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Robert E. Stevens David L. Loudon Bruce Wrenn Phylis Mansfield Marketing Planning Guide Third Edition

Robert E. Stevens David L. Loudon Bruce Wrenn Phylis Mansfield

Marketing Planning Guide

Third Edition

Phylis Mansfield Marketing Planning Guide Third Edition Pre-publication REVIEWS, COMMENTARIES, EVALUATIONS “T his

Pre-publication

REVIEWS,

COMMENTARIES,

EVALUATIONS

“T his text is different from general marketing strategy books in that

it opens with a consideration of bud-

geting and organizational structure, as well as offering a good overview of marketing research techniques. The strength of the text is clear and the worksheets in the appendixes are excel- lent tools to help students understand how a marketing plan is written.”

pendently for a practical, e.g., part-time, MBA marketing management course, as the main text; it can also serve either function for advanced undergraduate marketing principles courses; and the very same book would be highly benefi- cial to the practitioner in implementing

marketing concepts. The key to this book’s usefulness is its focus on planning. The authors en- courage the readers to roll up their sleeves and actually do some market- ing. Academics and managers usually coexist with an uneasy tension; this book tosses aside such an assumption and gets right down to the business of showing how to enact good marketing. One of the keys to the implementation and clarification of planning in this book is its numerous tables and audits, plus an appendix full of worksheets that challenge the marketer to tangibly and concretely explicate his or her own version of attracting and retaining cus- tomers. Many kinds of readers will find this book useful.”

Deirdre Bird, PhD Assistant Professor of Marketing, Providence College

PhD Assistant Professor of Marketing, Providence College “M arketing Planning Guide by Stev- ens, Loudon, Wrenn,

“M arketing Planning Guide by Stev- ens, Loudon, Wrenn, and Mans-

field is in its third edition and will con- tinue to be a useful resource. It can be

a practical supplement to a theoretical

MBAmarketing management course whose main text is Kotler; it can suffice inde-

Dawn Iacobucci, PhD Professor of Marketing, Wharton, University of Pennsylvania

main text is Kotler; it can suffice inde- Dawn Iacobucci, PhD Professor of Marketing, Wharton, University

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Marketing Planning Guide

Third Edition

BEST BUSINESS BOOKS ®

Robert E. Stevens, PhD David L. Loudon, PhD Editors in Chief

Doing Business in Mexico: A Practical Guide by Gus Gordon and Thurmon Williams Employee Assistance Programs in Managed Care by Norman Winegar Marketing Your Business: A Guide to Developing a Strategic Marketing Plan by Ronald A. Nykiel

Customer Advisory Boards: A Strategic Tool for Customer Relationship Building by Tony Carter Fundamentals of Business Marketing Research by David A. Reid and Richard

E. Plank

Marketing Management: Text and Cases by David L. Loudon, Robert E. Stevens, and Bruce Wrenn Selling in the New World of Business by Bob Kimball and Jerold “Buck” Hall

Many Thin Companies: The Change in Customer Dealings and Managers Since September 11, 2001 by Tony Carter The Book on Management by Bob Kimball Concise Encyclopedia of Advertising by Kenneth E. Clow and Donald Baack

Application Service Providers in Business by Luisa Focacci, Robert J. Mockler, and Marc Gartenfeld The Concise Handbook of Management: A Practitioner’s Approach by Jonathan

T. Scott

The Marketing Research Guide, Second Edition by Robert E. Stevens, Bruce Wrenn, Philip K. Sherwood, and Morris E. Ruddick

Marketing Planning Guide, Third Edition by Robert E. Stevens, David L. Loudon, Bruce Wrenn, and Phylis Mansfield Concise Encyclopedia of Church and Religious Organization Marketing by Robert E. Stevens, David L. Loudon, Bruce Wrenn, and Henry Cole The Economics of Competition: The Race to Monopoly by George G. Djolov Market Opportunity Analysis: Text and Cases by Robert E. Stevens, Philip

K. Sherwood, J. Paul Dunn, and David L. Loudon

Concise Encyclopedia of Real Estate Business Terms by Bill Roark and Ryan Roark Concise Encyclopedia of Investing by Darren W. Oglesby

