Chapter 5 – Marketing Plan

WHAT IS A MARKETING PLAN?

A marketing plan is a document containing the marketing objectives, marketing strategies, and the activities that
will be undertaken to execute these strategies. The plan must consider the overall goals of the enterprise which must
take precedence over the specific marketing objectives.
COMPETITOR ANALYSIS
The marketing strategies that the entrepreneur will execute must be based on an intelligent assessment of the
business environment. In short, the decisions concerning the 4Ps of marketing -product, price, place (distribution), and
promotion (also known as the marketing mix) -require the entrepreneur to understand how these four elements
influence each other and how they can be integrated to effectively exploit business opportunities.
An important component of the industry analysis is a documentation of the current strategies of competitors.
The entrepreneur can get hold of the relevant information by visiting the competitors' websites, getting hold of
company catalogs, flyers and brochures, reading newspaper and magazine articles, and interviewing customers,
suppliers, and distributors.
After scanning and reading the materials from these sources, and then supplementing these with additional
interviews with key informants, the entrepreneur can summarize the information by filling up Table 5.1, except the last
column, which will be reserved for his own company. This will show him, at a glance, the various market strategies
utilized by competitors, which on the needs and wants of his target market.
Company A Company B Company C Your Company
Target Market
Product/Service
strategies
Pricing strategies
Distribution
strategies
Promotion strategies

Table 5.1 Comparison of the Marketing Strategies of Major Competitors

Once the strategies have been summarized, the entrepreneur can now proceed to identify his competitor's
strength (or benchmark that must be met or surpassed) and weaknesses (or gaps in the execution of the strategy),
which could be listed in Table 5.2. The MADI questions of Dr. Ned Roberto provides a useful way of identifying unmet or
unsatisfied customer needs and expectations. This will require the entrepreneur to interview customers or to conduct a
focus group discussion (FGD) to determine the following about products or services that now exist in the market:
M-What is MISSING ("Kulang")?
A-What is ANNOYING ("Nakakabuwisit")?
D-What is DISAPPOINTING ("Nakakabanas")?
I-What is IRRITATING ("Nakakainis")?

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 Table 5.2 Company
Strengths A Company
and Weaknesses of Major B
Competitors Company C
Strengths (Benchmarks)
Weaknesses (Execution
Gaps)

Let us go back to our entrepreneur planning to offer flavored pan de sal. By asking the MADI questions, he might
just validate his intuition, which led him to his product idea. For example, one of the FGD participants might say: "Puro
plain pan de sal at Spanish bread lang ang binebenta. Sana may iba pang flavors." (The bakery only sells plain pan de sal
and Spanish bread. I wish they could offer additional flavors). Or he could get comments such as "laging mahaba ang
pila" (Queueing time is too long), "masungit yung tindera" (The lady selling the bread is unfriendly), or "mura nga, puro
hangin naman" (It's cheap, but not filling enough) which gives him an idea about what is important to the customers.

WHAT ARE THE STEPS IN PREPARING THE MARKETING PLAN?

