2012/06/04

The Marketing Plan: the unresolved matter for SMEs


One of the keys for an SME to grow is the professionalization of the role of marketing. There is a widely shared belief that the marketing is only for the large companies. However, most of the SMES develops marketing actions on a daily basis, but they don’t say they are doing marketing: they say they are simply "doing business". Let me share with you just two typical examples: a restaurant’s owner who invites a good customer with an extra drink with the hope of a soon return or a 2 x 1 promotion with an end-of-life product. So, obviously, SMEs do marketing every day. But they don’t do it in a structured way and responding to a formal business strategy.

But let's start at the beginning: what is marketing and what’s it for in an SME? Marketing is the discipline that develops methodologies and techniques to achieve the business objectives of an organization and looks for the best way to meet the needs of consumers and customers. In the words of Raul Peralba, marketing is "everything that needs to be done to enable the sales; that is, it is the art of attracting and maintaining customers".

In this process we must be able to find out how customers think, how they work and what they want, and how we can find a place for us in a market that is full of competitors. Marketing must, therefore, manage a difficult balance between the capabilities of the organization, what the market demands and what the competition leaves us to do.

Philip Kotler, one of the world's leading authorities on the subject, defined the process of marketing in five phases clearly identified:

1. Market research and economic environment.
2. Definition of the target market.
3. Definition of the marketing strategy.
4. Management of the Marketing Mix.
5. Control.

This process is similar for any type of organization regardless of its size or activity profile. However, with the aim of simplifying and with the permission of Mr Kotler we can say that a Marketing Plan for a SME should contemplate the following 4 chapters:


Diagnosis

A good marketing plan should include an analysis of the current situation of the business. Therefore, there is a need to identify clearly the market is serving, the competition, the regulatory and technological context, the economical situation, etc. It also should consider a diagnosis of the brand image of our organization. At the end of the day, our sales are also determined by our reputation.

There are several tools for this phase. The most well-known and perhaps the easiest to implement is the SWOT. On one hand, it allows us to identify weaknesses and threats and, on the other, strengths and opportunities. This exercise can be complemented by another model of strategic analysis: the analysis of the Porter five forces. With this methodology we can address, among other things, the bargaining power of buyers and suppliers, the potential appearance of substitute products or the threat of new entrants in the market.

Finally, in this stage of diagnosis, we must develop a benchmarking exercise; that is, compare our marketing activity, communication and product with the competition to identify best practices from which to learn or copy if our strategic model is compatible. At this point we must try to overcome the temptation to believe that our model is based solely on the best price. Let us consider, for example, the latest sale that we have done and the motivation of the client to buy: Was it only a question of price? Was the customer influenced by the good relationship established with him during the last few months? Did it have anything to do the customer care service?

If the budget or the level of ambition of your small business permits it, there is an additional possibility that usually requires the participation of an organization specialized in marketing services: market research. Through this tool, you can get very valuable information such as market share (yours and your competitors) or brand recognition. You can also check a new value proposition in its pre-launch phase (see next point). There are also many platforms on the market that can be used free of charge.

The use of all the tools mentioned above will make you have a thorough knowledge of your competitive reality and your real potential to have a differential proposal. But what it is more important: this information will also enable you to identify new customer needs that can have an adequate response from your company.


Determine goals and value proposition

It is the time to determine the objectives. These can be of two types: purely economic (for example, selling a certain quantity of product or attain a certain market share) or more intangible (for example, being the most recognized or preferred brand). Obviously both types of goals are perfectly complementary and can live together in our marketing plan.

In this phase it is very important to determinate a differential value proposition. On the basis of what we already know (diagnosis) and what we want to do (objectives), we must build a solid proposal in terms of product, service or experience that really meets the latent needs of our target customers. I stress once again the importance of not be swayed by the first impression that the price is the sole determinant of the reason for the customer's purchase.

To do this it’s very helpful to develop a market segmentation exercise. This will identify homogeneous groups of customers who will respond in a similar manner to the actions of the marketing mix.


Action Plan (marketing mix)

The marketing mix is the combination of four tools that an organization uses to implement the strategy and achieve the goals. This is often called "the four P" of marketing:

Product. It is based on the products and services company portfolio management.

Price. It is a fundamental element and it is perhaps what let you adapt faster to the competitive circumstances. Obviously, your objective is to generate income and it is determined by the costs of production, the margins you wish to obtain, the competitive context, etc.

Promotion. It’s about communicating the brand, the benefits of the product or service, etc. The advertising, public relations, direct marketing or sales promotion are some of the basic tools of communication. At this point, it is especially necessary to recall the important role of social networks.

Placement. This is the element of the mix that manages the process by which a product arrives in a satisfactory manner to the customer. Under the distribution policy you have to manage the  distribution channels (all the agents involved in the process to move the product from the supplier to the consumer), the physical distribution (transport, stock management, etc.) and merchandising (actions that are performed at the point of sale).


Monitor and measure

Although Peter Drucker used to say that "the marketing produces results, the rest only costs", the marketing plan quite often needs a specific budget. Therefore, it is imperative that you check your implementation and measure the return on investment (ROI). A good measurement will allow you to add value to the marketing action and facilitate the provision of resources for future plans.

To finish this post, I'd like to share a quote from David Packard (co-founder of Hewlett Packard): "Marketing is too important to be left to the marketing department". It is a nice way to remember that marketing is a responsibility of senior management. Therefore, if we talk about SMEs and you are the owner or manager of one of them, you should take this discipline very seriously.