Your marketing plan will will help you to decide the why, when,
where and to who you are going to sell your products.
The plan is the second and the most important component of your complete Business Plan.
Often a great deal of time and money can be saved by observing your competitors and taking notes on how their businesses' are operating. In your marketing plan a thorough analysis of you competition should include the following questions:
- Who are my competitors?
Do your competitors work in the same type of medium you do (i.e. do they work with wire, handmade lampwork, semi precious stones, ceramic, etc.?) Do your competitors produce the same type of product you do but of a different medium? (i.e. maybe you design only bracelets using lampwork beads, you may also be competing against another jewelry designer who also only creates beautiful bracelets but with polymer clay beads.)
- What product lines do my competitors carry?
Are your competitor's products functional or decorative? Do they sell the same style of products you plan to produce? How do your products compare to your competitors', including price, quantity, quality, and craftsmanship? How can you make your products different or better than that of the competition?
- Who are their customers?
Are their target customers the same as yours? What selling points can you use to win these customers? How can you alter your product or it's use to reach different target customers?
- What advantages do I have over my competitors, or what advantages do they have over me?
How can you effectively use these advantages as selling points to pass on to buyers and prospective customers? If your competitors have any advantages over you, how will you offset them?
- Who is prospering or just surviving and why?
Why are some succeeding and why are some failing? How can you take advantage of these strengths or weaknesses in learning what or what-not to do?
- How large are my competitor's businesses? Do they have employees and how many?
If they are a large business with employees, then they are probably capable of handling large orders. Can you compete with their production in order to pursue large orders as well?
The information you gleaned from observing your competitors will assist when making future decisions such as what to sell, for how much, and to whom. With your marketing plan it will also help you when deciding on which market route to concentrate more on, such as more craft fairs, more retail shops, maybe even diversifying your market to include home-party plans, holiday boutiques or mail order. (For more information on different marketing channels see How to Sell Jewelry: A Guide to Marketing and Selling Beaded Handmade Jewelry)
Price and Costs for Your Marketing Plan
In your marketing plan you need to know what it costs you to produce your products for your customers? Provide a breakdown of how you determined your costs including materials, labor, and overhead costs. What price will you charge for your product(s)? Show both your wholesale and retail prices.
To determine your cost per item, simply add the cost of your materials, your labor and your overhead expenses. To figure out your labor costs, you have two options. You can add an annual salary to your overhead cost and divide the total by how many items you know you could produce in a year.
(total overhead expenses + salary) total items produced = cost per item
$19,500 + $30,000) 1,500 = $33.00
Your second option is to calculate your labor costs on a per-piece method (how long it takes you to produce one item, then multiply this by an hourly rate, what you feel your labour is worth for an hour of work). To reach a figure for your overhead you determined how much it costs you a year for rent, utilities, insurance, depreciation, then divide this total by the amount of units you plan to produce. The following is a description of cost breakdown:
DESCRIPTION OF COST BREAKDOWN
Pink Floral Necklace
DIRECT COST: clasp $ 2.20
flower beads $ 4.20
accent beads $ 2.10
ribbon $ 1.25
crimps/wire $ .35
Labor 1.5 hrs x $15.00 hr $22.00
Overhead $ 3.75
Wholesale Price = $35.85 Retail Price = $71.70 (2 x wholesale price)
In the above example the total cost to produce this item is $35.85, which is what you could charge wholesale for it. The retail price is usually twice the wholesale price, but if you were to sell your products retail (say at a craft show) you must also take in consideration your selling costs which should include: booth rental, transportation there and back, time spent selling and of course packaging materials. This would greatly cut into your gross profits, but then again that's why the retail price is double the wholesale price.
After setting prices, in your marketing plan determine methods for payment. Is yours a cash or cheque-only business, or will a credit card system also be used to induce more sales?
Who are your customers? What is the profile of your typical customer (i.e. age, sex, location, interests, education, etc.)? In finding the answers to these questions ask yourself: Who do you think would probably buy your product, or who are you making your product for?
Once you have identified who your customers are, or to whom your product is appealing, you can then cater to the taste of this typical customer and seek the best ways to reach him or her.
The next questions now are: How do you plan to distribute your products to your customers (i.e. Craft Shows, wholesale to retail outlets, specialty shops, your studio shop, holiday boutiques, party plan, mail order, etc.)? How will you inform customers about your products? What forms of promotion and advertising would be most effective for your business (business cards, flyers, brochures, pamphlets, catalogs, etc.)? and How much do you intend to spend on advertising and have you budgeted for this expense?
