3.2. Marketing & Sales

3.2.1. Marketing concept

Marketing defines how the company's range of services is to be presented, promoted, distributed or advanced on the market. This is done with the aim of marketing the products and services effectively and successfully. This means selling at the same time.

The best possible marketing strategy is to be developed in the business plan. It should enable the products and services to be sold effectively. A strategy is a plan of actions or a policy by which the greatest possible benefit can be achieved. The marketing strategy must make statements about the sales forecast.

The marketing mix defines the combinations of the company's marketing and advertising measures that are to be specifically executed and thus have an influence on the customer.

Marketing concepts have different scopes in influencing business management and entrepreneurial processes. The business plan is about focusing on the essentials for successfully marketing one's own business.

In order to find the right marketing strategy for one's own company, a marketing concept must be developed that leads to a concrete marketing and advertising plan. This plan must define how the market is to be developed, how the company wants to present itself in the market, how the pricing policy is to be designed and finally how concrete advertising and communication is to be carried out.

In the business plan, the marketing concept should make statements on product policy, distribution policy, pricing policy and communication policy.

Produktpolitik

The product policy describes the products and services in terms of their quality and characteristics. While the performance description (module 2) defines which products and services the company wants to sell, the marketing aspect determines the policy of marketing to specific target customers. In other words, it is about the way in which the products and services are to be sold. In the process, a product strategy typical of the company is to be developed.

-       The business plan must describe how the developed products and services are to be offered in concrete terms. It must be explained how products with their special features are to be offered on the market for certain customer groups. In the product policy, the way of marketing is to be determined. Consumer goods, for example, are sold differently than capital goods or services:

-       Characteristics of consumer goods: retail, specialised trade, wholesale, craft, gastronomy, customer is the end consumer, mass market, target customer definition

-       Characteristics of capital goods: Industrial products, finished products, plants, industry, mechanical engineering, electrical goods, large customers, monopoly companies, private customers, corporate customers, system business (turnkey houses).

-       Characteristics of services: intangible performance, know-how sales, consulting, mediation, training, culture, craft services, gastronomy, service to customers, health

It must be worked out which market strategy is to be used to sell the product or service in the specific market sector.

Product policy is about:

• Brand policy
• Product programme policy
• Product development, product differentiation
• Quality policy
• Service offer

Distribution policy

Distribution policy describes the way or process of "distributing" products and services to customers. It is about an optimal distribution strategy that generates high customer satisfaction. The goal of an entrepreneur must be to deliver his products and services "just in time", i.e. at the right time, at the right place, to the customer.   

In distribution, a distinction is made between two ways of distributing goods.

a) Purchase of goods:

Purchasing goods is about how you yourself can buy your products and services from the manufacturer or wholesaler, locally or worldwide, on demand - on demand as fast as or whenever possible - or with long delivery times, packaged or loose, with customs duty or without, with taxes or without, etc.. The decisive factor is which goods, in which quality, with which delivery time, at which purchase price and overall at which conditions can be purchased. In the global price war, it is a question of the best purchasing conditions and ultimately the lowest production costs. In competition, the customers decide where and from whom you buy the goods.

It is necessary to check where certain goods are available at the lowest price, how purchasing and transport to one's own company can be organised, what possibilities there would be to get the goods directly to the customer so that, for example, an intermediate warehouse would become superfluous. Example: A book producer and trader who can organise sales on demand only needs to produce on demand. 

b) Sale of goods:

The sale of goods describes the path of the goods to the customer. In a coffee shop, the customer is served at his or her seat or "... to go". The sale of goods is to be organised in the way the customer wants. It is important to examine how the sale and transport of goods or products from one's own company to the customer can best be organised. When the customer comes into the shop, he wants to be addressed and served in a very specific way. If the goods are to be delivered free to the customer's home, certain logistics are required. If the goods are ordered via the Internet, questions of packaging, payment, complaints, transport damage, insurance, etc. must be defined.  

