What does Duct Tape Marketing mean and what relevance is it to me? This short article is designed to introduce the concept of Duct Tape Marketing and to give some practical advice based on the idea.

What is Duct Tape Marketing?

Duct Tape Marketing is the name of the best-selling small-business-marketing guide from John Jantsch. ‘Duct Tape’ is, of course, a fabric-reinforced vinyl tape (typically black or silver grey) that is renowned for its versatility, strength and low cost. John Jantsch uses this metaphor to illustrate that the marketing techniques he prescribes are also low cost, versatile and practical. In fact an emphasis on practicality is a constant theme for him. His primary intention is to educate small business owners and entrepreneurs about the benefits of implementing a practically oriented small business marketing system that is both highly effective and competitively priced.

The context

One thing evident from an analysis of marketing literature is the heavy preponderance of marketing academics (as distinct from practitioners) writing on the subject. This has resulted in a significant body of material based on academic theories and models. Author John Jantsch come at it from a different angle. Using his perspective and experience he recommends practical small business marketing advice and tips that cut straight to the issues at hand. In essence, this is the core of the Duct Tape Marketing process – marketing using practical activities that help to ensure that your company is known, liked and trusted by your target market.

Who is responsible for marketing?

This is, of course, a rhetorical question. There is pretty much universal agreement now that marketing is everyone’s responsibility, given its all-pervasive nature. Again, this is something John Jantsch wholeheartedly espouses. Marketing is not something tacked onto a small business, but rather an integral component from day one. Ensuring a strong marketing culture permeates all elements of your business is critical, as ultimately, marketing is about creating awareness for your product or service, gaining trust and finally delivering value.

“If you get nothing else from this book, get this: you are in the marketing business. Marketing is an all-encompassing outlook that must inform every activity of your business,” writes Jantsch.

The primary audience for Duct Tape Marketing is entrepreneurs and small business owners, people who typically perform numerous functions within their business. Multitasking as a skill is a prerequisite for most entrepreneurs. However, these entrepreneurs are also the very same people who often relegate ‘marketing’ to the sides as it drops down the ‘To Do’ list. This is also why the Duct Tape Marketing message is so important and so timely!

Key Lessons

There are three main areas covered in the book:

1. Creating Trust – getting prospects to know about your business, like you and trust you.

2. Generating Action – ensuring that these prospects act on their connection to you.

3. Replicating Success – finding out what works and then concentrating resources for maximum effect.

Together, these three areas create a holistic marketing system.

1. Creating Trust

Creating familiarity with and trust in your company, and its product or service is one of the most fundamental components of any marketing activity. If no one knows about your business, how can you expect to make money? However, creating awareness and then trust is not as easy as it seems. We live in an increasingly media cluttered world where people receive a daily bombardment of different marketing messages from disparate sources. The aim of all entrepreneurs is to make their idea stand out from the crowd, and to get themselves noticed by their target market. Without trust there will be no action and without action no revenue.
The Duct Tape Marketing System commences with the notion of an ideal customer or client. The recommendation to entrepreneurs is to identify an ideal client (or clients) first, and to then decide how best to reach them. You decide where best to target your marketing activities. This necessarily means you are NOT trying to serve everyone. By limiting your focus, you increase your perceived legitimacy as someone who understands this particular customer’s needs.

Only after there is a good understanding of your ideal customer can you design appropriate branding, marketing materials and product features for this market. Jantsch emphasizes that you want to offer products and services for each stage of prospect/customer cultivation, from free educational offerings for prospects through to loyalty offerings for repeat customers. An additional key element is the use of the Internet to help create awareness through the creation of a website.

A final component implicit in the process of ‘creating trust’ is the need to undertake marketing activities with integrity. Generating awareness without engendering trust is not going to lead to any action in stage two.

2. Generating Action

Once you have created familiarity and generated an element of trust, the next stage is generating leads and encouraging action. In practical terms, this involves the target for your marketing activities (leads) acting on the messages and buying your product or service. It does not stop there however, as these customers can be vital in generating further custom or referrals based on their perceptions after their initial purchase action.

How do you get these leads to act?

There are a number of methods suggested by Jantsch to motivate those prospects who didn’t act following the trust stage. Jantsch is a keen advocate of direct response advertising. This is advertising where the customer is enticed to engage with an advert or website. Typically this will take the form of a coupon, free offer, or discount in return for the prospect acting, be that providing data or clipping a coupon out. For example, on our BPlans.co.uk site we offer a free business plan eBook in return for a name and email. The beauty of this model is these prospects are highly qualified leads who you can then market to. He is also a keen advocate of direct mailing where you send offers to appropriately targeted leads.
With all of these methods, the message from Jantsch is clear – these are not activities that should take place in isolation. These activities need to coexist with appropriate PR and other marketing activities. Marketing needs to take many measurable forms where you can clearly identify responses (and actions) to specific activities so as to ensure that the various activities you undertake are driving action. For example, Web analytics products such as Google Analytics can be used to manage the effectiveness of disparate marketing activities that result in customers engaging with a website.

The final component to the lead generation initiatives relates to referral-based marketing. On this Jantsch is unequivocal:

‘If you provide a product or service that helps people solve problems and meet needs, then you are doing a disservice to your customers and the world … if you don’t actively seek referrals.’

3. Replicating Success

The final section advises the reader to analyse which marketing activities have worked and to do more of them. The emphasis now is on planning, with Jantsch recommending that goals be set, budgets worked out and a marketing calendar prepared for the year to come. The key marketing activities for the year will be correlated with the achievements of the previous year. The focus is on goal setting with clear metrics related to revenue and profitability with specific activities put in place to achieve them.

