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Strategic Marketing Planning - Essay Example

The second part provides guidelines for the marketer which will ensure that the input to the marketing plan is customer focused and considers the strategic dimension of all of the relationships the organization has with its business environment. The third part provides a brief overview of a process for assessing whether the strategic marketing plan creates or destroys shareholder value, having taken account of the risks associated with the plan, the time value of money and the cost of capital.

It also outlines other metrics for measuring the effectiveness of the marketing strategy. Keywords: strategic marketing, planning, world class, success factor, marketing accountability Introduction Research into the efficacy of formalized marketing planning (Thompson 1962; Leighton 1966; Collate et al. 972; Anions 1977; McDonald 1984; Greenly 1984; Pierce 1997; Smith 2003) has shown that marketing planning can make a significant contribution to commercial success.

The main effects within organizations are: the systematic identification of emerging opportunities and threats preparedness to meet change the specification of sustainable competitive advantage improved communication among executives reduction of conflicts between individuals and departments the involvement of all levels of management in the planning process more appropriate allocation of scarce resources consistency of approach across the organization a more market-focused orientation across the organization This article is Malcolm McDonald, 2006, and is used under license.

It also appears as a chapter in the forthcoming book: Baker, M. J. And Hart, S. (Des) The Marketing Book, 6th den, (Oxford: Buttonholer-Henchman), and is reproduced with their permission. 2 Correspondence: Professor Malcolm McDonald, Cornfield School of Management, Cornfield University, Cornfield, Bedford, MAKE AOL 1 The Marketing Review, 2006, 6, 375-418 SESSIONS-XX print / SINS 1472-1384 online Stubborn Publishers Ltd. 376 The Marketing Review, 2006, 4, 375-418

However; although it can bring many benefits, a strategic marketing plan is mainly concerned with competitive advantage – that is to say, establishing, building, defending and maintaining it. In order to be realistic, it must take into account the organization’s existing competitive position, where it wants to be in the future, its capabilities and the competitive environment it faces. This means that the marketing planner must learn to use the various available processes and techniques which help to make sense of external trends, and to understand the organization’s traditional ways of responding to these.

However, this poses the problem regarding which are the most relevant and useful tools and techniques, for each has strengths and weaknesses and no individual concept or technique can satisfactorily describe and illuminate the whole picture. As with a Jigsaw puzzle, a sense of unity only emerges as the various pieces are connected together. The links between strategy and performance have been the subject of detailed statistical analysis by the Strategic Planning Institute. The PIMPS (Profit Impact of Market Strategy) project identified from 2600 businesses, six major links (Bezel 1987).

From this analysis, principles have been derived for the selection of different strategies according to industry type, market conditions and the competitive position of the company. However, not all observers are prepared to take these conclusions at face value. Like strategy consultants Libation and Pits (1985), who believe that all businesses are unique, they are suspicious that something as critical as competitive advantage can be the outcome of a few specific formulae. For them, the PIMPS perspective is too mechanistic and glosses over the complex managerial and organizational problems which beset cost businesses.

What is agreed, however, is that strategic marketing planning presents a useful process by which an organization formulates its strategies, providing it is adapted to the organization and its environment. Positioning Marketing Planning with Marketing Indeed, Smith’s PhD thesis (2003) proved a direct link between organizational success and marketing strategies that conform to what previous scholars have agreed constitutes strategy quality, which was shown to be independent of variables such as size, sector, market conditions and so on.

This Hess linked superior performance to strategies with the following qualities: 1 . Homogeneous market segment definition 2. Segment specific propositions 3. Strategy uniqueness 4. Strength leverage and weakness minimization 5. Creation of internal and external synergies 6. Provision of tactical guidance 7. Alignment to objectives 8. Alignment to market trends 9. Appropriate resounding 10. Clear basis of competition Strategic Marketing Planning: Theory and Practice 377 Let us first, however, position strategic marketing planning firmly within the context of marketing itself.

As can be educed from Chapter 1, marketing is a process for: defining markets; quantifying the needs of the customer groups (segments) within these markets; determining the value propositions to meet these needs; communicating these value propositions to all those people in the organization responsible for delivering them and getting their buy-in to their role; playing an appropriate part in delivering these value propositions to the chosen market segments; monitoring the value actually delivered. For this process to be effective, we have also seen that organizations need to be consumer/customer-driven. A map of this process is shown below.

This process is clearly cyclical, in that monitoring the value delivered will update the organization’s understanding of the value that is required by its customers. The cycle is predominantly an annual one, with a marketing plan documenting the output from the ‘understand value’ and ‘determine value proposition’ processes, but equally changes throughout the year may involve fast iterations around the cycle to respond to particular opportunities or problems. It is well known that not all of the value proposition delivering processes will be under the control of the marketing apartment, whose role varies considerably between organizations.

