“There are people who make things happen, there are people who watch things happen, and there are people who haven’t the slightest idea what’s happening” –Oliver Wendell Holmes.
Marketing is the department that makes things happen in any business. A lot of folks in business specifically, small and medium scale business owners, go into business without adequate plans for marketing. This has caused a lot of struggles in business.
It is important to have an in-depth plan for marketing. Efforts and resources should be channelled into productive marketing efforts.
In planning your market, it is essential to guide you through the following,
- Understanding marketing plan
- Understanding market research
- Scope of market research
- Types of market research
- Usefulness of market research
- Steps to marketing research
- Components of a marketing plan
- Break even analysis
Understanding Marketing Plan
Production is never complete until the product gets to the final consumer. A general rule of thumb is to spend 3% to 5% of your actual or expected annual turnover on marketing. A warehouse full of inventories that never clear off is the biggest frustration to any small, medium or large-scale business.
Market planning entails knowing your product, market, customers and competition. Marketing strategy is built around these four fundamental indices. These are broken down into something called a marketing mix made up of 7Ps {product, price, promotion, place (distribution), people, process and physical evidence}. These are the elements of a marketing plan.
Every product is created around a verified problem (need) for a set of users. It is also important to state clearly that you are not the only provider of the solution, or if you are, others are seriously looking for ways to enter the market in a cost effective way. This means, your monopoly power will soon be broken.
It becomes necessary to perform a study of the market to plan effectively.
Understanding Market Research
Marketing research is a systematic process of gathering, recording and analysing data about problems bothering on the marketing of goods and services. This includes findings into the market segments, product differentiation, channel relationships, effectiveness of sales attendants, advertisements, pricing strategies, customer satisfaction, etc.
Research is designed to give holistic information about the subject matter to enable the identification of opportunities, problem(s), and degree of effects as well as the solutions available.
Scope of Market Research
Market research is conducted to determine market specific features, potentials, market share analysis, sales analysis, competition, testing of new product, trend and as well, short and long term analysis and so on. The need for specific information about the market requires verified data for decision-making.
Types of Market Research
You can carry out market research in various ways depending on the information you want.
Industry Research
This is a study to find out how an industry runs or behaves. Remember, an industry is a group of firms producing similar products/services. Researches in this area are often designed to find out the prevailing trend in a specific period.
This kind of information can be gathered through interviews with key industry players, annual reports, articles and online platforms. As a matter of recommendation, it is vital to first identify your sources of data relevant to your research.
General Research
A general research is a research on information that is already available. The research is merely to find where it is. This can be in libraries, professional association reports, government publications, advertising agencies, etc. This relies on secondary data sources.
Market Surveys
This is purely primary data source based. The researching firm generates data through interviews and questionnaires. This is targeted at finding certain information about frequency of purchase, outlet of purchase, consumer satisfaction, age, gender, income and other demographic information about consumers and product information.
With the emergence of technology, businesses utilizing the tool of technology can undertake market surveys at relatively low cost compared to businesses that are not utilizing such tools.
Statistical Research
Statistical research provides information that has been collected and analyzed in quantity rather than quality. This is seen in reports of agencies like the National Bureau of Statistics, Central Bank of Nigeria Statistical Bulletin and so no. This is research for quantitative information.
Usefulness of Market Survey
The importance of market research cannot be over emphasized. The following are the importance of market research;
- It matches products with demand.
- It minimizes cost through guaranteed efficiency.
- It minimizes errors that will result in waste.
- It gives exact information about the demography of customers.
Steps in Marketing Research
Every research follows a procedure. Marketing research is not an exception. The key steps carried out in marketing research are as stated below:
Problem identification
It is the first step in every research. You must fully understand the cause, effect, what is currently being done and the scope of the problem. If the problem is not properly understood, it can lead to poor product, strategy and so on.
Research Design
Set objectives for the research and establish a data collection method from the methods below:
Secondary Data
This is available in government publications, organization’s internal records, professional associations, and marketing research organizations. All you need here is to know the sources where such data are published, then, you go and get them based on what you want to examine.
