The tactical plan answers questions like:
Do you need a direct mail campaign?
How do you get existing customers to come back?
Which is the best type of advertising?
How do you approach people for referrals?
Consequently the tactical plan covers only 12 months and it focuses on what you are actually going to do in your business during that period. It usually concentrates on promotional tactics, and is a short-term action plan aimed at providing specific results.
To begin, you will need to select your target markets.
Select targets for the coming year
The most important task is to select the right targets. The first target is always existing customers. You should split existing customers into a number of subgroups, for example:
‘Gold’ customers: your best customers, or those who could potentially grow into best customers
Key people who create word-of-mouth business for you
People who refer business to you.
Then other targets such as potential or new customers. For example:
Potential customers you have not yet approached in your region that are similar to the above list of existing customers
Potential customers of a similar profile in other regions
New targets such as hospitals, kindergartens
New targets such as the retired section of the population, or teenagers.
The idea is to split your market into subgroups because it is more cost effective to target these with specific promotional activities than broad coverage. For example, if your main target is large companies in your local region, then broad newspaper or radio advertising would probably be irrelevant. The best tactic would be to obtain a list of such companies and personally visit them.
Target only the biggest or most viable groups first, and remember your business limitations. Do not target large corporates and then find you cannot deliver what you promised. You only get one chance.
Once you have selected your targets (you could have between three and five groups) the idea is to develop specific tactics for each.
The key point to note is that you should not approach your promotional planning by thinking vaguely: “we must do some promotion, so how about some newspaper and radio adverts, a couple of flyers, a few visits, and business card circulation?”
You need to be a lot more specific. A better approach is to say: “right, we want to target existing customers, so we’ll start a newsletter, post them all a discount card, and run a special sales evening just for them.”
There are a number of steps to take before you launch into your promotional brainstorming.
1. Select one target from your list
For example, let us assume you want to target students as a specific group.
2. Consider adjustments
Do you need to adjust any parts of your business for this target market? Namely:
The price? In this example you might give a student discount.
The product or service? In this example you might want to repackage.
How you deliver or distribute? In this example you might offer free delivery.
Adjust these three variables of price, product and place (distribution or location) only if appropriate.
3. Promotions 12
Create promotional tactics especially for this target.
In our example, promotional tactics for the student target market might include:
contacting clubs the target group might belong to (such as rugby or netball clubs) and offering their members a discount
mailing out promotional material with their club newsletter by offering to contribute towards postage costs
advertising in magazines or newspapers they are most likely to read, or on radio stations they are most likely to listen to
sponsoring a charity and getting some coverage in their mailouts
finding a database of students and mailing to them (for example another business that has student customers, where you can jointly mail, without breaching the Privacy Act)
promoting your business on a website that students are interested in (such as music or travel).
You get the idea. The point is the promotional tactics developed are relevant only to the target you are aiming at. By reducing promotional wastage you are saving considerable marketing money.
And remember, there is no such thing as ‘everyone is my market’ as it simply is not true.
4. Repeat the steps for other targets
When you have completed this exercise you may end up with a total promotional cost larger than your planned budget. In this case you will have to set priorities from the ‘must do’s’ to the ‘would be nice’ and ‘not crucial to success’ ideas.
Did the tactical plan work?
Did the plan work, or did only certain parts of it work? To answer this question we have to monitor what happened (without spending too much time collecting data).
Continually measure and fine-tune your marketing tactics, deleting any idea that performs poorly. Some ideas you may keep for other reasons, for example, the web page. Although the page may not yet be providing new customers it might be fundamental in keeping the ones you have and be necessary to your future plans.
Another way of deciding if the tactic worked is to calculate a simple break-even point. Let us take advertising as an example:
If you spend $1,000 on an advert and your gross profit is around 50 percent, you will need $2,000 in sales just to cover the cost of the advert.
The gross profit may be lower, however, because advertising often promotes a sale or special, reducing the margin. So if the $1,000 advert promotes products where the gross profit is only 35 percent, for example, suddenly you now need $2,858 in sales to cover the cost.
When it comes to marketing budgets ,often there’s never enough money to cover all that you want to do. The biggest problem is over-capitalizing. In other words, spending $5,000 on marketing might bring in the same amount of business as spending $20,000.
Most businesses spend from 0 to 6 percent on marketing. Zero percent may apply if you are clever enough and word of mouth has built to such an extent that you have the luxury of not needing to promote (the ideal situation). Six percent is likely to apply if you have just started your business and need some awareness, or you are in a very competitive industry.
