Sample marketing plan
New-Home Cabinets & Interiors
Executive summary
New-Home Cabinets & Interiors has been operating for three years as a cabinet-making business whose core business has been the production of kitchen cabinets for the domestic market.
The business is subject to fluctuations in demand and is particularly sensitive to changes in interest rates which, in turn, affect the domestic home market. The cabinet-making industry is also extremely competitive and price sensitive. In addition, the business is unable to grow because of the constraints of the existing premises.
This plan recommends a change of positioning and a change to the core business of the firm, taking advantage of market opportunities to service high income, quality conscious home owners with a quality customised design and consultancy service, constructing designer kitchens. A second focus for the business is the production of customised fixtures and fittings for the growing retail industry. This market segment is poorly serviced and much of the production work can be done on-site, obviating the need for new premises.
This change in direction will require a re-positioning of the business, including a proposed change of name to New-Design Home & Commercial Interiors.
The business is a partnership owned by Brian and Jane Todd. It is financed by $20,000 owners’ equity and $30,000 bank loan, secured by the owners’ home mortgage.
It is planned to extend the capital of the business with a further $20,000 loan to increase the turnover of the business by 95% over the next four years and to maintain growth at 5% thereafter.
It is anticipated that the business will return a net profit before tax of $7,314 in the first year, representing a net return on investment of 10% per annum. The net cash flow is positive, resulting in $5,738 over the next year.
The planned activities of the business will achieve the owners’ goal to generate a reasonable income to support a family and maintain a stable family business, without losing control of the ownership of the business.
Business description
This business is a small cabinet-making workshop operating out of a light industrial estate on the southern outskirts of a major city. The owners, Brian and Jane Todd, have set up the business to establish a stable income to support their young family. They believe that their core business is manufacturing kitchen cabinets for the domestic market.
Business name
The name ‘New-Home Cabinets & Interiors’ has been registered with the State Registrar.
Core business
The main products marketed by New-Home Cabinets & Interiors are custom built kitchen cabinets. The two key customer groups are domestic home owners and domestic building contractors.
Industry
The business operates in the construction industry. Construction is the fourth largest industry sector after the mining, rural and retail industries and employs some 295,000 people in Australia. The rate of growth in the construction industry is estimated to be around 7%. The industry suffers from fluctuations in activity due to seasonal conditions and economic changes. It is particularly sensitive to changes in home lending interest rates. The present outlook is good for the industry, with expected continued growth over the next three to four years.
The construction industry has a high level of small businesses and self employed contractors and is subject to many legislative requirements. Some states have or are considering
legislation to license trade contractors.
Ownership
This business is owned by a partnership of Brian Todd and Jane Todd. The two partners are equal owners and profit is distributed equally between them after each has drawn wages appropriate to the work they performed.
Goals
The owner’s goals are to generate a reasonable income to support a family and to maintain a stable family business.
Mission statement
To manufacture and install quality kitchen cabinets to the domestic market with friendly service and courtesy.
Legal and regulatory requirements
The premises are registered as a workplace with the relevant state government authority. The business name is registered. A contractor’s license has been obtained.
Business objectives
• To generate a profit in excess of $10,000 per year.
• To maintain a steady growth of between 10 and 20 percent per year over the next five years.
• To reach a level of activity in the next five years which can be sustained over the following five years.
Situation analysis
External factorsEconomy
The economy is in recovery after a fairly lengthy recession. The first indicators of recovery are the increase in activity in the housing industry. Housing figures have increased, with the number of new houses being constructed having risen by 13% in the last year.
There is some uncertainty in the domestic market due to the probability of housing loan interest rates rising one or two percent in the next year. People are still buying homes at the bottom end of the market but there is reluctance to purchase or build homes at the top end of the market.
Many people have decided to remain in their present homes rather than purchase new ones, often choosing instead to renovate.
Another indicator of economic recovery is the increase in retail spending, with several large stores taking this time to refurbish in an effort to attract customers to a store with a new image.
Social patterns
There is an increase in single parent families which is reflected in the number of smaller dwellings and townhouses being constructed. There is also a larger number of women working and especially in double income families, labour saving devices such as dishwashers are popular.
The increase in the ageing population has meant that there are increasing numbers of retirement villages being built.
Competition
Cabinet-making is extremely competitive. There are 28 cabinet-making workshops within a 10 kilometre radius of New-Home Cabinets & Interiors’ premises. The prices charged are similar, although New-Home Cabinets & Interiors tend to be a little above most of the others because they specialise in custom designed cabinets.
Environment
Concerns about the environment include the use of sustainable timber supplies and biodegradable glues, stains and varnishes. There is also a new range of water soluble products that are ‘environmentally friendly’.
Technology
Computerised table saws are making the cutting and layout for constructing cabinets much more efficient.
