Chapter 10

1. Chapter 10 The Marketing Plan Entrepreneurship & Small Business Management

2. Developing the Marketing Mix • After completing your market analysis and identifying your business. • You must identify what you want to do with your marketing efforts. You must define your marketing objectives. • Most businesses objectives relate to sales, market share, growth, and profit. • Short-term marketing objectives are for one year. • Long-range marketing objectives might reflect what you hope to achieve in three to five years. • These are sometimes called goals. • When objectives are clearly written, they provide a blueprint for developing your individual marketing strategies and your overall marketing plan. • They also help you measure your success. • Next, you must create an appropriate marketing plan. The marketing plan consists of four strategies – product, place, price and promotion. To reach your marketing objectives, all four P’s must be mixed appropriately. • They must be directed toward the target market. • The combination of the product, place, and promotion strategies that you use to reach your market is the marketing mix. Entrepreneurship & Small Business Management

3. The Product Strategy • The product strategy deals with goods or services. • Product decisions are crucial to the success of your business. • Products that don’t match up with customer needs or expectations will not sell. • While conducting market analysis, you have probably already gathered some product information and made some product decisions. • Now you must address such considerations thoroughly and systematically. Entrepreneurship & Small Business Management

4. Product Features • Think about your product as a package of features or benefits for the customer. • Goods such as cars, appliances, or clothing include physical features. • They have style, color, quality, and options. • Also consider intangibles such as warranties, service contracts, delivery, installation, and instructions. • Service businesses such as financial institutions and video arcades, offer intangible benefits. • They include convenience, health, a sense of well-being, and entertainment. • What will your product offer? Entrepreneurship & Small Business Management

5. Branding, Packaging, and Labeling • How will you identify your product? • How can it stand out from the competition? • Part of the answer lies in branding, packaging, and labeling. • A brand is the name, symbol, or design used to identify a product. • A package is the physical container or wrapper that holds it. • The label is the part of the package used to present information. • All three contribute something to the product and, in the process, become part of it. • For example, when you buy Puma footwear, you expect a certain quality of athletic shoe in a specific type of box with a clearly marked label. Entrepreneurship & Small Business Management

6. Product Selection • What products will you sell? • Are you going to manufacture them or sell them? • Developing and manufacturing new products to sell involves several steps. • First you generate product ideas and sort out the good ones from the bad. • Then you study the product’s potential costs and revenues. • You develop the product and test-market it. • Finally, if everything looks promising, you introduce it. • In contrast, choosing products for resale is largely a matter of gathering information. • First you study consumer demands and product availability, then make decisions to bring the two together. • If you begin selling more than one item, consider how well the new product might fit in with the other items you sell. Entrepreneurship & Small Business Management

7. Product Positioning • Product positioning refers to how consumers see your product. • Luxury cars such as Mercedes-Benz and Cadillac are positioned as the most prestigious. • Economy cars are positioned as the best bargain. • How you position your product depends on your marketing goals. • Who is your target consumer? • You can position your product through its quality, availability, pricing, and uses. • Branding, packaging, and labeling also affect your product’s image and positioning. Entrepreneurship & Small Business Management

8. Product Mix • Finally, you will need to consider your product mix. This term refers to all the products a company makes or sells. • If you are going to offer multiple products, you should think about how they relate to each other. • If you want to reach a single market, you may decide to include only products that complement each other. • Alpine concentrates on car stereo equipment. • If you try to reach multiple markets, you may decide on a more diversified mix. • Sony sells audio equipment of all kinds, as well as video, computer, and home appliances. • What you sell will depend on the image you want to project and the market are targeting. Entrepreneurship & Small Business Management

9. Product Decisions • As you consider the product strategy for your marketing plan, ask yourself the following questions, keeping your target market in mind. • What products should I manufacture or sell? • At what quality level should I make my goods? • How much inventory should I maintain? • How will my products be better than my competitors? • How will I position my products? • What will my customer service policy be? • Will the physical layout of my business encourage sales? • Do my hours of operation match the times that my target market prefers to do business? Entrepreneurship & Small Business Management

10. The Place Strategy • Place strategy involves how you will deliver your goods and services to your customers. • Where will customers buy your product? • When will they buy it? • Will your product actually be there, ready and available for sale? • Note that all these questions involve movement of your product-to your location and to your customers. • Therefore, this part of the marketing mix is also known as the distribution strategy. • You have already considered some aspects of distribution. • As you conducted market analysis, you noted how your competitors operate. • What can you learn from their distribution? • How can you do better? • Likewise, as you investigated potential sites, you identified the suitability of loading and storage areas. • You also checked the sites’ proximity to distribution systems. • Examining the following areas will help you finalize your strategy. Entrepreneurship & Small Business Management

