Malcolm mc donald_on_marketing_planning

MALCOLMMCDONALD

ON MARKETINGPLANNING

London and Philadelphia

UNDERSTANDING MARKETING PLANS AND STRATEGY

MALCOLMMCDONALD

ON MARKETINGPLANNING

First published in Great Britain in 2002 by Kogan Page Limited entitled If You’re So Brilliant…How Come Your Marketing Plans Aren’t Working?

Reissued in 2008 entitled Malcolm McDonald on Marketing Planning

Apart from any fair dealing for the purposes of research or private study, or criticism orreview, as permitted under the Copyright, Designs and Patents Act 1988, this publication mayonly be reproduced, stored or transmitted, in any form or by any means, with the priorpermission in writing of the publishers, or in the case of reprographic reproduction in accor-dance with the terms and licences issued by the CLA. Enquiries concerning reproductionoutside these terms should be sent to the publishers at the undermentioned addresses:

120 Pentonville Road 525 South 4th Street, #241London N1 9JN Philadelphia PA 19147UK USA

© Malcolm McDonald, 2002, 2005, 2008

The right of Malcolm McDonald to be identified as the author of this work has been assertedby him in accordance with the Copyright, Designs and Patents Act 1988.

ISBN 978 0 7494 5149 3

British Library Cataloguing in Publication Data

A CIP record for this book is available from the British Library.

Library of Congress Cataloging-in-Publication Data

McDonald, Malcolm[How come your marketing plans aren’t working?]Malcolm McDonald on marketing planning : understanding marketing plans

and strategy / Malcolm McDonaldp. cm.

Includes index.ISBN 978-0-7494-5149-3

1 Marketing–Planning. 2. Marketing–Management. I. McDonald,Malcolm. How come your marketing plans aren’t working? II. Title.

HF5415.13 M369157 2007658.8902--dc22

2007037090

Typeset by Saxon Graphics Ltd, DerbyPrinted and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall

Contents

Important note from the author viiPreface ix

Introduction 1

1 Understanding marketing planning 7The need for a systematic approach 9The difference between strategy and tactics 13Question and answers 19

2 How marketing planning fits with corporate planning 25Questions and answers 30

3 The strategic marketing planning process and the marketing plan 37Marketing audit 38SWOT analyses 42Assumptions 44Strategy formulation 44Strategic marketing plan ‘ingredients’ and ‘recipe’ 46Questions and answers 49

vi � Contents

4 Defining markets and segments prior to planning 55Questions and answers 60

5 Understanding products and services prior to planning 67Questions and answers 75

6 Setting marketing objectives and strategies 81Marketing objectives 81Marketing strategies 87Questions and answers 90

7 Advertising and sales promotion strategies 97Advertising strategies 98Sales promotion strategies 103Questions and answers 107

8 Sales strategies 113Questions and answers 119

9 Price strategies 125Questions and answers 130

10 Place (distribution and customer service) strategies 137Questions and answers 143

11 Information and organization 149Information 150Forecasting 154Organization 155Questions and answers 165

12 Making marketing planning work 171Questions and answers 183

13 Next steps… 191

Index 193

Important note from the author

This is a text for busy managers who don’t have time to wade through volu-minous texts. Accordingly, its strengths are that it contains only the essentialsnecessary for marketing planning. Its weaknesses are that it gives only brieftreatment to some of the really complex issues that get in the way of effectivemarketing planning, such as corporate culture, politics, organizational struc-tures, knowledge, skills and a host of other items. Nonetheless, the essentialsare here and those who want and need a quick and effective guide will find itin this useful little book.

It covers the essentials of marketing planning and contains a number of testquestions at the end of each chapter. Whilst these are by no means essential tothe learning process, they do nonetheless provide a quick check on under-standing. Of much more significance are the two ‘tests’ in Chapter 1. Pleaseensure you complete these.

For those who need a totally professional approach to strategic and tacticalmarketing planning, I refer you to my main text on this subject: MarketingPlans: How to prepare them; how to use them (Butterworth-Heinemann, Oxford,2007, 6th edition). Much of the thinking and some of the exercises anddiagrams have been borrowed from this widely used and respected globaltext.

viii � Important note from the author

Finally, this book would not have been possible without the editorial assis-tance of Margrit Bass of Native Arrows ([email protected]). Herperceptive insights and writing skills are second to none.

Preface

In the present business climate of increasingly competitive markets, there is agrowing realization that success in the future will come only from meticulousplanning and market preparation. In order to make a confident commitment tothe future, an organization’s marketing plans must be meaningful: they mustbe relevant, realistic, and useable. To be of any benefit, marketing plans mustaccurately portray the known corporate and market environments as well asprovide an educated guide through unknown terrain, given the inevitability ofchange.

There are three distinct yet interdependent stages involved in developingstrategic marketing capability in an organization:

• Establish a disciplined framework, or logic, for undertaking the marketingplanning process and producing strategies.

• Underpin this framework with a meaningful marketing intelligencefunction (which may or may not reside within a specific department)

• Undertake the necessary steps inside the organization to convert thewritten plans into actionable propositions. These steps will likely involvechange in organizational culture, structure and operations, which is bestdriven by the leadership and commitment of the CEO.

A working marketing plan is achievable, providing you are equipped with asound understanding of the aims and principles of marketing planning, andare prepared to make the right investment in terms of time, energy, resourcesand commitment. This book sets out to impart such understanding throughconcise explanation of the key concepts and instruction in undertaking therequisite planning steps. Readers are invited to test their knowledge andprogress by completing the Question and Answer sections at the close of eachchapter, and the educational tests included in some chapters.

x � Preface

Levels of competence inmarketing are still verylow

After 50 years of marketing, developing a marketingstrategy that is sufficiently robust to guide the rest ofthe organization about how it can build superiorvalue for its customers remains one of the mostelusive of all marketing skills.

Research into marketing planning carried out atCranfield during 25 years reveals a truly appallinglevel of competence in this central function ofmarketing. Indeed, things seem to be getting worserather than better, and over 10 years since thefamous Brady and Davis criticism of the wholemarketing domain, marketing people are still seenas ‘expensive, slippery and unaccountable’.

Our research also shows an unacceptably lowlevel of competence in basic marketing skills. Manyso-called ‘practitioners’ have not even heard of mostof the diagnostic tools of the trade necessary for

Introduction

producing a good, solid marketing plan, and thepercentage of qualified marketers (in the sense ofhaving passed the appropriate marketing examina-tions) is at an all-time low. What, we wonder, wouldhappen to a would-be accountant, architect, banker,or engineer who thought they could get a jobwithout passing appropriate standards? Even moredepressing, marketing practitioners have this awfulhabit of blaming everyone else in the organizationfor their own failure to have much impact on theespoused strategy.

So, with such a blatant and devastatingly honestand up-front commentary on the state of marketing,what is this book about? Excellent marketingplanning is a core requirement for marketers andthis little book tackles this topic head on. It takes allthe mystery out of it and acts as a straightforward‘this is how you do it’ guide to this most difficult butessential of marketing processes.

First, however, let’s get a fix on how well yourcompany seems to be performing generally. Thefollowing Introductory Test is not a trick question-naire, but if you don’t score very well, it willcertainly confirm that you need help. If you scorebrilliantly well, I recommend that you quickly moveon to the core section of this book, which begins withChapter 3.

2 � Malcolm McDonald on marketing planning

Marketing planning is acore requirement formarketers

Introductory Test:Evaluation of organizational performance*Place a tick after each statement in the column that most accurately describesyour organization’s situation.

Very True Don’t Untrue Verytrue know untrue

1 (a) Our return on invested capital is satisfactory.

(b) There is good evidence it will stay that way for the next five years.

(c) Detailed analysis indicates that it isprobably incapable of being materiallyimproved.

2 (a) Our market share is not declining.(b) This is a fact, based on objective

evidence.(c) There is objective evidence that it will

stay that way.

3 (a) Our turnover is increasing.(b) At a rate faster than inflation.(c) But not at the expense of profitability.

4 I know for sure that our salesorganization is only allowed to push less profitable lines at the expense of more profitable ones if there are rational reasons for doing so.

Introduction � 3

* This test is adapted from Marketing Plans: How to prepare them; how to use them, Malcolm McDonald, Butterworth-Heinemann, Oxford, 6th edition, 2007.


5 (a) I understand why the company has performed the way it has during thepast five years.

(b) I know (apart from hoping) where it isheading during the next five years.

6 (a) I am wholly satisfied that we make what the market wants, not what we prefer to produce.

(b) Our operations, R&D, IT, HR, finance, marketing and selling strategies aredeveloped for the profitability of thecompany as a whole rather than for the gratification of any personal ambitions.

(c) I am satisfied that we do not use short-term tactics which are injurious to our long-term interests.

7 (a) I know that sales and profit forecasts presented by operating management are realistic.

(b) I know they are as exacting as they can reasonably be.

(c) If I or anyone insists that they are raised, it is because a higher level isattainable not just because a better-looking budget is required.

8 (a) The detailed data generated internallyare analysed to provide timely information about what is happeningin the key areas of the business.



(b) Marketing research data whichoperating management acquires issynthesized into plain English, and isactually needed and used in the keydecision-making process.

9 (a) We do not sell unprofitably to anycustomer.

(b) We analyse our figures to be sure ofthis.

(c) If we do, it is for rational reasonsknown to us all.

10 Our marketing policies are based onmarket-centred opportunities whichwe have fully researched, not on vaguehopes of doing better.

Introduction � 5

Join up the ticks down the page and count how many are to the left of the don’tknow position, and how many are at the don’t know position or to the right of it.

Interpretation of Introductory Test If you have 11 or more answers in the don’t know position or to the right of it,then the chances are that your company isn’t very market-driven. It needs totake a closer look at itself. But are you sure? If not, you’re going to have to workreally hard at marketing.

Scores between 12 and 20 to the left of the don’t know position indicate anorganization that appears to have a reasonable control of many of the signif-icant ingredients of commercial success. Nonetheless, there is clearly still roomfor improvement.

Scores above 20 to the left of the don’t know position indicate an organizationcompletely in command of the key success variables. Are you certain that thisis a true reflection of your organization’s situation? If you are, then the chancesare that its marketing skills are already highly developed and that you areprobably already doing a reasonably good marketing job.


Widespread ignorance about marketing planningand confusion about the difference betweenstrategic marketing planning, and sales forecastingand budgeting, has caused many an organization tostrive short of its full potential or, indeed, to dieprematurely without the real root cause of deathever being identified. Such agonizing outcomes canbe avoided to a great extent by fully understandingwhat marketing planning is (and is not), and assimi-lating this understanding in actual practice.

To acquire an understanding of marketingplanning, it is necessary first to gain an appreciationof the role of marketing within the business context.When Adam Smith said back in 1776 that consump-tion is the sole end and purpose of production, hewas in fact describing what has been termed themarketing concept. Central to the marketing concept

1

Understanding marketingplanning

is the idea that marketing is a matching processbetween a company’s capabilities and the wants andneeds of customers in order to achieve the objectivesof both parties. Marketing is thus about providinggoods and services for which there is a knowncustomer demand, rather than selling what thecompany likes to produce.

The purpose of marketing planning and its prin-cipal focus are the identification and creation ofcompetitive advantage. Marketing planning is theplanned application of marketing resources toachieve marketing objectives. Given the increasingturbulence and complexity of the marketplace, andthe rapid pace of technological change, the need fora disciplined, systematic approach to the market hasnever been so acute. The most marked difference inmarketing planning today, as compared toyesteryear, is that all levels of management areinvolved, with the resulting intelligence comingfrom the market rather than from the heads of aremote group of planners with little or no opera-tional involvement.

The current trend in successful businesses is towardsan emphasis on scanning the external environment,identifying early the forces emanating from it, anddeveloping appropriate strategic responses. Strategicmarketing planning is a management process leading toa marketing plan. It is a logical sequence and a series ofactivities leading to the setting of marketing objectivesand formulation of plans for achieving them. (Theprecise steps in this process and the contents of amarketing plan are the subject of Chapter 3.) In small,undiversified companies this process is usuallyinformal whereas in larger, more diversified organiza-tions, the process is often systematized.


The purpose of marketingplanning is theidentification and creationof competitive advantage

THE NEED FOR A SYSTEMATICAPPROACH

Although simple to grasp intellectually, strategicmarketing planning is notoriously the most difficultof all marketing tasks. The reason why is that itinvolves bringing together into one coherent, realisticplan all the elements of marketing, and this ‘coales-cence’ requires at least some degree of institution-alized procedures as well as inevitable compromisebetween conflicting objectives. For example, considerthe four typical business objectives of: maximizingrevenue; maximizing profits; maximizing return oninvestment; and minimizing costs. Each has itsown special appeal to different managers within theorganization, depending on their particular function.To achieve a kind of ‘optimum compromise’ de-mands accurate and collaborative understanding ofhow these variables interact, and steadfast ratio-nality in decision-making.

Commercial success is, of course, influenced bymany factors apart from just planning procedures. Amyriad of contextual issues adds to the complexityof the marketing planning process. These include:company size; degree of internationalization; man-agement style; degree of business environmentalturbulence and competitive hostility; marketinggrowth rate; market share; technological develop-ments; and so on. However, irrespective of the sizeor complexity of the organization, some kind ofstructured approach to situation analysis is neces-sary in order that meaningful and realisticmarketing objectives can be set.

A frequent complaint is marketing’s preoccu-pation with short-term thinking and an almost total

Understanding marketing planning � 9

lack of ‘strategic thinking’, or considering thelonger-term implications of external and internalinfluences on the organization. Another complaint isthat marketing plans consist largely of numbers,which bear little relationship to and offer littleinsight into current market position, key opportu-nities and threats, significant trends and issues, orindeed, how to meet sales targets. Financial objec-tives, while being essential measures of the desiredperformance of a company, are of scant practicalhelp, since they say nothing about how the results areto be achieved. The same applies to sales forecastsand budgets, which are not marketing objectives andstrategies. Basing company plans on a combinationof forecasting and budgeting systems can only workif the future is going to be the same as the present orthe past. As this is rarely the case, reliance on a fore-casting and budgeting approach often leads to thefollowing common problems:

• lost opportunities for profit;• meaningless numbers in long-term plans;• unrealistic objectives;• lack of actionable market information;• interfunctional strife;• management frustration;• proliferation of products and markets;• wasted promotional expenditure;• confusion over pricing;• growing vulnerability to changes in the business

environment;• loss of control over the business.

These problems are symptomatic of a much deeperproblem emanating from a lack of marketing


planning. Marketing planning is about marketingobjectives (what you want to achieve) andmarketing strategies (how you plan to achieve yourmarketing objectives). There can be objectives andstrategies at all levels in marketing. For example,there can be advertising objectives and strategies,and pricing objectives and strategies. However, it isimportant to remember that marketing objectives areconfined to products and markets only. And theyshould be capable of measurement, otherwise theyare not objectives. Measurement should be in termsof some or all of: sales volume, sales value, marketshare, profit, or percentage penetration of outlets.

Marketing objectives are about one or more of thefollowing:

• existing products in existing markets;• new products for existing markets;• existing products for new markets;• new products for new markets.

Marketing strategies are the means by whichmarketing objectives will be achieved and aregenerally concerned with the four ‘P’s of themarketing mix: product, price, place and promotion.

Understanding the real meaning and significanceof marketing objectives helps managers to knowwhat information they need to enable them to thinkthrough the implications of choosing one or morepositions in the market. However, finding the rightwords to describe the logic of marketing objectivesand strategies is infinitely more difficult thanwriting down numbers on a piece of paper andleaving the strategies implicit. A numbers-orientated system will not encourage managers tothink in a structured way about strategically


Marketing objectives areconfined to products andmarkets only

Marketing strategies arethe means by whichmarketing objectives willbe achieved

relevant market segments, nor will it encourage thecollection, analysis and synthesis of actionablemarket data. And in the absence of such activitieswithin the organization, it is unlikely that thedecision-makers will have much other than intuitionand ‘feel’ to go on in determining how best tomanage limited, valuable resources.

The challenge remains of how to get managersthroughout an organization to think beyond thehorizon of the current year’s operations. Managerswho are rewarded on the basis of current opera-tional performance find it difficult to concern them-selves about the corporate future. This is exacerbatedby behavioural issues, in the sense that it is safer andmore rewarding personally for managers to do whatthey know best, which, in most cases, is to managetheir current range of products and customers inorder to make the current year’s budget.

Einstein wrote: ‘The formulation of a problem is farmore essential than its solution, which may be merelya matter of mathematical or experimental skill. Toraise new questions, new possibilities, to regard oldproblems from a new perspective, requires creativeimagination.’ Unfortunately, in situations of problemsold or new, such creativity is rare, especially whenmost managers are totally absorbed in managingtoday’s business. Accordingly, they need some systemthat will help them think in a structured way aboutproblem formulation, which in turn, can lead them tomore effective problem resolution, and ideally to pre-empting and preventing problems in future.

The benefits of a marketing plan are that it:

• achieves better coordination of activities;

• identifies expected developments;


• increases organizational preparedness to change;

• minimizes non-rational responses to the unex-pected;

• reduces conflicts about where the organizationshould be going;

• improves communications;

• forces management to think ahead systemati-cally;

• enhances the matching of available resources toselected opportunities;

• provides a framework for the continuing reviewof operations;

• demands a systematic approach to strategyformulation, which leads to a higher return oninvestment.

There are four main stages in the marketingplanning process: analysis, objectives, strategy,tactics. This process is formally expressed in twomarketing plans, the strategic marketing plan andthe tactical marketing plan.

THE DIFFERENCE BETWEEN STRATEGYAND TACTICS

The crux of marketing planning lies in knowing thedifference between strategy and tactics. All organi-zations need to have a longer-term (strategic)marketing view as well as a short-term (tactical)marketing operation. Much of the confusionsurrounding marketing planning derives predomi-nantly from not understanding the real significanceof a strategic marketing plan as opposed to a


Four main stages: analysis,objectives, strategy, tactics

tactical, or operational marketing plan. A strategicmarketing plan is for a period that extends beyondthe next fiscal year, and usually covers three to fiveyears. It is the backdrop against which operationaldecisions are taken, determining where thecompany is, where it wants to go and how it can getthere. A tactical plan is for a shorter period,normally for one year or less. While similar incontent, its level of detail is much greater as itcontains the scheduling and costing of the specificactions necessary for the achievement of the firstyear of the strategic plan.

Tactical marketing plans should never becompleted before strategic marketing plans. Mostmanagers prefer selling the products they findeasiest to sell to the customers that offer the least lineof resistance. However, those who prepare tacticalplans first and then extrapolate them merelysucceed in extrapolating their own shortcomings.Such preoccupation with short-term plans is atypical mistake of companies that confuse sales fore-casting and budgeting with strategic marketingplanning.

The pragmatic, profit-related reasons for needingto develop a strategic marketing plan, and for doingso before deciding operational courses of action, areillustrated by the ‘survival matrix’ shown in Figure1.1. The horizontal axis represents strategy as acontinuum from ineffective to effective, while thevertical axis represents tactics on a continuum frominefficient to efficient. Those firms with an effectivestrategy and efficient tactics continue to thrive,while those with an effective strategy but inefficienttactics merely survive. Those firms to the left of thematrix are destined to die.


Tactical marketing plansshould never be completedbefore strategic marketingplans

To test your understanding of marketing planning,the business benefits it offers and the business real-ities it illuminates, complete Tests 1.1 and 1.2. (Test1.2 utilizes Figure 1.2.)

Test 1.1: The benefits of marketing planningInstructionsWhat follows is a list of the benefits of marketing planning. With yourcompany in mind, score each benefit by means of the scale given below.

0 1 2 3 4 5 6 7 8 9 10

Never Sometimes Frequently Most of the time Always


Die quickly Survive

Die slowly ThriveMar

keti

ng

tac

tics

Marketing strategy

100

90

80

70

60

50

40

30

20

10

10 20 30 40 50 60 70 80 90 100

Effi

cien

tIn

effic

ient

EffectiveIneffective

Figure 1.1 Survival matrix

These tests are taken from Marketing Plans: How to prepare them; how to use them,Malcolm McDonald, Butterworth-Heinemann, Oxford, 6th edition, 2007

� � �

1. Our approach to marketing planning ensures that we get a highlevel of coordination of our various marketing activities. ( )

2. Our marketing planning process enables us to identify unexpecteddevelopments in advance. ( )

3. Because of the way we approach marketing planning, there is an increased readiness for the organization to change, in response to the issues ‘flagged up’. ( )

4. When we are faced with the unexpected, our marketing planning process minimizes the risk of non-rational responses. ( )

5. Having a marketing plan reduces the conflicts between managersregarding ‘where the company should be going’. ( )

6. Our marketing plan improves communications about market-relatedissues. ( )

7. Because of our marketing planning process, management is forced to think ahead systematically. ( )

8. Having a marketing plan enables us to match our resources to opportunities in an effective way. ( )

9. Our marketing plan provides us with a useful framework for a continuing review of progress. ( )

10. Our marketing planning has led us to develop more profitable marketing strategies. ( )

TOTAL

Scoring and interpretation for Test 1.1The maximum score for the exercise is 100. If you scored:

81–100: Marketing planning is really paying off in your company.61–80: You are not receiving the benefits you should be receiving.41–60: You appear to be moving along the right lines, but there is still a long

way to go.0–40: Either your marketing planning process is inadequate, or your

company is not really trying to make marketing planning work.


Test 1.2: The survival matrixIt is important to remember that profitability and high market growth arenearly always correlated. In other words, the higher the market growth, thehigher the profitability.

This phenomenon can sometimes obscure the fact that a company thatappears to be doing well can still be losing ground in comparison with itscompetitors. While apparently thriving, it is in fact dying slowly. The crunchcomes when the erstwhile buoyant market growth slows down, and the othercompanies demonstrate quite clearly their superior performance.

InstructionsBefore coming to the survival matrix, please respond to the following state-ments by scoring them as follows:

1. We review our sales forecasts and budgets a minimum of once a month. ( )

2. The training we provide for salespeople is very good. ( )3. Our salespeople consistently meet or exceed their sales targets. ( )4. Any sales promotional campaigns we run are carefully monitored. ( )5. We have a good relationship with our advertising agency. ( )6. Our sales staff are clear about the role they are expected to play. ( )7. Our sales managers are very good motivators. ( )8. Most of the company knows who our best customers are. ( )9. The sales force has a good conversion rate in terms of number of

visits per order. ( )10. Our marketing is reasonably stable, ie there is not a staff turnover

problem. ( )

TOTAL


0 1 2 3 4 5 6 7 8 9 10

Never Sometimes Frequently Most of the time Always

� � �

Scoring and interpretation for Test 1.2Often the most potent short-term tactic is the use ofthe sales force. Following the example shown inFigure 1.2, enter the sales force effectiveness score onthe vertical axis on the survival matrix (Figure 1.1)and then draw a horizontal dotted line across thematrix. Take the marketing benefits score from Test1.1 and enter this on the horizontal axis of thematrix. Draw a vertical dotted line up from thispoint. Where the two dotted lines meet is where youposition your company on the survival matrix.

QuestionsWhat are the implications for your company?What actions might be required if improvements areneeded?


Mar

keti

ng

tac

tics

(sco

re =

60)

Marketing strategy benefits

(score = 35)

100

90

80

70

60

50

40

30

20

10

10 20 30 40 50 60 70 80 90 100

Position ofcompany

Figure 1.2 Positioning on the survival matrix

QUESTIONS AND ANSWERS

Questions1. In which century could it be said that the

marketing concept was first advocated in areasoned manner?a) 17th century c) 19th centuryb) 18th century d) 20th century

2. Marketing involves making both strategic andtactical decisions. Identify which are which bywriting S (strategic) or T (tactical) in the bracketsafter the following.i) Decide to put emphasis on face-to-face

selling. ( )ii) Set tougher sales targets. ( )iii) Run a sales promotion. ( )iv) Develop a new image for the company. ( )v) Reposition the product in the market. ( )vi) Change packaging colour. ( )

3. What does the marketing concept really mean?a) That the organization treats its customers in a

friendly way.b) That the organization sets out to dominate a

market.c) That the organization is driven by a desire to

satisfy customer needs.d) That the organization sells its products more

persuasively.


