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Chapter 7
Marketing Plan
Chapter Notes
I.
Introduction

This chapter focuses on how the firm will actually find customers and close sales

It deals with the nuts and bolts of marketing in terms of price, promotions,
distribution, and sales

Describe a company’s marketing plan by articulating its marketing strategy,
positioning, and points of differentiation and how they will be supported by price,
promotional mix, and sales process and distribution strategy

The marketing section of the business plan must lay out specifically how you plan
to make your target market aware of the existence of your product or service

Reinforce how your product provides its user unique value and differs from
similar products in the marketplace

There are two things to be mindful of as you write this section:
o
The elements of a firm’s marketing plan should be developed with the
customer plainly in mind
o
You must detail exactly who will sell your product and how your sales
process will work

Describe your sales process and the methods that you’ll use to sell your product
(e.g., via direct sales force, through distributors or wholesalers, through an
alliance with companies that sell complementary products, or through some other
means)
II.
Overall Marketing Strategy

Marketing strategy refers to a firm’s approach to marketing its products and
services in broad terms, which forms the basis of all its marketing-related
activities

Begin the marketing plan section by articulating your marketing strategy because
it sets the tone for the entire section

Another important reason for having a marketing strategy and for articulating it in
a business plan is to make sure that a firm’s marketing efforts are consistent with
its overall mission and understanding of the market
a.
Positioning Strategy
o
After selecting a target market, the next step is for a firm to select a
“position” in the market
o
Position is concerned with how a firm is situated relative to its
rivals (or potential rivals)
o
Determining which position to occupy and compete in is simply a
judgment call on the part of a company based on its mission, its
overall approach to the marketplace, and its competitive landscape
b.
III.
Points of Differentiation
o
You should also clearly articulate your specific points of
differentiation early in the marketing plan section of your business
plan
o
It’s typically best to limit the points of differentiation that you talk
about to two or three points, to make them memorable and distinct
o
Make sure your points of differentiation aren’t liabilities, if a
discerning reader starts playing devil’s advocate
o
The most compelling forms of differentiation are created through
innovations that are difficult to imitate because they are created by
competencies unique to a firm
o
A useful way for a start-up to visually depict its primary point of
differentiation is through a product attribute map

A product attribute map is created by articulating two of a
product’s most important attributes, one on the x-axis and
the other on the y-axis
Pricing Strategy

This section should explain how you plan to price your product or service

The price a company charges for its products also sends a clear message to its
target customers

State how you plan to price your product or services and provide a brief rationale
for your pricing philosophy
a.

Cost-Based Pricing vs. Value-Based Pricing
o
The two methods for determining the price of a product or service
are cost-based pricing and value-based pricing:

In cost-based pricing, the list price is determined by adding
a markup percentage to a product’s cost

The advantage of this method is that it’s
straightforward and easy to justify

The disadvantage is that it’s not always easy to
estimate what the costs of a product will be,
particularly for a start-up

Companies are also finding it increasingly difficult
to dictate prices to customers given customers’
ability to comparison shop on the Internet to find
what they believe is the best price

In value-based pricing, the list price is determined by
estimating what consumers are willing to pay for a product
and then backing off a bit to provide a cushion
Sometimes, to make this determination, a company has to conduct focus
groups or try different pricing options in test markets
o
o
b.
IV.
Most experts recommend value-based pricing because it hinges on
the perceived value of a product or service rather than cost-based
pricing, which ignores the customer
Value-based pricing also frequently produces a higher gross
margin (a company’s net sales minus cost of goods sold)
Other Pricing-Related Issues
o
Most experts warn start-ups to resist the temptation to charge a low
price for their products in hopes of capturing market share
o
Most consumers make a price-quality attribution, naturally
assuming that the higher-price product is also the better quality
product
o
The price you’re able to charge is largely a function of: (1) the
objective quality of your product or service and (2) the perception
of value that you create in the minds of your customers relative to
competing products in the marketplace
Sales Process and Promotions Mix

