1. Developing the Marketing Plan
part 4
The New Venture Business Plan 9
Developing the Marketing Plan
PowerPoint Presentation by Charlie Cook
12e
Copyright © 2003 South-Western College Publishing.
All rights reserved.

2. Looking Ahead After studying this chapter, you should be able to:
Describe small business marketing
Discuss the nature of the marketing research process.
Define market segmentation and its related strategies.
Explain the different methods of forecasting sales.
Identify the components of a formal marketing plan.
Copyright © by South-Western College Publishing. All rights reserved.

3. What is Small Business Marketing?
Activities directing the flow of goods and services from producer to consumer or user.
Small business marketing consists of those business activities that relate directly to:
Identifying a target market
Determining target market potential
Preparing, communicating, and delivering a bundle of satisfaction to the target market
Copyright © by South-Western College Publishing. All rights reserved.

4. Essential Marketing Activities
Market Analysis
An evaluation process that encompasses market segmentation, marketing research, and sales forecasting
Marketing Mix
The combination of product, pricing, promotion, and distribution activities.
Copyright © by South-Western College Publishing. All rights reserved.

5. Core Marketing Activities for Small Business
Market Analysis
Marketing Mix
Marketing Research
Market Segmentation
Sales Forecasting
Target Market
Entrepreneur
Distribution Promotion Pricing Product
Copyright © by South-Western College Publishing. All rights reserved.
Fig. 9-1

6. Marketing Philosophies Make a Difference
Production-Oriented
Emphasizes development of the product and production efficiencies over other activities
Sales-Oriented
Favors product sales over production efficiencies and customer preferences
Consumer-Oriented
All marketing efforts begin and end with the customer; focus is on the consumer’s needs— this philosophy is the most consistent with long-term success of the firm
Copyright © by South-Western College Publishing. All rights reserved.

7. Why Firms Fail to Adopt a Consumer Orientation
The State of Competition
With no competition or high demand, firms focus on production.
Production Focus of Small Business Managers
Small business managers tend to have strong production skills and weak marketing skills.
Focus on the Present
Small business managers tend to focus on current success which is the result of an overemphasis on selling.
Copyright © by South-Western College Publishing. All rights reserved.

8. The Nature of Marketing Research
The gathering, processing, reporting, and interpreting of market information
Secondary Data
Market information that has been previously compiled by others
Primary Data
New market information that is gathered by the firm conducting the research
Copyright © by South-Western College Publishing. All rights reserved.

9. The Nature of Marketing Research
Steps In the Marketing Research Process
Identifying the informational need
Why do we need to know this?
Searching for secondary data
Who has researched this topic already?
Collecting primary data
Who do we ask and what do we ask them?
Interpreting the data
Got the information, now what does it mean?
Copyright © by South-Western College Publishing. All rights reserved.

10. Methods for Collecting Primary Data
Observational Methods
Human
Mechanical
Questioning Methods
Surveys
Mail
Telephone
Personal interviews
Experiments
Copyright © by South-Western College Publishing. All rights reserved.

11. Understanding Potential Target Markets
A group of customers or potential customers who have purchasing power and unsatisfied needs
Focus strategy
A type of competitive strategy in which cost and marketing strategies are achieved within narrow market segments
Market Segmentation
The division of a market into several smaller groups with similar needs.
Copyright © by South-Western College Publishing. All rights reserved.

12. Ingredients of a Market
Ingredient 1 Customers: People or businesses
Ingredient 2 Purchasing power: Money/credit
Ingredient 3 Unsatisfied needs
Copyright © by South-Western College Publishing. All rights reserved.

13. Market Segmentation Variables
The parameters used to distinguish one form of market behavior from another for the purpose of market segmentation
Benefit Variables
Specific characteristics that distinguish market segments according to the benefit sought
Demographic Variables
Specific characteristics that describe customers and their purchasing power
Copyright © by South-Western College Publishing. All rights reserved.

14. Types of Market Segmentation Strategies
Unsegmented Strategy (Mass Marketing)
A strategy that defines the total market as the target market
Multisegmented Strategy
A strategy that recognizes different preferences of individual market segments and develops a unique marketing mix for each
Single-Segmentation Strategy
A strategy that recognizes the existence of several distinct segments but focuses on only the most profitable segment
Copyright © by South-Western College Publishing. All rights reserved.

