Why you need a business plan before a marketing strategy.
So, you’ve got a brand spanking new or relatively young business. You have a good idea, a logo and a premises to house your small team of staff (or it could just be you!). You can’t wait to start interacting with customers and see the orders rolling in. All of this means you’re ready for some marketing, right? Not so fast.
Sure, marketing is designed to help target your audience and draw customers — but first, you need to have a business plan. It may not seem like the most exciting activity in the world, but crafting a business plan is absolutely essential to good marketing. Without one, any marketing activities undertaken can be costly, time-consuming and less effective. In other words, marketing success relies on a solid business plan.
The truth is that starting a business requires hard work and careful planning. The good news is that this planning all pays off when your business is up and running and chugging along like a steam train.
Creating a successful and sustainable business is a long game — and it starts with a business plan.
What is a business plan?
In short, a business plan helps determine what makes your business unique, what exactly you’re offering, who your customers are likely to be and how your business is actually going to make money.
Of course, it’s also both much bigger and more granular than that. It begins with knowing your vision, mission and values, which then crystallise into concrete goals. These goals help you formulate your business’s key systems and processes.
Why is it important?
A business plan is the bridge that links your business with your marketing efforts. Without that bridge, you might find yourself exerting far too much energy swimming across a sea of confusion and unstrategic activity when things would be far easier and more effective with a plan (we love an ocean-inspired metaphor here at PIER). You can launch a digital marketing campaign with all the gusto in the world — but if you haven’t thought long and hard about who you’re targeting and why, it ends up being a case of “throw everything at it and see what sticks”.
Also, the systems and processes laid out in your business plan are what make your business scalable, because they create the structure that makes it possible to expand your team (and therefore your business) rather than having to reinvent the wheel each time you grow.
Hence, once a business is established, customer retention becomes both more economical and more powerful than acquisition. And now for the fun part: actual strategies to encourage customer retention.
Crafting a business plan
At PIER, we’re big fans of the Strategyzer’s Business Model Canvas, which lays down nine building blocks every business needs to start with as a foundation. You don’t need to have every block covered off before marketing can commence: marketing activity can actually happen alongside the formation of these blocks, and in fact the first six blocks involve marketing.
1. Customer Segments
Step one: Know your customers and who you’re targeting. Rather than trying to be all things to all people, it’s wise to segment your target audiences so that you can develop your sales offering and market to them more effectively. While some businesses are in “mass market” industries (think, for example, of a supermarket or electrical goods store) most of us are dealing with a small slice of the consumer base and we need to know the needs and wants of our particular slice. Research can be a helpful tool in this step.
2. Value Propositions
While all businesses are unique in some sense, the chances are your industry is flooded with similar offerings. If you’re joining an existing and possibly saturated market, you need to communicate your edge. And even if the market you play in is new, innovative and niche, you need to be crystal clear on your selling point.
This step is about clarifying exactly what you’re offering and what makes your business unique — your Unique Selling Proposition (USP) — which could be something as simple as that you provide prompt and sincere customer service. Again, research is important here (especially research on your particular market and where you sit within it). Knowing this will inform your messaging and marketing strategy.
Channels are the ways in which you reach your customers. They comprise direct channels such as your sales force and website, and indirect channels such as bricks-and-mortar stores, partner stores and wholesalers. There are also “Owned Channels” (that is, channels owned by your organisation) and “Partner Channels” (those owned by an outside organisation). Ideally, your business would employ a mix of both — while Partner Channels lower your margins, they also garner more exposure.
4. Customer Relationships
As the bread and butter of your business, the way you interact with your customers matters. Depending on your business model, customer interaction might involve personal assistance over the phone, via email or face-to-face; self-service; automated service (via the phone or online chat functions, for example); web forums; call centres; co-creation (in the form of user reviews) and so on. If yours is a specialist industry where customers require a high level of guidance then the infrastructure for your customer relationships will look different to a business that provides fast solutions to common problems.
5. Revenue Streams
There are a multitude of ways in which revenue flows into a business. There are asset-based businesses that sell physical products (books, make-up) or services; those that charge usage fees (hotels, couriers) or subscription fees (Netflix); those that make money from leasing or renting (hire cars) or from licensing (stock photos); those that attract revenue through advertising fees, and so on.
Your business might be a combination of various revenue streams, but knowing where your money will actually come from helps focus your attention and efforts on your most profitable streams (see FranklinCovey’s Four Disciplines of Execution). It wouldn’t make sense, for example, to devote fifty per cent of your time, energy and budget to selling sneakers in-person if your business actually derives 90 per cent of its revenue from the online sale of boots.
6. Key Resources
This step is about determining and defining the resources that your business relies upon to operate. Resources can mean everything from your production facilities and physical products to intellectual property, finance (funds from banks or investors) and human resources (experts to develop your products, or staff to serve your customers). Again, this will depend on the nature and structure of your business, but it’s essential to work out what the resources are that keep your operation afloat.
7. Key Activities
While certain aspects of a business can be automated, no business is truly “set-and-forget”: it requires maintenance. The Strategyzer folk tell us that key activities fall into one of three categories. Production, which is the main activity in the manufacturing industry, involves designing, making or delivering products. Problem solving is about creating new solutions to customer problems and is a key activity in the services industry. The third category is the provision of a platform or network (think eBay or Amazon).
Whichever category you fall into, your key activities are the things your business must continue to do (and continue to do well) in order to stay relevant and meet the needs of your customers.
8. Key Partnerships
Key partnerships are becoming more and more important to businesses (in fact, many businesses couldn’t function without them). This step includes alliances forged with your non-competitors, strategic partnerships with competitors and relationships with suppliers. Basically, it’s about your contacts, connections, network and relationships.
There are various motivations for these partnerships, which range from optimisation and economy of scale (for example when infrastructure is shared between businesses to save on cost); reduction of risk and uncertainty (pooling knowledge and resources to come up with a solution); and the acquisition of particular resources and activities (outsourcing certain tasks).
9. Cost Structure
Finally, your business plan needs to be solidified through the process of actually going through and working out all of the costs involved in launching and running your business. Many business owners overlook this step and fail to take into account things like the fact that during the first few years of business they might lose money through not paying themselves a salary and having no other form of employment. Of course, it also involves costs such as the purchasing of stock and equipment, the leasing of premises and paying the staff.
Naturally, your business plan can and will evolve as your business progresses, but having the framework provided by a business plan will set you up for a killer marketing strategy.
If you have any questions about which phase of business you’re in and whether you might be ready for marketing, get in touch with PIER today and we’ll be happy to have a chat.