Editor's note: This article originally published on Feb. 28, 2002.
A few years ago, at the height of the Internet boom, I was consulting with startups, helping them develop business plans and taking them to banks or venture capital firms for funding. I repeatedly saw the same mistakes: rosy scenarios of 20 percent market penetration in one year, financial projections that exploded into the million-dollar range instantaneously, and competitive positioning statements that always began with, "We have no competition."
When anyone questioned these improbable scenarios, the immediate response was always the same: "You just don't get it!" The environment of huge IPOs and free-spending venture firms had warped the business-planning process and encouraged entrepreneurs to fudge the numbers.
Those days are long gone.
In the current economic environment, business plans need to be skewed toward clear, realistic, achievable goals. In the first installment of this three-part series, I presented the six elements of a business plan:
- Business mission
- Competitive position
- Target marketing
- Sales and marketing plan
- Operational plan
- Costs and revenue forecasts
In this article, I'll cover target marketing and the development of a sales and marketing plan. I'll also share some of my experiences helping businesses come up with their own marketing plans.
A fundamental principle of modern business is that you can't be everything to everyone. If you're going to sell high-end cappuccino for four bucks a pop, you're not going to get the coffee-and-doughnuts crowd.
Consultants have to make the same types of decisions. Are we going after contracted-technician business or strategic, CIO-level consulting engagements? Are we competing in a rural township or in the financial district of a major metropolitan area? All of these decisions, and more, are part of target marketing. The market analysis section of the business plan studies factors like these:
- The market's geographic boundaries: Are we a local or neighborhood firm competing in a limited area, or are we competing across a city or a region?
- The market niche we're targeting: Are we "the best PC technicians for the best price," or are we "the CIO's strategic partner"?
- The characteristics that define our target prospects: Are we going after the small and medium business market or the Fortune 500? Are we focusing on Wall Street giants or the agribusinesses of Manhattan, KS?
- The size and potential of the selected markets: This is where the discipline of reality must be applied. You may hope for a 20 percent penetration and millions of dollars of revenue, but does the market you've targeted support those projections?
Remember, this is a research and analysis task. You need to understand the geographic and economic marketplace and build a convincing plan that illustrates who your clients will be and what the potential is. Some questions you'll have to consider are:
- Who are the major corporations in our area?
- Who uses IT services the most?
- What are the biggest industries?
- Is the economy going up or down?
- How does the cost of living and the price of services compare to the national average?
One of the most accurate sources of information to help you answer such questions is the U.S. Census Bureau's Economic Census, designed to help uncover important economic factors for every specific geographical area in the United States. Well-stocked public libraries will also have tools such as subscriptions to Sorkins Directories, a listing of company profiles, or online databases such as ReferenceUSA, which lists 12 million businesses across the United States. Other resources, such as the local chamber of commerce and the local business newspaper, can also be helpful with this research. When in doubt, consult a reference librarian — the researcher's best friend.
The point of this exercise is to develop a target market analysis that illustrates that you've realistically analyzed your marketplace and that it can sustain and support the business goals you've set. Pay special attention to defining your niche and clearly stating what segment of the market you'll be targeting.
Once you've targeted your market, the next question you need to answer is, how will I get their attention and close the sale? This is where your sales and marketing plan comes in.
Putting these principles into practice
Here's an example from my work as a consultant. Recently, I was hired by a large global consulting firm to assist in the development of a marketing campaign. I began my engagement by reviewing the firm's marketing material. In all of its brochures, the firm emphasized a set of packaged services, such as migration, e-commerce, and network design. While I agreed that highlighting specialties and competencies was a good idea, I suggested that the client focus less on "canned" service packages and more on success stories and case studies of successful engagements.
Firms will often try to "product-ize" services to make them easy to describe and articulate for sales teams. The problem with this type of marketing is that, while products are essentially the same for every customer, services are customized for each engagement.
Prospects will often chafe at the idea of a preexisting package. They wonder, "What if the package isn't exactly what I need? Will the service provider be flexible and create the engagement to fit my expectations, or are they going to try and jam me and my project into a 'box' based on their preexisting packages?"
In this case, I advised my client to build the marketing material around the concept of flexible, customized services that are specifically designed for the customer for every engagement rather than on "packages." By creating case studies and success stories that spanned multiple industries and highlighted the firm's ability to apply technology to a wide range of business problems, the firm was able to send the message that their approach could ensure that their clients' IT investment could yield real business results.
By making the creation of a success story an integral part of the close out of every engagement, this firm built a library of marketing material that sent the right message of flexibility and client-centered services.
Sales and marketing plans
Marketing and selling services is very different from selling products. Product marketing is all about the product and the firm that's selling it, while services marketing is all about the client and his or her special needs and circumstances.
When selling products, the sales cycle culminates when you make the sale, while in services, the relationship really begins when you close the deal. Product selling is transaction-oriented, while services selling is relationship-oriented. Product businesses sell based on the "four Ps:" product, price, place, and promotion, while service businesses sell based on the "three Rs:" referral, reference, and reputation.
For all these reasons, the creation of a marketing and sales plan for an IT consulting business is a challenging undertaking. The marketing plan for any business answers these basic questions:
- How will I make my target market aware of my firm and its services? Will I advertise in the local paper, give seminars and speeches, send out a newsletter?
- How will I differentiate my marketing message so my target clients will buy from me instead of my competitors? Will I sell based on low price, on my experience, on specialized expertise?
- What mix of marketing efforts will I use to get my message across? For example, will I place an ad in the local business journal that promotes a free seminar I'm presenting?
- How will I sell my services? For example, will I have an outbound sales force that cold-calls or knocks on doors, or will I sell my services through a broker?
Unlike marketing campaigns for new products, which typically include advertisements in multiple mediums and perhaps free samples and direct mail appeals, most professional service firms build their marketing campaigns around the creation of credibility and reputation.
To get this effect, many consultants focus their marketing efforts on writing articles, appearing as an expert at industry conferences or local trade shows and other speaking engagements, and other credibility-enhancing activities.
Be aware of your strengths and weaknesses. For example, if you've never written a letter before, you may struggle getting articles published. If you're uncomfortable with public speaking, presenting seminars may not be your best marketing vehicle. This doesn't mean that you can't develop those skills, of course. I was once a nervous public speaker, but through preparation and practice, I have transformed myself into a comfortable presenter and get a large portion of my engagements from my seminars and presentations.
Rick Freedman is the author of three books on IT consulting, including "The IT Consultant." Rick is an independent consultant and trainer, working, through his company Consulting Strategies Inc., to help agile teams and organizations understand agile practices and migrate successfully.