11. Channels of Distribution • To formulate your place strategy, you need to understand the possible channels of distribution. A channel of distribution is the path a product takes from producer (or manufacturer) to final user (or consumer). • There are two basic types of channels-direct and indirect. • A direct channel moves a product from producer to customer with no one in between. • Service businesses are typical examples. If you give an H&R Block tax preparer y9our financial records, he or she will return to you a finished tax return a few days later. No one else is involved. • In contrast, an indirect channel employs intermediaries. These are people or businesses that move products between producers and final users. They include wholesalers and retailers (who sell in the consumer market), distributors (who sell in the industrial market), and agents (who arrange sales). For example, a clothing designer might use an agent to contact wholesalers and retailers. • This way, he or she can reach a large market without having to worry about maintaining a sales staff or store. This allows the designer to concentrate on what he or she does best-designing. Entrepreneurship & Small Business Management

12. Channels of Distribution (continued) • The type of business you have will determine where you fit in your channel of distribution. • If you are a producer, you will be concerned with sending products through a channel. • If you are a retailer, you will be concerned with receiving them. • If you are a wholesaler, you will be concerned with both. • You may also use or be involved in more than one channel. • The channel of distribution you choose can affect your product in many ways. • It can raise or lower your product’s cost. • It can affect the potential for loss or damage to your product in transit. • Most important, it can determine how quickly your product reaches your customers. • If you can find a channel that is more efficient than the ones similar businesses are using, you can gain a competitive edge. Entrepreneurship & Small Business Management

13. Channels of Distribution – Consumer Market Manufacturers/Producers Agents Wholesalers Retailers Consumer Consumer Consumer Consumer Consumer Entrepreneurship & Small Business Management

14. Channels of Distribution – Industrial Market Manufacturers/Producers Agents Industrial Distributors Industrial User Industrial User Industrial User Industrial User Entrepreneurship & Small Business Management

15. Intensity of Distribution • How broadly will you distribute your product? • You have three choices. • Intensive distribution involves placement of a product in all suitable sales outlets. For example, you can find best-selling paperbacks in bookstores, supermarkets, and magazine stands. • Selective distribution limits the number of sales outlets in an area. For example, textbooks are only found near schools. • Exclusive distribution limits the number of outlets to one per area. For example, a museum might sell a special book for an exhibit. Entrepreneurship & Small Business Management

16. Transportation • The physical movement of goods will also enter into your place decisions. • How will your product be shipped? • Your choices include by truck, train, airplane, or pipeline. • If you are dealing in information, you might be able to send it through the Internet. • The method of transportation affects how fast your product reaches consumers. • It will also determine your shipping costs. • Generally, air transportation is the most expensive and waterway is the cheapest. • Finally, it will dictate in some measure how your product will be packaged. Entrepreneurship & Small Business Management

17. Location, Layout, and Availability • As you learned earlier, location, or site, considerations are important to your place strategy. • They are especially important to retail and service business that depend on customers to come to them. • If yours is such a business, you can increase customer access and encourage sales by selecting a location near transportation routes. • You might decide to have entrances on different sides of your site. • You might also favor evening over morning hours of operation. • What do these options have in common? • They are designed to match the needs and opportunities of potential customers. • In order words, they are designed to make it easy for people to do business with you. Entrepreneurship & Small Business Management

18. Place Decisions • When you make your place decisions, keep your target market in mind and ask yourself the following questions: • How will my products be sold and distributed? • Will my product go directly from producer to user, or will it go through an intermediary? • Can I use more efficient channels of distribution? • What are the channel members I will use to obtain my products? • What are the channel members I will use to distribute my products? • How intensively will I distribute my products? • Is my location appropriate for my target market (or markets)? • Will the physical layout of my business encourage or discourage sales? • Do my hours of operation match the times that my target market prefers to do business? Entrepreneurship & Small Business Management

19. Reviewing & Revising The Marketing plan • In business, change is constant. • Technology makes products obsolete. • Clothing styles go forward from season to season. • A sport that is popular now will be replaced by a new one next year. • How can you measure change? • How can you predict it and prepare for it? • Such adjustments are made according to market research. • Suppose you own and manage a CD store. • The releases that are selling well this week may not even be on the charts next month. • To stay profitable, you must keep up with what’s going on in the music scene. • In business terms, you must continue your market research. Entrepreneurship & Small Business Management

20. Marketing Research • Once you’ve started your business, your marketing research is not over: • You now have another source of primary information – your customers: Gather information from current and former customers. Conduct surveys by mail, on the phone, over the Internet, in personal interviews, and through focus groups. • Secondary information is available through your operation itself: Accounting records and sales receipts include your expenses. They also show which products are moving and which ones aren’t. • Collect information that affects your operation: Read newspaper, magazine, Internet, and trade publications. Clip articles that pertain to your business and make a file. • Make market research an ongoing priority: You can rely on informal research for much of your information gathering, but at some point you may want more sophisticated methods. If so, consider hiring a professional market researcher. Entrepreneurship & Small Business Management