Define markets & understand value Monitor value Asset Base Determine value Proposition Deliver value Figure 1 . Map of the Marketing Process 378 The marketing department is likely to be responsible for the first two processes, ‘Understand value’ and ‘Determine value proposition’, although even these need to involve numerous functions, albeit co-ordinate by specialist marketing personnel. The ‘Deliver value’ process is the role of the whole company, including, for example, product development, manufacturing, purchasing, sales promotion, direct mail, striation, sales and customer service.

The marketing department will also be responsible for monitoring the effectiveness of the value delivered. The various choices made during this marketing process are constrained and informed not Just by the outside world, but also by the organization’s asset base. Whereas an efficient new factory with much spare capacity might underpin a growth strategy in a particular market, a factory running at full capacity would cause more reflection on whether price should be used to control demand, unless the potential demand warranted further capital investment.

As well as physical assets, choices may be influenced by financial, human resources, brand and information technology assets, to name Just a few. Thus, it can be seen that the first two boxes are concerned with strategic marketing planning processes (in other words, developing market strategies), whilst the third and fourth boxes are concerned with the actual delivery in the market of what was planned and then measuring the effect.

Input to this process will commonly include: The corporate mission and objectives, which will determine which particular markets are of interest External data such as market search Internal data which flow from ongoing operations Also, it is necessary to define the markets the organization is in, or wishes to be in, and how these divide into segments of customers with similar needs. The importance of doing this correctly was emphasized earlier in the reference to Smith’s 2003 PhD. The choice of markets will be influenced by the corporate objectives as well as the asset base.

Information will be collected about the markets, such as the market’s size and growth, with estimates for the future. The map is inherently cross-functional. ‘Deliver value reposition’, for example, involves every aspect of the organization, from new product development through inbound logistics and production to outbound logistics and customer service. The map represents best practice, not common practice. Many aspects of the map are not explicitly addressed by well-embedded processes, even in sophisticated companies.

Also, the map is changing. One-to-one communications and principles of relationship marketing demand a radically different sales process from that traditionally practices. Hence exploiting new media such as the Internet squires a substantial shift in thinking, not Just changes to IT and hard processes. An example is illuminating. Marketing managers at one company related to us their early experience with a website which was enabling them to reach new customers considerably more cost-effectively than their traditional sales force.

When the website was first launched, Strategic Marketing Planning: Theory and Practice 379 potential customers were finding the company on the Web, deciding the products were appropriate on the basis of the website, and sending an email to ask to buy. So far so good. But stuck in traditional model of the sales process, the company would allocate the ‘lead’ to a salesperson, who would phone up and make an appointment perhaps three weeks’ hence.

The customer would by now probably have moved on to another online supplier who could sell the product today, but those that remained were subjected to a sales pitch which was totally unnecessary, the customer having already decided to buy. Those that were not put off would proceed to be registered as able to buy over the Web, but the company had lost the opportunity to improve its margins by using the sales force more Judiciously.

In time the company realized its mistake: unlike those prospects which the company identified and contacted, which might indeed need ‘selling to, many new Web customers were initiating the dialogue themselves, and simply required the company to respond effectively and rapidly. The sales force was increasingly freed up to concentrate on major clients and on relationship building. Having put marketing planning into the context of marketing and other corporate functions, we can now turn specifically to the marketing planning process, how it should be done and what the barriers are to doing it effectively.

We are, of course, referring specifically to the second box in Figure 1. The Marketing Planning Process Most managers accept that some kind of procedure for marketing planning is necessary. Accordingly they need a system which will help them to think in a structured way and also make explicit their intuitive economic models of the business. Unfortunately, very few companies have planning systems which possess these characteristics. However, those that do tend to follow a similar pattern of steps. Figure 2 illustrates the several stages that have to be gone through in order to arrive t a marketing plan.

This illustrates the difference between the process of marketing planning and the actual plan itself, which is the output of the process, which is discussed later in this chapter Each of the process stages illustrated in Figure 2 will be discussed in more detail in this article. The dotted lines Joining up stages 5-8 are meant to indicate the reality of the planning process, in that it is likely that each of these steps will have to be gone through more than once before final programmer can be written. How Formal Should this Process Be?

Although research has shown Hess marketing planning steps to be universally applicable, the degree to which each of the separate steps in the diagram needs to be formalized depends to a large extent on the size and nature of the company. For example, an understudied company generally uses less formalized procedures, since top management tends to have greater functional knowledge and expertise than subordinates, and because the lack of diversity of operations enables direct control to be exercised over most of the key determinants of success.