A firm’s sales process (or cycle) depicts the steps it goes through to identify
prospects and close sales

Promotions mix refers to the specific tactics it uses, such as advertising and public
relations, to support the sales process and enhance its overall brand

Sales and promotions is one area where hard work and ingenuity can make up for
a lack of funds

Money can also be easily wasted if the sales process is not carefully thought
through and executed
a.
Sales Process
o
Sales process (or cycle) varies by firm, but normally includes the
following steps:
1.
Prospect for (or gather) sales leads
2.
Make the initial contact
3.
Qualify the lead
4.
Make the sales presentation
5.
Meet objections and concerns
6.
Close the sale
7.
Follow up
o
Following a structured process to generate and close sales benefits
a firm in two ways: (1) it enables a firm to fine-tune its approach to
sales and build uniformity into the process and (2) it helps a firm
qualify leads, so the firm can spend its time and money pursuing
the most likely buyers
b.
Promotions Mix
o
Promotions mix includes the specific tactics that a firm uses to
communicate with potential customers including advertising,
public relations, and other promotions-related activities
i.
Advertising

Advertising is making people aware of a product in
hopes of persuading them to buy it

The major goals of advertising are to raise customer
awareness of a product, explain a product’s
comparative features and benefits, and create an
association between a product and a certain lifestyle
(or a certain objective in a business-to-business
context)

Media include direct mail, magazines, newspapers,
radio, the Internet, television, and billboard
advertising

Media used normally depends on the firm’s target
market

There are many downsides to conventional forms of
advertising, which steers start-ups away from
advertising on a broad basis:

Low credibility

Possibility that high percentage of viewers
will not be interested

Message clutter

Relative costliness

Perception that advertising is intrusive

Possibility that poorly crafted ads run risk of
irking target market

Most start-ups tend to be selective in advertising
efforts, such as limiting their print ads to industry
trade journals or using focused pay-per-click
ii.
Public Relations

Public relations refers to efforts to establish and
maintain a company’s image with the public

The major difference between public relations and
advertising is that public relations isn’t paid for

Examples of public relations techniques include:

Press releases

Media coverage

Articles about the firm in newspapers,
magazines, or industry press

Blogging


iii.
V.

Monthly newsletters

Civic, social, and community involvement
Generating favorable public relations is better than
advertising because it is more grassroots and
doesn’t seem to be as self-serving
The key to getting media coverage is to have a story
to tell, rather than simply extolling the value of your
product or service
Other Promotions-Related Activities

Some firms give away free samples or trial
memberships as a way of exposing potential
customers to their product or service

This type of initiative is often pursued to create
“buzz” or word-of-mouth advertising

Buzz means creating awareness and a sense of
anticipation about a company

In most cases, putting together a specific budget for
promotional activities is helpful
Distribution and Sales

Distribution encompasses all the activities that move a firm’s product from its
place of origin to the consumer

This section of your business plan clearly identifies your distribution and sales
plan in terms of who will make the sales
a.
Distribution and Sales Alternatives
o
The first step in determining a distribution and sales strategy is to
sort through the choices
o
The key to making the right choices among the alternatives is to
think carefully about where people in your target market shop, and
then about the most effective and economical ways to get your
products in these outlets
o
Selecting the manner to distribute and sell a product or service is
not a trivial issue; this critical issue lies at the heart of a firm’s
overall marketing plan and its ability to effectively reach its target
market
b.
Sales Strategy and Related Issues
o
Your description should make it clear whether you plan to field
your own sales force
o
Describe how many salespeople you will initially need, how their
numbers will be ramped up as your company grows, and how they
will be compensated
o
o
If distributing via intermediaries, describe how they will be
chosen, and the ways in which the intermediaries will interface
with the sales outlets in your industry
One way a new firm can innovate and provide unique value in the
marketplace is via distribution and sales