Preparing the marketing plan involves the following steps: (a) assessing the business situation; (b) defining the
target market; (c) setting the marketing goals and objectives; (d) developing marketing strategy and action programs;
and (e) preparing the budget for the action plan.
Assessing the business situation
If the marketing plan is being written after the business has already started, it should describe present market
conditions and how the company's goods and services fare against those of its competitors. Any future opportunities
must also be presented.
Defining the Target Market
Businessmen now recognize the value of focusing on a particular segment of the market, given that people have
different needs, wants, preferences, and expectations. Worth telling is the story of San Miguel Corporation (SMC), which
used to offer only San Miguel Pale Pilsen to Filipino drinkers until the 1970s. When Asia Brewery launched its cheaper
beer products (including "Beer," now Beer na Beer), San Miguel responded by launching "Gold Eagle, which targeted the
lower-income class, and by filing a lawsuit against its competitor. Today, San Miguel Breweries, Inc. (SMBI), a subsidiary
of SMC, has a variety of beer products that cater to several segments of the market. These include Red Horse Extra
Strong Beer, which seems to appeal to males in their late teens or early 20s, especially rock band fans; San Mig Light,
which targets the health-conscious bunch, and the lifestyle brews, namely San Miguel Super Dry, Cerveza Negra, and San
Miguel Premium All Malt, which cater to the sophisticated, high-end market.
Clearly, San Miguel has mastered not only the craft of brewing beer but also of market segmentation, a process
of dividing the market into small groups that have some similar characteristics. By focusing only on a particular segment,
the entrepreneur can develop a product or service that is responsive to the needs of this specific group.
Step 1: Decide what general market or industry you wish to enter
Step 2: Divide the market into smaller groups based on customer characteristics: (a) demographic (e.g, age,
gender, educational attainment, occupation, income level), (b) psychographic (e.g., personality, lifestyle); (c) geographic
(e.g, barangay, city/ municipality, province, region)
Step 3: Select segment or segments to target.
Step 4: Prepare a marketing plan integrating product, price, distribution, and promotion
Setting the Marketing Goals and Objectives
Before strategies can be formulated, the entrepreneur must know where he intends to bring the business. Thus,
the answer to the question "Where do we want to go?" This is where SMART goals come into play. SMART means that
marketing objectives must be S Specific, M-Measurable Attainable, R-Realistic, and T Time-bound. For example, it does
not help much if the entrepreneur simply indicates his desire to increase sales by the end of the year. Who does not?

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But he could instead express it this way: "To increase our sales by at least 10% in each of our two branches by the end of
year." This objective is definitely specific, measurable, and time-bound Whether it is attainable and realistic, however,
depends partly on market conditions and on the business's past performance.
Marketing goals can be expressed in terms of the following: market share, market penetration, revenue by
territory, new products launched, number of distributors, customer service responsiveness, sales promotion, and
advertising expenditures. For example, our pan de sal entrepreneur might have the following objectives for the year:
10% market share, 70% market awareness, three new products launched, and distribution of 1,000 flyers in the nearby
church, market, and schools.

