Wednesday, November 19, 2008

Developing a Good Marketing Plan

By Olu Akanmu (August 2005)

A good product does not sell itself. This is a funny logic that runs against the basic human intuition. A good product sells itself only when backed by a solid well thought out marketing plan. What is then a marketing plan?

A marketing plan in simple terms is that program or plan that lays out how a product or service will be adopted by its best target market to produce the desired revenue and profit for the firm. In essence, it is finding those who will use the product or service, how they will use it, where they will use it and sometime when they will use it and by so doing generate revenue for the owner of the product. If marketing planning is however that simple, everyone will be a great marketer; or rather every product should be selling. This does not usually happen. This is because; there are methods for developing a good marketing plan. This is what we shall discuss. Hopefully, you will be able to apply it to your own business.

The steps to follow in developing a good marketing plan are as follows

a) Analyze the business environment of the product or service: Consider the economy, social environment and government policy. Does it have any impact on your business? We will illustrate the marketing planning principle with the example of a common business a small eatery. If the economy is growing, there is more disposable income in circulation. If your eatery is to be located in an industrial estate, are the industries in your location on the positive side of government policy? If the industries grow, there will be more workers who have more money to spend, implying a good business for your eatery. Is your eatery located in a place where population will continue to grow or decline? Apapa Central Business District in Lagos for example has witnessed significant decline of commerce due to the degeneration of the environment, and the decline of some manufacturing industries that used to be located there. Abuja is witnessing massive population surge of people who have no comfortable place to stay and have to eat out. This is good for eatery business.

The economy, social and government policy are larger environmental issues. Come nearer home to the immediate environment of your service. In your defined location, where your customers are likely to be coming from, how many eateries are available? In essence, consider competition and your customers. Are there too many eateries or are there too few for the number of people who may want to eat out. Consider, the size of the market and competition in that market. Do not define your competition too narrowly. Remember that any alternative the customer perceives to product is a competitor. For example, buses are an alternative to railways. Railways are not a monopoly in the real sense.

You may want to consider the level of service provided by current competitors. Do customers have to travel far to get service? Do they have to queue for long? Is the environment comfortable? In essence, you are analyzing the market for opportunity gaps.

b) Analyze the strength and weakness of your product. No product is perfect. A good product must however have more strength than weaknesses relative to its competitors. Please, note that the analysis is done from a customer perspective, comparing your product to the alternatives available. It implies that it is not good enough to be exactly like an existing competitor. You need to be different in a relevant way to the customer.

c) Analyze your opportunities and threats: What are the market gaps you have spotted in your environment analysis? Are there customers who are not currently satisfied with existing services? How many are they? Can you product satisfy these customers? Is the number of customers growing more than those who can supply them? What issues in the environment threaten your business plan? Will government policy change? Will the FCT Ministry enforce the new town planning law? Will there be entry of new competitors with similar or substitute products?

d) Define your objectives: What do you want to achieve in a planning period, usually one year? Put a clear number on it. If you can measure clearly what you intend to achieve, you will never know whether you have been successfully or whether you could have been more successful. Objectives can be revenue, market share, tones or volumes of product that you want to sell in the year.

e) Spell out clearly the risks that you cannot control. There are things that we may never know, control or plan for. Yet, we need to plan sometimes with the best of optimism. A marketing plan for agricultural services may need to spell out good weather as a risk and assume that there will be good rain. That becomes an assumption of the plan. If it turns out, that there is drought, the plan will need to be quickly reviewed as the foundation assumptions of the plan no longer holds.

f) Define your target market. From your analysis, which part of the market do you think will be most waoed by your product? Remember that everybody cannot love your product, but certain sections of the market will love it more than others because your product is more closely aligned to their needs than others. Find out these group or market segment? Is it big enough commercially to give you your revenue objectives? If not, you may have to define your target a little more broadly and adjust your product or service mix to appeal to a wider customer group or segment.

g) Define your marketing strategy. Your marketing strategy has a typical four leg…(Product, Price, Promotion and Place). The classic 4Ps of Marketing. The marketing strategy is about how to take advantage of your strength, minimize the impact of your weakness, and capitalize on your opportunities and ward-off your threats. (from the steps c and d). The tools to do these are the 4Ps of product, price, promotion and place.

a. Product: What is the strength of your product? Is it something you can take advantage of, to differentiate your service in positive way for the customer. Remember that differentiated service tend to command better prices and higher revenue. And if your product does not have any differentiation, can you build one into it as a product plan? How your eatery be different from others. You business will not prosper just by being like others. You have to be different.
b. Price: How will you price your product? Do you want to price a little above your competitors to signal to the market that your product is superior. Many entrepreneurs miss this important signaling opportunity. It is not all the time that low price sells. You can also price below your competitor to achieve quick market penetration. You must however be careful not to communicate the impression of an inferior product with your low price. Always have your target market in mind. A good pricing strategy for a product targeting a different market from yours may not be a good pricing strategy for your product.
c. Promotion: How will your target market know about your product? Are you going to advertise, send out salesmen, print flyers, banners etc? How do you want the target market to see your product/ service? Is it the eatery with a clean environment or the eatery for family outing? You may even consider the eatery for fast service? The way in which you want the market to see your product must be backed by tangible product offering to ensure that your advertising claim is not hollow.
d. Place or Distribution: How will the target market get or access your product or service? Where will you locate and in how many places? For tangible products, are you going to appoint middlemen or distributors? How will you structure your margins reward your distributors, keep them motivated while leaving for yourself sufficient margin for profitability.

h) Develop a Calendar of Action: A marketing plan is an academic exercise if it does not have a clear calendar of program and actions based on the marketing strategy discussed above. Every strategy should be extended to a clear actionable initiative of what is to be done, when it is to be done, how to do it, where to do it and who to do it.

i) Put together a budget and expenditure plan: What do you intend to spend? All your action must be contained within your budget. Develop and expenditure plans by period, month and quarter.

j) Performance Review: Do a periodic (monthly or quarterly review of your performance based on the plan? Are you on target or above target? What are the performance gaps and why? What do you need to do to close the gaps? And if you are above target, did you under-estimate your market potential in the first instance? Would you consider an upward review of your target because of this new reality?


Olu Akanmu
August 2005


Anietie said...

Nice Work!

Opeyemi Adeleke said...

Excellent piece! It's both academic, professional and street-wise. Even a small business owner can make do with it.

kamoru said...

This is very fantastic and informative. more power to your energy.