Know your market before developing a marketing plan
In creating a marketing plan for your new product or service (i.e. a new thingamajig), assessment of the probable size and dimensions of the customer base you will target for your offerings is fundamental.
The first questions lay the groundwork for getting a handle on the make-up of your proposed customer constituencies.
• Who do I foresee as the ultimate customers for my thingamajigs? Will I actually be serving levels of customers in the marketplace, selling my thingamajig directly to end users, or will I have to market through distributors, wholesalers or sales representatives? If so, what are the characteristics of these intermediate customers?
• What are the demographics and psychographics of my target customers? This is an important consideration since you’ll want to be sure your intended customers have the attitudes, habits and self-perceptions to see themselves as customers and to actually become purchasers.
• Can my intended customers afford to have their perceived needs satisfied by my thingamajig? Is my anticipated pricing realistic in light of my prospects’ financial circumstances? You must determine the economic status of your intended customers, and you must know how many dollars your target customers will be willing and able to spend for the product, service or process you offer.
• Where are the individual geographic territories I intend to serve? How accessible are they? Do they constitute a reasonable pattern given the reach and resources I can command? Since you intend to sell to these customers frequently, you must assess the geographic scope of your market and the pockets of the customer territory you intent to penetrate.
Once you have compiled this information, you’ll want to create a portrait of your ideal customers. Different marketing approaches must be used for individual and business customers. In the case of non-business customers, demographics, psychographics, needs/expectations analyses, etc. are important. Business customers, on the other hand, should be analyzed from the point of view of things like company size, viability, position in their industries, etc.
• What are the profiles of the customers to whom I am trying to sell? Do I have their names and addresses? Here is where you must provide a specific description of the customers your firm wants to attract and serve. You must have a rationale for such selection and have detailed information, perhaps in an easily accessible data base, concerning the targets you select.
Do a reality check to make sure your intended market really exists. Make a list of the first 10 people you will actually attempt to sell your thingamajigs to. Carefully estimate how much you believe they will buy, when they will buy and when they will pay you.
The next step involves estimating the aggregate size of your targeted markets.
• What is the total number of potential buying units in my marketplace? How many product or service items (by category) will I sell annually to each customer? Each customer segment? The anticipated dimensions of the market are especially important in start-up situations.
It is also extremely important for you to evaluate the future of your market, your industry and your thingamajig.
• What will my market be like in the future? What are the socio-economic trends in the marketplace?
• What are the anticipated changes in product life cycles?
• What are the developments in technology, potential legislation or regulations that will affect my firm, its competition and its markets?
If you find it difficult to respond to these issues, don’t take any additional steps in business plan creation until you’ve rethought the marketability of your thingamajig. The answers to these questions will force any venturer—whose pragmatism may be overcome by enthusiasm in the early stages of a venture—to personally confront the importance of having a real market identified before the expensive process of marketing is engaged.
Paul Willax is a professor of entrepreneurship and chairman of the Center for Business Ownership Inc., Amherst, N.Y. He is also the author of the book, “Brass Tacks Tips for Business Owners,” available at barnersandnoble.com. If you have a question or suggestion for his column or to receive a free, weekly e-mail newsletter, “Brass Tacks Brainfood,” write to Willax@TheBrassTacks.com.