Primary Data
This obtains data from direct sources including customers, middlemen, salesmen, competitors, interviews, etc. This can be achieved through observation, experimentation or survey.
There are a couple of ways to achieve this.
Online Data Collection Method
This leverages technology and it is only available to businesses that have online presence. It is very reliable. Businesses can choose to either leverage online advertising sites as they have large databases in large markets across different geographic locations or launch the survey from the business sites using the customer database (lead) already generated.
Primary Research Instrument
A traditional data gathering uses tools like video cameras, recording devices in interviews and questionnaires. Online platforms also offer tools with different privacy policies such as SurveyMonkey, SoGoSurvey, Typeform, Google Form, Client Heartbeat, SurveyGizmo (now Alchemer) and so on. Google Form is free.
Data Analysis and Report Preparation
This final step in marketing research is analysis and report preparation. This involves the organization of the data collected and bringing out useful information from it for decision-making.
The traditional approach requires a skill in data analysis to be able to organize and draw meaningful information from the data collected. However, the online platforms also offer analytic tools that handle the analysis and presentations. These take away the need to hire the services of an expert.
So great! Now you have successfully gathered the information necessary to write up your marketing plan. Let’s proceed to the structure and components of a marketing plan.
Components of a Marketing Plan; Market Analysis
Market analysis runs on the neurons of the 7Ps of marketing mix. For simplicity, we are going to structure it according to the template we have available.
- Executive Summary
- Market Research
- Marketing Objectives
- Ideal Customer Profile/Market Segmentation
- Competition Analysis
- Comparative Price Analysis
- Pricing Strategy
- Marketing Strategy
- Competitive Advantage (Unique Selling Propositions)
- Market Situation Summary
- Brand Promotional Strategy
- Customer Service Policies
- Risk Management Strategy
- Online Marketing Strategy
- Distribution Strategies
- Projected Distribution Target
- Projected Annual Sales/Revenue
- Break even Analysis
According to the marketing mix concept, if the market facts are known, the entrepreneur can combine the 7Ps elements in proportions that will produce the most profitable marketing results. The assumption is that the proportions of the mix will change as market conditions change.
Breakeven Analysis
This management control strategy enables you to evaluate the point at which the business will sell enough products/service to cover its cost of production. At breakeven, you are neither making profit nor loss. You have only covered your cost above which you start making profit.
Profit depends on sales volume, selling price and costs, such as rent or depreciation allowance, from your variable costs per unit, such as direct labour and materials.
Relax! Let’s do a bit of quantitative work to simplify it in simple steps.
Breakeven Volume is calculated using the formula
Step 1: Determine Contribution Margin Percent (Sales – Variable Cost). CM% is CM divided by selling price. The variable cost is simply your cost of goods sold (CGS).
Step 2: Take the Sum of Fixed Expenses per Month (Fixed Costs): These costs of factors do not change with the level of output, such as rents, electricity bill, or cost of power supply, as the case may be, wages/salaries of workers, and other utilities.
Step 3: Break Even Volume = Total Fixed Costs divided by Contribution Margin %
Let’s now take some examples.
Monthly Fixed Expenses N N N
Rents 20, 000
Wages/Salaries 50,000
Utilities 15,000 85, 000
Unit Selling Price 10,000
Less: Cost of Goods Sold:
Materials and Labour 4,000
Less: Other Variable Costs:
Delivery Expenses 300
Commission 200 4500 5500
Unit contribution margin is N5, 500.
Total Fixed Cost is N85, 000.
Breakeven Volume = 85000/5500 = 15.45 by approximation, 15 units. Read More
Market analysis helps you to understand the external and internal business environments in which they are operating. Those factors are capable of affecting your business operations positively and negatively.
The internal analysis focuses you on your strengths, weaknesses, opportunities and threats (SWOT). The external factors include things like competition, government regulations, etc. that are outside of your own control. It is essential to have a detailed and proper analysis of the market to avoid any potential uncontrollable risk and to take advantage of every possible opportunity.
