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Archive for June, 2010

Utilize the “4 P’s” When Projecting Business Plan Assumptions for New Products

Monday, June 21st, 2010

by: Geoff Ficke

Prospective clients often present my marketing and product development consulting firm completed Business Plans as they attempt to elicit interest in their projects. Invariably the assumptions that their sales, income and profit projections describe are unrealistic. I am then asked how to best assemble believable, supportable numbers that will excite, not scare off investors, venture capital or partners.

A Business Plan is simply a document that describes a commercial opportunity and quantifies, qualifies and narrates details of the offering. The exercise of writing a Business Plan sounds fairly mundane and easily accomplished. It is not. I have rarely read a Business Plan submitted by a novice that was worth spending more than a minute or two contemplating.

The Harvard Business Review in a recent article mentioned use of the “4 P’s” for Potential when projecting budgets, sales and profits. This is a simple, easily understood template for aspiring entrepreneurs to consider utilizing. The “4 P’s” of Potential are Population, Penetration, Placement and Purchase Frequency. The “4 P’s of Marketing that are essential to customizing a brand and marketing strategy are; Product, Price, Placement, and Promotion.

The “4 P’s” of Potential, if accurately researched, detailed and confirmed are invaluable in supplying investors with assumptive numbers that will withstand intense scrutiny.

Consider:

Population

What is the real size of the actual population that would be interested in potentially buying your product? If you were marketing a snack cracker, it could be the whole population of a country. Most of us eat snack crackers at some time.
If you have a Pet Product, specifically a dog snack treat, the market is confined to the 77.5 million dog owners in the United States. If it is a cat snack food the market reach is a bit larger, approximately 94 Million licensed cat owners.

Placement

Now that you know the size of the consumer population base that can potentially purchase your product how do you surmise market Placement? Let’s assume that you want to introduce a cosmetic product and it will be moderately priced (Price = one of the “4 P’s” of Marketing). Your research indicates that there are approximately 75, 000 stores in the United States that carry competitive mid-priced brands such as Oil of Olay skin care, Maybelline and Cover Girl cosmetics or Revlon perfumes. As a small beauty product brand or start-up you will not achieve deep Placement in early stages of existence, certainly not big box distribution until the brand shows sales traction on a local or regional level. If you gain Placement in 1.5% of the discovered universe of 75,000 outlets in Year 1, you would achieve distribution in 1,125-doors. As the brand develops in year 2, Placement can be expected to easily grow to 2.5% or 1,875-doors, year 3, etc.

Penetration

How much of the Population will you penetrate with purchase of your product?
There are 17 million licensed hunters in the United States. If your exciting new camouflage, stealth hunting boot was able to gain 1% Penetration of this class in the first full year of sales, you would sell 170,000 units.

Purchase Frequency

A consumable product (food, drink, vitamin, cosmetic, household cleaner, etc.) has a much more frequent usage and repurchase rate than a dog leash, a hunting boot or other hard goods. Another term for Purchase Frequency that is often used is Sales Turnover. A Gourmet Meat Marinade might turn inventory levels three times in a year in a specialty store. A popular priced, higher volume marinade might turnover 10 times in a national supermarket outlet. Purchase Frequency is determined by utility of the product, daily or occasional use, price, packaging size and geography. A sun care product will turn over monthly in warm weather markets, only seasonally in colder weather climes.

Here is a simple formula that can be used to divine the Potential Size of a market for a product using the “4 P’s” during Year 1 of distribution:

Placement = 2% of 100,000 stores = 2000 placements

Population of Women Age 35 to 60 for an Anti-aging Skin Care Treatment
USA only = 55,000, 000

Penetration of potential buying Population
.001% of 55,000,000 = 55,000

Purchase Frequency = 3 Sales Turns per each full year of sales

Assuming a regimen (example only) of $40 X 55,000 consumers X 3 Repurchases and the above indicates that achievement of these 4 P’s of Potential would generate $6.6 million in sales.

This does not reflect new product extensions, international distribution or other variables. If the “4 P’s” of Potential are fully, deeply and diligently vetted, this number, while still an assumption is much more realistic and believable to the most difficult audience on earth: the cynical investor. This is the best to qualify, quantify and narrate the assumptions that are the cornerstone of any Business Plan.

How the Classic Sun Tzu Treatise “The Art of War” Applies to Modern Marketing

Sunday, June 20th, 2010

by: Geoff Ficke

Many years ago, I was required to read a modern translation of Sun Tzu’s classic text on warfare, “The Art of War” for a college course on Ancient History. I completed the read, took the test, passed the course, and promptly filed old Sun Tzu in the catacomb of my mind. I thought I was done with war theory and strategy.

As the years have gone by, and I have worked as a consumer product sales manager, product developer and marketing strategist for over four decades, I find that I use many of the military lessons that Sun Tzu taught in 600 B.C. and which are still studied at West Point and in military schools to this day. The lessons are simple, timeless and convert almost exactly for use as marketing commandments. I even refer regularly to my old dog-eared student copy of “the Art of War” for inspiration.

