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This is the entire marketing plan
VI. Pricing Structure
Determine the price you will charge. For your service, determine pricing (this may be based on an “average” price per service rendered). You must:
· Demonstrate that your price allows reasonable profit in accordance with your profitability strategy (indicate this), allowing for your FC and VC that you determined in the preceding section.
· Share the pricing strategy that you have selected, in accordance with those provided by our text author. What is your rationale for the pricing strategy selected?
· Identify your total Year ONE Gross Revenues and projected Gross Profitability. Determine this for a three year window, based on reasonable projections. Does your pricing structure reflect volume discounts or other circumstances that might affect your revenue/profitability?
· If you are using a channel of distribution, describe the profitability approach are you taking with your channel members to ensure appropriate profit at their end so that they will want to promote your product?
· Weigh your pricing strategy with pricing currently offered by your competition. Consider how your proposed price fits into the target market and compares to the competition. Your pricing should allow for sufficient profitability to allow you to cover your essential fixed costs (FC) and variable costs (VC) on which you will want to reflect (but do not have to be listed).
Pricing Strategies from the author (Kotler & Keller, 2012) and Module 7 Lecture Notes: Pricing
“Determining a Pricing Strategy
Armed with information about costs and product break-even levels, the marketer needs to determine the company’s overall pricing strategy. There are essentially two main strategies: profit maximization and sales maximization.
Profit maximization suggests that the company is willing to give up sales in order to generate the greatest amount of revenue possible per sale. For this strategy, higher prices result in lower sales. Fewer people will be willing to pay a high price, but those that do will be contributing a greater amount of profits over costs.
Sales maximization typically sacrifices revenues in order to increase sales – the number of consumers buying the product. The prices are lower, but the number of customers is greater.
These two strategies assume that demand is elastic. In its simplest terms, demand is elastic when an increase in price means a decrease in demand, but when price decreases demand goes up. This is the driving force behind sales – the sale increases the number of customer sales, attracted by the lower prices, but the amount earned per sale goes down because of the lower price.
Closely related to the two strategies above are market penetration pricing and market skimming pricing. These strategies are often employed when launching new products.
The marketer’s ability to manipulate price is to a large degree determined by the consumer’s concern with price and the degree of product differentiation. For example, if a consumer has a high level of concern for price and the product differentiation is low, then the marketer’s flexibility to manipulate price is also low.
Market Penetration Pricing
Sometimes an organization wants to achieve the largest market share possible, even if it means sacrificing profits, because the marketer believes that once a satisfied customer is acquired, the more difficult it will be for competitors to steal the customer away. Over time the company may plan to cross-sell other, more profitable products, or gradually increase prices once the market has stabilized. Obviously, this strategy requires the financial resources to accept reduced revenues and the service and product quality needed to satisfy the customer. That can be difficult to do with lower revenues.
Market Skimming Pricing
A profit maximization strategy means the company is willing to accept a lower level of sales in order to achieve a higher price per product from those who do purchase. This strategy works best when a relatively large number of consumers are willing to pay a high price to have the newest, best, and most advanced product in a specific category. These are often the opinion leaders in their market area. The company may intend to roll out similar mid-level products at a later point to develop market share, relying on opinion leaders to generate interest in their new products. Profit maximization allows the company to recoup its product development costs more quickly.”
Other Pricing Strategies
While firms must make strategic decisions about their overall pricing strategies, other pricing strategies and tactics are often used to create a competitive advantage. Here are some of the more frequently used tactics:
Quantity discounts – Firms often reward buyers by lowering per unit pricing for large orders.
Price promotions – As one of several promotion strategies, firms will lower prices or offer discounts for a limited time to induce sales from consumers and channel intermediaries.
Product bundling – Firms often combine products and offer consumers a lower total price when multiple products are purchased. Banks, for example, sometimes offer a lower rate on car loans if the consumer also has a checking or savings account.
Value-added pricing – Similar to bundling, this approach offers option packages at reduced rates. It allows manufacturers to reduce production costs.
