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This sample marketing plan was created with Marketing Plan Pro software.

As the following details show, we need to improve our gross margin and contribution margins. The business has been trending towards less profitability because we've been caught in price competition. We need to reverse that trend.

Break-even Analysis

For our break-even analysis, we assume running costs of approximately $120,000 per month, which includes our full payroll, rent, utilities, and an estimation of other running costs. Payroll alone, at our present run rate, is only about $55,000.

Margins are harder to assume. Our overall average is based on past sales. We hope to attain a higher margin in the future.

The chart shows that we need to sell about $400,000 per month (8,000 units) to break even, according to these assumptions. This is about half of our planned 1997 sales level, and significantly below our last year's sales level, so we believe we can maintain it.

Break-even Analysis

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Break-even Analysis
  
Monthly Units Break-even8,000
Monthly Revenue Break-even$400,000
  
Assumptions: 
Average Per-Unit Revenue$50.00
Average Per-Unit Variable Cost$35.00
Estimated Monthly Fixed Cost$120,000

Sales Forecast

The $6 million sales forecast is shown in detail in the tables and charts below. This represents a 20% increase over the present year. We believe it is a conservative forecast, and we are sure we can make our numbers this year as a result of more effective marketing.

The data shows that we are still unable to attribute our sales in any significant way to our sales and marketing program. The "Other Sales" type shown here is the general sales coming in that is not tied to a specific type of program. This is obviously by far the largest portion of our projected sales. Advertising comes second.

This doesn't indicate a problem with the plan or our implementation; it is just a fact of life. Much of our marketing activity generates sales in ways that don't allow us the luxury of tying it back directly to a specific program.

Sales Forecast

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Sales Forecast
 20012002200320042005
Unit Sales     
Systems1,6661,8332,0162,2172,439
Service4,9755,4736,0206,6227,284
Software3,7254,0984,5074,9585,454
Training2,2302,4532,6982,9683,265
Other4,5755,0335,5366,0896,698
Total Unit Sales17,17118,89020,77722,85425,140
      
Unit Prices20012002200320042005
Systems$1,976.89$1,976.89$1,976.89$1,976.89$1,976.89
Service$76.38$76.38$76.38$76.38$76.38
Software$214.56$214.56$214.56$214.56$214.56
Training$50.67$50.67$50.67$50.67$50.67
Other$300.00$300.00$300.00$300.00$300.00
      
Sales     
Systems$3,293,502$3,623,639$3,985,410$4,382,765$4,821,635
Service$380,001$418,028$459,808$505,788$556,352
Software$799,253$879,267$967,022$1,063,788$1,170,210
Training$113,000$124,294$136,708$150,389$165,438
Other$1,372,500$1,509,900$1,660,800$1,826,700$2,009,400
Total Sales$5,958,257$6,555,128$7,209,747$7,929,431$8,723,034
      
Direct Unit Costs20012002200320042005
Systems$1,680.36$1,686.83$1,686.83$1,686.83$1,686.83
Service$45.83$40.00$40.00$40.00$40.00
Software$160.92$154.89$154.89$154.89$154.89
Training$10.14$10.00$10.00$10.00$10.00
Other$150.00$150.00$150.00$150.00$150.00
      
Direct Cost of Sales     
Systems$2,799,479$3,091,959$3,400,649$3,739,702$4,114,178
Service$228,004$218,920$240,800$264,880$291,360
Software$599,443$634,739$698,089$767,945$844,770
Training$22,602$24,530$26,980$29,680$32,650
Other$686,250$754,950$830,400$913,350$1,004,700
Subtotal Direct Cost of Sales$4,335,779$4,725,099$5,196,919$5,715,557$6,287,658

Sales by Manager

Sales by Manager: As might be expected, Leslie has by far the largest sales quota to manage. This is suited to our strategy of putting Leslie in charge of the sales force, and tracking sales through the sales force. Details follow.

