[Ten Simple Ideas] The Ernst & Young Business Plan Guide: Chapter by Chapter - Chapter 9 - Marketing Plan
In this series of articles, I will post ten simple ideas from chapters in The Ernst & Young Business Plan Guide (3rd edition). This seventh post in the series brings out ten simple ideas from Chapter 9, Market Plan.
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License: CC0, Public Domain
License: CC0, Public Domain
Introduction
At 35 pages, the Marketing Plan chapter of The Ernst & Young Business Plan Guide (3rd edition) spans more than 15% of the entire book. Perhaps reflecting its relative importance in the business plan, it is the bulkiest chapter.
The authors subdivide the concept of the marketing plan into six subsections. These are: market definition, competition and other influences, marketing strategy, market research, sales forecasts, and supplemental material. Each of these subsections is then described in some more detail.
As with all other chapters so far, the authors give a general description of the concept first, then they provide an example business plan from Good Foods Incorporated (GFI), and they follow that with a brief analysis of the business plan. This chapter differs, however, because the examples and analysis are done subsection by subsection, instead of covering the entire section in a single pass.
The remainder of this post will mine ten simple ideas from the chapter and provide some of my own commentary on the topic.
The Market Plan: ten simple ideas
1.) A market plan can be organized into six subsections: market definition, competition and other influences, marketing strategy, market research, sales forecasts, and supplemental material.
I imagine that there are many different ways to organize a marketing plan, but the six sub-sections that the authors gave make sense to me. In the market demand and opportunity section, the demand for the product should be established. In the competition and other influences, the business plan should describe potential obstacles. Much of this will be focused on the competitive landscape, but it should also include things like regulators and advocacy groups that might impact the business. The marketing strategy section describes how a business plans to employ its marketing tools. The market research section might also stand alone as its own section in the business plan. It contains formal and informal market research to legitimize assertions that are made elsewhere in the document. Detailed financial projections are typically presented in the financial section of the business plan, but it can be useful to also include sales forecasts as their own subsection in the marketing section. Finally, any other support material can be included as a subsection in the market plan, or it can be included in the business plan as a supplementary appendix.
2.) A business plan must be written in a way that is interesting to read and persuades the reviewer that the authors have thoroughly evaluated the market landscape and found a way to fulfill an unmet need.
The authors give 5 key tests to identify a successful marketing plan:
- Have a need and a market been clearly identified?
- Has a clear, persuasive case been made as to how sales will be generated.
- Have all relevant factors been introduced in a manner that is objective, but also in a way that inspires confidence on the part of the reviewer?
- Does this section serve as a sound basis for the implementation of a market strategy?
- Is the section readable and interesting?
These tests should act as guideposts for the author when the business plan is being written.
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License: CC0, Public Domain
3.) The level of detail in the market definition and opportunity section should correspond to the level of market saturation that is required in order to succeed.
If the business only expects to need to get a small share of a large market, less detail is needed in this section. If the business needs to achieve a large market share in order to succeed, then detailed information is critical.
4.) The market definition and opportunity section should identify and prioritize general market parameters along with relevant specific target markets.
The example is given of a computer manufacturer, who might identify the generalized target markets as "in-home users, small businesses, and large corporations." Each of these target markets might be further divided according to factors such as geography, demographics, and psychographic data.
5.) Suggested topics for the competition and other influences section include the current degree of competition, the future sources of competition, along with other factors that might influence the firm's ability to succeed.
In addition to a general discussion of the competitive landscape, it is also suggested to use graphic or tabular representations. The discussion of the current competitive landscape should begin with a general overview, then (where possible) offer specific businesses, products, or services that will offer competition.
When writing about future sources of competition, the business plan should consider the maturity of the industry. Mature industries tend to be more stable, while emerging industries tend to have very dynamic marketplaces. The business plan should account for trends like these.
Aside from competitors, other external factors can also influence a business' ability to succeed. For example, this may include regulators, suppliers, and the general public. These must be identified and discussed in a similar way to the discussion about competition.
A mistake that was demonstrated in the GFI example in the book is the tendency to take competition too lightly. When writing and executing a business plan, the threat of competition must be taken seriously.
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License: CC0, Public Domain
License: CC0, Public Domain
6.) The marketing strategy section should describe how the entrepreneur plans to use the various marketing tools in order to accomplish the firm's goals.