Duct Tape Marketing and Palo Alto Software

Finally, it is worth mentioning that our company, Palo Alto Software, has collaborated with John Jantsch to create software that walks you through these steps: Marketing Plan Pro powered by Duct Tape Marketing. On a recent upgrade to our Marketing Plan Pro software, we concluded that it was in need of a punchier overhaul that resulted in the creation of more practical marketing plans. It quickly became evident that John Jantsch would be the perfect partner in the creation of a product that reduces the time it takes to create a compelling marketing plan for your business. Jantsch is a firm believer in planning, goal setting and budgeting, all areas that Palo Alto Software is particularly strong in through our suite of planning software tools.

Additional Resources

Marketing Plan Pro powered by Duct Tape Marketing

Duct Tape Marketing by John Jantsch

Most start-ups need to keep their costs down when they start out, as revenue is uncertain. There are a bunch of free online tools that can help you manage your business costs more effectively. The companies running some of these tools rely on word of mouth as their primary marketing technique and hence some of them will not be familiar to you. Help is at hand though, as this article aims to introduce you to some of the free business tools available – all you need is an Internet connection and a willingness to try these out.

Blogs

Blogs have become increasingly popular as a means for companies to communicate with their customers. Blogs are typically news posts that tend to be more informal than the typical corporate blurb you find on most websites. However, before you implement a blogging strategy, you need to consider the likely demands on your time that result. An empty blog sends out all the wrong signals, so someone in your company will need to commit to writing stories for the blog to ensure it remains up-to-date.

o    More Information:  http://wordpress.org/
o    Drawbacks – Keeping a blog up-to-date can be very time consuming.
o    Verdict –Don’t rush in!

Business plans

Writing a business plan is one of the most important things a start-up business should do, but it is a task that many new entrepreneurs find challenging. Help is at hand from Palo Alto Software  which provides a whole host of free business-planning tools and resources. These range from free sample business plans to hundreds of articles to business start-up calculators.
o    More Information: BPlans
o    Drawbacks – Using a free or inexpensive sample plan from the Internet is rife with pitfalls. No sample can exactly represent you, your location, or your business.
o    Advantage – You are better off writing your own business plan from scratch using Business Plan Pro.
o    Verdict –Upgrade to Business Plan Pro 11.0 (£80)

Customer service email

Once your website is up and running you’ll need a system to manage your email. Here at Palo Alto Software, we designed an email product to help you manage all email going to shared email addresses such as info@, sales@ or support@.
o    More Information: Email Center Pro
o    Drawbacks – Given we built it, there are none!
o    Verdict –Try it out free here.

Keyword search alerts

Google Alerts sends you emails updating you on the popularity of particular keywords or terms you specify. These alerts can help you monitor competitor behaviour, or keep you abreast of the latest developments in your industry.
o    More Information: Google
o    Drawbacks – Extra mails in your inbox!
o    Verdict –Optional Tool.

Google Docs

With the increasing shift to online applications, it may not be necessary to kit everyone in the office out with their own copies of Microsoft® Vista™. Instead, some people could use an open-source desktop application, along with the online file-editing and sharing tool, Google Docs. These applications work like simplified versions of Word, Excel and PowerPoint®, and allow colleagues to work together on the same document.
o    More Information: Google
o    Drawbacks – Don’t lose the password!
o    Verdict –Essential Tool.

Internet-based phone calls

With Skype you can make Internet calls to whoever you want for free (assuming they also have Skype) or for a small fee if to a landline.  Again it is ideally suited to start-ups who want to keep the cost of calls down, and like instant messaging, is ideally suited to facilitating communication when people are geographically dispersed.
o    More Information: Skype

o    Drawbacks – The reception can be flaky on occasions.
o    Verdict –Essential Tool.

Instant messaging

This is a popular form of two-way communication using typed text.  A key benefit is the fact that the communication can take place in real time and hence it facilitates improved communication, particularly amongst geographically-dispersed colleagues.
o    More Information: Yahoo
o    Drawbacks – Ensure everyone is on the same client, i.e. America Online, Yahoo!, Skype or Windows Live.
o    Verdict –Essential Tool.

To do lists

There are a number of online ‘to do’ lists which help you manage your priorities. Of course some people will be happy with the trusty pen and paper. However, if you want online access to your ‘to do’ list consider some of the free options that are available.
o    More Information: Remember the Milk or ToDoist

o    Drawbacks – Do you really need 24/7 access to your to do list?
o    Verdict –Stick to the pen and paper.

Web analytics

All start-ups typically create a website right away for a number of reasons: to market their business, to generate leads and to sell their products or services. Once you have a website live, it is vital that you understand who is using your website, what they are doing when they arrive, how long they are staying, etc. All of this information is available free using Google Analytics.
o    More Information: Google
o    Drawbacks – the main drawback is the fact that Google owns the data.
o    Verdict –Essential Tool.

Summary

One thing all start-ups face is uncertain revenues against a backdrop of largely certain costs. Many of these free applications are perfectly suitable for use from Day One, ensuring you save money without compromising on business essentials.

Alan Gleeson

The growth in the use of the Internet in recent years has led to a huge shift in marketing activities to the online space. This article explains some of the key things for you to focus on to help you market effectively online. Secure that domain name early. The natural starting point is the creation of a website. Once you start your business it is important to secure the domain name in the markets you intend to compete in. We at Palo Alto Software, Inc and Palo Alto Software Ltd have lots of domain names ranging from PaloAlto.com (global), PaloAlto.co.uk (U.K.), and PaloAlto.ie (Ireland). These help ensure that prospective customers can find us easily by typing our name directly into a Web browser.

There are numerous ways you can build a website, from doing it yourself using available software tools, to hiring website specialists. Regardless of the method chosen you need to be completely clear on the main purpose of the website. Is it to sell products or to generate leads? Once the primary purpose is clear, you can then decide on the layout, alongside the look and feel.