These can be linked with computer aided design (CAD) programs to link the design process with the actual production.
Geographic factors
New-Home Cabinets & Interiors is situated in the second fastest growing area in Australia. There is a ready supply of timber, laminates and all cabinet-making supplies within a five kilometre radius of the workshop.
Legal and political factors
There is increasing pressure on trade contractors to become licensed and to take up management training as part of the process.
Tax legislation has been tightened up which makes it almost impossible to conduct business on a ‘cash in hand’ basis.
Ethical
There is a strong move to use only timbers grown in sustainable forests, such as pine and softwood. Using imported hardwood could be seen as condoning the damage being done by loggers to rainforests in South East Asia.
Opportunities
• Increase sales of cabinets to the domestic housing sector as building activity increases.
• Enter the home renovation market.
• Find a niche market in refurbishing retail stores.
Threats
• Home building activity concentrating on the small home - profit margins very low for custom built cabinets in small homes.
• Competition – most of the competitors can undercut New-Home Cabinet & Interiors and if work slows down, they will get the jobs.
• New-Home Cabinets & Interiors could be overtaken by competitors with computerised systems who can manufacture cabinets more quickly and efficiently. Using CAD technology, competitors could offer individually designed cabinets, taking away New-Home’s competitive edge as a custom built cabinet-making business.
Internal environment
Human resources
There are two owner managers who are actively involved in the business. In addition, there are two other tradesmen employed and one apprentice.
Workshop Manager – Brian Todd
Brian has a trade background, is a qualified cabinet-maker with a wide range of experience from production of modular cabinets to antique restoration. He had two years’ experience in selling and two years’ experience as production manager for a large cabinet-making
business before starting up his own business.
Business Manager – Jane Todd
Jane is a qualified teacher. She has completed a course in financial management and had one year’s experience as a credit controller in a Government Department before starting up this business.
Cabinet-maker - Joe
Joe is a qualified tradesman from a traditional trade background. He is particularly skilled in craftsman-designed solid timber products. He is a capable tradesman and pays attention to detail and quality, although he tends to be a slow worker.
Cabinet-maker - Paul
Paul is a qualified tradesman who likes to be on-site as much as possible. He is a reliable worker but does not enjoy production cabinet work.
Apprentice - Stan
Stan is a third year apprentice who is capable of completing most cabinet-making tasks. His work is sound but he tends to be unreliable and requires supervision.
Human Resources
Skills developed
Skills required
Business manager – Jane Todd Financial management Administration
Presentation
Marketing knowledge. Product knowledge Estimating and quoting. Workshop Manager – Brian Todd Cabinet-making
Selling
Estimating and quoting
Financial management Marketing.
Cabinet-maker - Joe Cabinet-making Solid timber craft
Fast production techniques.
Cabinet-maker - Paul Cabinet-making Onsite installation
Fast production techniques.
Apprentice - Stan Cabinet-making Working without supervision.
Physical resources
The business operates out of rented premises with a three year lease in place and a further option to extend for three years. The premises are large enough to accommodate four tradespersons.
New-Home Cabinets & Interiors owns all the plant and equipment, including a manual table saw, two compressors, air drills, nail guns, spray guns, drill press, band saw, belt sander and a full complement of hand-held electric tools.
The business also owns office furniture and equipment.
A one tonne truck is owned by the business and is used for delivering cabinets and collecting materials when required. It is ten years old but is mechanically sound. The business also has a station wagon used for visiting clients and some personal use of the owners. This vehicle is twelve months old and is leased through a finance company over a five year period.
Financial resources
The business was financed with a home equity loan of $50,000, which has been partly repaid. The owners now have $20,000 equity in the business and owe $30,000 to the bank. Cashflow is positive but there is little working capital to sustain growth. However, the Todds would be able to borrow further funds through their home equity loan.
Performance
Over the last three years, profit has increased gradually. Sales have shown a steady growth, but have leveled out in the last year. This has been partly because the business has reached maximum capacity for the workshop and is unable to take on more work and partly because prices for cabinets have been kept as low as possible because of the high levels of
competition.
Potential
There is no room for further expansion because the workshop premises are not large enough to accommodate any more tradespeople.
Any increase in business activity would require more working capital which could be accessed through a loan.
Strengths
• Good skilled trades people producing quality cabinets.
• Owners have good combined skills of selling and financial management. • Access to further working capital.
Weaknesses
• Manual table saw – no computerised equipment. • Premises do not allow for expansion.
• Sales levels stagnant.
SWOT analysis
Strategy Strengths Weaknesses Strategy
Target quality conscious segments.
Good skilled trades people producing quality cabinets. Owners’ combined skills of selling and financial
management. Access to further working capital.
