If you’re an entrepreneur or part of a smaller business, you may have noticed that your approach to marketing is very different and, let’s say, more haphazard than traditional marketing theory recommends. This is perfectly okay! As it turns out, more marketing researchers are discovering that traditional marketing planning does more harm than good for small ventures. To see why this is so, let’s first get a better idea of what traditional marketing planning recommends and which alternative approaches better suit new ventures.
Traditional marketing planning suggests that you should discover market opportunities through carefully analysing the market, predicting an optimal outcome, and then designing marketing plans to achieve that goal. Marketing plans assume an annual cycle and they incorporate the entire marketing mix (product, price, promotion, and distribution). However, as an entrepreneur, have you ever encountered markets that sit tight for a year while you execute your plan? Of course not. Do you have research resources at your disposal that allow you predict movements in the market a year from now? Usually not. Most of the good resources you’re likely to want are paywalled. Research and common sense suggest that this isn’t how entrepreneurs actually go about their marketing activities when faced with uncertainty.
Peter Whalen and Samuel Holloway propose that new ventures use Effectual Marketing Planning (EMP) instead. EMP is the idea that new business opportunities are “created” instead of “discovered” by entrepreneurs who take action, learn from their mistakes, and engage in market experimentation that generates useful feedback. Then, through the process of experimentation, a market opportunity and business model “co-evolve” and fall in line with each other. This approach focuses on creating opportunities through action instead of discovering them, and it uses uncertainty as a source of new opportunities.
There are five basic principles of Effectual Marketing Planning.
1. The duration of planning cycles is short.
Traditional marketing plans assume an annual cycle. However, new ventures find it more difficult to accurately predict the market and commit a year’s worth of marketing activities to one plan. Although long-term strategic direction is still important, small firms can benefit from short, one month long plans. Sometimes even shorter! The planning cycle should ideally synchronize with events that naturally produce useful information, such as purchasing cycles, media buying opportunities, or internal board meetings.
2. The number of plan components is small.
As discussed previously, traditional marketing planning incorporates the whole marketing mix. However, new firms should focus on fewer, more straightforward activities that can be easily modified based on market feedback.
3. Favour completing transactions over the pursuit of relationships.
This essentially means focusing on survival during the formative years. Although forming relationships and strong brands are both important to a company’s long term success, they take time and many resources to develop. When a new venture focuses on transactions instead, they will receiver faster and more easily interpreted market feedback.
4. Leverage existing resources.
Entrepreneurs should make intelligent use of the means immediately at their disposal, such as current networks and tangible assets. Whalen and Holloway explain this very simply:
“A traditional chef creates a menu and then goes to the market to acquire the necessary ingredients. The effectual chef goes to the pantry, surveys its contents and then designs a menu that optimizes the ingredients on hand.”
5. Let the market be your teacher.
The EMP approach creates short and simple, action-oriented plans that produce feedback which the firm can easily learn from and incorporate into their marketing activities. The key is not to be afraid of negative feedback! Negative feedback can be disastrous in a year-long traditional marketing plan, but smaller negative outcomes can be turned into future successes for a new venture.
The essential idea is that when a new venture is operating under uncertainty, resources can be used more efficiently by making small investments instead of attempting to predict a single optimal outcome and then committing many resources to an uncertain goal. You can learn more about this approach here.
As an entrepreneur and small-business owner, does the effectual marketing approach better reflect the challenges you’re facing?