Defining your business

Just like a builder, you need to lay down a strong foundation on which to build your business. Your foundation should start with the basics, such as defining your product, figuring out how it fills tangible and emotional needs and for which consumers, and determining how it fits into the current marketplace. You also need to define what you want to accomplish with your business.

The following sections provide an actionable overview of the elements of a successful marketing plan. While not referred to as the four Ps of marketing, the critical aspects of product, promotion, place and price are addressed from a current perspective.

Mapping out your action plans

Your marketing plan should build on your business plan by outlining the product development, marketing, and sales actions needed to accomplish the goals and timeline you’ve set. Your plan needs to address all audiences and constituents. For example, if you will rely on investors to finance your operations until you become profitable, your communications plan should include investor relations activities and information for both potential investors and future shareholders. Your presentations, letters, and reports will need to include financial data that addresses stock assignments, sales projections, win rates, operational expenses, and so on.

Investor and shareholder communications must comply with federal law, so you’ll need an advisor to ensure you’re communicating correctly with your financial backers.

Some of the actions you’ll need to define and include in your overall marketing plan are explained in the following sections.

Setting a budget

Your marketing plan needs to set forth a budget that’s appropriate for your current resources, goals for lead generation, sales and cost per lead. A rule of thumb has been to set a budget based on revenue percentage (you’ll find more on calculating a marketing budget later in this section). There are many factors to consider when setting a budget, and the following sections highlight some of the more important ones.

Calculating percentage of revenue

Some business organizations suggest setting a marketing budget according to a percentage of your company’s gross revenues or your sales revenue. You may want to start with 5 to 7 percent of gross revenue projections or 2 to 5 percent of sales. If you’re just getting started, you may set your budget according to projected revenues based upon a market analysis of potential customers, the percentage of market you expect to achieve, and a win rate you anticipate with your current sales team.

It’s important to have a realistic expectation for your win rate because it will determine your revenue and corresponding marketing budget. The sales win rate formula below will help you set a benchmark:

Using this formula, if you have 50 deals in your pipeline, and you close 15 of them, your win rate is 30 percent. Given the market elements you face, market size, and competitors’ market share, is this realistic to maintain? How much time do you anticipate it will take to close 30 percent of the deals in your pipeline moving forward? Calculating these numbers will help you determine a timeline for reaching your profitability goals. Knowing your win rate is also important when pitching your business to investors.

Pricing opportunities and obstacles

It’s easy to think that price is the primary driver for sales and the lowest-priced product gets the most sales. Yet, as I mention in Chapter 2 when I talk about the emotional drivers of choice, being the low-price leader can actually be detrimental to your long-term success. Pricing strategies present both opportunities to attract new sales and boost profits as well as obstacles that can spark short-lived sales but impede profits over time (see Table 6-1).

Your pricing goal should be to see how much you can sell your product for, not how little. Keep in mind that if you start out as the low-price leader in your market, you’ll have a hard time moving away from that position. To counteract that, you may have to engage in aggressive branding campaigns to justify a new price, which can be expensive and lower your profit margin.

If you want to raise your price and sell more, consider the following strategies:

• Building brand awareness: Better-known brands command a premium price. Maintaining consistent customer communications, a social media presence, and publicity campaigns helps drive visibility and pricing stability.
• Increasing quality: Create new and improved versions of your product that give consumers a perceived reason to spend more on it.
• Upping your social media dialogue: Inspire word-of-mouth marketing by encouraging happy customers to post about their experience with your products on social media channels. Word-of-mouth marketing can earn a 5 to 10 percent higher price over competing products.
• Using prestige pricing: Adding a more sophisticated look to your packaging and advertising can help you successfully boost your price 20 to 100 percent.

All these strategies take time, resources, and money, so it’s important to weigh the potential returns along with the consequences.

Sometimes competitor pricing can force you to lower prices to a point that you barely make any profits. If you find yourself in this situation, you may need to consider changing your distribution model.

Avoiding the dangers of deep discounting

Using deep discounting to entice prospects to try your product may be tempting, but beware. Often, you encounter more perils than payoffs when you use Groupon and other big discount platforms. Here are some facts from a Business Insider survey of businesses that ran Groupon deals:

• Nearly 80 percent of the Groupon users surveyed discounted their prices between 50 and 75 percent.
• Many of the businesses earned revenues as low as 25 percent of normal.
• Restaurants that typically earn 6 to 8 percent profit margins earned 3 percent margins, which doesn’t help long-term sustainability.
• More than 50 percent of the companies retained only a handful of Groupon customers. Some retained about 25 percent, and none retained 50 percent or higher.
• The majority say they won’t use Groupon again, and 50 percent wouldn’t refer it to a friend.