4. Which of the following is the most aptdescription of the marketing process?a) A democratic process in which consumers

have the right to select their preferred candi-dates (suppliers). They ‘elect’ them by castingtheir money votes to those who supply thegoods or services that best satisfy their needs.

b) Deciding what the customer wants,arranging to make it, then distributing andselling it at a profit.

c) The planning and execution of all businessactivities so that the optimum influence isexerted on the customer, resulting in an opti-mization of prices and greater long-termprofits.

d) The organization and performance of thosebusiness activities which facilitate theexchange of goods and services between themaker and the user.

5. Two competing banks in the same town offermuch the same range of financial products.Research has revealed that 80 per cent of bankcustomers in the town have a preference for tele-phone or online banking. Even so, Bank Adecides to extend its opening hours.

How should Bank B respond? Should it:

a) Do nothing different?b) Copy Bank A’s opening hours?c) Open for even longer than Bank A?d) Do market research on the effectiveness of its

current opening hours?


6. Which of the following is NOT part of themarketing mix?a) customer service d) priceb) research and development e) distributionc) advertising

7. Which of the following is NOT an organizationalcapability?a) creativity d) environmental concernb) technology e) compliance with ISO 9000c) skilled labour (International Quality

Standard)f) research and development

8. Which of the following is NOT part of thebusiness environment?a) legislation f) technological b) trading standards developmentsc) market trends g) competitiond) market share h) fashione) economic trends

9. Marketing literature is liberally sprinkled withthe words ‘customers’ and ‘markets’. Which ofthe following statements do you believe is mostaccurate?a) ‘Customers’ and ‘markets’ mean the same

thing.b) ‘Customers’ are real, ‘markets’ are what we

define them to be.c) ‘Customers’ come and go, but ‘markets’

remain.d) Look after ‘customers’ and ‘markets’ will

look after themselves.


10. It is said that the marketing planning process hasto be appropriate for the organization. Which ofthe following appears to be the best fit?a) Small company with a limited range uses a

highly formal process.b) Large company with several operating units

uses a highly centralized planning process.c) Large company with complex range of

products uses a semi-formal process.d) Small company with wide-range in a single

market uses a very informal planningprocess.

Answers

Question 1 Adam Smith, The Wealth of Nations,1776. Answer = b).

Question 2 Remember a strategic decision needstime to bear fruit, a tactical decision canmake immediate impact. Answer: i) = S, ii) = T, iii) = T, iv) = S, v)= S, vi) = T.

Question 3 While a), b) and d) might soundreasonable, c) is the true answer.Answer = c).

Question 4 It is the only definition that reflects the‘matching’ of supplier’s capabilitieswith the satisfaction of the buyer’sneeds. Answer = a).


Question 5 To copy what competitors do, withouthaving good reason, is to invite costs toescalate and get nothing back in return.Answer = d).

Question 6 Although research and developmentmay contribute to new product devel-opment eventually, it does notconstitute being part of the marketingmix. Answer = b).

Question 7 Having a concern for something(conceptual) is not the same as beinggood at something (actual). Answer = d).

Question 8 Market share is a measure of how wellthe company is meeting the needs of aspecific market segment. It is not anenvironmental factor. Answer = d).

Question 9 Customers are certainly real but we candefine our markets by industry, geog-raphy, customer types, etc. Markets arenot static and not all customers will fallinto the same segments. Answer = b).

Question 10 a) = overkill, b) = too controlled, c) = too informal. Answer = d).


It is not possible to planmarketing activities inisolation from otherbusiness functions

Marketing planning is the means by which an orga-nization monitors and controls the many internaland external influences on its ability to achieve prof-itable sales, and communicates throughout its ranksthe competitive stance it has chosen to achieve itsobjectives. It is therefore not possible to plan anorganization’s marketing activities in isolation fromother business functions. Consequently, themarketing planning process should be firmly basedon a corporate planning system.

A business starts at some time with resources andwants to use those resources to achieve something.This desired destination, or result, is a corporateobjective. Most often corporate objectives areexpressed in terms of profit, since profit is themeans of satisfying shareholders or owners, andbecause it is one universally accepted criterion by

2

How marketing planning fitswith corporate planning

which efficiency can be evaluated, which will in turnlead to efficient resource allocation, economic andtechnical progressiveness and stability. The policiesan organization adopts to pursue its profit objec-tives, such as to compete in a market, to manufactureitself but to outsource distribution, to managewithin cash flow and so on, are corporate strategies.

In practice, companies tend to operate by way offunctional divisions, each with a separate identity,so that what is a strategy in the corporate planbecomes an objective within each department. Forexample, marketing strategies within the corporateplan become operating objectives within themarketing department, and strategies at the generallevel within the marketing department becomeoperating objectives at the next level down (eg,advertising, sales promotion, personal selling). Atthe further level down, there would be, say, adver-tising objectives and advertising strategies, with thesubsequent programmes and budgets for achievingthe objectives. In this way, a hierarchy of objectivesand strategies is formed, which can be traced back tothe initial corporate objective.

The really important point, apart from clarifyingthe difference between objectives and strategies, isthat the further down the hierarchical chain onegoes, the less likely it is that a stated objective willmake a cost-effective contribution to companyprofits, unless it derives logically and directly froman objective at a higher level. Thus meaningfulmarketing objectives, concerning what is sold(products/services) and to whom it is sold (itsmarkets), will relate directly to corporate objectives,or the desired level of profit the organization seeksto achieve.


A hierarchy of objectivesand strategies

Marketing planning and corporate planning � 27

Corporate planning: step 1– corporate financialobjectives

Corporate planning: step 2– management audit

Corporate planning: step 3– objective and strategysetting

While marketing planning is based on markets,customers and products/services, business planninginvolves other corporate resources, which will havea bearing on the identified markets. It is thereforeuseful to understand how marketing planningrelates to the corporate planning process. There arefive steps in the corporate planning process, asoutlined in Figure 2.1.

Step 1 amounts to a statement of corporatefinancial objectives for the long-range planningperiod of the organization. These objectives are oftenexpressed in terms of turnover, profit before tax, andreturn on investment. Usually this planning horizonis five years, but the precise period should be deter-mined by the nature of the markets in which theorganization operates. A useful guideline is thatthere should be a market for the organization’sproducts for long enough at least to amortize anycapital investment associated with those products. Itis advisable to keep the period down to three years,since beyond this period any detail in the strategicplan is likely to become pointless.

Step 2 is an audit, or systematic, critical andunbiased review and appraisal of the environmentand the company’s operations. In practice, the bestway to carry out a management audit is to conduct aseparate audit of each major management function.Thus the marketing audit (concerned with themarketing environment and marketing operations)is part of the larger management audit, in the sameway that the operations audit is.

Step 3, objective and strategy setting, isundoubtedly the most important and difficult of thecorporate planning stages, since if this is not doneproperly everything that follows is of little value.

Cor

pora

te fi

nanc

ial o

bjec

tives

Issu

e of

cor

pora

te p

lan,

to in

clud

eco

rpor

ate

obje

ctiv

es a

nd s

trat

egie

s;op

erat

ions

obj

ectiv

es a

nd s

trat

egie

s et

c;lo

ng-r

ange

pro

fit a

nd lo

ss a

ccou

nts;

bala

nce

shee

ts

Mar

ketin

gpl

an

Mar

ketin

gob

ject

ives

,st

rate

gies

Per

sonn

el p

lan

Per

sonn

elob

ject

ives

,st

rate

gies

Fin

anci

al p

lan

Fin

anci

al o

bjec

tives

,st

rate

gies

Ope

ratio

ns p

lan

Ope

ratio

ns o

bjec

tives

,st

rate

gies

Dis

trib

utio

npl

an

Dis

trib

utio

nob

ject

ives

,st

rate

gies

Ste

p 4

Pla

ns

Ste

p 3

Obj

ectiv

ean

d st

rate

gyse

tting

Ste

p 2

Man

agem

ent

audi

t

Ste

p 1

Cor

pora

tefin

anci

alob

ject

ives

Ste

p 5

Cor

pora

tepl

ans

Mar

ketin

gau

dit

Mar

ketin

g

Per

sonn

el a

udit

Man

agem

ent,

tech

nica

l and

adm

inis

trat

ive

abili

ty, e

tc

Fin

anci

al a

udit

Cre

dit,

debt

, cas

h flo

wan

d bu

dget

ary

cont

rol;

reso

urce

allo

catio

n;ca

pita

l exp

endi

ture

;lo

ng-t

erm

fina

nce

Ope

ratio

ns a

udit

Val

ue a

naly

sis;

engi

neer

ing

deve

lopm

ent;

wor

k st

udy;

qua

lity

cont

rol;

labo

ur; m

ater

ials

; pla

nt a

ndsp

ace

utili

zatio

n;pr

oduc

tion

plan

ning

;fa

ctor

ies

Dis

trib

utio

nau

dit

Sto

cks

and

cont

rol;

tran

spor

tatio

n;w

areh

ousi

ng

Figu

re 2

.1M

arke

ting

pla

nnin

g w

ithi

n th

e co

rpor

ate

plan

ning

pro

cess

This is the stage in the planning cycle when acompromise had to be reached between what iswanted by the several functional departments andwhat is practicable given the constraints withinwhich any organization operates.

Step 4 involves producing detailed plans for oneyear, containing the responsibilities, timing andcosts of carrying out the first year’s objectives, andbroad plans for the following years.

Step 5 is an incorporation of these detailed plansinto a corporate plan, which will contain long-rangecorporate objectives, strategies, plans, profit andloss accounts, and balance sheets. A main purpose ofthe corporate plan is to provide a long-term vision ofwhat the company is or is striving to become, takingaccount of shareholder expectations, both resourceand consumption market trends, and the distinctivecompetence of the organization as revealed by themanagement audit.

What this means in practice is that the corporateplan will contain at least the following elements:

• Corporate objective, or the desired level of profitability.

• Corporate strategies, which denote businessboundaries

– what kinds of products will be sold to whatkinds of markets (marketing)

– what kinds of facilities will be developed(operations and distribution)

– the size and character of the labour force(personnel)

– funding (finance).


Corporate planning: step 4– step plans

Corporate planning: step 5– corporate plans

• Other corporate objectives, such as social respon-sibility, corporate/stock market/employer image,etc.

The relevance of the corporate plan to the marketingplan is immediately visible in that the first item toappear in the marketing plan is often a pageoutlining the corporate mission and objectives. Itshould consist of brief statements about the organi-zation’s role or contribution, business definition,distinctive competences, and indications for thefuture (ie, what the firm will do, might do, will neverdo). The mission statement should be followed witha section summarizing the organization’s financialperformance, and its financial projections for thethree-year planning period. This will provide theperson reading the marketing plan with anoverview of the financial implications of the plan,including the organization’s financial goals(revenue and profit targets) and how these will beachieved. The mission statement and financialsummary represent the goal-setting phase of themarketing planning process, ensuring that themarketing plan is launched on a firm and realisticcorporate footing.


Questions1. Which of the following is NOT a corporate

objective?a) To make 15 per cent return on capital

employed.b) To be the most profitable company in our


Linking the corporate planto the marketing plan

market sector as measured by return on netassets.

c) To increase earnings per share by x per centper annum.

d) To improve customer service levels by x percent per annum.

2. Which of the following is NOT a marketingobjective?a) To sell N products to segment A.b) To generate £Y from segment B.c) To increase market share of product X in

segment C.d) To increase prices by 10 per cent.

3. The objective-setting process of a companyought to be primarily based on:a) Previous sales records.b) Its markets.c) Maximizing profits.d) Its productive resources.

4. A mission statement is intended to:a) Make all employees feel good about the

business.b) Describe in detail the core strengths of the

company.c) Highlight the role of the business, its

distinctive competence, future direction andmotivate the employees.

d) Be a ‘call to arms’, eg ‘we are going to wipeout our competitors’.


6. In identifying what makes a key accountcustomer should you consider:a) The people at each customer account and their

relationship with you.b) A range of factors which would make a

customer attractive to your company.c) The price you can get for your products.d) The volume of sales you have with a customer.

5. Here are two sets of ‘snapshots’ taken of fourcompanies over a three-year period. Which onelooks to have the most successful future?


A B C D

3 years ago

Sales revenue (£m) 250 150 200 180

Net profit (£m) 16 17 10 15

Return on assets % 12 18 8 12

Market growth % 18 22 12 15

Market share % 20 15 18 15

Today

Sales revenue (£M) 450 140 220 300

Net profit (£M) 55 15 12 25

Return on assets % 26 20 14 18

Market growth % 17.5 15 19 18

Market share % 9 14 19 20


7. Several factors inhibit the marketing planningprocess. Which of the following is not such afactor?a) An over-reliance on numbers and detail.b) Confusion over marketing planning terms.c) The separation of strategic and tactical plans.d) The involvement of non-marketing managers.

8. Creativity is said to be a vital component ofmarketing. In which type of organizationalsetting is it most likely to flourish productively?a) An organization which plans ahead realisti-

cally and sets very challenging targets.b) An organization with a highly autocratic

CEO.c) A bureaucratic organization.d) A ‘laissez-faire’ organization where staff

have considerable freedom to act.

9. Market research should be used to:a) Confirm the action you have taken (eg build

new plant, investment, etc).b) Enable critical business decisions to be made

with confidence.c) Demonstrate to customers that you care

about their reaction to new products andservices offered by your company.

d) Examine market possibilities to identify trendsand market opportunities for your business.

10. Which of the following is more likely to result inlong-term success?a) Making customers aware of your products

and their benefits.b) Paying high salaries to product managers.

c) Developing first-class products (which willsell themselves).

d) Setting a high price (to maximize profits).

Answers

Question 1 Answer = d). This is a customer serviceobjective.

Question 2 Answer = d). This is a pricing objective.

Question 3 It is only by understanding its marketsthat a company can be successful.Answer = b).

Question 4 While there is some merit in answers a),b) and d) – although with d) there maybe some question marks – c) is the mainreason to have a mission statement.Answer = c).

Question 5 Company A has increased revenue andprofits but market is not growing andshare is declining rapidly. B and C havenot changed significantly. C is doingslightly better. D has increased revenueand profits and market growth andmarket share are up.Answer = d).

Question 6 Not only is this true for now, but it mustalso be true (ie attractive) in the future.Answer = b).

Question 7 Answer = d). It is often helpful ifcolleagues get involved.


Question 8 To some d) may look to be an attractiveanswer, but constructive creativitycomes from the organizational brain-power being focused on real issues, notfrom everybody doing ‘their ownthing’. b) is dismissed because auto-cratic CEOs rarely welcome the ideas ofothers. In bureaucratic organizations(c), the operational procedures (redtape) tend to discourage any lateralthinking.Answer = a).

Question 9 Answer = d).

Question 10 Answer = a).


Logical steps to marketingplanning

As mentioned earlier, the strategic marketingplanning process is a series of logical steps that haveto be worked through in order to arrive at amarketing plan. Strategic marketing planning bymeans of a planning system is, per se, little more thana structured way of identifying a range of optionsfor the company, of making them explicit in writing,of formulating marketing objectives which areconsistent with the company’s overall objectives andof scheduling and costing out the specific activitiesmost likely to bring about the achievement of theobjectives. It is the systemization of this processwhich is distinctive and which lies at the heart of thetheory of strategic marketing planning.

Figure 3.1 outlines the constituent 10 steps, high-lighting the difference between the process ofmarketing planning and its output, the actual

3

The strategic marketingplanning process and the

marketing plan

written marketing plan. A more comprehensivedescription of the ‘ingredients’ and ‘recipe’ forproducing a strategic marketing plan is provided atthe end of this chapter.

Experience has shown that a strategic marketingplan should contain: a mission statement; financialsummary; market overview; SWOT analyses;assumptions; marketing objectives and strategiesappropriately prioritized; and resource allocationscontaining details of timings, responsibilities andcosts, with forecasts and budgets. To ensure thatthese elements appear in the marketing plan, it isnecessary to complete each of the first nine planningsteps in succession before producing the detailedone-year plan. However, the dotted lines in Figure3.1 indicate the reality of the marketing planningprocess, that is to say, it is likely that each of thesesteps will have to be gone through more than oncebefore final marketing programmes can be written.

The initial, goal-setting phase of the marketingplanning process was considered in Chapter 2,where it was emphasized that the clear definition ofagreed corporate objectives and organizationalmission is fundamental to the success of marketingplanning, and consequently, to the success of themarketing plan. This chapter proceeds to describethe importance and activity of the second phase, thesituation review.

MARKETING AUDIT

Clearly, any marketing plan will only be as good asthe information on which it is based, and themarketing audit is the means by which information


An iterative process

for planning is organized. A marketing audit is asystematic, critical and unbiased review andappraisal of all the external and internal factors thathave affected an organization’s commercial perfor-mance over a defined period. It answers the question:‘Where is the organization now?’ The marketingaudit is essentially a database of all market-relatedissues for the company, which forms part of thecompany-wide management audit. By providing anunderstanding of how the organization relates to theenvironment in which it operates, the marketingaudit enables management to select a position withinthat environment based on known factors.

Often the need for a marketing audit does notmanifest itself until things start to go wrong for theorganization, such as declining sales, fallingmargins, lost market share, under-utilized

The strategic marketing planning process � 39

1. Mission

2. Corporate objectives

3. Marketing audit

4. SWOT analyses

5. Assumptions

6. Marketing objectives and strategies

7. Estimate expected results

8. Identify alternative plans and mixes

9. Budget

10. 1st year detailed implementation programme

Phase 1Goal setting

Phase 2Situation review

Phase 3Strategy formulation

Phase 4Resource allocation and monitoring

Measurementand

review

The Strategic Plan(output of the planning process)

Mission statementFinancial summaryMarket overviewSWOT analysesAssumptionsMarketing objectives and strategies3-year forecast and budgets

Figure 3.1 The 10 steps of the strategic marketing planning process

production capacity, and so on. However, withoutknowing the cause of these danger signs,management can easily treat the wrong symptomsand fail to address the root problems. For example,the introduction of new products, restructuring ofthe sales force, reduction of prices or cutting of costsare unlikely to be effective measures if more funda-mental problems have not been identified. Ofcourse, if the organization survived for long enough,it might eventually solve its problems though aprocess of elimination. Either way, the problemshave first to be properly defined, and the marketingaudit helps to define them by providing a structuredapproach to the collection and analysis of data andinformation on the complex business environment.

Any organization carrying out an audit will befaced with two kinds of variable: those over which ithas no direct control and those over which it hascomplete control. The former include economic andmarket factors, while the latter usually concern theorganization’s resources, or operational variables.This division suggests that the marketing auditshould be structured in two parts:

• External audit – the uncontrollable variables(business and economic environment, themarket, the competition).

• Internal audit – the controllable variables (orga-nization’s strengths and weaknesses, operationsand resources vis-à-vis the environment andcompetitors).

The key areas that should be investigated underthese two headings are outlined in Table 3.1.

As well as considering what the marketing auditshould cover, when the audit should be undertaken


Marketing audit: externalaudit and internal audit

Tab

le 3

.1T

he m

arke

ting

aud

it c

heck

list

Ext

ern

al a

ud

itIn

tern

al a

ud

itB

usin

ess

and

econ

omic

env

iron

men

tm

arke

ting

ope

rati

onal

var

iabl

es–

polit

ical

/fi

scal

/le

gal

–ec

onom

icO

wn

com

pany

–so

cial

/cu

ltur

alSa

les

(tot

al, b

y ge

ogra

phic

al lo

cati

on, i

ndus

tria

l–

tech

nolo

gica

lTy

pe, c

usto

mer

, by

prod

uct)

–in

tra-

com

pany

Mar

ket s

hare

sPr

ofit

mar

gins

/co

sts

The

mar

ket

Mar

keti

ng m

ix v

aria

bles

as

follo

ws:

Tota

l mar

ket,

size

, gro

wth

and

tren

ds

(val

ue/

volu

me)

–pr

oduc

t man

agem

ent

Mar

ket c

hara

cter

isti

cs, d

evel

opm

ents

and

tren

ds

–pr

ice

–pr

oduc

ts–

dis

trib

utio

n–

pric

es–

prom

otio

n–

phys

ical

dis

trib

utio

n–

oper

atio

ns a

nd re

sour

ces

–ch

anne

ls–

cust

omer

s/co

nsum

ers

–co

mm

unic

atio

n–

ind

ustr

y pr

acti

ces

Com

peti

tion

Maj

or c

ompe

tito

rsSi

zeM

arke

t sha

re/

cove

rage

Mar

ket s

tand

ing/

repu

tati

onPr

oduc

tion

cap

abili

ties

Dis

trib

utio

n po

licie

sM

arke

ting

met

hod

sE

xten

t of d

iver

sifi

cati

onPe

rson

al is

sues

Inte

rnat

iona

l lin

ksPr

ofit

abili

lty

Key

str

engt

hs a

nd w

eakn

esse

s

and who should undertake it are also crucial to theeffectiveness of the resulting marketing plan. Manypeople hold the mistaken belief that the marketingaudit should be a last-ditch attempt to define anorganization’s marketing problems, or at best some-thing done by an independent body from time totime to ensure that an organization is on the righttrack. However, since marketing is such a complexfunction, it seems illogical not to carry out a prettythorough situation analysis at least once a year at thebeginning of the planning cycle (described inChapter 12). Many highly successful companies, inaddition to using normal information and controlprocedures and marketing research throughout theyear, also undertake an annual self-audit of every-thing that has had an important influence onmarketing activities as a discipline integrated intothe management process.

This can be achieved, firstly, by institutionalizingprocedures in as much detail as possible so that allmanagers involved in the audit, from the highest tothe lowest levels, conform to a disciplined approach;and secondly, by providing thorough training in theuse of the procedures themselves.

SWOT ANALYSES

The next task is to turn the results of the marketingaudit into actionable intelligence. It is essential at thisstage to concentrate on analysis that determines whichtrends and developments will actually affect the orga-nization, and to omit all the information that is notcentral to the organization’s marketing problems.Inclusion of over-detailed sales performance histories


Successful companiesundertake annual self-audit

by product, for instance, which lead to no logicalactions whatever, only serve to rob the audit of focusand reduce its relevance.

Since the purpose of the marketing audit is toindicate what the organization’s marketing objec-tives and strategies should be, it is helpful to adopt aformat for organizing the audit’s major findings. Auseful way of doing this is to complete a SWOT(strengths, weaknesses, opportunities, threats)analysis for each major product or market segment.A SWOT is a summary listing of internal differentialstrengths and weaknesses vis-à-vis competitors andkey external opportunities and threats. It shouldinclude reasons for good or poor performance. Byidentifying the critical success factors (CSFs) for theorganization, and important outside influences andtheir implications, the key issues to be addressedwill emerge.

A SWOT should answer such questions as:

• What do customers need?

• How do they buy?

• What are our competitors doing?

• How well are we performing against customerneeds?

• What are the key opportunities and threats?

A SWOT should be brief, interesting and concise, ifpossible, running to no more than two pages. It isgenerated from internal debate and is not just oneperson’s opinion. The SWOTs should enable thereader, whether or not he or she was involved intheir preparation, to grasp instantly the main thrustof the business, even to the point of being able towrite marketing objectives. It is important to


A SWOT is a summary ofinternal differentialstrengths and weaknessesvis-à-vis competitors andkey external opportunitiesand threats

remember that only the SWOT analyses, not theaudit, will actually appear in the marketing plan.

A sample form for SWOT analysis, leading tostrategy formulation, is given in Figure 3.2. Thisform should be completed for each of the organi-zation’s market segments.

ASSUMPTIONS

Having completed the marketing audit and SWOTanalyses, fundamental assumptions on future condi-tions can be made relating to each product/marketsegment under consideration. These assumptionswill also appear in the marketing plan. An exampleof a written assumption might be: ‘With respect tothe company’s industrial climate, it is assumed thatindustrial overcapacity will increase from 105 percent to 115 per cent as new industrial plants comeinto operation, price competition will force pricelevels down by 10 per cent across the board; a newproduct will be introduced by our major competitorbefore the end of the second quarter’.

Assumptions should be key and few in number. Ifthe plan can be implemented irrespective of theassumption, then the assumption is unnecessary. Asa measure of their importance, these assumptionswill be used to guide the setting of marketing objec-tives and strategies.

