Last month in this space, I reviewed a series of market projections for 2014 from Harvard University as well as the industry’s leading associations.
The Marketing Maze
The path to marketing success needn’t be complicated. In fact, the most profitable plans tend to be simple ones that are easy to implement.
False starts, wrong turns and dead ends. Developing a marketing plan can feel like wandering through a labyrinth — eventually you hope to find your way to the clients who are going to give you the best return on investment.
Missteps, whether an ineffective advertising campaign or a poorly targeted audience, are not only costly but also unnecessary. The path to marketing success needn’t be complicated. In fact, the most profitable plans tend to be simple ones that are easy to implement.
To illustrate the musts and must-nots, two remodeling firms agreed to let Professional Remodeler critique their marketing plans on condition of anonymity. Located in the Pacific Northwest, Company A has been in business for more than 25 years and has more than $3.5 million in annual revenue. To maintain current size and revenue, it is expanding its services to become a full-service contractor. Company B is a small firm in a major Southwestern metropolitan area. Its business objectives are to stay small, maximize profits and set up the owner for retirement within 10 years.
Let’s see how their plans stack up on six critical sections: a business review, an analysis of the target market, objectives and strategies, tactics, measurements, and budget.
Conducting a general business review
Taking time to analyze your business allows you to develop a summary that solidifies your positioning and affirms your unique selling proposition. This review includes evaluating your product/service and price/value relationship, the cornerstone of your business. Ask yourself the following questions:
You can hire a consultant to conduct a research study, but if that’s too costly, try calling past customers, calling leads who did not choose your company, asking friends and family or creating a satisfaction survey for your customers to complete after their projects. Develop a database of these responses and use the information to update your marketing plan regularly.
Next, spend time describing the current market situation as well as trends in your business and the market. Market information lets you anticipate and act on positive or negative market shifts that could affect your business. Again, this should be reviewed and updated regu-larly. Useful resources for market information include the U.S. Census Bureau, local government offices, the Remodelors Council, the NAHB, the Joint Center for Housing Studies of Harvard University, the Small Business Administration, economic indexes and your own project records.
The review should discuss the competition in your market. Identify your top three to five direct and indirect competitors. Describe their products/services, how they go to market, their pricing and where you see their position in the market.
Finally, develop a list of problems and opportunities, which can become a hit list from which your marketing strategies are framed.
Obviously, Company A has spent considerable time developing its position in the market. Its unique selling proposition is “providing professional service with a personal touch.” This positioning is supported by quality work at a fair price, excellent customer service and open communication, all of which benefits customers. It appears that Plan A has been reviewed and updated based on the addition of expanded services to the plan.
Company B does not have a clear position in the market other than size. While this could be a position to wrap a strategy around, Company B does not consider how being a small company benefits its customers. Making a profit with the fewest hours is internally focused and works as an operating objective, but again provides no value or benefit to customers and does not provide the company with a unique selling proposition. It also seems to conflict with delivering great service compared with the competition.
Plan A is a great example of how reviewing and updating your plan can help you better prepare for shifts in your business. Plan A encapsulates quantitative economic data such as the stock market along with qualitative information regarding industry and corporate impact on the market. It also considers trends the company sees in its customers and projects. Speaking to the fact that the consumer has many choices, the plan does a decent job of describing the company’s market competition. It would be better, though, if the plan spoke more specifically to how Company A differentiates itself.
Is Company B nimble and ready to take changes in the marketplace head-on? Its internalized, generic statement does not instill confidence that Company B understands or knows its competitors.
In looking at Plan A, it is apparent why reviewing problems and opportunities is important. Company A is poised to address problems to meets its goals and to leverage its key strengths to differentiate itself further in the market. At Company B, the marketing plan will be developed without a clear understanding of the business and the market.
Identifying and understanding your target market
A target market is defined as a group of people with common demographic and/or psychographic characteristics. Demographic information includes age, gender, geographic location, household income, age of home, years in home, education and profession. Psychographics are more subtle, requiring you to profile and describe your target in terms of attitudes, decision-making processes and core values.
Using both kinds of information gives you direction for communicating with a particular audience. Instead of viewing your product/service as being right for everyone, look at who the core of your business will be and focus on developing them. Targeting allows you to deliver the right product to the right customers with the right message at the right time, making them more likely to purchase. Targeting can also lead to new product/service ideas. When you understand your audience, you might discover an unmet want or need on which you can capitalize.
When studying your target market, look at both existing and prospective clients. Your existing client base is the most important target because those people are your advocates and will provide repeat business as well as referrals. The more you understand your current customers, the easier it is to identify potential new qualified clients.
Researching industry trade journals, local government offices, the U.S. Census Bureau, your local chamber of commerce and current market trends also can help you determine the wants and needs of prospective customers, as well as the size of the target segment.