Ensure your website is optimised

Given the hundreds of thousands of websites out there, it is worth reviewing a number to get a feel for the type of design and user interface you would like. Finally, when it comes to a website it needs to be ‘search-engine friendly’. This means that searches initiated from the likes of Google (using repetitive software, called ‘bots’) can find your site, scan it and identify the keywords associated with the website. Many firms offer Search Engine Optimisation (SEO) services which are designed to help you achieve high rankings on the search engines, such as Yahoo! and Google. Most of the techniques they employ are widely known so you could choose to do it yourself. However, be aware: anyone promising top place listings on Google should be treated with caution. There are techniques (so-called black hat techniques) which can be used to game the system – however, Google has been known to punish sites known to be using such techniques, as BMW® found, to its cost, when Google delisted them in 2006.

As it takes time for a new website to get indexed by the search engines, it is likely that traffic will be low at the start. New sites tend not to feature in organic search returns for some time, but there are ways to drive traffic to your site using some of the methods described below.

Use Web analytics to improve your site

Once you have set up the domain name and site, you will want to understand how many users you are attracting, where they are coming from and how they are behaving on your site. Google Analytics is the most popular tool to manage this. It is available free from Google, easy to implement and even easier to use. If you want to see where people are going on your site, tools such as Crazy Egg® will help you improve the design of your site by showing you where people are clicking and where they are not.

Once the basics are in place it is now a case of creating awareness of the existence of your site and generating traffic to the site.

Get traffic to your site on day one

The quickest way to get traffic to a website is signing up for Google AdWords’ Pay-per-click (PPC) service. In the U.K. the vast majority of Web searches are via Google so this is the best one to focus on. This service lets you create adverts that appear when people search for certain keywords. You then pay according to each click you receive (hence the name ‘Pay-per click’). The main attraction with this option is that it is a highly targeted form of advertising, and you only pay when the prospect clicks on your advert and lands on your website.

Create unique landing pages

You need to decide where you want to bring the prospect when they click. Dropping users onto a homepage can be confusing, so you need to create a number of landing pages that are highly relevant to both the search term and the AdWord copy. For example, if a user searches for ‘marketing plan’ and the advertising copy is for Marketing Plan Pro® then the landing page needs to feature Marketing Plan Pro prominently. The beauty of running Analytics in the background is that you can measure conversions so you can identify which combinations of advert copy and landing pages are the most successful. After that it’s a case of testing, testing and more testing. A/B testing is a popular method where 50% of the audience is randomly assigned to see page A, and 50% to see page B. Whichever page results in the most conversions ‘wins’ and that then becomes the new default page.

Get websites to link to you

One well-known component of the Google algorithm that decides on the attractiveness of your website (which then correlates to a higher search ranking) is the number of back links to your site. The more sites that link to your website, the better, particularly if the linking site is an academic or government-owned site.  Each link is considered a ‘vote’ and votes from impartial sites such as academic ones are deemed to carry more weight.

Seek a presence on high-traffic sites

It may be possible for you to feature on larger portal sites by offering to support them with either new or fresh content or special offers. Steer clear of anyone offering you a tenancy agreement, e.g. you pay £1,000 per month to feature on a third-party website. These offers mean you bear all the risk and they rarely, if ever, deliver any meaningful traffic. Similarly, spending money on banners and buttons is not in vogue like it used to be – for good reason. PPC marketing is where your budget should be going – not on risky placements on websites.

Blogging is not all it’s cut out to be

A number of companies set up blogs to enable them to communicate with interested parties and customers on a more informal basis. Blogs are simply basic websites which contain a list of posts or news stories by an author, typically about a specialist topic. While they are easy to set up and maintain, they do place a demand on the blog owner or blogger to constantly update them. If you do not think you have the time to post news stories daily it is probably best to avoid the temptation of creating a blog. Other, less demanding forms of social media include placing comments on forums and participating in news groups.

The above activities should give you a flavour of some of the types of marketing activities you can undertake online. Others, such as issuing online press releases and creating newsletters, can also help you drive traffic to your websites. From there it’s a case of ensuring the design and offer are compelling enough to entice the user to buy from you, assuming that is the primary purpose of your website.

A marketing plan is a core component of a business plan. It relates specifically to the marketing of a particular product or service and it describes:

• An overall marketing objective
• A broad marketing strategy
• The tactical detail related to specific marketing activities
• The various costs associated with these activities
• Those tasked with delivering these activities by name

The starting point for any marketing plan is an analysis of the strategic context, as a typical objective for most plans is promoting a good or service as effectively as possible. An assessment of the company, its environment and its customers helps to ensure that the author of the plan obtains a holistic view of the wider context. In turn this helps them to focus their energies and resources accordingly. This is particularly important given that most marketing managers will be subject to that all-too-familiar constraint—limited resources (invariably financial). In effect, a marketing plan is produced to ensure that limited resources are allocated to activities that are likely to bring the maximum return.

An assessment of the context will include analysis of both internal and external factors. There are a number of frameworks and tools designed to assist you with this:

• A SWOT analysis forces you to consider internal Strengths and Weaknesses alongside external Opportunities and Threats.
• Porter’s Five Forces is a framework designed to assist you in considering the broader competitive and environmental context.

It is also vital that you have a thorough understanding of your customers; look to whether segments exist within your broad customer group that can be profitably served utilizing specific and targeted marketing activities.

Following an analysis of broader conditions, a marketing strategy can then be put in place. This strategy needs to include financials so that all activities can be assessed in the context of their cost as a portion of the overall marketing budget. Regardless of the product or service, the objectives tend to be similar for most managers; create awareness, stimulate interest in the offering, and ultimately (profitably) convert this awareness into sales. All these factors are intertwined and, hence, the importance of effective market planning.

Using a local restaurant as an example, their marketing activities are going to be predominantly concentrated within a two to three mile radius of their restaurant, as this area is where the vast majority of their customers are likely to come from. Tactically, there is no point in such a restaurant advertising on TV (even locally) as the cost would be prohibitive in the context of their business model. They are limited in terms of capacity (number of seats) and their average cost per head so that, even if they created huge awareness and interest via TV advertising, the resultant revenues would still be unlikely to cover the cost of the specific marketing activity. On the other hand, stuffing leaflets through local letterboxes is extremely targeted and comes at low relative cost, which explains the sheer volume of fast-food flyers most of us get on a daily basis.