STRATEGY FORMULATION

Strategy formulation will involve estimatingexpected results, and considering alternative waysforward and marketing mixes. When the strategies


Assumptions: externalfactors beyond yourcontrol

1 2 3 4 5

You

Com

p A

Com

p B

Com

p C

Com

p D

4. S

TRE

NG

TH

S/W

EA

KN

ESS

ES A

NA

LYS

ISS

core

you

rsel

f and

eac

h of

you

r mai

n co

mpe

titor

s ou

t of 1

0 on

eac

h of

the

CS

Fs.

Then

mul

tiply

the

scor

e by

the

wei

ght.

Tota

l 100

1 2 3 4 5 1 2 3 4 5

1 2 3 4 5

1. S

EGM

ENT

DES

CR

IPTI

ON

It sh

ould

be

a sp

ecifi

cpa

rt of

the

bu

sine

ss a

nd s

houl

d be

ver

y im

porta

ntto

the

orga

niza

tion

2. C

RIT

ICA

L S

UC

CES

SFA

CTO

RS

(C

SF

s)W

hat a

re th

e fe

w k

ey th

ings

from

the

cust

omer

s' p

oint

of

view

that

any

com

petit

or h

asto

do

right

to s

ucce

ed

3. W

EIG

HTI

NG

How

impo

rtant

is e

ach

of th

ese

CS

Fs?

Sco

reou

t of 1

00

1 2 3 4 5

TH

RE

AT

S

5. O

PP

OR

TUN

ITIE

S /

THR

EATS

Wha

t are

the

few

thin

gs o

utsi

de y

our d

irect

co

ntro

l tha

t hav

e ha

d, a

nd w

ill h

ave,

an

impa

ct o

n th

is p

art o

f you

r bus

ines

s?

6. K

EY

ISS

UES

TH

AT

NE

EDTO

BE

AD

DR

ESS

ED

Wha

t are

the

real

ly k

ey is

sues

from

th

e S

WO

T th

at n

eed

to b

e ad

dres

sed?

OP

PO

RTU

NIT

IES

Tota

l

Figu

re 3

.2Sa

mpl

e fo

rm f

or S

WO

T a

naly

sis

have been agreed, the resources and activitiesrequired to deliver the strategies need to be costedout, resulting in the budget. Finally, a one-yeartactical plan (first year detailed implementationprogramme) must be developed, turning the generalmarketing strategies into specific sub-objectives,each supported by more detailed strategy and actionstatements. Depending on the circumstances, thismight comprise an advertising plan, a salespromotion plan, a pricing plan, a product plan, andso on, or any combination thereof.

STRATEGIC MARKETING PLAN‘INGREDIENTS’ AND ‘RECIPE’

Figure 3.3 is a summary of what appears in astrategic marketing plan (‘ingredients’), togetherwith a list of the principal marketing tools/tech-niques/structures/frameworks that apply to eachstep in the marketing planning process. Table 3.2outlines the successive actions (‘recipe’) required toproduce a strategic marketing plan. These should beborne in mind throughout the remainder of thebook, and may be usefully revisited for clarificationand instruction.



Figure 3.3 ‘Ingredients’ of the strategic marketing plan and associatedtools/techniques

Phase 1Goal setting

The marketingplanning process

Phase 2Situation review

Phase 3Strategy formulation

Phase 4Resource allocationand monitoring

The output of the marketing planning processstrategic marketing plan contents

Marketing theory(structures, frameworks, models)

Mission statement

Financial summary

Market overview

Opportunities/Threats

Strengths/Weaknesses

Issues to be addressed

Portfolio summary

Assumptions

Marketing objectives

Marketing strategies

Resource requirements

Measurement and review

Market structureMarket trendsKey market segmentsGap analysis

(By product)(By segment)(Overall)

Marketing auditMarket researchMarket segmentation studiesGap analysisProduct life cycle analysisDiffusion of innovationAnsoff matrixForecastingMarket research

Issue management

Key success factors matrixMarket researchMarket segmentation studies

BCG matrixDirectional policy matrix

Downside risk assessment

Porter matrixAnsoff matrixBCG matrixDirectional policy matrixGap analysis

Market segmentation studiesMarket studiesResponse elasticities

ForecastingBudgeting

(By product)(By segment)(Overall)

(4 x Ps)(Positioning/branding)

(By product)(By segment)(Overall)(By product)(By segment)(Overall)

Strategic focusProduct mixProduct developmentProduct deletionMarket extensionTarget customer groups

ProductPricePromotionPlace


1. Start with a mission or purpose statement.2. Include a financial summary that illustrates

graphically revenue and profit for the fullplanning period.

3. Carry out a market overview:– What is the market?– Has the market declined or grown?– How does it break down into segments?– What are the trends in each?

4. Identify the key segments and do a SWOTanalysis for each one:– Outline the major external influences and

their impact on each segment.– List the key factors for success. There

should be less than five or six.– Give an assessment of the company’s differ-

ential strengths and weaknesses comparedwith those of its competitors’. (Scoreyourself and your competitors out of 10 andthen multiply each score by a weightingfactor for each critical success factor, eg,CSF1 = 60, CSF2 = 25, CSF3 = 10, CSF4 = 5.)

5. Make a brief statement about the key issuesthat have to be addressed in the planningperiod.

6. Summarize the SWOTs using a portfoliomatrix in order to illustrate the importantrelationships between the key points of yourbusiness.

7. List your assumptions.8. Set objectives and strategies.9. Summarize your resource requirements for

the planning period in the form of a budget.

Table 3.2 ‘Recipe’ for producing a strategicmarketing plan


Questions1. The process of strategic marketing planning is

concerned with:a) Identifying which customers get which

products in the long term.b) Selling what the company can produce most

economically.c) Forecasting future sales and budgeting to

meet them.d) Identifying to whom sales will be made in the

short term.

2. In carrying out a SWOT analysis you should:a) First examine your weaknesses.b) First examine your external environment to

identify your strengths.c) First examine the external environment to see

what opportunities and threats exist.d) Carry out a situation review to identify by

segment, relative strengths, weaknesses,opportunities and threats.

3. A consultant identifies a lack of marketingplanning in a client company. What would be hisor her best strategy to move things forward?a) Write the first marketing plan himself or

herself, as a model to be followed.b) Enthuse the CEO about marketing planning.c) Run training sessions for managers about

marketing planning.d) Set up a marketing information system.


4. In what context should markets/customers andproducts/services be used?a) To establish the company’s competitive

position.b) To aid forecasting.c) To set marketing objectives and strategies.d) To select the best marketing option.

5. How important are assumptions in the planningprocess? Which of the following is most accurate?a) Having assumptions is a lazy way of

avoiding finding out the facts. They weakenthe process.

b) It is OK to have assumptions, as long as theyare realistic and few in number.

c) Every assumption you make ought to benoted so that you cannot be blamed if thingsgo wrong.

d) It is not necessary to note assumptions in theplan because it will be obvious where theyhave been made.

6. Here are four rationales for planning. Which ismost consistent with strategic marketing?a) Plan to survive first, then take it from there.b) Plan to be thriving in three years’ time.c) Plan to meet the annual sales forecast.d) Plan to respond quickly to sudden opportu-

nities.

7. Which of these outcomes is most likely in theshort term when a company introducesmarketing planning?a) It will immediately become successful.b) The corporate culture will change.


c) It will create a competitive advantage.d) It will cause the business to reappraise its

priorities.

8. The basic marketing planning process is drawnbelow, but some of the steps are missing. Yourtask is to fill in the blanks.


1. Mission

2.

3.

4. SWOT analyses

5.

6.

7.

8.

9. Budgets

10.

9. A marketing audit is:a) A comprehensive description of the market-

place.b) A detailed analysis of the customer database.c) An analysis of the company’s marketing

performance in the context of industrialtrends and changes in the marketing envi-ronment.

d) An analysis of company’s strengths andweaknesses against the competition.

10. The SWOT analysis is intended to capture thekey issues from the marketing audit. Here aresome factors that might appear in such an audit.Mark in the brackets whether you think they areS (strength), W (weakness), O (opportunity), T(threat) or NS (not significant enough to beincluded in the SWOT). There are two factors foreach category.i) Two key account managers are not

well trained ( )ii) Our main competitor is extending its

product range. ( )iii) We have a patent on the product

finishing process. ( )iv) Our level of customer service is about

average for this industry. ( )v) Our customer retention ratio is rising. ( )vi) Our main competitor has had major

problems with suppliers and fallen down on deliveries to customers. ( )

vii) Interest rates are likely to remain stable. ( )

viii) Tariff barriers are to be reduced in target export market. ( )


ix) Our product range is ageing. ( )x) Imported goods make an ever-

increasing proportion of total sales in our market. ( )

Answers

Question 1 This is most likely to ensure the organi-zation’s long-term health.Answer = a).

Question 2 SWOTs are most useful when done bysegment.Answer = d).

Question 3 Without the enthusiastic support of theCEO marketing planning is doomed tofailure. Answer = b).

Question 4 Marketing objectives are about what issold and to whom.Answer = c).

Question 5 When we are trying to look into thefuture we can only do so by makingsome assumptions. However, theyought to be significant and few innumber, otherwise the plan is beingbuilt on quicksand.Answer = b).

Question 6 Strategic planning looks at a longertime scale.Answer = b).


Question 7 The introduction of marketing planninginvariably confronts managers withnew data and hence new choices. Whatseemed good business yesterday doesnot necessarily stay that way in the lightof a thorough marketing audit.Answer = d).

Question 8 Answer: 2 = Corporate objectives, 3 =Marketing audit, 5 = Assumptions, 6 =Marketing objectives and strategies, 7 =Estimate expected results, 8 = Alter-native plans and mixes, 10 = Detailedfirst year plan.

Question 9 a), b) and d) might figure as a part ofthe marketing audit but are not bythemselves a market audit.Answer = c).

Question 10 Answer: i) = W, ii) = T, iii) = S, iv) = NS,v) = S, vi) = O, vii) = NS, viii) = O,ix) = W, x) = T.

Before turning to the subject of strategy formulation,it is worth taking a closer look at the main compo-nents of the marketing audit, namely the customerand market audit and the product audit, which wedo in Chapters 4 and 5.


Choosing the rightcustomers

One of the key aspects of marketing planning ischoosing the right customers to focus on. Few com-panies can successfully be ‘all things to all people’,and it is therefore necessary to define in precise andactionable terms just who are the organization’s cus-tomers, both now and in the future. Knowing wheresales and profits are coming from is key to under-standing current market positions and assessingpotential market directions.

Most companies experience a phenomenon calledthe Pareto effect, or the 80/20 rule, whereby some 20per cent of customers account for 80 per cent of busi-ness. However, this does not mean that the bestpotential customers reside in the top fifth of the mar-ket, and care must be taken to identify and addresseach market segment appropriately in the context ofthe market as a whole.

4

Defining markets and segments prior to planning

Market segmentation enables a firm to target itslimited resources on the most promising opportuni-ties by sorting customers into economically manage-able and ‘prioritizable’ groups. Segmentation can bebased on a myriad of criteria regarding customercharacteristics and buying behaviour, thus coveringthe critical issues of ‘who buys’, ‘what they buy’ and‘why they buy’. The bases for market segmentationare summarized as follows:

What is bought Price categories, outlets used,physical characteristics of differ-ent products. Analysis of productand purchase characteristics clari-fies market structure and marketmechanics.

Who buys Demographic/socio-economic/geographic/cultural factors. Anal-ysis of customer attributes aidscommunication programme design.

Why Benefits, attitudes/beliefs, person-ality/lifestyle. Analysis of customerbehaviour underpins marketingstrategy.

A market segment should be a group of customerswith the same or similar requirements, which can besatisfied by a distinct marketing mix. The univer-sally accepted criteria concerning what constitutes aviable market segment are:

• segments should be of an adequate size to pro-vide the organization with the desired return forits effort;

• members of each segment should have a highdegree of similarity in their requirements, yet bedistinct from the rest of the market.


A market segment is agroup of customers withsimilar requirementswhich can be satisfied by adistinct marketing mix

• criteria for describing segments must be relevantto the purchase situation;

• segments must be reachable.

A useful way of tackling the complex issue of marketsegmentation is to start by drawing a ‘market map’as a precursor to a more detailed examination ofwho buys what. A market map defines the distribu-tion and value chain between the supplier and theend user, or consumer, taking into account the vari-ous buying mechanisms found in a market, includ-ing the part played by ‘influencers’, or third partiesthat advise on or otherwise sway the outcome of thepurchasing decision. Influencers should appear onthe market map, as shown in Figure 4.1, just as ifthey were a transaction stage. By tracing the ‘routes’of transactions in your market, it is possible to iden-tify the most important routes, as well as the keyjunctions where decisions are made and segmenta-tion could occur.

Clearly, the typology of the customer or the seg-ment should be related to the firm’s distinctive com-petence and that of its competitors – as identified inthe marketing audit and SWOT analyses – if differ-ential advantage is to be created. Remember, thepurpose of segmentation is to find the best ways to

Defining markets and segments prior to planning � 57

A ‘market map’ defines thedistribution and valuechain between the supplierand the end user

Key junctions wheredecisions are made iswhere segmentationshould be considered

Figure 4.1 Market map with influencers

Suppliers Distributors Retailers Contractors Independentinfluencers

Final users

match the organization’s capabilities with groups ofcustomers who share similar needs, and therebyachieve some commercial gain. Marketers must alsobe aware that customers (people who buy from you)and consumers (users of your products or services)may not always be one and the same. For instance, ahusband (customer/purchaser) buys perfume forhis wife (consumer). To be an attractive proposition,the ‘package’ of benefits offered by the product/ser-vice will need to reflect the characteristics of bothcustomer and consumer.

Customers buy products and services because theyseek the benefits derived from them, not their inher-ent features. In this sense, products and services areproblem solvers. For example, customers buy aspirinto solve the problem of headaches, and they buy drillsbecause they need holes. Not every product or servicebenefit will have equal appeal to all customers, orgroups of customers. However, through customerdialogue or market research it is possible to establishwhich benefits customers perceive as important.

To be useful for segmentation, a benefit has toappeal to a significant number of customers. Benefitanalysis, or the listing of features of major productstogether with what they mean to the customer, is away of identifying which are the most important ben-efits to which customers. To get from a feature to anadvantage, and then to a benefit, the phrases ‘whichmeans that?’ and ‘so what?’ can be helpful. For exam-ple, ‘Our products are handmade by experts (feature),which means that they are better quality thanmachine-made ones’ (advantage) – so what? – ‘whichmeans that they last longer’ (the real benefit).

Obviously, the better your products/services pro-vide benefits to customers which match their needs,


Customers and consumers

Feature – advantage –benefit

the more competitive your products/services aregoing to be in the marketplace. Also, the more accu-rately you can define your market segments, themore accurately you can measure your marketshare. Correct market definition is crucial for:

• share measurement;

• growth measurement;

• the specification of target customers;

• the recognition of relevant competitors;

• the formulation of marketing objectives andstrategies.

Market share is the proportion of actual sales (eithervolume or value) within a defined market, and is thusa measure of satisfying customers. Afrequent mistakethat is made by people who do not understand whatmarket share really means is to assume that theircompany has only a small share of some market,whereas, if the company is commercially successful, itprobably has a much larger share of a smaller market.

Considering the direct relationship between mar-ket share and profitability, it is important to arrive ata meaningful balance between a broad market defi-nition and a manageable market definition. Too nar-row a definition could restrict the range of newopportunities afforded through segmentation; toobroad a definition could make marketing planningmeaningless. A market is essentially the aggregationof all the alternative goods or services that cus-tomers regard as being capable of satisfying thesame customer need. The following definitions canbe useful in calculating market share:

• product class, eg, cigarettes, computers, fertiliz-ers, carpets;


A market is theaggregation of all thealternative goods orservices capable ofsatisfying the samecustomer need

• product sub-class, eg, filter, personal computers,nitrogen, carpet tiles;

• product brand, eg, Silk Cut, Dell, Nitram, Heuga.

The organization’s ability to satisfy customers, espe-cially major customers of strategic importance, or keyaccounts, on a consistent and continual basis is crucialto both customer acquisition and customer retention.Within any given market segment there are criticalsuccess factors (CSFs) for winning the business, suchas breadth of offering, speed of service, low prices,reliable delivery, and so on. The secret of marketingsuccess is, of course, to change the offer in accordancewith changing needs, and not to offer exactly thesame product or service to everyone. It is thereforeessential for an organization to establish what theseCSFs are and how well the organization compareswith its closest competitors, when measured againstthese factors. Without such insight, the road toachieving sustainable competitive advantage will beunnecessarily difficult.


Questions1. Below are a number of words. Your task is to fit

them into the correct places in the table below.There are four sets of items to consider.

Hoover, beer, lipstick, Subaru, upright vacuumcleaners, bitter, cosmetics, cars, Bass, vacuumcleaners, 4-wheel-drive, Revlon.


Product class

Product sub-class

Product brand

2. Which of the below ought not to figure in the cri-teria for selecting a market segment? Segment is:a) Based on company product range.b) Sufficiently large to generate required revenue.c) Distinctly different.d) Reachable for communications.

3. Below is a blank marketing map. Using the fol-lowing information, fill in the blank boxes, showquantities when you can, and put arrows show-ing direction.

A farmer grows strawberries. About 10 per centof his crop is sold to ‘pick your own’ enthusiastsand a similar quantity is sold in the farm shop.About 20 per cent of the crop is sold to a jam fac-tory and the remainder goes to a wholesaler whodistributes to shops, bakers and restaurants.

4. Here are some occupations. Write next to each


one if it falls into the socio-demographic class ofA, B, C1, C2, D or E.i) packer in vi) office

factory ( ) supervisor ( )ii) partner in vii) wood

law firm ( ) carver ( )iii) sales viii) junior school

manager ( ) teacher ( )iv) snow ix) dentist ( )

clearer ( ) x) Army general v) plumber ( ) (retired) ( )

5. A differential benefit is:a) Different from other benefits you offer.b) Different from what you used to offer.c) Different from what competitors offer.d) Different from what the market expects.

6. A newly appointed marketing manager set outto identify the CSF in a key market segment. Heidentified four as shown below. However, one isnot really a CSF. Which one is not?a) On-time delivery.b) Level of customer service.c) Level of company advertising.d) Up-to-date design.

7. Three of the following criteria are relevant tomarket segmentation. Which one is not?a) Who the customers are.b) What customers buy.c) Why they buy.d) The price you charge.

8. Pareto’s Law is often found to operate when


marketing data is analysed. If a company had acustomer base of 200, how many of these arelikely to account for approx. 80 per cent of thesales revenue? Is it:a) 10? c) 38?b) 22? d) 54?

9. A company analysed its three major competitorsusing CSFs and weightings gathered fromresearch. It assessed each one as shown below.Which is the most dangerous competitor? Whatdoes it score?

10. Four companies operate in the same industrialmarket segment. Company A has a 10 per centshare of the market and operates with the lowestprices. Company B has a 6 per cent share andcharges the highest prices. Company C has a 18per cent share and has the most up-to-date facili-ties. Company D has a 12 per cent market shareand the largest sales force. Which company islikely to be the most profitable?a) Company A. c) Company C.b) Company B. d) Company D.


Competitor Assessment Scores

on a scale of 1–10 (high)

CSF Weighting A B C

On-time delivery 0.5 9 5 7

Product quality 0.3 5 5 7

Quality of sales staff 0.2 4 8 4

Answers

Question 1

Question 2 The product range is designed to meetthe needs of a market segment, not todefine it. Answer = a).

Question 3

Question 4 Answer i) = D, ii) = A, iii) = B, iv) = E, v)= D, vi) = C1, vii) = C2, viii)= C1, ix) = B,x) = A.

Question 5 A differential benefit gives you a com-petitive advantage. Answer = c).


Product class Beer Cars Vacuum cleaners Cosmetics

Product sub-class Bitter 4-wheel-drive Upright vacuum cleaners Lipstick

Product brand Bass Subaru Hoover Revlon

C

O

N

S

U

M

E

R

S

Retail

Farmer

Factory

W’saler

Farm shop

Shops

Bakers

Restaurants

20 %

60 %

10 %

10 % ‘Pick your own’

Question 6 While the level of advertising mayimpact on sales revenue, when seenfrom the customer’s point of view itdoes not compare with factors such asdelivery, service, design, etc.Answer = c).

Question 7 Price is part of the marketing mix, andmay be irrelevant. Answer = d).

Question 8 Pareto’s law is also known as the 80/20law, so 80 per cent of sales revenue canbe expected from roughly 20 per cent ofcustomers. 20 per cent of 200 is 40, thus38 is the closest figure.Answer = c).

Question 9 Note: All raw scores (1–10) are multi-plied by the appropriate weighting fac-tors and the results for each companyare totalled.Answer = A.

Question 10 Note: This answer is based on the out-come of PIMS research, which indicatesthat a company’s profitability isdirectly proportional to its marketshare. Since all companies operate inthe same market segment, marketshare must also be a relative measure ofsatisfying customers. Answer = c).


The other half of the marketing audit, having con-sidered whom we sell to, is what we sell to them.The central role that a product (here meaning prod-uct or service) plays in marketing managementmakes it such an important subject that mismanage-ment in this area is unlikely to be compensated forby good management in other areas. Understandingproducts by means of a product audit is a prerequi-site to setting meaningful marketing objectives.

A product is the total experience of the customeror consumer when dealing with an organization.The discussion on market segmentation in Chapter 4explained how a product is a problem solver, in thesense that it solves a customer’s problems, and isalso the means by which the company achieves itsobjectives. When a customer buys a product, he orshe buys a particular bundle of benefits perceived as

5

Understanding products andservices prior to planning

satisfying his or her own particular needs andwants.

As illustrated in Figure 5.1, a product or service canbe envisaged as a set of concentric circles. Functionalfeatures (such as components and performance) formthe core. This is encircled by added values thatenhance the basic features (such as reputation, corpo-rate image, and style of service and support), which isknown as the product or service surround. Generallyspeaking, the product surround accounts for 80 percent of a product’s impact, while accounting for only20 per cent of costs. The reverse tends to be true forthe core product. The importance attributed to theintangible elements, specifically brand name andvalue perceptions, is worth special consideration.


Quality perceptions

Valueperceptions

Brand name Reputation

Advice

Availability

After-sales service

Before-sales

serviceDuring- sales

service

Warrantees

Add-ons

Oth

er u

ser

reco

mm

end

atio

n

Org

aniz

atio

n

Corporate image

80 per cent of the impact, but only 20 per cent of the costs

Intangibles

ServicesFunction

Packaging

Price

Efficacy

Features

Design

PRODUCT

Figure 5.1 What is a product?

Where a relationship with the customer develops,this is often personified either by the company’sname or by the brand name on the product itself. Abrand is a name or symbol that identifies a product.The three principal components of a brand are:brand strategy (which stems from its position in theportfolio), brand positioning (what the brand actu-ally does and what it competes with) and brand per-sonality (its sensual, rational and emotional appeal).A successful brand identifies a product as havingsustainable advantage. The reason why brands maybe valued at figures far in excess of their balancesheet value is that it is relationships with customers,not factories, that generate profits, and it is companyand brand names that secure these relationships.When brand names are neglected their distinctivevalues are eroded and they can no longer commanda premium price. Consequently, they offer nounique added values and decay into commodities.Commodity markets are typically characterized bythe lack of perceived differentiation by customersbetween competing offerings, and thus purchasedecisions tend to be taken on the basis of price oravailability and not on the brand or company name.Understanding the implications of brand value isfundamental to good marketing planning.

Having considered the vital factor of benefits aspart of product management, we must ask ourselveswhether one product is enough. Historians of tech-nology have observed that all technical functionsgrow exponentially until they come up against somenatural limiting factor, which causes them to slowdown and eventually to decline as one technology isreplaced by another. The same phenomenon appliesto products, and is embodied in the product life

Understanding products and services prior to planning � 69

Branding: strategy,positioning andpersonality

Commodities areperceived to have nodifferentiation bycustomers leading topurchasing decisions onthe basis of price

cycle (PLC), which plots the volume or value of salesof a product within a market or segment. From amanagement perspective, the PLC concept is helpfulin that it focuses attention on the likely future salespattern if no corrective action is taken. It is impor-tant to note that an organization is only concernedwith the life cycle trend of a total market, or segmentand with the sales of their product within it.