War and marketing have many similarities. Warfare is all about the successful control of ground. Marketing is all about the successful control of in-store (or media) ground: shelf space, location, display.

In warfare Sun Tzu stressed the importance of controlling the high ground. From a position of height, an army can look down on their enemy, target fire, hold ground with fewer soldiers and maintain cover while the enemy must expose themselves to come forward.

Robert E. Lee was arguably the greatest field commander ever produced in the United States (well, George Patton fans might argue this point). Lee performed remarkably in the Civil War with less manpower, less armaments and horrible logistic support. And yet, General Lee, a student of Sun Tzu, forgot the crucial importance of not fighting unless an army controlled the high ground as his Confederate force was routed at Gettysburg and the trajectory of the bloody conflict was irredeemably altered.

In marketing the high ground is taken when you offer a service or product that is honest in performance, presents value, offers new, exciting features and benefits and motivates consumers to choose your item and not the competitions. Do not be fooled, the craft of marketing and selling consumer products is a form of warfare. There is only so much shelf space in even the largest big box retail store. Advertising vehicles are limited by time (television, radio spots), space (newspaper, magazine ads), cost and frequency. The competition is always seeking to take the high ground and advance on your market share.

Sun Tzu said, “The winning general knows what is required for victory and then attacks. The losing general attacks; then seeks victory”. The same is true in marketing a business service or consumer product. A business plan, customized marketing strategy, Unique Selling Proposition and sales plan for successfully achieving distribution is essential to success. All too often, the over-confident or novice marketer attempts to penetrate a sales channel without conducting the proper due diligence and laying a groundwork that will support a campaign.

“Use the resources of others to your advantage”, is another theorem that Sun Tzu espoused. This is the basis of guerrilla warfare. It is equally applicable to guerrilla marketing.

“The winning general must think like a cobra”, wrote Sun Tzu. Cobras are fast, nimble, agile, ferocious and cunning. General Dwight Eisenhower is a perfect example of a military leader thinking and acting as a cobra. For the invasion of Normandy, D-Day, June 6, 1944 the Allied Commander continually feinted, used General Patton’s movements as a ruse, oversold false landing spots, and used deceit to confuse the Nazi’s about the date, place and strength of the landing force they would confront.

Successful marketers utilize as much secrecy, speed, agility and cunning as possible to outwit and out-hustle their competition. The cobra advantage is why new products continually penetrate large, established, often lethargic categories that are lead by sluggish, multi-national bureaucratic companies. In the beauty and cosmetic industry Bare Essentials and Philosophy has powered past many old line brands. Apple continually re-invents itself and energizes the technology sector. Jimmy Choo has become a generic label for the high-end footwear industry in the last decade. In 40 years WalMart has come to dominate and run off dozens of far older retail competitors. The Korean auto maker Hyundai has quickly become a top selling brand as price, quality and performance has provided the Company a keen Unique Selling Proposition.
“The Art of War” is still studied religiously to this day at military academies around the world. The reasons are simple: the lessons of successfully making war have not changed. Technology certainly has. Strategy and logistics, as described over 2600 years ago by Sun Tzu have not. The same applies to marketing. New distribution channels and technologies are created but the essential rules of marketing, and they parallel the rules of successfully making war, do not change. I recommend any serious aspiring marketer to pick up a copy of “The Art of War”, read it, and hold onto to it for career-long reference.

Baron International Announces Retail Launch of AirStone™ DIY Home Remodeling Product

Wednesday, June 9th, 2010

Press Release
For Immediate Release
June 5, 2010
Contact: Geoff Ficke
gficke@msn.com

Retains Services of International Consulting Firm Duquesa
Marketing to Manage Fall-2010 Introduction

Louisville, KY Tom Scanlan, President of Estate Products, Inc. announced today that his specialty home product manufacturing Company, Baron International, Inc., has engaged the services of Duquesa Marketing to manage the fall -2010 national retail store launch of AirStone™, a patent pending, green, novel faux stone technology.

“We field tested AirStone at the recent Louisville Home and Garden show”, said Mr. Scanlan. “Our expertise is in the manufacture and distribution of building supply products, not retail. We were blown away by the response from the attendees at the show, even though we realized that we needed retail marketing expertise to exponentially expand AirStone’s reach. We spoke to a number of possible consulting candidates and Duquesa Marketing was a perfect fit”.

“AirStone is a rarity in todays clutter of look-alike products”, said Geoff Ficke, President of Florence, KY based Duquesa Marketing. “This item really offers DIY’ers something to latch onto. Only a fraction of the weight of stone, made from largely recycled materials, AirStone can be installed by a novice and the product adds warmth and beauty to any wall. The product and installation system are a model of elegant simplicity and much more affordable than messy masonry stone work”.

Baron International, Inc. will announce pricing, launch dates and retail distribution later this summer. The Company is currently exploring international distribution opportunities. A full package of point of sale materials and display is being developed to support the rollout.

