Chapter 7
Marketing Plan
Key Words
Marketing strategy—refers to a firm’s approach to marketing its products and services
stated in broad terms
Gross margin—a company’s net sales minus its cost of goods sold
Price-quality attribution—consumers naturally assume that the high-priced product is
also the better quality product
Sales process (or cycle)—refers to the steps the firm goes through to establish
relationships with customers and close sales
Chapter Overview
This chapter builds on Chapter 6, which discussed the market analysis by introducing the
marketing plan portion of the business plan. This chapter focuses on how the firm will
actually find customers and close sales. It also deals with the nuts and bolts of marketing
in terms of price, promotion, distribution, and sales.
Chapter Summary
1.
The best way to describe a company’s marketing plan is to start by articulating
its marketing strategy, its positioning, and its points of differentiation, and then
2.
There are two things to be particularly mindful of as you write the marketing
section of your business plan. First, all the elements of a firm’s marketing plan
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3.
marketing strategy, pricing strategy, sales process and promotions mix, and
distribution and sales.
This marketing chapter of the business plan contains four sections: overall
3.
A firm’s marketing strategy is its approach to marketing its products or services
stated in broad terms, which forms the basis of all of its marketing-related
activities.
4.
the market. Position is concerned with how a firm is situated relative to its rivals.
In a sense, a position is a part of a market or a specific target market that a firm
is claiming for its own.
After selecting a target market, the next step is for a firm to select a “position” in
5.
message to its target customers.
Price is an important issue because it determines how much money a company
6.
product, and then backing off a bit to provide a cushion. Most experts
recommend value-based pricing because it hinges on the perceived value of a
product or service rather than cost-plus markup, which is a formula that ignores
the customer.
There are two methods for determining the price of a product or service: cost–
based and value-based pricing. In cost-based pricing, the list price is determined
7.
relationships with customers and close sales.
8.
relations over advertising because it’s free and it helps build the firm’s
credibility.
Advertising is making people aware of a product in hopes of persuading them to
buy it. The major difference between public relations and advertising is that
9.
One issue that is particularly important in executing a promotions plan is to
focus on the benefits of a product or service rather than the features.
10.
Distribution encompasses all the activities that move a firm’s product from its
place of origin to the consumer.
Chapter Outline
I. Introduction
II. Overall Marketing Strategy
a. Positioning Strategy
b. Points of Differentiation
ii. Public Relations
iii. Other Promotions-Related Activities
V. Distribution and Sales
a. Distribution and Sales Alternatives
b. Sales Strategy and Related Issues
Chapter Notes
I. Introduction
• This chapter focuses on how the firm will actually find customers and
close sales
• The marketing section of the business plan must lay out specifically how
you plan to make your target market aware of the existence of your
product or service
• Reinforce how your product provides its user unique value and differs
from similar products in the marketplace
II. Overall Marketing Strategy
• Marketing strategy refers to a firm’s approach to marketing its products
and services in broad terms, which forms the basis of all its marketing-
related activities
• Begin the marketing plan section by articulating your marketing strategy
because it sets the tone for the entire section
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a. Positioning Strategy
o After selecting a target market, the next step is for a firm to
select a “position” in the market
b. Points of Differentiation
o You should also clearly articulate your specific points of
differentiation early in the marketing plan section of your
business plan
o The most compelling forms of differentiation are created
through innovations that are difficult to imitate because
they are created by competencies unique to a firm
o A useful way for a start-up to visually depict its primary
point of differentiation is through a product attribute map
III. Pricing Strategy
• This section should explain how you plan to price your product or service
a. Cost-Based Pricing vs. Value-Based Pricing
o The two methods for determining the price of a product or
service are cost-based pricing and value-based pricing:
• In cost-based pricing, the list price is determined by
adding a markup percentage to a product’s cost
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• Companies are also finding it increasingly
difficult to dictate prices to customers given
customers’ ability to comparison shop on the
Internet to find what they believe is the best
price
• Sometimes, to make this determination, a company has to conduct
focus groups or try different pricing options in test markets
o Most experts recommend value-based pricing because it
b. Other Pricing-Related Issues
o Most experts warn start-ups to resist the temptation to
charge a low price for their products in hopes of capturing
market share
IV. Sales Process and Promotions Mix
• A firm’s sales process (or cycle) depicts the steps it goes through to
identify prospects and close sales
a. Sales Process
o Sales process (or cycle) varies by firm, but normally
includes the following steps:
1. Prospect for (or gather) sales leads
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2. Make the initial contact
3. Qualify the lead
o Following a structured process to generate and close sales
benefits a firm in two ways: (1) it enables a firm to fine-
tune its approach to sales and build uniformity into the
process and (2) it helps a firm qualify leads, so the firm can
spend its time and money pursuing the most likely buyers
b. Promotions Mix
o Promotions mix includes the specific tactics that a firm
i. Advertising
• Advertising is making people aware of a
product in hopes of persuading them to buy
it
and billboard advertising
• Media used normally depends on the firm’s
target market
• There are many downsides to conventional
forms of advertising, which steers start-ups
away from advertising on a broad basis:
• Low credibility
• Possibility that high percentage of
viewers will not be interested
• Public relations refers to efforts to establish
and maintain a company’s image with the
public
• Examples of public relations techniques
include:
• Press releases
• Media coverage
• Generating favorable public relations is
better than advertising because it is more
grassroots and doesn’t seem to be as self–
serving
iii. Other Promotions-Related Activities
• Some firms give away free samples or trial
memberships as a way of exposing potential
customers to their product or service
V. Distribution and Sales
• Distribution encompasses all the activities that move a firm’s product from
its place of origin to the consumer
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• This section of your business plan clearly identifies your distribution and
sales plan in terms of who will make the sales
a. Distribution and Sales Alternatives
o The first step in determining a distribution and sales
strategy is to sort through the choices
b. Sales Strategy and Related Issues
o Your description should make it clear whether you plan to
field your own sales force
Review Questions
1.