A useful extension of the PLC is what is termed ‘dif-fusion of innovation’. Diffusion is the adoption ofnew products or services over time by consumerswithin social systems, as encouraged by marketing.It thus refers to the cumulative percentage of poten-tial adopters of a new product or service over time.The actual rate of diffusion has been found to be afunction of a product’s:

• relative advantage (over existing products);


Product life cycle – Figure 5.2

Diffusion of innovation –Figure 5.3

Time

£ S

ales

Introduction Growth Maturity Saturation Decline

Figure 5.2 The product/market life cycle

• compatibility (with lifestyles, values, etc);• communicability (how easy it is to communicate);• complexity;• divisibility (whether it can it be tried out on a

small scale before commitment).

Diffusion is also a function of the newness of theproduct itself, which can be classified broadly underthree headings:

• continuous innovation (eg, the new miracleingredient);

• dynamically continuous innovation (eg, dispos-able lighter);

• discontinuous innovation (eg, microwave oven).

Discovering a typology for those who are preparedto buy and try new products (‘innovators’ and ‘earlyadopters’) can seriously help in the promotion ofnew products. If we can target our early advertisingand sales effort at winning over the trendsetters andopinion leaders in the market, then we can proac-tively increase our chances of also convincing themore conservative and sceptical customers to adoptour product.


Time of adoption

16%Laggards

34%Late majority

34%Early majority

13.5%Early adopters

2.5% Innovators

Num

be

r of

ne

w a

dop

ters

Figure 5.3 ‘Diffusion of innovation’ curve

At any point in time, a review of an organization’sdifferent products would reveal different stages ofgrowth, maturity and decline. If the objective is togrow in profitability over an extended period, then theproduct portfolio should reveal a situation in whichnew product introductions are timed so as to ensurecontinuous sales growth. The idea of a product portfo-lio is for an organization to meet its objectives by bal-ancing sales growth, cash flow and risk. Ideally, acompany should have a portfolio of products whoselife cycles overlap. This guarantees continuity ofincome and growth potential. It is therefore essentialthat the whole portfolio is reviewed regularly and thatan active policy towards new product developmentand divestment of old products is pursued.

All organizations have products that produce dif-ferent levels of sales and profit margins. Profitoccurs from the mix of products, ranging from lowmargin–high turnover to high margin–low turnover.The purpose of the marketing plan is to spell out atleast three years in advance what the desired prod-uct combination is. RONA (return on net assets) canbe portrayed as the business ratio:

Net profit= RONA

Net assets

Profits, however, are not always an appropriate indi-cator of portfolio performance as they will oftenreflect changes in the liquid assets of the company,such as inventories, capital equipment, or receiv-ables, and thus do not indicate the true scope forfuture development. Cash flow, on the other hand, isa key determinant of a company’s ability to developits product portfolio.


The Boston Matrix, shown in Figure 5.4, is usefulin product portfolio planning as it classifies a firm’sproducts according to their cash usage and theircash generation along the two dimensions, relativemarket growth rate and market share. It showsgraphically the positions of products in terms of rel-ative market share and market growth, making iteasier to see the relationship between multipleproducts. The Boston Matrix is based on the princi-ple that cash – not profits – drive a product from onequadrant to another. It is a valuable planning toolfor considering the implications of different prod-uct/market strategies and for formulating policiestowards new product development, providinggreat care is taken over the ‘market share’ axis. Therelationship of market share to cash generation isthat the higher the market share, the higher the


The Boston Matrix

‘Star’

Cash generated

Cash use

0

High

High

‘Question mark’

Cash generated

Cash use

‘Cash cow’

Cash generated

Cash useLow

‘Dog’

Cash generated

Cash use

0

Low

Relative market share(ratio of company share to share of largest competitor)

Mar

ket g

row

th(a

nnua

l rat

e in

con

stan

t £ r

elat

ive

to G

NP

gro

wth

)

Figure 5.4 The Boston Matrix – cash management

output, and the lower the unit costs througheconomies of scale and the learning curve – thus acompany can command higher margins and gener-ate more revenue.

The four quadrants, or categories of products inthe Boston Matrix are sometimes labelled ‘star’,‘cash cow’, ‘question mark’ and ‘dog’ to indicatetheir respective prospects. The function of theBoston Matrix is to aid forward planning by suggest-ing strategy for the future development of the range:selectively invest in ‘question marks’; invest in andgrow ‘stars’; maintain ‘cash cows’; and criticallyexamine ‘dogs’ and delete them as appropriate.‘Dog’ products generate poor cash flow, and thecosts of maintaining them can sometimes impede ordestabilize overall business progress.


SizeMarket growthPricingMarket diversityCompetitive structureIndustry profitabilityTechnical roleSocialEnvironmentLegal

SizeGrowthSharePositionProfitabilityMarginsTechnicalPositionStrengthsWeaknessesImagePollutionPeople

Business/company strengths

Invest/grow Selectivity/earnings Harvest/divest

Ind

ust

ry/m

arke

t at

trac

tiven

ess

high medium low

Figure 5.5 The directional policy matrix (DPM)

There are, however, factors other than marketgrowth and market share that determine prof-itability, so many companies use an expanded ver-sion of this known as the directional policy matrix(DPM). As shown in Figure 5.5, the axes becomerelative business strengths and market attractive-ness, indicating the relative importance of eachmarket to the business. It is extremely importantwhen using the DPM to define your marketsclearly.


Questions1. In what way should a marketer primarily view a

product or service?a) In terms of its component parts and costs.b) In terms of its features and benefits.c) In terms of the total experience of the customer.d) In terms of its sales.

2. Below are some statements about products andservices. Against each write T (true) or F (false).a) Services cost more overall than

products. ( )b) Only a product can be consumed after

it is produced. ( )c) The person delivering a service is part

of the offer package. ( )d) Only products have features. ( )e) Only products can have a ‘surround’. ( )f) It is difficult for services to be

reproduced consistently. ( )


Directional policy matrix(DPM)

3. Which of the following are part of the core offer(C), or the product surround (S)?a) packaging ( ) d) brand name ( )b) customer e) image ( )

service ( ) f) design ( )c) price ( )

4. One of the following statements about successfulbrands is not absolutely true. Please tick whichone it is. A successful brand must:a) Have a logo.b) Be instantly recognizable.c) Give a sustainable competitive advantage.d) Deliver superior marketing performance.

5. For a product in the growth phase of its life cyclewould you:a) Let the growth trend develop naturally?b) Find ways of cutting cost to maximize profit?c) Spend to promote its competitiveness?d) Reduce price to increase sales?

6. For a product at the saturation stage would you:a) Increase promotion to extend its life?b) Manage it for sustained earnings?c) Kill it off to free resources for newer products?d) Carry on as before and let nature take its

course?

7. You are a late entrant into a market which,though it has peaked, is sizeable and attractive.What is your entry strategy?a) Offer a keen price and stress the quality of

your products.b) Price high and stress the status that owner-

ship brings.


c) Price at mid-level and spend little on promo-tion.

d) Price keenly and advertise heavily.

8. A company plotted a Boston Matrix for its prod-ucts with the following results.

Which product ought to receive the major invest-ment to ensure continued success? Tick your answer.

9. Which of the following could be market attrac-tiveness factors (M), business strengths (B) or notsignificant (NS) in a domestic market?a) Few e) Non cyclical

competitors. ( ) sales pattern. ( )b) High interest f) State-of-the-

rates. ( ) artc) Customers equipment. ( )

requiring g) Few barriers quality to to entry. ( )ISO 9000. ( ) h) Guaranteed

d) Our location. ( ) supplies. ( )


C

B

D

E

A

10. The Boston Matrix is designed to be used for:a) Showing whether you have sufficient cash to

run the business.b) Carrying out a competitive analysis.c) Demonstrating how products relate to markets.d) Showing areas of market growth.

Answers

Question 1 The customer pays for the total experi-ence of a purchase.Answer = c).

Question 2 Answer: a) = F, b) = T, c) = T, d) = F, e) =F, f) = T.

Question 3 Answer: a) = C, b) = S, c) = C, d) = S, e) = S, f) = C.

Question 4 All the others are essential features ofbrands. Answer = a).

Question 5 It is important to promote products attheir growth stage. They can be ‘milked’later when they mature. Answer = c).

Question 6 This also means minimizing promotioncosts. Answer = b).

Question 7 You have to appeal to the late majorityand laggards in the market. Answer = a).


Question 8 Answer: D = 2, but E would be accept-able. The reason is that the company hasno ‘stars’ and so one/some must beacquired quickly to balance the portfolio.

Question 9 Answer: a) = M, b) = NS, c) = NS, d) = B,e) = M, f) = B, g) = M, h) = B.Note: For b) high interest rates willaffect all players in a domestic marketto the same extent, ie, level playingfield.ISO 9000 operates similarly. To com-plete in a market you must meet itsquality standards, but once all playersare at this level there is no differentialadvantage, ie business strengths.

Question 10 It shows at a glance how the productportfolio is balanced. Answer = a).


The setting of marketing objectives and strategies isthe key step in the marketing planning process for itis the point at which all the information accumu-lated in the customer and market audit and productaudit is translated into decisions about marketingdirection and delivery.

MARKETING OBJECTIVES

Objectives are the core of managerial action, provid-ing direction to the plans. An objective will ensurethat a company knows what its strategies areexpected to accomplish and when a particular strat-egy has accomplished its purpose. Without objec-tives, strategy decisions and all that follows will takeplace in a vacuum. The meaningfulness, and hence

6

Setting marketing objectivesand strategies

effectiveness, of any objective depends on the qual-ity of information inputs and how closely it isrelated to and reflective of the organization’s capa-bilities in the form of its assets, competences andreputation that have evolved over a number ofyears, or in the case of young companies, that haveprovided the basis for start up.

An objective contains three elements:

• the attribute chosen as a measure of efficiency, egmarket share;

• the yardstick or scale by which the attribute ismeasured, eg operating period (by end of Year 3);

• the value on the scale which the organizationseeks to attain, eg 25 per cent market share.

The important point about marketing objectives isthat they are concerned solely with products and mar-kets, for it is only by selling something to someone thatthe organization’s financial goals can be achieved. Ifprofits and cash flows are to be maximized, the orga-nization must consider carefully how its current cus-tomer needs are changing and how its products/services offered need to change accordingly. Further,objectives should be measurable; otherwise they arenot objectives. Marketing objectives are normallystated in standards of performance for a given operat-ing period or conditions to be achieved by a givendate. Thus measurement should be in terms of someor all of: sales volume, sales value, market share,profit, or percentage penetration of outlets. Generalterms such as ‘maximize’, ‘minimize’, ‘penetrate’should be avoided unless quantification is included.

Marketing objectives consider the two main dimen-sions of commercial growth: product developmentand market development. The Ansoff matrix shown in


Marketing objectives:about products andmarkets

Figure 6.1 is a useful planning aid as it describes thefour possible combinations of products and markets,or the four categories of marketing objectives:

• Selling existing products to existing markets/segments (market penetration).

• Extending existing products to new markets/segments (market extension).

• Developing new products for existing markets/segments (product development).

• Developing new products for new markets/seg-ments (diversification).

There will be different marketing responses to eachpermutation in the matrix, and the formulation ofmarketing objectives for each quadrant will be dif-ferent for different companies. The term ‘new prod-ucts’ infers a degree of technical innovation and‘new markets’ assumes an element of unfamiliarityin a market situation. The newness factor of theproduct–market combination corresponds to the

Setting marketing objectives and strategies � 83

Marketpenetration

Productdevelopment

Marketextension

Diversification

Present New

increasingmarketnewness

Pre

sent

New

PRODUCTS

Increasingtechnologicalnewness

MA

RK

ET

S

Figure 6.1 The Ansoff matrix

level of risk that the company has to manage. Thuspursuing marketing objectives concerned with newproducts in new markets is the riskiest strategy of allbecause it takes the organization furthest away fromits known strengths and capabilities and further intothe unknown. New resources and skills have to bedeveloped. Diversification is what has led manycompanies to go bankrupt and why many of thosethat diversified through acquisition during periodsof high economic growth have since divested them-selves of businesses that were not basically compati-ble with their own distinctive competence.

The marketing objectives should be consistentwith the information from the product life cycleanalysis and portfolio matrix (or DPM, see Figure5.5) discussed in Chapter 5. From the marketingaudit and SWOT analysis, you will know: why cus-tomers want your products and services; which areyour best markets and market segments; and the‘life’ of your products or services. Most importantly,you will know from the portfolio matrix how theproducts/services in your range relate to each otherin terms of raising funds. Creative and intelligentinterpretation of the portfolio matrix is key to estab-lishing the right marketing objectives for your com-pany. Figure 6.2 is a list of guidelines for marketingand other functions, which should be consideredbefore setting marketing objectives and strategies.The circles on the DPM, representing your sales ineach market, can be moved to indicate their relativesize and position in three years’ time. You can do thisto show first, where they will be if the companytakes no action, and second, where you would ide-ally prefer them to be. These latter positions willbecome the marketing objectives.


Ansoff Matrix: indicationof levels of risk for acompany

M

aint

ain

or in

crea

sedo

min

ance

Diff

eren

tiatio

n –

line

expa

nsio

n

Lead

– a

ggre

ssiv

epr

icin

g fo

r sha

re

Agg

ress

ive

mar

ketin

g

Bro

aden

dist

ribut

ion

Tigh

t con

trol –

go

for

scal

e ec

onom

ies

Exp

and,

inve

st (o

rgan

icac

quis

ition

, joi

nt v

entu

re)

Exp

and

– in

vest

Upg

rade

man

agem

ent

in k

ey fu

nctio

nal a

reas

Fund

gro

wth

Red

uce

in p

roce

ss –

ex

tend

cre

dit

Mai

ntai

n or

slig

htly

milk

for e

arni

ngs

Pru

ne fo

r les

s su

cces

sful

diffe

rent

iate

for s

egm

ents

Sta

biliz

e pr

ices

/rais

e

Lim

it

Hol

d w

ide

dist

ribut

ion

patte

rn

Em

phas

ize

cost

redu

ctio

nvi

z. v

aria

ble

cost

s

Max

imiz

e ca

paci

tyut

ilisa

tion

Focu

s on

spe

cific

proj

ects

Mai

ntai

n, re

war

d ef

ficie

ncy,

tight

en o

rgan

izat

ion

Lim

it fix

ed in

vest

men

t

Tigh

ten

cred

it –

redu

ceac

coun

ts re

ceiv

able

incr

ease

inve

ntor

y tu

rn

Mai

ntai

n se

lect

ivity

–

segm

ent

Em

phas

ize

prod

uct

qual

ity

Mai

ntai

n or

rais

e

Mai

ntai

n se

lect

ivel

y

Seg

men

t

Tigh

t con

trol

Incr

ease

pro

duct

ivity

eg s

peci

aliz

atio

n

Inve

st s

elec

tivel

y

Allo

cate

key

man

ager

s

Inve

st s

elec

tivel

y

Red

uce

Fore

go s

hare

for p

rofit

Agg

ress

ivel

y pr

une

Rai

se

Min

imiz

e

Gra

dual

ly w

ithdr

awdi

strib

utio

n

Agg

ress

ivel

y re

duce

fixed

and

var

iabl

e

Free

up

capa

city

Non

e

Cut

bac

k or

gani

zatio

n

Min

imiz

e an

d di

vest

oppo

rtuni

stic

ally

Agg

ress

ivel

y re

duce

Inve

st s

elec

tivel

yin

sha

re

Diff

eren

tiatio

n –

line

expa

nsio

n

Agg

ress

ive

– pr

ice

for

shar

e

Agg

ress

ive

mar

ketin

g

Lim

ited

cove

rage

Tigh

t – b

ut n

ot a

t exp

ense

of e

ntre

pren

eurs

hip

Inve

st

Inve

st

Inve

st

Fund

gro

wth

Inve

st

Pro

duct

s

Mar

ket s

hare

Pric

e

Dis

tribu

tion

Pro

mot

ion

Cos

t con

trol

R &

D

Pro

duct

ion

Per

sonn

el

Inve

stm

ent

Wor

king

cap

ital

Inve

stfo

r gro

wth

Mai

ntai

n m

arke

tpo

sitio

n, m

anag

efo

r ear

ning

sS

elec

tive

Man

age

for c

ash

Opp

ortu

nist

icde

velo

pmen

t

Man

agem

ent

vari

able

s

Key

pos

ition

s on

the

DP

M

Figu

re 6

.2Pl

an g

uid

elin

es f

or p

osit

ioni

ng o

n th

e D

PM

As discussed in Chapter 2, corporate objectiveslead to corporate strategies, which in turn suggestmarketing objectives and strategies lower down thebusiness hierarchy. Gap analysis is a technique usedto explore the shortfall between the corporate objec-tive and what can be achieved by various strategies.As described in Figure 6.3, what it says is that if thecorporate sales and financial objectives are greaterthan the current long-range trends and forecasts,then there is a gap to be filled. The operations gapcan be filled by reducing costs, improving the salesmix and/or increasing market share. The strategygap can be filled by finding new user groups, enter-ing new segments, geographical expansion, newproduct development, and/or diversification. Themarketing audit should ensure that the method cho-sen to fill the gap is consistent with the company’scapabilities and builds on its strengths.


Gap analysis

Objective

New strategies

Diversification

New markets

New products

Market penetration

Productivity

Do nothing scenario

Strategygap

Sales

Time

Figure 6.3 Gap analysis

MARKETING STRATEGIES

All organizations serve a mix of different types ofmarket. Marketing strategy enables the organizationto select the customers, and hence the markets, itwishes to deal with. It is the route by which the orga-nization seeks to achieve its marketing objectivesthrough the range of products/services it offers toits chosen markets. By indicating what strengths areto be developed, what weaknesses are to be reme-died, and in what manner, marketing strategiesenable operating decisions to bring the organizationinto the right relationship with the emerging patternof market opportunities, which previous analysishas shown to offer the highest prospect of success.

Marketing strategies are generally concerned withthe four ‘P’s of the marketing mix:

• Product – the general policies for product dele-tions, modifications, additions, design, brand-ing, positioning, packaging, etc.

• Price – the general pricing policies to be followedfor product groups in market segments.

• Place – the general policies for channels and cus-tomer service levels.

• Promotion – the general policies for communi-cating with customers under the relevant head-ings, such as advertising, sales force, salespromotion, public relations, exhibitions, directmail, the internet, etc.

The main components of marketing strategy are: thecompany, customers, and competitors. When settingmarketing strategies, it is important to know yourposition in the market, as well as the positions of yourcompetitors, so that ideally you can meet customer


needs by doing something your rivals aren’t expect-ing and will find difficult to emulate or supersede.The point to remember about differentiation as astrategy is that you must still be cost-effective.

Michael Porter’s generic strategies matrix, shown inFigure 6.4, demonstrates that some markets are inher-ently more prone to lack of differentiation in productsand services. In such cases, the attainment of low costsmust be a corporate goal if adequate margins are to beobtained. The ultimate strategy for commodity mar-ket situations, where there is no differentiation or costadvantage, is to move to either a cost leadership orniche strategy. A niche position is achieved throughoffering added value, whereas in a cost leadershipposition, the values offered are cost competitive.

Marketing strategies should state in broad termshow the marketing objectives are to be achieved.They should cover:

• the specific product policies (the range, technicalspecifications, additions, deletions, etc);

• the pricing policies to be followed for productgroups in particular market segments;


Porter’s generic strategies

NicheOutstanding

success

Disaster Lowestcost

High

Low

High LowLowRelative costRelative cost

DifferentiationDifferentiation

Figure 6.4 Porter’s generic strategies matrix

Differentation

Relative cost

• the customer service levels to be provided forspecific market segments (such as maintenancesupport);

• the policies for communicating with customersunder each of the main headings, such as salesforce, advertising, sales promotion, etc, as appropriate.

Some of the marketing strategies available to man-agers include:

• change product design, performance, quality orfeatures;

• change advertising or promotion;

• change unit price;

• change delivery or distribution;

• change service levels;

• improve marketing productivity (eg, improvesales mix);

• improve administrative productivity;

• consolidate product line;

• withdraw from markets;

• consolidate distribution;

• standardize design;

• acquire markets, products, facilities.

Marketing strategies define broadly the means ofimplementing the marketing plan and are not con-cerned with detailed courses of action, which are theone-year operational, or tactical plans derived fromthe strategic plans. However, those responsible forpreparing strategic marketing plans will benefit fromunderstanding the detail contained within opera-tional plans for the main elements of the marketing


mix. Therefore, let us consider next what shouldappear in the advertising and sales promotion plans,the sales plan, the pricing plan and the distributionplan (Chapters 7, 8, 9 and 10 respectively).


Questions1. Using the Porter’s ‘generic strategies matrix’

shown below, in which boxes would you placethese businesses? Write the box letter in thebrackets.i) Cut price, no frills grocery store. ( )ii) High price organic food store. ( )iii) Successful supermarket with

reputation for quality. ( )iv) Traditional food store, stuck in the

past. ( )


a b

c d

Differentiation

High

High Low

Low

Relative costs

2. The Acme Company have a corporate objectiveto generate 20 per cent return on capitalemployed in three years’ time. To achieve this thecompany must then be earning £20 million insales revenue. The marketing director calculatesthat a continuation of current strategies will onlyproduce £15 million. Which of the following,taken individually will not help to close the gap?a) Reduce discounts.b) Develop new products.c) Increase advertising.d) Become more productive.e) Cut costs.f) Increase prices.g) Develop new markets.h) Improve the product mix.i) Improve the customer mix.j) Lower the revenue target.

3. There are five main strategies to apply to prod-ucts according to their position on the directionalpolicy matrix. What are they? Write youranswers in the spaces provided.

i) ii) iii) iv) v)


i iii

v

ii iv

Marketattractiveness

High

High Low

Low

Strengths

4. Which of the above would be best suited to:a) A ‘cash cow’? b) A ‘star’?

5. Two opposing forces meet armed with musketsthat take three minutes to reload. Force A has 100soldiers and Force B, 200. However, the troops inForce A are better trained and can expect to bringdown 20 per cent of their opponents in each vol-ley. They are twice as effective as Force B.

When either force is reduced to less than 50 percent of its original number it will retire from thefield.i) Assuming both fire the first volley

simultaneously, who wins?a) Force A b) Force B

ii) Also, how long does this skirmish last if it istimed from the opening exchange?

a) 6 minutes c) 12 minutesb) 9 minutes d) 15 minutes

6. The diversification box of the Ansoff matrix hasto be treated with care because it represents:a) The least profitable options.b) The most risky options.c) The options which take longest to implement.d) The most costly options.

7. If you choose an invest strategy, which of thestatements below are true (T) or false (F)?a) The market must be attractive. ( )b) Sales volume must show a year-on-year

increase. ( )c) Prices should increase to cover costs. ( )d) Marketing objectives should at best

match market growth rates. ( )


e) The market should be stable. ( )f) The market should be growing. ( )

8. Which of the following are true (T) or false (F)?To be successful, marketing strategies shouldensure that:a) Prices cover costs on all

products/services. ( )b) Quality is never less than the highest

standard. ( )c) The sales force is the largest. ( )d) Changes in market needs are

addressed. ( )

9. Gap analysis is used to:a) Monitor the gap between you and competitors.b) Identify gaps in your product range.c) Identify the shortfall from expected results if

current strategies remain unchanged.d) Identify gaps in the SWOT analysis.


10. The Ansoff Matrix, shown below, helps to iden-tify four broad strategies. These are:i) New product iii) Market

development. ( ) extension. ( )ii) Market iv) Diversification. ( )

penetration. ( )

Indicate which strategy fits in which box bywriting a, b, c or d in the brackets above.

AnswersQuestion 1 Answer: i) = d), ii) = a), iii) = b) and iv) =

c).

Question 2 £5 million must be generated from newstrategies. Increasing advertising, byitself will incur costs and not necessar-ily generate revenue. Cutting costs caninfluence profitability but will not gen-erate revenue. Lowering the target(moving the goalposts) is no way to runa business.Answer: c), e) and j).


a b

d c

Markets

Existing

Existing New

New

Products

Question 3 Answer: i) Invest for growth; ii)Maintain market position, manage forearnings; iii) Selective investment; iv)Manage for cash; v) Opportunisticdevelopment.

Question 4 Answer: a) = ii, Maintain; b) = i, Invest.

Question 5 After the opening exchange Force B isdown to 160 men. The next roundreduces it to 123, then 104, then approx.80. Thus there are 3 loading periodsafter opening exchange = 9 minutes.Answer: i) = a), ii) =b).

