Chapter 02
Marketing plan
This chapter discusses the followings.
2.1 Introduction to a marketing plan
2.2 Market analysis
2.3 Marketing strategies of the proposed business
2.4 Sales forecast
2.5 Sales income and sales expenses
2.6 Marketing fixed assets
2.7 Preparing a marketing plan
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2.1 Introduction to a marketing plan
A marketing plan can be identified as the basis of the entire business plan. This is
because all other parts of a business plan will be prepared based on the information
of the marketing plan, such as customer needs of the target market and quantity of
units in demand.
The marketing plan explains what goods or service an entrepreneur expects to
offer, its potential market and the related marketing strategies. It also includes the
projected sales for the product and the sales expenses to be incurred.
Marketing plan is the document that presents the goods or service that is expected
to be marketed by an enterprise, its target market, and how the target market will
be reached.
The following information is included in a marketing plan:
P Market analysis
P Marketing strategies of the proposed business
P Sales forecast
P Sales income and sales expenses
P Marketing Fixed Assets
Let us examine each of them briefly.
2.2 Market analysis
A market analysis refers to exploring the market in relation to the business. It deeply
investigates the demand for the goods or service, the target customers, the nature of
the competitors and their marketing strategies, etc. This will help the entrepreneur
understand the factors that he/she should consider when deciding on marketing
strategies for his/her business.
The main purpose of a market analysis is to get the necessary information to
prepare an accurate marketing plan. Therefore, a market analysis is the first step of
preparing a marketing plan.
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Obtaining information for a market analysis
Information needed for a market analysis can be gathered through different means.
Given below are some of the methods used often for this purpose:
P Distributing questionnaires among customers and getting their responses
P Interviewing customers
P Observering customers’ transactions in the market
P Using sources such as newspapers, magazines, reports, the Internet etc.
Important factors in a market analysis
1. The demand for the goods or service
What the entrepreneur expects to offer to the market may be something
that is already available in the market. If not, it could be a modified version
of something that is already available, or something entirely new. Whatever
it is, it is necessary to examine the customers’ willingness to buy it as well
as their ability to buy it.
2. Target customer
This refers to the customers who we can expect to buy the product, or who
we can expect to be persuaded to buy it in future.
Let us identify the target customer through the following examples:
Goods/ service Target customer
Exercise books School students
Gold Jewelry Ladies
Preparatory material for Grade 5 Students of Grades 4 and 5
Scholarship examination
Mobile phone repairing Mobile phone users
Sports goods Sportspersons
An entrepreneur must identify his/her target customer correctly. This can be done in
a very specific manner by considering factors such as the customer’s age, income
level, gender, occupation, social status, etc.
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3. Competitors
The same kind of goods or services can be offered to the market by many
different suppliers. The other suppliers who provide goods or services that
are similar to those that we offer are our competitors. There are many
varieties of toothpaste, soap, chocolates, telecommunication services, etc
available on the market under different brand names, and these are examples
for competitive goods and services.
In addition to such homogeneous products, there can be substitute goods/ services as well.
Given below are some examples for substitute goods/ services.
goods/ services Substitute
Laundry soap Laundry powder (washing powder)
Butter Margarine
Western medicine Ayurvedic medicine
Cab services Three wheelers
Tea Coffee
Therefore, when studying competition, it is important that you consider the
homogeneous products (i.e. goods and services which are similar to yours), as
well as substitute products. In addition, you should pay attention to the marketing
strategies used by your competitors.
Activity 01
Select several goods and services available on the market. Write down some
homogeneous products and substitute products for each of them.
Goods/ service Homogeneous products Substitute products
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2.3 Marketing strategies of the proposed business
By exploring the market, the entrepreneur can
understand the marketing strategies used by the
competitors. Then the entrepreneur has to select
strategies for his/her own business, so that it
can face the competition successfully. Selection
of marketing strategies should be based on the
marketing mix. There are four main variables of
the marketing mix, which are also known as the
4 Ps: Product, Price, Place and Promotion. Given Figure 2.1
below is a short description of the 4 Ps.
Product
Products refer to goods or services offered to the market which can satisfy
the customer’s needs or wants.
This involves information regarding the product such as its content,
ingredients, shape, quality, size, brand name, instructions for use, etc.
Price
The cost incurred by the customer when obtaining a product is called its
price. This is a main factor that determines the demand for the goods as well
as the profit earned by the entrepreneur.
Pricing strategies, how the prices are to be set, any discounts to be given etc
are considered here.
Place
This refers to how the goods or service will reach the target customer.
Different strategies can be used to make the goods/service available to
the customers. For example, the entrepreneur may sell the goods directly to
the customer, or through retail traders. If not, the entrepreneur can sell the
goods to the wholesale trader, who sells them to the retail trader, who in turn
sells them to the customer.
Out of all such strategies, the most suitable one/s should be considered to
make the product available to the customer.
