Lesson 5.1 – Develop the Marketing Plan
What is Marketing?
 all of the processes used to determine and satisfy the needs of customers and the company

planning

pricing

promoting

distributing

selling
Marketing Concept - Uses the needs of customers as the primary focus of a product or service during:




planning
production
distribution
promotion
Marketing Mix - reaching the target market through a blend of:




product
price
distribution (placement)
promotion
Marketing Goals should be written following the SMART guidelines.



Short Term Goals - Achievements for the next year are the focus of short-term goals.
Medium Term Goals - Achievements for the next two to five years are the focus of medium-term goals.
Long Term Goals - Achievements for a 5, 10, or 20 year time horizon are the focus of long-term goals.
Marketing Plan 



defines your market
identifies your customers and competitors
outlines a strategy for attracting and keeping customers
anticipates changes
The Marketing Plan should include the following information:
1.
2.
3.
4.
5.
6.
7.
8.
Product or Service
Target Market
Competition
Marketing Budget
Business Location
Pricing Strategy
Promotional Strategy
Distribution Strategy
Lesson 5.2 - The Marketing Mix─Product
The Consumer Driven Market




The wants and needs of customers are the most important consideration when developing any
product or marketing effort.
The U.S. has changed from a product-driven market to a consumer-driven market.
Consumers are more educated.
Competition includes the global market.
Product Mix - the different products and services a business sells


Entrepreneurs may carry some products that are not profitable just to please customers.
A small percentage of the product selection often makes up the majority of sales revenue.
Product Management - There is more to a product than consumers may realize.





Features - product characteristics that will satisfy customer needs
Branding - the name, symbol, or design used to identify your product
Packaging - the box, container, or wrapper in which the product is placed
Labeling - where information about the product is given on the package
Positioning - creating an image for the product in the customer’s mind
Lesson 5.3 - The Marketing Mix─Price
Price - the amount a customer pays for a product or service


needs to be low enough that customers buy from you
needs to be high enough so revenues exceed expenses
Price Objectives Might Include:





maximize sales
discourage competition
establish an image
increase profits
attract customers
Investment - the costs of making and marketing a product
Return on investment (ROI) - amount earned as a result of the investment

usually expressed as a percentage
Example: If it cost you $100 to make and market a product and you sold it for $140, your ROI would be:
$40/$100 =40% ROI
Market Share - a business’s percentage of the total sales generated by all companies in the same market

The total market for a product must be known in order for market share to be determined.
There are multiple ways to increase market share including:



lowering prices
advertising and promotion
networking with potential customers
Methods for Determining Price:
1. Demand-Based Pricing - pricing that is determined by how much customers are willing to pay for a
product or service
 Survey potential customers to determine what they would be willing to pay for a product.
 The highest price identified is the maximum price that can be charged.
2. Cost-Based Pricing - determined by using the wholesale cost of an item as the basis for the price
charged
 Markup Price is determined by adding a percentage amount to the wholesale cost of an item.
o Markup amount = Wholesale cost × Percentage markup
o Retail Price =
Wholesale cost + Markup amount
 Markdown Price is determined by subtracting a percentage amount from the retail price.
3. Competition-Based Pricing - pricing that is determined by considering what competitors charge for the
same good or service
Pricing a Service
To set a price for a service, consider the following:
o
o
the cost of items used in providing the service
the amount of time required to produce the service
Time Based Pricing
The amount of time it takes to complete a service will be the basis for determining the price of the
service.
o
o
o
Providers must decide whether the cost of materials will be:
included in the price
listed as a separate charge
Pricing an Idea
You can sell your ideas by
1. working as a consultant
2. licensing - selling your idea to a company for the development and launch of a new product
licensing payments can occur through
o
o
o
up-front payment
royalties
annual minimum
Lesson 6.1 – The Marketing Mix - Distribution (Placement)
Supply Chain Management - the coordination of manufacturers, suppliers, and retailers working together to
meet a customer need for a product or service
Distribution - involves the locations and methods that are used to make products available to customers
Channels of Distribution - the routes that products and services take from the time they are produced to the
time they are consumed
Channel Options
1. Manufacturer to Consumer
o
sales methods may include:

the Internet

direct mail

television shopping channels
o
no intermediaries
o
most cost-effective
o
limited sales opportunities
2. Manufacturer to Retailer to Consumer

sales force sells goods to retailers

retailers sell goods to consumers

offers more sales opportunities
3. Manufacturer to Wholesaler to Retailer to Consumer



manufacturer sells large quantities to a wholesaler
wholesaler stores and sells smaller quantities to many retailers
lower production costs can lead to lower prices
4. Manufacturer to Agent to Wholesaler to Retailer to Consumer


The manufacturer delegates the sales function to an agent.
frequently used in international marketing
Distribution channels will vary based on business needs.



market size
type of product or service
customer needs and wants
Physical distribution




transportation
storage
handling
packaging
Lesson 6.2 – The Marketing Mix - Promotion
Advertising - a paid form of communication sent out by a business about a product or service


Advertising is very important for small and/or new businesses.
Advertising should clearly communicate your message and image.
Online Advertising


Online advertising has increased as Internet usage has grown.
Online technology lets businesses interact with consumers via
 chat rooms
 blogs
 e-newsletters
As it is easier to determine the effectiveness of online advertising than traditional advertising, new methods to
charge for online advertising have been developed.
Three common ways to charge for online advertising include:
o
Cost per Mil (CPM)

the advertiser is charged based on the exposure of the message to a specific audience

o
o
priced per thousand viewers reached with the message
Cost per Click (CPC)

the advertiser is charged based on the number of user clicks on the advertisement

viewers respond to the ad by clicking on the hyperlink within the ad
Cost per Action (CPA)

the advertiser is charged when a user takes an action that leads to a sale

the publisher of the ad assumes all the risk in running this type of ad

advertisers prefer this type of charge for banner ads
Television Advertising

commercials
o

last less than a minute
infomercials
o
last a half hour or more
o
provide in-depth coverage about a specific product
Disadvantages are:

it is very expensive

the audience is too broad to be effective for most businesses
Radio Advertising

less expensive than television advertising

listener demographics are more specific than television
o
easier to reach target audience

pay for air time

pay for production costs
Disadvantages are:
o
the message is purely audio

a visual of the product is not shown
o
listeners may forget what they hear
o
listeners may “surf the airways” during commercials
Newspaper Advertising

Historically, newspapers were the single largest form of advertising in the U.S.
Advantages of newspaper advertising include:
o
relatively inexpensive
o
targets a limited geographic area
o
reaches a large number of people
Disadvantages are:
o
Many people in the audience may not be interested in your business.
o
Your ad faces a lot of competition from many other ads in the newspaper.
Direct-Mail Advertising
o
promotional materials sent to target customers through the mail
o
Companies that specialize in maintaining targeted mailing lists can provide almost any type of list
needed
Disadvantages are:
o
Direct-mail is often considered to be “junk mail.”

It often gets discarded without being read.
Magazine Advertising

Magazines are an excellent way to aim products and services at specific markets.

Local magazines that target a limited geographic area are often the best choice for small businesses.
Disadvantages are:

National distribution can make some magazines an inappropriate way to advertise a local
business.
Outdoor Advertising

billboards and signs

can be effective as the name of your business is located where many people can see it
Transit Advertising

signs on public transportation

can provide more information than a billboard

effective if your target market includes consumers who use mass transit
Social Networking Sites

Business owners are using social networking sites for business promotion.
o
Twitter
o
LinkedIn
o
YouTube
o
Facebook
o
Blogging
Budgeting for Promotion

Obtain cost estimates for all advertising that is under consideration.

Calculate a projected budget.

Determine whether your advertising budget, as a percent of sales, is in line with industry averages.