Question 6 It doubles the risk by calling for newproducts and new markets. Answer = b).

Question 7 Answer: a) = T, b) = F, c) = F, d) = T, e) =F, f) = T.

Question 8 a) is false because it might be a suitablestrategy to have a ‘loss leader’.

b) is false – the customer is the arbiterof quality – the highest possiblestandard is not always required orpossible.

c) is false because the quality of thesalesforce is more important than itssize.

Answer: a), b) and c) = F; d) =T.

Question 9 Answer = c).

Question 10 Answer: i) = b), ii) = a), iii) = d), iv) = c).


Communications mix

In order to achieve its marketing objectives, an orga-nization has to communicate with both existing andpotential customers. It can do so in a variety of ways,either on an impersonal or personal basis. Impersonalcommunication is accomplished indirectly, usingadvertising, promotion, point-of-sale displays, andpublic relations, while personal communication isundertaken directly, in face-to-face meetings, gener-ally using a sales force. The armoury of communica-tion techniques at the organization’s disposal, whichmight be used singly or in combination, can beblended together into an effective and persuasivecommunications mix. The choice of communicationsmix should be the most cost-effective solution forachieving the organization’s communications objec-tives that derived from its marketing objectives,which in turn originated from its corporate objectives.

7

Advertising and sales promotion strategies

The communications plan is the blueprint for inte-grating the various components of the communica-tions mix. It comprises the advertising, salespromotion and sales plans. The former two involveimpersonal communication, while the latter con-cerns personal communication. This chapter consid-ers the advertising plan and the sales promotion plan.The sales plan is the focus of Chapter 8.

ADVERTISING STRATEGIES

Advertising (often referred to as ‘above-the-lineexpenditure’) uses measured media such as televi-sion, cinema, radio, print and electronic media (eg,banner advertising on web sites). The usual assump-tion is that advertising is deployed in an aggressiverole and that all that changes over time is the cre-ative content. But the role of advertising usuallyalters during the life cycle of a product. For example,the process of persuasion (awareness, interest, atti-tude formation, decision to act) cannot normallystart until there is some level of awareness about aproduct or service in the marketplace. Creatingawareness is therefore one of the most importantobjectives early on the PLC. If the offer has been cor-rectly matched with customer needs and is per-ceived to be superior to competitors’ offers, throughthe astute use of such vehicles as branding, pricingor customer-convenient distribution, then the cus-tomer will be persuaded to buy.

The ‘diffusion of innovation’ curve discussed inChapter 5 is relevant here. Experience indicates thatonce the first 3 per cent of innovators have adoptedthe product, the early adopters will likely try it, and


once the 8–10 per cent point is reached, the rest willlikely follow suit. This pattern demonstrates the needfor different kinds of advertising for each category ofcustomer, and thus different sets of advertising objec-tives and strategies for different stages in a product’slife cycle. It is worth remembering too that, for opti-mum effect, advertising effort can be directed notonly at consumers, but at all those who influencecommercial success, including channels, sharehold-ers, media, employees, suppliers and government.

The first step in preparing an advertising plan is todecide on reasonable, achievable objectives foradvertising. The acid test for confirming whether anobjective is suitable as an advertising objective is toask: ‘Is it possible to achieve this objective by adver-tising alone?’ If the answer is no, then it is not anobjective for advertising.

A common misconception is that advertisingobjectives should be set in terms of sales increases. Asadvertising is one of a host of determinants of saleslevels (which also includes product quality, price andcustomer service, for example), sales increases can-not be a direct objective of advertising. It is alsoimportant to be clear on the distinction between mar-keting objectives and advertising objectives.Marketing objectives are concerned with what prod-ucts go to which markets, whereas advertising objec-tives are measurable targets concerned principallywith changing attitudes and creating awareness.

There are two basic questions that advertisingobjectives should address: ‘Who are the people weare trying to influence?’ and ‘What specific benefitsor information are we trying to communicate tothem?’ Many companies use outside agencies todesign their advertising. Advertising objectives,

Advertising and sales promotion strategies � 99

Advertising objectives –about changing attitudesand creating awareness

however, should always be set by you and not by anadvertising agency.

There are many possible advertising objectives,such as:

• to convey information;

• to alter perceptions;

• to alter attitudes;

• to create desires;

• to establish connections, (eg, association ofbacon and egg);

• to direct actions;

• to provide reassurance;

• to remind;

• to give reasons for buying;

• to demonstrate;

• to generate enquiries.

Having defined and agreed the advertising objec-tives, all other steps in the process of assembling theadvertising strategy flow naturally from them. Thesesubsequent steps address the following questions:

• Who?

– Who are the target audience(s)?

– What do they already know, feel, believeabout us and our product/service?

– What do they know, feel, believe about thecompetition?

– What sort of people are they? How do wedescribe/identify them?

• What?

– What response do we wish to evoke from the


target audience(s)?Are these specific commu-nications objectives?

– What do we want to ‘say’, make them ‘feel’,‘believe’, ‘understand’, ‘know’, about buy-ing/using our product/service?

– What are we offering?

– What do we not want to convey?

– What are the priorities of importance for ourobjectives?

– What are there objectives which are writtendown and agreed by the company and adver-tising agency?

• How?

– How are our objectives to be embodied in anappealing form? What is our creative strat-egy/platform?

– What evidence do we have that this is accept-able and appropriate to our audience(s)?

• Where?

– Where is/are the most cost-effective place(s)to expose our communications (in cost termsvis-à-vis our audience)?

– Where is/are the most beneficial place(s) forour communications (in expected responseterms vis-à-vis the ‘quality’ of the channelsavailable)?

• When?

– When are our communications to be displayed/conveyed to our audience?

– What is the reasoning for our scheduling ofadvertisements/communications over time?

– What constraints limit our freedom of choice?


– Do we have to fit in with other promotionalactivity on:

– other products/services supplied by ourcompany?

– competitors’ products/services?

– seasonal trends?

– special events in the market?

• The results:

– What results do we expect?

– How will we measure results?

– Do we intend to measure results and, if so, dowe need to do anything beforehand?

– If we cannot say how we would measure pre-cise results, then maybe our objectives are notsufficiently specific or are not communica-tions objectives.

– How are we going to judge the relative suc-cess of our communications activities (good/bad/indifferent)?

– Should we have action standards?

• The budget:

– How much money do the intended activitiesneed?

– How much money is going to be made available?

– How are we going to control expenditure?

• The schedule:

– Who is to do what and when?

– What is being spent on what, where andwhen?


SALES PROMOTION STRATEGIES

Sales promotion (often referred to as ‘below-the-line expenditure’) is non-face-to-face activity con-cerned with the promotion of sales. It is essentiallya problem-solving activity designed to encouragecustomers to behave more in line with the eco-nomic interests of the company, ie to bring forwardtheir decision to buy. Sales promotion involves themaking of a featured offer to defined customerswithin a specific time limit. The offer must includebenefits not inherent in the product or service, asopposed to the intangible benefits offered in adver-tising, such as adding value through appeals toimagery.

Typical tasks for sales promotion include: control-ling stock movement; counteracting competitiveactivity; encouraging repeat purchase; securingmarginal buyers; getting bills paid on time; andinducing trial purchase. It is generally used as ashort-term, tactical initiative, in contrast with thenotion of advertising as a long-term, strategic activ-ity that changes with the PLC. However, sales pro-motion does have a strategic role to play in helpingto strengthen the bond between seller and buyer,and thus a sales promotion strategy is required toensure that each promotion increases the effective-ness of the next in terms of impact and investment ofresources. Further, it is possible to establish a style ofsales promotion that, if consistently applied, willhelp to establish the objectives of a product over along period of time, which are flexible and havestaying power.

Confusion about what sales promotion is, oftenresults in expenditures not being properly recorded.


Sales promotion:encouraging a purchase

Sales promotion expenditure is sometimes consid-ered, for example, as advertising or sales forceexpenditure, or as a general marketing expense,while loss of revenue from special price reductionsis often not recorded at all. Not surprisingly, salespromotion is notoriously one of the most misman-aged of all marketing functions. In order to managesales promotion expenditure effectively, it is essen-tial that objectives for sales promotion be estab-lished, in the same way that objectives aredeveloped for advertising, pricing or distribution.These will be dependent on the company’s market-ing objectives and may relate to any of the four ‘P’s.

Sales promotion seeks to influence:

Salespeople to sellCustomers to buyCustomers to use more, earlier, faster,Users to buy etc.Users to useDistributors to stock

In order to achieve these objectives, the promotioncan take one of three forms. It can involve:

• money (price reductions, coupons, competitions);

• goods (free goods, eg, two for the price of one,trade-ins, free trials, redeemable coupons, etc);

• services (guarantees, training, prizes for events,free services, etc).

When determining the nature of the sales promo-tion, you should decide first, which target group(s)need to be influenced most to make an impact onyour sales problem and second, what type of


�

promotion will have maximum appeal to thatgroup. When considering the cost element, youmust remember that the promotional costs have tobe weighed up against the benefits of reducing thesales problem, which the sales promotion isintended to solve. The cost-effectiveness of the salespromotion must be established and integrated intothe overall marketing plan.

The objectives for each sales promotion should beclearly stated, such as trial, repeat purchase, distri-bution, a shift in buying peaks, combating competi-tion, and so on. Then the strategy to implement theobjectives must be worked out. Sales promotionstrategy should follow the standard route of: selectthe appropriate sales promotion technique; pretest;mount the promotion; and finally, evaluate in depth.Spending must be analysed and categorized by typeof activity (eg, special packaging, special point-of-sale material, loss of revenue through price reduc-tions, and so forth).

As for the sales promotion plan itself, the objec-tives, strategy and brief details of timing and costsshould be included. It is important that the salespromotion plan should not be too detailed, and onlyan outline of it should appear in the marketing plan.(Detailed promotional instructions will follow asthe marketing plan unfurls.) It is also important toensure that any sales promotion is well coordinatedin terms of what happens before, during and afterthe promotion. At different stages, different peoplemight be participating and special resources mightbe required. Therefore the plan needs to be pre-pared in a simple way that most people can follow.As a guide, a sales promotion plan should containthe following:


Sales promotion: plan foractivities before, duringand after the promotion

Heading Content

Introduction Briefly summarize the problemupon which the promotion isdesigned to make an impact.

Objectives Show how the objectives of thepromotion are consistent withthe marketing objectives.

Background Provide the relevant data orjustification for the promotion.

Promotional offer Briefly, but precisely, providedetails of the offer.

Eligibility State who is eligible andwhere.

Timing Specify when the offer isavailable (giving opening andclosing dates).

Date plan Give the dates andresponsibilities for all elementsof promotion.

Support Identify special materials,samples, etc that are requiredby the sales force, retailers, etc.

Administration Include budgets, storage,invoicing, delivery, etc.

Sales plan Cover briefing meetings,targets, incentives, etc.

Sales presentation List points to be covered.

Sales reporting Give details of any specialinformation required.

Assessment Define how the promotion willbe evaluated.



Questions1. Which of the following are impersonal commu-

nications (I) and which are personal communica-tions (P).a) advertising ( ) d) sales b) point of sale promotion ( )

display ( ) e) targeted mail ( )c) customer f) salesperson

help line ( ) visit ( )

2. Below is a matrix which illustrates the combina-tions of relationship between product/servicecomplexity and its commercial uncertainty. Eachbox suggests that the buying process might beorganized differently. Your task is to match the sug-gestions below with the appropriate boxes in thematrix. There is one mark for each correct answer.

i) Routine buying process operated at a low management level. ( )

ii) Buying decision made by top management. ( )


a b

c d

Commercialuncertainty

High

High Low

Low

Product complexity

iii) Buying decision mainly delegated to a technical specialist. ( )

iv) Decision to buy referred to topmanagement for approval. ( )

3. What is a benefit?a) Something the customer wants.b) Something cheaper than the competition.c) Something the product supplies that the cus-

tomer wants.d) Something the product does better than its

competitors.

4. Tick which of the following communicationtasks lend themselves to impersonalmethods.a) To announce a new service.b) To show how a complex product can adapt to

specific situations.c) To overcome objections.d) To provide customer confidence.e) To explain differential benefits.f ) To close a sale.

5. Part 1What are the two missing group names in the‘diffusion of innovation’ sequence shown below?

Innovators......Early majority......Late majority......

Part 2What proportion of the total population,approximately, does each of the missing groupsrepresent?

( ) ( )


6. An advertisement is most effective if:a) It appears almost everywhere.b) It carries a single, believable message.c) It is very cleverly worded.d) It contains humour.

7. In the Boston Matrix, which box contains theproducts most likely to benefit from advertising? a) ‘problem child’b) ‘star’c) ‘cash cow’d) ‘dog’

8. Which of the following criteria would you use tomeasure the efficacy of an advertising campaign?a) An increase in sales revenue.b) The number of new customers.c) The extent to which the campaign met its

objectives.d) The cost of winning each new customer or sale.

9. Decide which of the following statements aboutsales promotions are true (T) or false (F).a) The only legitimate target for a sales

promotion is the customer. ( )b) Because a sales promotion is a ‘below

the line’ activity it requires less planning. ( )

c) Sales promotions are only a tacticalmarketing weapon. ( )

d) Sales promotions can only be used with consumer goods. ( )

e) The key to success with a sales promotion is always to have a new‘gimmick’. ( )


10. A Marketing Manager is considering running a‘2 for the price of 1’ sales promotion. Which ofthe reasons listed below would NOT justify thistype of promotion?a) To boost falling profits.b) To shift slow moving products.c) To defend market share.d) To counter a competitor’s new product launch.

Answers

Question 1 Answer: a) = I, b) = I, c) = P, d) = I, e) = P,f) = P.

Question 2 Answer: i) = d), ii) = a), iii) = c), iv) = b).

Question 3 Remember, a benefit is somethingbestowed by the product or service thatthe customer values. A cheaper price isnot therefore a benefit if the customerseeks high quality or exclusivity. Nor issomething the product does better abenefit, unless we can be sure that thisparticular advantage is what the cus-tomer seeks. Answer = c).

Question 4 Answers: b), c) and f) can only be com-pleted satisfactorily using face-to-facecommunication.Answer: a), d) and e).

Question 5 Part 1: Answer: Early adopters (some-times called opinion leaders) and laggards.Part 2: Answer: 13.5 per cent and 16 percent respectively.


Question 6 Although a) may sound attractive, thecost of such widespread exposure doesnot automatically guarantee success. Itmight only mean that an ineffectiveadvertisement is seen by more people.With c) and d) the ‘cleverness’ mayobscure the key message.Answer = b).

Question 7 Promotional investment in ‘stars’ addsto their potential as ‘cash cows’ later intheir life, and competition will be keen. Answer = b).

Question 8 Advertising objectives can be manyand varied. For example, some objec-tives may be to improve customer con-fidence or create an awareness of a newproduct. Thus the only correct answeris c).

Question 9 Answer: All are false.a) This is patently untrue because

intermediaries or your own sales-force could be the target for a salespromotion.

b) All promotions need careful plan-ning.

c) Sales promotions can be used strate-gically, eg to defend market share,entice new customers, etc.

d) Promotions can work equally wellwith services.

e) A ‘gimmick’ might help, but the keyto success is to provide an offer that


is attractive and thus motivates thetarget audience to take action.

Question 10 This type of promotion will do nothingfor falling profits, but could be verysuccessful in terms of meeting the otherobjectives. Answer = a).


Where sales actindependently ofmarketing longer-termstrategies often fail

While it is quite possible that some companies willnot use advertising and sales promotion, very fewfail to have some element of face-to-face selling intheir marketing mix. Traditionally, companies hadsales forces long before marketing was in vogue.This sometimes explains why, in many organiza-tions, sales and marketing are regarded as two sepa-rate functions. However, where sales departmentsact independently of marketing, they often attaintheir short-term sales goals but fail to achieve themix of products and markets consistent with itslonger-term strategic marketing objectives.

Personal selling, or promotion via person-to-person conversation (be it at the customer’spremises, by telephone, or elsewhere), is a vital partof the marketing mix. It offers the advantages of two-way communication, which advertising and sales

8

Sales strategies

promotion cannot provide. Sales messages can bemade more customer-specific, questions can beasked and answered, and the salesperson can ask foran order and perhaps negotiate on price, delivery orspecial requirements. Such flexibility and personal-ization in communication can greatly enhance ser-vice levels and help close sales, but at a high cost.When the total costs of recruiting, managing and pro-viding salespersons with all the necessary resourcesand support systems is considered, personal sellingoften accounts for more expenditure than advertis-ing and sales promotion combined. It is thereforeimportant to plan how personal selling will be inte-grated into the ‘communications mix’, and then toorganize the logistics to ensure that the right resultsare achieved cost-effectively.

Before attempting to produce a sales strategy, it isnecessary to establish what information customerswill require from the sales force. Communicationefficiency depends on achieving a match betweenthe information required and the information given.The organization must therefore identify the majorinfluencers in each purchase decision and find outwhat information customers are likely to need at dif-ferent stages of the buying process. It will also needto know if the customer is buying for the first time orcontemplating a repeat order. Customer informationneeds may range from details about the productrange and product performance, to price, runningcosts, guarantees, load sizes, competitor products,special offers, reordering, and so on.

The role of the salesperson is clearly about muchmore than just ‘selling’ and will vary according to thebusiness concerned. A salesperson may be an order-taker, a negotiator, a demonstrator, or a composite of


Personal selling providestwo way communications –at a cost

these and other roles. To optimize the sales force andobtain best value for money from personal selling, anorganization must resolve three basic issues. It mustdetermine the requisite number of salespeople, theirprecise sales role and how they are to be managed.

Salespeople essentially undertake three activities.They make calls, travel and administrate. Byanalysing their current workload and consideringalternative ways of undertaking these responsibili-ties, the organization can decide what constitutes areasonable workload (ie, how many calls it is possi-ble to make in a working day given the concomitanttime values for clerical tasks and travel) and howterritories can be equitably allocated. Equally, anassessment of existing and potential customersshould be made and the annual total number of callscalculated, bearing in mind that different customercategories need different call rates. The followingformula is helpful in ascertaining how many sales-people are needed:

Number of Annual total calls requiredsalespeople

=Annual number of working days× all salespeoples’ calls per day

Having decided what role the sales force is to play inthe communications mix per market segment, thenext step is to draw up quantifiable objectives forthem, including:

• how much to sell (volume);

• what to sell (product/service mix);

• where to sell (market segments);

• allowable costs;

• profit margins.

Sales strategies � 115

Sizing your sales force

Sales objectives

The first three types of objectives derive directlyfrom the marketing objectives and constitute theprincipal components of the sales strategy. The salesplan is, in effect, a translation of these figures/prod-ucts/customers into individual targets for each salesrepresentative, taking into account special factorssuch as their territory size, the size of customerswithin a particular territory, and so forth. Additionalquantitative objectives might include the number oftelephone contacts, service calls, distance travelledor reports submitted for a defined period.

Qualitative objectives should also be set. Thesewill be related to the salesperson’s skills in perform-ing the job and can be appraised in terms of agreedstandards of performance. The emphasis should beplaced on measurable performance standards, suchas expectations of work quality, efficiency, style andbehaviour, rather than non-measurable factors,such as creativity, loyalty, interest and enthusiasm,which can easily be misconstrued as favouritism orunfairness.

The key management activities involved in man-aging the sales force are summarized as:

• setting performance standards (both quantifi-able and qualitative);

• monitoring achievements;

• helping/training those who are falling behind;

• setting the right motivational climate.

While monitoring what salespeople do can largelybe accomplished through reports, sales figures andso on, assessing how they do things usually requiresobserving them in action. As a rule, the higher the uncertainty surrounding the salesperson, the


Sales management – a verydifferent role to selling

territory, the product range, the customer, and soforth, the more frequently performance should bemonitored. Having measurable standards of perfor-mance enables managers to identify the area andnature of help that salesperson needs, and torespond appropriately. For instance, he or she mayneed more information about prices and products,more support in terms of administration or joint vis-its, or more training to improve his or her skills set.

Perhaps most crucial of all is creating the rightmotivational climate. To maximize sales force per-formance it is necessary to achieve the optimal bal-ance between incentives and disincentives. Whileremuneration will always be a key determinant ofmotivation, sales managers can improve sales forceperformance by clarifying performance expecta-tions, providing rewards consistent with perfor-mance, giving due praise and recognition, ensuringfreedom from fear and worry, and encouraging intheir sales team a sense of doing a job that is worth-while and valued.

Due to the uniqueness of each business situationand sales force make-up, no two sales plans will beexactly the same. However, some general guidelinescan be given. Table 8.1 is an example of setting objec-tives for an individual salesperson. These objectiveswill be the logical result of breaking down the mar-keting objectives into actual sales targets.



Table 8.1 Objectives for the individual salesperson (based on the originalwork of Stephen P Morse when at Urwick Orr and Partners)

Task The standard How to set the How to measure What to look forstandard performance

1 To achieve Sales target per Analysis of Comparison of Significant shortfallpersonal period of time for • territory potential individual between target andsales individual groups • individual salesperson’s achievement over atargets and/or products customers’ product sales against meaningful period

potential. targetsDiscussion andagreement betweensalesperson andmanager

2 To sell the Achievement of Analysis of Scrutiny of Failure to achieverequired specified range and individual customer individual customer agreed objectives.range and quantity of sales to a records of records. Complacency withquantity to particular customer • potential Observation of range of sales madeindividual or group of • present sales. selling in the field to individualcustomers customers within an Discussion and customers

agreed time period agreement betweenmanager and salesperson

3 To plan To achieve Analysis of Scrutiny of High ratio of calls tojourneys appropriate call individual individual customer an individualand call frequency on customers’ potential. records. customer relative tofrequencies individual Analysis of order/call Analysis of order/call that customer’sto achieve customers. Number ratios. Discussion ratio. Examination yield. Shortfall onthe of live customer and agreement of call reports agreed total numberminimum calls during a between manager of calls made over practical given time period and salesperson an agreed timeselling cost period

4 To acquire Number of prospect Identify total Examination of Shortfall in numbernew calls during time number of potential • call reports of prospect callscustomers period. Selling new and actual customers • records of new from agreed

products to existing who could produce accounts opened standard. Low ratiocustomers results. Identify • ratio of existing to of existing to

opportunity areas potential customers potential customersfor prospecting

5 To make a To exercise the Standard to be Regular observations Failure tosales necessary skills and agreed in discussion of field selling using • identify objectiveapproach techniques required between manager a systematic analysis of each stage ofof the to achieve the and salesperson of performance in sales approachrequired identified objective related to company each stage of the • identify specificquality of each element of standards laid down sales approach areas of skill,

the sales approach. weaknessContinuous use of • use of supportsales material material


Questions1. Which of the following statements is true? Most

companies:a) Spend more on advertising than on the sales

force. b) Spend more on sales promotions than the

sales force.c) Spend more on the sales force than advertis-

ing and sales promotion together.d) Spend about the same on each.

2. Which of these is true? The real secret to successin sales depends upon:a) Having up-to-date product knowledge.b) Understanding the customers’ buying

processes.c) Having equal sized sales territories.d) Having a good incentive scheme for sales staff.

3. Deciding how many salespeople you need canbe critical. Should the decision be based upon:a) What you can afford?b) What your competitors have?c) The minimum practical selling cost?d) Enough to service customers as agreed in the

marketing plan?

4. Which of the following are true (T) or false (F)? Agood salesperson will:a) Make meetings a two-way

conversation. ( )


b) Know that good products sell themselves. ( )

c) Be an extrovert. ( )d) Customize his or her message for

each meeting. ( )e) Demonstrate vast product knowledge

at every opportunity. ( )f) Recognize buying signals quickly. ( )

5. It was found that all of a company’s customerscould be positioned on the following matrix. Ifyou were the sales manager, what order of prior-ity would you give to the customer communica-tions in each box?

a) Top priority Box ( )b) Next Box ( )c) Next Box ( )d) Lowest priority Box ( )


A B

C D

Business potential

High

Poor Good

Low

Relative cost

Quality of relationship

6. Tick in which of the following situations tele-phone selling could be used successfully.a) To deal with a reorder.b) To deal with distant customers.c) To deal with awkward customers.d) To deal with a product launch.

7. Which of the following is the most important? Agood salesperson will be strong on:a) Striking up a friendship with the customer.b) Stressing the features of the product.c) Sticking to his or her preplanned presentation.d) Identifying the customer’s problems.