The book listed six different types of marketing tools that should be dealt with. These include: sales and distribution strategy, pricing strategy, advertising, public relations and promotion, site analysis, related budgets, and future marketing activities.
There is a great deal of detail in this section that isn't really suited for a blog post, so if you're not familiar with the use of marketing tools, it is recommended to read the chapter.
The authors do mention that meticulous detail is not needed, but the reviewer needs to have a general understanding about how the business will be marketing its product or service.
7.) In the marketing strategy section the level of detail should be balanced against the likelihood of change.
When things like cold calling, formal presentations, commission plans, and detailed price lists are planned, it is good to include details about them in the business plan. However, it may be prudent to exclude details about communication strategies, advertising strategies, promotion strategies, and other things that are prone to frequent revision.
8.) The purpose of the market research section is to give the reviewers a general understanding of the market and to enhance the plan's credibility.
As mentioned earlier, the market research section can stand alone or it can be included as a subsection of the market plan section. The research does not need always need to be elaborate, so the depth of the research should be guided by an informal cost/benefit analysis. If a deep dive is done into market research, then it should probably be a stand-alone section of the business plan. If the research is less elaborate, then it makes sense to include it in the market plan section.
9.) The sales forecast section can be organized in a variety of ways.
The authors suggest that there are a number of ways to organize a sales forecast, and they list four common methods. These include: sales by period, sales by product or service, sales by customer group, or market share.
Describing sales expectations by by period is used to project sales over a period of time, which can help the reviewers to see how sales projections fit into their own investment goals. Detailing sales by product or service is useful for companies that have multiple lines of products and/or services. Detailing sales expectations by customer groups can help to lend credibility to the forecasts. Finally, the market share presentation format is probably only useful when the market size is not so big as to dwarf the significance of any single company.
No matter which method is selected, it is useful to include graphical and tabular presentations of the data, and it helps to substantiate the numbers with documents like contracts or letters of intent.
10.) Support material can be listed in the market plan section, or as an appendix.
It may be convenient to read the support material in context with the market plan section, but there is a danger to overloading the reader. If there is any doubt about the supporting material becoming excessive, the chapter suggests that it should be included as an appendix.
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License: CC0, Public Domain
License: CC0, Public Domain
Conclusion
This post has offered ten simple ideas from chapter 9, Marketing Plan, in The Ernst & Young Business Plan Guide (3rd edition). The length of the chapter reinforces the notion that this is a fundamentally important section of the business plan.
The chapter suggests organizing the Marketing Plan into 6 sections, market definition, competition and other influences, marketing strategy, market research, sales forecasts, and supplemental material. Of those, all except market research and supplemental material are to be included in this section for all business plans. Depending on the level of detail, the entrepreneur may elect to include the market research as a stand-alone section, and if the supplemental material section is too extensive, it may be included as an appendix.
Note: I am not affiliated in any way with Barnes and Noble, the authors, or the publishers of the book. I linked to a copy of the book on the Barnes and Noble site more or less at random, and I don't particularly endorse that site over any other site where you might purchase it.
45% of the rewards from this post will go to the Rustin Golden Knights Marching Band
Previous Articles in the series
Part I: The purpose of a business plan
- [Ten Simple Ideas] The Ernst & Young Business Plan Guide: Chapter by Chapter - Series Overview and Chapter 1
- [Ten Simple Ideas] The Ernst & Young Business Plan Guide: Chapter by Chapter - Chapter 2 - Who Reads the Business Plan?
- [Ten Simple Ideas] The Ernst & Young Business Plan Guide: Chapter by Chapter - Chapter 3 - Legal forms of a business
- [Ten Simple Ideas] The Ernst & Young Business Plan Guide: Chapter by Chapter - Chapter 4 - Due Diligence
Part II: An in-depth look at a business plan
- [Ten Simple Ideas] The Ernst & Young Business Plan Guide: Chapter by Chapter - Chapters 5-7 - Contents, Executive Summary & Company Description
- [Ten Simple Ideas] The Ernst & Young Business Plan Guide: Chapter by Chapter - Chapter 8 - Products and Services
- This Post: [Ten Simple Ideas] The Ernst & Young Business Plan Guide: Chapter by Chapter - Chapter 9 - Marketing Plan
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