This assignment consists of two (2) sections:
a marketing plan and sales strategy, and a marketing budget. Note: You must
submit both sections as separate files for the completion of this assignment.
For the first six (6) months your company is
in business—to give you time to perfect your product and to learn from actual
customers—you will start marketing and selling in your own community, a radius
of twenty-five (25) miles from where you live.
For most non-alcoholic beverages, marketing
(as opposed to the actual product itself) is key to success. Cola drinks, for
example, are fairly undifferentiated, as are many energy drinks, juices,
bottled water, and the like. Companies producing these types of beverages
differentiate themselves and attract market share through marketing and brand
awareness—both of which are critical to success.
Section 1: Marketing
Plan & Sales Strategy (MS Word or equivalent)
Write the three to five (3-5) page Marketing
Plan & Sales Strategy section of your business plan, in which you:
1.
Define your company’s
target market.
o Analyze the types of consumers who will be
drinking your beverage in demographic terms (i.e., age, education level,
income, gender, ethnic group, etc.). Support your analysis with actual data on
the size of the demographic groups in your local community (nearby zip codes).
o Outline the demographic information for your
company specified on the worksheet in the course text (p. 107 | Demographic
Description).Click
here for help accessing a specific page number in your eBook.
§ Hints: At American FactFinder (http://census.gov), you will find demographic information on
potential consumers in your area. If you are selling through other businesses
(such as grocery stores), indicate the number of those businesses in your local
area. You will find information about such businesses in your local area at
County Business Patterns (http://www.census.gov/econ/cbp/). Check Chapter 2 of Successful Business
Plan for more research sources.
2.
Assess your company’s
market competition.
o Use the factors listed in the course text
graphic (p. 123 | Assess the Competition) to assess your company’s
market competition.
o Defend your strategy to successfully compete
against market leaders in your segment.
§ Hints: For example, in the soft drink market, it is intimidating to
try to compete against Coke and Pepsi. Newcomers in mature markets typically
must pursue niche markets or even create new market categories, as Red Bull did
with energy drinks.
o Defend your plan to differentiate yourself
from the competition using the information detailed on the worksheet in the
text (p. 131 | Market Share Distribution).
§ Hints: Every business faces competition and the non-alcoholic beverage
market is an especially crowded market.
1.
Clarify your company’s
message using the information provided on the worksheet in the text (p. 160 | The
Five F’s).
o
§ Hints: Before you choose your marketing vehicles, you must determine
the message you want to convey through those vehicles.
2.
Identify the marketing
vehicles you plan to use to build your company’s brand. Justify the key reasons
why they will be effective. Provide examples of other non-alcoholic beverage
companies that use these tactics effectively.
o
§ Hints: If you plan to use online marketing tactics, refer to the
worksheet in the text (p.171 | Online Marketing Tactics) to aid your
response. Remember that even if you’re selling through grocery stores you need
to build your brand and social media is a major part of that in regard to
beverages. Some of the marketing tactics that beverage companies use include:
sampling in grocery stores, building a following on social media, sponsoring
events, exhibiting at trade shows attended by retailers, and so on. You will
use a combination of these tactics. For example, if you decide to give out
samples in grocery stores, promote your sampling on your social media networks
and those of the grocery store.
o
§ Hints: If you are planning to distribute through resellers, describe
how you plan to reach them, for example, through industry trade shows or by
establishing your own sales force. For information on trade shows, visit the
Trade Show News Network (http://www.tsnn.com). You can exhibit or network at these shows.
1.
Format your assignment
according to these formatting requirements:
1.
Cite the resources you
have used to complete the exercise. Note: There is no minimum requirement for
the number of resources used in the exercise.
2.
Be typed, double
spaced, using Times New Roman font (size 12), with one-inch margins on all
sides; references must follow APA or school-specific format. Check with your
professor for any additional instructions.
3.
Include a cover page
containing the title of the assignment, the student’s name, the professor’s name,
the course title, and the date. The cover page and the reference page are not
included in the required page length.
Section 2: Marketing
Budget (MS Excel worksheets template)
Section 2 uses the “Business Plan Financials”
MS Excel template (see: Course Required Files in Week 1). Use the “Business
Plan Financials Guide” (see: Course Required Files in Week 1) to support your
development of the Marketing Budget.
1.
Complete the Marketing
Budget worksheet for your company.
o
§ Hints: The goal of the marketing budget is to help you determine how
much it will cost you to reach your market and achieve your sales goals.
§ Hints: When filling out the “Marketing Budget” worksheet in the Excel
spreadsheet:
§ Begin in the current year and complete a
marketing budget for the first year of your business. The information you enter
in the marketing budget spreadsheet will flow through to your “Income
Statement” in the Business Plan Financials.
§ Leave the number at zero (0) for any marketing
vehicles you do not intend to use.
§ Remember that all marketing activities involve
costs. If social media represents a significant portion of your marketing,
assume you will have cost of advertising and that should be reflected on your
budget. Even if a social media site charges nothing to use it, you will need to
use company resources to manage the site, pay someone to execute your social
media marketing campaigns, and will most likely pay for ads on that site.
§ Do NOT leave the “Marketing Budget” blank,
assuming you will not have any marketing costs.
Use this template APA_Template_With_Advice_(6th_Ed)
.doc107_demographic_description.pdfassignment_1_company_description_and_swot_analysis_sp.doc171_online_marketing_tactics.pdf160_the_five_f___s.pdf131_market_share_distribution.pdftext_book_files.pdfassignment_1_company_description_and_swot_analysis_sp.docbusiness_plan_financials.xlsmbusiness_plan_financials.pdfhttps://jigsaw.vitalsource.com/api/v0/books/9781933895475/print?from…
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Know Your Customers
Is Your Company Market Driven?
Defining Your Target Market
Demographic Description
Geographic Description
Lifestyle/Business-Style Description
Psychographic Description
Purchasing Patterns Description
Buying Sensitivities Description
Market Size and Trends
Size
Trends
Preparing the Target Market Section of Your Business Plan
Chapter Summary
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Essential to business success is a thorough understanding of your customers. After all, if you don’t know who your customers
are, how will you be able to assess whether you are meeting their needs? Since success depends on your being able to meet
customers’ needs and desires, you must know who your customers are, what they want, how they behave, and what they can
afford.
You have to be market driven. Who will buy it? What do they feel about it? Do they think it’s a luxury or a
commodity? Do they need a big bottle or a small bottle? Particularly with a brand-new product, you have to
understand your market.”
Larry Leigon
Founder, Ariel Vineyards
Is Your Company Market Driven?
Moreover, if you are using your business plan to secure financing, defining the nature and size of your market is critical.
Many investors look for companies aimed at substantial-sized markets and that are market driven. In other words, they seek to
fund companies whose orientation is shaped by the demands and trends of the marketplace rather than the inherent
characteristics of a particular product or service.
Being attuned to your market may lead you to make changes in your advertising, packaging, location, sales structure, and
even the features and character of the product or service itself. In the long run, a market analysis will save you money. When
deciding which marketing vehicles to use (advertising, trade shows, or other), you can then choose approaches based on
whether they reach your specific target market.
A market analysis differs from a marketing plan. An analysis enables you to identify and understand your customers; a
marketing plan tells how you are going to reach your customers. Laying out a marketing plan is covered in Chapter 10.
Be willing to look at different market segments instead of just the obvious or largest market, to secure some
degree of market penetration. Take, for instance, the credit card electronic key for hotels. Even though these keys
represented substantial savings, established hotels at first were reluctant to make the changeover from traditional
locks. Instead, new hotels were the first to put in this type of lock, and existing hotels followed later, once the
benefits were well known.”
Eugene Kleiner
Venture Capitalist
If you do not sell your product or service directly to the end-user but rather to retail outlets, distributors, or manufacturers,
you have two markets, and you should define the characteristics of both of them — the ultimate consumer and the
intermediary who is your actual customer. These target markets may have very different habits and concerns, and you need to
understand both of them, as they each affect your sales. For instance, you may sell software you develop to a computer
manufacturer that then bundles it with the computers they sell to consumers. The computer manufacturer’s biggest concern
may be cost; the consumer’s may be ease-of-use.
To gather information for this chapter, use the methods discussed in Chapter 2.
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You may be tempted to describe your market in the broadest possible terms, choosing to include all those who might
potentially use your product or service. Doing so gives you the comforting sense that you have a huge market to exploit.
Unfortunately, this gives you little genuine information on which to base your business decisions. You could end up defining
the market for furniture as everyone who lives indoors — hardly helpful if you’re trying to come up with a marketing plan for
your furniture store.
Instead you need to identify the particular market segments you wish to reach. These segments describe distinct,
meaningful components of the overall market and give you a set of specific characteristics by which to identify your target
market.
Let’s say you are considering opening a discount dry cleaning establishment. You plan your service to be less expensive
and faster, but, as a result, it may also be of slightly lesser quality than the dry cleaner now serving the area.
Thus, you might define your target market in these terms: “Employed women in white-collar jobs, price and time
sensitive, commute by car, ages 25 to 50, household incomes of $40,000–$80,000 per year, children living at home, reside in
the Laurelwood neighborhood.” You then need to determine whether the neighborhood has enough consumers who fit this
profile to support your business.
Customers can be categorized in several ways, by income level or by lifestyle issues. The income levels can fall
into one or more of the following categories: luxury, upscale, upper moderate, moderate, and budget. Lifestyle
issues are more subjective. The target customer is less dependent on income level and more on her attitude about
how she spends her disposable income.”