Developing Marketing Strategy and Action Programs

Once the marketing goals and objectives have been set, the entrepreneur can proceed with developing his
marketing strategy and accompanying action plan. Thus, in answering the question "How do we get there?" strategies
should be formulated for each element of the marketing mix.
Product. This must include a description of the product or service that will be offered by the business. Aside
from the physical characteristics of the product, there must also be a description of other important components that
add value to the customer, such as the brand name, image, packaging, delivery time, after-sales service, and warranty.
Pricing. Price is an important consideration for many buyers and must therefore be given appropriate attention
by the entrepreneur. But what must be considered when deciding on the price of a product? The most critical are cost,
competition, and perceived value. Thus, the terms cost-based pricing competition-based pricing, and value-based pricing
are used.
For cost-based pricing, entrepreneurs must make sure that they calculate both variable costs and fixed costs.
Variable costs are those incurred on each unit that is produced, such as direct labor, raw material, commission given to a
salesperson, or the cost of packaging. Fixed (overhead) costs refer to costs of things such as facilities and equipment that
do not change with the number of units that are produced. While it is easy to determine variable costs, it is a bit tricky to
determine the per unit portion of fixed cost because this is dependent on the volume of goods that must be produced or
bought.
To illustrate, let us look at the example of a retail store selling shoes in Makati City. Let us assume that the
company buys the shoes for PHP 150 per piece (cost of goods) from a Marikina supplier: Overhead costs for maintaining
the store are estimated at PHP 50,000. The entrepreneur expects to buy and sell 1,000 units, which translates to a unit
overhead cost of PHP 50 per shoe. He adds PHP 50 for profit, resulting in a final price of PHP 250. If he buys and sells
only 500 units, however, the unit overhead becomes PHP 100. This brings his total cost to PHP 250 (i.e., PHP 150 variable
cost + PHP 100-unit overhead) If he wants to keep the PHP 50 profit for every shoe, then he must raise his price to PHP
300.
For competition-based pricing, entrepreneurs must consider the prices of existing products or services in the
market. Offering an affordable price, even for an innovative product, would encourage customers to switch from more
established products to the new product. The entrepreneur must also anticipate the reaction of competitors.
For value-based pricing, entrepreneurs must be aware of the value attached by customers to products or services. Why,
are son willing to pay much more for a product such as Apple's iPhone, when there are more affordable alternatives like
the locally-made MyPhone? It can be argued that the iPhone has several product features that the MyPhone does not
have. What accounts for the huge price difference could be the "intangible benefits" (e.g, prestige, 'pogi points) that an
iPhone owner gets.
Place. What is the best way of getting the product to the consumer? When deciding on a channel for distributing
one's product, the entrepreneur must consider the following interrelated factors: (a) the channel's directness, (b) the
customer's convenience, and (e)cost-effectiveness.
If the market for the product is highly concentrated (e.g, urban areas like Metro Cebu or Metro Manila), the
entrepreneur can consider direct sales to the customer or to a retailer. If the market is dispersed across a wide
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geographic area, it might be more cost-effective to avail of the services of a wholesaler rather than to do direct sales.
However, going directly to the customer might be the best option for products that are very expensive, bulky,
perishable, or hazardous.
Using middlemen might work well for many start-up ventures, which might not want to carry the cost of
transport, storage, and a large sales staff. Wholesalers, for example, provide these services at a lower cost because they
operate with economies of scale.
Entrepreneurs can also consider a combination of these different channels including electronic retailing. In the
Philippines, entrepreneurs can make their products available through e-retailing companies like Lazada, which offers a
wide range of items that include fashion apparel, electronics, car accessories home appliances; and Zalora, which allows
independent merchants to sell their products, especially clothing, footwear, accessories, and beauty
products.
Promotion. For start-up businesses, it is essential for the entrepreneur to make his product known to his
potential consumers. He can do this by utilizing traditional media such as print, radio and television, or by tapping new
media, such as the Internet. Small entrepreneurs might not be able to afford television advertising, which is very
expensive. Relatively more affordable is advertising in newspapers and magazines. Publications that cater to a
specialized readership (e.g., golf enthusiasts, architects and interior designers, teenage girls) might be the best option
for entrepreneurs who want to reach a particular market segment
whose characteristics match the publication's main readers.
Preparing the Budget for the Action Plan
The budget needed to execute the marketing strategies and activities can be included in the Marketing Plan
when prepared as a stand-alone document. However, if it is just a chapter of a business plan, then the budget should be
included in the financial projections, as discussed in Chapter 7.

WHAT MUST BE CONSIDERED IN DEVELOPING MARKETING STRATEGY AND ACTION PLANS?

Evidently, the entrepreneur has to make many decisions concerning the marketing of a product or service, based
on what was discussed in the previous section. Table 5.8 summarizes these areas for decision-making.

Marketing Mix Areas for Decision-Making

Product Products features, style, options, brand name, quality of materials or components, product-
bundling, packaging, sizes, after-sales service and warranties
Price Quality image, list price, quantity, discounts, allowances for quick payment, credit terms and
payment period
Place Setting up of own distribution outlet, use of wholesalers and/or retailers, number of distributors,
(Distribution) number of channels, geographic coverage, inventory, transportation and use of electronic
channels
Promotion Media alternatives, message, advertising budget, sales promotion (e.g., displays, flyers, coupons,
special events), use of social networking, website design and interface and publicity efforts
Table 5.3 Marketing Mix Decisions
It must be reiterated that a decision on one element of the marketing mix must be linked to decisions on the
other elements. For example, a decision to highlight the quality and brand of the product might be undermined by a
decision to offer the product at a lower price range. Even if the cost of producing the product might be low enough to
justify the low price, offering the product at a much higher price might be more consistent with the image that it intends
to project to its intended target market.