Marketing Research: Text and Cases, Second Edition by Bruce Wrenn, Robert

E. Stevens, and David L. Loudon

Marketing Planning Guide

Third Edition

Robert E. Stevens David L. Loudon Bruce Wrenn Phylis Mansfield

ROUTLEDGE Routledge Taylor & Francis Group
ROUTLEDGE
Routledge
Taylor & Francis Group

LONDON AND NEW YORK

First published 2006 by Best Business Books

Published 2013 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN 711 Third Avenue, New York, NY 10017, USA

Routledge is an imprint of the Taylor & Francis Group, an informa business

© 2006 by Robert Stevens, David Loudon, Bruce Wrenn, and Phylis Mansfield. All rights reserved. No part of this work may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, microfilm, and recording, or by any information storage and retrieval system, without permission in writing from the publisher. Printed in the United States of America.

First edition published 1991. Second edition published 1997.

Cover design by Marylouise E. Doyle.

Library of Congress Cataloging-in-Publication Data

Marketing planning guide / Robert E. Stevens p. cm. Includes bibliographical references and index.

[et al]. — 3rd ed.

ISBN-13: 978-0-7890-2337-7 (hard : alk. paper) ISBN-13: 978-0-7890-2338-4 (soft : alk. paper)

1. Marketing—Management. I. Stevens, Robert E., 1942- II. Title.

HF5415.13.S874 2005

658.8'02—dc22

2005008559

CONTENTS

About the Authors

xi

Preface

xiii

PART I: INTRODUCTION TO MARKETING PLANNING

Chapter 1. The Importance of Marketing Planning

3

Marketing Planning in Action: Starbucks

3

Introduction

4

What Is Marketing?

5

What Is Planning?

8

Planning’s Place in the Organization

11

The Marketing Planning Process

13

The Marketing Plan Format

16

Summary

18

Chapter 2. Organizational Considerations in Marketing Planning

19

Marketing Planning in Action: Simple Is Best

19

Introduction

20

Organizational Purpose

20

Organizational Objectives and Strategies

22

Organizing for Planning

26

Organizational Structure

27

Coordination and the Planning Process

32

Organizational Structure and Market Responsiveness

36

Summary

36

Chapter 3. Database Marketing Planning: Getting Needed Information

39

Marketing Planning in Action: Hyundai Motor Company

39

Introduction

40

Database Marketing

40

Marketing Research

44

Decision Making

45

Types of Data

48

Steps in a Marketing Research Project

49

Summary

58

PART II: SITUATION ANALYSIS

Chapter 4. Product/Market Analysis

61

Marketing Planning in Action: Napster and the Advent of Music File Sharing

61

Introduction

62

Environmental Scanning

62

The Strategic Implications of Product/Market Analysis

65

Sales Analysis

71

Cost Analysis

74

Summary

80

Chapter 5. Consumer Analysis

81

Marketing Planning in Action: The Antiaging Movement

81

Introduction

82

Market Segmentation

83

Psychographics/Lifestyle Segmentation

88

Market Grid Analysis

91

Market Potential

100

Summary

104

Chapter 6. Competitive Analysis

105

Marketing Planning in Action: The Package Delivery Industry

105

Introduction

106

The Concept of Competitive Advantage

106

Purpose of Competitive Analysis

108

Competitive Forces and Advantages

111

Summary

122

Chapter 7. Opportunity Analysis

123

Marketing Planning in Action: Reinventing Barbie

123

Introduction

124

Problems versus Opportunities

124

Internal Factors

125

Other Factors

129

Ranking Opportunities

131

Summary

132

PART III: OBJECTIVES

Chapter 8. Marketing Objectives

135

Marketing Planning in Action: Kodak

135

Introduction

136

What Are Objectives?

136

Alternatives to Managing by Objectives

137

Characteristics of Good Objectives

138

Types of Objectives Included in a Marketing Plan

141

Using Situation Analysis Data to Set Objectives

144

Summary

145

PART IV: STRATEGY, STRATEGY VARIABLES, AND FINANCIAL IMPACT

Chapter 9. Marketing Strategy Development

149

Marketing Planning in Action: Mercedes

149

Introduction

150

What Is Strategy?

150

Elements of Marketing Strategy

151

Alternate Marketing Strategies

155

Factors Influencing the Strategy Selected

159

Summary

161

Chapter 10. Product Decisions

163

Market Planning in Action: DuPont

163

Introduction

164

Product: The First Component of the Marketing Mix

164

What Is a Product?