8. Which of these is the most accurate statement?The customer’s decision making unit (DMU)consists of:a) Those people who are involved in the choice

of supplier.b) Arepresentative of all organizational functions.c) The buyer, plus someone from the technical

and finance departments.d) The buyer and the CEO.

9. Choose the most appropriate ending for the fol-lowing statement. ‘The key role for a sales man-ager is …’a) To be available at all times to deal with prob-

lems experienced by customers or the salesforce.

b) To develop sales representatives.c) To negotiate prices with major customers.d) To ensure that all sales reports are submitted

on time and that sales staff do not abuse theirexpenses.


10. A key business ratio is:

= RONA

This is calculated by using this formula:

Net Profit × YY Net Assets

What is Y? Is it:a) Total assets?b) Cost of sales?c) Working capital, ie capital employed – fixed

assets?d) Sales revenue?

Answers

Question 1 Several pieces of research support viewc) UNLESS the company is in mailorder or promotion-driven sales.Answer = c).

Question 2 Answer: a) and d) may have some bear-ing on sales success, but b) is the criticalfactor.

Question 3 Although some companies resort to a),b) and c), d) is the only sensible answer.

Question 4 Answer: T = a), d) and f). These all helpthe sales process. F = b), c) and e) whichcan derail it.

Net Profit��Net Assets


Question 5 Answer:a) = A. Improving relationships with

high potential clients must be ratedhighly.

b) = B. Maintaining good relationshipswith important customers is easierthan making them in the first place.

c) = D. Squeezing extra business out ofthose with whom the company has agood relationship comes next.

d) = C. This is clearly the lowest prior-ity; in fact, who wants this business?

Question 6 Answer: a) and b) – assuming the prod-uct was not too complex.

Question 7 Note: a failure to do this makes itimpossible to meet the customers’needs.Answer = d).

Question 8 This also explains why the compositionof the DMU can vary from company tocompany and according to the natureof the purchase.Answer = a).

Question 9 Like any other manager, the sales man-ager has to get results through others,not do their job for them. Thus devel-oping each sales representative is a keytask for successful managers.Answer = b).



Price has an interactiveeffect on other elements ofthe marketing mix

Pricing is a marketing ‘tool’ just as much as the com-munications devices of advertising, sales promotionand the use of the sales force. Moreover, it is gener-ally easier and quicker to change a price than it is toalter an advertising campaign, revamp a sales pro-motion, or to deploy the sales force in a differentmanner. The pricing decision is important for twomain reasons: price not only affects the marginthrough its impact on revenue; it also affects thequantity sold through its influence on demand. Inshort, price has an interactive effect on the other ele-ments of the marketing mix, so it is essential that it ispart of a conscious marketing scheme, with objec-tives that have been clearly defined.

The reason why pricing is rarely separated outand put into a plan of its own is because it is so inte-gral to the offer that it is generally included as part of

9

Price strategies

the product/segment plans. Pricing is also tradition-ally a source of disagreement between marketersand accountants: the marketer sometimes wants tohold or reduce the net selling price in order toincrease market share, while the accountant oftenwants to increase the price of a product in order tomaximize profitability. Certainly, any team compris-ing a financially alert marketer and a marketing-orientated accountant will make formidable opposi-tion in the marketplace.

When trying to resolve the question of whetherthe role of pricing should be to increase profitabilityor to increase market share, a number of factorsshould be considered:

• objectives (corporate and marketing) and theproduct portfolio;

• PLC (product life cycle);

• the product’s position in the market;

• competitors;

• potential competitors;

• costs (your own and the competitors’);

• channels of distribution.

We know that it is important for an organization tohave a well-defined hierarchy of objectives to whichall its activities and actions, including pricing, can berelated. As corporate objectives will influence mar-keting objectives, so marketing objectives will influ-ence pricing objectives. For instance, marketingobjectives for a particular product may dictate ashort-term emphasis on profitability rather thanmarket share, which will obviously influence thepricing strategy. This will be a function of that product’s position vis-à-vis other products in the


Pricing and internal debate

portfolio. The setting of marketing objectives for anyparticular product, then, is the starting point in anyconsideration of pricing. The portfolio matrix dis-cussed earlier in Chapters 5 and 6 indicates thatprices should be selected as follows:

• ‘question mark’ – price competitively to get mar-ket share;

• ‘star’ – price to maintain/ increase market share;

• ‘cash cow’ – stabilize or even raise price;

• ‘dog’ – raise price.

Any pricing policy should also reflect the fact thatthe role of pricing will change over a product’s lifecycle. The product’s position on its life cycle willsuggest the following pricing strategies:

• introduction – either price low to capture marketshare, or price high in recognition of novelty andprestige;

• growth – price low (competitively) to get marketshare;

• maturity – as per growth phase;

• saturation – stabilize price, consider raising it;

• decline – raise price.

In addition, the product’s position in the market-place should factor in the pricing decision. It wouldbe foolish, for example, to position a product as ahigh-quality, exclusive item, and then to price it toolow. Price is one of the clearest signals customershave of the value of the offer the company is makingthem, and there has to be a sensible relationshipbetween the two.

Competitors’ pricing strategies should thus betaken into account. This raises the issues of product

Price strategies � 127

The links with marketingobjectives and portfolioanalysis

The links with the productlife cycle

Product positioning

positioning and market segmentation. Whereverpossible, a company should be seeking to blend theingredients of the marketing mix in such a way thattheir ‘offer’ to the customer cannot be compared toanyone else’s ‘offer’. For, if two products are per-ceived as the same, the one with the lowest price willwin most of the time. It is therefore necessary toanalyse the prices charged by your competitors fortheir versions of your product or service, beforedeciding your own price.

Potential competitors should be another consider-ation. Some firms launch new products at high pricesto recover their investment costs, only to find thatthey have provided a price ‘umbrella’ to entice com-petitors, who then launch similar products at muchlower prices, thus moving down the experiencecurve quicker, often taking the originating com-pany’s market away from it in the process. A lowerlaunch price, with possibly a quicker rate of diffusionand hence a greater rate of experience, may make itmore difficult for a potential competitor to enter themarket profitably. These scenarios represent ‘skim-ming’ and ‘penetration’ policies, respectively.

Costs should also figure in the pricing equation,both the company’s own costs and those of its com-petitors. The most common way of setting price is touse the cost-plus approach, arriving at a price thatyields margins commensurate with declared profitobjectives. Whatever costing system is used as thebasis for reaching pricing decisions, it must be accu-rate, for without this there is no point of reference toput pricing into perspective. Costing systems thatallocate fixed costs to all products in the range canproduce misleading results. Knowing what the cus-tomer is prepared to pay for your product/service


Differentiating your offer

Skimming and penetrationstrategies

Danger of cost-plus pricing

(the going rate price), consider different costingoptions, with the objective of getting the averagecost per unit as low as possible, thereby securing awider range of options. Caution should be exercisedto ensure as much as possible that the pricing strat-egy applied to one product does not adversely affectthe pricing strategies used for other products in therange, and that all chosen pricing policies work col-lectively in support of the organization’s overallstrategic objectives.

Where channel intermediaries are used, such aswholesalers, distributors and retailers, the companywill need to consider rewarding them for their ser-vices. This reward is in effect a payment for the ser-vices they provide and for the costs saved by thesupplier. However, the total channel margin mayhave to be shared between several intermediariesand still reach the consumer at a competitive price.Various types of margins are commonly encoun-tered, most of which take the form of discountsagainst a nominal price list. These are:

• Trade discount. This is a discount given againstthe pricelist for services made available by theintermediary, eg, holding inventory, buying inbulk, redistribution, etc.

• Quantity discount. This is a discount given tointermediaries who order in large lots.

• Promotional discount. This is the discount givento distributors to encourage them to share jointlyin the promotion of the product(s) involved.

• Cash discount. In order to encourage promptpayments of accounts, a cash discount of around2.5 per cent for payment within 10 days is oftenoffered.


Pricing and channelintermediaries

Margin management can thus be viewed as a matterof trade-offs of cost versus the added value of usingdistributors, with the objective of achieving theorganization’s marketing goals. The question ofmargins (both the margin retained by the firm andthus by implication the margin allowed the distribu-tor) should therefore be addressed in the context ofoverall marketing strategy and the financial policyand capital structure of the firm. As a general rule,the company should give away only the costs itsaves by using an intermediary.

In summary, the pricing plan should consider allthe factors affecting price, which comprise:

• marketing objectives;

• the cost structure;

• legal constraints;

• consumer attitudes;

• competition (direct);

• competition (substitutes);

• company/product image;

• economic situation.


Questions1. It is often claimed that a ‘cost plus’ pricing policy

can be dangerous. Is this because:a) It gives accountants too much power?b) It does not reflect the market?c) It is not very accurate?d) It is too difficult to apply?


2. Below is a typical demand curve. Referring to this,which of these statements is the most accurate?a) It is important to set price P2 at a level which

ensures that production capacity is filled, Q2.b) It is important to maximize the price, P1,

even if demand is limited to Q1.c) It is important to find whichever P x Q combi-

nation along the curve gives the best resultfor achieving an organization’s objectives.

3. A company has a portfolio that contains five‘question marks’. What ought to be its pricingpolicy towards them?a) Should all be priced low in order to win mar-

ket share?b) Should all be priced high to maximize rev-

enue?c) Should only the best prospects be priced

high?d) Should only the best prospects be priced low?


P2

Q1 Q2

P1

Price

Quantity

4. A popular form of positioning map is price ver-sus quality, shown below. Which of the zones A,B, C or D on the map correspond to the descrip-tions given here?

a) Lost profits.b) Opportunistic, maybe unsustainable, pricing.

5. Successful pricing strategies are likely to resultfrom examining which of the factors listedbelow? Tick your choice.a) The costs of production and what competi-

tors are doing.b) Your objectives for market share, what the cus-

tomer will pay, costs and competitors’ prices.c) Your costs, current prices in the market and

the experience curve.d) The experience curve, your raw material

costs and competitors’ prices.

6. The PIMS database shows that there is a distinctrelationship between quality, sales, price, costsand market share. Which of the combinationsbelow is correct, a, b, c or d?Note: I = increases, D = decreases.


A B

C D

Quality low Quality high

Price high

Price low

7. Which of the following circumstances favours a

skimming policy (S) and which ones a penetra-tion policy (P)?a) Demand is likely to be price inelastic. ( )b) Little is known about the costs of

producing and marketing the product. ( )c) Competitors are likely to enter the

market quickly. ( )d) There are no distinct and separate

price–market segments. ( )e) Demand is likely to be price elastic. ( )f) There are likely to be different price–

market segments. ( )g) There is a high probability that big

savings can be made in production and/or marketing costs with large sales volume. ( )

h) Some competitors are expected to leave the market. ( )

8. In the context of the product life cycle, whatwould be your pricing policy for a product at itsmaturity phase? Would you:a) Price competitively? c) Stabilize prices?b) Price low? d) Raise prices?


Market share Sales price Costs Quality Answer

a I D I I

b D D I I

c I D I D

d I I D I

9. A skimming policy may be best described as onewhere:a) Prices are set low to mop up all the price sen-

sitive customers.b) Prices are set high to maximize sales margins.c) Prices are set just above average to attract the

more discerning customers.d) Prices are allowed to fluctuate in line with

market conditions.

10. What would be the objective of offering a distrib-utor a cash discount?a) To encourage prompt payment.b) To encourage the volume of business gener-

ated by the distributor.c) To encourage a distributor to stock whole

range of products.d) To encourage the distributor’s promotional

efforts.

Answers

Question 1 While a cynic might prefer a), the trueanswer is b).

Question 2 Answer = c).

Question 3 The company will only invest in thevery best prospects and price thesecompetitively to gain market share. Answer = d).

Question 4 Answer: a) = D. Here the company issupplying high quality but not askingthe price commensurate with this.


Answer: b) = A. Here the company ischarging a high price yet the product isof poor quality.

Question 5 Your pricing strategy must reflect yourmarketing objectives. However, it will be tempered by a real-istic assessment of what customers areprepared to pay, the margin you expectto make (hence the need to know costs)and the price of competing products orservices. Answer = b).


Question 7 Answer: Skimming policy = a), b), f)and h), for all of these situations sug-gest that price can be raised towardsthe top end of ‘what the market willbear’. Penetration policy = c), d), e) andg), here are circumstances where pric-ing must be very competitive if you areto make impact.

Question 8 Answer = a). In all likelihood this is stilla star (the market is probably stillgrowing) and needs to be managed asone. Later, when demand (and compe-tition) abates it can be appropriate tostabilize the price and minimize pro-motional costs.

Question 9 Answer = b) assuming of course thatthe market conditions are favourablefor this strategy.


Question 10 Answer = a). Note, in order to makeimpact on volume of sales, some formof volume discount would be arranged.Similarly, other incentives (not neces-sarily cash) would reward the otherspecific distribution objectives, eg,prizes or services.


Supply chain management

For many businesses, distribution plays a small partin their marketing plans. When it is considered, theprime concern seems to focus on the physicalaspects, the logistics of getting goods transportedfrom the company to the customer. Distribution,however, embraces a much broader concept thanjust the delivery of goods. In addition, it takes intoaccount the strategic importance of distributionchannels and the potential value of channel interme-diaries. It also ensures that ‘customer service’ is keptin the forefront of the company’s deliberations aboutits marketing policies.

Unless there is a formalized distribution structure,distribution-related activities may be spread acrossproduction, marketing, procurement, finance and soon, leading to conflicts of interest between distribu-tion decisions. A more centralized, inter-related

10

Place (distribution and customer service) strategies

distribution system, often referred to as ‘logistics’ or‘the supply chain’, will ensure that one distributionactivity is traded off against another to arrive at themost efficient system overall. The person responsi-ble for distribution, therefore, has several variablesto contend with in the search for trade-offs; takentogether these constitute the distribution mix. Thereare five components to manage in the physical dis-tribution of tangible products:

• Facilities – the number, size and geographicallocation of storage and distribution depots.

• Inventory – the stockholding levels throughoutthe distribution chain consistent with customers’service expectations.

• Transport – the modes of transport, deliveryschedules, etc.

• Communications – the flow of information, eg,order processing, invoicing, forecasting, etc.

• Unitization – the way in which goods are pack-aged and assembled into large units, eg, palleti-zation, containerization, etc.

Together, these five areas make up the total cost ofdistribution within a company. In some businesses,distribution costs can amount to 20 per cent of theselling price. This emphasizes the importance ofconsidering distribution within the context of theentire marketing mix.

The ultimate purpose of any distribution plan,and the fundamental role of a company’s distribu-tion function, is to ensure that the right product is inthe right place at the right time. If a product is notavailable when and where the customer wants it, itwill surely fail in the market. This implies the need


for some organization of resources into channelsthrough which the product or service can move fromits original source of supply to its ultimate consump-tion. The optimal choice of distribution channelswill be dependent on the type of business concernedand the markets it is engaged in. While some compa-nies use multiple channels, often involving severalintermediaries, others choose to deal with their cus-tomers more directly. There are basically threeoptions from which to choose:

• to sell direct to the customer/user;

• to sell to customer/users through intermediaries;

• to use a combination of the two points above (ie, dual distribution).

The role of an intermediary is to provide the meansof achieving the widest possible market coverage atlowest unit cost. The use of an intermediary carriesbenefits for the manufacturer, but it also involvessignificant ‘costs’, the most important of which is theloss of control that accompanies such a channelstrategy. Marketing channel decisions thereforerequire a cost/benefit appraisal of the implicationsof all the physical distribution alternatives, takinginto consideration marketing strategy, the appropri-ateness of the channel to the product, the integrityand compatibility of the channel partner and cus-tomer requirements, as well as the comparative costsof selling and distribution. It is also important toremember that the product’s physical path may wellbe different from the one taken by the process ofexchange of money for goods (or transfer of owner-ship), particularly as many intermediaries share inthe financial risk with the supplier.

Place (distribution and customer service) strategies � 139

Channels to market

The output of an integrated distribution system iscustomer service. Customer service is a system orga-nized to provide a continuing link between the firstcontact with the customer, through to the time theorder is received and the goods/services delivered andused, with the objective of satisfying customer needscontinuously. As customer service is increasingly a keydeterminant of competitive advantage, and it is likelythat different customer segments will require differentlevels of customer service, managing customer serviceprovision is a complex and critical activity.

It is also an expensive one. Operating service levelsat 100 per cent can be crippling to the supplier, yet todrop below an acceptable level is to surrender one’smarket share to a competitor. Research has shown thatonce the service level (defined as the percentage ofoccasions the product is available to customers, whenand where they want it) increases beyond the 70–80per cent mark, the associated costs increase exponen-tially. In many cases, such high levels of customer ser-vice are not necessary. Thus the choice of service levelfor a particular product should balance supplier costsand customer benefits; the point of balance beingreached when the costs equal the extra revenue gainedby the extra level of availability. Service level decisionswill be tempered by other influential factors, such as:

• The contribution to fixed costs, eg can it bear thecost of an upgraded service level?

• The nature of the market, eg, are there substituteproducts?

• The nature of the competition, eg, do they offerbetter service levels?

• The nature of the distribution channel, eg, do wesell direct or through intermediaries?


A balance between servicelevels and cost

The key to marketing success is to develop a customerservice package (the customer’s perception of supplychain performance) that embraces product availabil-ity, with attractive order cycle times and mechanismsfor minimizing customer inconvenience arising fromorder cycle times. This necessitates a dynamic knowl-edge of both customer needs and preferences, and thecompany’s ability to satisfy them. The proven directcorrelation between customer retention and profitabil-ity suggests that the costs of providing enhanced cus-tomer service could be seen as a justified investment incustomer retention.

As in the development of the other tactical plans, dis-tribution planning should begin with the distributionaudit (see Figure 2.1), from which distribution objec-tives and strategies can be established. Distributionobjectives can be many and varied, but the followingare considered basic for marketing purposes:

• objectives related to outlet penetration by type ofdistribution;

• objectives related to inventory range and levelsto be held;

• objectives related to distributor sales and salespromotion activities;

• objectives related to other specific customerdevelopment programmes, eg, incentives fordistributors.

A simple, iterative approach to distribution plan-ning can be summarized as the following steps; thecontent of which will shape the distribution strategy.

1. Determine marketing objectives.2. Evaluate changing conditions in distribution at

all levels.


Distribution objectives

3. Determine the distribution task within overallmarketing strategy.

4. Establish a distribution policy in terms of type,number and level of outlets to be used.

5. Set performance standards for distributors.6. Obtain performance information.7. Compare actual with anticipated performance.8. Make improvements where necessary.

The interrelationship between developing the mar-keting plan and developing the distribution plan isusefully depicted in Figure 10.1.


Marketing objectives

Marketing plan

Marketing strategies

Distribution programme

Distribution missions

Distribution objectives

Distribution strategies

Distribution plan

Distribution performance measures

Product programme

Pricing programme

Promotion

Distribution channelsselection

Marketing audit

Distribution audit

Distribution operations

Distribution budget

Figure 10.1 The distribution plan in relation to the marketing plan


Questions1. Mark each of the following statements either true

(T) or false (F).Distribution is only concerned with:a) The physical transportation of goods. ( )b) Establishing the best channels for

getting goods to customers. ( )c) Optimizing the level of availability of

goods for customers. ( )

2. The distribution mix is made up of five items.Here are four of them. What is the missing item?Write your answer in the space provided.Facilities Inventory Transport Unitization

……………

3. Which of the following criteria would be attrac-tive when it comes to selecting a channel inter-mediary?a) Creditworthiness is unknown.b) The intermediary carries competitor’s lines.c) Its management is enthusiastic and innovative.d) It is experienced in selling to our market.e) It has a very well trained sales team.f) It is close to a motorway.

4. Product availability levels are a key component ofcustomer service. Which of the following wouldbe most susceptible to stock-out situations?a) prescription drugs; d) cars;b) household furniture; e) newspapers;c) flowers; f) fashion wear.


5. Complete the following sentence by placing atick against the most appropriate endings(s)of those given below.

For customer service to be successful it isimportant that…a) All customers are treated the same.b) Customers’ expectations of service are met.c) Quality standards are maintained to the

highest levels.d) There is a designated customer service

manager.

6. Customer retention is very important for anybusiness because primarily:a) It makes it easier for marketing planning.b) It increases profitability.c) It reduces the number of complaints received.

7. The customer service package ought to be cen-tred around:a) Whatever customer complaints suggest.b) What you believe customers want.c) Whatever are the key determinants of cus-

tomer satisfaction.d) Having a well-trained and polite staff.

8. A strawberry grower sells some of his crop at thelocal market, some to a wholesaler who suppliesbakers and restaurants in the nearest large town,the rest goes to a jam factory and to ‘pick yourown’ enthusiasts. Which of the following ‘maps’,showing how the fruit reaches the consumers isthe correct representation of his business? Recordyour answer by ticking a, b or c. Please note thatthe names of intermediaries have been omitted,otherwise the question would be too simple.


9. Which of the following distribution objectives canbe considered as basic for marketing purposes?a) To hold an inventory range at specific levels.b) To replace vehicle fleet.c) To use approved carrier instead of own

transport.d) To have an appropriate incentive scheme for

distributors.e) To set outlet penetration levels per channel.f) To refurbish warehouses.


SUPPLIERa

CONSUMERS

SUPPLIERb

CONSUMERS

SUPPLIERc

CONSUMERS

10. In seeking to become more competitive in a par-ticular distribution channel, which of the follow-ing factors would most influence your thinking?a) Your relative strengths and weaknesses.b) The costs associated with operating in that

channel.c) The number of competitors.d) The size of the market.

Answers

Question 1 Answer: All are false, because distribu-tion is concerned with all three factorslisted above. All must be considered bythe marketer.

Question 2 Answer: Communications.

Question 3 Answer: Attractiveness features = c), d)and e). While f) may appear to beattractive, being near a motorway byitself is not enough. The distributor’slocation vis-à-vis the customers andourselves is far more significant.

Question 4 Answer: a), c), e) and f) are usuallyrequired immediately, whereas peopleare prepared to select a model of car orfurniture from a showroom and waitfor it to be delivered at some later date.

Question 5 Answer = b)Note that (a) is not true because cus-tomers in different market segments will


be likely to require a different customerservice ‘package’. (c) is false because thehighest possible standards could farexceed customer expectations and/orwhat competitors are offering, thusincreasing costs unnecessarily. (d) iswrong because having good customerservice is not dependent upon having adesignated manager. Having a customerservice policy and training staff to fulfilit are likely to be more important factors.

Question 6 While a) and c) may be partly true, theprime benefit of customer retention isits impact on profitability. Hence b) isthe answer.Answer = b).

Question 7 Note that while a) appears to be a reason-able answer, it could lead to customerservice being focused on the wrongthings. Similarly, staff training resultsfrom having the correct customer serviceobjectives, not the other way round.Answer = c).

Question 8 Answer = b).Reading from left to right:Line 1 = to jam factory to retailers toconsumersLine 2 = to market to consumersLine 3 = to ‘pick your own’ – no intermediariesLine 4 = to wholesaler, then througheither bakers or restaurants


Question 9 Answer: a), d) and e), the others aremerely means of reducing costs orsheer necessity.

Question 10 Note: Although factors b), c) and d) aresignificant in making a choice of chan-nel, once that choice is made it is howyou use your relative strengths andweaknesses, vis-à-vis your competitors,that will be the springboard to success.Answer = a).


To make marketingplanning work you needinformation

In outline, the marketing planning process is simple,consisting of: a situation review; assumptions; objec-tives; strategies; programmes; and measurementand review. The reality, of course, is much morecomplex due to the number of contextual issues thathave to be considered, the nature of which will beunique to each business situation. ‘When to plan’,‘how often’ and ‘by whom’ are just a few of the ques-tions requiring answers, indicating a much widerarray of practical concerns. Before tackling suchquestions (as we will do in the next chapter), it isimportant to recognize at the outset that the imple-mentation of a marketing planning system is gov-erned by two major constraints: information andorganization.

To make marketing planning work, you needinformation, so that you can forecast the market, so

11

Information and organization

that you can organize your business to cope – and,ideally, to excel. Any marketing plan is only as goodas the information on which it is based, and this iswhy the ongoing collection, storage, analysis andexploitation of meaningful market information is socentral to marketing activity. The other key point isthat marketing planning occurs within a ‘living’environment, that is to say, it affects and is affectedby the nuances of company structure and culture.For instance, featuring among the many marketingplanning issues is whether or not the company’smanagement style can adapt sufficiently to enablethe marketing planning process to deliver therewards it promises.