The reader of the plan should clearly be able to relate to the marketing initiatives in terms of the message, the target audience and the means to accessing this audience. A good marketing plan will detail specifics, i.e., a number of marketing activities, their respective costs, and the expected return on investment. Measuring return on marketing has historically been one of the greatest challenges the industry has faced. The advent of PPC (pay-per-click) advertising via the Internet has finally resulted in managers being able to track sales resulting from specific campaigns and adverts. However, this is just one means of advertising, and calculating effective ROI (return on investment) figures for other forms, such as billboards and TV, remains as elusive as ever.

In summary, a marketing plan should enable marketing managers to document their assessment of the opportunity in terms of effective allocation of limited resources. While most managers would love the luxury of a seven-figure marketing budget to spend on every conceivable advertising medium, the reality is that most need to market effectively on a pittance. A marketing plan assesses the most efficient means to attract potential customers and ultimately convert them to sales. Without a plan, a business is essentially rudderless and marketing activities are more likely to be reactive and, hence, considerably less effective.

When it comes to starting a business, entrepreneurs face a number of challenges, not least the issue of whether there is actually a demand for their particular product or service. The more unique the concept, the greater the challenge in predicting future sales levels. However, as this article will show, there are a number of methods that can assist you in making better educated guesses when forecasting sales for your goods or service.

Forecasting
Since time immemorial, people have sought to predict the future. Until the emergence of the relatively modern concept of ‘risk’ and the development of probability theory in the 17th century, predictions about the future had traditionally been the preserve of soothsayers such as Nostradamus. However, with probability theory, mathematicians demonstrated that one could use past indicators to make educated guesses as to the expected outcome of a particular set of events, e.g., the roll of a die. All these years later, and despite our progress, we still lack the ability to predict the future. Nevertheless, by considering various risks and probabilities, we can aim to understand some likely future (sales) scenarios to a greater degree.

Naturally, if you run an existing business, you will have a trading history and will be able to use this data to make more informed decisions with regards to future possible outcomes. If you generate strong cash flows and have a stable cost base, you can assess available investment options with more confidence. On the other hand, if you are just about to start up, you obviously lack ‘history’, and while you can make some assessment of the initial monthly outgoings (particularly fixed costs), the real challenge is to accurately predict the likely sales revenues. Breaking revenue down into its constituents (the product price times the quantity sold) gives entrepreneurs the two key figures they need to consider to begin forecasting. Price can be determined by the entrepreneur, while quantity is the variable that is most difficult to predict (notwithstanding the correlation between price and demand).

Why is forecasting important?
Firstly, cash is the lifeblood of any business and is needed to fund working capital to enable a business to run effectively. A large number of business expenses and investments in assets need to be paid for up front, and these obviously have to be paid for out of capital. These outgoings occur against a backdrop of uncertain sales levels and often a delay in receiving cash on those sales (exacerbated if your sales are predominantly on credit). Consequently, companies need to prepare cash flow forecasts to assess what the level of the cash shortfall will be, so they can obtain financial assistance in advance, such as bank overdrafts or loans. Companies can be profitable on paper yet run the risk of falling insolvent if they do not meet their obligations as they fall due. Hence, it is necessary to understand the nuances of cash flow for your particular business from Day 1, as good cash flow management plays a large role in ensuring continued solvency.

Of additional importance, investments in businesses are based on the ability of the firm to generate free cash flows, so as to reward the investor for taking a risk. The amount of cash generated and its timing is of particular interest to investors, who face an array of investment options with various risk / return tradeoffs. Typically, investors will look to review a business plan before they invest and they will pay particular attention to the predicted sales levels and cash generation capability of the company (as detailed in the cash flow forecast). Hence, these two factors underline why accurate forecasting is of vital importance to those setting up in business.

What forces affect demand?
At the start-up stage it is difficult to assess with certainty what you believe the revenue will be for Month 1. Once you have one month of trading, then of course you can use that month’s figures to forecast likely sales levels in subsequent months. As a result, when you draw up your business plan initially, you need to assess the landscape and try to estimate a range for the predicted sales levels.

The following represents a list of some questions about the key external and internal determinants of demand. Answers to these questions will support the entrepreneur in coming up with plausible figures for Month 1/ Year 1.

Having assessed the various determinants of demand, it is now a little easier to hone in on a plausible range of sales forecasts for the months and years ahead.

How do you make a sales forecast?
Once you have considered the context, you are now in a more informed position to consider potential revenue figures.

There are two main elements to forecasting – the use of facts and the use of subjective assessment / judgment. Given the uncertainty, you can aim to identify a range for the sales predictions depending on your assessment of the potential impact on sales of specific conditions, be they environmental or company-specific (or a combination of both). There are numerous determinants of demand, ranging from the performance of the overall economy to whether there is any appetite (demand) for your particular product or service. You need to consider which of these is likely to have the biggest impact on your offering. Ideally, you should be able to obtain a Profit and Loss / Income Statement (facts) for a competitor and you could use that as a reference point to assess likely demand levels for your company (judgment).

Looking for comparable indicators for a service
Not every new company has a directly comparable competitor whose accounts can be scrutinized for sales data. However, no matter how unique your concept is, if you define your market widely enough, it is likely that you can use figures from alternative offerings (facts) to help you assess likely demand levels (judgment). For example, when the Millennium Dome was being launched in London in 2000, they initially targeted 12 million visitors in Year 1. While the actual visitor figures reached an impressive 6.5 million, the huge shortfall in numbers meant that it was not even close to breaking even / financial viability and it ultimately failed as a venture. Had senior management looked closely at visitor figures for the UK’s other top paying attractions, they would have found that Alton Towers was top at 2.65 million visitors closely followed by Madam Tussaud’s and the Tower of London. These proxies would have given them a clearer sense of the range in numbers and a more conservative target within this range would have resulted in a very different proposition / investment structure from Day 1.

