if you will need to recruit the necessary human resources.
The first thing you have to detail is the current status of the product or service. Explain exactly what stage of development your product or service has reached. You may have a laboratory prototype of the product or a rough idea of what equipment and materials you will need for a service, but you may not have everything you need because you still have to obtain financing. In this event, the potential investor or lender will want to know just how far along you are in the development of the product or service.
After you have indicated the current status of the product or service, you need to detail the goals associated with its development. When forming your goals, it’s important not to underestimate time, costs, and personnel requirements. If you say you can finish developing a product in three months but it actually takes four months, that raises the costs beyond what you’ve specified, which hampers your ability to complete the project.
As you discuss your product development goals, you need to specify your technical requirements as well as the goals you have for the marketability of the product. If the product doesn’t meet the needs of the target group of customers, and if it doesn’t effectively counteract the strengths your competitors have, then there is no sense in developing the product.
You also need to specify how you will go about meeting your goals so you can delegate personnel to complete each task and establish deadlines by which they need to do so.
Within the product development section, you should also include a development budget. You need to take into account all the expenses associated with developing the product, from prototype to production.
These costs usually include:
Material – All raw materials used in the development of the product.
Direct Labor – All labour costs associated with the development of the product.
Overhead – All overhead expenses required to operate the business during the development phase such as taxes, rent, phone, utilities, office supplies, etc.
G&A Costs – The salaries of executive and administrative personnel along with any other office support personnel.
Marketing & Sales – The salaries of marketing personnel required to develop pre-promotional materials and plan the marketing campaign that should begin prior to delivery of the product.
Professional Services – Costs associated with outside experts such as accountants, lawyers, and business consultants.
Miscellaneous Costs – Costs that are related to product development.
Capital equipment – Equipment you will need to buy, lease or rent to produce your product or service.
The last element you need to discuss in the product development section are risks involved with the development of the product or service. It is important to identify these risks because doing so will show any potential investors or lenders that you have thoroughly thought out the development process and have already come up with a plan to solve any problems that may arise.
Operations
In the operations section of the marketing plan, you need to describe how the product will fit into the continuing operations of the company. Start by listing all the products or services your company offers and the motivating factors behind your current proposal.
After you’ve done this, provide some background information on yourself and your management team. Include your experience, projects you’ve supervised, your education, etc. Give the reader a good idea of who he or she will be dealing with and what type of expertise this proposal is based on.
You should also discuss your business’s financial resources, human resources, and its strengths and weaknesses. You need to let the reader know how solvent your company is, what type of expertise you have that will aid in the implementation of your marketing plan, and how you perceive your company’s strengths and weaknesses.
You should also include an analysis of your operating expenses, capital requirements and the cost of goods in your marketing plan. The operating expenses should include all fixed and variable expenses associated with the operation of the business. This is important because it will illustrate how the introduction of the new product will affect the company’s operating expenses.
The same is true of the capital requirements. If the equipment is already in place, the investment in equipment might be nominal or even nonexistent. Most companies, however, will need to purchase new equipment to produce a new product.
The cost-of-goods analysis is mainly for manufacturers, merchandisers, and service companies which use a great deal of material to service their clients. This analysis shows the material, labour, and overhead expenses associated with the production of the product on a continuing basis.
Objectives and goals
Your objectives and goals should spell out exactly what you intend to accomplish. Long-range objectives are usually linked to the performance and prosperity of a company and involve financial targets such as overall sales, return on investment, increased profit margins, etc. Of course, your long-range objectives don’t have to be confined to financial goals, but can include other areas of growth within a company such as market share, personnel, productivity, research and development, or any other objective you deem suitable for your company.
Short-term goals should be viewed as a series of building blocks that will eventually lead to the achievement of your long-range objective(s).
Start your objectives and goals section by stating your long-range objective(s). From there, move into the various short-term goals that you will need to achieve to reach your objectives.
Marketing tactics
In the marketing tactics section, you should detail both your market strategy, and how your competition is likely to react to it. This is something overlooked in many marketing plans. Don’t make the same mistake.
For every action you take, your competitors will make a countermove to maintain their present position in the market or expand it. Provide the reader with an outline of how your competitors will react to your plans, and how you propose to counteract them.
To develop a clear understanding of the information you will need to include in the marketing tactics section, you should ask yourself a series of questions.