INFORMATION

The supply of information presents its own chal-lenges, in terms of having too much or too little, tooearly or too late, or indeed, of the right kind. The rea-son why it is so difficult to specify marketing’s infor-mation needs is that, unlike accounting ormanufacturing, which have fixed informationneeds, marketing’s information needs keep chang-ing as the marketing strategy evolves. Further, mar-keting information has a limited life – it is perishable– so a company’s information bank must be con-stantly replenished.

A cost/benefit appraisal of all sources of market-ing information is required to ensure that investmentin such information is justified. One way of estimat-ing how much to spend is based on the theory ofprobability and expected value. For example, if bylaunching a product you had to incur development


It is difficult to specify allmarketing informationneeds

costs of 1 million euros and you estimated there wasa 10 per cent chance that the product would fail, themaximum loss expectation would be 100,000 euros(ie, 1 million euros x 0.1). Therefore it is worth spend-ing 10,000 euros to prevent a loss.

Marketing researchAs stressed throughout this book, profitable devel-opment of the company can only come from a con-tinual commitment to matching the company’scapabilities with customers’ needs. In order that thecompany can be certain this matching process is tak-ing place effectively, it is necessary that a two-wayinformation flow exists between the customer andthe firm. This is the role of marketing research.Marketing research is concerned with the wholemarketing process. (Market research is researchabout markets.)

There are many forms of marketing research toconsider, which break down into four basic types:• Internal – analysis of sales records, advertising

levels, price versus volume, etc.

• External – use of sources outside the organiza-tion to complement internal research.

• Reactive – responses to questionnaires, struc-tured interviews, etc.

• Non-reactive – interpretation of observed phe-nomena, eg, filming customers in a store, listen-ing to customer panels, etc.

As there are pros and cons for each type, a mix can beuseful. For example, sales records can provide valu-able insights, but are not good predictors of futureperformance as they are restricted to historic perfor-mance. Telephone interviews are quick and relatively

Information and organization � 151

The difference betweenmarketing research andmarket research

inexpensive, but limited in the amount of technicalinformation that can be obtained. The starting pointof any marketing research programme should be anexamination of existing materials, particularly bymeans of desk research. When combined with inter-nal sales information, the wealth of informationavailable from published information can be themost powerful research method open to a company.

The gathering of data is only the first step in mar-keting research. Data must be given direction beforeit can become relevant information, and informationis only relevant if the company has some purpose inmind, some marketing problem to solve.Information allied to purpose becomes intelligence:information that is consumable and useable by man-agement in converting uncertainty into measurablerisk. Conversion of uncertainty into risk and theminimization of risk is perhaps marketing manage-ment’s most important task, and marketing researchis vital in this process.

Marketing information system (MIS)A system to facilitate information flows needs to bedeveloped so that there are appropriate inputs andcorrect data gets to the users in a sensible form.Sound marketing plans rely on sound marketingevidence, and this requires the organization of infor-mation into a coherent structure so that planners canmatch external facts about the market to internalfacts and figures. Many companies have turned totechnological innovation (eg, database technology)to extract vital information from often unwieldy andcomplex data.

However, while computerized data collection andanalysis can make marketing research easier by


Marketing data,information andintelligence

automating the reconciliation of internal and exter-nal audits, it can also conceal or divert attentionfrom the reality of the situation. Companies areprone to collecting data that is readily availablerather than that which is actually needed, and toaccumulating data that they do not know how touse. There is also a common assumption that com-puterized analysis gives definitive results, where infact, the data used for analysis may be incomplete,out of date, irrelevant, or somehow flawed. Thus theuse of information, and the use of IT in managinginformation, must be guided by good judgementand a well thought through, systematic approach.

Cranfield’s six ‘I’s model summarizes the ways inwhich IT generally can add value to the customerand hence improve the organization’s marketingeffectiveness. It comprises:

• Integration – of data across time and databases.

• Interactivity – beyond addressability to dialogue.

• Individualization – information-enabled tailor-ing.

• Independence of location – the death of distance.

• Intelligence – informed strategy.

• Industry restructuring – redrawing the marketmap.

Because all companies are in some ways unique,there are no easy, ‘off-the-shelf’ marketing informa-tion systems. However, there are a few secrets of suc-cess in constructing a good one. These are:

• Understanding what marketing needs and par-ticularly how the internal and external viewswill be reconciled.


Computers are often notthe answer

• Developing a strong cost-benefit case for infor-mation systems, given that other systems,including financial ones, will have to be alteredto accommodate the needs of marketing.

• Working continuously with internal IT staff untilthe system is built. They are under pressure fromother sources, especially finance, and unlessmarketing maintains momentum and direction,then other priorities will inevitably win.

Marketing should take place as close to the customeras possible. Marketing planners must thereforesecure cross-functional understanding and coopera-tion if they are to develop the systems they require toensure that the company’s products meet presentand future customer needs. They must build inter-departmental bridges to acquire data, informationand knowledge on an ongoing basis.

FORECASTING

As marketing’s task continues to increase in size andcomplexity, the ability to plan ahead effectively isparamount. The growing diversity of customer needsin today’s rapidly changing environment has resultedin shorter product life cycles, which have thereforebecome more difficult to manage profitably. The diffi-culty of finding and developing profitable marketshas made forecasting more hazardous and less accu-rate still. Before any company can set marketingobjectives and strategies it must make some long-range, or macro forecasts of markets in total. Then,when the company has decided what specific marketopportunities it wants to take advantage of, it mustmake detailed unit, or micro forecasts. The type of


forecasting will depend upon the: accuracy required;availability of data; time horizon; and position of theproduct in its life cycle (macro at an early stage).

For maximum accuracy, both macro and microforecasting require two techniques for forecasting:quantitative and qualitative techniques. Quantitativetechniques are based on facts, or statistical probabili-ties. To account for likely changes to past trends, it isthen also necessary to use qualitative methods, suchas expert opinions and market research, to predictprobable discontinuities.

ORGANIZATION

In addition to issues surrounding marketing infor-mation and forecasting, companies also face issuesregarding how best to organize for marketing plan-ning. While the marketing planning process itselfremains more or less consistent throughout, howthat process is managed must be congruent with thecurrent organizational culture. In other words, mar-keting planning organization must reflect the orga-nizational evolution of the company as it passesthrough characteristic life phases.

As depicted in Figure 11.1, organizational growthis propelled by reaction to crises. At start up the firmis often organized around the owner who tends toknow more about customers and products than any-one else in the company (creative evolution).However, as the firm grows in size and complexity,and new products and markets are added, the orga-nizational form breaks down and the owner musteither sell up or allocate certain functional duties tospecialized departments (directed evolution).


Organizing for marketingplanning

Eventually these departments seek greater auton-omy and a more delegative style of leadership pre-vails, which generates more autonomy at lowerlevels (delegated evolution). As growth continues,senior management become seriously concernedabout the high levels of autonomy lower down inthe organization and try to regain control by estab-lishing better coordination between the variousparts of the organization (coordinated evolution).Ultimately, the coordinated practices become insti-tutionalized and thus planning procedures becomeritualized, and procedures seem to assume prece-dence over problem solving. To redress the stiflingeffects of oppressive bureaucracy or ‘red tape’, thecompany strives towards a new phase of collabora-tion, with greater emphasis on teamwork, creativityand spontaneity (collaborative evolution).

Clearly, each solution to an organizational devel-opment problem gives rise to the next evolutionaryphase. Since the key to successful marketing is tohave a suitable organizational structure, understand-ing this pattern of structural change can usefullyindicate appropriate organizational and planningframeworks. Figure 11.2 tries to encapsulate the


A Creativity

C Direction

E Delegation

G Coordination

I Collaboration

BLeadership

DAutonomy

FControl

HRed tape

?

Psychologicalindigestion?

TimeS

ize

Growth through

evolutionary periods

Crisis points as company

grows–revolutionary periods

Figure 11.1 Organizational evolution

types of organizational structure as they relate tocompany size and complexity, and the associateddegree of formality in the marketing planning pro-cess. (To evaluate the appropriateness of your organi-zational structure, place an x on each of the four linesto indicate where your organization currently lies.)

No one particular organizational form can be rec-ommended, common sense and market needs beingthe final arbiter. However, the following factorsalways need to be considered:

• marketing ‘centres of gravity’;


Place an x on each of the four lines below to indicate where your organization lies

Company size

Diversity ofproducts

Diversity ofmarkets

Degree offormalizationof planning

Typicalorganizationalstructure

small large

low high

low high

low high

‘Pioneer’

No need for bigsystems

One person cancope

Frequent butinformalcommunications

Highly flexible

Person can’tcope

Becomes difficultto get answers

‘Scientific’

System becomesdeveloped

Specialist rolescreated

Communicationsmore formal

Communicationsbreakdown

People getfrozen into roles

‘Matrix’

More flexibilityin dealing withproducts andmarkets

Communicationfrequent andinformal

As size/diversityincreases,managementloses control

Communicationbreakdown

‘Centralized’

Centralizedmarketingrestores elementof control

Expertise fromspecialist roles

Get out of touchwith what ishappening in thefield

Slow responding

‘Decentralized’

Marketingspecialists inclose touch withoperating units

Duplication ofeffort, work

Costly inmanpower

Description

Description

Breakdownsignals

Figure 11.2 Organizational structure

• interface areas (eg, present/future; salespeople/drawing office; etc);

• authority, responsibility, and accountability;

• ease of communication;

• coordination;

• flexibility;

• human factors.

An organization’s marketing planning effectivenessis affected significantly by the way that it organizesfor marketing. Wherever practicable, it is sensible toorganize around customer groups, or markets, ratherthan around products, functions or geography, sothat personnel, accounting, production, distributionand sales policies are tailored to unique sets of mar-ket needs. It is also better to put sales and marketingunder the supervision of one person so as to ensureproper coordination of these distinct but interrelatedfunctions (see example b) in Figure 11.3). Separationof sales and marketing at board level can cause dis-parity between what marketing is planning andwhat sales is doing out in the field. Lack of a suitable


Organize around customergroups or markets notproducts, functions orgeography

Director

Director Director Director MarketingDirector

Sales Marketing

Director Director SalesDirector

MarketingDirector

Chief Executive

Chief Executive

a)

b)

Figure 11.3 Organizing for marketing at board level

organizational structure for an integrated marketingfunction, compounded by lack of meaningful infor-mation about market segments, means that market-ing planning is unlikely to be successful.

The main organizational barriers to effective mar-keting planning can be summarized as:

• Cognitive – not knowing enough about market-ing planning.

• Cultural – the company culture is not orientatedtowards marketing planning.

• Political – the culture ‘carriers/leaders’ feelthreatened by marketing.

• Resources – not enough resources are allocatedto marketing.

• Structural – lack of a plan and organization forplanning.

• Lack of an effective MIS.

To identify what organizational barriers may exist inyour firm, so that you can work to overcome them,complete Test 11.1.


Barriers to marketingplanning


Test 11.1: Organizational issues in marketing planning*You are asked to answer a series of statements about your organization’s approach tomarketing planning. Since this quest is for useful and genuine data, please try to be asaccurate and objective as you can as you complete this document.You score the questionnaire by entering a number, 1–5, only in the position indicated by thebox next to each statement. Choose your scores, using these criteria:

1 If you strongly disagree with statement.2 If you tend to disagree with statement.3 If you don’t know if you agree or disagree.4 If you tend to agree with statement.5 If you strongly agree with statement.

A B C D E

1 The chief executive and directors show an active interest in marketing planning.

2 The chief executive and directors demonstrate their understanding of marketing planning.

3 The chief executive and directors use themarketing plan as the basis for making keymarketing decisions.

4 The chief executive and directors allocate adequate resources to ensure the marketingplan is completed satisfactorily.

5 The need for a marketing plan is clearly explained to all managers.

6 There is adequate information/data upon whichto base a marketing plan.

7 Our marketing plan has a good balance between short-term and long-term objectives.

8 People are clear about their role in themarketing planning process.

* This test is taken from Marketing Plans: How to prepare them; how to use them, Malcolm McDonald, Butterworth Heinemann, Oxford, 6th Edition, 2007.


A B C D E

9 Line managers are trained to understand how the marketing planning process operates.

10 Line operational managers believe the marketing plan is a useful document.

11 Enough time is allowed for the planning process.

12 It is made easy for line managers to understandthe plan.

13 Marketing planning is never starved for lack of resources.

14 It is reasonable for a company like ours to havea well-thought-out marketing plan.

15 Reasons for past successes or failures are analysed.

16 In our organization we don’t leave planningjust to the planners; other managers have a valuable contribution to make.

17 Our organizational style encourages a sound marketing planning process.

18 There is clear understanding of the marketingterminology we use in our organization.

19 Market opportunities are highlighted by the planning process.

20 Functional specialists contribute to the marketing planning process.

21 We limit our activities so that we are not facedwith trying to do too many things at one time.

22 Taking part in marketing planning in our organization holds a high prospect of beingrewarded, either financially or in career terms.


A B C D E

23 Only essential data appear in our plans.

24 Marketing does not operate in an ‘ivory tower’.

25 From the wealth of information available to use,we are good at picking out the key issues.

26 There is a balance between narrative explanationand numerical data in our plans.

27 Our field sales force operates in a way which is supportive to our marketing plan.

28 Our plan demonstrates a high level of awarenessof the ‘macro’ issues facing us.

29 Inputs to the planning process are on the wholeas accurate as we can make them.

30 Marketing planning is always tackled in ameaningful and serious way.

31 Our plan doesn’t duck the major problems andopportunities faced by the organization.

32 There is a high awareness of ‘micro’ issues inour plan.

33 Our plans recognize that in the short term wehave to match our current capabilities to themarket opportunites.

34 Inputs to the marketing planning process are anintegral part of the job of all line managers.

35 Marketing planning is a priority issue in ourorganization.

36 Our planning inputs are not ‘massaged’ to satisfysenior executives.


A B C D E

37 People understand and are reasonably happy that our marketing planning process is logicaland appropriate.

38 We use the same time-scale for our marketingplans as we do for finance, distribution, production and personnel.

39 We view our operational plan as the first year ofour long-term plan, not as a separate entity.

40 Senior executives do not see themselves asoperating beyond the confines of the marketing plan.

41 The advocates of ‘correct’ marketing planning aresenior enough in the company to make sure it happens.

42 People are always given clear instuctions about the nature of their expected contribution to themarketing plan.

43 We try to make data collection and retrieval as simple as possible.

44 Our marketing plans do not go into great detail, but usually give enough information to make anynecessary point.

45 The role of specialists is made quite clear in ourplanning process.

46 We are always prepared to learn any newtechniques that will make our marketing planningprocess more effective.

47 The role of marketing planning is clearly understood in the organization.

48 Marketing research studies (by internal staff oragencies) are often used as inputs to ourmarketing planning process.


A B C D E

49 Our marketing planning is regularly evaluated inan attempt to improve the process.

50 The chief executive and directors receive information which enables them to assesswhether or not the marketing plan is coming to fruition as expected.

TOTAL SCORES

Add up the total scores in each column.

Interpretation of Test 11.1Add up the scores for columns A, B, C, D and E and write themin the boxes provided. Each of the letters represents a potentialbarrier to marketing planning, namely:

A = Cognitive barrier, ie knowledge and skills.B = Resource barrier, ie lack of time, people, data.C = Systems/routine barrier, ie lack of procedures.D = Organizational climate barrier, ie belief and interest in

marketing planning.E = Behaviour barrier, ie the roles people play

The maximum score for each of these areas is 50 points. Thehigher the score, the less that potential barrier to marketing islikely to be making an impact. In other words, the areas with lowscores (below 30) will probably be the areas worth investigatinginitially in the search for improvement.

Personal notes

List what actions need to be taken.


Questions1. Which of the following is not an example of mar-

keting research?a) Research about the effect of pricing on

demand.b) Research about trends in a specific market.c) Research about customer response to

advertising.d) Research about customer expectations of

service.

2. Below are listed some examples of marketresearch methods. Identify which of these arereactive forms of research (R) and which are non-reactive (N).a) telephone d) retail audits ( )

surveys ( ) e) using b) consumer government

observation ( ) statistics ( )c) user tests ( ) f) pilot testing ( )

3. In general, what is the main danger of basingmarketing decisions solely on internal sources ofinformation?a) They will not be very accurate.b) They will not be in an immediately usable

form.c) They will contain only historic information.d) They will not reflect the total market.


4. Analysis of internal data can usually uncoversome useful marketing information. Typically,which of the following would you expect to beable to find from internal sources?a) Value of goods sold per customer.b) Buyer’s name and position.c) Reasons for purchase decision.d) Volume of goods sold by geographical region.e) The competitiveness of your customer pack-

age.f) Information about customers’ buying

processes.

5. The Cranfield six ‘I’s model illustrates ways inwhich IT can add value to customers. Below arejust four of its components, please write themissing ones in the spaces provided.

integration independence ……………of location

industry individualization …………….restructuring

6. In order to set marketing objectives and strate-gies, which of the following methods of forecast-ing would be your choice?a) Macro forecasting. b) Micro forecasting.


7. Here is a representation of how organizationsexperience periods of evolutionary growth as theyincrease in size and become more mature. Eachgrowth phase gives rise to a phase of turbulence,or crisis, which has to be resolved before it canonce again make progress. Please identify (i) themissing growth phase, and (ii) the most appropri-ate style of marketing planning for that phase.

i) ……………………………………ii) The planning approach ought to be:a) Bottom up.b) Top down.c) A mixture of both.

8. Wherever practicable is it best to organize around:a) Customer groups.b) Product groups.c) Geographical areas.d) Cost centres.

9. Tick which of the following are typically charac-teristics of a centralized organizational structure.a) There is an unnecessary duplication of tasks

and functions.b) Decision makers have less feel for the market.c) Control tends towards bureaucracy.


A Creativity

C Direction

E Delegation

G Coordination

I Collaboration

BLeadership

DAutonomy

FControl

HRed tape

?

Psychologicalindigestion?

Time

Siz

e

Growth through

evolutionary periods

Crisis points as company

grows–revolutionary periods

d) All units pursue a coordinated marketingstrategy.

e) There is great flexibility.f) There is a high level of synergistic working

and creativity.

10. Why is it so difficult to specify marketing infor-mation needs?a) Because IT programmes cannot deliver the

right information.b) Because marketing strategy is constantly

evolving.c) Because organizations are slow to recognize

their information requirements.d) Because accounting information takes priority.

Answers

Question 1 Answer = b). This is an example of mar-ket research as opposed to marketingresearch.

Question 2 Answer: reactive (target audiencerespond to questions or stimuli) = a) c)and f).Non-reactive (target audience behaviouris implied by analysing data) = b), d)and e).

Question 3 Answer = c) sales records, etc by theirvery nature are historic documents andmay not be good predictors for thefuture; and d) unless of course the com-pany has a monopoly and even that


does not always guarantee 100 per centcoverage of a market.

Question 4 Answer = a), b) and d).

Question 5 Answer: intelligence and interactivity.

Question 6 Answer = a). It is important to get the‘big picture’ first.

Question 7 Answer = i) Direction. ii) = b).

Question 8 Answer = a). These provide the mostaccurate indicators of what needs haveto be met.

Question 9 Answer = b), c) and d). These are com-mon characteristics of a centralizedorganization.

Question 10 Answer = b). This requires new types ofinformation rather than the fixed androutine.

Note: a). This is a problem of deliver-ing information, not about specifying it.The real problem here lies in the calibreof the management and a lack of proac-tivity, not the difficulty about specify-ing information. This may be true, but itis a red herring behind which incompe-tent managers may hide. The requiredmarketing information should be speci-fied and made an issue in order to getadequate resources.


As organizations grow sodoes the need forformalized procedures

As we have seen in the previous chapter, therequired degree of formalization of marketing plan-ning will depend on the company’s size and thediversity of its products/markets. As companies getlarger, their operational problems get more complex.Written procedures are needed to make the market-ing strategy explicit and the marketing conceptunderstood. Thus, the bigger and more diversifiedthe organization, the bigger the need for standard-ized, formalized procedures.

However, while the degree of formalization willchange with organizational evolution, the need for acomplete marketing system does not. The problemsthat companies suffer, then, are a function of eitherthe degree to which they have a requisite marketingplanning system or the degree to which the formal-ization of their system grows with the situational

12

Making marketing planningwork

complexities attendant upon the size and diversityof operations. Figure 12.1 explores four key out-comes that marketing planning can evoke.

It can be seen that systems I, III, and IV, ie, wherethe individual is totally subordinate to a formalizedsystem, or where individuals are allowed to do whatthey want without any system, or where there is nei-ther system nor creativity, are less successful thansystem II, in which the individual is allowed to beentrepreneurial within a total system. System II,then, will be an effective marketing planning system,


II Complete marketingplanning

IV Apathy

I Bureaucraticplanning IIIAnarchy

Degree of formalizationDegree of openness

Figure 12.1 Four key outcomes of marketing planning

but one in which the degree of formalization will be afunction of company size and diversity.

The really important issue in any system is theextent to which it enables control to be exercised overthe key determinants of success and failure. Researchhas shown that certain conditions must be satisfied fora marketing planning system to work. There must be:

• Openness. Any closed-loop planning system,especially if it is based just on forecasting andbudgeting, will deaden any creative responseand will eventually lead to failure. Thereforethere has to be some mechanism for preventinginertia from settling in through the over-bureaucratization of the system.

• Integration. Marketing planning that is not inte-grated with other functional areas of the busi-ness at general management level will be largelyineffective.

• Coherence. Separation of operational and strate-gic marketing planning will lead to a divergenceof the short-term thrust of a business at the oper-ational level from the long-term objectives of theenterprise as a whole, with the short-term view-point winning because it achieves quick results.

• Leadership. Unless the chief executive under-stands and takes an active role in strategic market-ing planning, it will never be an effective system.

• Time. It can take three years to introduce market-ing planning successfully.

As we have seen, a successful marketing planningsystem follows requisite, key steps:

• There will have to be guidance provided by thecorporate objectives.

Making marketing planning work � 173

• A marketing audit must take place.

• A gap analysis must be completed.

• SWOT analyses must be drawn up.

• Assumptions and contingencies must be considered.

• Marketing objectives and strategies must be set.

• Individual marketing programmes must beestablished.

• There must be a period of measurement andreview.

All this work will take time, and will certainlyrequire discussions with other functional depart-ments, either to get information or to ensure collabo-ration. Thus it is important to schedule the tasks andtiming, and to present it in a clear manner, for exam-ple, diagrammatically as shown in Figure 12.2. Thecircle represents a calendar year and the time peri-ods are given as examples to indicate the sequenceof planning activities. As the company gets moreexperienced in planning, then the timetable canprobably be tightened up and the whole planningperiod shortened. In the second planning year,months 11 and 12 could be used to evaluate the firstyear’s plan and thereby prepare information for thenext round of corporate planning. The planning pro-cess is an iterative one and a continual undercurrentthroughout the year.

It is also clear from the planning cycle that keyaccount planning must take place at the same timeas, or even before, draft plans are prepared for astrategic business unit.

Significantly, there are two open loop points. Theseare the key times, or opportunities in the planning


process when a subordinate’s views and findingsshould be subjected to the closest examination by asuperior. By utilizing these ‘oxygen valves’, life canbe breathed into marketing planning, transforming itinto the critical and creative process it is supposed tobe, rather than the dull, repetitive ritual it so oftenturns out to be.

There is a natural point of focus in the futurebeyond which it is pointless to plan for. Generally,small firms can use shorter horizons because theytend to be flexible in the way in which they can react


D

J

N F

A M

O M

S A

J

J

Headquarters consolidationof operational andstrategic plans

Preparationof short-termoperational plansand budgets (1 year)

Headquarters reviewRevise and agree long-termobjectives, strategies, budgets(ie strategic marketing plansare finalized)(open loop point 2)

(open loop point 1)

• Management audits• Marketing audits• SWOT analyses• Objectives, strategies• Budgets (proposed) long term(ie draft strategic marketingplans are prepared)

Implementationof first years’soperational plan

Start ofbudget year

Chief executive’s‘kick-off’/briefing

meetings

START

Figure 12.2 Strategic and operational planning – timing

to environmental turbulence in the short term.Larger firms need longer lead times in which tomake changes in direction and thus require longerplanning horizons. While three and five year peri-ods are commonly used, the planning horizonshould reflect the nature of the markets in which thecompany operates and the time needed to recovercapital investment costs.

