Marketing Plan for Brick Manufacture
Following on from the previous article on planning a business in brick manufacturing, this article will address the marketing aspect of the document. This section is extremely important to the investor - they will want to know that even if you have a good idea for a product or service, that it is in the right place at the right time.
Market Research
What is the size of the construction industry?
What are the trends in construction?
What market are you targeting?
How much of that market could you realistically get?
How are the customers' needs changing?
Example:
South Africa's construction industry receded by 20% during the 2020 pandemic. Unemployment for construction workers by the March 2021 was at 32.5% (contributing to 7.2 million persons unemployed). To counteract this problem, the government has planned its budget to include USD 45.3 billion for infrastructure development, including some allocation to housing.
The World Bank, African Development Bank and Development Bank of South Africa support an investment programme that is expected to create more than 1.8 million employment opportunities over the next decade. Current experts are anticipating a revival for the construction industry in South Africa, which is anticipated to see a growth of 6.2%.
The brick industry, specifically, achieved $6.196 billion in sales volume from April 2019 to March 2020. With the expected growth of the industry at 6.2%, that means an additional $384million will be available for new brick business and production expansion of existing business.
Operating in our area, we expect to see a surge of new construction ahead of the expected 6.2% average and will come to the market with 3500 concrete blocks per day in production. We expect customers will also increase their demand for associated brick types - that is why we have budgeted for various moulds to be used in the Doubell brick machine as the market grows.
Barriers to Entry
Consider the start-up costs, production costs, marketing requirements, employee skills needed, legality, taxes, certifications, etc.
The marketing plan is meant to show the investor that you have considered these factors that impede the launch of the business and you have come up with solutions to any problems that might occur.
Brick manufacture can mean that the existing hardware stores won't readily accept the new business - perhaps they have an oligopoly on the market keeping prices high. Maybe the cement supply is being controlled by a few wealthy individuals the ensure costs are high and dependency on the single supplier is kept. Maybe corruption in the area means there are illegal bribes that must be budgeted for, despite the law. An investor will want to know the honest survey of the landscape rather than hidden costs later.
Threats and Opportunities
This can form part of a SWOT analysis, which is a typical marketing exercise and one investors are familiar with. Despite the language translation failure of acronym, in English it means Strengths, Weaknesses, Opportunities and Threats.
Basically, you need to analyse the business in these categories to provide insight. You can break the SWOT down further to parts of the business (management, production, workforce, marketing, sales, etc.) but simply put: you want to consider things that might affect your future plans.
After the assessment, you should describe how the strengths will overcome the weaknesses & threats, as well as how the opportunities can be capitalised - Indicate the short-term and long-term goals for this.
Strengths
Strengths in a business plan usually indicate some sort of skill set or channel for sales and marketing. It can be similar to opportunities except that it's the strength key point that will utilise the opportunity presented.
An example would be that the management team has a member that studied or has experience in the field of sales. This is a strength that will leverage that skill when selling brick orders to customers. Similarly, perhaps a member has a good affinity for accountancy and can manage the bookkeeping.
Weaknesses
While the investor wants positive and motivational feedback in the business plan, they will also want to know of any potential drawbacks. Analysing the weaknesses will show honesty; but more importantly it will show an objective assessment of dangers that may be faced. This forethought will compensate for what is discovered.
It does not have to be as personal as pointing out that a managing member has a gambling addiction. It should be more of an issue in comparison to competition in the industry. In brickmaking, it can be that there are no skilled workers familiar with brick-making in the community.
After the full SWOT analysis, you should provide action steps to capitalise on the positives and remediation steps to counteract the negatives. For example, a lack of skill as a weakness means that a budget amount of money should go to training.
Opportunities
When something is noticed that the competition has not noticed; or the competition has not acted upon the information - this is an opportunity. If there is a mandate for BBEEE (a South African programme for preferencing "previously-disadvantaged" individuals) procurement of bricks and your business is compliant, that is an opportunity; especially if your competition is not.
If there is a river on your property providing free river sand, that is an opportunity to reduce your aggregate costs.
If there is a property owned by the family which allows you to operate rent-free, that is an opportunity.
Opportunities give an advantage to favour success when starting a new business and investors will be more likely to join.