If you are looking to set up a local service such as a coffee shop, there are also numerous resources you can use in assessing likely demand. Websites such as www.caci.co.uk/acorn/ and www.upmystreet.com/ enable you to get extensive free demographic data about areas based on post code searches. Profiles available from www.scavenger.net offer an insight into a specific industry and its outlook. Finally, if you want to consider setting up overseas, then websites such as www.cia.gov/cia/publications/factbook/ give an excellent insight into various local conditions in advance of undertaking more localised research.

The facts from these sources need to be backed up by judgment. If, for example, you were looking to open a coffee shop on the Fulham Road, London, you would start with a list of likely costs, ranging from rent through to set-up, etc. Once you had an estimate of the costs, you would then look to work out the revenues. To do this, you could park a car outside of a particular target location for the shop and count “footfall” for the day. You could also obtain average spend per customer, estimate a percentage conversion rate from the footfall and use these figures to assess whether you believed you could break even by relying on passing trade.

You could also drive around the neighbourhood looking at competitive coffee shops and their locations. Hence, by using a number of different data points, you can now make a more informed decision on the financial viability of a proposed coffee shop in Fulham. If you want to get more scientific, you could assess how consumption of coffee is correlated with the economy (i.e., will less be consumed in a down turn) and also whether you needed to stock alternatives to boost average spend e.g. fair trade coffee /non coffee-based alternatives or food. As mentioned previously, there is no exact number – you are merely striving to produce a good educated guess, i.e., a plausible figure that is within a range for a typical company in that field. Product Indicators

There are a number of different methods to try to assess sales levels for a new product. Firstly, by assessing the key benefits of the product, it is possible to understand the core need being fulfilled. This will then help inform you of a category of complements or substitute products it belongs to. More scientific approaches include George Day’s top down and bottom up approaches which seek to assess demand from different sides. The top down approach seeks to drill down from the total population to a final market segment, whereas the bottom up approach looks to generalize from the consumption of individual customers.

Alongside these approaches are more subtle ones, for example, an assessment of demand based upon data from disparate sources such as the Internet. Here are two common tools:

“Key Word Assistant” from Overture http://inventory.uk.overture.com/d/searchinventory/suggestion/ is one such tool. It enables you to enter a search term for your product and it returns the number of searches that were undertaken on that term in the previous month. Invariably searches are attempts to resolve problems or satisfy needs, so the results can give an indication as to likely demand levels.

“eBay Pulse” relies on a similar concept http://pulse.ebay.co.uk/ as it gives an insight into top sellers from the eBay market place. Again, this can help you assess demand for a particular product, determine the category it is best suited to, and even a naming convention (when assessed in conjunction with the Key Word Assistant).

How do you make a more accurate sales forecast?
Having assessed the wider environmental conditions and considered the internal decisions regarding the proposition, it is possible to make more accurate predictions for Month 1. After that, it is a case of extrapolating into the future using a growth factor and flexing for seasonality or cyclical trends. Notwithstanding the difficulties in forecasting for a start-up, the real benefits accrue after a year of successful trading. Once there is an historical record for a year of trading, it is then possible to plan with more certainty through the use of more scientific methods, such as trend analysis and comparison with variables. For example, an ice cream vendor could compare sales of ice cream with an obvious variable – weather temperature – in order to assess the correlation between the two variables. Once a sales forecast has been made, it can then be used for budgeting, allocating resources, managing cash flow, and as a basis to secure investment.

Conclusion
The aim of sales forecasting is to come up with some revenue figures that can be considered to be credible in the wider context. As illustrated above, forecasting is not an exact science but a mix of fact-based analysis and judgment. Placing some rigor around the process of deriving credible revenue figures also serves the entrepreneur by enhancing their awareness of some of the key drivers for revenue growth in their business. It will also help them to produce a more plausible business plan, and ensure that the author is confidently able to answer questions regarding the market opportunity – questions that will top the list of any prospective investor or bank manager.

The competitive strategy

Understanding the dynamics of competitors within an industry is critical for several reasons. First, it can help to assess the potential opportunities for your venture, particularly important if you are entering this industry as a new player. It can also be a critical step to better differentiate yourself from others that offer similar products and services. One of the most respected models to assist with this analysis is Porter’s Five Forces Model. This model, created by Michael E. Porter and described in the book “Competitive Strategy: Techniques for Analysing Industries and Competitors”, has proven to be a useful tool for both business and marketing-based planning.

Background
The pure competition model does not present a viable tool to assess an industry. Porter’s Five Forces attempts to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry. This model may be used as a tool to better develop a strategic advantage over competing firms within an industry in a competitive and healthy environment. It identifies five forces that determine the long-run profitability of a market or market segment.

• Suppliers
• Buyers
• Entry/Exit Barriers
• Substitutes
• Rivalry

Supplier power

• Supplier concentration
• Importance of volume to supplier
• Differentiation of inputs
• Impact of inputs on cost or differentiation
• Switching costs of firms in the industry
• Presence of substitute inputs
• Threat of forward integration
• Cost relative to total purchases in industry

Buyer power

• Bargaining leverage
• Buyer volume
• Buyer information
• Brand identity
• Price sensitivity
• Threat of backward integration
• Product differentiation
• Buyer concentration vs. industry
• Substitutes available
• Buyers’ incentives

Entry/Exit barriers

• Absolute cost advantages
• Proprietary learning curve
• Access to inputs
• Government or other binding policy
• Economies of scale
• Capital requirements
• Brand identity
• Switching costs
• Access to distribution
• Expected retaliation
• Proprietary products

Substitutes

• Switching costs
• Buyer inclination to find alternatives
• Price-performance
• Trade-off of the available substitute products or services

Rivalry

• Exit barriers
• Industry concentration
• Fixed costs
• Perceived value add
• Industry growth
• Overcapacity status
• Product differences
• Switching costs
• Brand identity
• Diversity of rivals
• Corporate stakes

Service

• Level of service compared to others
• Added value perceptions
• Dynamics with other attributes

Power of suppliers
An industry that produces goods requires raw materials. This leads to buyer-supplier relationships between the industry and the firms that provide the raw materials. Depending on where the power lies, suppliers may be able to exert an influence on the producing industry. They may be able to dictate price and influence availability.