Nancy Glaser
Business Strategies Consultant
To be a useful planning tool, the definition of your target market must meet these criteria:
■
■
■
■
Definable. It should have specific characteristics identifying what the potential customers have in common.
Meaningful. The characteristics must meaningfully relate to the decision to purchase.
Sizable. It must be large enough to profitably sustain your business.
Reachable. Both the definition and the size must lead to affordable and effective ways to market to your potential
customers.
Once you have defined your market, you should then assess its size and trends, evaluate your competitors for that
particular market, and probe the market for strategic opportunities.
Demographic Description
Begin describing your market by the most basic, objective aspects of the customer base. These details are the specific and
observable traits that define your target market.
Demographic information is particularly useful when devising your marketing plan. Many marketing vehicles, such as
publications, mailing lists, radio, and TV, accumulate this kind of data about the market they reach. Thus, you are better able
to judge whether such vehicles are appropriate for your company.
Remember, you want to define those characteristics of your target market that meaningfully relate to the interest, need,
and ability of the customer to purchase your product or service.
It’s very difficult to create a new market, even if there’s a need. Developing a new market takes years, even if
you’re 100% right about the need and the product. The best market to look for is a market that already exists, that
is already being served, but being served in a marginal fashion.”
Eugene Kleiner
Venture Capitalist
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In the previous definition of the target market for the Laurelwood dry cleaner, for instance, the definition “white-collar
jobs” directly relates to the need for regular dry cleaning; “women” relates to the fact that most dry cleaning nationally is
purchased by women; “commute by car” is important because the location is not near public transportation; and
“$40,000–$80,000” relates to the customer’s ability to pay for dry cleaning while being less likely to afford the
more-expensive cleaners.
On the Demographic Description worksheet on page 107, describe the demographic details of your target market,
whether you are marketing to consumers or to businesses.
Geographic Description
Next, define the primary geographic area(s) you intend to serve. This definition should be as concrete as possible, indicating
whether your business serves a particular neighborhood, city, state, region, nation, or portion of the international market.
Also, look at the density of the area — whether urban, suburban, or rural — and, if customers will be coming to your
place of business, indicate whether the location is in a mall, strip center, business district, or industrial area, or will be a
stand-alone facility. Some businesses define their geographic market by climate, serving only cold-weather or hot-weather
locations.
The decision to locate in Napa was a marketing decision. We could have made our product anywhere, but ‘Napa’
is associated with premium wines. We wanted Napa on the label.”
Eugene Kleiner
Venture Capitalist
If you are making your product or service available globally — especially online — you may be tempted to view the
entire world as your geographic target market. However, even online, there are limitations to which geographic areas are your
primary target markets. These limits may be due to issues of fulfillment (e.g., shipping goods), language, licensing, or legal
issues, and there are certainly limits of realistic market demand from different areas.
Using the worksheet below and the one on page 108, describe the geographic details of your target customers, whether
domestic or international.
Domestic Geographic Description
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Demographic Description
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Globalization: International Target Market
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In the Target Market section of your plan, convey a sense of the concerns and interests of your customers. How do they spend
their time? What issues are they facing in their lives or businesses? With whom do they associate? How do they relate to their
employees and community?
Your natural instincts and experience with customers gives you some sense of what your customers are interested in. It’s
logical, for instance, to assume that receptive targets for your expensive specialty food product are fairly likely to subscribe to
Gourmet or other food magazines and might belong to local food and wine organizations. Or, if the market for your business
service is law firms, you would naturally assume they belong to the local Bar Association.
A little research can help you identify other aspects of your target market’s lifestyle or business style. Observe customers
in places where they shop or live. What other products or services do they buy? What kinds of cars do they drive? What kinds
of clothes do they wear?
Review the publications you think target customers subscribe to. What other companies are advertising? What are the
articles about? Survey your customers, whether in person, by mail, or on the phone, and ask them about some of their
activities.
What kinds of people or businesses need or want your product or service? Do they go to the movies, watch TV, or stream
videos? Do they entertain at home? If so, for whom? What other kinds of products or services would be used in the same
setting with yours?
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Running head: DESCRIPTION AND SWOT ANALYSIS
Week 3 Assignment 1: Company Description and SWOT Analysis
1
DESCRIPTION AND SWOT ANALYSIS
2
Company Description and SWOT Analysis
The revised non-alcoholic beverage company name is Cates Nutritional products
Company Limited. The choice of the name is based on the fact that it is a new company
owned by Melinda Cates and focuses on non-alcoholic beverages of high nutritional value.
The choice of the name is also based on the fact that the current needs of the company are to
establish itself in the soft drink industry as a company whose products encourage healthy
living. The target of the company is the youths who would like to retain healthy products, the
middle-class people and the sports people who attend county fares. Even though the target of
the company as at now is limited to only the county and within 100 miles radius of the
production plant, the new NAB company name would give he company room for expansion
into other nutrition related food ventures apart from soft drinks if the owners wish that the
company diversifies.
Mission statement
Cates Nutritional products Company Limited is a small sized nutritional beverages
company with the aim of feeding Americans with delicious foods while at the same time
ensuring that the test is naturally pleasant to the consumers. We strive to incorporate
creativity into science to keep delivering healthy products at affordable products and the
convenience of the customers. At Cates Nutritional products Company Limited, we will
maintain profitability by giving the market what it needs in line with our aim. The company
seeks to be a brand known across the United States at America within a considerably short
time, but at the same time ensuring a steadily reasonable growth rate.
DESCRIPTION AND SWOT ANALYSIS
3
Industry Trends
The soft drink industry has had considerable shifts in patterns across the different
types of soft drink beverages in the recent past as a result of the health concerns associated
with carbonated drinks, caffeine levels of the drinks and economic changes in the American
population. In the case of carbonated beverages, for instance, there was a drop of from 701 8ounce servings per person to 675 8-ounce servings. This shows how carbonated beverages are
losing market share in favour of healthier options (Paulsen, Rognså, & Hersleth, 2015). In
2014, coffee, energy drinks and tea sales increased considerably unlike carbonated beverages,
fruit beverages and value-added water. The statistics show that American consumers prefer
energizing drinks to enhance their training to keep fit and natural products to sodas and
preserved fruit beverages as a result of health concerns.
Cates Nutritional products Company Limited will focus on providing caffeinated
energy drinks from natural coffee and tea. The drinks will have antioxidants such as vitamin
E and omega-3 oils for good mental activity in addition to more energy for training preferred
in the year 2014, unlike other options (Paulsen, Rognså, & Hersleth, 2015). The addition of
antioxidants and other minerals such as iron will make the drinks healthier to attract a good
percentage of individuals in the target focus group.
Strategic Position
The strategic position that will be more preferred for Cates Nutritional products
Company Limited will be customer perception matters. The company intends to reach at least
half of the Americans in the next five years with healthy caffeine-based energy drinks
fortified with antioxidants and omega-3. Therefore, the way customers see the brand will be
DESCRIPTION AND SWOT ANALYSIS
4
more important if expansion is to be seen. The intention is to create a company that is known
for healthy options for sports people and the youths in most of the States of America (Stern,
Ng & Popkin, 2015).Pepsi, Coca-Cola and other industry giants all run the majority of the
soft drinks industry. However, in the recent past, the soft drink giants have found themselves
under pressure to reduce their calories, and they have promised to reduce up to 20 percent of
the calories in ten years time. Furthermore, the addition of carbonated water in most of the
mainstream products of the industry market ensures that their popularity and customer
perception reduces over time (Paulsen, Rognså, & Hersleth, 2015). Therefore, focusing on
solving one of America’s biggest problems would be critical in ensuring a growth in market
share within the projected time. The promotion of customer perception may be achieved by
using athletic sports people like the brand ambassadors and sponsoring health-related events
that the company budget can allow.
Company’s Distribution Channels
The company plans to distribute its soft drinks through authorised distributors across
the state and in restaurants and another place that are open during sports events. Approved
dealers that can distribute company products during sports functions will be more preferred
(Stroh, 2015). The company will also open stores in busy downtown locations to energise the
working population through their days during work.
Risks that the Company Faces
There are three significant risks that Cates Nutritional products Company Limited
faces. One of them is caffeine related regulations. The company will be required to limit the
amount of caffeine to acceptable levels (Paulsen, Rognså, & Hersleth, 2015). To mitigate the
risk, the company will strictly include caffeine levels that are not higher that required by the
FDA at any given time.
DESCRIPTION AND SWOT ANALYSIS
5
The second type of risk is the market risk. The company faces the possibility of not
being accepted by the suspicious American population. However, to counter the risk, the
company will start up slowly based on the links already created by Melinda Cates also
involve a comprehensive media campaign on health and the benefits of the products of the
company.
The third risk is the competitive risk. The soft drink market has key players who
distribute most of the products and determine the price. To counter the risk, the company will
focus only on nutritionally enhanced energy drinks that the industry giants do not currently
offer customers.
SWOT Analysis
Strengths
Dedicated workers currently run the company with varied expertise. Ian Glass, for
example, is retired from Pepsi, a major industry player and, therefore, has a lot of experience
in the capacity of line foreperson. Melinda Cates is experienced in soft drink making, and the
CEO is an MBA graduate with business experience.
Weaknesses
The company has limited capital to fund its ventures, and most of the workers are
volunteers although will be paid. The company also has the challenge of maintaining high
products as a result of inadequate finances to hire expert analysis.