Threats
What changes might you anticipate in the government regulations or law that could hinder your operations. It could be related to the product (new requirement for strength of bricks supplied) or something affecting the business (tax clearance certification, special licence introduced, etc.)
Product Features and Benefits
Describe the brick this business will manufacture. A specification of dimensions is required. Since this is a marketing plan section, be sure to focus on what bricks are already available to the customer and what they would expect if they were to buy from you.
Other related topics to discuss include a refund policy, quality assurance, product delivery. Not all customers will have the same requirements in product strength but it may not be easy to schedule production to have different product strengths; So you may choose to have a single strength to service all customers but take less profit by having a competitive price. This could be seen as a decision to offer superior bricks for less than the competitors as a way of adhering to the mission statement of the business.
Target Customer
Business plan templates usually place a large emphasis on this section in terms of demographic profiles. It is probably more useful for a business that sells fashion than for bricks; However, the investor will still want to know what kind of customer has been identified.
Typically, brick sales usually are aimed at individuals performing home renovations or businesses that resell or use the bricks in construction. (Do you recall the familiarity of this? That's because we briefly discussed this topic in the company description - it was meant to be a summary of this section)
End-users refer to the individual contractors purchasing bricks and distributors can refer to the businesses that are buying bricks in bulk wholesale. Individuals would not likely repeat their purchases frequently whereas resellers would repurchase consistently. This insight might cause you to consider how you would handle credit applications for goods bought on account (by reliable customers). Offering credit is a way to encourage sales but will likely cause stock depletion.
Key Competitors
There is always competition. It can be niche or it can be broad - it must be identified so that it can be accommodated. Other brick manufacturers in the area will be direct competition. Other brick-makers out of town might still offer competition if local customers currently transport bricks in from them. Businesses that sell bricks (even if they don't make them) are also considered competition, even if they will stock and sell your product. Distributors will likely demand a reduced price so that they can generate a profit. They make money from the resale and you gain a distribution channel to push sales volume.
Evidence is important here - be sure to include competing quotations in the appendix.
Indirect competitors are businesses that will reduce the available money customers will have to spend on your product type. For example, being a concrete brick manufacturer means that customers purchase concrete bricks. If customers are convinced to buy clay bricks then they aren't buying from your direct competition as such (there is room for debate here, but the example should indicate what is meant well enough).
Fencing is a product alternative for traditional brick walls. A boost to marketing for fencing products means customers spend less on bricks to build boundary walls. This is another example of an indirect competitor. Be aware of these potential hinderances to your business sales.
Competitive Analysis
Customers will always compare products between suppliers. To anticipate this, it's time to think like a customer in order to assess what value is placed on factors of the sales offering.
Product range
Price
Quality
Selection
Service
Reliability
Expertise
Reputation
Location
Appearance
Account / Credit availability
Advertising
Comparing the business with competition on each of these factors will inform the explanation of competitive advantages and disadvantages.
Market Positioning
With the researched assessments in this section so far, it is time to describe how you want to present your business to the customers. This paragraph should reflect your position in the segmented market you have identified thus far.
Example:
The community has a clear motivation to improve its living conditions. Most people are not willing to wait for government to provide free housing, which might take years for a project to arrive. Since they are spending their own money, a focus on small-scale builders is important. The business will offer an account for bricks with registered professionals to assist in their cash flow. Delivery will also be offered to service self-employed contractors without a transport vehicle. Despite the emphasis on affordable pricing, it will be ensured that the bricks are of the national standards by periodically testing. We want to build a relationship of integrity with the local construction workforce which larger distributors fail to do.
Advertising and Marketing Channels
Select a suitable medium for communication with the customers. In a country where infrastructure or education is lacking, advertising via email or smart phone does not seem sensible. Equally, spending a lot of money on a national tv advert is unsuitable when the brick factory is only servicing a localised area. Consider radio and print media (newspapers, magazines, etc.) in addition to online advertisements and television.
The adverts are active pushes for attention to inform potential customers that bricks are available for sale. Another great advert method is to erect a signboard along the highway road; especially if you manage to get a property along that road.
Promotions Budget
The goal of advertising is to boost sales. It's the most basic principle of marketing: For every 1000 people that see an advert of your product, how many people will go ahead and purchase? That answer relies on the way your advertising is done (discussed in the previous section) but the scalability isn't always accurate.