A segment is unattractive when an organization’s suppliers have the ability to:

• Increase prices without suffering from a decrease in volume
• Reduce the quantity supplied
• Organise in a formal or informal manner
• Compete in an environment with relatively few substitutes
• Provide a product/material that is a critical part of the end product or service
• Impose switching costs on their customers when they depart
• Integrate downstream by purchasing or controlling the distribution channels.

One example of this is DeBeers ability to wield influence within the diamond industry. DeBeers’ high level of control over some of the most productive diamond mines in the world gives them extreme power within the industry. The best defense in mitigating the power of suppliers is to build win–win relationships with suppliers or arrange to use multiple suppliers.

Power of buyers
The power of buyers describes the impact customers have on an industry. When buyer power is strong, the relationship to the producing industry becomes closer to what economists term a monopsony. A Monopsony is a market where there are many suppliers and one buyer. Under these market conditions, the buyer has the most influence in determining the price. Few pure monopsonies actually exist, but there is often a connection between an industry and buyers that determines where power lies.

The bargaining power of buyers increases when they have the ability to:

• Be “organized” in some form with others providing similar products and services
• Purchase a product that represents a significant fraction of the buyer’s costs
• Buy a product that is undifferentiated
• Incur low switching costs when they change vendors
• Be price sensitive, with other options available
• Integrate upstream, to purchase the providers of the goods.

To mitigate the power of buyers, sellers can seek to select buyers with less power to negotiate, switch suppliers, or develop superior offers that strong buyers cannot refuse. Barriers to Entry/Exit
The possibility of new firms entering the industry impacts competition. A key is to assess how easy it is for a new player to enter an industry. The most attractive segment has high entry barriers and low exit barriers. Although any firm should be able to enter and exit a market, each industry often presents varying levels of difficulty, commonly driven by economics. Manufacturing-based industries are more difficult to enter than many service-based industries. The definable characteristics of each industry protect profitable areas for firms and inhibit additional rivals from entering the market. These inhibitive characteristics are referred to as barriers to entry.

Barriers to entry are more than the expected ebb and flow that markets typically experience. For example, when industry profits increase, one would expect firms to enter the market to take advantage of the high profit levels, which will eventually result in reducing profits.

Conversely, when profits decrease, we would expect some firms to exit. Other factors that will deter new entrants are falling prices, actions that keep prices artificially low, expectations that future prices will fall, large or unpredictable start-up expenditures, and other extreme uncertainties.

Barriers to entry are unique characteristics to each industry. They reduce the rate of entry of new firms and, therefore, maintain a level of profits for current industry competitors. Barriers to entry can be created or exploited to enhance a firm’s competitive advantage.

Barriers to entry arise from several sources:

• Patents and proprietary knowledge
• Asset specificity – (specialised technology or infrastructure)
• Economies of scale
• Government involvement.

Barriers to exit work similarly to barriers to entry. Exit barriers limit the ability of a firm to leave the market and can exacerbate rivalry – unable to leave the industry, a firm must compete. Some of an industry’s entry and exit barriers can be summarised as follows: Profitability potential is high when both entry and exit barriers are high. In this situation, firms do face more risk because poorer-performing ones tend to continue to produce regardless of profitability and, therefore, continue to add to the supply.

Substitute products

Porter’s Five Forces model refers to “substitute products” as those products that are available in other industries that meet an identical or similar need for the end user. As more substitutes become available and affordable, the demand becomes more elastic since customers have more alternatives. Substitute products may limit the ability of firms within an industry to raise prices and improve margins.

For example, the price of aluminum cans is constrained by the price of glass bottles, steel cans, and plastic containers. These containers are substitutes, yet they are not rivals in the same industries. A substitute product to the services offered by a local accountancy firm is accounting software such as Sage Line 50 or tax-based software – two very different industries that offer some of the same consumer benefits.

The treat of substitutes often impacts price-based competition. There are other concerns in assessing the threat of substitutes relating to technology. New technologies contribute to competition though substitute products and services. Think of the impact wireless technologies have had on traditional telephone service. Except in remote areas it is unlikely that cable TV could compete with free broadcast TV from an antenna without the greater diversity of entertainment that it affords the customer.

Again, a segment is unattractive when there are actual or potential substitutes for a product.

Rivalry
Firms strive to secure a competitive advantage over their rivals. The intensity of rivalry varies within each industry and these differences can be important in the development of strategy.

Industries that are “concentrated,” versus “fragmented,” often display the highest level of rivalry. Economists recognise industry concentration and measure it by a “concentration ratio” (CR). The Census Bureau reports the CR by Standard Industrial Classification (SIC) Code and it indicates the percent of market share held by the four largest firms. A high concentration ratio indicates that a majority of market share is controlled by the largest firms. If a few firms hold a large market share, the competitive landscape is less competitive as it nears that of a monopoly. A low CR indicates that the industry has many rivals, none with significant market share. These fragmented markets are said to be competitive.

In pursuing an advantage over its rivals, a firm can choose from several competitive moves:

• Changing prices
• Improving product differentiation
• Creatively using channels of distribution
• Exploiting relationships with suppliers.

