Many custom electronics companies today have more business than they can handle. Others can’t get enough work and don’t know how to break out of the pattern. Is it by accident or by design? Are you doing the business that optimizes your strengths and resources or simply responding to current market conditions? What happens if the situation changes? How do we deal with threats from all of the various competitors?
While some residential systems integrators may conclude that marketing is unnecessary, experts contend that it is an essential element of any business plan. The fact is that every business in our industry-designer/installer, manufacturer, rep firm or consultant-needs a marketing plan.
Marketing is not just advertising and promotion. In fact, it can be broken down into seven key elements, which this article will refer to as the “Seven Links in the Marketing Chain.” Even if you already have a marketing plan, this article also will suggest ways for you to update your plan.
First, it’s important to make a distinction between marketing and sales. Even the dictionary has a hard time differentiating between the two. They are cross-referenced to the extent that a casual reader could conclude that they mean essentially the same thing. They are, however, as different as art and science, yet willing partners in the custom installation business.
Here is a composite dictionary definition of marketing: The act of developing products or services and exposing them for sale to a specified customer base. Now, compare that definition with the one for sales: The act of causing and expediting a purchase at a specified price (or within a price range). The key word is “specified.” It implies that the activities are deliberate as opposed to accidental or random. In less formal language, here are several ways to say the same thing:
1. Marketing opens the door; sales closes it.
2. Marketing prepares a customer environment; sales operates within that environment.
3. Marketing defines the product (goods and services) and prepares targeted customers to buy; sales finishes the job by completing the transfer of goods.
4. Marketing is the art of communicating with potential customers; sales is the science of converting potential customers into real paying customers.
5. Marketing hooks them; sales reels them in.
Marketing also tends to deal with long-range strategic issues, while sales is about making the numbers happen now. A key point is that they are both important, and you can’t have sustained business success without strength in both areas.
A marketing plan is a written document that describes how you and your company go about developing your products and offering them for sale to your target customers. Your marketing plan has seven elements or “links in the marketing chain.”
Link 1: Product Strategy. Products can be goods or services. Custom industry product examples include categories of goods (audio systems, video systems, home theater, multimedia networking, security, telephony and environmental control) and categories of services (pre-design consultation, systems design, installation, integration of multiple sub-systems, end-user training, maintenance contracts and repair and troubleshooting.)
Key Point: Most custom businesses get involved with multiple product categories.
Link 2: Pricing Strategy. This starts with an understanding of the going price range and trends-how much things sell for or “what the market will bear” financially. It varies widely depending on the product category. Determine if prices are going up, down or staying the same. For example, plasma screen prices continue to come down as a category. Labor rates are generally stable or trending up.
Key Point: While you may not necessarily be able to “name your price,” you have much greater control over your price when you have a pricing strategy that is part of a complete marketing plan.
Link 3: Promotional Strategy This includes an understanding of promotional methods and costs and can include media advertising (print and broadcast), publicity, sales literature, web sites, trade shows, showcase installations and direct marketing.
Key Point: Most people think of advertising when they hear the word marketing. While advertising is one of the promotional options available, there are many others that may be more effective, depending on the circumstances. Further, marketing-as shown in this article-includes the other six links and is not limited to advertising or promotion.
Link 4: Place Strategy. This takes place on two levels. First, the physical location where business is conducted depends on your product focus and can range from home offices to full corporate office/showroom facilities. Second, you need to define your geographic trade area and decide whether you market on a local, regional, national or international basis.
Key Point: Where you conduct business is a marketing decision. While the image presented by your location is important, be sure to weigh the practical considerations like cost and overall feasibility.
Link 5: Salesforce Strategy. Decide who does the selling, what skills your salespeople need and how much it costs to employ good salespeople. Remember that marketing and sales are related, but different. Can a residential systems expert sell into the commercial market? Can your audio person make the transition to whole-house integrated systems? Again, these are marketing decisions and key to your business strategy.
Key Point: Sales can be a full time job, especially for companies that want to grow or explore new markets. Determine who has the time and motivation to sell for you, as well as the skills.
Link 6: Customer Profiles. Write down the key characteristics of your target customers, including:
-Whether they are institutional or individual customers.
-Demographic information-income, education, occupation.
-Geographic information-where they live and/or do business.
-Psychographic information-what they think about.
-Buying habits and preferences.
-Special needs or characteristics.
Key Point: Residential systems customers are relatively simple to target. CEA and CEDIA have published market research that describes the growing home theater audience in detail. Write down the profile of your target customer and screen out opportunities that just don’t fit.
Link 7: Competitive Environment. Identify who your competitors are and write down their strengths and weaknesses. There are two types of competition, direct and indirect. Direct competition involves similar businesses in the same product category. Examples include other contractors, consultants, manufacturers or rep firms.
Indirect competition is any product or service that goes after the same target customer’s attention (“mindshare”) and money. Examples not only include other custom installation specialists, but alternative purchases like furniture, clothing, home improvements, computers, cars, and/or activities like vacations, hobbies, education and leisure.
Key Point: Your direct competitors are generally predictable and easy to understand. Indirect competition tends to be “scarier” than direct competition. Yet, it needs to be reckoned with, and the seven links of your marketing plan are tools to do so.
Why You Need a Written Marketing Plan. Sadly, many businesses in this industry simply never think about all seven links, let alone write them all down. Many of my clients over the years have said “I have a plan. It’s all right up here” (pointing to their head). This is risky business in my opinion. When you do write the plan down, you are more likely to succeed. Writing is a clarifying process. Following the outline above (the Seven Links) also helps you be sure that you are not forgetting anything. You’ll also be able to share your strategic vision and tactical ideas with the people around you, from current employees to prospective investors.
Assuming that you have a good idea of your product strategy and have written a set of financial objectives, the first step toward a marketing plan is the one you’ve just taken: being aware of what’s in a marketing plan.
Now, try this:
1. Understand the market. Do a little market research. Key elements here are pricing trends, customer profiles and competitive environment. Answer the question, “Who are the most successful businesses in my product category and what are they doing to be successful?” This gets you grounded and helps prevent mistakes.
2. Consider the target audience for your marketing plan. Is it just for you and your staff, or will you need to show it to investors or other financial stakeholders? This decision does not change any of the Seven Links, but will have an influence on your written tone, level of detail and timeliness.
3. Start writing. Use the Seven Links as a basic outline. Fill in the blanks as your thoughts occur or as you turn up information. Don’t worry about doing the thinking and writing in the same order as the list.
A Final Word. A common pitfall is to worry about what’s missing, get frustrated, and give up on writing anything down. Now you have perspective. While there are no guarantees in business or in life, you can be sure that you are covering the bases when you understand the details in each of the Seven Links in the Marketing Chain. The chain is only as strong as the weakest link. And yes, you need a marketing plan. Good luck and happy planning!
John Stiernberg is founder and principal consultant with Stiernberg Consulting, the Sherman Oaks, California-based business development firm (www.stiernberg.com).