The marketing plan
convinces the reader that an opportunity exists and that the proposed
enterprise can capitalize on it. The consumer must demonstrate a thorough
knowledge of market demands, trends, competition, and customers. To
complete this section of the business plan, the consumer must conduct
research to determine who will buy the product or service, how much
to charge, how and where to distribute/sell the product or service,
and how to package and promote it.
Products and Services
This section describes the product or service. The consumer
discusses the currently-unsatisfied market need or desire and describes
how his or her product or service will meet that need or desire.
The Target Market
This section describes the market and the customer. These
resources (many available at public libraries) provide data on markets
- County and City Data Book
- Statistics for States and Metropolitan Areas
- Statistical Abstract of the United States
- Trade Association Publications
- A Guide to Consumer Markets
- Editor & Publisher Market Guide
- Sales & Marketing Management Survey of Buying Power
- Sales & Marketing Management Survey of Buying Power, Part II
- The Internet (use search engines such as Excite, Lycos, Webcrawler,
Infoseek, etc., to gather information on a specific industry)
- Locale-specific directories such as the Montana Business Directory
- Small Business Administration
- State Departments of Labor
- Consumer-conducted surveys or focus groups
- Interviews with non-competing owners of similar businesses or the
same type of business
The consumer references all information sources and describes
the method used to gather target market data. He or she describes the
geographic market including its physical size, history, and trends (e.g.,
growth); and the proximity and relevance of potential customers. This
section should also contain an estimate of the potential market, the
number of customers the business expects to serve immediately after
opening, the rate of expansion, and possible expansion into other markets.
If the potential customer is an individual rather than a business, this
section describes customer demographics such as gender, age, education
and income levels, residence location, and how they will access the
business. If pertinent, it describes customers' hobbies, where they
shop, what they read, and what they buy.
If the potential customer is a business, this section describes customer
demographics such as type of business, size, business location, how
it will access the consumer's business, and other services or products
If the business's location is integral to its marketing
activities, the "Marketing" section briefly describes the location and
the reason for its selection. In some business plans, the complete description
may be in this section, but in others a more complete description will
be included in the "Operations" section of the business plan. Please
see the "operations" description for a comprehensive discussion of business
This section describes others who are competing for the
same market. It should state what they charge, their weaknesses and
strengths, how the consumer's product or service differs from theirs,
and the features and benefits of the consumer's service or product versus
the features and benefits of competitors' service or product. Describe
the methods used for gathering this information.
The consumer should describe how he or she will gain market share. For
example, will people patronize the business because of price, technical
sophistication, image, superior product or service, location, or sales
and/or marketing techniques? It is important to remember that a small
business can rarely compete on the basis of price, because larger businesses'
economies of scale and efficiencies allow them to offer lower prices.
Most Small Businesses Compete on The
Basis of Quality & Service
Crumbs Pastry Shop
Crumbs Pastry Shop owners Sue Hanneman-Williams and
Kelly Bauer Bakkum decided right from the start to market their
wholesale/retail dessert business to clients who wanted high-quality
desserts. Sue and Kelly recruited their wholesale accounts by
promising both quality and reliable, timely service. After servicing
their new accounts for one month, they discovered a competing
bakery undercutting their prices to attract the same accounts.
They were tempted to reduce quality and lower prices.
"We considered it, but not for very long. We asked ourselves if
we wanted to make these inferior products for the rest of our
lives. But all our future plans relied on high quality."
Crumbs communicated its position clearly to the lost accounts
and proceeded to find new customers. Now the owners find orders
from these original accounts slowly coming back. Crumbs' experience
shows the importance of a microbusiness not competing on the basis
Advertising and Promotion Strategies
This section describes how the message about the product
or service will be communicated to the users. It should describe the
business owner's philosophy about customer service. It also describes
the image the consumer wishes to portray about his or her product through
packaging, brochures, letterhead, business cards, displays, and the
behavior/dress of employees.
This section discusses all promotional activities. It answers the following
questions: What advertising media will be used - newspaper, radio, television,
the Internet, windshield handouts, magazines, mailings, billboards,
demonstration sites? What is the frequency of advertising - daily, weekly,
monthly, bi-monthly? Will promotions (giveaways, discounts) be used?
Who will contact customers - in-store sales staff, sales representatives,
telemarketers? How will customers be contacted - by telephone, in-person
cold-calls, trade shows, e-mail? Will a website be created?
This section should also discuss how customer satisfaction will be assessed.
For example, through questionnaires, focus groups, repeat business,
and/or referrals to others.
More on Marketing and Advertising
"Marketing" describes everything a business owner does to
present his or her product to potential customers. Advertising is part
of a marketing plan. Marketing also includes designing a logo and written
materials such as brochures, business cards, letterhead, packaging,
web page - anything that is disseminated to the public about the business,
product, or service. Marketing can also include developing a mailing
list, and researching potential customers and their needs, and public
The terms "promotion" and "advertising" often are used interchangeably,
however, they are not the same. Promotion includes a range of activities
including advertising (a paid announcement to sell a product), public
relations (resulting in understanding of and goodwill towards a person
or firm), direct mail, telemarketing, one-on-one selling, trade shows,
and flyers or posters.
Promotion Serves Three Purposes:
- Promoting awareness of a business and its product or service
- Stimulating sales
- Establishing or modifying a firm's image
You will be asked to evaluate whether the type of promotional
activity selected is appropriate for the business, if it will produce
projected sales by reaching the targeted customers, and if it fits reasonably
into the business's budget. The following will assist you with evaluating
proposed promotional activities.