The business plan shall describe the ways, means and costs. It must be described: By whom? To whom? By what means? How are the products to be produced, packaged and transported? How should they be presented to the customer? What does the retail shop or warehouse need to look like? What capacities are needed? Does the company need its own sales force? How should the sales process actually be designed in e-commerce? Is there an enterprise resource planning system with all the functions or is ordering by mail and paying by invoice sufficient for the time being? What are the distribution costs?

In distribution, it is important to recognise the trade levels and define how the paths in between can be effectively designed. Depending on the stage of development of a product (product life cycle) or the entire company, the sales strategies must be adapted to this. Logistics plays an important role in this. Many industrial companies in the automotive industry partly do without their own warehouses because the goods can and must be delivered "just in time" by truck. In this context, questions of location must be answered as well as the physical distribution of goods in real terms.

Trade margin:
The trade margin lies between the purchase of goods and the sale of goods. It describes the difference between the cost price and the selling price of the goods. The larger the margin is for the company, the more likely it is to make a profit on the sale of the goods.

In commercial costing, it is necessary to calculate (a) a "mark-up margin" based on the costs of purchasing goods, which b) covers the company's costs of action (personnel, premises, material costs, etc.) and which c) includes a profit contribution.

The mark-up margin is usually calculated as a percentage mark-up (30%, 100% or X) on the purchase of goods. It is to be calculated from the real expenses of the company. The mark-up margin is a reference value for pricing.

In commercial practice there are various forms of calculation, which are presented in Module 8.

Distribution policy is about:

• Purchase and sale
• Distribution system
• Sales organisation
• Logistics
• Import, Export
• Packing
• Shipping
• Merchandise management system
• Service
• Distribution strategy

Pricing policy

Pricing policy describes what market prices are possible for the products and services in the market. A pricing strategy from the sales perspective must be developed.

From a marketing perspective, the market price must be determined. It must indicate at what conditions and with what prices the products and services can be offered in the market. The market price is in tension with the cost price of one's own products and services. When determining the pricing policy, it is necessary to work out what prices the competitors have and how they calculate their market prices. Only when the market prices are known and one's own cost price has been determined, can the sales price be established as the final result of the calculation.

The pricing strategy has to take into account the competitive situation of the company. In competition, it can be assumed that prices are always under pressure. The profit shares in the price are usually only a few percentage points. The profit margin helps to decide which strategy is realistic for the pricing policy. It has to be decided whether a high price strategy, a normal price strategy or a low price strategy is the right one.

As a rule, it can be formulated: A high price strategy requires an excellent offer and target customers with purchasing power. A normal price strategy moves at the level of the market price. A low-price strategy must offer high quality at low prices.

Those who "dump prices" want to undercut their competitors. As a rule, this means making offers below the market and cost price. The selling price does not cover costs. It is sold at a loss. This strategy can only be sustained for a certain period of time in order to drive competitors out of the market. It requires enormous capital, because the losses have to be financed. Such a strategy is only suitable as an investment in the future of the company in order to achieve a monopoly position in the market in the long run. The great unknown is the capital strength of the competitors, which can trigger the company's own ruin if the losses cannot be refinanced by the hoped-for additional market shares.   

In marketing, rebates, bonuses and discounts play just as important a role as delivery conditions and terms of payment. Which customer, which benefits are to be granted, must be defined. These conditions represent incentives to buy, which in reality cost different amounts. The behaviour of competitors must be determined.

When considering pricing policy from a marketing perspective, the structure of supply and turnover must be taken into account, as well as considerations of cost recovery. The calculation of break-even can be helpful for pricing policy. Break-even determines the sales volume that is necessary to reach the break-even point.

Pricing policy is about:

• Market prices, cost prices, sales prices
• Maximum prices, normal prices, low prices
• Dumping prices
• Rebates, bonuses and discounts
• Delivery conditions
• Terms of payment

Communication policy

Communication policy can be defined as the most important part of marketing. While the product, distribution and pricing policies provide the basis, internal and external communication as the marketing of products and services emerges as the actual marketing task.

In the business plan, the communication policy describes how the company wants to communicate with its customers and with which communication strategy the products and services are to be sold. What are the goals of corporate communication?