More importantly for the sake of budgeting is the ability to supply. If you spend all your surplus profits on advertising, you will likely attract many customers that want to buy bricks. If you can't supply those bricks, then those customers will go to the competition that can supply. You can see that your ability to service the demand should match the budget for the advertising appropriately.
For brick supplies, advertising will likely be in the paper; as a leaflet (to suppliers, to contractors, or at the post office) or as a road-side sign board.
The budget should feature once-off expenses and repeated (monthly or annual) expenses. Once the business is running, it will be easy to see what percentage of the profits should be allocated to maintain the sales or grow the business towards expansion.
Pricing
The purpose in finding the right price for a brick is to maximise the sales income. If you sold your bricks for $0.01 then you would sell out of your stock but make a financial loss. If you set the sales price for bricks at $100 each then you would sell no bricks, generate no income and still have a financial loss. The answer for the right price is the amount customers are willing to pay, which should match your ability to manufacture & replace. This is easily adjusted according to the market value (since competitors have done this determination with trial and error already).
When customers compare your bricks to competitors, they will judge on price, quality and availability (and to some extent, business service). Business plans will often say that price is not a differentiator and that you should concentrate on quality and offer the market price - that is not true. If you have the same quality and undercut the competitor, the customers will come to you and the competitor might be slow to adjust.
Bricks are difficult to market to customers who want to pay the least amount. You need to judge whether the market is unsophisticated in this manor; enough to pressure your philosophy on quality. If the construction companies require a quality certificate and make up the majority of sales, then a few individuals that complain about price should not cause you to change the sales price. There will always be individuals that will want a cheaper price no matter how cheap you make the product.
For the business plan, always start with the prevailing market rate (with attached evidence in the appendix) and write out a motivation why your pricing strategy is above or below that market price.
Example:
Analysis of local competing suppliers of the products Strong Bricks LLC will manufacture shows the prevailing market rate of Product A at $1.50, Product B at $2.15 and Product C at $2.90. (See Appendix)
As the business launches and offers promotion, we intend to come into the market at a competitive ±15% cheaper than the market rate: Product A: $1.29 Product B: $1.89 Product C: $2.49
This promotional price will last for 3 months before increasing to the market rate (which we expect will be lower than the current rate as competition is forced to drop prices).
During that time, we will be marketing our superior quality in strength. Even after the prices increase, the promoted quality aspect will drive customer retention instead of returning to the competition. This will be done by increasing cement costs by 35% (of expected ratios for market-comparable strength), giving a total reduced profit margin of 29% from market rates. While this is high, we are certain that it incorporates a brand goodwill increase in value far above the loss of profit, which will generate stable future business.
Location
A significant cost for brick-manufacturing is actually in the product sales - the transport cost. When pricing for delivery, the cost of fuel, the driver, the wear and tear of the vehicle usage, breakages in transport, etc. is scaled by the distance travelled.
One of the benefits of starting a new brick business is being able to position closer to the customers than the competition. This allows local collection and reduced delivery costs. Here are some considerations for a brick manufacturing business:
Proximity to customers
Distance from the nearest quarry
Distance from labour (can workers get to the business)
Site preparation (existing offices, cement slab, water source, electricity)
Affiliated businesses nearby
A little more on the last point - if you set up near associated businesses (other construction-related venues) then your potential customers will notice you without the need for additional advertising. It will also be convenient to describe your location over the phone and for collection when they pick up other goods nearby.
Distribution
Selling bricks is typically done directly, via a brick reseller (like a hardware store) or to a group buyer. Selling directly is usually done when the potential customer approaches you directly. Bricks are not products that people will buy when they do not need them so selling "door-to-door" is not really an effective method.
Using a reseller will usually mean taking less profit (discount to resellers) but they will have staff to deal with customers, they will advise customers of suitable products, and they will be reliable with payment. They will also have their own marketing budget that you can benefit from.
The other benefit of having a reseller is their location is likely to be elsewhere which means more reach to the community. Many resellers will also carry the stock on their premises without you paying storage fees, freeing up your premises for more stock.
Another thing to consider is placing your products where the competition exists. If you can sell your bricks at the same resellers as the competition, the customer will likely choose your cheaper and stronger bricks when deciding.