Strategic Marketing Planning Marketing Essay

Published Date: 23 Mar 2015

Since the early 1960s, planning process has become more important as a means of coping with a turbulent business environment. Several conceptual frameworks have been developed to better understand the process of strategy formulation, and for such processes, the term "strategic marketing" is used to describe the decisions taken to develop long-run strategies for survival and growth. Two schools of thought can be identified (Ashill, Frederikson & Davies, 2003).

One school adopts a normative position and conceptualises strategic marketing planning primarily in terms of rational "content" models of strategy formulation (e.g. McDonald, 1984; Greenley, 1986). The other consists of a more limited number of exploratory studies, which focus on the issue of "context" (e.g. Leppard and McDonald, 1991; Speed, 1994; Piercy & Morgan, 1994). The "normative" approach typically describes the application of logical flow models (O'Shaughnessy, 1988) documenting a pre-determined series of discrete steps of operation. This literature draws heavily on classical organization and decision-taking theories by Weber and Fayol, and stresses such issues as: the need for strategic marketing planning; the format of planning; the formal procedures to institutionalise planning; and the general "location" of analytical techniques within the operational frameworks (Ashill, Frederikson & Davies, 2003).

A major shortcoming of above mentioned "content" models has been described by several researches as their failure to consider the organizational context in which strategic marketing planning takes place (e.g. Leppard & McDonald, 1991; Speed, 1994; Greenly & Bayus, 1994; Piercy & Morgan, 1994). These writers also suggest that artificial or narrow boundaries have often surrounded strategic marketing planning research.

Empirical research conducted by Brooksbank (1991) revealed that successful companies are likely to share at least seven common characteristics. Table X lists essential characteristics and provides a direct contrast between the characteristics typically associated with an effective versus an ineffective marketing plan:

Effective

Ineffective

Strong top management support

Compiled by staff

Thoroughly researched

External competitive focus

Proactive/visionary

Weak top management support

Compiled for staff

Scantily researched

Internal efficiency focus

Reactive/based on past

Table X. The marketing plan: essential characteristics (Brooksbank, 1991).

McDonald's marketing planning

"In essence, strategic marketing planning is an approach to business which… can enable even the smallest competitor to survive successfully. However … there is no simple "magic formula" which can be administered. There is no marketing equivalent of Aladdin's lamp, which can make an organization's dream come true" (McDonald, 1992, p. 4).

According to McDonald (1992) marketing planning is a logical sequence of activities which leads to the setting of marketing objectives and the formulation of plans to achieve them. Main steps of McDonald's (2007) marketing planning process with comparison to other marketing professionals' plans are represented in Table X. Table X shows that there is a substantial overlap of steps among different marketing planning and there are no considerable differences between different marketing planning processes (see Table X). Only an order and used terminology are slightly varied. For the purpose of this consultancy business project McDonald's approach to marketing planning is chosen.

Table X. Main steps of marketing planning process (adapted from Neves (2007)

Table X. Main steps of marketing planning process (adapted from Neves (2007).

McDonald (1992) considers marketing planning as one out of six models of perspectives of strategic decision making:

a planning model;

an interpretive model;

a political model;

a logical incremental model;

an ecological model;

a visionary leadership model.

In a planning model strategic decisions are reached by use of a sequential, planned search for optimum solutions to defined problems. This process is highly rational and is fuelled by concrete data. McDonald (1992) identified following strengths and weaknesses of a planning model:

Strengths

Weaknesses

Systematic

Unemotional

Various strategic opinions are considered before selecting the most appropriate one

It provides a framework which can be communicated and understood through the organization

It provides a discipline of review and evaluation for managers

Assumptions are made that the environment is predictable over the strategic time span

It is implied that the organization is not directly affected by the environment over this time

There is separation between those who make decision and those in possession of the most useful information

It can become bureaucratic and ritualistic, e.g. the annual numbers game

Table X. Strengths and weakness of a planning model (McDonald, 1992).