Product line pricing – Firms with extensive product lines will often develop pricing schedules that allow the firm to meet consumer demand at different price points, from low cost products to higher cost, better quality products.” (Module 7 Lecture Notes)
VII. Channels of Distribution
When describing your channels of distribution structure, be sure to identify:
· The rationale for the structure that you have selected
· How you will work with your channel members to help them promote your product to the ultimate consumer. This may include PUSH and PULL promotional strategies. How will you manufacture your product, warehouse it, and move the product to the next channel level?
· What should your channel members expect from you, the manufacturer (marketer) of your product? How will your organization be structured to accomplish this?
As you will have a sales force (or someone who assumes the selling function), discuss the selection, compensation, training, and management of your sales staff. If, on the other hand, you are selling directly to the end-used (direct channel), discuss this here.
If you are providing a service to your target market, you fulfill the responsibilities of a direct channel service provider. You will not use intermediaries (i.e., wholesalers, brokers, retailers, etc.). Instead, describe HOW you will provide the services that you will offer your target market (Note: The Product Description section describes WHAT you will provide). As a service provider, describe your physical facility, how you will deliver your service, and other aspects that suggest you are taking that which is intangible and making it tangible.
VIII. Integrated Marketing Communications (IMC) Promotion Plan
Your marketing plan should demonstrate a promotional approach that embraces integrated marketing communications (IMC). This includes a clearly-stated MESSAGE that is consistently communicated to your stakeholders.
Your promotional effort should:
· Demonstrate an appropriate mix of advertising, public relations, sales promotion, direct marketing, and personal selling. You should include the Internet and social media, too, as appropriate to your promotional effort.
· Describe your primary objective for your promotional approach. Outline this in terms of measurable tasks that you want to accomplish. What is your advertising goal to which you will measure success for your advertising expenditures? This is a complete description of your proposed promotion plan.
· Describe each of your promotional activities that you envision as essential to ensure an integrated approach to promoting your product or your service. Describe your execution (i.e., your rollout plan), in accordance with the following format for any and all expenditures (The dollar figures will go into the IMC Promotion Budget):
1) Weekly 1/4-page ads in the Sunday Ledger @$5,100 for each edition.
Ads run each Sunday for two months, followed by publication during alternate weeks for Week 52. Total Cost $147,900
2) 30-second radio spots on WBAL-AM, with two ads during morning drive time and one during evening drive time; ads to run five days each week for first month and alternate every other week for five months; ads to run once each morning every other day during months Six through Twelve. Total Cost: $117,451
Consider what constitutes the most appropriate promotional mix of advertising, sales promotion, public relations, direct marketing and personal selling, that gains you the most “bang for the buck.” Who is your target market and what do you see as the cost per customer to reach them and to have them contract with you (i.e., purchase) your product or service?
If you plan to use personal selling or direct marketing and have previously discussed these in your Channels of Distribution section, reference that here and be sure you’ve fully covered the communication aspects of these tools.
You must show a clear understanding of what you want your IMC promotional strategy to do for you in terms of measurable outcomes. Ensure your IMC approach makes sense, given that you could easily spend millions of dollars (in theory) to promote your product or service.
When all is done, your IMC Strategy will provide an executable promotional plan that indicates the what, where, when, and how much.
IX. Integrated Marketing Communications (IMC) Budget
Tally up your projected IMC budget for your FIRST Year. You should include your costs for any and all advertising, public relations, sales promotion, direct marketing programs, and personal selling. Remember to include benefits (35%) for sales personnel, should this be part of your plan.
To gain a clear and accurate understanding, your research will be important. You are expected to contact an appropriate radio station, newspaper, etc., to determine the actual cost to advertise in that media. This is not a “guesstimate,” but an actual budget that is based on your projected promotional plan and an income stream that will support it.
Include in your Promotion Budget your projected dollar costs for promotion for your first year of business. This should be based on your having made a diligent effort to understand approximate expenses for advertising/media and other promotional venues.
