Marketing Plans
Marketing plans are extremely important for both organizing the internal activity of an organization and for representing it in front of external representatives such as investors. Marketing plans can facilitate the understanding of a company’s approach of the market, customers, and competitors. They can therefore motivate employees to perform better or encourage venture capitalist to contribute to provide financial support to a company with a clear sense of direction for growth. While there are different ways in which marketing plans can positively impact the overall performance of an organization, there is no doubt that when designed and implemented correctly, they always have a positive that impact.
The ancient Greek aphorism ‘Know thyself ‘ applies not only to human beings but also to companies. A proof for this comes from the fact that marketing plans usually start to be prepared before the company or the product they are prepared for comes to existence.
Marketing plans’ role is decisive in the beginning since it is always better to assess the market and its needs before investing too much in terms of efforts and resources.
If a company will ever end up with the conclusion that its product or service will not be a success, it is always preferable to get to that finding earlier than later in the process. Furthermore, while investors are happy to support an enthusiastic entrepreneur and its innovative ideas, not being able to transpose the enthusiasm into a well-structured, realistic plan, can represent the cut back that will make the difference between a successful or a failed negotiation.
The ‘know thyself’ principle is also reflected in the fact that companies possessing good knowledge about the strengths they posses and the opportunities existent on the market, can adopt a proactive strategy that allows them to become leaders of the market, to become the exclusive providers for a niche market, or at least to increase their profitability.
Vendor Financing
Ever wonder why some companies make more money than the others? Why some have a higher ROI in spite of being in the same industry as you are? While the others complain about deteriorating margins, these guys can make a lot of money without any problem at all?
Understanding the ROI formula
The Return on investment is a simple ratio, but understanding its implications can help you go a very long way as an entrepreneur. It is simply return divided by investment. You can increase your profitability, which implies increasing your selling price. And you can reduce your investment and with the same returns enjoy an increased profitability.
To take a simple example, if you were selling something for 100 bucks and made a 20% profit, you could increase this profit to 50% if your investment fell to 80 bucks. A 20% decrease in investment led to a 30% increase in profitability.
The important observation is that they are inversely related.
Another important observation is that as costs keep on falling, profitability will increase at an increasing rate. So the harder they fall the better it is for you as they will propel you to a situation of leap-bound growth.
Understanding Control
Now since we know the mathematics of the ROI formula, let’s see what we can do and what we cannot do. In many cases particularly in online retail, increasing your selling price will be a suicidal move. A lot of businesses are built on cost superiority. Customers want cheaper goods which are of the same quality, especially when they can see that the quality is same.
Consider a customer buying a cell phone from you or your competitor. They know that it is the same phone and they are not going to pay the cost of your inability to manage your operations effectively. So the selling price is basically market-driven.
Vendor Financing
Ever wonder why some companies make more money than the others? Why some have a higher ROI in spite of being in the same industry as you are? While the others complain about deteriorating margins, these guys can make a lot of money without any problem at all?
Understanding the ROI formula
The Return on investment is a simple ratio, but understanding its implications can help you go a very long way as an entrepreneur. It is simply return divided by investment. You can increase your profitability, which implies increasing your selling price. And you can reduce your investment and with the same returns enjoy an increased profitability.
To take a simple example, if you were selling something for 100 bucks and made a 20% profit, you could increase this profit to 50% if your investment fell to 80 bucks. A 20% decrease in investment led to a 30% increase in profitability.
The important observation is that they are inversely related. Another important observation is that as costs keep on falling, profitability will increase at an increasing rate. So the harder they fall the better it is for you as they will propel you to a situation of leap-bound growth.
Understanding Control
Now since we know the mathematics of the ROI formula, lets see what we can do and what we cannot do. In many cases particularly in online retail, increasing your selling price will be a suicidal move. A lot of businesses are built on cost superiority. Customers want cheaper goods which are of the same quality, especially when they can see that the quality is same.
Consider a customer buying a cell phone from you or your competitor. They know that it is the same phone and they are not going to pay the cost of your inability to manage your operations effectively. So the selling price is basically market-driven.