In addition to the disappointing income figures, deep discounting for customer acquisition presents other dangers. For example, loyal customers that aren’t offered the same deal as new customers can feel unappreciated and lose interest in buying from you. Additionally, you devalue your brand. After you offer low prices, customers may see you as less prestigious or valuable, and that hurts your ability to ever raise your prices in the future.

Because of the frequency of the discounts and sales many consumer brands and department stores offer, customers have been conditioned to wait for the next sale. Running too many sales often does more harm than good and has helped usher out the era of department stores ruling the retail sector.

Lowering prices is easier than raising them. When you lower your price, you may lower people’s interest in buying your product again at a higher price, and you may be stuck with a price that hurts your profits even if you increase your sales volume.

Keep in mind that most offers fail to motivate the vast majority of customers, so you need to find ways to add appeal, value, and urgency to any discounts you offer. Here are some tips:

• Make the discount worthwhile and convenient. Coupons are appealing to a large percentage of customers when discounts are higher than 50 cents. Consider offering digital and printed coupons to make them easy to use.
• Make your offers reciprocal. Ask customers to opt in to your marketing list in return for a discount. For the right offer, many consumers will comply.
• Set time limits. Include expiration dates to give customers a sense of urgency to act.

Pricing to address perceptions

Like marketing campaigns, pricing decisions need to be driven by strategies, not just random choices. You need to research how your price aligns with supply and demand, competitors, perceived value, and so on. You also need to consider some of the psychological implications associated with pricing such, as those explained in this section.

Framing prices

How you present or frame an offer impacts its perceived value. Studies show that Buy one, get one free offers drive more sales than Two for the price of one deals. Additionally, stating You can have this car for just $600 a month influences behavior more than stating Buy it for $40,000. It’s all about framing offers and pricing so they align with consumers’ expectations. When you make purchases seem more reasonable than overwhelming, you help create a sense of comfort and take fear out of the purchasing process.

Finding your strengths

Identify the strong points of your products, brand image, and marketing program so you know what to build on in your plan. Your strengths are the keys to your future success. Strengths can include

• Product innovation
• Price for value delivered
• Customer service policies and practices
• Location
• Unique experience beyond your product
• Brand reputation

Your brand slogan, campaign taglines, positioning statements, value and mission statements, creative presentations, and sales pitches — really, all your communications — need to present and support your strengths. You can do this directly with verifiable claims about your excellence, and more subtly through your word choices, and your marketing content.

As you identify your strengths, outline actions that will help you build on them to strengthen your overall brand.

Addressing your weaknesses

As hard as it might be to face our flaws, it is important to pinpoint the areas in which your products, brand image, and marketing program are relatively weak. For example, perhaps you have several older products that are losing sales, and your plan needs to address how to adapt or cut these products, as well as your overall positioning. Weakness may include

• Higher prices due to lower economies of scale (cost advantages based on production efficiencies) than competitors
• A shallow product line
• Fewer features for your product compared to others in your space
• Fewer distribution points than competitors who have more established channels
• A reputation for not being able to deliver on promises

As you outline your weaknesses, document strategies for how and where you can improve. Set goals and time frames for fixing the problems you can to ensure they aren’t forgotten and prevent them from potentially turning into crises.

Looking for opportunities

Opportunities present themselves in various forms. Some may be obvious, while others aren’t. Apparent opportunities, or those that present themselves in most cases, to outline in your SWOT analysis might include

• New growth markets
• New communications or distribution channels for reaching customers
• Potential partners for collaboration or bundling

Other types of opportunities are those that you seek to create for your brand. For example, you may see a void of subject matter experts in your industry. This presents an opportunity for you to position your experienced executives as authorities in the field. Have them participate in, speak at, and author guest columns and blog posts.

Collaborating with organizations and complimentary companies presents another realm of opportunities. Seek out organizations that support your category, values, and your environmental, social, and governance (ESG) standards. Work together to host events that are meaningful, beyond sales opportunities, so you can tap into each other’s networks and add value to each other’s businesses.