“We Don’t Look Good, If You Don’t Look Good” Vidal Sassoon’s Vision

Monday, June 7th, 2010

by: Geoff Ficke

In the 1970’s I enjoyed the great good fortune to begin my business career in the cosmetic industry. This was an electric time for the beauty industry with great entrepreneurs, amazing promotions, sizzling product launches and progressive retailers all combining to energize the business and drive unprecedented growth and excitement. As the decade unwound, I found myself in a fortunate place at a most fortunate moment: I became sales manager for Vidal Sassoon Hair Care Products. It was an invaluable learning experience.

Vidal Sassoon is the very definition of a “renaissance man”. Born into poverty in London during the depression, he apprenticed in the beauty salon of the famous Raymond of Mayfair. In 1948 he fought as a “sabra” in the Israeli war for independence. This experience triggered a lifelong devotion to philanthropy, education and activism that would benefit the Israeli nation and people everywhere and continues to this day.

The emergence of the 1960’s counter-culture, inspired in large part by the international popularity of the Beatles music and fashion, was a boon to Mr. Sassoon. His first salon on London’s Bond Street became a Mecca for hip, young trend setters seeking to replicate the bob-cut, geometric hair styles popularized by the “Fab Four” and perfected by Sassoon. Along with fashion designer Mary Quant, and Yardley Cosmetics, Vidal Sassoon became part of the beauty and style tour that accompanied Beatles concert tours. This greatly enhanced the consuming public’s awareness of the new techniques in hair design being crafted by this visionary talent.

The Vidal Sassoon salon concept was very different from the typical beauty salon of that time. The architecture, music, modernistic uniforms and styling techniques utilized in the “Sassoon Way” were standardized and taught in the new international chain of Vidal Sassoon Training Schools. The initial London salon was soon expanded into a vast group of Vida Sassoon upscale salons sprinkled around the globe. New York, Tokyo, Beverly Hills and Frankfurt were only a few of the cities that came to host Mr. Sassoon’s eponymous shops. These salons always occupied the best addresses, such as Rodeo Drive in Beverly Hills and The Water Tower in Chicago.

This visibility lead to the introduction of a line of hair care products principally sold in beauty salons. The professional products enjoyed great initial success, but Mr. Sassoon, and the executives that had been brought in to manage the rapid expansion of the Vidal Sassoon brand recognized a much larger opportunity: there was no consumer hair care line that offered a professional, designer provenance and Sassoon had the opportunity to seize this market space.

Always a visionary, the Vidal Sassoon Hair Care brand broke molds, yet resonated easily with consumers. Before the introduction of the Sassoon product line, hair care was a simple commodity business. Prell, Breck and Suave were the major brands of the day and their products were basically soapy cleansers for hair, inexpensive, elemental. Sassoon products differed in three major ways: they were packaged in solid color, starkly minimalist containers, they were marketed to be used in a 3-step regimen and they utilized a revolutionary high fashion branding statement. This was the first targeted, designer hair care program.

Rather than a simple hair cleaning product Vidal Sassoon pioneered cleansing, moisturizing and conditioning the hair follicle with three specific formulae. As the public responded ever more positively to this innovative system of hair care new, highly targeted, specifically marketed treatments and styling products were introduced. The sleek, understated packaging of the line in itself became a powerful generator of brand awareness for Vidal Sassoon Hair Care products.

Owing to the fame and legend that was attached to Mr. Sassoon, the Company did everything possible to link him and the products together as one in the public’s mind. Each commercial and print advertisement ended with the most famous beauty industry branding statement of the 1970’s and 1980’s, spoken by Vidal Sassoon, “We don’t look good, if you don’t look good”. American and worldwide product distribution channels became flush with demand for these hair care products that consumers everywhere were demanding.

Mr. Sassoon, and his actress wife Beverly Adams, became media darlings of that era. They appeared as regular guests on the most popular television talk shows of the time and gained a huge following for their views on healthy lifestyles. They co-authored several best-selling books on diet, exercise and beauty.

The demand for products that could leverage the solid gold name of Vidal Sassoon would soon lead to licensing. A number of very successful licensing contracts enabled manufacturers to brand styling tools, small electrics, hair ornaments and salon equipment with the Vidal Sassoon name. Many of these products sell successfully to this day.

As the brand and business interests of Vidal Sassoon expanded exponentially, the Company was regularly approached with offers to be purchased. This was a period when large, multi-national consumer product houses sought to build portfolios of brands across a spectrum of categories. Richardson-Vick Pharmaceuticals purchased the Vidal Sassoon Hair Care product business and they were subsequently absorbed into Proctor & Gamble.

Vidal Sassoon is recognized as one of the great beauty and fashion innovators of all time. He almost single handedly created the celebrity, fashion hair care treatment industry. From schools, to salons, to products, to licensing and as a media presence, Mr. Sassoon has pioneered the branding of himself, and his related products, as an intertwined, world- wide recognizable brand. He has been just as active and productive in the good works and causes he actively supports.