Sales Breakdown by Manager

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Sales by: Manager
 20012002200320042005
Sales     
Ralph4,1184,2354,6685,1535,351
Leslie10,90013,33114,79316,13817,129
Sonny107254271372456
Jan1,0234687828661,671
Casey435237259319533
Other588365460
Total17,17118,89020,77722,85425,140
Average2,8623,1483,4633,8094,190

Sales by Tactic

Our sales don't really breakdown well into marketing tactics because we are still selling the same main products and services: systems, installation, and so on. However, we can still make this breakdown to at least show how we expect to see increasing sales of training, network services, and sales directly related to customer contacts and upgrades.

Sales Breakdown by Product

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Sales by: Tactic
 20012002200320042005
Sales     
Networking8,6179,94210,95112,04713,258
Training1,1771,3261,4991,6721,874
Custom Solutions7389221,0651,2401,413
Sales per Customer4095486928651,096
Other6,2306,1526,5707,0307,499
Total17,17118,89020,77722,85425,140
Average3,4343,7784,1554,5715,028

Sales by Product

Sales by Product: The $6 million sales forecast is shown in the following table and chart. As always, our largest single sales item is the sales of systems. The next largest item is the general, non-specific sales, which of course will also be mostly systems. The details follow.

Sales Breakdown by Tactic

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Sales by: Product
 20012002200320042005
Sales     
System8,91710,44011,48412,63513,897
Software1,0761,3051,4361,5831,544
Service2,3262,6102,8713,1593,474
Training313475479491512
Other4,5394,0604,5074,9865,713
Total17,17118,89020,77722,85425,140
Average3,4343,7784,1554,5715,028

Expense Forecast

The following marketing budget comes to a total of less than $450 thousand. This is actually a decrease over the $485 thousand we spent this year on the marketing budget. We believe we can get more effective marketing with less money, because we are managing the marketing better.

Marketing Expense Budget

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Marketing Expense Budget
 20012002200320042005
Advertising$150,000$250,000$225,000$200,000$200,000
Catalogs$25,000$28,000$31,000$34,000$37,000
Websites$113,300$125,000$138,000$152,000$167,000
Promotions$16,000$18,000$20,000$22,000$24,000
Shows$20,200$22,000$24,000$26,000$29,000
Literature$7,000$8,000$9,000$10,000$11,000
PR$1,000$1,000$1,000$1,000$1,000
Seminars$31,000$34,000$37,000$41,000$45,000
Service$10,250$11,000$12,000$13,000$14,000
Training$60,000$66,000$73,000$80,000$88,000
Other$12,000$15,000$20,000$25,000$30,000
 ------------------------------------------------------------
Total Sales and Marketing Expenses$445,750$578,000$590,000$604,000$646,000
Percent of Sales7.48%8.82%8.18%7.62%7.41%

Expense by Manager

Budget by Manager: As the following table and chart show, the largest budget piece is the $151 thousand (almost entirely advertising budget) managed by Ralph.

Expense Breakdown by Manager

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Expenses by Manager
 20012002200320042005
Expenses     
Ralph$151,000$163,080$176,126$190,217$205,434
Casey$65,700$70,956$76,632$82,763$89,384
Leslie$75,000$81,000$87,480$94,478$102,037
Sonny$111,050$119,934$129,529$139,891$151,082
Jan$31,000$33,480$36,158$39,051$42,175
Other$12,000$109,550$84,074$57,600$55,888
Total$445,750$578,000$590,000$604,000$646,000
Average$74,292$96,333$98,333$100,667$107,667

Expense by Tactic

Expenses by Tactic: As our budget in detail shows, we are following our priorities with our marketing expenditures. Most of our expenses follow the main priorities as assigned in the strategy pyramid. For this year, we plan to spend 80% of our sales and marketing budget on the priority areas related to tactics. That percentage will increase to more than 90% during the fifth year of our marketing plan.