Other areas in which you can find opportunities for growing your brand awareness, reach and value include:

• Data: Build a strong database of contacts in your space so you can generate meaningful conversations with prospects others might not have access to.
• Experts: Hire innovators from different cultures, areas of expertise, generations and so on so you can move faster on product development and niche marketing.
• Customer Satisfaction: If you have a high customer satisfaction rate, you may have an opportunity to create more case studies, secure customer reviews on public review sites, and generate referrals among qualified prospects.

The key here is to think of opportunities from multiple angles — the ones that exist, the ones you can leverage, and the ones you can create. Then go seize the day!

Focusing on functional alternatives, or threats

A threat is any external force, element, trend, or change that can reduce your sales or profits or make it difficult to achieve your growth goals. Common threats include new technologies that create new competitors, large competitors that can outspend you, and economic or demographic shifts that cut into the size or growth rate of your customer base.

Threats can also include rising operational costs that lead to more mergers and acquisitions in given markets, leaving small companies vulnerable to takeovers as a way to avoid bankruptcy. In an era where big boxes and brands are gaining monopolistic advantages, economies of scale, and labor power over smaller independent companies, you can’t turn a blind eye to market consolidations at any level.

Another key analysis involves understanding how your product compares to functional alternatives, products that aren’t really the same as yours but perform some or many of the same functions and are designed for the same basic outcomes. Software platforms and applications compete with functional alternatives quite a bit.

For example, digital asset management platforms, content management systems, and marketing resource management systems are all designed to do many of the same things and produce the same outcomes: higher efficiencies in creating new versions of content for cross-channel distribution that can be delivered to consumers with personal relevance. But each system is slightly different, which puts them in different software/technology categories and makes them functional alternatives to each other. A great example of a functional alternative is Uber. Taxis used to dominate transportation for individuals wanting private rides. When Uber came along, travelers suddenly had an attractive alternative, which has totally disrupted the taxi industry.

You need to decide how your products support or compete with functional alternatives and then build action items into your marketing plan. Questions to ask yourself include

• Which business category best describes where you are now?
• Which business category best describes where you aspire to be to maximize your long-term profitability?
• Where do you currently fit in your primary category? If you made it on Gartner’s Magic Quadrant — a coveted ranking of best-in-class products within a given industry — would you be considered a leader, challenger, niche player, or visionary?

Mapping out your SWOT grid

Table 6-2 is an example of how you can organize a competitive SWOT analysis for your products. You should also take the time to do a SWOT analysis from a branding, market position, sales, capitalization, and growth perspective.

Creating a SWOT analysis that compares you to your competition is a must if you want to stay ahead in the game or be constantly aware of what you need to do to get ahead if you’re not there yet. Today’s markets move fast, and you need to be prepared to act fast to clear any hurdles you face and jump on opportunities before they disappear.

Before completing your SWOT grid, collect information about your competitors’ promises, product claims, industry awards or rankings, pricing models, advertising messages, persona, and promotions. The more armed you are with information, the better prepared you are to identify your SWOT high points and low points and how they compare to competitors.

Some information worth gathering about your competitors includes

• Company: Describe how the market perceives your competitor and their key product.
• Key personnel: Who are the managers, and how many employees do they have?
• Financials: How strong is their cash position (do they have spending power, or are they struggling to pay bills)? What were their sales in the last two years?
• Sales, distribution, and pricing: Describe their primary sales channel, discount/pricing structure, and market share estimate.
• Product/service: What are the strengths and weaknesses of their product or service?
• Promises and claims: What promises and claims related to benefit, value, performance, and quality do they make, and how do you compare? Can you position yourself according to what they deliver?
• Promotions and offers: Do they offer any promotions that can cut into your sales or tempt your customers to switch to their products? What’s the timing and pricing differential of these promotions, and how can you schedule yours to offset any impact?

Armed with this information to add to your competitive SWOT analysis, you’ll be ready to succeed more efficiently than you can imagine.

Sharing is caring (and good for business)

In business, you can collaborate with associations, civic groups, and even competitors, to create a more robust product, service, or experience for customers. For example, Microsoft and Toyota teamed up to advance information systems in cars. American Express and FourSquare worked together to introduce how mobile technology can work for restaurants and consumers.