Opportunity
The larger corporations face criticism based o health concerns, and some fewer
players are currently combining energy and nutrition to power the athletes. Therefore, the
DESCRIPTION AND SWOT ANALYSIS
6
company will have a chance to carve a niche for itself in a market with less competition. The
large industry players also focus more on carbonated drinks living a better opportunity for
Cates Nutritional products Company Limited to thrive as a company that combines energy
and nutrition.
Threats
The threats Cates Nutritional products Company Limited faces include the presence
of large firms like PepsiCo and Coca-cola, who will be expensive to displace. Another threat
is as a result of the downward pricing pressures the big business cause, making it hard to have
a high-profit margin. The large industry players control the prices of the products in the
sector, therefore giving the power to run expensive promotional campaigns and decide he
prices. The two factors may make it hard for Cates Nutritional products Company Limited to
make any reasonable profits.
DESCRIPTION AND SWOT ANALYSIS
References
Paulsen, M. T., Rognså, G. H., & Hersleth, M. (2015). Consumer perception of food–
beverage pairings: The influence of unity in variety and balance. International
Journal of Gastronomy and Food Science, 2(2), 83-92.
Stern, D., Ng, S. W., & Popkin, B. M. (2015). The nutrient content of US household food
purchases by store type. American journal of preventive medicine.
Stroh, P. J. (2015). Business Strategy—Creation, Execution and Monetization. Journal of
Corporate Accounting & Finance, 26(4), 101-105.
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will soon block your email as spam, and if enough people do that, email filters will block your messages to
many larger servers.
Online Advertising
Even if you find most online ads bothersome, it’s a good bet that there are others you’re happy to see. For instance, if you’re
looking for environmentally sensitive products — solar-powered heating, energy-efficient lights, recycled building materials,
and so on — and come across a website listing and describing suppliers of such products, you’ll be thrilled. You won’t care
that these companies paid to be listed; you’ll just be glad to find all of these resources in one location.
What’s important is that you design your own online ads to attract (not annoy) your target customers and then place them
where potential customers are most likely to see them.
Some major types of online website advertising opportunities are:
■ Portal Sites/Directories. Portals and directories serve as online hubs — usually grouped around a common theme, topic,
product, or location — where users come to look for information, products, and services. As such, portals can provide
effective (and affordable) places to advertise your product or service.
■ Website Ads. Banner ads typically include graphics or photos as well as text, and are placed adjacent to the content of the
webpage itself. Interested viewers can then click through to the advertiser’s website.
Another form of website advertising is interstitial ads — that is, ads that appear between (or before) other content and
websites. With this type of ad, viewers become a captive audience. After they type in a website address, an ad appears
before the actual site they want to visit opens.
■ Sponsorships. With a sponsorship, an advertiser pays to support a website, portion of a website, content within a website,
or the organization behind the website. In return, the website gives the advertiser visibility and recognition. Often, this
visibility takes the form of a static banner ad; however, it can also mean displaying the sponsor’s name, logo, or tagline in
immediate proximity to content.
■ Online Classifieds. Some of the most effective ads are pure text (or, perhaps, text augmented with a few pictures) — the
equivalent of online “classified” ads.
The best known is Craigslist (www.craigslist.org). While most people look for jobs or used goods on Craigslist, many
businesses also use the site to advertise their products or services. Advertising on Craigslist takes time (you have to
continually update your ad to stay visible), but, in most cases, it’s free.
■ Affiliate Auction. Online auction sites, such as eBay, are more than just places for individuals to auction off used goods to
the highest bidders. Representing huge online marketplaces, such sites have created myriad marketing opportunities for
entrepreneurs. Since you can set up “stores” on these sites or list products as “Buy It Now” without conducting an auction,
you can use auction sites as an advertising medium — just as you would online classified sites.
■ Affiliate Programs. You can advertise your products or services on other people’s websites by setting up an affiliate
program (which can also be thought of as pay-per-sale advertisements, since the hosting website only gets paid if the ad
results in a sale).
Affiliate advertising offers incentives for others to place your ads on their sites in exchange for a piece of the action. For
instance, if one of their site visitors clicks your ad, goes to your site, and makes a purchase, the originating site gets a
commission on the final sale.
What’s your ‘go to market’ plan to let potential customers know you exist? If people don’t know you exist,
you’re not going to scale. How will you let people know you have a solution to their problem?”
Lauren Flanagan
Cofounder and Managing Director, BELLE Capital USA
Online Marketing Tactics
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In today’s connected world, it’s far easier to find and serve customers worldwide than ever before. While your domestic
market may seem like a large enough target market to pursue, especially if yours is a young company, you should also at least
consider expanding your potential customer base internationally.
Even if you don’t directly target global customers, it’s likely that you’ll have customers throughout the world, especially if
you have an online presence. International customers may find you even if you are not actively seeking them.
Before you decide to market your products or services internationally, you must determine whether there’s likely to be
market demand from other countries, and if you can affordably and effectively fulfill orders should you receive them. After
all, there’s no point in marketing a product if it’s going to be impossible or unaffordable to ship. So begin your global
marketing evaluation by determining which — if any — of your products or services are appropriate for global sales. Are
there customers in other countries who are likely to want or need your products or services? If so, in which countries?
Keep in mind that you do not necessarily need to have a physical presence in another country to be able to market to
customers. You might, for instance, find a locally based company with which to partner that can import and market your
products or that can license your products or intellectual property, adapt your offerings to meet the needs of the local market,
and market them under either your name or its company name.
For most businesses, however, their online presence — particularly through their website or their sales through other
websites — is going to be their major global marketing vehicle. So as you build or redesign your website, keep international
prospects in mind, with considerations such as:
■ Making your website friendly for international customers (for example, the use of multiple languages, prices in other
currencies, use of the metric system for measurements, customer support for different time zones).
■ Creating special websites or landing pages for each country or region you’re marketing to.
■ Making an attempt to understand cultural norms. For instance, in some countries, comparison advertising (e.g., taste tests
of Coke versus Pepsi) is not done. In many Asian countries, red is a symbol of good luck.
■ Using social media. Participating in social media — blogs, and social networking sites — where many or most users are
from your target countries.
■ Buying ad words to appear when searchers are from a specific country. Some search engines allow you to target particular
countries. Keep in mind that in some countries, other search engines may be dominant — such as Baidu in China.
Globalization: Marketing
Complete this worksheet if you intend to market your products or services and make sales internationally.
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Of course, you can also create a local presence if the opportunity in a specific country is large enough to warrant it. In
such a case, you will certainly want to learn about that country’s customs when it comes to marketing and sales. You may
wish to engage locals on your marketing team or hire local marketing companies (public relations or advertising firms, for
example) that better understand the local market. You’ll also need marketing collateral materials (such as brochures)
appropriate for that country.
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Use the worksheet on page 173 to sketch out your global marketing efforts.
Directly related to your marketing strategy is your sales structure — how you achieve actual customer orders. In this section
of your plan, describe the two main components of your sales system: the sales force and the sales process.
If your business plan document is being used for external funding requests, you don’t need to go into great detail; it is
enough to provide a general outline, giving a sense of your understanding of what is necessary to produce sales. For internal
planning, however, you should flesh out these concepts more thoroughly.
With public relations, you need to keep your best foot forward at all times. You should be scrupulously honest, as
direct as possible; at the same time, you want to protect your long-term goals and the reputation and dignity of any
individuals involved. It’s important to maintain a certain public perception of your organization, so you can’t go
into all the details of each decision. The public has a hard time handling negatives. You must have standard,
acceptable methods and forms of response to critical questions and inquiries.”
Bill Walsh
Former Coach and President
San Francisco 49ers
The Heartbeat of Your Sales Force
At the center of your company’s income-producing activities are those members of your staff with specific sales
responsibilities. These are the people who come in direct contact with your potential customers and who most immediately
determine whether your product or service is actually purchased. These key staff members are your sales team, and you must
carefully plan how you make the best use of their skills and time.
What responsibilities do you give your sales team? What commissions and incentives do you provide? How do you train
and supervise the people responsible for bringing in your revenues?
Of course, every employee actually has a part in attracting and retaining customers: If the janitor does a poor job and the
store looks dirty, customers may not want to buy from you. Thus, many companies incorporate some form of sales-related
training for all personnel. But certain staff members (and nonemployees, as well) have particular responsibilities for securing
sales, and these individuals are at the center of your sales team.
Sales Force
List below the type of sales force you use, and how many salespeople you have in each category.
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Sales Activities
Sales activities can be conducted either on your business’ premises or by calling on customers at their homes or places of
business. And your sales force can consist of either inside or outside salespeople.
■ Inside Sales Personnel. Employees who remain on the company’s premises to secure sales; includes floor salespeople in
retail stores, personnel who take phone orders, and telemarketing.
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■ Outside Sales Personnel. Salespeople who go to customers’ locations to solicit orders; these can be company employees
working on salary alone, salary plus commission, or straight commission; or they can be independent contractors — sales
representatives and manufacturer’s agents, either representing many product lines or handling one company’s products
exclusively, usually on a commission-only basis.
■ Online Sales. Online sales can include websites that sell products directly to customers through either an ecommerce site
or an auction site such as eBay. Lead generation sites generate sales indirectly by collecting leads for salespeople. Lead
sites often require that visitors provide contact information if they want to access the sites’ content, videos, and/or
downloads. Salespeople then use this contact information to follow up with users.