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Promotion
Businesses use various strategies to create a demand for their goods
or services, to increase the existing demand and to attract the customers.
These strategies are called promotion.
The following are some possible means of promoting a product.
P Television, radio, newspapers,
banners, leaflets, posters
P Methods involving new technology,
such as promotions over Websites,
Facebook, etc
P Using mobile SMS Figure 2.2
P Meeting the customers in person
P Organizing charity programmes and artistic or cultural events
As described above, the marketing plan should include the promotional strategies
for attracting the customers and retaining their loyalty for the product.
2.4 Sales forecast
A sales forecast refers to determining the
quantity of goods or services to be marketed
within a provided period of time in future.
After analyzing the market, the entrepreneur
can understand the demand for his/her
product within the target market. There may
be a large market for the product.
Figure 2.3
An entrepreneur may not cover the entire market demand at the time of starting up
the business. Depending on the strength of his/her business, the entrepreneur can
forecast the market share included in such market share.
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Example :-
The demand for a certain product is 15 000 units per week. The
current competitors provide only 12 000 units. Therefore, there is a
market gap for 3 000 units. It is the new entrepreneur who should
decide whether he/she can supply all 3 000 units or only a part of it.
When making a sales forecast, the expected quantity of sales can be calculated per
day, per week, per month, per trimester, per year, etc. It would facilitate the decision
making. The forecasted market share should be included in the marketing plan.
Activity 02
Indicate one type of goods and one service that an entrepreneur can offer targeting
each of the groups of customers given below:
No. Target market Good Service
01 People over 65 years of age
02 Pre-school children
03 Women who wish to work in the Middle East
04 Private bus owners
05 Students expecting to follow their higher
education abroad
06 Electricians
07 Working mothers
08 Small scale businessmen
09 Doctors
10 Diabetics patients
2.5 Sales income and sales expenses
Sales income
By multiplying the number of units to be sold by the expected selling price, we can
calculate the sales income.
Expected sales Expected number of units to Expected selling
= x
income be sold (goods or service) price of a unit
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Sales expenses
All expenses incurred in marketing the goods or service are taken under sales
expenses.
Example :-
Salaries and wages for Marketing managers and staff
Expenses related to sales outlets (if any), such as rental, maintenance,
electricity, water, insurance, etc
Office expenses such as telephone charges, stationery, etc
Publicity and promotion-related expenses
Depreciation for fixed assets such as sales vehicles, office equipment
in the Sales Department, etc.
As indicated above, the forecasted data regarding the total sales income and
expenditure should be included in the marketing plan.
2.6 Marketing fixed assets
These are the fixed assets that are directly relevant to the sales and distribution
activities of the business.
Example :-
Land and buildings, machinery, equipment, vehicles, office tools and
furniture, etc. which are used in sales and distribution-related activities
Figure 2.4
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2.7 Preparing a marketing plan
To further clarify the concepts discussed above, let us study a marketing plan
prepared for the following scenario.
After having considered a number of business ideas, Akila Jayawardene
finally decided to manufacture yoghurt.
He thought of starting the business targeting his own town, Araliya, in
Rathnapura. Given below is the information he found from studying the
market for yoghurt in the area:
Population in Araliya 40 000 citizens
5% of the population eat yoghurt every day. At present, 75% of the yoghurt
sold in the market is dairy yoghurt and 25% is fruit yoghurt.
Details about competitors
Competitor Monthly supply Market share
Rajarata yoghurt 12 000 20%
Saumya yoghurt 18 000 30%
ABC Foods Co. 6 000 10%
Healthy Foods Co. 24 000 40%
Total 60 000 100%
Marketing strategies used by competitors
Product : offering two varieties, i.e. dairy yoghurt and fruit yoghurt
Price : according to market price
Place : through retail traders
Promotion : displaying name boards carrying the name of the yoghurt
at retail shops, displaying posters
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Akila understood that 50% of the demand for yoghurt in the area was
fulfilled by external companies and 50% by two local manufacturers.
Therefore he decided to capture 10% of the market share in the first year
of business. The following strategies were selected.
Product: dairy yoghurt and fruit yoghurt
Price : competitive market price
Place : selling through retail traders and restaurants, and selling from
the place of manufacture
Promotion: displaying posters at the outlets, offering stickers for children
A three-wheeler worth Rs. 480 000 will be bought to distribute yoghurt.
Other expected expenses are given below:
Annual depreciation of the three-wheeler - Rs. 4 800
Annual insurance premium of the three-wheeler - Rs. 4 800
Monthly fuel and service expenses - Rs. 7 200
Monthly salary for sales staff – Rs. 10 000
Monthly expense for printing posters – Rs. 1 500
Monthly expense for printing stickers – Rs. 2 000
Distribution of yoghurt will take place five days a week. The market price
of a cup of yoghurt is Rs. 30. There is no difference in price between dairy
yoghurt and fruit yoghurt.