Apart from helping the organization to cope with intense competitive pressures, increasing turbulence, environmental complexity, a marketing plan is generally accepted as being useful for the organization, for managers, for non-marketing functions, and for subordinates to (McDonald, 1992):

set objectives and strategies;

help to identify the source of competitive advantage;

get resources;

clarify roles and improve co-ordination;

monitor progress..

The validity and usefulness of a conventional model of the sequence of stages in strategic marketing planning is constantly being challenged, because the conventional model ignores the organizational and human realities facing the planner. Also, the logical model ignores the processual characteristics of planning and the essential routine of iteration, and it presumes that each of the activities in planning is completed to perfection at first attempt - a situation far removed from the reality of planning (Piercy & Giles, 1990). The logical planning model tends to assume that strategies are deliberately are rationally chosen, whereas the accumulating research evidence that strategies are emergent from a confused and imperfect process rather than direct and obvious (Piercy & Giles, 1990). McDonald (1989) described ten principal barriers to marketing planning. Some of these barriers are:

lack of in-depth analysis;

lack of knowledge and skills;

lack of a systematic approach to marketing planning;

failure to prioritize objectives;

hostile corporate cultures.

Mission

McDonald (2007) distinguishes two levels of mission. One is a corporate mission statement, the other is a lower level, or purpose statement. The following should appear in a mission or purpose statement (McDonald, 2007):

Role or contribution (profit, service, or opportunity seeker)

Business definition (preferably in terms of the benefits that are being provided)

Distinctive competencies (essential skills, capabilities, or resources)

Indication for the future:

what the firm will do;

what the firm might do;

what the firm will never do.

Corporate objectives

Every business starts at some time with resources and wants to use those resources to achieve something. What the business wants to achieve is a corporate objective, which describes a desired destination, or result (McDonald, 2007). One of the commonly used approach for setting corporate objectives is the balanced scorecard approach.

The balanced scorecard approach was introduced by Kaplan and Norton as a strategic performance management tool for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy (Kaplan & Norton, 1992). This approach is built on the logic that for business to be considered successful it must satisfy the requirements of three stakeholders: investors, customers and employees:

Investors require financial performance, measured in economic profitability, company's market value and cash flow

Customers require quality and service, which can be measured through market share, customer commitment, and customer retention

Employees of a firm want that firm to be a healthy place to work

Marketing audit

A marketing audit is a systematic appraisal of all the external and internal factors that affect a company's commercial performance (McDonald, 2007). Marketing audit involves external and internal audit:

External audit

Internal audit

- General environment

Political, economic, social, technological environmental, legal (PESTEL framework)

Own company sales (total, by geographical location, by industrial type, by customer, by product)

Market shares

Profit margins, costs

Marketing information, research

Marketing mix variables: product management, price, distribution, promotion, operations and resources

- The market

Customers and consumers

Total market, size, growth and trends (value/volume)

Market characteristics, developments and trends: products, prices, physical distribution, channels, communication, industry practices

- Competition (the Five Forces framework by M. Porter)

Major competitors

Size

Market share/coverage

Market standing and reputation

Product capabilities

Distribution polices

Marketing methods

Extent of diversification

Profitability

Key strengths and weaknesses

Table X. Conducting an audit (adapted from (McDonald, 2007).

By conducting an external audit, a firm identifies the critical threats and opportunities in its micro (competitive) and macro (general environment) environment. It also examines how competition in this environment is likely to evolve and what implications that evolution has for the threats and opportunities a firm is facing (Barney & Hesterly, 2010).

Internal analysis helps to identify organization's strength and weaknesses. It also helps to understand which of company's resources and capabilities are likely to be a sources of competitive advantage. Also, internal analysis can be used by firms to identify those areas of an organization that require improvement and change (Barney & Hesterly, 2010).