If you don’t feel comfortable being a salesperson, if you can’t handle rejection or don’t like the feel of it, find
something else to do, because even if you don’t end up selling your product, you need to sell investors, employees,
vendors, and the public on your enterprise.”
Seth Goldman
Cofounder, Honest Tea
You can also hire independent telemarketing services to conduct your telephone sales from their place of business, using
their employees.
Once you determine the nature of your sales team, delineate how you divide responsibilities among personnel — for
example, assigning sales representatives by territories, product lines, or customer types.
Employee Compensation and Training
How do you pay your sales force? Some form of commission is common in most selling situations. What commission
percentage do you provide?
Do you give bonuses for reaching certain goals?
Do you use other incentives, such as awards, gifts, or vacations? Do district managers or other supervisors receive
commissions on their staff’s sales?
You also need to consider how you continue to train, motivate, and supervise your sales force. Selling is a difficult, often
dispiriting, task, and salespeople need frequent encouragement and support. Who will be responsible for this? The Sales
Force worksheet on page 175 helps you outline the structure of your sales team.
Sales Process
Finally, you need to identify the procedures you use in making sales calls and presentations, and to project the level of results
you expect from your sales force. Although this information is not necessary to include in a business plan prepared for
external financing purposes, the data on sales productivity is important in developing realistic sales forecasts.
Sales Process and Productivity
On this worksheet, outline the procedures and productivity levels you expect in your sales efforts.
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How will actual sales be achieved? You will likely use more than one of the methods shown in the graphic below. Set
goals for each method you employ.
SALES METHODS
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Aspects you should consider in evaluating your sales process include:
■ Cold-Calling. Contacting targeted customers before they have indicated any interest in purchasing your product or
service; this can be done in person or on the phone.
■ Leads. Developing or purchasing names of potential customers who have expressed at least some level of interest in your
product or service.
■ Productivity. Estimating the amount of time it takes to secure sales, and the level of sales realistically expected from each
salesperson.
■ Order-Fulfillment. Ensuring that orders are completed promptly and accurately, an essential completion of the sales
process.
■ Goals. Establishing specific, measurable objectives for each salesperson and the total sales force; realistically assessing
the number of sales possible for each sales representative given the nature of his or her assigned territory/product
line/customer base; setting sales quotas based on these assessments.
We book travel packages together [air transportation, hotel, etc.] with our strategic partners. We work in
tandem with their salespeople. They may be making a heavy volume of sales calls, and they sell our hotel along with
their product.”
Andre Tatibouet
Founder, Aston Hotels
■ Follow-up Efforts. Making sure that the sales representative maintains ongoing contact with the customer after the sale
and seeks out repeat sales opportunities.
■ Optimize Your Website. Adding keywords to your site and/or buying keywords to help boost your rankings in search
engines and direct more traffic to your site.
Use the Sales Process and Productivity worksheet on page 177 to outline the procedures and productivity levels you
expect in your sales efforts.
International Sales
Once you have determined that there is likely to be demand from customers in other parts of the world for your products or
services, you need to evaluate how you will make and fulfill sales.
One of the biggest challenges in serving international customers is fulfilling orders. If you have a physical product, it may
be difficult and expensive to ship, and you may face tariff or custom considerations. You need to examine those issues before
you spend time or money marketing and building a sales operation.
If, however, what you are providing is a downloadable product (such as software, an app, or content) or an online hosted
service, there’s almost no problem in fulfilling orders — assuming, of course, that the product or service has some
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international appeal. If that is the case, you should certainly give consideration to how to improve your online presence to
attract global customers.
Recognize that sales conditions and terms may be different in other countries. For instance, in some countries, many
consumers will not have credit cards, or you may have limits on the interest rates you can charge even your commercial
customers. As you make your sales plans and projections, you’ll need to understand those differences.
A typical way for companies to develop international sales is to partner with another company/corporation or a sales
company or distributor in that country. Or, you may license your product or intellectual property (for example, software,
designs, content) for them to sell under either your brand name or theirs. Contact your industry trade associations to see
what’s typical in your industry and how other companies currently license similar products in other countries.
One excellent way to test the waters for global markets is by participating in international trade shows. These expositions
bring many parties in an industry together to show their products to potential customers. Trade shows are an excellent,
efficient way to reach a large number of international customers and partners. They can be a method of finding local
distributors or licensors in other countries. Use the worksheet on page 181 to outline any plans you have for international
sales.
You need to distill the highlights of your marketing and sales planning into a concise and compelling statement of how you
reach customers and convince them to purchase from your company. The Marketing section of your business plan should
include:
■ The message you attempt to send customers; how you position your company in the market.
■ The marketing methods and vehicles you use.
■ The sales force and sales procedures you use.
The Marketing Budget and Sales Projections worksheets and the Plan Preparation Form on pages 182–186 help you
organize information for completion of your business plan’s Marketing section.
Refer to the previous worksheets in this chapter when completing your marketing budget estimates for the Marketing
Budget worksheet. Some of this information will also be used in the Financials section of your business plan. To complete the
Sales Projections worksheet, estimate income by each
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be reproduced or transmitted without publisher’s prior permission. Violators will be prosecuted.
The Four Ps of Marketing
What messages do you give customers to motivate them to purchase your product or service? Traditional marketing experts
emphasize the elements in the graphic below, known as “the Four Ps,” in influencing customers to buy.
WHY CUSTOMERS BUY: THE FOUR Ps
These elements leave a lot out of the marketing picture, however, especially as customers have become more
discriminating over the years and look for products or services not just to fill an immediate need but to enhance their overall
sense of well-being.
Most marketing strategists agree that people buy benefits, not features. In other words, customers are more concerned
about how a purchase will affect their lives than about how the company achieves those results. So your marketing message
must tell customers what they get, such as security or an enhanced self-image, rather than merely the detailed specifics of
what your product or service does.
What Customers Want: The Five Fs
“The Five Fs,” described below, are a convenient way to sum up what customers want.
1. Functions. How does the product or service meet their concrete needs?
2.
Finances. How will the purchase affect their overall financial situation — not just the price of the product or service, but
other savings and increased productivity?
3.
Freedom. How convenient is it to purchase and use the product or service? How will they gain more time and less worry
in other aspects of their lives?
4.
Feelings. How does the product or service make customers feel about themselves, and how does it affect and relate to
their self-image? Do they like and respect the salesperson and the company?
5.
Future. How will they deal with the product or service and company over time? Will support and service be available?
How will the product or service affect their lives in the coming years, and will they have an increased sense of security
about the future?
Customers, of course, want to receive benefits in all these areas, and you should be aware of how your product or service
fulfills the entire range of their needs. However, your primary message must concentrate on one or two of these benefits that
most effectively motivate your customers and that stake out a competitive position for your company.
You communicate these benefits through every interaction you have with your customers, not simply through your
advertising. Naturally, your company slogan and any words you use in advertisements deliver an overt statement to the
potential customer. Perhaps the name of the business itself is a direct message, for example, “Toys ’R Us” or “Cheap Tickets.”
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Ecommerce
Conducting sales and transactions on the Internet.
Search Engine Marketing (SEM)
The practice of purchasing ads to increase your website’s ranking and visibility on relevant search engine results pages —
often called paid search.
Search Engine Optimization (SEO)
Optimizing your website by planning content and design that leads to high rankings on search engine results pages when a
user searches for relevant keywords.
Social Media
Content created by individuals and disseminated online through networking sites such as blogs, YouTube, and Facebook.
Used for awareness, marketing, and customer communication and retention.
The Five Fs
Keeping the Five Fs in mind, describe the message you want to convey to customers about your product or service.
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Power of the Indirect Message
Indirect messages can leave an even stronger impression with customers. If brochures are cleanly designed and sales
representatives conservatively dressed, it conveys the impression that the company is professional and responsible. If the
decor features trendy colors and rock music plays in the background, the implication is that the company is youthful and
contemporary.
Everything supports the vision. That’s the key in retailing. Everything must reinforce the central concept you are
trying to convey to your target market, including your product lines, the customer service you offer, architectural
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design, the hours you’re open, even the type of bags you use.”
Nancy Glaser
Business Strategies Consultant
Sometimes, unfortunately, a company sends out mixed messages — for example, having nicely dressed salespeople but
poorly printed sales material. How will you convey an image to your customer that reinforces your direct message? How will
you add value to your product or service through design, packaging, and presentation?
The Five Fs worksheet on page 160 helps you organize your answers to these questions; the information then can be
incorporated into the Marketing section of your business plan. This worksheet helps you summarize how you reinforce your
company’s image and what you are trying to tell customers about your product or service. Use the information for internal
planning as well as in your business plan.
Once you have clarified what you want to tell customers about your company, you must describe how you disseminate that
information.
How do you reach potential customers? Do you advertise? If so, where?
Do you send an email newsletter? If so, to what mailing lists? Do you optimize your website for search engines? Do you
participate in trade shows? If so, which ones and how frequently?
Since every marketing vehicle costs money, carefully plan how you intend to spend your marketing dollars. In devising
your overall marketing program, be sure you look for:
■
■
■
■
Fit. Your marketing vehicles must reach your actual target customer and be appropriate to your image.
Mix. Use more than one method so customers get exposure to you from a number of sources.
Repetition. It takes many exposures before a customer becomes aware of a message.
Affordability.
Use the Marketing Vehicles worksheet on page 162 to document how you employ various marketing vehicles in your
business.
