Chapter 5

Developing the
Right
Marketing Mix
and Plan

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 Chapter Learning Objectives

1. Combine the four Ps—product, price, place, and

promotion— into a marketing mix.
2. Choose the attributes of your product or service.
3. Price your products for success.
4. Find the best location for maximum efficiency and
effective distribution.

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 Chapter Learning Objectives

5. Select the mix of promotion to use for your business.

6. Add the fifth P, philanthropy, to your business.
7. Recognize the importance of a marketing plan.
8. Apply breakeven analysis to evaluate your marketing
plan.

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The Four Marketing Factors
promotion - the use of advertising and publicity to get a
marketing message to customers.
The four Ps—together will communicate your marketing
vision and competitive advantage to your customer.

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Product: What Are You Selling?

• Your business, no matter how humble its beginnings,

may have the potential to grow into a multimillion-
dollar company, so it is important that you think
through every step of its development.
• How you define and refine your product or service will
have a tremendous impact on your ability to grow.

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Create Your Total Product or Service Concept

• A product is something that exists in nature or is made by

human industry, usually to be sold, whereas a service is
intangible—work, skills, or expertise provided in
exchange for a fee.
• Your product will be defined by its physical attributes
(e.g., size, color, weight, shape), its performance
characteristics (e.g., speed, strength, efficiency,
durability), and its pricing, branding, and delivery.
• The selection of your product or service and its branding
will be a critical part of your marketing mix.

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 Focus Your Brand
• The key to building a
successful brand is to
focus tightly on the
primary benefit you want
customers to associate
with your business.
• Even entertainers can
become a brand.
• Oprah Winfrey is among
the most recognized and
wealthiest celebrities in
the world today.

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Ford’s Costly Failure: The Edsel

• One of the most notorious examples of a product

whose failure was caused by lack of focus is the car
Ford introduced in 1958, the Edsel.
• Ford tried to include every kind of gadget and design
element the company thought consumers might
possibly want in a car.
• Even millions of dollars of promotion will not make
consumers buy a product they do not want.

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Ford’s Focus on Success: The Mustang

• Ford learned from the Edsel mistake, however. When

it introduced the Mustang in 1964, it focused very
clearly on a target market of people from 20 to 30
years old who wanted a powerful car.
• Everything about the Mustang, from its design to the
colors it came in, was focused on appealing to young
drivers.
• Interestingly, Ford tried to offer some luxury and four-
door versions of the Mustang a few years later.
• Sales dropped, probably because the brand had
started to lose focus.

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 How to Build Your Brand

You can build your own brand by following these steps:

• Choose a business name that is easy to remember,
describes your business, and helps establish mindshare.
• Create a logo that symbolizes your business to the
customer.
• Develop a good reputation.
• Create a brand personality.
• Communicate your brand personality to your target
market.

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 How to Build Your Brand

logo - short for logotype, a

company trademark or sign.
trademark - any word,
name, symbol, or device
used by an organization to
distinguish its product.

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How to Build Your Brand

Always present yourself and your business in such a way

that people will have confidence in your product or service:
• Provide a high-quality product or service.
• Maintain the highest ethical standards.
• Define your product or service clearly. Focus.
• Treat your employees well.
• Make all your advertisements positive and informative.
• Associate your company with a charity.
• Become actively involved in your community.

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Price: What It Says about Your Product

• As reported by author Jay Conrad Levinson, a study of

consumers in the furniture industry found that price
came ninth when they were asked to list factors
affecting their decision to make a purchase.
• Confidence in the product was the number one
influence on buying patterns, and quality was number
two. Service was third.
• Therefore, entrepreneurs should consider not only the
economics but also the psychology of pricing.

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Strategies and Tactics for Effective Pricing

• Pricing strategy is not a one-size-fits-all proposition.

• As you define the marketing strategy for your
company, including your target market(s), competitive
advantages, and overall marketing mix, the range of
appropriate pricing strategies emerges.
• However, at its point of introduction, it may have to be
priced in line with the competition until it is established
as the market leader.
• At the same time, mass-market products may be
priced at a lower level.

