The Marketing Plan: The Market
Roughly defined, a market is a place populated by sellers and buyers, who interact to exchange goods and services for money or other currency.
Whether you sell a product or a service, you are operating in a market. Your job is to find potential buyers for your goods or services and give them a reason to buy from you. If you are the only source of a product or service in the market, good for you. In the real world, there are others who have similar products or services. It is against these people you compete for your market share.
Competition is good for the market and for the consumer. It helps to keep everyone honest. If prices are too high, competition can help to drive prices down. If one player offers poor quality goods or services, the business will shift to a competitor. Theoretically, the market will reward the seller of higher quality, better service and or the lowest price. These are the fundamental laws of the market to which every entrepreneur is bound.
You are a seller of goods or services or both. Your business will operate in a specific segment of the market, determined by the product or service you sell. Your segment of the market and its scope is determined by the demand for your product or service, given the size of the market and its demographics. For example, you produce a glossy magazine featuring attractions for tourists to the area; restaurants, hotels, fitness clubs, car rental agencies and entertainment. Your income flows from the sale of advertising space in the magazine, less the cost of its production.
The consumers of the information in the magazine are visitors to the area. Your customers are the advertisers in the magazine. Your job is to convince the advertiser that their business will benefit by broadcasting their marketing message in your magazine. The success of your magazine in driving business to your advertisers will influence the prices you can charge for advertising. The year-over-year sustainability of your magazine will depend on the tourist business generated for your advertisers. If they perceive your product is a smart media buy, advertising revenue will continue or even grow. If your product doesn’t deliver, your business will decline.
From this description of your business, one would say you are in advertising or “media”. Your direct competition is any other organization which produces a similar tourist or entertainment guide. In a broader sense, however, you are in the same business as newspapers, radio, television, pay-for-play websites and social media. You are competing with all of them for your customers’ advertising dollar. Your customer has an advertising budget that is a finite number. It is at the discretion of the advertiser what portion of the budget will be spent with you. Generally speaking, the advertiser will look for the lowest cost per thousand or “bang for buck” in advertising. Online or social advertising has the lowest cost per thousand and that’s not your particular business.
Clearly, you need to know your market in general and the forces that influence buying decisions.
You also have to know the demographics on your market. If you are marketing your glossy magazine in a city of one million residents, which attracts 10 million visitors annually, your market reality is vastly different from the same business in a tourist town of 10,000 residents, attracting 20,000 tourists annually. Since the business is driven by tourism, you need to know the demographics of the tourists. Are they well-heeled travelers from outside the country who have a taste for upscale accommodation, food and drink? Or, is the tourist business primarily families traveling for hockey or gymnastic tournaments, who are in search of budget lodging and fast-food restaurants?
Your market can be defined in terms of age, family unit size, economic levels, education and preferences for quality and quantity of goods and services. As a good marketer, you will identify your typical customer profile. This is the “sweet spot” in your market; your bread and butter. Every marketing decision will be made with this market demographic in mind. You should know the characteristics, buying habits and how buying decisions are made in your target market group. You will constantly monitor this group because it will change over time. If you are selling vehicles to families of four with two working parents and two children who are engaged in many sports activities, they need a vehicle to match their lifestyle. Ten years later, when the kids have moved out (hopefully) the empty-nesters may want a different type of vehicle. Another ten years on, when both are retired, they may want yet another vehicle or no vehicle at all. You need to make sure that your market base is broad enough to sustain your business in five, ten and twenty years into the future.
A successful, sustainable business needs a steady stream of new customers to replace those who have moved on. At the same time, the business must read changes in demographics and in the market, adjusting or even re-inventing itself to respond to change. There are many stories of established businesses that failed because the market gradually changed beneath their feet; they did not recognize the shifts or failed to respond.
If you are just starting out, you need to analyze your target market carefully and try to predict where it might go over time. Read trade publications; talk to your suppliers and above all, communicate constantly with your customers.
Marketing can be stated as simply as this: “Figure out what your customers need or want, and sell it to them”. The challenge of course, is in knowing what your customers need or want, and in knowing how much they are prepared to pay.
Marketing requires us to understand our target market and learn what motivates buying decisions. KNOW THY CUSTOMER!