Marketing Vehicles
Use this worksheet to outline your marketing schedule, listing each type of marketing vehicle, the frequency with which
you use it, and what it costs you annually. This is the basis of your marketing budget and will be used in the Financials
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section of your business plan.
Be Resourceful
Often the best marketing vehicles are not the most obvious or the most expensive. A large ad in a specialty publication may
prove far more effective and less expensive than a small one in a general newspaper. Building a presence on a social media
site targeted to a specific audience can bring better results than being on the most popular social media sites.
You may want to consult the Standard Rate and Data Service to find names and advertising rates of specialty and general
publications. To find information on trade shows, look online for trade organizations in your industry.
You can also find an extensive listing of trade shows online at:
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TSNN.COM
www.tsnn.com
SUCCESSFUL MEETINGS
www.successfulmeetings.com
Or refer to the book Trade Shows Worldwide: An International Directory of Events, Facilities, and Suppliers, published
by Gale Research.
If you are marketing to businesses, identify potential customers for direct mail or telemarketing efforts on ThomasNet at
www.thomasnet.com.
Some of the marketing vehicles to choose from are:
■ Brochures. Leaflets, flyers, or other marketing collateral; these are particularly useful for service businesses.
■ Company Website. Every business must have a website. It may be robust — where you sell products directly to
customers, or answer customer service inquiries — or it may be quite simple.
■ Print Media. Newspapers, magazines, and specialty publications.
■ Broadcast Media. Radio and cable television can likewise target specific markets; network TV stations can be very
expensive, however.
■ Social Networking. Social media sites, microblogging sites, and blogs that help you build relationships with customers
and influencers in your market.
■ Online Advertising. Paying for visibility on other websites; these can be banner ads, sponsorship of other sites,
purchasing of keywords in search engines, and participating in online portals.
■ Advertising Specialties. Items imprinted with the company name given to customers, such as calendars, caps, desk sets,
and other gifts.
■ Direct Mail. Flyers, catalogues, brochures, and coupons.
■ Email Mailings. Regular or infrequent mailings to email mail lists; these can be direct advertisements or online
newsletters.
■ Public Relations. Free feature and news articles in the media and other publicity, usually secured by public relations
specialists.
■ Sampling. Distribution of free product samples, or coupons entitling recipients to free or discounted samples of your
product or service.
■ Informal Marketing/Networking. Activities such as joining organizations, public speaking, or attending conferences.
In addition to direct marketing methods, you can employ a number of creative strategies to promote your company. These
tactics often involve little or no extra cost and can be the source of substantial increased revenues. Complete the Traditional
Marketing Tactics worksheet on page 165 to indicate marketing tactics you use to increase sales.
Various industries have particular marketing tactics, and enterprising entrepreneurs devise unique methods to reach
customers. A few important strategies to consider in your marketing approach are described below.
Media Advertising
Advertising works. Customers expect to learn about products and services from ads in newspapers and magazines, on the
radio or television, or online. Advertising gets your company’s name and message to a large number of people with relatively
little work on your part. But it costs money. Don’t buy ads based merely on the number of people reached; make sure the ad is
reaching the right people: your target market. A badly designed and poorly written ad may be worse than no ad at all, so
spend the time and money to develop a good one. Run ads repetitively; professionals estimate it takes nine exposures to an ad
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before someone even notices it.
Customer-Based Marketing
Often neglected, this is one of the most fruitful types of marketing. Two particularly effective approaches are to emphasize
repeat sales by positioning your product or service to be consumed or replaced, and to offer add-on sales, whereby you
increase the total revenues per customer through the sale of extra products or services.
Another approach is point-of-purchase promotion: merchandising displays or other offers presented to customers at time
of sale to encourage impulse purchases.
Traditional Marketing Tactics
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Strategic Partnerships
Identify a related company with which to associate for promotion, sales, or distribution. Ways in which you might use such a
partnership include:
■ Cooperative Advertising. This type of advertising occurs when two companies are mentioned in an advertisement and
each company pays part of the costs. This is a frequent practice in many industries.
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■ Licensing. One company may grant permission to another to use its product, name, or trademark. For instance, instead of
selling your computer software program directly, you might license it to another software publisher to incorporate in its
program.
■ Distribution Agreement. This is an agreement whereby one company carries another’s product line and distributes
another company’s products or services.
■ Bundling. This is a relationship between two companies in which one company includes another company’s product or
services as part of a total package.
Special Offers/Promotions
Special offers and promotions enable you to increase sales revenue and build market share by offering customers special
values. The tendency is to consider this primarily a retail tactic, yet service companies and business-to-business marketing can
also incorporate the practice.
Strategies include leader pricing — products or services on which you make little or no profit — to entice first-time
customers and increase patronage, and introductory or limited time offers to build cash flow at critical points.
In seeking strategic partners, the first criterion is to find those groups that have a shared view of what we are
trying to do. We have four criteria for choosing a strategic partner: 1) similar strong emphasis on marketing; 2)
shared understanding of the target market; 3) agreement on the geographic area we’re serving; and 4) ethical,
quality people. We next try to find people who can give us better access to different types of media, and at better
rates than we could secure. Often potential partners approach us; in other cases, our vice president of sales contacts
her counterpart in an organization we are interested in. Then we make sure that the partnership is as profitable for
them as it is for us, or else they won’t be coming back to us. This ensures their support for the endeavor and opens
the door for future business partnerships.”
Andre Tatibouet
Founder, Aston Hotels
Premiums
The use of premiums in marketing includes encouraging sales and creating goodwill through gifts, sweepstakes, discounts,
and other perceived added value. These “extras” can be packaged with products or services (such as free wine glasses with a
two-bottle box of wine), given as gifts with a purchase, or offered as discounts, often in conjunction with other companies
(such as travel discounts), for established customers. Many websites use sweepstakes with prizes to attract visitors to their
sites.
The online universe offers an enormous range of marketing opportunities. New ones are developed as fresh technologies
emerge and entrepreneurs create innovative ways to communicate. Add to this the fact that people are now connected to the
Web virtually all the time via smartphones and other mobile devices. Complete the Online Marketing Tactics worksheet on
page 171 to describe which online tactics you’ll use.
Social Media Sites
These sites are based on the concept of user-generated content combined with continuous interactivity and connectedness.
The result is a huge number of people constantly attached to the Web, their electronic devices, and each other.
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Are you trying to reach consumers or businesses? Does a mass-market site (e.g., Facebook, Twitter, Pinterest), a special
interest site (e.g., Chowhound for food), or a professional networking site (e.g., LinkedIn) better suit your offering? Once
you’ve picked the right site (or sites), provide relevant and interesting content to raise your company’s visibility in the
community.
HOW TO USE SOCIAL MEDIA
Blogs
Blogs — short for Web logs — are frequently updated online journals that can contain text, audio, video, graphics, and
photos. From a marketing perspective, blogs work well for businesses in which expertise is valued — for consultants,
technology service providers, professional service businesses, and so on.
Whether you create your own blog or regularly contribute to a popular blog in your field, your blogging efforts can greatly
enhance your visibility and credibility. If you offer readers something of value (beyond a sales message), it’s likely you’ll
attract people looking for your services or products.
Effective use of blogs can:
■
■
■
■
■
■
Build name and brand recognition.
Establish you as an expert.
Attract customers and clients.
Create links to your website.
Generate buzz around a new product.
Let you tap into a committed market.
Other Social Media Tactics
Creating your own podcast — a radio or TV program that gets downloaded to computers and mobile devices — might be a
good option if you have compelling content on the most popular podcast topics: technology, politics, and business.
What about a video? While YouTube is the best known of the video-sharing sites, there are many others out there, and
some of them are focused on “how to” videos, possibly providing a perfect opportunity to showcase your expertise.
Review sites and community sites give users the opportunity to rate and post comments about the products, services, and
companies they use. These sites include Yelp.com, Angie’s List, TripAdvisor, Zagat, and Epinions.com. Their comments and
reviews can be powerful marketing tools for your business — or they can result in disaster.
As with every other aspect of your marketing plan, you should carefully evaluate the return on investment you can expect
from blogs, social networks, and other online marketing tactics. Although many of these activities don’t appear to cost much
money, all of them take time. Be sure to factor in the time — yours, your staff’s, and any consultants’ — that goes into social
media marketing.
Mobile Marketing
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Mobile devices have transformed the way customers deal with local businesses. How long has it been since you used your
smartphone to find a business? To reserve a table at a restaurant? To get directions? Likely, not long. You don’t have to
develop a gee-whiz app or use every mobile method available in order to reach the increasing number of people searching for
businesses like yours on their mobile devices. You do, however, at least need a mobile version of your website.
Daily Deals
The prospect of getting a bargain has driven the phenomenal success of daily deal sites such as Groupon, Living Social, and
hundreds of others. For some companies, these offers are invaluable business builders. Other companies, which have lost
money and attracted only bargain-hunting customers, have rued the day they ever signed up.
A deal site sends an email daily to those who’ve registered. People interested in your discounted product or service
purchase your deal. You typically pay nothing to be included, but the deal site gets a hefty piece of the sale: 30% to 50%. And
typically, you must offer at least a 50% discount. So if your business creates custom photo books, here’s what a money
breakdown might look like: You offer your $40 leather-bound photo book for $20. With each sale, you get $10; the site gets
$10. Those who never redeem the coupon add to your profit margin: Businesses report 5% to 40% nonredemption rates.