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Strategies and Tactics for Effective Pricing
Common pricing strategies include the following:
value pricing - “more for less” strategy that balances quality
and price.
prestige pricing - the pricing strategy in which a firm sets high
prices on its products or services to send a message of
uniqueness or premium quality.
cost-plus pricing - takes the organization’s product cost and
adds a desired markup.
markup pricing - a cost-plus pricing strategy in which a
predetermined percentage is applied to a product’s cost to
obtain its selling price.

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Strategies and Tactics for Effective Pricing

penetration pricing - a pricing strategy that uses a low price

during the early stages of a product’s life cycle to gain market
share.
skimming pricing strategy - seeks to charge high prices
during a product’s introductory stage, to take early profits
when the product is novel and has few competitors, and then
to reduce prices to more competitive levels.
meet-or-beat the competition pricing - constantly matching or
undercutting the prices of the competition.

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Strategies and Tactics for Effective Pricing

follow-the-leader pricing - a pricing strategy that is similar to a

meet-or-beat-the competition method, but uses a particular
competitor as the model for pricing.
personalized pricing - a dynamic pricing strategy in which the
company charges a premium above the standard price for a
product or service to certain customers, who will pay the
extra cost.
variable pricing strategy - provides different prices for a single
product or service.
price lining - the process of creating distinctive pricing levels.

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Place: Location, Location, Location!

• Regarding place, the type of business you are running

will influence your choice of location and your
distribution system for reaching out from that place to
your customers.
• Wal-Mart was the first mass-merchandise store to
choose locations in rural and semirural markets.
• Wal-Mart has done an efficient job of choosing
locations that are ideal for attracting potential
customers who are underserved by similar retailers.
• This strategy has been so successful that other stores
now seek to be located near a Wal-Mart.

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Place: Location, Location, Location!

• Of course, the Internet has made it possible for an

entrepreneur to start a retail business out of her home
•
and reach customers all over the world.
• This has led to the belief that online stores can forgo
the expense of renting a location that caters to foot
traffic.
• For nonretail businesses, the key to location might be
cost or convenience rather than proximity to the market.
• The Internet is making it easier for people who provide
services—such as graphic or Web-site design,
writing/editing, or accounting—to start businesses at
home.
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 Key Factors in Deciding on a Location
The key factors in deciding on a location

Considerations include the following:

• access for customers
• access to suppliers
• climate and geography
• convenience
• cost of facilities (rent, construction, and the like)
• demographics
• economic conditions and business incentives
• governmental regulations and laws, including environmental impact
• labor pool
• proximity to competitors
• visibility

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 Promotion: Advertising + Publicity

• Promotion is the use of advertising and publicity to get

your marketing message out to your customers.
• Advertising, as discussed in Chapters 2 and 4, is paid
promotion that is intended to generate increased sales
of your product or service.
• Publicity is free mention of a company, person, event,
product, or service in media outlets, such as
newspapers and magazines or on radio or television.

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Use Integrated Marketing Communications
for Success

• Marketing communications promotes your business to

your current and prospective customers and to those who
influence purchasing and sales decisions.
• All communications include an originator (source), a
specific message (overt and/or subliminal), a channel for
dissemination, and a target (receiver).
• Promotion has expanded beyond advertising, sales
promotions, and personal selling to include database
marketing, sponsorships, direct marketing, alternative
marketing, e-active marketing, and public relations.

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Reinforce the Company’s Unique Selling
Proposition

• Your unique selling proposition (USP) becomes

valuable to your organization when it is successfully
communicated to your target customers and motivates
initial and repeat purchasing decisions.
• A unique selling proposition that is not successfully
communicated is worthless.
• A unique selling proposition that is successfully
communicated can be priceless.

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Promotional Planning

• Vast quantities of promotional material bombard

consumers and businesses daily, frequently creating
unwanted clutter and noise.
• Successful promotions are the result of solid planning.
• For promotional planning to be integrated in the
operations of your organization, all of the business’s
components will need to have meaningful roles in the
process.

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Determine a Promotional Budget

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Determine a Promotional Budget
There is no single correct way to determine your promotional
budget. However, several methods can be used in combination:

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The Advertising Advantage
• The topic of advertising and advertising management
has certain glamour about it.
• The popular media have portrayed advertising as a
fast-paced, highly creative, fun, and lucrative career
choice.
• At the same time, advertising itself has often been
shown to be false, manipulative, deceitful, and
coercive.
• As with any aspect of your business, advertising has
specific objectives that make it an integral component
of the marketing mix.

