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Types of Marketing Plan Analysis

Two major types of marketing plan analysis are situation analysis and SWOT analysis. In a SWOT analysis, the company analyzes its strengths, weaknesses, opportunities and threats. A situation analysis concentrates on the factors and forces that affect the company’s internal affairs and external environment.

A marketing plan analysis is meant to evaluate a company’s market research, sales goals and strategies to obtain new customers. There are two types of marketing plan analyses: vertical and horizontal.

What is a Marketing Plan?

A marketing plan is a document that lays out the marketing efforts of a business in an upcoming period, which is usually a year. It outlines the marketing strategy, promotional, and advertising activities planned for the period.

Marketing Plan

Elements of a Marketing Plan

A marketing plan will typically include the following elements:

Marketing objectives of the business: The objectives should be attainable and measurable – two goals associated with SMART, which stands for Specific, Measurable, Attainable, Relevant, and Time-bound.

Current business marketing positioning: An analysis of the current state of the organization concerning its marketing positioning.

Market research: Detailed research about current market trends, customer needs, industry sales volumes, and expected direction.

Outline of the business target market: Business target market demographics.

Marketing activities: A list of any actions concerning marketing goals that are scheduled for the period and the indicated timelines.

Key performance indicators (KPIs) to be tracked

Marketing mix: A combination of factors that may influence customers to purchase products. It should be appropriate for the organization and will largely be centered on the 4Ps of marketing – i.e., product, price, promotion, and place.

Competition: Identify the organization’s competitors and their strategies, along with ways to counter competition and gain market share.

Marketing strategies: The development of marketing strategies to be employed in the coming period. These strategies will include promotional strategies, advertising, and other marketing tools at the disposal of the organization.

Marketing budget: A detailed outline of the organization’s allocation of financial resources to marketing activities. The activities will need to be carried out within the marketing budget.

Monitoring and performance mechanism: A plan should be in place to identify if the marketing tools in place are bearing fruit or need to be revised based on the past, current, and expected future state of the organization, industry, and the overall business environment.

A marketing plan should observe the 80:20 rule – i.e., for maximum impact, it should focus on the 20% of products and services that account for 80% of volumes and the 20% of customers that bring in 80% of revenue.

Purpose of a Marketing Plan

The purpose of a marketing plan includes the following:

  • To clearly define the marketing objectives of the business that align with the corporate mission and vision of the organization. The marketing objectives indicate where the organization wishes to be at any specific period in the future.
  • The marketing plan usually assists in the growth of the business by stating appropriate marketing strategies, such as plans for increasing the customer base.
  • State and review the marketing mix in terms of the 8Ps of marketing – Product, Price, Place, Promotion, People, Process, Physical Evidence, and Performance.
  • Strategies to increase market share, enter new niche markets, and increase brand awareness are also encompassed within the marketing plan.
  • The marketing plan will contain a detailed budget for the funds and resources required to carry out activities indicated in the marketing plan.
  • The assignment of tasks and responsibilities of marketing activities is well enunciated in the marketing plan.
  • The identification of business opportunities and any strategies crafted to exploit them is important.
  • A marketing plan fosters the review and analysis of the marketing environment, which entails market research, customer needs assessment, competitor analysis, PEST analysis, studying new business trends, and continuous environmental scanning.
  • A marketing plan integrates business functions to operate with consistency – notably sales, production, finance, human resources, and marketing.

How many types of plan are needed, and why?

A single plan would be ideal, but in practice, different types and scales of businesses will need a different type of plan. It can help to define the scope and purpose of each one, you should define, for example for a multichannel marketing plan, this could be:

  • Purpose: To define a strategy and plan resources needed to achieve business sales targets.
  • Timeframe: Annual, typically. Could have a longer-term outlook e.g. 18 months to three years.
  • Scope: The focus is on marketing communications techniques to deliver leads and sales targets for defined products. It can apply to a complete business, or if there are multiple markets and product categories, a single market.
  • Channels: Includes online channels and offline media as required.
  • Key outputs: Marketing objectives. Marketing budget. Campaign plans. Resource plans.

How to do a market analysis?

The objectives of the market analysis section of a business plan are to show to investors that:

  • you know your market
  • the market is large enough to build a sustainable business

In order to do that I recommend the following plan:

  1. Demographics and Segmentation
  2. Target Market
  3. Market Need
  4. Competition
  5. Barriers to Entry
  6. Regulation

The first step of the analysis consists in assessing the size of the market.

Demographics and Segmentation

When assessing the size of the market, your approach will depend on the type of business you are selling to investors. If your business plan is for a small shop or a restaurant then you need to take a local approach and try to assess the market around your shop. If you are writing a business plan for a restaurant chain then you need to assess the market a national level.

Depending on your market you might also want to slice it into different segments. This is especially relevant if you or your competitors focus only on certain segments.

Volume & Value

There are two factors you need to look at when assessing the size of a market: the number of potential customers and the value of the market. It is very important to look at both numbers separately, let’s take an example to understand why.