Deals are best offered to launch a new business or get your name out there, for slow periods to drive new traffic, and to
move excess inventory.
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How Will You Obtain Sufficient Market Share?
If yours is a new business, it will generally be easier and less expensive to enter a market with many diverse competitors than
one dominated by a few major players. If you are preparing a business plan for financing purposes, you will have to
demonstrate to potential funding sources through your marketing plan how your company will gain and maintain a reasonable
market share.
Complete the Market Share Distribution worksheet on page 131 to outline how sales are distributed among the
competition, both by total sales revenues and by unit volume. (Some companies make fewer but higher-priced sales by
targeting the most lucrative customers; others sell greater volume at lower per-unit prices.) Once again, look at competitors
both by individual companies and by categories of competition, as they apply to your situation.
You will probably have to estimate the figures required by the worksheet, based on information gleaned from trade
associations, annual reports, business publications, and independent industry research firms. Definitive information on sales is
notoriously difficult to locate.
Finally, in your competitive analysis you have to do a little fortune-telling. You must make a few reasonable predictions of
what the competition will look like in the future. New competitors enter markets all the time, and sometimes current
competitors drop out. Don’t take comfort in the fact that other companies have overlooked a particular product or service.
Once you show you can be successful, someone will want to take a piece of that market from you. Who are your new
competitors likely to be? How long will you have the field to yourself before other competitors jump in?
Forecasting the competitive situation over the next five years or so, based on logical conclusions from concrete evidence
such as current product lines, gives you as well as potential investors a better sense of the long-term viability of your business.
One of the most important factors to examine is barriers to entry: those conditions that make it difficult or impossible for
new competitors to enter the market. Every company can gain a sense of how best to prepare for future competition by
examining the barriers to entry.
If your company’s competitive position depends on new technology, new manufacturing techniques, or access to new
markets, outlining the barriers to entry is essential. This will be one of the first areas judged by potential funding sources.
Barriers to Entry
Few barriers to entry last very long, particularly in newer industries. Even patents do not provide nearly as much protection as
is generally assumed. Thus, you need to realistically project the period of time by which new competitors will breach these
barriers.
As a barrier to entry, it should take significant money and significant skill to enter the business. Patents, while
desirable, are not sufficient to protect against new competition, although they help the entrepreneur in raising
money because they show the product is unique. Service businesses have a harder time securing venture capital
funds because competitors can enter the field easily, and investors are wary. You need barriers to entry to protect
your market.”
Eugene Kleiner
Venture Capitalist
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Market Share Distribution
List below the current market leaders and the approximate percentage of the market each one commands.
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BARRIERS TO ENTRY
Some common barriers to entry for new competition are:
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Complete the worksheet on page 133 indicating Future Competition and Barriers to Entry.
To prepare the Competition portion of your business plan document, synthesize the information from the worksheets in this
chapter into a brief synopsis. In particular, you want to provide:
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Description of Competition
Market Share Distribution
Competitive Positions
Barriers to Entry
Strategic Opportunities
I don’t want to hear the words ‘No one has ever done this before,’ or ‘There’s no competition.’ ”
Damon Doe
Managing Partner
Montage Capital
Use the Competition Plan Preparation Form on page 134 to outline the Competition section of your business plan.
Don’t be afraid to use bullet-point lists and charts (see Chapter 3 for suggestions) in this section. Also, include pertinent
information from market research, particularly customer surveys.
You have to understand your competition if you’re going to be an effective competitor yourself. Develop a strong sense of
your competitive position — your strengths and weaknesses in terms of customer perception and your internal company
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resources; this will be vital when preparing your marketing strategy. Always assume competition will get more intense, and
be prepared for new competitors to enter the market.
Future Competition and Barriers to Entry
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Competition Plan Preparation Form
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Using this form as a guide, summarize the main points you wish to make in the Competition section of your business
plan.
SAMPLE PLAN: THE COMPETITION
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THE COMPETITION
Competing with ComputerEase to supply software training services to the target market (businesses making substantial use
of computers and having more than 50 employees) are these categories of software training providers:
• Online training/distance learning programs
• Individual independent training consultants
Lists categories of competitors.
• Local software training companies
• National training companies
• Software developers
• Community college classes
• Trainers from within the targeted companies themselves
ComputerEase hopes to build its business of developing custom training for corporations that have developed their own
software applications for in-house use, as this represents a very high-margin business. Community college classes are
generally not suitable for the corporate market, since classes are typically held in the evenings for at least 10 weeks —
conditions that do not meet business customers’ needs.
Online Competitors
The number of online computer software training firms has exploded in recent years. A Google search on “online software
training” returned more than 100 million results. Yet this is a heavily fragmented market, with many small players and no
single vendor dominating. The most-serious single competitor is a major online university, but it primarily targets
individuals rather than corporate clients.
Local Competitors
Eight local businesses and four individuals in the Vespucci area actively market their software training services. An
unknown number of additional individual consultants provide such training on a less-visible level.
Indicates specific competitors.
Only one local company has developed a substantial presence with the target market: JMT Training. JMT has operated for
more than six years and is the largest local software training company.
The individual independent consultants in this market generally provide training for just one or two software programs.
Other Competition
Three major national software training companies periodically conduct classes in the Vespucci area. Lesser-known
national companies also occasionally provide such services, generally targeting recent purchasers of particular software.
The current fast growth of online training has opened markets — including our local market — to international and local
competition. The three national software training companies all have fairly robust online training programs. Since our
target market is principally English-speaking countries, we view our international competition as coming mostly from
other English-speaking countries. Presently, there are two international companies — one based in the U.K. and one based
in Australia — that are potential future competitors.
In-house training by employees of the targeted companies varies widely in content, form, and quality. Very few companies
have “trainers”; most training is provided on an ad hoc basis by supervisors and fellow workers. A conservative
interpretation of a survey conducted by ComputerEase indicates that at least 20% of such training would be contracted out
if satisfactory training could be obtained.
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Market Share Distribution
The responses to the ComputerEase survey indicate that target companies currently conducting software training use
providers as follows:
Advantages Over Competition
A chart outlining ComputerEase’s competitive position is included in the Appendix. Generally, the advantages
ComputerEase has in relation to its competitors are:
• Its status as an “Authorized Training Center” for major software publishers gives it credibility through joint programs,
plus the availability of pre-release and steeply discounted software.
• Its management team is business-oriented, rather than computer-oriented, and is entirely focused on the needs of
corporate trainers.
• Its course developers are certified in the software for which they are developing courseware.
• It has a proven instructional design methodology for creating, testing, and supporting high-quality courseware.
• It is a local, rather than national, provider of on-premise training.
• It has a sterling reputation for delivering high-quality service.
• It offers ongoing technical support for corporate clients at low cost.
Competitive Positions
This is how ComputerEase ranks the strengths of its competitors:
1. In-house trainers
2. Online training courses
3. JMT Training
4. National training companies
5. Other local companies
6. Independent contractors
By far the biggest competitor for the dollars spent on business software training is the in-house training department. After
that, other online competitors are the highest hurdle to winning business, as there are other, cheaper alternatives to the
ComputerEase products on the market. However, ComputerEase is garnering a growing reputation for delivering
high-quality and highly effective training in this crowded field.
Ranks competitors and describes strengths and weaknesses.
JMT is considered the strongest competitor due to its current client base, the personality and sales skills of its owner,
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Janice Tuffrey, and its potential to associate with national franchise training operations. However, JMT’s current training
staff and materials are of inconsistent quality, and current clients have expressed dissatisfaction with the lack of quality
control. Moreover, JMT lacks skilled management of its financial affairs, resulting in insufficient capital for marketing and
updating equipment. No other local companies have either the financial or the personnel resources to adequately respond
to a well-organized, sufficiently funded competitor.
National training companies market their services through direct mail or telemarketers and have no local sales force. Their
customer base is neither loyal nor particularly satisfied with the service.
The quality of in-house trainers varies widely. However, since these trainers are already on staff, there is little or no
additional cost to the customer for using them.
Independent contractors lack a substantial client base and adequate resources to respond to new competition.
Barriers to Entry
It is not easy for new competitors to enter the on-premises training market, which requires a substantial overhead due to
rent/leasing expenses, equipment, trainers, and printed materials. Moreover, software providers are becoming increasingly
selective about which companies they will allow to serve as “Authorized Training Companies.” These relationships are
crucial in terms of receiving pre-release, below-retail-cost copies of software to prepare new courses, and for cosponsoring
product introduction events, as well as bolstering customer perception.
Indicates limits to new competition.
The barriers to entry of online training are much lower, however. All it takes is a single individual designing interactive
courseware for the Web using one of the many authoring programs that exist. Even if the content developer is not
technically inclined, he or she can easily find someone to do the coding that makes the content accessible via a standard
browser. There are no printing costs, as all the documentation and course materials exist online for the student to
download. Of course, there are marketing expenses — to address the challenge of getting noticed in such a crowded field
— as well as credibility issues, but simply getting a product to market is relatively cheap and easy to do. Although online
competitors can come from anywhere, they will need to understand domestic markets.
Strategic Opportunities
The market for computer training services is highly dissatisfied at present as shown by a survey of human resource
directors of target companies. Their levels of satisfaction with current training arrangements are shown below:
Highly satisfied — 8%
Somewhat satisfied — 18%
Somewhat unsatisfied — 43%
Highly unsatisfied — 31%
This unusually high dissatisfaction level with current providers represents a unique opportunity for ComputerEase in a
rapidly expanding market.