21. Reviewing Your Marketing Mix • Ever wonder why cereal boxes undergo face-lifts every now and then? • Market research provides information a business needs to make such adjustments to the marketing plan. • By being aware of what’s happening in your market, you can make changes in your marketing strategies (the four P’s) as needed to meet your marketing objectives. • In this section, we will look at the kinds of changes businesses often have to consider in their product and place strategies. • We will also overview price and promotion considerations. Entrepreneurship & Small Business Management

22. Possible Product Changes • Concerns about product strategy are the same for both start-up and ongoing businesses; what goods or services should you offer? • How will your products be different from your competitors’ products? • What can you do to make sure customers can identify your products? • The only difference is that now you will be making decisions about existing products rather than projected ones. • A change in any one of your products could affect your other products. • A change might stimulate sales through increased traffic or cause a loss of sales through negative consumer reaction. For example, when Volkswagen reintroduced in the Beetle in 1998, the increase in traffic benefited all Volkswagen models in the showroom. In contrast, if a car model gets a bad reputation, the entire image of a manufacturer can suffer. Entrepreneurship & Small Business Management

23. Adding Products • Before adding products to your line or adding lines, ask yourself these questions: • Is there sufficient demand to add the new product? A few people may have expressed interest, but you’ve got to sell enough to break even. • Is the product consistent with your current business? It may be a good idea for somebody’s operation but not for yours. • Will it compete with your current products? It may sell very well, but what if it takes away an equal amount in current sales? • Is it the best use and application of your economic resources? Can your money, labor, and facilities be better used by putting your money, labor, and facilities be better used by putting them to work in connection with another product line or another part of your marketing mix? Entrepreneurship & Small Business Management

24. Eliminating Products • One reason to eliminate a product is that it isn’t selling. • Sometimes business people are slow to take such action, thinking they can make the item sell. • Not cutting the product can lead to a build-up of inventory and financial losses. • By not cutting it, you may be misusing sales or production efforts. • Another reason for eliminating products is to simplify your line of goods or services. • This allows you to focus on the things you do well. Entrepreneurship & Small Business Management

25. Changing Products • Changing the style or design of your product, if the changes are consistent with customer demands, can give you a competitive edge. • You may make changes to keep in step with current fashions. • You may also improve your products with the latest technology. • Changing your product may affect your prices and distribution. • Timing must be considered, too. • Your offerings should be up-to-date, but not ahead of the market. Entrepreneurship & Small Business Management

26. Changing Brands, Packaging, or Labels • If you manufacture products under a variety of brand names, you may want to consolidate them all under one brand. • This could help to build a brand preference among customers. • If you carry other people’s brands for resale, you may be able to sell more by offering your own private brand. • Larger supermarkets often offer a variety of products on their own label. • You may want to change packaging and labels to enhance the attractiveness, interest, and salability of your products. • You may also change your packaging for environmental reasons. • Budget Gourmet dinners are packaged in molded paper containers. Because so many consumers are concerned about the environment, these kinds of changes could make your product more appealing. Entrepreneurship & Small Business Management

27. Revising Guarantees and Service Policies • To build customer confidence and increase sales, a business can improve or add service policies and guarantees. • A guarantee is an assurance of the quality of a product. • Guarantees and policies can make the difference in a sale, particularly with big-ticket items. • Of course, you must be able to provide the additional guaranteed services. Entrepreneurship & Small Business Management

28. Possible Place Changes • When you make changes in your ongoing place strategy, they will most likely be in the areas of location, layout, and availability. • To some extent, you may also make changes in your channels of distribution. Entrepreneurship & Small Business Management

29. Improving Location • As your business grows, you may look for ways to improve your location. • You could extend it by using kiosks, or stands, on street corners or in malls. • With some businesses, you could “take your location to the customer” through mobile units. • You might also want to consider more permanent and substantial changes. • You might add outlets or branch operations. • You could change your base location to be more accessible to customers. • Because these are more permanent steps, however, they would have to be coordinated with your plans for growth. Entrepreneurship & Small Business Management

30. Rearranging Layout • You may also want to rearrange the physical layout of your operation. • For retail and some service businesses, this change can enhance sales. • Adding or expanding parking or access to your business can do the same. • If you are a manufacturer, wholesaler, or extractor, you might reorganize how your goods are physically distributed. • This could increase your capability to serve your customers Entrepreneurship & Small Business Management

31. References • Allen, K. & Meyer, E. (2000). Entrepreneurship and Small Business Management. Retrieved August 25, 2012, from Glenco McGraw-Hill. Entrepreneurship & Small Business Management