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The Advertising Advantage

The objectives of advertising and its management should

reflect those of a comprehensive promotional plan, and
successful advertising will achieve them all:
• building brand and image,
• providing information,
• persuading,
• stimulating action, and
• reinforcing the purchasing decision.

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Types of Advertising

institutional advertising - provides information about an

organization, rather than a specific product, and is
intended to create awareness about a firm and enhance
its image.
product advertising - is designed to create awareness,
interest, purchasing behavior, and post-purchase
satisfaction for specific products and services.

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Media Planning and Buying: Focus on Your
Customer
• An effective advertisement for a business typically
concentrates on the benefit a product or service
provides to the customer.
• What are their reading, viewing, and listening
patterns? What appeals to them? What doesn’t?
• Avoid wasting money in outlets in which the audience
won’t be interested in your product or service.
• Combine this common-sense approach with solid
research to maximize advertising effectiveness.

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Marketing Materials Should Reinforce Your
Competitive Advantage
• All promotional items for your business should reflect
and reinforce your marketing vision, which in turn will
reinforce your competitive advantage.
• They should include the name of your business, your
logo, and a slogan, if you have one.
• In fact, you will have a much stronger impact if all your
business materials are tied together with a strong,
•
coordinated image.
• This should extend beyond your logo into the format,
font style, colors, and look of your materials.

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Sales-Promotion Solutions

• Sales promotions provide another set of tools to add to

the mix.
• Various efforts to increase sales volume by specified
levels, which either reward purchases or provide
discounts, can be effective for both consumer and
business-to-business marketing.
• Sales-promotion solutions do not have to be complex
or sophisticated to work.

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When to Use Promotional Tools

• Promotional tools are best used when the strategy

calls for a highly targeted, time-limited boost in
response.
• They can be excellent ways to encourage new-product
trials and to raise seasonal performance.
• Contests and sweepstakes are a way of securing
product engagement and, potentially, repeat sales.
• Sampling brings the product or service message to life
for the customer through experience.

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Advertising Specialties

• The strategic inclusion of specialty items can be an

effective sales promotion tool.
• The best giveaways are those that are useful, such as
pens, on which prospective customers will see your
•
business name and contact information.
• Visit wholesalers, or search online to investigate
discount prices on quantities of calculators, watches,
pens, or other appropriate items.

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Trade Show Exhibits
The use of trade show exhibits is a proven promotional
strategy for business-to-business companies and can also
succeed for certain types of consumer marketing.

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Trade Show Exhibits

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Mall Carts or Kiosks

• For many seasonal businesses, or businesses that are

working to create full-scale retail operations, mall carts
or kiosks may prove effective.
• Signing a multiyear lease for a retail store is not likely
to make sense for a seasonal business such as a
Christmas or Halloween operation.
• Sometimes such businesses can find vacant retail
spaces to rent for just a season, or they can partner
with others to rotate in and out of a store.
• In other situations, they can create a business model
of changing seasonal inventory and focus.

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Alternative Marketing

guerilla marketing - original, unconventional, and

inexpensive small-business promotional strategies.
buzz marketing - another name for word-of-mouth
marketing.
edutainment - a promotion that combines education and
entertainment to make a more lasting impression upon
an audience.

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Alternative Marketing

Alternative Marketing of Today:

• Guerilla Marketing
• Buzz Marketing
• Product Placement/Branded Entertainment
• Lifestyle Marketing
• In-Store Marketing

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Alternative Marketing
For example, signage, shelf placement, sampling, and
“edutainment” can all play roles. Which ones are best will
depend on your marketing strategy:

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Other Media Venues

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E-Active Marketing

e-active marketing - when the two major components of

Internet marketing—e-commerce and interactive
marketing—combine.
• Internet advertising has grown with the expansion and
adoption of Internet technology.
• Not only have entrepreneurs and major corporations
come to include online advertising and promotion as a
regular part of the media mix, entire industry segments
have evolved to serve the interactive media field.