165

Product Positioning Strategies

166

Quality- and Value-Based Marketing

168

Service Strategy

171

Improving Customer Perceptions of Service Quality

172

New-Product Development Decisions

173

Changing Existing Products

178

Product Line Decisions

179

Branding Decisions

180

Packaging and Labeling Decisions

181

Summary

182

Chapter 11. Place Decisions

185

Marketing Planning in Action: The Changing Face of Retail Stores

185

Introduction

186

Who Will Be Channel Captain?

187

Which Type of Channel Should Be Used?

189

Which Kind of Middlemen Should Be Used?

191

Market Exposure Decisions

192

Transportation and Storage Decisions

194

The Physical Distribution Concept

196

Summary

197

Chapter 12. Promotion Decisions

199

Marketing Planning in Action: Product Placement

199

Introduction

200

Target Audience Decisions

201

Promotional Methods Decisions

202

Media Decisions

203

Message Content Decisions

206

Personal Selling Strategy Decisions

210

Sales Promotion Decisions

213

Publicity Decisions

214

Promotional Budgeting Decisions

215

Summary

216

Chapter 13. Price Decisions

217

Marketing Planning in Action: Hotel Price Guarantees

217

Introduction

218

Price Level Decisions

218

Price Determination

219

New Product Pricing Decisions

225

Pricing Policy Decisions

226

Summary

229

Chapter 14. The Financial Impact of Marketing Strategies

231

Marketing Planning in Action: Razor Wars

231

Introduction

232

Pro Forma Income Statement

232

Pro Forma Forecast

234

Pro Forma Cost Forecast

237

Return on Investment

238

Strategy Revisions and Contingency Plans

240

Summary

241

PART V: IMPLEMENTING AND CONTROLLING THE MARKETING PLAN

Chapter 15. Marketing Plan Implementation

245

Marketing Planning in Action: The Fluctuating Popularity of the Hummer

245

Introduction

246

Implementation Skills

246

Integrating a Societal Marketing Orientation Throughout the Organization

247

Transition from Strategy to Tactics

250

Summary

253

Chapter 16. Monitoring and Controlling the Marketing Plan

255

Marketing Planning in Action: Reinvigorating Levi Strauss

255

Introduction

256

Integration of Planning and Control

257

Timing of Information Flows

258

Performance Evaluation and Control

258

Establishing Procedures

265

Summary

265

PART VI: PLANNING ANALYSIS

Chapter 17. The Marketing Planning Audit

269

Marketing Planning in Action: Johnson & Johnson

269

Introduction

270

The Planning Audit

270

Audit Personnel

271

Objective, Scope, and Breadth of Audit

272

Audit Data and Reporting Format

276

Increasing the Level of Sophistication in Planning

276

Summary

277

Appendix A. Worksheets

279

Chapter 1: Getting Started

279

Chapter 2: Organizational Consideration

281

Chapter 3: Informational Needs

282

Chapter 4: Product/Market Analysis

284

Chapter 5: Consumer Analysis

286

Chapter 6: Competitive Analysis

288

Chapter 7: Summary of Situation Analysis

290

Chapter 8: Marketing Objectives

292

Chapter 9: Marketing Strategy Development

293

Chapter 10: Product Decisions

295

Chapter 11: Place Decisions

298

Chapter 12: Promotion Decisions

300

Chapter 13: Price Decisions

306

Chapter 14: Financial Impact

308

Chapter 15: Plan Implementation

310

Chapter 16: Marketing Control

313

Chapter 17: Marketing Planning Audit

315

Appendix B. Sample Marketing Plan: Water-Oriented Recreation Park

321

Situation Analysis

321

Objectives

326

Strategy

327

Control Procedures

330

Consumer Study

332

Notes

337

Index

345

ABOUT THE AUTHORS

Robert E. Stevens, PhD, is Professor of Marketing in the Depart- ment of Management and Marketing at the University of Louisiana at Monroe. During his distinguished career, Dr. Stevens has taught at the University of Arkansas, the University of Southern Mississippi, and Hong Kong Shue Yan College. His repertoire of courses has in- cluded marketing management, business research, statistics, market- ing research, and strategic management. The author or co-author of twenty books and well over 150 articles, he has published his re- search findings in a number of business journals and in the proceed- ings of numerous professional conferences. He also serves on the edi- torial boards of four professional journals. Dr. Stevens has acted as a marketing consultant to local, regional, and national organizations and is the owner of two small businesses.