15. Market All Potential Users of a Writing Instrument
Marketing Mix 1
Product:
Lead Pencil
Price:
$0.79
Promotion:
Television
Distribution:
Extensive
Small Business
(Community Writing Company)
Market All Potential Users of a Writing Instrument
An Unsegmented Market
Copyright © by South-Western College Publishing. All rights reserved.
Fig. 9.3

16. A Multisegmentation Market Strategy
Marketing Mix 2
Product:
Felt-Tip Pen
Price:
$1.00
Promotion:
Professional Magazines
Distribution:
Direct from Factory
Marketing Mix 3
Gold Fountain Pen
$50.00
Personal Selling
Department Stores
Marketing Mix 1
$0.49
Campus Newspapers
Bookstores
Small Business
(Community Writing Company)
Market
Segment A
Students
Segment C
Executives
Segment B
Professors
A Multisegmentation Market Strategy
Copyright © by South-Western College Publishing. All rights reserved.
Fig. 9.4

17. A Single-Segmentation Market Strategy
Marketing Mix 1
Product:
Felt-Tip Pen
Price:
$0.49
Promotion:
Campus Newspapers
Distribution:
Bookstores
Small Business
(Community Writing Company)
Market
Segment A
Students
Segment C
Executives
Segment B
Professors
A Single-Segmentation Market Strategy
Copyright © by South-Western College Publishing. All rights reserved.
Fig. 9.5

18. Estimating Market Potential
The Sales Forecast
A prediction of how much (in units and/or dollars) of a product or service will be purchased within a market during a specified period of time
An essential component of a business plan that:
Assesses the new venture’s feasibility.
Assists in planning for product scheduling, setting inventory levels, and personnel decisions
Copyright © by South-Western College Publishing. All rights reserved.

19. Dimensions of Forecasting Difficulty
Limited Entrepreneurial/
Managerial Experience
New Venture
Poor Understanding of
Forecasting Techniques
Established Business
Conditions That Make
Forecasting Easier
Forecasting More Difficult
Experienced
Entrepreneur/Manager
Entrepreneur Familiar with
Forecast
Copyright © by South-Western College Publishing. All rights reserved.
Fig. 9.6

20. The Forecasting Process: Two Dimensions of Forecasting
The Starting Point
Breakdown process (chain-ratio method)
Forecasting begins with macro-level variable and works down to the sales forecast (top-down).
Buildup process
All potential buyers in various submarkets are identified and then the estimated demand is added up (bottom-up).
Copyright © by South-Western College Publishing. All rights reserved.

21. The Forecasting Process: Two Dimensions of Forecasting (cont’d)
The Predicting Variable
Direct forecasting
The use of sales as the predicting variable
Indirect forecasting
Variables related to sales are used as proxies to project future sales
Copyright © by South-Western College Publishing. All rights reserved.

22. Sales Forecasting with the Breakdown Method
Estimating Market
Linking Variable Source Value Potential*
1. Idaho state U.S. census of 100% 1,000, population population
2. State population in Sales & Marketing 12% 120,000
target age Management
category Survey of Buying Power
3. Target age enrolled in colleges Idaho Department 30% ,000
and universities of Education
4. Target age college students Student survey in a preferring convenience over price marketing research class 50% 18,000
5. Convenience-oriented students Personal telephone
likely to purchase new felt-tip pen interview by
within next month entrepreneur 75% ,500
6. People who say they are likely to Article in Journal
purchase who actually buy of Consumer Research 35% ,725
7. Average number of pens bought Personal experience of
per year entrepreneur ,900
SALES FORECAST FOR IDAHO
*Figures in this column, for variables 2-7, are derived by multiplying the percentage or number in the Estimating Value column times the amount on the previous line of the Market Potential column.
Copyright © by South-Western College Publishing. All rights reserved.

23. The Formal Marketing Plan
Market Analysis
Customer profile
A description of potential customers in a target market
Sales forecasts
“most likely,” “pessimistic,” and “optimistic
The Competition
Profile of key management personnel
Overall strengths and weaknesses
Related products being marketed or tested
Likelihood of competitors’ entry into target market
Copyright © by South-Western College Publishing. All rights reserved.

24. The Formal Marketing Plan (cont’d)
Marketing Strategy
Total product and/or service plan
Decisions affecting the total product
Distribution plan
Decisions regarding product delivery to customers
Pricing plan
Setting an acceptable value on the product
Promotional plan
Communicating information to the target market
Copyright © by South-Western College Publishing. All rights reserved.