Thus, situation reviews, the setting of marketing objectives, and so on, are not always made explicit in writing, although Hess steps have to be gone through. In contrast, in a diversified company, it is usually not possible for top management to have greater functional knowledge and expertise than subordinate management, hence planning tends to be more formalized in order to provide a consistent discipline for those who have to make the decisions throughout the organization.

Either way, there is now a substantial body of evidence to show that formalized planning procedures generally result in greater profitability and stability in the long term and also help to reduce friction and operational difficulties within organizations. Johnson and Baileys (2000) typology of the different styles of planning went some way to throwing light on the actual degree of formalization of marketing planning processes, although Smith’s 2003 thesis reduced these to three – visionary processes, rational processes and incremental processes, with most successful companies using some combination of all three.

The Strategic Plan (Output of the Planning Process) Mission Statement Financial Summary Market Overview SOOT Analysis Assumptions Marketing Objectives and Strategies 3 Year Forecast and Budgets 1 Mission . Phase One 2 Corporate Objectives Goal Setting . 3 Marketing Audit . 4 SOOT Analyses . Phase Two 5 Assumptions Situation Review . 6 Marketing Objectives and Strategies . 7 Estimate Expected Results . Phase Three 8 Identify Alternative Plans and Mixes Strategy Formulation . 9 Budget . Phase Four 10 1st Year Detailed Implementation Programmer Resource Allocation & Monitoring .

Measurement and Review Figure 2. The Ten Steps of the Strategic Marketing Planning Process Where marketing planning has failed, it has generally been because companies have placed too much emphasis on the procedures themselves and the resulting forecasts, rather than on generating information useful to and consumable by management. But more about reasons for failure later. For now, let us look at the marketing planning process in more detail, starting with the mission statement. Step 1 Mission Statement Figure 2 shows that a strategic marketing plan should begin with a mission or purpose statement.

This is perhaps the most difficult aspect of marketing planning for managers to master, because it is largely Strategic Marketing Planning: Theory and Practice 381 philosophical and qualitative in nature. Many organizations find their different departments, and sometimes even different groups in the same department, pulling in different directions, often with agitators results, simply because the organization hasn’t defined the boundaries of the business and the way it wishes to do business. Here, we can see two levels of mission.

One is a corporate mission statement, the other is a lower level, or purpose statement. But there is yet another level, as shown in the following summary: Type 1 Type 2 Type 3 ‘Motherhood’ – usually found inside annual reports designed to ‘stroke’ shareholders. Otherwise of no practical use. The real thing. A meaningful statement, unique to the organization concerned, which ‘impacts’ on the behavior of the executives at all levels. This is a ‘purpose’ statement (or lower level mission statement). It is appropriate at the strategic business unit, departmental or product group level of the organization.

The following is an example of a meaningless, vapid, motherhood-type mission statement, which most companies seem to have. They achieve nothing and it is difficult to understand why these pointless statements are so popular. Employees mock them and they rarely say anything likely to give direction to the organization. We have entitled this example The Generic Mission Statement and they are to be avoided. THE GENERIC MISSION STATEMENT our organizations panama ironstone to protect and increase the value of its owners’ investments while efficiently and fairly serving the needs of its customers. … Insert organization name… ] seeks to accomplish this in a manner that contributes to the development and growth of its employees, and to the goals of countries and communities in which it operates. The following should appear in a mission or purpose statement, which should normally run to no more than one page: 1 Role or contribution Profit (specify), or Service, or Opportunity seeker Business definition – define the business, preferably in ERM of the benefits you provide or the needs you satisfy, rather than in terms of what you make.

Distinctive competences – these are the essential 2 3 382 The Marketing Review, 2006, 4, 375-418 skills/capabilities resources that underpin whatever success has been achieved to date. Competence can consist of one particular item or the possession of a number of skills compared with competitors. If, however, you could equally well put a competitor’s name to these distinctive competences, then they are not distinctive competences. 4 Indications for the future What the firm will do What the firm might do What the firm will never do

Step 2 Setting Corporate Objectives Corporate objectives usually contain at least the following elements: ; ; The desired level of profitability Business boundaries – What kind of products will be sold to what kinds of markets (marketing) – What kinds of facilities will be developed (operations, R and D, information systems, distribution etc. ) – The size and character of the labor force (personnel) – Funding (finance) Other corporate objectives, such as social responsibility, corporate image, stock market image, employer image, etc.

Such a corporate plan, containing projected profit and zoos accounts and balance sheets, being the result of the process described above, is more likely to provide long-term stability for a company than plans based on a more intuitive process and containing forecasts which tend to be little more than extrapolations of previous trends. This process is further summarized in Figure 3. Step 3 The Marketing Audit Any plan will only be as good as the information on which it is based, and the marketing audit is the means by which information for planning is organized.