Important instruments of communication policy are described below. In the business plan, the right and appropriate choice of options must be made. The challenge lies in limiting the options to what is necessary and economically possible.     

3.2.2. Communication tools and Marketing-mix

The instruments of marketing must be coordinated with each other. All marketing instruments should pursue the goal of positively influencing the customer's purchase decision.

Market presence

In everything a company does, its market presence must be right. It is the company's business card. The appearance must correspond to the Corporate Identity (CI) (corporate identity) and the Corporate Design (CD) (corporate form, colour, appearance). Corporate Identity (CI) is the fine art of communicating with the customer. It is about the unmistakable unity of the company and communicating it. In the long run, this will only succeed if the self-presentation and presentation is done in a typical "exterior" (design), in form, colour, writing, language, image and if the advertising media are used in a targeted manner.

The company name, the company logo or also the signet, are often the entrance ticket. They must have a high recognition value. The basis for this is a corporate concept that can communicate the strengths of the company. The name and the signet should establish a link to the services offered. As a start-up, your own name can speak for itself. Signet, company name and advertising material must be coordinated. The customer must be told what makes the offer stand out. The market presence must fit.

When a logo becomes a trademark, it has succeeded in gaining acceptance. It is usually enough to see the logo to know which brand it is. For example, the star of Mercedes, the yellow M of McDonald's, the typical spelling of Google. What would the dark drink be without its unmistakable lettering? Coca Cola! Nothing more than a brown, foamy fizzy drink with no real value?

In the following, the importance of important communication tools will be outlined in order to be able to decide for the business plan which tools can be used for one's own marketing:

 

Public relations

Public relations is the conscious and continuous effort to build public understanding and trust for an offer or a company. Public relations should have an image-building effect. The company's goals and services are communicated so that a company image is created. Unlike advertising, public relations is not primarily product-related, but focuses on the company as a whole. It is about the external impact in the sense of a corporate identity. Effective public relations work increases the level of awareness and leads to the development of a positive opinion of the company.

Personal sale

The most direct form of advertising is personal selling. This takes place in consultation and sales talks in every shop, restaurant, travel agency or production hall.

The personal direct approach can also be made by telephone or in writing (direct mailing). In each case, it must be decided who is to be addressed and how this person can actually be reached. Telephone marketing has its own "rules of the game": The interlocutor is not known personally; neither is the situation he or she is in. The person who feels disturbed does not like to buy. Long introductions without saying what it is about are annoying. The aim could be to be allowed to send a brochure, to offer a sample, to arrange an appointment for a consultation or a visit. Good and plausible reasons are always necessary. The direct approach must be well prepared.

Product placement

Product placement aims at the integration of products and/or services, e.g. in media programmes (cinema, video and TV programmes), in an effective advertising manner. In the media, products are presented without the advertising being immediately recognisable. This happens when a main actor drives a certain car, eats the ice cream of a certain manufacturer or the photo backdrop depicts a certain company.

Product placement is to be distinguished from surreptitious advertising. The advertising effect is bought and not "obtained".

Sponsoring

In sponsorship, the sponsor, a person or a company, gives capital in return for the sponsored person making contributions to the achievement of the sponsor's goals. Sponsoring is based on the principle: performance and consideration. Sponsoring is widespread in "sport", in the "arts", in "social" and also in the "environment". Educational sponsoring is still relatively little developed.

Advertising and advertising planning

Advertising is the planned use of advertising media to promote sales. Advertising should draw attention to the company's offers. The needs and concrete requirements of the customers are to be addressed.

Advertising is on the one hand "sales promotion" and on the other hand "opinion formation" (public relations). Sales advertising aims to make the company's products and services known in concrete terms and to encourage people to buy them. Sales are to be stimulated directly. With every advertisement, public relations also takes place in the sense of increasing the level of awareness of the company as a whole in the public. This is about reputation, trust and information. Advertising makes use of various media.

Advertising is an investment that must pay off. Advertising does not necessarily have to be funny, crazy or eccentric. It has to fit the company and the offer. Advertising pursues the goal of positively influencing customers. Advertising is one of the most important forms of market communication.