Your evaluation for this section is based, in part, on demonstrated diligence that allows you to communicate to your instructor your thorough understanding of the realities of promotion.
Consider your costs for the following possible promotional costs:
· Television
· Radio
· Magazines
· Newspaper
· Internet
· Outdoor Advertising
· Yellow Pages
· Miscellaneous other advertising
· Social Media
· Advertising Agency services
· Public Relations services (publicity, etc.)
· Sales Promotion (what you have created, e.g., magnets, coffee mugs; trade show participation)
· Direct Marketing program (Direct Mail, “Permission Marketing,” etc.)
· Personal Selling (salary and 35% benefits, plus expenses)
X. Executive Summary
Your Executive Summary is a one to two-page synopsis of your entire marketing plan. It is an abstract of what the reader is about to read. Key elements include:
· A measurable goal for your marketing plan and how your marketing plan’s success will be evaluated in quantitative outcomes.
· A good mission statement that is a standalone paragraph. It should state the business or industry your company finds itself
· One or two of your goals and values
· A brief paragraph that shares specifics about each of the sections that follows. Remember that this is a 50,000-foot document.
When one is done reading the Executive Summary, one should be able to say, “Ah, now I know what this company does.”
Be sure to also include your financial highlights such as sales and revenue forecasts, projected growth and market share, and expected profitability. Briefly reference the current market situation as it relates to your product/service and company and outlines the opportunity. Point out key success factors and/or major pitfalls you plan to avoid. Reference major actions, changes or trends you anticipate over the next three years, and how these will impact your marketing strategy.
Product idea:
The product that I am suggesting is a GPS tracking system for bow hunters. The initial concept I am proposing is a set of arrow tips that contain GPS tracking devices. The GPS tracking device would not only make locating animals once they are shot with the arrow much easier but it will also allow hunters to track and retrieve stray arrows without a problem. The tiny GPS device will be included in the arrow tip and will remain in the animal once it is shot which will transmit the location of the animal back to the main unit. If the target is missed then the arrow can be easily retrieved and re-used. GPS arrow tips will be initially sold in conjunction with the GPS tracking device unit and can also be purchased separately from the GPS unit as well. When purchased separately the individual arrows will be available in amounts such as three, six, and twelve and will obviously be much less expensive than the arrows sold with the main GPS unit.
The target market for this product would be bow hunters who hunt white-tailed deer or any other game that is legal to hunt with a bow. Hunters typically complain of having problems tracking animals once they have been shot either with a rifle or with a bow. This problem can at times be worse for bow hunters because the shot is not as powerful as a blast from a rifle which may result in a longer time for the animal to collapse and die. Animals shot with an arrow can travel further distances than an animal shot with a rifle which results in a more challenging track. If bow hunters are equipped with a method to track the animals once they are shot they can have a much easier time locating their kill. This system also solves the problem of lost arrows and tips as bow hunters can easily retrieve their equipment if they miss the mark on their shot. Money spent on equipment such as arrow tips is a complaint of many hunters. As a result of this product hunters will not only be able to save money replacing arrows but will also be able to save time searching for their animal and/or their arrows.
IV. Competitive Analysis
Competition
Nothing currently in the market
-string loaded arrows
-flashlight that picks up blood trails (only works on flat surfaces). The light helps blood reflect more. This is a dark application because it would be unnecessary in daylight
-tracking dogs (not sold in stores). Cost of training is very expensive
The purpose is to track, not kill
THIS IS AN UNTAPPED MARKET
Benefits
-arrow location
-arrow recovery
-animal location
-animal recovery
Once you buy the tracking system it will be difficult to lose the equipment (can’t lose arrows because they have tracking devices)
Initial cost may be a bit higher, but it’s not like you will have to buy equipment over and over again
Bow hunting is cheaper than hunting with a rifle, but it takes much more effort
Initial cost of buying and sighting in a rifle is much more
(focus on competitors)
For your top two (2) primary competitors:
· Indicate why you have selected these two competitors. Offer a SWOT Analysis that focuses on the STRENGTHS and WEAKNESSES of each competitor.
