Developing Effective Business Portfolio in Your Business Plan.
Why Many Business Plans Fail
The bug to start your own business has bitten you and you are talking and telling your friends about it. But stop a minute, what will you sell (the product), who will you sell to (the target customer), what is the price (The price), how will people know about your business (Promotion). Basically that is what entrepreneurs call the marketing mix? These may seem simple questions but actually if you do have an answer to each one of them, then you have no business to talk about. The right answer to each of these questions is what is called a marketing opportunity. A marketing opportunity is a combination of factors that creates a market. A market is a place where you find two types of people, willing buyer and willing seller. Many times we think we have a viable business idea, we talk about it to our friends, relatives or even neighbors and we spend time writing business plans but fail in our business despite how religiously we execute those business plans. Many times this happens because we have not asked ourselves the above questions and if we have then we cannot answer the above questions truthfully. If we have not answered the above questions then it means we have not identified a marketing opportunity. With no marketing mix, then we cannot have a marketing mix and without the marketing mix, then it means we do not have a marketing strategy. Many would be successful business never see the light of the day because the idea owners lack the necessary skills to identify a marketing opportunity, as well as create and implement a marketing strategy. Marketing strategy is basically a plan and execution of any business on how to sell anything in this world. It is the core of sales and profits. It is what gives our business the bottom line as well as, maintain a healthy cash flow. Marketing plan creates our business competitive edge, which differentiate us from other businesses and make us grow. For you to identify a marketing opportunity, the first thing to do is to carry an environmental scanning. This scans both the business’s macro and micro environments. I have talked before on how to carry out environmental scanning, you can get write ups on PEST and SWOT analysis by visiting this blogs archives. The tool for analyzing your macro environment is SWOT analysis and the tool for analyzing the micro environment is PEST analysis. Therefore as you are planning a new business, scan the environment and your business will succeed and grow.
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Your Business Portfolio and Your Business Plan.
We have talked about business plans what makes and breaks business plans. I want add something to your business toolkit; a business portfolio. A business portfolio has been defined as a collection of products that make up your business. A business portfolio is a sum of what your business need to sell to make it in the marketplace. It is the entire line of your products and with each products contribution and role defined strategically. Each of your products must play a critical role in the growth and profitability of the business, now and in future. In a business portfolio development, each product must be described in its current and future role to your business. Your business portfolio must be in line with your business SWOT and your entire business mission and vision. To come up with an effective business portfolio that will serve your business on a long term, you must start by scanning your current business portfolio and ask yourself what role each of your product is playing currently as well as its future role in the entire business. Scanning your business environment gives a clear picture of how your business environment will be today and the future and therefore you will be able to determine the lifespan of each of your products and assigning them a more strategic role as well as allocate the right amount of resources on a long term basis. Scanning the environment will enable you to create the right strategy for your business product line. Your business portfolio must be in line with your business strengths, weaknesses, threats and opportunities. In your business portfolio creation, you must decide on resources allocation and how that will be maintained currently and in the future, the resource allocation will be based on current and future role of your products. The relationship between your business portfolio and the strategy is that your business strategy borrows a lot from your business portfolio. Your business portfolio is the map of what products need to be killed, replaced and which products needs to be maintained and for how long and any products extension your business might need in future. I always say that a business portfolio is your entire marketing strategy. I would like you to start by doing the following: Start by scanning your business environment, and develop your long term product strategy. But all the above are tied to carrying out a market segmentation.
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Market Segmentation, Targeting and Positioning
Segmentation is one of the most important activities in marketing. Segmentation is the process of identifying and developing segments. A segment is a group of people, customers, and businesses processing one or more similar characteristics. A market segment is ideal in marketing because it can provide a basis of providing product or products that meet needs of a specific segment. Within a market segment, the attributes that make the segment classified together are homogeneous but are heterogeneous compared to other existing market segments.
Thus market segmentation is the process of dividing and classifying different customer clusters that share similar attributes within each segment but are different from other segments. When your business is carrying out a segmentation exercise, it must have enough information on the entire market to enable segmenting the market into distinct market segments. Each segment should have similar wants, needs, attitude, demographics, psychographics, lifestyles, life stages etc across the entire segment. After the segmentation exercise, product’s benefits are matched with the needs of the specific segments thus creating relevant products for the specific customer segments. In marketing, matching the needs to benefits is known as targeting and the specific segments for that specific product and benefits is known as the target group. The action of matching the segments to the products in marketing is known as market positioning.
By segmenting the market, one is able to calculate the size of the segments, making it possible for a business to forecast the revenue as well as profits. This is an ideal step when writing a business plan. While developing a business or a marketing plan, the market segmentation exercise enables your business to set effective and tangible targets for each segment based on tangible information as opposed to gut feelings. Market segmentation exercise improves on efficacy, creating effectiveness and efficiency in business and marketing plans, bringing value to your target customers and the business owners.
One key benefit of market segmentation is precise and accurate marketing efforts for each segment, with a clear understanding of who the target customer and consumers are and where they can be found. This saves on your marketing spending, by eliminating trial and error in your marketing campaign. Segmentation saves on time and money because one does not get into the market with products that the market does not require. Segmenting the market enables your business to take advantage of the existing niches based on the customer needs.
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