Describe the difference between the market analysis chapter of a business plan
and the marketing chapter.
Answer: Whereas the market analysis focused on describing a firm’s target
2.
the periodicals they read, the media they watch, and so on in order to fine-tune
Why is it important for the marketing plan to be developed with the customer
plainly in mind?
Answer: Beyond producing a product or service that accommodates your
3.
What is a company’s marketing strategy and why is it important?
Answer: A firm’s marketing strategy is its approach to marketing its products or
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4.
market that a firm is claiming for its own.
What is meant by a company’s “positioning” strategy?
Answer: After selecting a target market, the next step is for a firm to select a
5.
What is the purpose of a product attribute map?
Answer: A product attribute map is a useful way to visually depict a firm’s
6.
off a bit to provide a cushion.
Describe the difference between cost-based pricing and value-based pricing.
Answer: In cost-based pricing, the list price is determined by adding a markup
7.
that the higher price product is also the better quality product.
What is the price-quality attribution?
Answer: Most consumers make a price-quality attribution, naturally assuming
8.
persuading them to buy it. The major difference between public relations and
Describe the differences between advertising and public relations? Which of the
two alternatives do start-ups tend to prefer?
Answer: Advertising is making people aware of a product in hopes of
the firm’s credibility.
9.
10.
distribution and sales plan in terms of who will make the sales. To assist you
with thinking through these issues, focus on (1) distribution and sales
alternatives and (2) sales strategy and related issues. This critical issue lies at the
target market.
Describe how firms should approach the topic of distribution and sales.
Answer: This section of your business plan should clearly identify your
Application Questions
1.
Spend some time looking at ZUCA’s website (http://www.zuca.com). Comment
on each element of ZUCA’s marketing plan (product, price, promotion, and
distribution and sales). On a scale of 1 to 10 (10 is high), rate the strength of
related activities.
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ZUCA’s overall marketing plan. Justify your rating.
2.
pricing, the list price is determined by estimating what consumers are willing to
pay for a product, and then backing off a bit to provide a cushion. Most experts
recommend value-based pricing because it hinges on the perceived value of a
product or service rather than cost-plus markup, which is a formula that ignores
Kathy has developed a new type of smoke detector, which is much more
sensitive than previous generations of smoke detectors, and is particularly geared
to people who live in small spaces, like apartments or dorm rooms. Kathy
doesn’t know how to price this product. Describe to Kathy the two most
common methods of pricing and give her your recommendation for how to price
the product.
Answer: There are two methods for determining the price of a product or
3.
Study the website of Velocity Sports Performance (http://www.velocitysp.com),
a franchise organization that helps athletes in every sport, at all ages and skill
levels, realize their athletic potential. Make a list of the types of public relations
activities that the owners of Velocity Sports Performance and their franchisees
could engage in to promote the company.
4.
Beth Andrews has developed a new line of women’s clothing that has created
some positive buzz among friends and some business stores in her local
community. When asked by a reporter, “Where do you plan to sell your
clothing?” Beth said, “Hopefully everywhere—Costco, Wal-Mart, Sacks,
Nordstroms, the Internet, and specialty clothing boutiques.” Write a critique of
Beth’s distribution and sales strategy. Provide her recommendations for a more
appropriate distribution and sales strategy.
Answer: The first step in determining a distribution and sales strategy is to sort
through the choices. The key to making the right choices among the alternatives
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5.
Think of a company other than Dell or IKEA that has innovated in a very
meaningful way in regard to how it distributes and sells its product or service.
Write a short critique of how this innovative distribution or sales strategy has
contributed to the company’s success.
Additional Activities
1. Burger Wars
Purpose: to practice differentiating similar products.
After lecturing on differentiation, ask the students for form discussion groups. Tell them
they are going to brainstorm for this activity, and remind them of the rules of
2. Benefits or Features? Sold!
Purpose: to compare and contrast benefits and features, and practice the sales process.
This is a two-part activity; if you have limited time, you could choose to only conduct
one of the two parts.
Part 2 of this exercise requires the students to pair up with one other person in their group
to role play the sales process, selling and buying the same product used in Part 1. Student
A plays the role of the salesperson, and Student B plays the role of the customer. Ask the
“customers” to play their roles as if they are skeptical or unsure if they really want or
need the product. Try to build some competition into the role play to make it more
enjoyable for the students, as they will learn more if they have some fun with this. Allow
them approximately 10 or 15 minutes to close the sale.
After time has expired, ask the customers who chose to purchase the product what
convinced them to buy—was it a feature or a benefit? Ask the salespersons what part of
the sales process was most difficult or ineffective, and which part was the easiest or most
effective.
3. PR Anyone?
Purpose: to discover how prevalent free publicity is in the local newspaper.
For this activity, you will need copies of the local newspaper or magazine. Ideally, you
will have one for each student, but this activity can be accomplished with small groups
sharing one newspaper. If the newspaper is large, divide the sections among the various
groups of students.
Debrief the exercise by asking each student or group to share its lists of businesses
mentioned in the newspaper or magazine—write the names of the businesses on the
board. Then ask students:
o How many of these businesses have you heard of prior to reading these articles?
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4. Pickup or Delivery?
Purpose: to demonstrate that a firm’s chosen distribution channel can help to
differentiate its products or services from its competitors.
Debrief by asking each group to share its choices and explain its reasoning.