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Marketing plan
1. Product
Information regarding the proposed product
1' Dairy yoghurt (includes milk, sugar and vanilla)
11' Fruit yoghurt (includes milk, sugar, vanilla, pieces of fruit and jelly)
2. Target group
The population of Araliya, Rathnapura. Population is 40 000 citizens.
3. Target sales area
Araliya, Rathnapura
4. Market for the proposed product
No. of Monthly demand Annual demand
Product target Pattern of Value
customers consumption Quantity Quantity Value
Price x Units
1. Dairy 1 500 Year-round 45 000 1 350 000 540 000 16 200 000
yoghurt (Monthly) demand (60 000 x 75%) (45 000 x 30) (45 000 x 12) (540 000 x 30)
2. Fruit 500 -do- 15 000 450 000 180 000 5 400 000
yoghurt (Monthly) (60 000 x 25%)
60 000 1 800 000 720 000 21 600 000
5. Analysis of supply from competitors
Goods/ services supplied by Their market share
Principal competitors
them (approximately)
1 Rajarata Industries Dairy yoghurt/ fruit yoghurt 20%
2 Saumya Industries -do- 30%
3 ABC Foods Co. -do- 10%
4 Healthy Foods Co. -do- 40%
100%
6. Target market share
Product Expected market share
1. Dairy yoghurt 10%
2. Fruit yoghurt 10%
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7. Marketing strategies used by competitors
Marketing mix Strategies
Product Offering two varieties, i.e. dairy yoghurt and fruit yoghurt;
ensuring the good quality and hygienic nature of the product
Price Setting a competitive price
Place Distribution through retail traders
Promotion Displaying name boards carrying the name of the yoghurt
at retail shops; displaying posters in the sales area
8. Proposed marketing strategies of the entrepreneur
Marketing mix Strategies
Product offering two varieties, i.e. dairy yoghurt and fruit yoghurt
Price Setting a competitive price
Place through retail traders and restaurants;
Promotion Displaying posters at the outlets; offering stickers to attract
children
9. Annual sales forecast
Goods/ service No. of units to be Unit price Monthly sales Annual sales
sold per month Rs. Rs. Rs.
Dairy yoghurt 4 500 30 135 000 1 620 000
Fruit yoghurt 1 500 30 45 000 540 000
Total 6 000 180 000 2 160 000
10' Sales expenses
Item Monthly sales expenses Annual sales expenses
Salary for Sales staff 10 000 120 000
Vehicle depreciation 400 4 800
Sales vehicle insurance 400 4 800
Fuel and service expenses 7 200 86 400
Posters printing expenses 1 500 18 000
Stickers printing expenses 2 000 24 000
Total 21 500 258 000
11. Marketing fixed assets
Item Value Rs. Annual depreciation Rs.
Three-wheeler 480 000 4 800
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Activity 03
Sasmitha decided to start a business of manufacturing and selling sweets. She
visited several restaurants in the area to find out about the sweets available
for sale and the demand for them.
Based on the information given by the restaurant owners, she understood that
there were many who manufactured sweets using wheat flour. However, there
were only a few who manufactured sweets out of rice flour and kurakkan flour.
Through a market analysis, she understood that a considerable number of
people, being diabetic, were starting to use rice flour and kurakkan flour.
Given below is some information that she has collected:
Her hometown, Jayagama in Akuressa, has a population of around 80 000
citizens
20% of the population like food made of kurakkan flour and rice flour
They wish to buy sweets at least once in two days
The main competitors and their market shares are as follows:
‘Vimansi Sweets’ – 30%
‘Arundathi Sweets’ – 35%
The marketing strategies of the competitors –
Ensuring the taste and hygienic quality
Distributing once per two days and having the unsold items returned to them
Displaying sales posters near shops that sell sweets
Sasmitha decided to start up the business covering 25% of the market. She
will be using the same marketing strategies as her competitors. In addition,
she decided to circulate flyers giving information about her products.
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At the beginning, she decided to offer rice-and kurakkan-flour-mixed cake
and Aluva. Their market price will be as follows:
Cake Rs. 20
Aluva Rs. 10
A motorcycle worth Rs. 200 000 will be bought to distribute the products.
Given below are the estimated expenses:
Monthly salary for the employee distributing the products – Rs. 15 000
Insurance (annual) Rs. 3 000
Fuel (monthly) Rs. 10 000
Service charges (monthly) Rs. 1 500
Motorcycle depreciation (annual) Rs. 4 800
Flyers and sales posters will cost Rs. 6 000 per year.
Based on the above information, prepare the marketing plan for ‘Sasmitha
Sweets’.
Let’s Answer
01. What is a marketing plan?
02. Name the sections of a marketing plan.
03. Name the 4Ps and describe them briefly.
04. What are the means of collecting information for a market analysis?
05. Explain what you mean by marketing fixed assets.
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