For example, the intensity of rivalry is increased by the following industry characteristics:

• Numerous competitors that are particularly strong or aggressive that are competing for the same customers and resources
• Declining sales revenues and volumes resulting in slow market growth, creating the need to actively fight for market share
• High fixed costs result in an economy of scale effect
• High storage costs or highly perishable products
• Plant capacity is being added, over and above what is needed to meet demand
• Low switching costs for buyers
• Low levels of product differentiation
• Strategic stakes are high when a firm is losing market position or has potential for great gains
• High exit barriers place a significant cost on abandoning the product
• A diversity of rivals with different cultures, histories, and philosophies
• An industry shakeout
• When a rival acts in a way that elicits a counter-response by other firms
• Competitors have high stakes – economic and other – and will battle to remain as a player within the segment.

These conditions will make competing within the industry more challenging, commonly leading to frequent price wars, advertising battles, and the addition of new products.

Service
Service can also play a part in the industry’s dynamics. Those competitors that provide superior service may bring an advantage to their competitive position if the industry/customer places value on this attribute. This is another point of differentiation and can be a key strategic element to consider. If a competitor has a service component that is difficult to replicate, it will prove to offer a strategic advantage.

The result
We can look at several industries and see how Porter’s Five Forces would depict them; the entertainment industry is in flux, telecommunications companies are volatile, computer firms are merging, utility industries are down, the housing market is up. Porter’s Five Forces can assist us to better understand these dynamics in a more objective manner and hopefully make better strategic decisions as a result.

The exact nature of your plan, and your marketing situation, dictates its contents. You add detail or take it away to suit your needs.

In the real world you’ll want to customise your outline according to whether you are selling products or services, to businesses or consumers, or you’re a nonprofit organisation.

Although the outline does change in some respects as a result, this is a good standard sample outline for a basic marketing plan.

Expanded Plan Outline

1.0 Executive Summary

2.0 Situation Analysis

2.1 Market Summary

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2.1.1 Market Demographics
2.1.2 Market Needs
2.1.3 Market Trends
2.1.4 Market Growth

2.2 SWOT Analysis

2.2.1 Strengths
2.2.2 Weaknesses
2.2.3 Opportunities
2.2.4 Threats

2.3 Competition
2.4 Services
2.5 Keys to Success
2.6 Critical Issues
2.7 Channels
2.8 Macroenvironment

3.0 Marketing Strategies

3.1 Mission
3.2 Marketing Objectives
3.3 Financial Objectives
3.4 Target Marketing
3.5 Positioning
3.6 Strategy Pyramids
3.7 Marketing Mix

3.7.1 Services and Service Marketing
3.7.2 Pricing
3.7.3 Promotion
3.7.4 Service
3.7.5 Channels of Distribution

3.8 Marketing Research

4.0 Financials, Budgets, and Forecasts

4.1 Break-even Analysis
4.2 Sales Forecast

4.2.1 Sales Breakdown 1
4.2.2 Sales Breakdown 2
4.2.3 Sales Breakdown 3

4.3 Expense Forecast

4.3.1 Expense Breakdown 1
4.3.3 Expense Breakdown 2
4.3.3 Expense Breakdown 3

4.4 Linking Sales and Expenses to Strategy
4.5 Contribution Margin

5.0 Controls

5.1 Implementation Milestones
5.2 Marketing Organization
5.3 Contingency Planning

Advertising is regulated by both federal and state law. Under the law, your ad is unlawful if it tends to mislead or deceive. This means the government doesn’t have to prove at an administrative hearing or in court that the ad actually fooled anyone — only that it had a deceptive quality. Your intentions don’t matter either. If your ad is deceptive, you’ll face legal problems even if you have the best intentions in the world. What counts is the overall impression created by the ad — not the technical truthfulness of the individual parts. Taken as a whole, your ad must fairly inform the ordinary consumer.

In addition, if your ad contains a false statement, you have violated the law. The fact that you didn’t know the information was false is irrelevant.

The Federal Trade Commission (FTC) is the main federal agency that takes action against unlawful advertising. State and local governments also go after businesses that violate advertising laws; usually this is the responsibility of the state attorney general, consumer protection agency and local district attorney. Consumers and competitors may also be able to proceed directly against the advertiser.

Over the years, the FTC has taken action against many businesses accused of engaging in false and deceptive advertising. A significant number of those administrative actions have been tested in court. By and large, courts have upheld even the most stringent FTC policies. For the most part, the FTC relies on consumers and competitors to report unlawful advertising. If FTC investigators are convinced that an ad violates the law, they usually try to bring the violator into voluntary compliance through informal means. If that doesn’t work, the FTC can issue a cease-and-desist order and bring a civil lawsuit on behalf of people who have been harmed. The FTC can also seek a court order (injunction) to stop a questionable ad while an investigation is in progress. In addition, the FTC can require an advertiser to run corrective adverts — adverts that state the correct facts and admit that an earlier ad was deceptive.

Most states have laws — usually in the form of consumer fraud or deceptive practices statutes — that regulate advertising. Under these laws, state or local officials can seek injunctions against unlawful adverts and take legal action to get restitution to consumers. Some laws provide for criminal penalties — fines and jail — but criminal proceedings for false advertising are rare unless fraud is involved.

Consumers often have the right to sue advertisers under state consumer protection laws. For example, someone who purchases a product or services in reliance on a false or deceptive ad might sue in small claims court for a refund or join with others (sometimes ten of thousands of others) to sue for a huge sum in another court.

A competitor harmed by unlawful advertising, or faced with the likelihood of such harm, generally has the right to seek an injunction and possibly an award of money (damages) as well, although damages are often difficult to prove. Such cases usually are based on one of two legal theories: unfair competition or commercial disparagement. The following rules will help keep your adverts within safe, legal limits.

Rule 1 — Be accurate
Make sure your adverts are factually correct and that they don’t tend to deceive or mislead the buying public. Don’t show a picture of this year’s model of a product if what you’re selling is last year’s model, even if they look almost the same.

Be truthful about what consumers can expect from your product. Don’t say ABC pills will cure headaches if the pills offer only temporary pain relief. Don’t claim a rug shampooer is a wizard at removing all kinds of stains when in fact there are some it won’t budge.

