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Guide to Writing a Business Plan – Part 5 – Marketing Strategy

October 11, 2011

In Part 5 of our 8-Part Guide to Writing a Business Plan we review the Marketing Strategy.

Once you have established the market, the competition and the factors that affect it you need to detail the strategy of how you will enter the market place.

8. Marketing Strategy

In marketing strategy the four principle strategies are:

  • Penetrate in new markets
  • To increase your share of the existing market
  • To entrench yourself in the market
  • To withdraw from the market place

Possible strategic objectives:

  • Sales objectives
  • Number of clients won
  • Profit or margin objectives
  • Share of the market
  • Penetrate into new areas
  • Penetrate into new market segments
  • Positioning objectives
  • Launching new products
  • Withdrawing products from the market place

Now the objectives of the business are identified you need to look at the marketing mix, these are the four elements that are at the heart of marketing: product, price, distribution, and promotion.

Product

There are three types of product decisions that can be made:

  • Create a new product
  • Modify a current product
  • Withdraw a product

These decisions need to based on gaps in the current market, gaps in other markets and short fallings of the competition.

Price

The most common pricing objectives are as follows:

  • To obtain profit on the capital invested
  • To obtain profit on sales
  • To gain a share of the market

There are basically three price strategies:

  • Pricing low for penetration
  • Price to match the competition
  • High pricing

These pricing strategies can be applied:

  • Generically across all products
  • With each line of products having a different pricing structure
  • With each product priced independently
  • By geographical area

Distribution

Distribution is the movement of merchandise from the place of production to the end consumer and all the processes in between.

All products that you sell can be sold in the same way or can be split by product or line of products, different market segments may be better served in different ways or different geographical regions may be better covered through different channels.

The distribution channel allows the business access to a market, to transport and sell products to the consumer; there are two routes to reach the customer:

  • Direct sales. From manufacturer direct to the end consumer.
  • Via resellers. Through agents, wholesale or retail.

Direct sales

Direct sales can be executed via the telephone, through your web page, via sales people visiting customers, by mail or through your high-street outlet or office.

Agents

Agents organize distribution to the end consumer through wholesale and retail. They will normally offer further services to aid this process including:

  • Transport
  • Sales promotion
  • A sales team
  • Accounts facilities
  • Giving credit to clients
  • Giving advise on the sector

Distributors

Distributors are companies that are authorized to distribute products in a determined graphical area.

They will then sell direct to large clients or use wholesale or retail as appropriate.

Wholesale

They buy the product and sell it onto other wholesalers or direct to retailers.

Retail

Retail sell the product direct to the end consumer. They can acquire the product via any or through all of the above channels depending on their activity, their location or product type.

Retail takes two forms, independent stores that have one or a few outlets and retail multiples which may have many outlets over a large geographical area.

Franchises

Franchising is the process of a set formula being applied by the franchisee that has been set up, tried, tested and proven by the franchisor.

The franchisee is responsible for following the set plan and the franchisor is responsible for supporting the franchisee, providing operational advice and often advertising or promotional material. The franchisee has to pay the franchisor regular royalties or a management fee from the operation and there is often an initial buy in fee.

Promotion

There are four basic forms of promotion

  • Personal sales
  • Sales promotion
  • Advertising
  • Public relations

TIPS

  • Be direct. Define the essential characteristics of your products and how they satisfy the needs of the market.
  • Do not be excessively technical.
  • It is very important to define the distribution strategy. Many products have failed because they have not organized distribution correctly or not supplied the necessary resources.
  • Be realistic with the promotional budget, remembering that the products or services are as yet unknown in the market place.
  • Be very careful when deciding on pricing strategy and all its variants.
  • This section is right at the heart of the business plan along with the figures, so be thorough.

On to Part 6 – Writing a Business Plan – Success Factors

Back to the Guide to Writing a Business Plan Index