David Loudon, PhD, is Professor of Marketing in the School of Business at Sanford University. He has also taught at the University of Louisiana at Monroe, Louisiana State University, the University of Rhode Island, Hong Kong Shue Yan College, and the North Ameri- can Executive program in Monterrey, Mexico. He has taught a variety of courses but focuses on marketing management and consumer be- havior. Dr. Loudon is co-author of twelve books and has conducted research in the United States, Europe, Asia, and Latin America on topics such as services marketing, marketing management, consumer behavior, and international marketing. He has also written over 100 articles, papers, and business cases, and his research findings have been published in a number of journals and in the proceedings of nu- merous professional conferences. Dr. Loudon is co-editor of Best Business Books, an imprint of The Haworth Press, Inc.

Bruce Wrenn, PhD, is Associate Professor of Marketing in the Divi- sion of Business and Economics at Indiana University South Bend. The author of several books on marketing management, planning, re- search, and marketing for religious organizations, Dr. Wrenn has also written numerous articles on marketing strategy, research, and mar-

xii

MARKETING PLANNING GUIDE

keting techniques for nonprofit and health care organizations. He spent several years with a major pharmaceutical company perform- ing market analysis and planning and has served as a consultant to a number of industries, religious denominations, and organizations in the food, high tech, and health care industries.

Phylis Mansfield, PhD, is Assistant Professor of Marketing at Penn State University, Erie. Her research and teaching interests include consumer complaint resolution, service quality, and social issues and ethics in marketing. She teaches in the areas of marketing principles, business-to-business marketing, and services marketing. Dr. Mans- field has previous industry experience as a product manager, a busi- ness systems analyst, and a corporate training manager. Her industry experience has been with SunTrust Bank, National City Bank, and in administration at Vanderbilt University. She has published several cases and articles that have appeared in such publications as the Jour- nal of Business Ethics.

Preface

Many changes have occurred in the business environment since the second edition of the Marketing Planning Guide was published in 1997. The third edition includes new orienting examples and text ma- terial, including a section on e-marketing and a section on ethics. The book was written for two groups: (1) practitioners who are preparing marketing plans and need background material to guide them through the process, and (2) as a college text for upper-division marketing courses where instructors want to use a practical “hands- on” approach for teaching the planning process to students. The an- cillary material includes an instructor’s manual with a test bank and PowerPoint slides for adopters.

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PART I:

INTRODUCTION TO MARKETING PLANNING

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Chapter 1

The ImportanceThe Importanceofof MarketingMarketing PlanningPlanning

MARKETING PLANNING IN ACTION:

STARBUCKS

Most Americans have heard of the company Starbucks. The prolifera- tion of Starbucks stores has been the subject of late-night television jokes and watercooler discussions, yet the company continues to open an average of three stores every day. When hearing about the com- pany’s debut on the Fortune 500 earlier this year, its founder, Howard Schultz, admitted that it would be arrogant to say that ten years ago he thought Starbucks would be where it is today, but from the very begin- ning of the company’s inception, his goal was to dream big. And dream big it does. In fact, the seemingly oversaturation of many retail markets is the very goal of his business strategy. Starbucks’ strategy is surprisingly straightforward: “Blanket an area completely, even if the stores cannibalize one another’s business.” Today the company has 6,000 stores in more than thirty countries despite the fact that it does not franchise. Its goal is to have a minimum of 10,000 stores worldwide. Yet Schultz’s goal for the company has as much to do with its philosophy of business as it does in becoming a multinational icon. Starbucks strives to be the kind of company everyone wants to work for, where even the part-time employees receive benefits such as health insurance and stock options. This nurturing environment trans- fers over to the employee’s belief in the company, its product, and sense of community, which in turn provides an atmosphere that is the key to success in service companies. The omnipresence of Starbucks adds to its success in spite of the fact that stores may literally be across the street from each other. When a new store opens it will often cannibalize a sister store, sometimes up to 30 percent of the existing store’s business.Although this may seem to be an inappropriate strategy to some, it does provide the company several operational benefits. With stores so close together it cuts down on deliv- ery and management costs, it can help to shorten customer lines in each store (particularly during the morning rush), and helps to increase total customer traffic. In a given week, 20 million people will buy a cup of cof-