Waterproof or fireproof means just that — not water resistant or fire resistant under some circumstances. The term Polar, when attached to winter gear, suggests that it will keep people warm in extreme cold, not that it’s just adequate when the temperature drops near freezing.

Rule 2 — Get permission
Does your ad feature someone’s picture or endorsement? Does it quote material written by someone not on your staff or employed by your advertising agency? Does it use the name of a national organisation such as the Boy Scouts or Red Cross? If so, get written permission.

Under U.S. copyright law, the “fair use” doctrine allows limited quotations from copyrighted works without specific authorisation from the copyright owner. In some circumstances, this doctrine provides legal justification for the widespread practice of quoting from favourable reviews in adverts for books, movies and plays — and even vacuum cleaners. However, with the exception of brief quotes from product or service reviews, you should always seek permission to quote protected material. For more on the fair use doctrine and many other aspects of copyright law and practice, see The Copyright Handbook: How to Protect and Use Written Works, by Stephen Fishman (Nolo).

Rule 3 — Treat competitors fairly
Don’t knock the goods, services or reputation of others by giving false or misleading information. If you compare your goods and services with those of other companies, double-check your information to make sure that every statement in your ad is accurate. Then check again.

Rule 4 — Have sufficient quantities on hand
When you advertise goods for sale, make every effort to have enough on hand to supply the demand that it’s reasonable to expect. If you don’t think you can meet the demand, state in your ad that quantities are limited. You may even want to state the number of units on hand.

State law may require merchants to stock an advertised product in quantities large enough to meet reasonably expected demand, unless the ad states that stock is limited. California, for example, has such a law. In other states, merchants may have to give a rain check if they run out of advertised goods in certain circumstances. Make sure you know what your state requires.

Rule 5 — Watch out for the word “free”
If you say that goods or services are “free” or “without charge,” be sure there are no unstated terms or conditions that qualify the offer. If there are any limits, state them clearly and conspicuously.

Let’s assume that you offer a free paintbrush to anyone who buys a can of paint for £8.95 and that you describe the kind of brush. Because you’re disclosing the terms and conditions of your offer, you’re in good shape so far. But there are pitfalls to avoid.

• If the £8.95 is more than you usually charge for this kind of paint, the brush clearly isn’t free.
• Don’t reduce quality of the paint that the customer must purchase or the quantity of any services (such as free delivery) you normally provide. If you provide a lesser product or service, you’re exacting a hidden cost for the brush.
• Disclose any other terms, conditions or limitations.

Rule 6 — Be careful when you describe sales and savings
You should be absolutely truthful in all claims about pricing. The most common pitfall is making doctored price comparisons with other merchants or with your own “regular” prices.

Rule 7 — Observe limitations on offers of credit
Don’t advertise that you offer easy credit unless it’s true. A business that’s not careful in this area can be charged with engaging in an unfair or deceptive practice that violates the FTC law. You don’t offer easy credit if:

• You don’t extend credit to people who don’t have a good credit rating.
• You offer credit to people with marginal or poor credit ratings but you require a higher down payment or shorter repayment period than is ordinarily required for credit-worthy people.
• You offer credit to poor risks, but once all the fine print is deciphered, the true cost of credit you charge exceeds the average charged by others in your retail market.
• You offer credit to poor risks at favourable terms but employ draconian (although legal) collection practices against buyers who fall behind.
• If you advertise specific credit terms, you must provide all relevant details, including the down payment, the terms of repayment and the annual interest rate.

Copyright © 2008 Nolo

*Disclaimer. NB these articles are for informational purposes only. They are not designed to be used as a substitute for legal advice.

Every marketing plan has to fit the needs and situation. Even so, there are standard components you just can’t do without. A marketing plan should always have a situation analysis, marketing strategy, sales forecast, and expense budget.

• Situation Analysis: Normally this will include a market analysis, a SWOT analysis (strengths, weaknesses, opportunities, and threats), and a competitive analysis. The market analysis will include market forecast, segmentation, customer information, and market needs analysis.
• Marketing Strategy: This should include at least a mission statement, objectives, and focused strategy including market segment focus and product positioning.
• Sales Forecast: This would include enough detail to track sales month by month and follow up on plan-vs.-actual analysis. Normally a plan will also include specific sales by product, by region or market segment, by channels, by manager responsibilities, and other elements. The forecast alone is a bare minimum.
• Expense Budget: This ought to include enough detail to track expenses month by month and follow up on plan-vs.-actual analysis. Normally a plan will also include specific sales tactics, programs, management responsibilities, promotion, and other elements. The expense budget is a bare minimum.

Are they enough?
These minimum requirements above are not the ideal, just the minimum. In most cases you’ll begin a marketing plan with an Executive Summary, and you’ll also follow those essentials just described with a review of organisational impact, risks and contingencies, and pending issues.

Include a specific action plan
You should also remember that planning is about the results, not the plan itself. A marketing plan must be measured by the results it produces. The implementation of your plan is much more important than its brilliant ideas or massive market research. You can influence implementation by building a plan full of specific, measurable and concrete plans that can be tracked and followed up. Plan-vs.-actual analysis is critical to the eventual results, and you should build it into your plan.

See an expanded marketing plan outline
See four essential tables for a marketing plan

Even though we agree that marketing plans will vary depending on the exact nature of your plan, it is hard to imagine a marketing plan that doesn’t contain, at the very least, these four essential tables. Usually you’ll have these plus several others.

Market Forecast
Analyze your market by segments and project market growth for five years.

Sales Forecast
Forecast your sales by product or service. The mathematics are simple, but important. You can’t do a marketing plan without a sales forecast.

Expense Budget
The budget is another absolute essential. How much are you going to spend? On what? How does your spending relate to strategy?

Milestones
This is perhaps the most important table in the whole plan: concrete milestones to make it real, with managers, deadlines, and budgets.


See the essentials of a marketing plan
See an expanded marketing plan outline

Sample tables from Marketing Plan Pro.