Product
1. How does your product or service differ from the competition?
2. What are the main features of your product or service?
3. At what point is your product entering the life cycle?
4. What message will you include on your package?
5. What will be the size, shape, colour and material of the package?
6. What is your sales and production forecast?
Distribution
1. What channels will you use to distribute your product or service?
2. How will you time your distribution?
3. Will your distribution be intensive, selective or exclusive?
Price
1. What are your pricing objectives?
2. What will be your basic per-unit cost of acquisition?
3. Will you offer a discount policy?
4. What will be your per-unit price?
5. What do you project your revenue and profit to be?
Sales Promotion
1. What will your budget be?
2. How will you position your product or service?
3. Will your promotions be coordinated with distribution schedules?
4. Will you employ extensive personal selling?
5. How large will your sales staff be?
6. How will you define sales territories?
7. How will you compensate your sales force?
8. What type of publicity will you seek?
9. What are your publicity objectives?
Advertising
1. What will be your campaign theme?
2. What will be your copy theme?
3. What type of media do you plan to use?
4. How frequently will you use these avenues?
5. What will be the length or size of your commercials or ads?
6. How much will they cost?
7. What is your advertising budget?
After you’ve answered all these questions, review your answers and start forming your thoughts for the marketing tactics section. Start this section with your marketing strategy and its objectives and explain how you will reach these objectives. Include supporting information whenever possible.
This may be in written form, or in a graph, table, or illustration, or it may take all these forms. The object is to be as clear and concise as possible so that the reader can grasp the tactics behind your objectives quickly.
Financial projections
This section is perhaps the most critical in the whole marketing plan because it will be the one most scrutinised by the reader. The financial projections section will include all the financial information relevant to the project.
Although each plan differs, most will require you to have a three-year income statement, a three-year cash-flow projection, and a three-year summary of the balance sheet. You may also want to include an implementation schedule and balance sheet.
Through your research and from the body of the marketing plan, you should already have solid numbers on which to base your projections. Your financial information will not only allow investors to determine whether or not they want to fund the proposal, but it is also important to you because it provides you with yet another crucial tool that will aid you in controlling the course of the project.
A three-year income statement is a month-by-month look at projected sales, fixed and variable expenses, and profits. It provides a quick look at how you believe your project will perform over a three-year period.
While the income statement takes a close look at sales and expenses, the cash-flow projection summarises this information and displays the availability of cash on a month-to-month basis. A cash flow projection is usually divided into two sections: income and total expenses. When expenses are subtracted from income, you wind up with your cash-flow excess or deficit.
The cash flow projection is an important barometer because it shows when you will need additional money to keep the project going. Although we recommend that you perform a three-year income and cash-flow projection, you can generate them for a one or two-year period or even up to five years. The choice is yours. A three-year period, however, is the norm for marketing plans.
A balance sheet is a table of assets and liabilities (ie., summary of credits and debits) as well as capital, or owner’s equity, of a business at one point in time. A balance sheet is typically generated when books are closed after a specific period of time, either monthly, quarterly, or annually.
For the marketing plan, we suggest you provide balance sheets on a yearly basis. You will be able to generate a balance sheet for year one, year two, and year three. Information for the balance sheet will be available from your income statement and cash flow projection.
You may also want to include an implementation schedule in your marketing plan. The implementation schedule lists the major goals and tasks necessary to complete the project and the capital outlay for each period.
You can base your schedule on weekly, monthly or quarterly periods. If your project is a lengthy one with projections of up to five years, we recommend basing your schedule on quarterly periods. If it ranges between a year and three years, implement a monthly schedule. If it is a year or less, you may want to consider a weekly schedule.
Keep in mind while you are forming your projections that market potential, sales potential and sales forecast all mean different things when it comes to forecasting. Market potential pertains to the total potential sales for a product or service within a specific geographical area over a fixed period of time.
Sales potential refers to the capability of the market to absorb the volume produced by a specific company within the industry, such as yours. For instance, market potential for the first year for the entire disposable nappy industry is $3.1 billion, but the ability of the market to purchase Bio-Baby nappies during that period of time is only $248 million.
Your sales potential, however, is not the same as your sales forecast. Sales forecast is the actual sales you believe your company will generate during the year based on your market research. The reason companies don’t achieve the total sales potential within a market is due to various factors, including limited resources, the margin of return on the investment, and unforeseen market factors.
Perhaps the most common reason why companies don’t achieve their total sales potential is because of the law of diminishing returns. This means the more aggressive you are in achieving total sales potential, the greater your marginal cost will be for each additional percentage point you gain above your sales forecast.
Summary
The summary concludes your marketing plan; therefore, it should highlight those points in your plan that are most significant. These include items such as the advantages your product has over your competitors, cost structure, and profits.
The summary doesn’t have to be long. A few paragraphs should allow you to encapsulate all the major points within your marketing plan so they are readily available for the reader should they bypass the body of the plan and go straight to the summary. Don’t skimp on this section of the marketing plan.
Your summary statement should start off with an explanation of the marketing plan. Since most are formed for the purpose of raising capital, you should include the amount of the investment you will need in order to accomplish your goals.
Next, provide the reasons why this investment is justified, such as your competitive advantage and any other elements that will contribute to your success. To assure yourself that you have included all the necessary information, you may want to write down all the major points you’ve discussed in the marketing plan.
