Yes, it is budget time for those of you who have your fiscal year the same as the calendar year. Some take this process a little more seriously than others. As one of my professors from graduate school said, “It all depends.”
If your business is relatively stable and has minimal impact from the external environment, then the annual budgeting process is probably pretty simple (don't we all wish we could say this!). And if your business is in the start-up phase or has a volatile competitive market, you may have extensive meetings with others in your organization in order to get as much input as possible into your plan for next year. Or you may be a public company and there are a whole different set of rules for developing plans and the disclosures to the public that are required.
The bottom line is that your marketing plan will dictate much of the financial planning for your organization. Yes, the number crunchers are going to have input on how interest rates and depreciation schedules will affect your income statement, but it’s the marketers and sales staff that have the real influence planning for future revenues. That is why all businesses need look at the fundamentals of marketing in one way or another to properly plan for the coming year.
The essence of all marketing plans focus on what is affectionately called the 4 P’s. They are product (or service), price, promotion and place (or distribution).
Product is simply what you are selling. Price is what you are charging for the product. Promotion includes all the advertising, social media activity, public relations and promotions. Place (or distribution) focuses on the cost of getting your product and your customer together.
Marketing plans should also
focus on the affect of competition and the external environment on each of the
The common mistake when creating or changing your marketing plan is that it does not have enough detail. You also need to identify the market in which your products are sold. There was a specialty retail company that first started out by saying that they were in the candle market. Then they realized that they were in the bigger home décor market. Then after much research they realized that they were in the even bigger gift market. Look to the behavior of your customers to find out how they are using your product and that will give you a hint as to how you should position what you are selling.
When you review your price structure, ask yourself if any customer questions have come up. How do your prospects that don’t buy react to your prices? Do you offer volume or promotional discounts? Price is the determining factor for the customer’s perceived value of everything that you are providing. In today’s economy, most people are motivated to find the best possible price and value. Only if you have the luxury of being a monopoly do you have less concern about price. And even monopolies have to consider the cost of barriers to entry into their markets. When considering price, market share becomes a factor. The more you reduce prices, you most likely will gain market share yet reduce profitability. It’s a tough balancing act between your profitability and gaining customers. And this all plays into your market strategy. Are you Mercedes or are you Toyota? Either strategy will have huge implications on your pricing.
Many people consider that the meat of their marketing plan is what is really their promotional plan. Remember that your promotions are designed for one thing – to get people interested in what you have to offer. Once they walk in the store, make that phone call, check out the website or send an e-mail, it is up to the remaining parts of the marketing plan and your promise to show value. Although you may spend a good deal of time considering the many alternatives to getting your message out into the firmament, you need to balance your efforts with the other very important parts of your overall marketing plan.
Place or distribution focuses on how you get your product or service connected to your customer. Does it require a vast distribution network and what is the cost of that network? How do prospective customers get to your website? Or do you drive a truck full of produce down to the Farmer’s Market? You may have wholesale and retail customers that take delivery in completely different ways. This part of the marketing plan is dedicated to making sure that you are being most cost efficient in getting the right goods to the right customers.
With the holiday shopping season just around the corner, be looking here for a new post about a different way to look at retail and the components that can determine success in the retail universe.