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E-Active Marketing
You can make the best use of e-active marketing approaches
by marrying them with your offline efforts to create a unified
approach to marketing:

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E-Active Marketing

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E-Active Marketing

brand spiraling - integrating a company’s conventional offline

branding strategy with its Internet strategy by using
conventional approaches to drive traffic to its online sites.
blog - (short for Web log) a journal that appears on the
Internet periodically (perhaps daily) and is intended for the
public.
blogosphere - the collective term used for all the blogs on the
Internet.

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E-Active Marketing

Some blog-hosting services include:

1. Blogger http://www.blogger.com
2. Medium http://www.medium.com
3. Twitter http://www.twitter.com (microblogging)
4. Tumblr http://www.tumblr.com
5. TypePad http://www.typepad.com
6. WordPress http://www.wordpress.com

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Online Social Networks

• The number and variety of online social networks has

grown phenomenally in recent years and is expected to
continue to do so.
• Social networks such as Facebook, MySpace, and
LinkedIn, as well as those for interest-specific niches (e.g.,
Flickr, imeem, BlackPlanet, Classmates.com, Goodreads,
and MyHeritage), continue to evolve, as new uses emerge.
• Advertising opportunities on these networks are more
complex than those on Web sites with banner ads.

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Online Social Networks

For many social networks, advertising and promotion are

either banned or taboo.
Some users create subtle promotion through what are
essentially scripted conversations on the sites.
stealth marketing - undercover, or deceptive, marketing
efforts that are intended to appear as if they happened
naturally.
mobile social networking - the updating of social-network
sites via mobile handsets.

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Consumer-Generated Advertising

• This can include campaigns in which the company solicits

advertisements from customers.
• Consumer generated media (CGM) also comes in a variety
of forms that are not specifically solicited by companies,
such as message-board posts, blogs, and forum
commentary.
• Consumer-generated advertising can generate enthusiasm
and engagement as well as increased loyalty.

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Viral Marketing
viral marketing - the process of promoting a brand, product,
or service through an existing social network, where a
message is passed from one individual to another—much as
a virus spreads.
• By creatively generating interest in and excitement about
your story, or an aspect of your business, you can work to
create a viral campaign.
• A viral campaign can be an e-mail or a video that may
include hyperlinked promotions, advertisements, games,
or online newsletters.
• There has to be a reason for people to tell others about
the message or pass it along, such as entertainment
value, uniqueness, or potential financial reward.
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Viral Marketing

Kristen Smith, Executive Director of WOMMA, suggests the

following six ways to keep people talking about your company
and your products:
1. Listen, speak, listen some more.
2. Be transparent and disclose.
3. Evaluate ROI continually.
4. Spread the word, not the manure.
5. Encourage an enterprise-wide WOMM.
6. Employ online and offline WOMM.

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Publicity Potential

• Publicity, sometimes referred to as public relations (PR) is

defined as “the planned and sustained effort to establish
and maintain goodwill and mutual understanding between
an organization and its public.”
• Consumers give publicity credibility because it is not paid
for.
• Publicity is important for a small business, which often has
a negligible advertising budget.

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Publicity Potential
To get publicity, you will need to mail or fax a pitch letter
and a press release to the magazine, newspaper, TV
station, or radio station you hope to interest.
pitch letter - correspondence designed to explain the story
behind a press release, and why it would be interesting and
relevant to the media outlet’s readers, listeners, or viewers.
press release - an announcement sent to the media to
generate publicity that explains the “who, what, when,
where, why, and how” of a story.

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Telling the Story
Younger entrepreneurs can have an advantage here
because relatively few young people start their own
businesses.
You have to make the connection:
• Who are you and what has happened to you or what
have you done that would make you and your
business an interesting story?
• Did you have to overcome any obstacles to start your
business?

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Telling the Story

• What about your product or service is unique? Is it

something your community really needs?
• When is a specific event taking place that is
newsworthy or of interest for a story?
• Where are you locating the business, or where is the
event or activity occurring?
• How has your business changed you and helped
members of your community?

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 Sample Press Release

• As we have said, in order to tell your story in a press

release or to a reporter, you will have to answer the six
basic questions: who, what, when, where, why, and how.
1. Who are you,
2. what did you do,
3. when did you do it,
4. where did you do it,
5. why did you do it, and
6. how did you do it?