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MARKETING PLANNING GUIDE

fee from a Starbucks store. The typical customer visits Starbucks four to five times each week—an unheard of frequency for customer visits to a retailer. The proliferation of stores also helps to bring a sense of “presence” to the customer, similar to the impact of multiple shelf facings of a product in a grocery store. The fact that Starbucks is everywhere and readily available contributes to its brand awareness despite the fact that it spends only 1 percent of its annual revenues on advertising. Typically, retailers spend close to 10 percent on ads each year. The company has also managed to have a significant impact on the way America views coffee and community. Starbucks’ $3 cup of coffee was viewed as a West Coast fad that would soon die out. It is far from a fad, and this premium pricing strategy certainly appeals to a specific segment of the total coffee market.Starbucks has successfully created a niche for a premium-priced product by offering consistent quality and a neighborhood conclave. It appears to serve that niche well, even though it captures just 7 percent of the total coffee-drinking market in the United States and less than 1 percent abroad. When Schultz took Starbucks public in 1992, the company had only 165 stores around Seattle and in neighboring states.Eleven years later it made its first appearance on the Fortune 500. What is Schultz’s goal for the next ten years? “We want to become one of the most respected and recognized brands in the world. Like Coke,” he adds. 1

INTRODUCTION

Planning is one of the keys to success of any undertaking, and no- where is it more important than in business. Every study dealing with business failures uncovers the same basic problem, whether it is called undercapitalization, poor location, or simply a lack of managerial skills. All these problems have their roots in planning. Marketing is one of the most important types of business activity that must be planned. The marketing plan defines the nature of the business and what that organization will do to satisfy its customers’ needs in the marketplace. As such, the marketing plan is not just an “academic” concept of use to educators, but is a ruthlessly practical exercise that can spell the difference between success and failure to all types of or- ganizations—big or small, producing for businesses or consumers, goods or services, for-profit or not-for-profit, offering domestic or in- ternational.

The Importance of Marketing Planning

5

For planning to be successful, it must be founded in a root philoso- phy or conceptual framework that provides a basis for analysis, exe- cution, and evaluation. A thorough understanding of both marketing and planning must precede any manager’s attempt to develop and ex- ecute a marketing plan. This chapter focuses on marketing and plan- ning and their relationship in the planning process.

WHAT IS MARKETING?

Various definitions of marketing have evolved over the years, but one that appears to be fairly complete is as follows: Marketing directs those activities that involve the creation and distribution of products to identified market segments. Several key words in this definition need further explanation. First, marketing directs. This is a manage- rial perspective rather than a residual perspective, which is concerned only with what has to be done to get goods and services to customers. Thus, marketing is not just a group of activities but more specifically is activities that are controlled in their execution to attain identifiable objectives. Second, marketing involves the performance of specific activities or functions. These functions constitute the work or sub- stance of what marketing is all about. To be involved in marketing means to be involved in the planning, execution, and/or control of these activities. Third, marketing involves both creation and distribution of goods and services. Although the product or service is actually created by the production function, marketing personnel are very much con- cerned not only about the creation of goods and services from a phys- ical perspective but also from the perspective of customer need. Mar- keting needs to have a vital role in creation as well as distribution of goods and services. In fact, a well-conceived product or service makes the rest of the marketing tasks easier to perform. Finally, marketing’s concern is with customers and meeting a need in the marketplace. However, its concern is not just with any or all customers but particularly with those preselected by management as the market segment(s) on which the company will concentrate. Thus, specific customers with their specific needs become the focal point of marketing activities.