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be reproduced or transmitted without publisher’s prior permission. Violators will be prosecuted.
Know Your Customers
Is Your Company Market Driven?
Defining Your Target Market
Demographic Description
Geographic Description
Lifestyle/Business-Style Description
Psychographic Description
Purchasing Patterns Description
Buying Sensitivities Description
Market Size and Trends
Size
Trends
Preparing the Target Market Section of Your Business Plan
Chapter Summary
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Essential to business success is a thorough understanding of your customers. After all, if you don’t know who your customers
are, how will you be able to assess whether you are meeting their needs? Since success depends on your being able to meet
customers’ needs and desires, you must know who your customers are, what they want, how they behave, and what they can
afford.
You have to be market driven. Who will buy it? What do they feel about it? Do they think it’s a luxury or a
commodity? Do they need a big bottle or a small bottle? Particularly with a brand-new product, you have to
understand your market.”
Larry Leigon
Founder, Ariel Vineyards
Is Your Company Market Driven?
Moreover, if you are using your business plan to secure financing, defining the nature and size of your market is critical.
Many investors look for companies aimed at substantial-sized markets and that are market driven. In other words, they seek to
fund companies whose orientation is shaped by the demands and trends of the marketplace rather than the inherent
characteristics of a particular product or service.
Being attuned to your market may lead you to make changes in your advertising, packaging, location, sales structure, and
even the features and character of the product or service itself. In the long run, a market analysis will save you money. When
deciding which marketing vehicles to use (advertising, trade shows, or other), you can then choose approaches based on
whether they reach your specific target market.
A market analysis differs from a marketing plan. An analysis enables you to identify and understand your customers; a
marketing plan tells how you are going to reach your customers. Laying out a marketing plan is covered in Chapter 10.
Be willing to look at different market segments instead of just the obvious or largest market, to secure some
degree of market penetration. Take, for instance, the credit card electronic key for hotels. Even though these keys
represented substantial savings, established hotels at first were reluctant to make the changeover from traditional
locks. Instead, new hotels were the first to put in this type of lock, and existing hotels followed later, once the
benefits were well known.”
Eugene Kleiner
Venture Capitalist
If you do not sell your product or service directly to the end-user but rather to retail outlets, distributors, or manufacturers,
you have two markets, and you should define the characteristics of both of them — the ultimate consumer and the
intermediary who is your actual customer. These target markets may have very different habits and concerns, and you need to
understand both of them, as they each affect your sales. For instance, you may sell software you develop to a computer
manufacturer that then bundles it with the computers they sell to consumers. The computer manufacturer’s biggest concern
may be cost; the consumer’s may be ease-of-use.
To gather information for this chapter, use the methods discussed in Chapter 2.
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You may be tempted to describe your market in the broadest possible terms, choosing to include all those who might
potentially use your product or service. Doing so gives you the comforting sense that you have a huge market to exploit.
Unfortunately, this gives you little genuine information on which to base your business decisions. You could end up defining
the market for furniture as everyone who lives indoors — hardly helpful if you’re trying to come up with a marketing plan for
your furniture store.
Instead you need to identify the particular market segments you wish to reach. These segments describe distinct,
meaningful components of the overall market and give you a set of specific characteristics by which to identify your target
market.
Let’s say you are considering opening a discount dry cleaning establishment. You plan your service to be less expensive
and faster, but, as a result, it may also be of slightly lesser quality than the dry cleaner now serving the area.
Thus, you might define your target market in these terms: “Employed women in white-collar jobs, price and time
sensitive, commute by car, ages 25 to 50, household incomes of $40,000–$80,000 per year, children living at home, reside in
the Laurelwood neighborhood.” You then need to determine whether the neighborhood has enough consumers who fit this
profile to support your business.
Customers can be categorized in several ways, by income level or by lifestyle issues. The income levels can fall
into one or more of the following categories: luxury, upscale, upper moderate, moderate, and budget. Lifestyle
issues are more subjective. The target customer is less dependent on income level and more on her attitude about
how she spends her disposable income.”
Nancy Glaser
Business Strategies Consultant
To be a useful planning tool, the definition of your target market must meet these criteria:
■
■
■
■
Definable. It should have specific characteristics identifying what the potential customers have in common.
Meaningful. The characteristics must meaningfully relate to the decision to purchase.
Sizable. It must be large enough to profitably sustain your business.
Reachable. Both the definition and the size must lead to affordable and effective ways to market to your potential
customers.
Once you have defined your market, you should then assess its size and trends, evaluate your competitors for that
particular market, and probe the market for strategic opportunities.
Demographic Description
Begin describing your market by the most basic, objective aspects of the customer base. These details are the specific and
observable traits that define your target market.
Demographic information is particularly useful when devising your marketing plan. Many marketing vehicles, such as
publications, mailing lists, radio, and TV, accumulate this kind of data about the market they reach. Thus, you are better able
to judge whether such vehicles are appropriate for your company.
Remember, you want to define those characteristics of your target market that meaningfully relate to the interest, need,
and ability of the customer to purchase your product or service.
It’s very difficult to create a new market, even if there’s a need. Developing a new market takes years, even if
you’re 100% right about the need and the product. The best market to look for is a market that already exists, that
is already being served, but being served in a marginal fashion.”
Eugene Kleiner
Venture Capitalist
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In the previous definition of the target market for the Laurelwood dry cleaner, for instance, the definition “white-collar
jobs” directly relates to the need for regular dry cleaning; “women” relates to the fact that most dry cleaning nationally is
purchased by women; “commute by car” is important because the location is not near public transportation; and
“$40,000–$80,000” relates to the customer’s ability to pay for dry cleaning while being less likely to afford the
more-expensive cleaners.
On the Demographic Description worksheet on page 107, describe the demographic details of your target market,
whether you are marketing to consumers or to businesses.
Geographic Description
Next, define the primary geographic area(s) you intend to serve. This definition should be as concrete as possible, indicating
whether your business serves a particular neighborhood, city, state, region, nation, or portion of the international market.
Also, look at the density of the area — whether urban, suburban, or rural — and, if customers will be coming to your
place of business, indicate whether the location is in a mall, strip center, business district, or industrial area, or will be a
stand-alone facility. Some businesses define their geographic market by climate, serving only cold-weather or hot-weather
locations.
The decision to locate in Napa was a marketing decision. We could have made our product anywhere, but ‘Napa’
is associated with premium wines. We wanted Napa on the label.”
Eugene Kleiner
Venture Capitalist
If you are making your product or service available globally — especially online — you may be tempted to view the
entire world as your geographic target market. However, even online, there are limitations to which geographic areas are your
primary target markets. These limits may be due to issues of fulfillment (e.g., shipping goods), language, licensing, or legal
issues, and there are certainly limits of realistic market demand from different areas.
Using the worksheet below and the one on page 108, describe the geographic details of your target customers, whether
domestic or international.
Domestic Geographic Description
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Demographic Description
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Globalization: International Target Market
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In the Target Market section of your plan, convey a sense of the concerns and interests of your customers. How do they spend
their time? What issues are they facing in their lives or businesses? With whom do they associate? How do they relate to their
employees and community?
Your natural instincts and experience with customers gives you some sense of what your customers are interested in. It’s
logical, for instance, to assume that receptive targets for your expensive specialty food product are fairly likely to subscribe to
Gourmet or other food magazines and might belong to local food and wine organizations. Or, if the market for your business
service is law firms, you would naturally assume they belong to the local Bar Association.
A little research can help you identify other aspects of your target market’s lifestyle or business style. Observe customers
in places where they shop or live. What other products or services do they buy? What kinds of cars do they drive? What kinds
of clothes do they wear?
Review the publications you think target customers subscribe to. What other companies are advertising? What are the
articles about? Survey your customers, whether in person, by mail, or on the phone, and ask them about some of their
activities.
What kinds of people or businesses need or want your product or service? Do they go to the movies, watch TV, or stream
videos? Do they entertain at home? If so, for whom? What other kinds of products or services would be used in the same
setting with yours?
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PRINTED BY: wclay24@gmail.com. Printing is for personal, private use only. No part of this book may
be reproduced or transmitted without publisher’s prior permission. Violators will be prosecuted.
Know What You’re Up Against
Competitive Position
Thoroughly Evaluate Your Competition
Customer Perception Factors
Internal Operational Factors
Other Factors Affecting Your Ability to Compete
First-Mover Advantage
Installed User Base
The Web
Inertia
Global Competition
Market Share Distribution
How Will You Obtain Sufficient Market Share?
Future Competition
Barriers to Entry
Preparing the Competition Section of Your Business Plan
Chapter Summary
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Famed baseball player Satchel Paige used to say, “Don’t look back; someone may be gaining on you.” But in business it is
imperative to see who’s gaining on you. It is far better to know what you’re up against than to be surprised when your sales
suddenly disappear to an unexpected competitor.
Every business has competition. Those currently operating a company are all too aware of the many competitors for a
customer’s dollar. Yet many people new to business — excited about their concept and motivated by a perceived opening in
the market — tend to underestimate the actual extent of competition and fail to properly assess the impact of that competition
on their business.
One of the very worst statements you can make in a business plan is, “We have no competition.” A knowledgeable
investor will immediately disregard a plan with such a statement because it indicates that either: 1) you have not fully
examined the realities of your business; or 2) there is no market for your concept.