Remaining sensitive and responsive to the mar-ketplace raises another question: Who should makemarketing decisions? Top management who areremote from the scene, or those at ‘the sharp end’who have intimate knowledge of the markets butless corporate authority? Location of marketingplanning within the company is an important aspectof successful marketing planning. Marketing plan-ning should take place as close to the marketplace aspossible in the first instance, but the plans shouldthen be reviewed at high levels within the organiza-tion to see what issues have been overlooked. Onemeans of formulating an informed, overall strategicview is to conduct a hierarchy of audits and SWOTsat each main organizational level (ie, individualmanager, group manager, profit centre, head office)and then to consolidate them.

Since, in anything but the smallest of undiversi-fied companies, it is not possible for headquarters toset detailed objectives for operating units, it is sug-gested that at the situation review stage of the plan-ning process, strategic guidelines be issuedoutlining possible areas for which objectives andstrategies will be set (eg, financial, operational,human, organizational, marketing), or the chiefexecutive gives a personal briefing at kick-off meet-ings. Strategic and operational planning must be a


Who should makemarketing decisions?

top down and bottom up process. Understandingthis total interdependence between upper and lowerlevels of management in respect of audits and objec-tive and strategy setting is crucial to achieving thenecessary balance between control and creativity.

The vital role that the chief executive and topmanagement must play in marketing planningunderlines a key point. That is, it is people who makesystems work, and that the system design andimplementation have to take account of the ‘person-ality’ of both the organization and the peopleinvolved, and that these are different in all organiza-tions. The attitudes of executives vary, ranging fromthe extremes of the impersonal, autocratic kind tothe highly personal, participative kind. There issome evidence to indicate that chief executives whofail, firstly, to understand the essential role of mar-keting in generating profitable revenue in a busi-ness, and, secondly, to understand how marketingcan be integrated into other functional areas of thebusiness through marketing planning procedures,are a key contributory factor in poor economic performance.

The most common design and implementationproblems with marketing planning systems are:

• weak support from the chief executive and topmanagement;

• lack of a plan for planning;

• lack of line management support (hostility; lackof skills/information/resources; inadequateorganizational structure);

• confusion over planning terms;

• numbers in lieu of written objectives and strategies;


It is people that makesystems work

• too much detail, too far ahead;

• once-a-year ritual;

• separation of operational planning from strate-gic planning;

• failure to integrate marketing planning into totalcorporate planning system;

• delegation of planning to a planner.

By contrast, a company with an effective marketingplanning system is likely to have:

• widely understood objectives;

• highly motivated employees;

• high levels of actionable market information;

• greater interfunctional coordination;

• minimum wastage of resources;

• acceptance of the need for continuous changeand a clear understanding of priorities;

• greater control over the business and less vulner-ability from the unexpected.

To summarize, then, the 10 principles of marketingplanning follow.

1. Develop the strategic plan first; the operationalplan is derived from this.

2. Put marketing as close as possible to the customer,and have marketing and sales under one person.

3. Marketing is an attitude of mind, not a set of procedures.

4. Organize activities around customer groups, notfunctional activities.

5. A marketing audit must be rigorous. No vagueterms should be allowed, and nothing should be


10 principles of marketingplanning

hidden. Managers should use tools like portfolioanalysis and product life cycle information.

6. SWOT analyses should be focused on segmentsthat are critical to the business; concentrate onlyon key factors that lead to objectives.

7. People must be educated about the planningprocess.

8. There has to be a plan for planning.

9. All objectives should be prioritized in terms oftheir urgency and impact.

10. Marketing planning needs the active support ofthe chief executive and must be appropriate forthe culture of the organization.

As a final exercise in exploring why your marketingplans are not working, or are not working as well asyou would wish them to, complete Test 12.1.


Test 12.1: Evaluation of marketing strategy(Test devised by Brian Smith, CEO Pragmedic – [email protected]– as part of his PhD study into marketing planning effectiveness. Usedwith his kind permission. Copyright remains with Brian Smith.)

InstructionsWith your company in mind, tick one answer to each of thefollowing questions.

1. Our marketing strategy makes it clear what markets orparts of the market we will concentrate our efforts on.– If your strategy attacks all of your market sector (eg,

retail groceries, super-conducting magnets) equally = 0– If your strategy is focused by ‘descriptor group’ (eg,

ABC1s, large firms, SMEs, etc.) = 1– If your strategy attacks needs-based segments (eg,

efficacy focused customers with high ego needs) = 2– If you don’t know = -1

2. Our marketing strategy makes clear what actions fit withthe marketing strategy and what does not.– If your strategy allows complete freedom of action = 0– If your strategy allows a high degree of freedom of action

= 1– If your strategy makes the most of your action plan

decisions for you = 2– If you don’t know = -1

3. Our marketing strategy clearly defines our intendedcompetitive advantage in the marketplace.– If there is no strong and supported reason why the

customer should choose you = 0– If there is a reason the customer should buy from you

but no strong proof = 1– If you can state clearly the reason the customer should

buy from you and not the competitor, and substantiatethat reason = 2

– If you don’t know = -1

4. Our marketing strategy allows synergy between theactivities of the different parts of the organization.– If the strategy is a compromise of what each department

is capable of = 0– If the strategy uses the strengths of only one or two

departments = 1


– If the strategy uses the best strengths of all departments= 2

– If you don’t know = -1

5. Our marketing strategy is significantly different from that ofour competitors.– If you target the same customers with the same value

proposition = 0– If you target the same customers OR use the same

value proposition = 1– If you target different customers with a different value

proposition = 2– If you target different customers with a different value

proposition = 2– If you don’t know = -1

6. Our marketing strategy recognizes and makes fullallowance for the needs and wants of our target customers.– If you only meet the basic functional needs (safety,

regulation, efficacy) = 0– If you also meet the higher functional needs (efficiency,

service, price) = 1– If you also meet the emotional and ego needs (brand,

confidence) = 2– If you don’t know = -1

7. Our marketing strategy recognizes and makes fullallowance for the strategies of our competitors.– If you are ignoring the competitors’ strategies = 0– If you are allowing for some of the competitors’ strategies

= 1– If you are allowing for all of the competitors’ strategies =

2– If you don’t know = -1

8. Our marketing strategy recognizes and makes fullallowance for changes in the business environment thatare beyond our control, such as technological, legislationor social change.– If your strategy is designed for today’s conditions = 1– If your strategy allows for one or two changes (eg,

technology or demographics) = 1– If your strategy considers the combined effects of all the

external factors = 2– If you don’t know = -1


9. Our marketing either avoids or compensates for thoseareas where we are relatively weak compared to thecompetition.– If you have taken little or no account of your relative

weaknesses = 0– If you are trying to fix your relative weaknesses = 1– If your strategy means that your relative weaknesses

don’t matter = 2– If you don’t know = -1

10. Our marketing strategy makes full use of those areaswhere we are relatively strong compared to thecompetition.– If you have taken little or no account of your relative

strengths = 0– If you are trying to use your relative strengths = 1– If your strategy means that your relative strengths

become more important = 2– If you don’t know = -1

11. Our marketing strategy, if successfully implemented, willmeet all the objectives of the organization.– If your strategy, fully and successfully implemented, does

not deliver your financial or non-financial objectives = 0– If your strategy, fully and successfully implemented,

delivers only your financial objectives = 1– If your strategy, fully and successfully implemented,

delivers your financial and non-financial objectives = 2– If you don’t know = -1

12. The resources available to the organization are sufficient toimplement the marketing strategy successfully.– If you have neither the tangible nor the intangible

resources to implement the strategy = 0– If you have only the tangible or the intangible resource,

but not both = 1– If you have both the tangible and the intangible

resources needed to implement the strategy = 2– If you don’t know = -1


Scoring and interpretation for Test 12.1Now add up the scores relating to your 12 answers for a totalscore. The maximum score for the exercise is 24. If you scored:

18–24 Well done! – Can I buy some shares?(Are you sure?)

12–17 You will succeed – If your competition is weak!

6–11 You will survive – If your competition is weak!

Less than 6 – Oh dear, it was nice knowing you.


Questions1. Which of the following statements about market-

ing planning are true (T) or false (F)?a) Any closed-loop marketing planning

system based on forecasts and budgetsleads to a creative marketing response. ( )

b) The separation of responsibility foroperational and strategic marketingplanning leads to a preoccupation with short-term results. ( )

c) Planning undertaken by the marketingfunction will be successful as long as inter-departmental politics do not lessen its impact. ( )

d) Marketing planning will never be effective unless the chief executive gives it his/her blessing and involvement. ( )

2. To a large extent the degree of formality of themarketing planning system can be related to com-pany size and market or product diversity. Thematrix below shows the possible combinations of


these factors. Please match quadrants A, B, C andD with the appropriate descriptions of formalitya, b or c given below.

Quad A ( ) Quad C ( )Quad B ( ) Quad D ( )

a) Low degree of formalization.b) Medium degree of formalization.c) High degree of formalization.

3. Which of the factors below contribute to the lowlevel of marketing planning formality in a smallcompany? Mark true (T) or false (F).a) Top managers have an in depth

knowledge of products and customers. ( )b) Formality is not the culture of most

small companies ( )c) There are few top managers and they

work in close proximity of each other. ( )d) The range of products or services is

usually not complicated. ( )


A B

C D

Product or marketdiversity

Wide

Large Small

Narrow

Company size

4. Complete the following sentence with the mostaccurate ending of those listed below.

The really important issue in any marketingplanning system is the degree to which:a) it enables control to be exercised over the key

determinants of success and failure;b) it is compatible with all the other company

planning procedures;c) it can be understood by the management and

staff;d) it clarifies the roles of those who figure in the

marketing plan.

5. Many companies claim that their marketing plan-ning will enable them to achieve the followinggoals: to increase sales; to maximize profits; toincrease market share; and to minimize operatingcosts. Is this belief realistic, or an impossibility?a) realistic b) impossible

6. Another way of looking at the way companiesimplement marketing planning is to considerthe degree to which their concern for planningmatches their concern for involving those whohave a contribution to make to the plan. Againthese two factors can be combined in the follow-ing matrix.

Your task is to match the matrix quadrantsA–D with the descriptive labels a–d.


a) anarchic planning ( )b) apathetic planning ( )c) bureaucratic planning ( )d) integrated planning ( )

7. Here are some definitions about the purpose ofmarketing planning. Which are true (T) andwhich are false (F)?a) To create a sustainable advantage. ( )b) To integrate the organization’s

functions profitably. ( )c) To create profitable customer demand. ( )d) To match intelligently our capabilities

with customer needs. ( )e) To be the best performing company

in the business. ( )

8. The role of the chief executive in the marketingplanning process is generally agreed to be whichof the following? a) To define the organizational framework.b) To act as a catalyst in obtaining inputs from

all divisions or departments.


A B

C D

Concern for staffinvolvement

High

Low High

Low

Concern for planning

c) To monitor the agreed plans.d) To maintain the balance between short and

long-term objectives.e) To provide a momentum for the planning

process.f) To provide the planning structure and systems.

9. What ought to be the strategic planning horizonfor a company’s marketing plan?Should it be:a) 1 year? c) 5 years?b) 3 years? d) It depends on the

circumstances?

10. There are some basic underlying principlesabout marketing planning. Which of those listedbelow are true (T) or false (F)?a) The strategic and operational plans

can be developed concurrently. ( )b) Marketing is an attitude of mind as

well as a process. ( )c) Don’t get too close to customers because

emotions will take over from logic. ( )d) A thorough SWOT analysis should be

conducted on every market segment. ( )e) Objectives should be prioritized in

terms of their impact. ( )f) A plan for planning evolves as the

plan develops. ( )


Answers

Question 1 Answer: a) = F, b) = T, c) = F, d) = T

Question 2 Answer:A = c). A large company with a diverserange of products or markets needs for-mal planning procedures to ensure thatthe complex data is handled in a pre-determined and consistent way.B = b). Although the company is small,a reasonable amount of formality isrequired to enable it to deal with itsdiverse operations.C = b). A degree of formalization isrequired because of the company size.D = a). A very simple and informalapproach would suit this situation.

Question 3 Answer: all are true, which makes it rel-atively easy to plan without having to resort to a complicated planning procedure.

Question 4 Although b), c) and d) are clearly bene-ficial features of any planning system,it is gaining control over the key deter-minants of success and failure that isreally important. Thus the answer is a).

Question 5 Answer = b). The stated objectives arenot mutually supportive, for example, togain market share may require prices tobe low, which is in conflict with maxi-mizing profits. Similarly, increasing sales


may require an investment in advertis-ing or more sales staff, which increasesrather than minimizes operating costs.

Question 6 Answer:a) = A. With a low concern for planningand with everyone getting involved, nodoubt with each person pursuing theirvested interests, anarchy will rule.b) = C. Here the low concern about any-thing constructive will result in apathy.c) = D. Here the concern for planningtakes precedent over peoples’ contribu-tions. When this happens it is notunusual to find sterile, bureaucraticplanning procedures.d) = B. Clearly the two concerns are notmutually exclusive. This quadrant inte-grates the two to best effect.

Question 7 Answer: T = a) and d). F = b), c) and e).It is only by first matching the capabili-ties to customer needs and creating asustainable competitive advantage thatthese conditions will arise.

Question 8 Answer = a), d) and e). It is the role ofthe CEO to create the conditions wheremarketing planning can take place. Heor she does not necessarily have tochase around to ensure that everyone isdoing their job.

Question 9 Answer = d). While 3 and 5 years arepopular choices, the planning horizon


needs to reflect the nature of the prod-uct and the time necessary to recovercapital investment costs resulting fromthe introduction of new strategies.

Question 10 Answer: T = b) and e). F = a) the opera-tional plan can only be developed afterthe longer-term strategic goals havebeen established, c) it is important toget as close to customers as possible, d)it will not be necessary to carry out athorough SWOT unless segments areimportant, and f) a plan for planningmust be agreed at the outset.


The purpose of this short section is to help you con-sider what activities might be ahead of you as youproceed with the preparation of your marketingplans.

THE MARKETING PLANPERFORMANCE MAP ®

The Marketing Plan Performance Map® is a rigorousdiagnostic tool (software supported) that will helpyou to identify the key areas for you to work on, andto evaluate your progress. It will also help to high-light where your problems lie, giving you a chanceto do something about them before they becomeinsurmountable. Details of this tool can be got fromINSIGHT, as shown overleaf.

13

Next steps…

TRAINING AND CONSULTANCY

INSIGHT Marketing and People is able to provideboth training and consultancy on helping you todevelop you marketing plans, including the use ofthe EXMAR software, designed to help automatemany elements of the planning process. INSIGHTspecializes in company work, but does also run aMarketing Planning Masterclass. Details of this eventcan be got by contacting INSIGHT as shown below:

INSIGHT Marketing and People1 Lidstone CourtUxbridge RoadGeorge GreenSloughSL3 6AGUnited Kingdom

tel: +44 (0) 1753 822 990fax: +44 (0) 1753 822 992e-mail: [email protected]

[email protected] web site: www.insight-mp.com

FURTHER READING

Cheverton, P (2004) Key Marketing Skills: A completeaction kit of strategies, tools and techniques for market-ing success, Kogan Page, London

Cheverton, P (2003) Key Account Management: A com-plete action kit of tools and techniques for achievingprofitable key supplier status, 3rd edn, Kogan Page,London

McDonald, M (2007) Marketing Plans: How to preparethem; how to use them, 6th edn, Butterworth-Heinemann, London


80/20 rule 55

advertisingeffectiveness 109, 111measurement of efficacy 109, 111and media 98and product life cycle 98–99

advertising objectives 99–100advertising strategies 97, 98–102

budget 102results 102schedule 102

Ansoff matrix 47, 50, 53, 82–83, 92, 94,95

assumptions 38, 44, 46, 50, 53audits 27, 67, 84, 141, 176awareness 98

benefits 58–59, 67–68, 99, 108, 110differential 62, 64

board level, marketing at 158Boston Matrix 73–74, 77, 78–79, 109, 111

Brady and Davis 1brands 69, 76, 78budget 38business environment 21, 23business strengths 74, 77

‘cash cow’ products 73, 74, 92, 95, 127cash flow 73centralized organizational structure 157,

167–68, 169change, as a marketing strategy 89channel intermediaries 129, 137, 139,

143, 144–45, 146, 147channel strategy 139chief executive (CEO) 49, 53, 177

role 187, 189coherence 173commercial success 9communication

with customers 97interpersonal 97, 98, 107, 108, 110personal 97, 98, 107, 110

Index

communications, in distribution 138communications mix 97, 114communications plan 98competition 41competitive advantage 8, 64competitors 63, 65

pricing strategies 127–28competitive advantage 140computerized data collection 152consolidation, as a marketing strategy 89consumers, and customers 58core offer 68, 76, 78corporate financial objectives 29

management audit 27objective and strategy setting 27, 29step plans 29

corporate objectives 25, 26, 29, 30, 31,34, 86, 91, 94

corporate planning, and marketingplanning 25–35

corporate planning process 27–30corporate financial objectives 27

corporate plans 29corporate strategies 29, 86cost leadership 88cost-plus pricing policy 128, 130, 134cost/benefit appraisal 150costing systems 128–29Cranfield 1, 153, 166, 169creativity 33, 35critical success factors (CSFs) 43, 60, 62,

63, 65customer information needs 114customer needs 154customer retention 141, 144, 147customer service 140–41, 144, 146–47

service level decisions 140customer service package 141, 144, 147customer service strategies 137–48customers 21, 23, 55

communication with 97and consumers 58relationship with 69

data collection 152, 153database technology 152decision making unit (DMU) 121, 123demand curve 131, 134design and implementation problems

177–78desk research 152differential benefits 62, 64‘diffusion of innovation’ 70–71, 72,

98–99, 108, 110directional policy matrix (DPM) 74, 75,

84, 91, 95plan guidelines for positioning on 85

discountscash 129, 134, 136promotional 129quantity 129trade 129

distribution 137–38, 143, 146communications 138facilities 138inventory 138transport 138unitization 138

distribution audit 141distribution channels 139, 146, 148distribution mix 138, 143, 146distribution objectives 141, 145, 148distribution planning 141–42distribution plans 138

in relation of marketing plan 142distribution strategies 137–48diversification 83, 84, 92, 95‘dog’ products 73, 74, 127

efficiency measures 82Einstein, Albert 12

financial summary 38forecasting 149, 154–55, 166, 169forecasting and budgeting approach

10–11formalization 171–72, 173, 183–84, 188

194 � Index

four ‘P’s, of marketing mix 11, 87functional divisions 26

gap analysis 86, 93, 95

hierarchy of objectives 126

improvement, as a marketing strategy89

influencers 57, 114information 149, 150–54information inputs 82innovation 70–71integration 173intelligence 152interdependence, between levels of

management 177internal sales information 152internal sources of information 165, 166,

168–68interpersonal communication 97, 98,

107, 108, 110introductory test, organizational

performance evaluation 3–5invest strategy 85, 92–93, 95

key account customers 32, 34key business ratio 122, 123

leadership 173logistics 138long-term success 33–34, 35

management 177interdependence between levels 177

management audit 27margin management 130margins 129–30market attractiveness features 74, 77market audit 84market definition 59market development 82market extension 83

market maps 57, 61market overview 38market penetration 83market research 33, 35

and marketing research 165, 168market research methods 165, 168market segmentation 56, 56–57market segments

criteria 56–57, 61, 62, 64, 65defining 55–65

market share 59, 63, 65, 73, 82, 86, 132,135

and cash generation 74marketing

at board level 158concept 7–8, 19, 22role within business context 7–8

marketing audit 38–42, 52, 54, 86checklist 41external audit 40, 41internal audit 40, 41

marketing decisions 176marketing information needs 168, 169marketing information system (MIS)

152–54successful 153–54

marketing map 61, 64marketing mix 21, 23, 128

four ‘P’s 11, 87marketing objectives 11–12, 26, 31, 38,

81–86marketing plan

benefits 12–13relation in distribution plan 142and the strategic marketing planning

process 37–54marketing planning 8, 183, 188

benefits, test 15–16and corporate planning 25–35definitions of purpose 186, 189effective systems 178goals 185, 188implementation 186, 189

Index � 195

key outcomes 172ten principles 178–79underlying principles 187, 190

marketing planning process 20, 22, 23inhibiting factors 33, 34

marketing planning strategy 49marketing process 20, 22marketing research 151–52, 165

and market research 165, 168types of 151

marketing research programme 152marketing strategy 1–2, 38, 87–90

change as 89consolidation as 89evaluation test 180–83improvement as 89success 93, 95

markets 21, 23, 41defining 55–65

media, and advertising 98mission statement 30, 31, 34, 38

newness factor 83–84niche strategy 88

objective and strategy setting 27, 29objectives, hierarchy 126openness 173operations gap 86organization 149, 155–64organizational barriers 159

test 160–64organizational capability 21, 23organizational evolution 155–56, 167,

169organizational growth 155organizational performance evaluation,

introductory test 3–5organizational structure 156–57‘oxygen values’ 175

Pareto effect 55Pareto’s law 63, 65

‘penetration’ policies 128, 133personal communication 97, 98, 107,

110personal selling 113–14PIMS database 132, 135PIMS research 65place (distribution and customer service)

strategies 137–48planning cycle 174planning horizons 175Porter, Michael 88Porter’s generic strategies matrix 88, 90,

94portfolio matrix 84, 127

see also Boston Matrixpositioning map 132, 134price strategies 125–36price versus quality, positioning map

132, 134pricing

and product life cycle 127role of 126

pricing policyproduct life cycle 133, 135‘question mark’ products 131

pricing strategiescompetitors 127–28successful 132, 135

‘problem child’ products see ‘questionmark’ products

product audit 67product availability 140, 141, 143, 146product brand 60, 64product class 59, 60, 64product development 82, 83product life cycle 69–70, 71, 76–77, 78,

84, 154, 155and advertising 98–99and pricing 127pricing policy 133, 135

product portfolio 71–72product sub-class 60, 64product surround 68, 76, 78

196 � Index

Index � 197

product/service complexity andcommercial uncertainty matrix107–08, 110

products 67–80features of 68

profit 25–26, 72promotional discounts 129

quality of relationship matrix 120, 123quantitative and qualitative forecasting

techniques 155quantity discounts 129‘question mark’ products 73, 74, 127

pricing policy 131, 134

risk and uncertainty 152RONA (return on net assets) 72, 122

sales, success in 119, 122sales force

expenditure on 119, 122management 116–17

sales manager’s role 121, 123sales promotion, cost-effectiveness 105sales promotion expenditure 104sales promotion objectives 104sales promotion plan, contents 106sales promotion strategies 97, 103–12sales strategies 113–23

qualitative objectives 116–17salespeople 119–20, 121, 122, 123

deciding on numbers 119, 122monitoring 116–17motivational climate 117objectives for individuals 118quality of relationship matrix 119–20role 114–15workload 115

segmentation see market segmentationservices 67–80

features of 68

situation review stage 176six ‘I’s model 153, 166, 169‘skimming’ policies 128, 133, 134, 135Smith, Adam 7socio-demographic classes 56, 62, 64‘star’ products 73, 74, 92, 95, 127step plans 29strategic marketing plan 13–14

‘ingredients’ and ‘recipe’ 46–48strategic marketing planning 8

systematic approach 9–13strategic marketing planning process

38, 39, 49, 50, 51, 53–54, 54and the marketing plan 37–54

strategic and operational planning,timing of 175

strategic planning horizon 187, 189strategy, and tactics 13–14, 19, 22strategy gap 86survival matrix 14–15

test 17–18SWOT analysis 38, 42–44, 49, 52–53, 54,

84, 176, 179sample form 45

systematic approach to strategicmarketing planning 9–13

tactical marketing plan 13–14tactics, and strategy 13–14, 19, 22target audiences 100–01telephone interviews 151telephone selling 121, 123theory of probability and expected value

150time 173timing, of strategic and operational

planning 175trade discounts 129

uncertainty, and risk 152unitization 138

Malcolm mc donald_on_marketing_planning

Business

Transcript of Malcolm mc donald_on_marketing_planning