6

MARKETING PLANNING GUIDE

Marketing Orientation

True marketing thought focuses on addressing the needs and wants of a targeted segment of the market. Other business philosophies or orientations may be put into practice by managers with marketing ti- tles, but they do not reflect authentic marketing thought. Exhibit 1.1 shows five different business orientations that have been used as the operating philosophies behind management decision making. The term dominant identifies the core objective that gives the orientation its name. Present means that the orientation includes that objective, but does not use it as the centrally controlling goal in orienting the manager’s thoughts about his or her company, its products, and its customers. Notpertinent means that a particular objective has no rele- vance, pertinence, or connection with the orientation described. This exhibit makes it clear that the production, product, and selling orien- tations are internally driven. Managers using such orientations are determining what they want to dictate to the market. Only the last two orientations—marketing and societal marketing—contain the ele- ments of an “outside-in” or market-driven philosophy, which stresses discovery of market opportunities, marketplace input regarding the organization’s claim of a competitive advantage, and the integration of effort across all areas of the organization to deliver customer satisfaction. These two orientations reflect the competitive realities facing organizations of all types. The societal orientation is particularly well-suited to internal and external environmental forces currently facing managers. It includes all of the positive contributions of the other four orientations, but adds concerns for the long-term effects of the organization’s actions and products on its customers, as well as the desire to consider the effects of the organization’s actions on society at large. In other words, it rec- ognizes the sovereignty of the marketplace and uses both deonto- logical (rights of the individual) and teleological (impact on society) ethical frameworks as part of the decision-making process. Putting this philosophy in practice requires a planning procedure that trans- forms this consumer orientation into marketing activities.

marketing

Societal

Marketing

EXHIBIT 1.1. Business orientations.

Selling

Product

Production

Present

Present

Present

Present

Dominant

Present

Present

Present

Dominant

Not pertinent

Present

Present

Dominant

Not pertinent

Not pertinent

Present

Dominant

Not pertinent

Not pertinent

Not pertinent

Dominant

Not pertinent

Not pertinent

Not pertinent

Not pertinent

to capitalize

Desire

and

synergies

on

in pro-

efficiencies

process

duction

to design

Attention

of a

production

and

product

quality

Dedicated re-

to stimu-

sources

and

interest

lating

desire for product

purchase

identify-

on

Focus

satisfying

and

ing

wants

and

needs

customers

of

Consideration of

on custom-

society

of

the short- effect

and

and on

long-term

actions

ers

8

MARKETING PLANNING GUIDE

WHAT IS PLANNING?

Anyone studying managerial functions soon learns that although the list of specific functions may vary from author to author, one func- tion common to all lists is planning. Planning may be defined as a managerial activity that involves analyzing the environment, setting objectives, deciding on specific actions needed to reach the objec- tives, and providing feedback on results. This process should be dis- tinguished from the plan itself, which is a written document contain- ing the results of the planning process. The plan is a written statement of what is to be done and how it is to be done. Planning is a continu- ous process that both precedes and follows other functions. Plans are made and executed, and then results are used to make new plans as the process continues.

Reasons for Planning

With today’s fierce business competition and economic uncer- tainty, traditional management approaches are becoming less effec- tive. In the past, the attention was on boosting profit by cutting ex- penses, conducting operational efficiency, and doing things right. Downsizing the firm’s workforce to cut costs became a popular reac- tion to profit squeezes for many organizations during the late 1980s and 1990s. However, it became obvious only later that such efforts to reduce costs may be sacrificing long-term competitive strengths for short-term financial gain. Gains in efficiency cannot deliver long- term benefits unless they are coupled with gains in effectiveness. A survey of 250 senior executives revealed that profit management in the future will require attention to effective marketing planning and strategy (doing the right things as well as doing things right). The sur- vey found that regardless of the type of business, remaining competi- tive will require companies to:

reorient planning techniques and processes with competitive marketing strategy as the driving force;

develop sound forecasts; and

realize “marketing strategy’is a productive adaptation of all cor- porate resources to new opportunities in the marketplace. 2

The Importance of Marketing Planning

9

Planners cannot control the future, but they should attempt to identify and isolate present actions and forecast how results can be expected to influence the future. The primary purpose of planning, then, is to see that what we do now will be used to increase the chances of achieving future objectives and goals; that is, to increase the chances for making better decisions today that affect tomorrow’s performance. Unless planning leads to improved performance, it is not worth- while. To have an organization that looks forward to the future and tries to stay alive and prosper in a changing environment, there must be active, vigorous, continuous, and creative planning. Otherwise, management will only react to its environment. Some managers and organizations with poor planning skills con- stantly devote their energies to solving problems that would not have existed, or at least would be less serious, with adequate planning. Thus, they spend their time fighting fires rather than practicing fire protection.