Manual table saw – no computerised equipment. Premises do not allow for expansion. Sales levels stagnant. Owners have no marketing skills or management training. Purchase computerised table saw. Promote personal service.
One of the owners to do a marketing/business planning course. Opportunities Threats Do not go into home renovation - does not match with skills.
Increase sales to the domestic housing sector.
Enter the home renovation market Find a niche market in refurbishing retail stores.
Home-building activity concentrating on the small home. Competition - most of the competitors can undercut New-Home Cabinets & Interiors. New-Home Cabinets & Interiors could be overtaken by competitors with computerised systems.
Develop market for on-site construction - shopfitting. Expand the business into shopfitting. Withdraw from making kitchen cabinets for small homes.
Market identification
Segment 1
Existing customers - small project builders.
Segment 2
Existing customers - small home owners.
Segment 3
Quality conscious home owners.
Segment 4
Medium sized retailers.
Customer profiles
Segment 1 - Small project builders
Product requirements - cheap medium quality cabinets.
Service requirements - installation of cabinets on day determined by client, short lead time, very little notice given for completion and usually require 30 day account.
Characteristics - notorious for not paying on time, no consistency in orders placed, seasonal low in December and January.
Segment 2 - Small home owners
Product requirements - medium quality cabinets, medium price, wide range of colours and designs to chose from.
Service requirements - personalised design, friendly and courteous service, site cleaned after installation and follow up call to ensure satisfaction.
Characteristics - individual ‘one off’ projects, usually lead to further work, word of mouth recommendations particularly high, deposit paid on placing order and balance paid in full on day of installation.
Segment 3 - Quality conscious home owners
Product requirements - high quality cabinets, medium to high price, up to date styling, top quality materials.
Service requirements - individualised design, knowledge of latest trends, high level of consultation, prompt delivery and installation, clean up after installation, courteous service. Characteristics - usually pay 50 - 80% on installation, often require 15 - 30 days before settling balance, unlikely to recommend others (want to preserve ‘uniqueness’ of product) little likelihood of follow up work and each job is a major sale.
Segment 4 - Medium sized retailers
Produce requirements - range of individualised cabinets and partitions, each product unique, durability is essential, medium quality materials but top quality appearance of finished
Marketing strategies
Positioning statement
To be seen as an above-average cabinet-making and shopfitting business specialising in customer service and individualised design.
Growth strategy
The preferred growth strategy for this business is product diversification. The business will seek out new markets with new products.
New market segments New products
Retail stores Counters
Fixtures and fittings Partitions
On-site construction Quality conscious home owners Designer kitchens
Full consultancy service The planned growth pattern is as follows.
Year 1 increase sales 10% Year 2 increase sales 15% Year 3 increase sales 20% Year 4 increase sales 20% Year 5 increase sales 5% Year 6 increase sales 5% Year 7 increase sales 5% Year 8 increase sales 5% Year 9 increase sales 5% Year 10 increase sales 5%
To achieve this growth, New-Home Cabinets & Interiors will have to re-position itself in the marketplace as an above-average quality shopfitting business which may require a change of name, image and a focused promotional plan.
Marketing mix
Segment 1
Product
Price
Placement
Promotion
Custom-built kitchen cabinets and vanity units.
Average to below average quality. Basic range of
Low price, slightly below market price.
Supply directly to project builders.
No promotion needed - this market segment is already an establish customer base.
Continue to maintain relationships with key clients.
Segment 2
Product
Price
Placement
Promotion
Custom built kitchen cabinets and vanity units. Average quality. Basic range of colours and materials. Individual design service, clean up and courtesy call.
Average price, at or slightly above market price. Sell directly to home owners. Word of mouth recommendation from existing clients.
Segment 3
Product
Price
Placement
Promotion
Custom built kitchen cabinets and vanity units. Top quality. Individual design and consultation service. Extensive range of designs, materials and colours. Clean up and courtesy call.
High price, above market. Sell through selected architects and project builders. Personal selling to architects and builders. Selected advertising in high quality home improvement
magazines.
Glossy brochures and presentation folders. Display stand at the Home Show, feature article in home magazine.
Segment 4
Product
Price
Placement
Promotion
Custom built cabinets, counters and benches. Partitions. Full design and consultation service. Project
High price, high margins but not related to market price. Market direct to retailers. Market through property management and shopping centre management companies. Personal selling to property management and shopping centre management
companies.
Selected advertising in retailer magazines. Direct mail to targeted
Control and review
Information which measures the following will be collected on a monthly basis. • Sales performance.
• Percentage increase in sales.
• Breakdown of sales figures into market segments. • Profit.
The owners will meet once a month to discuss the implementation of the marketing plan and the achievement of business objectives.
A full staff meeting will be held once a month to discuss any problems in implementing the plan and suggestions for improved achievement of objectives.