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Follow Up a Press Release

• Follow up your press releases with phone calls and e-

mail. Try to reach the journalists directly.
• Be polite but persistent.
• Do not wait for a newspaper or radio station to return
your call; call again (but do not make a pest of
yourself)—they receive many press releases every
day.
• We suggest saving all publicity you receive to show
potential customers because it has enormous value.

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Public Relations
In addition to publicity, you can build positive public relations
for your company through involvement in the local community
and in local, national, and international professional and
business organizations that pertain to your business:

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The Fifth P: Philanthropy

philanthropy - a concern for human and social welfare that

is expressed by giving money through charities and
foundations.
foundation - a not-for-profit organization that manages
donated funds, which it distributes through grants to
individuals or to other nonprofit organizations that help
people and social causes.
not-for-profit organization - an entity formed with the
intention of addressing social or other issues, with any
profits going back into the organization to support its
mission.

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Cause-Related Marketing

cause-related marketing - promotional efforts inspired by

a commitment to a social, environmental, or political
cause.
• You could donate a fixed percentage of your profits
(perhaps 1 or 2 percent) to a particular charity and
then publicize that fact in your marketing materials.
• Encourage your employees to participate in charitable
work, too.

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Gaining Goodwill

Many entrepreneurs try to make a difference in their

communities by giving money and time to organizations
that help people.
goodwill - an intangible asset generated when a
company does something positive that has value.

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Not-for-Profit Organizations

• Not-for-profit organizations are those whose purpose is

to serve a public cause rather than to accrue profits for
investors.
• The Internal Revenue Service classifies nonprofits
under section 501(c)(3) in the tax code.
• These corporations are tax-exempt. This means they
do not have to pay federal or state income taxes, and
they are neither privately nor publicly owned.
• Essentially, a board of directors controls the operations
of a 501(c)(3) nonprofit.

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What Entrepreneurs Have Built

• Many philanthropic organizations in this country were

created by entrepreneurs who wanted to do good works
with some of the wealth they had earned.
• Entrepreneurs have financed great museums, libraries,
universities, and other important institutions.
• Some foundations created by famous entrepreneurs (in
addition to the Gates Foundation) include the Rockefeller
Foundation, the Coleman Foundation, the Charles G.
Koch Foundation, the Ford Foundation, and the Goldman
Sachs Foundation.

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You Have Something to Contribute

You may not have millions of dollars to give to your

community—yet. But there are many ways you can be
philanthropic that will help others, get your employees
excited, and create goodwill in your community:
• Pledge a percentage of your profits to a nonprofit
organization you have researched, believe in, and respect.
• Become a mentor to a younger entrepreneur.
• Volunteer for an organization that helps your community.
• Sell your product to a charity that you support at a
discount.

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 Developing a Marketing Plan

The primary roles of the marketing plan include:

• demonstrating to potential investors that your company
can grow and offer returns,
• identifying the most beneficial target markets for the
organization,
• evaluating the competitive and industry environments,
• illustrating the pricing strategy, and
• detailing the promotional plan and budget.

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Marketing Analysis

• The analysis of the market is the heart of the marketing

plan.
• This brings together the various strategic and tactical
components of the marketing efforts into a single
comprehensive section.
• It is essential that the template for the sales plan include
the five Ps of marketing.
• The product, price, promotion, place, and philanthropy
are detailed here.

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Marketing as a Fixed Cost

• Marketing is part of your business’s fixed costs.

• Marketing should not be budgeted as a percentage of
sales but rather as money that is needed to drive
sales.
• As you remember, fixed costs are those that do not
vary with sales; they include utilities, salaries,
advertising, insurance, interest, rent, and depreciation.

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 Calculate Your Breakeven Point
• The question is this: Can you sell enough units to pay for
your marketing plan?
• It shows whether you will cover your fixed costs with the
•
number of units you plan to sell.
• If not, the one place you can cut costs is your marketing
plan. However, you should do this with care.
• Breakeven is the point at which fixed costs are recovered
by sales, but variable costs are not included and no profit
has yet been made.

Fixed Cost = Breakeven Units

Gross Profit per Unit

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