How should the promotional budget be split among the different methods of promotion? Here’s our guideline for a retailer in a good location:
% Promotional budget split 5% Personal selling 20% Direct mail/e-commerce 5% Publicity 5% Public relations 10% Word of mouth 35% Sales promotions/merchandising 5% Advertising 5% Monitoring impact of results 10% Contingency 100 TOTAL percent
Always have some contingency funds available as there will be times when even the best planning will not foresee events that you can take advantage of (a competitor going bust, or some event like your local sports team winning the competition).
Building your credibility
It is much more difficult to convince people to do business with you when you have little or no established credibility. This does not mean that you have poor credibility, but rather that those customers who have never heard of, or dealt with, you will perceive you as having limited credibility. This is likely for new businesses.
People are naturally apprehensive about switching to any new company. They perceive that there is a risk associated with the change: for example, the risk of being overcharged, of encountering rudeness or of experiencing poor work habits. Few customers will switch to your company simply because they are looking for a change.
So assuming this, you must be prepared to convince them or be the next best choice.
The need for a credibility strategy
Before seeking new customers, a proactive step is to develop a credibility strategy. The strategy attempts to offset and address as many of the customer’s apprehensions as possible. If this strategy is implemented properly, it will give the customer confidence in dealing with you and consequently it should be much easier to gain new customers,.
Remember that customers will do business with a company or person who is credible, expert and trustworthy.
Therefore when developing your credibility strategy, your aim is always to:
increase your credibility
reduce the level of risk and apprehension the customer may have about dealing with your business.
Get these elements right and you will find it much easier to promote to new customers and retain the ones you already have.
Your competitive advantage
Finally, it is crucial that you emphasis your competitive advantage at an early stage in your business plan, this way the reader will understand the concept of your enterprise as they continue to work through your information.
A competitive advantage is what you are better at doing than anyone else, or, in other words, how you manage to stay in business against the competition.
Could you list your key advantages?
Could your staff?
Could your customers?
A competitive advantage is only relevant when a customer (not you) thinks it is an advantage.
Remember that your competitors include other businesses competing for the consumer’s discretionary spending dollar, not just those in your industry. So to survive you need as many of the following as possible. If you are lacking some, then go and get them.
Competitive advantages include the following:
Unique or exclusive product
You can gain an advantage if you are able to source product or deliver services that the competition cannot. From your strategic thinking you will have highlighted services that customers may need, but no one is currently offering a cost-effective solution.
How you and your team deliver your product or service is a key factor in customer satisfaction. Never underestimate the value of excellent service, starting with the first point of contact – how does your phone get answered? Regularly phone (or ask a friend to call) your business to check on the telephone welcome.
You and your image
Yes, believe it or not, you are also a competitive advantage. No one else has your particular mix of skills.
You must have better knowledge than the other businesses around you. Information today is power and you need to gain the advantage over your competition in this regard.
Better supplier relationships
Being on good terms with your suppliers is an overlooked competitive advantage. Perhaps you have a strategic alliance or contract with them that the competition cannot match.
Large supplier backup
Being linked to a large well-known supplier will help. They conduct all of the market research, develop new products and services, undertake customer analysis and provide nationwide branding and advertising that all helps to enhance your credibility. A contract where you have exclusivity of supply is even better.
The quicker you can deliver the product or service at a consistent quality the better.
Being the cheapest is the easiest tactic to implement, but be careful as long-term survival in business often requires high margins. Generally businesses that compete on low price do so because they have a cost advantage: they can get stock or materials cheaper. They still might have high margins!
But being cheapest is the hardest point of difference to defend, even with a lower buying price advantage.
Building a strategic alliance with a customer, a supplier or a business that sells complementary products or services is an advantage. You might even consider an alliance with a competitor, preferably through a formal contract or agreement that locks in work for a period of time.
Owning unique technology that no one can access, or will have difficulty copying, can be a great advantage.
E-commerce is becoming more and more of a competitive advantage for many small businesses. You must mention how you intend to use e-commerce within your business. For example, e-commerce has enabled you to lower costs, improve customer relations, speed up delivery, communicate more easily with customers—or maybe even provided you with a new business model which has created new income streams.
Environmental and social issues offer a number of opportunities for you to gain a competitive advantage. For example, the way you design, manufacture and package your product using environmentally responsible, sustainable or recyclable materials may make it better for the environment than competitors’ products. If you can add an environmental or fair trade label such as Environmental Choice or Enviromark, so much the better.
Quality means conforming to customer requirements: the right product at the right time at the right price. Meeting the competitive advantages above will give you a quality product and a quality service.
It is important to briefly outline key achievements to date—you may be pleasantly surprised! This exercise provides you with an indication of the momentum you may currently have.