While developing a marketing plan for a small business may by the key to stepping the enterprise up to the next level, a surprisingly large number of business owners shy away from this relatively easy task.
The main reason, according to Danbury, CT-based Michael Short, director of strategic marketing, GE Capital Commercial Equipment Finance, is "the development of the marketing plan is so out of the mainstream of those things owners and managers of small businesses commonly do, it simply gets put aside."
Short added that small businesses focus more on problem solving. "Marketing involves a different process," he said. "You have to sit down and figure out where your business is today and where you want to take it. This is not a comfortable process."
Major benefits of a marketing plan, said Roth, is that it shows management to control the growth of the business. "Many companies don't have a handle on their business. They don't know where their profits are coming from and they often don't realize how much it costs to do business with what might be their biggest customers."
While owners and managers shy away from developing a marketing plan, both Roth and Short agree that developing the plan need not be such an intimidating task. They believe the owner, CEO and CFO should create the plan, which needn't be longer than five pages.
The basic fundamentals of the marketing plan ask:
- Who are your customers or target market.
- What are their (the customers') needs.
- What are your distinctive competencies in fulfilling those needs.
- How do you communicate those competencies to your target market.
1. GETTING STARTED
The first step, according to Short, is a precise definition of the business and its mission. "What would you tell a person you didn't know at a cocktail party when he asks what your business does," he said.
You need to develop a brief, business statement, he added. "Here's what we do, here is who we serve, here is where we have been and here is where we are going."
From the outset, it is crucial to set a goal for the plan, according to Roth. "It's important to set a target," he said. "Have some quantifiable expectations so you can evaluate the plan's performance based on those expectations."
Many plans never get off the ground because business owners don't have a clue on where to get information. Here are some ideas.
"Talk to your customers," said Short. "Find out from them who are the best companies in your field. What do they like and dislike about you. Customers are rather brutal in their honesty sometimes but be willing to expect and accept it."
For smaller, locally-oriented companies, Short advises getting in touch with the local chamber of commerce and getting a list of similar businesses. "Drive around or look in the telephone book," he added.
Roth suggests the Internet as a good source of information. "Go to one of the big search engines, like Excite or Yahoo, and plug in your products and see what comes out," he said. Other valuable sources are trade associations and trade publications.
2. ANALYTIC TOOLS
There are a number of basic and easy-to-use strategic planning tools that will help a business develop its plan. The easiest and most enlightening is the Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis. Here's how you do it. On a blackboard or easel draw four columns and start listing things under each of the four categories. Don't be surprised if you discover something that might be a strength also might be a weakness.
"The SWOT analysis should not only be done for your company but for your major competitors," said Short. Roth suggests another valuable tool is a four-quadrant box where you have cost (high and low) on one side and volume (high and low) on the other. "This allows you to graphically chart customers or potential customers where they might be high on the volume but very expensive to serve," he said.
Both Short and Roth add that computer spreadsheets also are a valuable analytic tool because they enable the business to plug in variables and ask "what if."
3. OBJECTIVES AND STRATEGY
The strategic analysis leads to the next steps -- determining objectives and strategy. Simply, it's deciding where you want to go and how you plan to get there. Both Roth and Short emphasize the focus must be on profit rather than sales volume. Short adds that in evaluating the performance of the business even profit can be deceptive because, for tax purposes, many smaller businesses are not interesting in showing big profits. He suggests analyzing cash flow statements or earnings before interest, taxes, depreciation and amortization (EBITDA).
"Emphasis should be on profit," said Short. "Volume or sales does not cure all evils. It might lower your per-unit costs, but won't determine if you are successful. All revenue is not created equal." Roth sees "creating alliances" with non-competing suppliers as an objective . "Let's say you and another supplier are both selling products to the same customer. You can help each other and this might create barriers to entry for your competitors," he said.
Short urges small businesses to focus on their "distinctive competencies" in developing a marketing strategy. "What is the value statement you want to create. Why do your customers buy from you."
Segmenting markets can also be a valuable strategy. This involves finding similarities and differences with the firm's present and potential customers such as:
- Geographic area
- Industries
- Size of customer in terms of sales or employees
- What customers are generating the greatest volume and what customers are generating the highest profits
"I find the 80/20 rule almost universal," said Short. "In almost every business I look at, there are 20 percent of the customers generating 80 percent of the business." Roth believes segmentation analysis allows the company to determine the intensity of customers' need for your products. "How important is my product to the customer, how often do they use it, is there any other competitor providing something unique that your customers absolutely need," he asks.
4. PLAN OF ACTION
The Action Plan develops specific goals and objectives and techniques for implementation. Goals might include increased sales, better profits, greater market share, introduction of new products or added distribution channels.
Roth cites a Proctor & Gable concept called STAR, which stands for Steps, Timing, Assistance and Responsibility, that is particularly valuable for determining how to accomplish a goal.
- STEPS involves the objective, such as introducing a new product.
- TIMING requires a time line that shows how the task rolls out over a time frame.
- ASSISTANCE refers to who will be part of the team to make it happen.
- RESPONSIBILITY singles out who has the ultimate custody for success or failure.
Deciding how you communicate your distinctive competencies to your target market brings in the advertising/sales aspects of the action plan. It may require changes in the sales force and/or use of media advertising, telemarketing, direct mail and/or greater Internet presence.
"You need to touch the customer through some medium with the right message," said Roth. "You have to look at that customer and ask yourself who is the decision-maker and what is the best way to reach that person."
5. BUDGETING
Every initiative in a marketing plan carries a price tag. The plan represents an investment in the business's future. Like any other investment, there is cost and payback. The return on the investment has to be in profitability -- not revenues.
"I take every project and determine what the volume and profit opportunity is on the basis of 12 months," said Roth. "The key is to decide what is the return on investment based on your profit margin. If I am going to invest $100,000 in a marketing program or task and I have a 20 percent margin, this means I have to generate $500,000 in sales just to break even."
"There is also a recurring aspect," he added. "If I maintain 60 percent of the new revenues the next year, I keep making money and the investment pays off even more."
6. MONITORING AND CONTROL
The marketing plan is a dynamic document. It is not something the CEO puts on the shelf and dusts off every year to see how well or poorly the company performed. It has to be analyzed and evaluated periodically and modified.
Roth believes small businesses should evaluate the plan on a monthly basis. "Every 30 days you should be looking at it and asking -- how am I doing," he said. "You might be surprised when you discover you are doing better than you thought.
"If you are not," he added. "Don't be afraid to make changes and pull the plug on things that are not working as long as you have given these executions enough time to develop."
Outline for Your Written Marketing Plan
Here are some basic steps to use in developing a written marketing program:
- EXECUTIVE SUMMARY -- a brief overview of the plan tied to specific goals.
- CURRENT MARKETING SITUATION -- relevant information on target markets, products and competition.
- OPPORTUNITIES/ISSUES ANALYSIS -- assessment of strengths, weaknesses, opportunities, threats and other relevant issues.
- OBJECTIVES -- specific goals of the plan in terms of sales, profits, market share.
- MARKETING STRATEGY -- your game plan or road map for achieving the objectives.
- ACTION PLAN -- what will be done, who will do it, when, and for how much.
- CONTROLS -- how the plan will be evaluated and by whom and how often.
James T. Berger is a freelance writer, marketing consultant and lecturer at Roosevelt University. His work has appeared in Crain's Chicago Business and Business Life.
Reprinted from
YOUR SUCCESS,
Spring 1999
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