· Describe of each company, its current market share, its product or service set offerings, its financials (e.g., revenues, profitability, etc.), current positioning within the market, target market that is seeks to reach, recent history (how are they doing?), and how they market themselves to the target market that you also wish to reach.
· Do a comparison of your product or service with that offered by the competition. How will you differentiate your product/service from that offered by the competition? Inherent in your presentation will be why your target market would likely select your offering over that of the competition. If you don’t have a differentiator, your target market won’t see one either.
· Describe the likely response that these two competitors will take once you begin to make ample waves, assuming that you are entering a market in which competition already exists. What response should you anticipate? What will be your response to what you project will be their likely response to your entry into the market?
Be sure to address substitutes. Are there any substitutes for your service or product offering? Identify any key substitutes, discussing their strengths and weaknesses of those substitutes that you have selected, when compared to your offering.
Who are your competitors targeting? Who are their current customers? Don’t go after the same market. You may find a niche market that they are overlooking (Porta, 2010)
MUST TARGET HUNTERS, BUT THE SPECIFIC TARGET IS BOW HUNTERS
Evaluate 7.1
Marketing Plan Milestone: Financial Analysis and Pricing
Submit part three of your Marketing Plan, which includes the following sections:
V. Financial Analysis
VI. Pricing Structure
V. Financial Analysis
As a marketer, you need to justify your marketing activities no matter if it’s a promotional campaign or development of a new product or service. You achieve this by first having a solid understanding of the financial impact of your marketing initiative and then presenting your financial analysis in a well-structured manner using industry acceptable framework.
In the financial analysis section, the first thing to show is sales (unit) and revenue ($) forecasts. Usually, this is done for a period of 3 to 5 years. You also need to show how much market share you are expected to get, and most importantly, illustrate its return on investment (ROI) using the
Net Present Value (NPV)
method. To help the management get a better idea about the feasibility of your marketing plan, a break-even (BE) analysis is often required. After all, nobody wants to invest in a new product or service that will only break even in 20 years’ time!
To polish up your work, it is always a good idea to include a sensitivity analysis to show how these forecasts will be changed under various market conditions (good, normal, bad).
In all, your Financial Analysis should consist of the following:
1. Break-even analysis
1. NPV (net present value analysis)
1. Sensitivity analysis for good, normal and bad business scenarios
DETERMINE FIXED COSTS (FC) AND VARIABLE COSTS (VC)
1. Break-even analysis
How to Perform a Break-Even Analysis
Llana DeBare, 2010
http://www.inc.com/guides/2010/12/how-to-perform-a-break-even-analysis.html
Break Even Analysis
http://fast4cast.com/break-even-calculator.aspx
Break-even Analysis Tool
Harvard Business School, 2007
http://hbsp.harvard.edu/multimedia/flashtools/breakeven/index.html
2. NPV (net present value analysis)
Net Present Value Analysis
Accounting Tools, 2013
http://www.accountingtools.com/net-present-value-analysis
Net Present Value Analysis
http://www.mass.gov/ocabr/business/banking-services/preventing-foreclosure/npv-analysis.html
Time Value of Money
http://www.acq.osd.mil/dpap/cpf/docs/contract_pricing_finance_guide/vol2_ch9
Corporate Finance – Applying NPV Analysis to Project Decisions
http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/applying-npv-net-present-value-project-decisions.asp
Net Present Value (NPV)
http://finance.thinkanddone.com/npv.html
3. Sensitivity analysis for good, normal and bad business scenarios
Sensitivity Analysis
http://www.investopedia.com/terms/s/sensitivityanalysis.asp#axzz2LgqcaeZt
Sensitivity Analysis
http://cbkb.org/toolkit/sensitivity-analysis/
Sensitivity Analysis
http://www.businessplanhut.com/what-sensitivity-analysis-example-and-components-involved
Example of Sensitivity Analysis
http://mat.gsia.cmu.edu/classes/mstc/sensitive/node2.html