Common types of paid advertising include radio, TV, print (newspaper,
magazine, yellow pages, trade directory, billboard, and weekly shopper),
direct mail ads (newsletters, flyers, postcards, brochures), and Internet/website
Promotional opportunities also include follow-up services (checking
on customer satisfaction or rectifying customer complaints), in-person
contact, sales promotions, point of-purchase displays, shared advertising,
and free samples.
Public relations is an often overlooked but effective promotion method
- especially for new or start-up companies. Public relations activities
include news releases; magazine or journal articles; attending or providing
seminars and workshops; sponsoring community activities; providing services
or goods to community organizations as a door prize or to be auctioned
off; or speaking engagements.
"Reach" and "Frequency" - Two Important Advertising Attributes
"Reach": The total number of unduplicated
people to whom the advertiser delivers a message. "Effective reach"
is determined by the number of people exposed to advertising who have
some degree of recall. For example, if 100 people are exposed to a radio
ad and 75 of them remember the ad and the product, then the effective
reach is 75%. To increase reach, an ad must use different media. For
example, running an ad on two radio stations, each with a different
music format increases the number of people exposed to the ad.
"Frequency": The number of times the audience is exposed
to a promotion over a period of time. "Effective frequency" is the number
of times people are exposed to an ad until they have some level of recall.
One rule of thumb says that three exposures constitute the minimum frequency
level. Frequency increases by running an ad more times within a time
period, such as three times per hour instead of one, or by placing an
ad in a newspaper four times per week instead of two.
Each Advertising Venue has its Advantages and Disadvantages
Radio - Radio stations have fairly clearly
defined audiences. This portable medium goes where the audience goes.
However, there are no visuals - audio must carry the message, and the
advertiser must rely on the announcer's skill to relay the message.
repeats brief messages and refers listeners to other sources
for more information.
Television - TV creates a visual image
that reinforces a message. The main disadvantage is cost. Another disadvantage
is that homemade ads compete with well-produced, slick ads and programs
- a reasonably good ad requires professional help.
Television can have a strong audio
and visual impact, and may reach a large, varied audience.
Personal Contacts and Meetings - Personal contacts
allow trust to be established fairly easily, control of the content,
and immediate feedback. There is a give-and-take with the audience,
and communication can be lengthy and detailed. Finally, personal contact
is especially important in rural areas. The disadvantages are that it
is difficult to provide visual information and it is difficult to reach
many people. There are specific networking
techniques for individuals who have a communication or mobility
Use personal contacts and meetings
when establishing integrity and making a human connection are
Mass Mailings of Brochures and Flyers - These are
mailed directly to an individual, business, or agency. The disadvantage
is that the mailings compete with other mail - the audience may not
read all (or any) of the message.
Mass mailings generally are inexpensive
and the documents can be filed for future reference.
Posters and Billboards - This is a cheap method with
great potential for reaching large audiences. The disadvantages are
that posters and billboards compete with other visual stimuli and passers-by
do not stop to read them, so messages must be brief and eye-catching.
Sites should be selected for their potential to reach the intended audience.
For example, motel billboards on the major highways entering a city
have greater potential for reaching potential customers than billboards
within the city.
Newsletter Announcements and Advertisements - These
are inexpensive and reach specialized audiences with identified interests.
However, a newsletter editor may cut or rewrite an article. Production
times may also be sporadic. To ensure an ad or article's timeliness,
the business owner should allow plenty of lead time for publication.
Newspaper Advertisements - Newspapers generally reach
a large, varied, mostly-adult audience. Longer messages are possible.
However, advertisements compete with other information in the publication.
Magazine Advertisements - The potential audience is
large and usually targeted. Like newspapers, longer messages are possible
but advertisements compete with other information in the publication.
Advertisements in popular publications are expensive. Identify the magazine's
readership to be sure the ad reaches its targeted audience.
Internet/Website Advertising - The worldwide web is
good for reaching a large audience - in fact it has a global reach with
most people residing outside a business's trade area. Potential customers
can read about a company 24-hours a day. On the web, the potential customer
must be looking for a particular type of product or manufacturer to
view the site; readers do not go to a site involuntarily and read or
hear about the product like a radio/tv/newspaper/magazine advertisement.
Potential customers must be able to locate a company on the web. Therefore
the business must register with a search engine such as Yahoo!. Also
because search engines read the entire site and compile the number of
times specific words appear in the site it is important to have a complete
description of the business's services and products on the web page.
Advertising on the web is a good medium for orders that can be shipped
or where potential customers can order a catalog. The site should contain
product descriptions and on-line ordering capability for either a product
or for more information. Also to assure customers will return a site
must be continually maintained and changed. The web is not for every
business - some businesses such as a barber, tire repair shop, or sheet
rocker likely will not benefit. The web page also must include the business's
address and telephone number.
(Adapted from The WEDGo Small Business Planner)
Chapter 6 Business Plan Study Guide: The Marketing Plan
- When developing the marketing plan the potential business owner
(must/may) conduct research to determine who are likely to be potential
- The marketing plan is where the consumer demonstrates a thorough
a. Market demands
b. Product pricing
c. Product sources
d. All of the above
- Because research is difficult to conduct, it is acceptable for the
consumer to identify his or her target market based on the reaction
of some people he or she has talked to.
- Offering lower prices than the competition is the most effective
way that small businesses can gain market share. T_____ F_____
- Small start-up companies generally do not benefit by conducting
public relations activities. T_____ F _____
- The worldwide web is an effective way to reach potential customers
in the local trade area. T_____ F_____
Study Guide Answers: Chapter
6 - The Marketing Plan
© July 1998, 1st Revision June 1999, 2nd Revision February 2001