There are many articles on writing the right business plan. However, after reading them, in many cases there are still many questions. In this article we will try to describe the whole process of writing a plan and its constituent elements in as much detail as possible.
Marketing Business Plan - Components
The following issues should be considered in the marketing part of a business plan:
- Market size
- Trends in market size change
- The life cycle of the industry
- Target Market (Audience)
- Communication policy
- SWOT analysis
- Market strategy
- Advertising budget
Consider each of them.
Market size (volume)
In order to calculate what potential the market has, we need to understand its volume. To calculate the volume we will need three indicators:
- Number of target audience (number of people who will be potentially interested in buying our product / service)
- Frequency of consumption for 1 year. Estimated frequency, ie how many times people use the product / service on average.
- Average price of products.
Let's say we want to start a company and sell women's perfumes in Tbilisi. Our task is to understand the maximum number of target audiences that may be interested in our products. The target audience looks like this: 15-65 year old females living in Tbilisi. To understand the number of these people, enter On the website of the National Statistics Office of Georgia And see the data. Unfortunately, it is not possible to filter data by city or gender. Therefore, based on the statistics of previous years, we assume that the number of women in Georgia is 52% of the total population. Let us also assume that a similar number will be fair for Tbilisi.
We take the data of 2018, where the population of Tbilisi is 1,158.7 million people. To believe our assumption, the number of women out of this is 602,524 people. Depending on the age range, we get 400,000 people.
The next stage - conducting a survey. Interview 100 - 120 people from our target audience to find out how many times a year they buy perfumes on average. Suppose we get the average consumption frequency2.
Let us also conditionally say that the average market price of perfumes is 50 GEL.
To calculate the market volume, multiply these three indicators by each other: 400 000 x 2 x 50 = 40 000 000 GEL. The potential volume of the market is 40 million GEL.
Market change trends (extrapolation method)
It is always important to know how the market will change in the next 5-10 years. For this we need to know the trends of its change. The method of extrapolation that we ourselves use when writing a business plan is one of the best to achieve the above goal. Extrapolation means moving current trends into the future. Let’s say our target audience was 300,000 in 2014, increased by 8% in 2015 to 324,000, in 2016 another 8%, and so on. (This data again On Geostat We find). Let's look at the data and we will see the trend: living in Tbilisi for 15-65 years. The female population is growing by 8% every year (the real trend is different, the numbers are taken for example). We can reverse this trend in the future and assume that if by 2018 our target audience was growing by 8%, in 2019, 20, 21, and so on. This trend will continue. Calculate the future volume of the market based on this trend.
Market change trends:
2018წ. – 40 000 000 (400 000 x 2 x 50).
2019წ – 43 200 000 (400 000 x 1.08 x 2 x 50)
2020წ – 46 656 000 (432 000 x 1.08 x 2 x 50)
Note that in this particular example we used only one indicator (population). In reality, both the average market price and the frequency of average consumption can change.
The life cycle of the industry
We can distinguish 4 main stages in the life cycle of the industry:
- New stage in the birth of the market: At this stage, only one or a few small companies are represented in the market. The basic rules of marketing relationship are formed, demand-supply. Market research by companies is associated with additional costs.
- Growth: New players enter the market, product range expands and competitive struggle increases. All competitors try to differentiate their products to gain an advantage over other companies.
- Maturity: At this stage the market growth reaches its maximum and the players in the market find the maximum profit from their activities.
- Decline: Technological development and changing consumer needs will lead to a decline in the industry. To stop this moment, you need to constantly monitor how the interests of consumers have changed, how relevant your product / service remains to them.
You need to be prepared for all these stages and know what actions will be taken to get maximum profit and minimum loss.
The Porter model is the best and most detailed model for analyzing the level of competition.Download the Excel file And fill the appropriate boxes.
Write down how closely your product / service relates to the season. If the product is seasonal, write down the estimated number of sales by this or that month / season.
What constitutes a typical buyer of your product or service? Draw a brief business portrait of him, write down the behavioral factors, identify the locations, establishments where he is most often present. Once you have established your target market, it will be easier for you to select the advertising tools that will help you achieve your goals.
What platforms are you going to use to communicate with your customers? Here are some key platforms:
- outdoor advertising
- Social networks (Facebook, Instagram, etc.)
- Website (multi-page site or landing page for different offers)
Weaknesses, strengths and opportunities of the company. Fill in the table below.
|Our strengths. What customers like about our business||Our weaknesses are what we want to fix.||What future opportunities does the company have||Possible problems and risks|
Briefly describe how you are going to sell your product, why would customers want to buy it when there are so many alternatives in the market as competitors? What will be done to keep the potential client as satisfied as possible.
Conduct an examination to determine the optimal price. Describe pricing policy and margin. On average, depending on the activity, the margin ranges from 15-30%.
Physical Evidence - How will your product be presented at customer contact points?
What loyalty program will you introduce to retain existing customers?
Write down the initial advertising budget and the expenses you will need to create and manage your communication policy sources. See example in the table.
|Marketing Expense (Aug. 2019)||Estimated Price|
|Landing making||400-500 ₾|
|B2B Flyers x1000 + design||300 ₾|
|B2B email making coding||150-200 ₾|
|Advertising on social networks||300-400 ₾|
|Total||1250 – 1400 ₾|
Now you know the structure of the marketing part of a business plan. However, remember that the investor is interested not only in numbers, but also in the real desire and aspiration, motivation of you and your team.