Advertising must have a message. It should be clear and true. It should not be misleading. It should use simple language. It should use the language of the target customers. Comparative advertising is only allowed to a limited extent. Disparaging advertising is unfair; it disparages the advertiser. Advertising should achieve the desired effect.

Advertising impact

The AIDA formula describes levels of advertising effectiveness.

Attention (attention) has the goal of generating attention!	Interest (interest) has the aim of conveying the advertising message and attracting interest!
Desire (Desire) has the aim of strengthening the desire for the product!	Action (Action) has the goal of getting the target person to buy !

Figure 3: AIDA formula

Advertising media

Each advertising medium has its own degree of effectiveness. The greatest effect is achieved when customers are addressed in different ways at the same time. For example, it is effective if a direct mailing is followed by a personal telephone follow-up.

If a target group is located, e.g. in a supra-regional catchment area, supra-regional daily newspapers, advertising journals, programme brochures or radio advertising could have an effect. If the target group is precisely delimited and can be grasped locally, brochures, direct mailing, promotional gifts can have a supporting effect. With vehicle advertising, outdoor advertising, reference folders or public relations, "background advertising" will increase awareness.

 

Important advertising media	Important advertising media
Image brochure Advertising letters Brochure Throwaway items Poster advertising Radio advertising Promotional gifts Transport advertising Car advertising Leaflets Television advertising Cinema advertising Trade fair advertising	Daily newspaper Trade papers General-interest newspapers Weekly/Sunday newspapers Customer magazines Newsletter Television Broadcasting Outdoor advertising Cinema Means of transport Merchandising

Table 4: Overview of advertising media

 

Feature description

Daily newspapers address the population in general. The audience is relatively large and so are the scattering losses. If the target group is small, advertising should be more precise.

Regular classified ads have the advantage of being noticed again and again by certain target groups.

Large advertisements are noticed, but they only have a one-off effect.

Information about an "Open Day" can also be published in daily newspapers as a press article. Regular customers should also be invited in writing.

Editorial contributions are very effective in advertising. They must bring news, e.g. certification as a specialist company, redesign, company takeover. They must be prepared journalistically. Even if the advertising effect is not immediately obvious, they have a good impact.

Commercial advertisements are gaining more and more space in the daily newspaper. Those who advertise a product also advertise their company. An image is created in the long run. Discounts should be taken advantage of for recurring advertisements.

Specialist journals address very specific specialist groups. Because they are specialised, they appeal to interested parties. They have a limited sphere of influence, but their impact is high.

The image brochure and the image brochure have a content-related claim. They should represent the company. Therefore, they must convey the particular impression that the company wants to radiate. In reality, there is often a big difference between what is intended and what is achieved. Brochures should be designed in such a lavish way that they leave a lasting impression. However, overdone glossy brochures can also create distance.

Company catalogues are a standard medium. In them, the company presents itself with its products or services.

Flyers, folders and brochures are intended for customers and the professional public. They inform briefly and quickly about the company's services. The personal delivery of the folder contributes to customer loyalty. They can be used to create a direct impact, provided it is received.

The direct mail advertising letter addresses the target group directly. The mailing must be well presented and to the point. Customers should be addressed as personally as possible. Information must be short and to the point. One page of text is too much for many customers. Only up-to-date and qualified address material should be used. Regular customers should be contacted directly at least once or twice a year and informed in a targeted manner.

Exhibitions and trade fairs have an indirect effect. The company can present itself and its performance in competition with the others. In-house exhibitions must develop a special ambience. The personal invitation for regular customers is well received. If there is then a hint of a promotional gift, this will encourage attendance.

Handouts can have a supporting effect. They inform briefly and quickly about an offer. As direct mail, they reach specific groups of buyers. Handbills are also quickly thrown away.

Posters can serve as points of attraction. They attract attention over a longer period of time. They need to be well designed to get them displayed. Why should someone put up your poster? A good advertising effect is achieved by large posters - in "favourable" locations.

Promotional gifts have a commemorative value. They maintain friendship. With pens, tear-off pads, writing pads or a folding rule, a "subliminal" attention is achieved. It is not to be hoped to sell just because of a promotional gift - unless it is something really special. The boundaries between promotional gift, favouritism or even bribery are fluid.