Imagine that you have the opportunity to open a shop either in Town A or in Town B:

TownAB
Market value£200m£100m
Potential customers2 big companies1,000 small companies
Competition2 competitors10 competitors

Although Town B looks more competitive (10 competitors vs. 2 in Town A) and a smaller opportunity (market size of £100m vs. £200 in Town A), with 1,000 potential customers it is actually a more accessible market than Town A where you have only 2 potential customers.

Potential customer?

The definition of a potential customer will depend on your type of business. For example, if you are opening a small shop selling office furniture then your market will be all the companies within your delivery range. As in the example above it is likely that most companies would have only one person in charge of purchasing furniture hence you wouldn’t take the size of these businesses in consideration when assessing the number of potential customers. You would however factor it when assessing the value of the market.

Market value

Estimating the market value is often more difficult than assessing the number of potential customers. The first thing to do is to see if the figure is publicly available as either published by a consultancy firm or by a state body. It is very likely that you will find at least a number on a national level.

If not then you can either buy some market research or try to estimate it yourself.

Methods for building an estimate

There are 2 methods that can be used to build estimates: the bottom-up approach or the top-down approach.

The bottom-up approach consists in building a global number starting with unitary values. In our case the number of potential clients multiplied by an average transaction value.

Let’s keep our office furniture example and try to estimate the value of the ‘desk’ segment. We would first factor in the size of the businesses in our delivery range in order to come up with the size of the desks park. Then we would try to estimate the renewal rate of the park to get the volume of annual transactions. Finally, we would apply an average price to the annual volume of transactions to get to the estimated market value.

Here is a summary of the steps including where to find the information:

  1. Size of desks park = number of businesses in delivery area x number of employees (you might want to refine this number based on the sector as not all employees have desks)
  2. Renewal rate = 1 / useful life of a desk
  3. The volume of transactions = size of desks park x renewal rate
  4. Value of 1 transaction = average price of a desk
  5. Market value = volume of transactions x value of 1 transaction

You should be able to find most of the information for free in this example. You can get the number and size of businesses in your delivery area from the national statistics. Your accountant should be able to give you the useful life of a desk (but you should know it since it is your market!). You can compare the desk prices of other furniture stores in your area. As a side note here: it is always a good idea to ask your competitors for market data (just don’t say you are going to compete with them).

That was the bottom-up approach, now let’s look into the top-down approach.

The top-down approach consists of starting with a global number and reducing it pro-rata. In our case, we would start with the value of the UK office furniture market which AMA Research estimates to be around £650m and then do a pro-rata on this number using the number of businesses in our delivery area x their number of employees / total number of people employed in the UK. Once again the number of employees would only be a rough proxy given all business don’t have the same furniture requirements.

When coming up with an estimate yourself it is always a good practice to test both the bottom up and top-down approaches and to compare the results. If the numbers are too far away then you probably missed something or used the wrong proxy.

Once you have estimated the market size you need to explain to your reader which segment(s) of the market you view as your target market.

Target Market

The target market is the type of customers you target within the market. For example, if you are selling jewellery you can either be a generalist or decide to focus on the high end or the lower end of the market. This section is relevant when your market has clear segments with different drivers of demand. In my example of jewels, value for money would be one of the drivers of the lower end market whereas exclusivity and prestige would drive the high end.

Now it is time to focus on the more qualitative side of the market analysis by looking at what drives the demand.

Market Need

This section is very important as it is where you show your potential investor that you have an intimate knowledge of your market. You know why they buy!

Here you need to get into the details of the drivers of demand for your product or services. One way to look at what a driver is to look at takeaway coffee. One of the drivers for coffee is consistency. The coffee one buys in a chain is not necessarily better than the one from the independent coffee shop next door. But if you are not from the area then you don’t know what the independent coffee shop’s coffee is worth it. Whereas you know that the coffee from the chain will taste just like in every other shop of this chain. Hence most people on the move buy coffee from chains rather than independent coffee shops.

From a tactical point of view, this section is also where you need to place your competitive edge without mentioning it explicitly. In the following sections of your business plan, you are going to talk about your competition and their strengths, weaknesses and market positioning before reaching the Strategy section in which you’ll explain your own market positioning. What you want to do is prepare the reader to embrace your positioning and invest in your company.

To do so you need to highlight in this section some of the drivers that your competition has not been focussing on. A quick example for an independent coffee shop surrounded by coffee chains would be to say that on top of consistency, which is relevant for people on the move, another driver for coffee shop demand is the place itself as what coffee shops sell before most is a place for people to meet. You would then present your competition. And in the Strategy section explain that you will focus on locals looking for a place to meet rather than takeaway coffee and that your differentiating factor will be the authenticity and atmosphere of your local shop.

Competition

The aim of this section is to give a fair view of who you are competing against. You need to explain your competitors’ positioning and describe their strengths and weaknesses. You should write this part in parallel with the Competitive Edge part of the Strategy section.

The idea here is to analyse your competitor’s angle to the market in order to find a weakness that your company will be able to use in its own market positioning.

One way to carry the analysis is to benchmark your competitor against each of the key drivers of demand for your market (price, quality, add-on services, etc.) and present the results in a table.

Conclusion

Every marketing plan should have a detailed analysis of the market. There are several types of analyses. These include SWOT analysis, competition analysis, market research, consumer and target market profiles, and market segmentation.

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