Collaboration inspires sharing of resources to improve the way we live, and as a result has spawned many shared-resources businesses like

• Uber, where drivers with cars helps travelers that need transportation
• Airbnb, where homeowners share homes or rooms with travelers looking for alternatives to hotel
• TaskRabbit, where people with free time do errands or odd jobs for those who are stretching to get it all done

Look around your marketplace. What common goals do consumers have? What challenges and aspirations do they share? Which businesses or organizations support your value proposition and align with your vision? And then ask yourself the big question: How can you bring brands and people together to solve a common problem or achieve a common goal?

Try to build collaborative efforts around your brand’s emotional selling proposition, or ESP (see Chapter 2). When you do this, you end up with a movement, not just a product and a brand. Companies that are perceived as moving toward a better world are the ones that are succeeding in this new era of consumerism.

Teaming up on CSR

Your CSR strategies for giving back, nurturing the environment, promoting charitable and community causes, and so on are a good foundation on which to build your collaborative efforts. Map out what you’ll do on your own or with other groups as part of your marketing plan. Some action items to consider include the following:

• Schedule giving back CSR activities regularly to keep your commitment an active part of your company vision and brand identity to the outside community.
• Involve employees, customers, and community members so that your CSR actions are truly collaborative, and become part of your local narrative.
• Measure all that you do and communicate your actions and impact so your constituents and potential partners for collaboration can see verifiable, quantifiable results. Ensuring that other organizations become aware of your impact can open some powerful doors for future opportunities to give back more than you imagine you can.

Many brands are actually launched around a purpose associated with the passions and values of their founders. Patagonia and Cotopaxi outdoor wear are two good examples of brands whose roots go back to the values of their founders, who started their companies based on personal experiences that inspired them to serve a needy segment of the world community.

Developing a CSR strategy is an essential part of a brand’s purpose, business goals, and marketing plan. As you build a marketing plan for your business, no matter which sector you serve, define the purpose you want your brand to be known for, take actions toward fulfilling that purpose and involving others, and collaborate with other organizations to increase your impact on your communities.

Monitoring and reacting to trends

Studying market trends to determine influences on sales that are out of your control will help you manage your resources most efficiently for the current conditions. When you do a trends analysis, you should include information about the following:

• Is the size of your buying population growing or shrinking? Do you need to look to open up new markets?
• Are the transaction value of each sale and the annual value of each customer going up or down? Should you consider adding complementary products to your offerings?
• Have functional alternatives been gaining in prominence and sales? Do you need to address comparisons in your messaging?
• What are the signs from any economic indicators that may impact sales in your category (housing starts, housing sales, unemployment, job growth, wages)? How are they expected to change within a given year or quarter?

Take note of current and future market indicators so you can plan accordingly. If you see a shrinking population or shifts in discretionary spending, adjust your output so you don’t end up with inventory you can’t sell.

Developing the customer experience

Your marketing plan needs to encompass the overall experience you plan to deliver. When products and prices are similar to competitors’ offerings, it’s the experience that elevates one brand over another.

Customers often care more about how they feel when doing business with you than the prices or benefits you offer. Note that posts on Google, Yelp, and other review sites frequently describe the service received, the attention and concern showed by employees, and other experiences with a business instead of the price or product features.

Your customer experience, as detailed in Chapter 3, needs to be built upon meaningful interactions from introduction to lifetime value that put your brand at a higher level than your competitors and give customers something to talk and post about.

Elements of the customer experience you should focus on include

• Customer service protocols: How you respond to missed expectations, product issues, repairs, technical support, troubleshooting needs, and so on
• Purpose: How you involve and engage your customers in your culture, values, and causes
• Communities: How you bring your customers and prospects together to form hives that support your brand and create bonds around similar values, product experiences, and causes

Look for a project management software tool that will enable you to map out action items, costs, timelines, task owners, and results so you have a single point of view on the impact, cost, and return on investment (ROI) of your marketing programs.

Step 1: Complete a situational analysis/summary

The first step is to outline the circumstances or situation you’re facing at the moment. For example, what is your level of brand awareness compared to competitors, and how are you poised to gain market share? What are your constraints on resources, funding, ability to scale, and so on? Explain the current situation as concisely as possible so all team members get an understanding of where you are and where you need to be.

Step 2: Establish your benchmark

When setting your goals, keep in mind what you have achieved and which actions have paid off, and establish a starting point, or benchmark, from which you want to build and improve. Review sales, market share, profits, customer satisfaction, web visibility, or other measures of customer attitude and perception from past campaigns. What levels of awareness, customer retention, and acquisition did you achieve? Your benchmark serves as a reality check for where you are and the foundation on which you should build your goals.