Don’t allow yourself to be awed by an opponent, or, on the other hand, to have contempt for them. Don’t allow
the extremes of your emotions to dictate your assessment of the competition. Never overreact to a great deal of
success or failure, either your own or the competition’s.”
Bill Walsh
Former Coach and President
San Francisco 49ers
You can see this by looking at the example of the photocopier. When the first one was invented, no competition existed
from other makers of photocopiers, of course. But competition still came from many sources, including suppliers of carbon
paper and mimeograph machines. And if the copier worked and the market was receptive, future competition could
realistically be projected. If no competition truly existed at the time it was invented — if people weren’t duplicating
documents by some means — it would have meant no market for photocopiers existed.
Honestly evaluating your competition will help you better understand your own product or service and give investors a
reassuring sense of your company’s strengths. It enables you to know how best to distinguish your company in the customer’s
eyes, and it points to opportunities in the market.
Learn from your competition. The basic concept of competition is responsiveness to customers, and watching your
competitors can help you understand what customers want.
Visit and observe successful stores. Analyze their strengths and weaknesses. Shop your competition.”
Nancy Glaser
Business Strategies
Consultant
As you begin your competitive assessment, keep in mind that you need to evaluate only those competitors aiming for the
same target market. If you own a fine French restaurant in midtown Manhattan, you don’t have to include the McDonald’s
next door in your competitive evaluation: You’re not aiming for the same customer at the same time. On the other hand, if you
are thinking of opening the first sports memorabilia shop in Alaska, you have to look far afield, at any such retail stores in
Seattle or Vancouver, mail-order dealers from all over the country, and online dealers from around the world, as that is where
your potential customers shop now.
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ASSESS THE COMPETITION
When preparing the competitive analysis portion of your business plan, focus on identifying:
It is tempting to want to judge your competition solely on the basis of whether your product or service is better than theirs. If
you have invented a clearly superior widget, it is comforting to imagine that widget customers will naturally buy your product
instead of the competitors’ and the money will roll in.
Unfortunately, many other factors will determine your success in comparison to other manufacturers of widgets. Perhaps
their brand name is already well-known. Perhaps their widgets are much cheaper. Perhaps their distribution system makes it
easier for them to get placement in stores. Or maybe customers just like the color of your competitors’ packages better.
The objective features of your product or service may be a relatively small part of the competitive picture. In fact, all the
components of customer preference, including price, service, and location, make up only half of the competitive analysis.
The other half of the equation consists of examining the internal strength of your competitors’ companies. In the long run,
companies with significant financial resources, highly motivated or creative personnel, and other operational assets will prove
to be tough, enduring competition.
You can’t be 5% or 10% better than the competition. You have to be 10 times better. There’s a huge lethargy
factor — you don’t get people to change their bank account, or whatever you’re trying to get them to change, if
you’re 10% better; you’ve got to be 10 times better.”
Andrew Anker
Venture Capitalist
Thoroughly Evaluate Your Competition
Two Competitive Analysis worksheets on pages 124–125 help you evaluate your competitive position in terms of both
customer preference and internal operational strengths.
The worksheets enable you to give greater or lesser importance to each competitive factor, depending on the significance
of those particular aspects. To complete each worksheet, give each factor listed a maximum possible number of points,
ranging from 1 to 10, with 1 being least important to your overall target market and 10 being the most important. Place the
maximum number for each factor in the Maximum Points column.
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Competitive Analysis: Customer Perception Factors
Following the directions on pages 123 and 126, allocate points for each of the factors listed below for both your
company and your competitors.
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Competitive Analysis: Internal Operational Factors
Following the directions on pages 123 and 126, allocate points for each of the factors listed below for both your
company and your competitors.
For instance, on the Competitive Analysis: Customer Perception Factors worksheet, let’s say your target market is
extremely price sensitive but willing to travel a long way to get a bargain. The purchase price factor might be given a
maximum of 10 points and the location factor a maximum of 2.
Once you have finished numbering the factors for your company and competitors, you will see how this weighting system
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gives you a better picture of the actual strength of your competitors as opposed to your own.
Keep in mind that you can also allot negative numbers. If, for example, your target market is interested only in items
perceived as luxuries, having too low a price may be a liability. If your market is particularly socially conscious, the fact that
your competitor conducts tests on animals may be a negative for the social image factor in their evaluation, giving you a
competitive edge.
In your analyses, look both at specific competitors — particular companies you compete against — and at the overall type
of competition. In the example of the Alaskan sports memorabilia store, for instance, the Competitive Analysis might have
four competitors listed: each of the two specific retail stores in Seattle and Vancouver, mail-order dealers, and online dealers
as categories.
It’s always easier to have an enemy. ‘We try harder’ is a very good business plan. ‘They’re the old guys, we’re
the new guys. Our job is to beat them’ — that’s a very clear message. You can raid the best people from your
competitors, you can look at their business plan and see how they developed, and you can follow the good parts and
throw out the bad parts. It’s straightforward.”
Andrew Anker
Venture Capitalist
If desired, you can include these completed worksheets in the Appendix of your plan, as well as use them for internal
planning purposes.
Customer Perception Factors
When doing your analysis, consider these customer perception factors:
■ Product/Service Features. Specific inherent attributes of the product or service itself; if key features are particularly
important, list separately.
■ Indirect/Peripheral Costs. Costs other than the actual purchase price, such as installation or additional equipment
required.
■ Quality. Inherent merit of the product or service at the time it is provided.
■ Durability/Maintenance. Quality of the product/service over time; ease of maintenance and service.
■ Image/Style/Perceived Value. Added values derived from design features, attractive packaging or presentation, and other
intangibles.
■ Customer Relationships. Established customer base and customer loyalty; relationships of sales personnel to customers.
■ Social Consciousness. Perception of the company, product, or service relative to issues such as environment, civic
involvement, and the like.
Get to know your competition over time; continually evaluate them as to approach, style, strategy, and
personnel. You need a ‘book’ on your competition. While you maintain your own standards of performance, you
look for voids in their game plan. Ask yourself how they would respond to different situations. While your own
standards should dominate your performance, within those confines, you adapt to what is necessary to take on the
competition.”
Bill Walsh
Former Coach and President
San Francisco 49ers
Internal Operational Factors
Internal operational factors that increase competitiveness include:
■ Financial Resources. Ability of the company to withstand financial setbacks, and to fund product development and
improvements.
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■
■
■
■
Marketing Budget/Program. Amount and effectiveness of advertising and other promotional activities.
Economies of Scale. Ability to reduce per-unit costs due to large volume.
Operational Efficiencies. Production or delivery methods that reduce costs and time.
Product Line Breadth. Ability to increase revenues by selling related products; ability for customers to purchase needed
items from one provider.
■ Strategic Partnerships. Relationships with other companies for purposes of development, promotion, or add-on sales.
■ Company Morale/Personnel. Motivation, commitment, and productivity of the employees.
We have to view our product through the eyes of a consumer and see what we look like to them in comparison to
our competitors. It’s easy to get involved in the manufacturing process and lose sight of what the consumer sees on
the shelf. But if you do, the rest of the process is immaterial.”
Larry Leigon
Founder, Ariel Vineyards
First-Mover Advantage
In new industries or new market segments, the first company to gain a reasonable foothold in the market can often leverage
being early into a significant competitive advantage. Having a market to itself for even a brief period may enable a company
to define the product, set standards, establish key strategic partnerships, capture customer attention, and in other ways gain
dominance. This rush to market, however, does not guarantee success, and many industries have instances of early market
leaders being overtaken by later-stage competitors.
No competition is a red flag for an investor. If you say, ‘there is no competition,’ then there’s either no market or
you just don’t understand the competition.”
Lauren Flanagan
Cofounder and Managing
Director, BELLE Capital USA
Installed User Base
If a sizable portion of the market currently uses a product that performs a similar function or is incompatible with your new
product or service, customers may resist the cost and inconvenience of making the transition. This is particularly true for
products involving technology or electronics.
Often even superior products have a difficult time getting a foothold in such markets. One of the most cited examples is
the familiar “QWERTY” keyboard. Keys on early typewriters were arranged to intentionally slow down typing to prevent the
mechanical keys from sticking. Although later keyboards improved on this arrangement, typists were already comfortable
with the “QWERTY” keyboard, and it remains to this day.
The Web
Using the Web substantially lowers barriers to entry in many industries, and in some cases it allows competitors to operate at
extremely narrow profit margins. The Internet also arms customers with substantially more purchase information, sometimes
even wholesale prices. Companies that previously may have been able to compete effectively in a particular geographic area
may now face worldwide competition.
Globalization: Competition
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PRINTED BY: wclay24@gmail.com. Printing is for personal, private use only. No part of this book may
be reproduced or transmitted without publisher’s prior permission. Violators will be prosecuted.
How Will You Obtain Sufficient Market Share?
If yours is a new business, it will generally be easier and less expensive to enter a market with many diverse competitors than
one dominated by a few major players. If you are preparing a business plan for financing purposes, you will have to
demonstrate to potential funding sources through your marketing plan how your company will gain and maintain a reasonable
market share.
Complete the Market Share Distribution worksheet on page 131 to outline how sales are distributed among the
competition, both by total sales revenues and by unit volume. (Some companies make fewer but higher-priced sales by
targeting the most lucrative customers; others sell greater volume at lower per-unit prices.) Once again, look at competitors
both by individual companies and by categories of competition, as they apply to your situation.
You will probably have to estimate the figure…
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