Expense Breakdown by Product

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Expenses by Tactic
 20012002200320042005
Expenses     
Networking$70,500$80,000$100,000$120,000$140,000
Training$41,000$50,000$60,000$70,000$80,000
Solutions$58,000$70,000$80,000$90,000$100,000
Market the Company$19,500$20,000$20,000$20,000$20,000
More Contacts$85,000$90,000$100,000$110,000$120,000
Sales per Customer$97,000$110,000$120,000$130,000$140,000
Other$74,750$158,000$110,000$64,000$46,000
Total$445,750$578,000$590,000$604,000$646,000
Average$63,679$82,571$84,286$86,286$92,286

Expense by Product

Budget by Type: The largest single expenditure program is advertising, at $150 thousand. This is actually $30 thousand less than we will have spent this year. The second largest is mailing, which is a priority because of its importance to our database marketing strategy.

Expense Breakdown by Tactic

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Expenses by Product
 20012002200320042005
Expenses     
Systems$90,000$97,200$104,976$113,374$122,444
Service$59,750$64,530$69,692$75,268$81,289
Software$22,000$23,760$25,661$27,714$29,931
Training$25,800$27,864$30,093$32,501$35,101
Other$248,200$364,646$359,578$355,144$377,235
Total$445,750$578,000$590,000$604,000$646,000
Average$89,150$115,600$118,000$120,800$129,200

Linking Expenses to Strategy and Tactics

We plan to spend about 7-8% of sales on sales and marketing expenses. As we look at specific breakdowns of sales and expenses by target market segment, of those sales that can be identified by segment the vast majority are small business, and our expenses that are tied to segments are also a ratio of 3 to 1 small business, so that matches.

Less than half of our sales and marketing expenses actually tie into the specific market segments. This makes sense for our marketing plan, since the benefits offered to both segments are frequently quite similar.

Our breakdown of expenses by product shows that we are following through on our strategy of migrating sales to the higher-margin and more-defensible product areas, particularly training and service. Although our systems sales continue to contribute the bulk of sales, the transition in expenses support our strategy.

Contribution Margins

Unfortunately, as the table shows, our contribution margin is an unimpressive 7% this year and that's the best we can do. Our gross margin has fallen significantly and we need to take steps to repair it, and, furthermore, we need to do some extra marketing to reposition ourselves with the new strategy.

The point is, however, that we are going to improve this margin over time. We expect the gross margin to go up to 25%, and the contribution margin to go up to 18% as we implement our new strategy. That's one of the main points of this plan.

Contribution Margin

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Contribution Margin
 20012002200320042005
Sales$5,958,257$6,555,128$7,209,747$7,929,431$8,723,034
Direct Costs of Goods$4,335,779$4,725,099$5,196,919$5,715,557$6,287,658
Other Variable Costs of Sales$263,165$143,103$156,195$154,337$168,584
 ------------------------------------------------------------
Cost of Goods Sold$4,598,944$4,868,202$5,353,114$5,869,894$6,456,242
      
Gross Margin$1,359,313$1,686,926$1,856,634$2,059,537$2,266,792
Gross Margin %22.81%25.73%25.75%25.97%25.99%
      
Marketing Expense Budget20012002200320042005
Advertising$150,000$250,000$225,000$200,000$200,000
Catalogs$25,000$28,000$31,000$34,000$37,000
Websites$113,300$125,000$138,000$152,000$167,000
Promotions$16,000$18,000$20,000$22,000$24,000
Shows$20,200$22,000$24,000$26,000$29,000
Literature$7,000$8,000$9,000$10,000$11,000
PR$1,000$1,000$1,000$1,000$1,000
Seminars$31,000$34,000$37,000$41,000$45,000
Service$10,250$11,000$12,000$13,000$14,000
Training$60,000$66,000$73,000$80,000$88,000
Other$12,000$15,000$20,000$25,000$30,000
 ------------------------------------------------------------
Total Sales and Marketing Expenses$445,750$578,000$590,000$604,000$646,000
Percent of Sales7.48%8.82%8.18%7.62%7.41%
      
Contribution Margin$913,563$1,108,926$1,266,634$1,455,537$1,620,792
Contribution Margin / Sales15.33%16.92%17.57%18.36%18.58%

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