Advertising on radio and television encounters special conditions. Commercials are produced very professionally in the established broadcasters. They are relatively expensive because they have a high degree of distribution. The effect is only created by repeated broadcasts. A one-off advertisement would be lost in the flood of advertising. For radio and television advertising to reach customers, it must be broadcast in a typical grid, e.g. time, slot, rhythm.

Advertising via local radio stations enables local containment. It could also be affordable for start-ups.

Transport advertising on buses, trams or taxis reaches the population of a region for a long time. Private cars and company vehicles can be used for advertising. Street posters, street signs or advertising on a house wall are potential advertising media and carriers.

Merchandising can promote sales. Items and merchandise are produced as sales promotions to support the company's main business. Own product lines with the company logo/signet are produced and sold. Merchandising can grow into a separate line of business for large companies, e.g. Bayern Munich.

Word-of-mouth

The best advertising is that which others do for you. Word-of-mouth advertising is extremely successful. If people talk positively about your company, it speaks for you. The opposite can have devastating consequences. Word-of-mouth advertising is so successful because it is authentic. Here, person A talks to B, who knows the product or service from personal experience. No one can speak better about a good product or service than the person who positively assesses the benefits for himself.

Sales television relies heavily on this factor and lets the "satisfied customers" speak personally in rows.

E-commerce / Internet

The internet offers unimagined possibilities for advertising. Trade is changing.  This expands the clientele for every company. Almost everything is traded online. Advertising on the Internet must find an answer to how it wants to be found in the flood of millions of homepages. It is not enough to create an Internet presence and believe that customers will find the company only because there is a website. Those who want to sell via the Internet must make it clear in their advertising strategy how they want to advertise to their target customers on the Internet.

Advertising budget, timetable and performance review

With the concrete determination of the advertising media, it must be determined at which point in time money is to be spent on advertising. The amount of the budget is influenced by several parameters. It must be determined:

• What is the company's starting situation? A start-up needs to create an image brochure or basic product information; a market leader will expand targeted customer approaches.
• What is the nature of advertising within an industry? Pizzerias like to advertise with handouts. The salesroom or the restaurant itself is advertising. A pizzeria may belong to a franchising chain and take over the advertising material.
• What is to be achieved with the advertising? In what time span should advertising take place?
• How big is the advertising budget in terms of turnover? Is it two, five or even 20 percent of turnover? It has to be determined which advertising pays off? If a small ad is placed in the daily newspaper on Saturday, the reaction can be determined on Monday at the latest. After that, the effect is almost zero.
• Simple statistics (tally sheets) can be easily created. When customers are asked where they found out about the company's offer, the impact analysis begins. If you do this regularly, you will get a good insight into the advertising behaviour of your customers.

Advertising matrix

An advertising matrix aims to link the advertising budget with the advertising measures. The business plan should not indicate everything that could be possible, but what is concretely planned for marketing the offers in the first business year. For the following years, a projection is to be made.

The following advertising matrix gives possibilities to advertise. It gives guidance on the specification of advertising. Budget planning is to be done on a monthly basis.

Advertising must be planned in terms of time, content and budget. A one-off opening advertisement is not enough. "If you don't advertise, you die!" is a simple sentence that is essentially correct. The advertising plan should be set up for at least one year. The budget has to be in proportion to turnover and earnings. The graphic design of the advertising material should be done with professional help, if possible with the help of an agency. This does not have to be expensive. A professional look pays for itself. A "cheap" advertisement can become anti-advertising.

Figue 5: Advertising matrix

Checklist for your business plan: Marketing & Sales

What is the best way to sell your offers to the competition?

1. Make relevant statements about the marketing concept for your company.
2. What is your marketing concept?
3. What is your marketing strategy?
4. What is your product policy?
5. What is your distribution policy?
6. What is your pricing policy? What are the market prices? What are the competitors' cost prices?
7. What is your communication policy? How do you want to communicate with your customers?
8. What means of communication do you want to use?
9. Create an advertising matrix for your company.