In your marketing plan clearly state exactly what methods will be used to reach buyers—how and where and when. Nothing can kill the success of a product faster than it being marketed to the wrong audience. Your success in selling—and thus your profit—will largely depend on how well you have done your market research to find the right marketing tools to reach your potential customers.
Sales Forecast for Your Marketing Plan
The sales forecast is an important part of your marketing plan. You maybe scratching your head, wondering where you are going to come up with a dollar figure on which to set your goals. An easy approach, especially for a business just starting up, is to determine an estimated number of units or items that might be produced in a year, based on how long it takes to make one and the number of hours you plan to devote to production each day or each week.
By establishing a suggested retail price for each unit (which you have calculated out in your price and costs portion of the marketing plan), you can then estimate your gross sales by multiplying your suggested retail price by the quantity you have determined that you could produce.
Suggested Retail Price x Quantity Produced = Gross Sales
Remember this is only your gross sales, your next step is to subtract your cost of goods sold (everything it costs for you to produce your product). This includes your labor and overhead expenses, such as raw materials, labor, rent, insurance, depreciation, utilities, maintenance and supplies).
Gross Sales - Production Costs = Net Sales
For example, let's say you design an exclusive line of gem stone earrings and you know that you could produce 15 pairs of earrings a day, maybe some days more, maybe some days less but on the average 15. You plan to work five days a week, therefore, you estimated you could make 75 pairs of earrings in a week. 75/week x 50 weeks = 3,750/year. You know that you could probably sell them for $20 a pair, so you multiply 3,750 x $20 giving you a gross sales of $75,000 (if you were able to sell them all, but that's where your market plan comes in—finding and getting customers).
In your marketing plan if you plan to sell your products both retail and wholesale then you must adjust your sales forecast accordingly. You cannot multiply all the products you feel that you are able to make by your suggested retail price if you plan to sell half of them wholesale, remember wholesale is half the price of retail.
Therefore, again using the example above: If you plan a half wholesale and half retail market strategy in your marketing plan, you would then multiply 1,800 pairs of earrings (half of 3,600) by your suggested retail price of $20, and the other half by $10 (your wholesale price which is labor + raw materials + overhead). This would give you a sales forecast of $54,000 ($36,000 retail + $18,000 wholesale).Try preparing three sales forecasts: one strictly retail, one strictly wholesale and the other half and half, then see which forecast best suits your needs or way of marketing.
A lot of jewelry designers prefer to sell strictly retail because they feel they could earn more profit per item. The only problem is that you are not guaranteed you're going to sell all your stock that you take to every craft show. And you must consider that you have spent much of your production time sitting there hoping to sell, as well as the traveling time there and back.
Therefore, many jewelry designers try to also secure a few large wholesale orders, and some sell strictly wholesale, because although they do not make as much profit per item, they do get a lot more orders without the hassles of the setting up and taking down of display booths and packing up all the unsold merchandise.
Also, many times with wholesale you get the orders first then produce your products to fill them. This helps to take the guess work out of selling at craft shows where you produce first then hope you are able to sell what you've made, sometimes finding that you have wasted a lot of time and money producing products that may never sell.
Once you know how many products you will need to sell to reach your sales goal, you then start concentrating on your Marketing Strategy — how, when and where will you reach these customers, and on your Production Strategy
—equipment, time and materials needed to finish them.
Marketing Strategy for Your Marketing Plan
So far in your marketing plan you've done your market research in finding out who your customers are and what they want; who your competitors are and how your products compare to theirs; you've worked out the price and costs of your products; and through your sales forecast you have calculated how many products you need to produce.
Next you must determine how and where you are going to sell all these products—this is where strategic marketing comes in. Your marketing strategy is where you sum up all the research you've completed by explaining all your strategies for pricing, distributing and promoting your product to support your sales forecast.
With your marketing plan begin your marketing strategy by estimating your marketing costs, explaining what you are going to do, when, and how much it is going to cost you. Then set up a calendar or schedule of events to indicate the time needed to attend these events, as well as deadlines for sending in applications for shows, advertising deadlines, scheduled dates for shipping large orders, etc...
For more detailed information on developing a business plans see the this article: A Business Plan for Your Home Jewelry Business
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