There is no reason why marketing cannot be audited in the same way as accounts, in spite of its more innovative, subjective nature. A marketing audit is a systematic appraisal of all the external and internal factors that have affected a company’s commercial performance over a defined period. Given the growing turbulence of the business environment and the shorter product life cycles that have resulted, no one would deny the need to stop at least once a year at a particular point in the planning cycle to try to form a reasoned view of how all the many external and internal factors have influenced performance.

Strategic Marketing Planning: Theory and Practice 383 CORPORATE Involves applying business planning to several different units of the equines aggregate BUSINESS Involves the other resources which must be brought to bear on the identified markets MARKETING Based on markets/ customers & products Figure 3. The Strategic Planning Hierarchy Sometimes, of course, a company will conduct a marketing audit because it is in financial trouble. At times like these, management often attempts to treat the wrong symptoms, most frequently by reorganizing the company.

But such measures are unlikely to be effective if there are more fundamental problems which have not been identified. Of course, if the company survived for long enough, it might eventually solve its problems through a recess of elimination. Essentially, though, the argument is that the problems have first to be properly defined. The audit is a means of helping to define them. Two Kinds of Variable Any company carrying out an audit will be faced with two kinds of variable.

There is the kind over which the company has no direct control, for example economic and market factors. Second, there are those over which the company has complete control, the operational variables, which are usually the firm’s internal resources. This division suggests that the best way to structure an audit is in two arts, external and internal. Table 1 shows areas which should be investigated under both headings. Each should be examined with a view to building up an information base relevant to the company’s performance. Table 1 .

Conducting an Audit External audit Business and economic environment Economic political, fiscal, legal, social, cultural Technological Intra-company The market Total market, size, growth and trends(value volume) Market characteristics, developments and trends; products, prices, physical distribution, channels, customers, consumers, communication, industry practices Competition Major imitators Size Market share coverage Market standing and reputation Production capabilities Distribution policies Marketing methods Extent of diversification Personnel issues International links Profitability Internal audit Own company Sales (total, by geographical location, by industrial type, by customer, by product) Market shares Profit margins, costs Marketing Information research Marketing mix variables, product management, price, distribution, promotion, operations and resources Key strengths and weaknesses Many people mistakenly believe that the marketing audit should be some kind of IANAL attempt to define a company’s marketing problems, or, at best, something done by an independent body from time to time to ensure that a company is on the right track.

However, many highly successful companies, as well as using normal information and control procedures and marketing research throughout the year, start their planning cycle each year with a formal, audit-type process, of everything that has had an important influence on marketing activities. Certainly, in many leading consumer goods companies, the annual self-audit approach is a tried and tested discipline. Objections to line managers doing their own audits usually centre round the problem of time and objectivity. In practice, a disciplined approach and thorough training will help. But the discipline must be applied from the highest to the lowest levels of management if the tunnel vision that often results from a lack of critical appraisal is to be avoided.

Where relevant, the marketing audit should contain life cycles for major products and for market segments, for which the future shape will be predicted using the audit information. Also, major products and markets Strategic Marketing Planning: Theory and Practice 385 should be plotted on some kind of matrix to show their current competitive position. The next question is: what happens to the results of the audit? Some companies consume valuable resources carrying out audits that produce very little in the way of results. The audit is simply a database, and the task remains of turning it into intelligence, that is, information essential to decision making.

Step 4 Market Overview This step which appears prominently in the actual strategic marketing plan, should spell out clearly: what the market is how it works what the key decision making points are what the segments are Market definition is fundamental to success and must be made in terms of need sets rather than in product/service terms. Thus, Sterner failed by defining its Markets as “duplicators” and IBM almost failed by defining its market as “main frames”. Accordingly, a pension is a not a market, as many other products can satisfy the same or similar needs. The following table lists hypothetical markets in the financial services sector. Some Market Definitions (personal market) Market Need (on-line) Emergency Cash (rainy Day’) Future Event Planning Cash to cover an undesired and unexpected event often the loss of/damage to property).

Schemes to protect and grow money which are for anticipated and unanticipated cash calling events (egg. Car replacement/repairs, education, weddings, funerals, health care) Cash to buy assets they require (egg. Car purchase, house purchase, once-in-a -lifetime holiday). The ability to maintain a desired standard of living (for self and/or dependents) in times of unplanned cessation of salary. The ability to maintain a desired standard of living (for self and/or dependents once the salary cheeses have ceased. The care and growth of assets (with various risk levels and liquidity levels). Ability to store and readily access cash for day-today requirements. Currently known as car insurance.