The Five Forces framework by M. Porter

One of most influential framework for analysing threats in a firm's competitive environment is the five forces framework developed by Professor Michael Porter (Barney & Hesterly, 2010). The five forces framework identifies the five most common threats faced by firms in their local competitive environments and the conditions under which these threats are more or less likely to be present. The five common environmental threats identified in the five forces framework are: the threat of entry, the threat of rivalry, the threat of substitutes, the threat of suppliers, and the threat of buyers (Porter, 2004). The threat of entry depends on the existence and "height" of barriers to entry. The threat of rivalry depends on the number and competitiveness of firms in an industry. The threat of substitutes depends on how close substitute products and services are - in performance and cost - to products and services in an industry. The threat of suppliers in an industry depends on the number and distinctiveness of the products suppliers provide to an industry. Finally, the threat of buyers depends on the number and size of an industry's customers. Taken together, the level of these threats in an industry can be used to determine the expected average performance of firms in an industry.

Porter's framework has been criticized as being complex, time-consuming and grossly incomplete (Neumann, 1994). This framework ignores the role of other external entities and social factors. Also, Porter's framework leaves the definition of "industry" up to the manager. The framework does not help determine the scope of the industry or likely reactions of buyers, suppliers, or rivals.

SWOT analysis

Major Strengths, Weaknesses, Opportunities, and Threats of a company identified with the help of conducted marketing audit are summarized in SWOT table. Based on SWOT analysis strategic choices will be made: which opportunities in organization's environment with organization's strengths will be exploited and which threats in organization's environment while avoiding organization's weaknesses will be neutralized.

Marketing objectives

Marketing objectives are generally concerned with the four Ps (product, price, place, and promotion) (McDonald, 2007). Marketing objectives are usually simply about one (or more) of the following:

existing products for existing markets;

new products for existing markets;

existing products for new markets;

new products for new markets.

Marketing objectives should be capable of measurement. Measurement can be in terms of some, or all, of the following: sales volume, market share, profit, percentage penetration. Marketing strategies are the means by which marketing objectives will be achieved (McDonald, 2007).

Marketing strategies

Most companies have moved from away from mass marketing and towards target marketing - identifying market segments, selecting one or more of them, and developing products and marketing programmes tailored to each (Kotler et al, 2008).

Figure X shows the four major steps in designing customer-driven marketing strategy. In the first two steps, the company selects the customers that it will serve. Market segmentation involves dividing a market into distinct groups of buyers with different needs, characteristics or behaviours, who might require separate products or marketing mixes. The company identifies different ways to segment the market and develops profiles of the resulting market segments. Targeting consists of evaluating each market segment's attractiveness and selecting one or more market segments to enter.

Decide on a value proposition

Select customers to serve

Segmentation

Divide the total market into smaller segments

Targeting

Select the segment or segments to enter

Differentiation

Differentiate the market offering to create superior customer value

Positioning

Position the market offering in the minds of target customers

Create value for targeted customers

Figure X. Steps in market segmentation, targeting and positioning (Kotler et al, 2008).

In the final two steps, the company deciding on a value proposition - on how it will create value for target customers. Differentiation involves actually differentiating the firm's market offering to occupy a clear, distinctive and desirable place relative to competing products in the minds of target customers.

Budgeting

A budget is "an agreed quantified plan of actions and policies to be implemented in a specified time period so as to try to achieve the corporate objectives" (Ward, 1989, p. 15). The budget is agreed against a set of assumptions regarding the external environment, and the overall long term plan of the business.

First-year detailed implementation programme

In a one-year tactical plan, the general marketing strategies should be developed in into specific sub-objectives, each supported by more detailed strategy and action statements (McDonald, 2007).

Contingency plan

Contingency plan should address the following questions (McDonald, 2007):

What are critical assumptions on which a plan is based?

What would the financial consequences be if these assumptions did not come true?

How will these assumptions be measured?

What action will you take to ensure that the adverse financial effects of unfulfilled assumptions are mitigated?