Step 3: Define your goals

While you’re working on everyday goals for marketing and sales, don’t lose sight of your long-term objectives. Learn from the moment to set goals for improvement and additional growth in the short and long term for incremental sales, customer acquisitions, profit margins, market share, and so on. Quantify your goals and assign metrics to all your activities.

Step 4: Take note of lessons learned

Continuously monitor your results, qualifiable and quantifiable, to assess the return on resources spent and impact on sales and revenue. Also include lessons learned from competitors or even dissimilar businesses that have had good (or bad) luck with marketing initiatives you may want to try. Consider any results from A/B testing of ESPs, campaigns, offers, promotions, channels, events, and so on (see Chapter 11).

Step 5: Outline your strategy

Mapping out your strategy and steps for executing every aspect of it is like building a road map with milestones along the way to your destination. Your map outlines action items for growing your revenues and profits.

Your strategy lays out how you’ll act on the information you gathered in Steps 1–4. For example, if your primary audience is middle-aged women, one point of your strategy may be to reach and convert young adult women to your products and brand so you can nurture the next generation of customers. Your action items will then outline how you’ll reach this goal.

A marketing strategy includes responses to market conditions, opportunities and threats, your positioning, and your messaging. All these elements are what make one brand different from another, and they need to be given appropriate time and attention.

Check out Figure 6-1 for an example of how a marketing strategy leads first to specific marketing objectives and then to marketing tactics.

Step 6: Commit to action items

You may want to outline the specific actions in your marketing plan and again in a spreadsheet so you can map out the timing of execution, due dates for materials needed, roles and responsibilities, and the status of each action item. Here’s an example of what this may look like:

Step 7: Build learning plans

To know what works best for your brand and budget, and how your marketing efforts will ultimately succeed, everything you do must be measurable and testable. Set up tests for every action to determine how it worked against past efforts or to decide on the best approach.

You may want to include actions like the following in a yearly learning plan:

• Identify new research projects, such as Voice of the Customer programs, which help you identify what matters most, new attitudes, new customer demand expectations, satisfaction rates, and so on.
• Try out direct marketing campaigns via A/B tests to identify a new champion or validate current champions that will still work in the new year.
• Test channels for promotions to identify the best response and return.
• Check new distribution channels to see whether you can identify more efficient and less expensive methods or partners.
• Examine new market segments to identify secondary customer groups you can nurture for future gains.
• Test lists to see which providers generate the best-performing lists and the best overall returns.
• Compare year-over-year response for past and present campaign messaging and offers.
• Experiment with engagement programs online and off-line to see which ones best build relationships.

Don’t think of your marketing plan as written in stone. In fact, your plan is just a starting point, and it’s an evolving process. As you implement it over time, you’ll discover that some things work out the way you planned and others don’t. Good marketers revisit their plans and adjust them as they go. The idea is to use a plan to help you be an intelligent, flexible marketer and guide your resources while being ready to change as quickly as markets and customers often do.

Preparing for economic influences

When preparing your marketing plan, you need to factor in economic trends and issues over which you have no control. Watch the leading published economic indicators and regularly monitor the numbers.

To stay on top of economic trends by cities, and especially for the cities in which you do the most business, monitor the Milken Institute’s Best Performing Cities annual list at www.best-cities.org.

Coming up with a reasonable budget

Don’t budget more than 10 percent of your revenue toward marketing unless you have good reason to believe (from past experience) that the ROI will be there. And don’t commit to a full year of expensive marketing. A first-quarter plan is more cautious and commits you to only a fourth of a year’s spending. Take it one step at a time.

Allocate dollars according to percentage of revenue each sales channel provides. If your online sales are 60 percent of your sales, consider allocating 60 percent of your budget to grow those sales, and 40 percent to the other channels that supplement your primary income. Figure 6-2 shows an overview of how to organize a marketing plan financially.

If you’re part of a start-up or small business, consider doing all your projections on a cash basis, which shows expenses in full when due versus spread across 12 months.

You should also create forecasts that provide guidance on projecting sales and assigning resources. Several helpful techniques are available for projecting sales, such as buildup forecasts, indicator forecasts, and time-period forecasts, described in the next sections.