In Plan A, the target market is not only defined, it is segmented to help the company focus specific services on the audience most likely to purchase. Breaking out single women as an audience provides obvious strategic direction for its handyman services. Additionally, it identified a potential new services niche in accessibility for people with disabilities. This plan does a nice job profiling the audience in psychographic terms but could use more demographic information to make the firm’s marketing dollars work harder.
Plan B lacks the target market content required to drive a successful marketing plan. The plan could be dramatically improved with two simple changes: Specifying the geographic region where the company concentrates would ensure that marketing is implemented there, and profiling current customers could emhance the company’s understanding of how to communicate to them.
Objectives and strategies
The objectives and strategies should deliver and reinforce positioning, leverage strengths, address potential problems with proactive solutions and thus guide you to long-term business success. Each objective should focus on a single goal, de-liver quantifiable results, relate to a specific time period and focus on affecting target market behavior.
Plan A does a fairly good job of mapping the company’s direction for the next year. Other than the sales goal, however, the objectives should be more specific. For example, the second objective could propose identifying 100 highly targeted prospects. Also, the strategies need to be more descriptive if they are to be actionable. Instead of simply stating “referral network,” the strategy could be: “Use loyalty and continuity-based marketing to maximize our referral network.”
Company B’s plan is less clear. Again, the objectives do not contain quantifiable goals. The first objective could be very strong if changed to: “Make good decisions to bring in 100 high-quality leads on a steady basis at a targeted cost of $5 per lead.” The strategies in Plan B do a decent job of directing their implementation but are too specific. For instance, keeping signs clean is a tactic, not a strategy. The strategy behind such a tactic might be: “Maintain our brand image as a clean, customer-service-oriented company.”
Tactics — your attack plan
Marketing tactics are where the rubber meets the road. Implementation of your tactical plan will influence how your positioning is perceived and valued by the target market and drive specific action by your target. It is also where you will spend the majority of your marketing dollars.
Plan A’s tactics are very strong. It includes specific actions to execute against each strategy as well as a detailed narrative of how and why each tactic will be implemented. (In the interests of space, only part of the section appears.)
Company B’s last tactic, changing the contact management software, is perfect. It is written with direction, ties into the strategy of staying in contact with customers and answers the objective of bringing in high-quality leads. The third tactic is good but could be more specific. Consider the impact if the tactic was “Test a quarterly newsletter to our existing clients. Evaluate costs of using a service versus time and capabilities to implement internally. Evaluate program after first year to determine success factor and future needs.”
Measurements — your compass
Not all of your tactics will succeed. In fact, odds are that you will have ideas or tactics that will fail. Does this mean you shouldn’t market, or you should be conservative with your plans? Of course not.
It means you shouldn’t forget the most overlooked element of a marketing plan, measurements. You need benchmarks for your goals, as well as time frames to achieve them, if you are to evaluate the success of your overall plan. Measurements will also help you track your individual tactical strategies. Possible measurements include sales, leads, number of referrals, store traffic, brand awareness, conversion and customer satisfaction. Measurements will work only if you identify them before implementation, continually review your tactics and your plan, and are willing to change course when necessary.
Neither plan includes measurements. Therefore, neither Company A nor B can be sure which tactics are working or when and how to change course and redirect marketing dollars. Both companies will be able to evaluate their programs only on instincts and perceptions rather than concrete information.
If you are willing to spend the time to develop a plan, you need to be willing to spend money to implement it. But you don’t need to spend an exorbitant amount. Look for value. What will de-liver the best-qualified leads and sales opportunities?
No magic formula can tell you what your marketing expenditures should be, but the average marketing budget in the remodeling industry is from 2% to 5% of gross sales. Your budget will depend on your market situation, competitive situation and growth strategies. New companies’ marketing expenses as a percentage of sales will be much higher. If you introduce a new product/service, you will need to spend more marketing dollars to create awareness. If your goal is to maintain, you can spend more conservatively.
Plan A thoroughly describes how the dollars will be spent and provides very specific direction. But it is too conservative given the company’s goals. One percent of sales is too little to effectively create awareness of new services, particularly in a large market.
Plan B’s lack of a budget could cause significant problems. A budget helps define priorities, and without that, implementation can be chaotic. If you don’t have specific spending guidelines, you will be throwing money away to complete your plan and spend more in the long run.
Starting with a conservative budget is fine. If you can’t afford to do a big promotion, identify smaller programs you can implement. Go big when it makes strategic sense and you are ready financially.
While Plan A could be improved, it contains vision, commitment and direction. Plan B does not provide strong business goals or strategies. Its tactics are fairly strong, but there is no clear vision for implementation. Plan B is much more likely than Plan A to not be executed or to stray from its original intent, lessening the chance of overall success for the company.
Developing a marketing plan is not difficult. It takes time and, most important, discipline. Simply having words on paper does not make a successful plan. Your plan needs to tie to your overall business goals, be specific, be measured, and be updated and improved regularly.
Brett Boyum is owner and founder of Go Full Circle Marketing, a firm that develops marketing plans and provides project management services. He can be contacted at firstname.lastname@example.org.