Reasons Given for Not Planning

In many small firms, managers may object to planning, thinking that it makes no sense for them because each knows what happened in the past year and what is likely to happen in the coming year. Another objection often voiced is that there is no time for planning. A third ob- jection is lack of enough resources to allow for planning. All of these objections actually point out the necessity for planning—even in the small firm. Such a firm may actually be a million-dollar business, making it imperative to have a plan of where the business is heading. The objection to the lack of time for planning may seem accurate, but simply reflects the fact that the lack of planning in the past has left in- sufficient time for attention to such necessities. Finally, the argument of insufficient resources should justify the role of planning to obtain the maximum benefit from the firm’s resources. Planning is a critical element in any organization’s success.

Advantages of Planning

Planning has many advantages. For example, it helps management adapt to changing environments, take advantage of opportunities cre- ated by change, reach agreements on major issues, and place respon-

10

MARKETING PLANNING GUIDE

sibility more precisely. It also gives a sense of direction to members of an organization as well as provides a basis for gaining commitment from employees. The sense of vision that can be provided in a well- written plan also instills a sense of loyalty in organization members. A firm can benefit from the planning process because it is a sys- tematic, continuous process that allows the firm to do several activi- ties:

1. Assess the firm’s market position—This involves what is termed a SWOT analysis, which is an examination of the firm’s internal strengths and weaknesses, external opportunities, and threats. Without explicit planning, these elements may go unrecognized.

2. Establish goals, objectives, priorities, and strategies to be com- pleted within specified time periods—Planning will enable the firm to assess accomplishment of the goals that are set and take corrective action to achieve the desired goals.

3. Achieve greater employee commitment and teamwork aimed at meeting challenges and solving problems presented by chang- ing conditions—Success is not achieved by everyone doing their best. Success is the result of everyone doing their best to support an overall objective that everyone understands and per- forms as team members to achieve.

4. Muster its resources to meet change through anticipation and preparation—“Adapt or die” is a very accurate admonition.

Disadvantages of Planning

Planning also may have several disadvantages. One disadvantage is that the work involved in planning may exceed its actual contribu- tions. Planning tends to delay actions and may cause some adminis- trators not to exercise initiative and innovation. Sometimes the best results are obtained by an individual appraising the situation and tackling each problem as it arises. Yet, in spite of these disadvantages, the advantages of planning far outweigh them. Planning not only should be done, it must be done.

The Importance of Marketing Planning

11

PLANNING’S PLACE IN THE ORGANIZATION

All managers engage in planning to some degree. As a general rule, the larger an organization becomes, the more primary planning is associated with groups of managers rather than individual manag- ers. Many larger organizations develop a professional planning staff for one or more of the following reasons:

1. Planning takes time. A planning staff can reduce the workload of individual managers.

2. Planning takes coordination. A planning staff can help integrate and coordinate the planning activities of individual managers.

3. Planning takes expertise. A planning staff can bring to a particu- lar problem more tools and techniques than any single individ- ual.

4. Planning takes objectivity. A planning staff can take a broader view than one individual and go beyond projects and particular departments.

A planning staff generally has three basic areas of responsibility.

First, it assists top administration in developing goals, policies, and

strategies for the organization. The planning staff facilitates this pro- cess by scanning and monitoring the organization’s environment. A second major responsibility of the planning staff is to coordinate the planning of different levels and units within the organization. Finally, the planning staff acts as an organizational resource for managers who lack expertise in planning. Managers who are new to their posi- tions and administrators of relatively new units in the organization may fall into this category.

In smaller firms, planning and execution must be carried out by the

same people. The greatest challenge is setting aside time for planning in the midst of all the other activities needed on a day-to-day basis.

Types of Plans

Programs and projects usually require different types of plans. A program is a large set of activities involving a whole area of a firm’s marketing capabilities, such as introducing a new product. Planning for programs involves the following:

12

MARKETING PLANNING GUIDE

1. Dividing the total set of activities into meaningful parts

2. Assigning planning responsibility for each part to appropriate personnel

3. Assigning target dates for completion of plans

4. Determining and allocating the resources needed for each part

A project is generally of less scope and complexity, and is not

likely to be repeated on regular basis. A project may be part of a broader program or may be a self-contained event. Even though it is a one-time event, planning is an essential element to accomplishing the objectives of the project and coordinating the activities that make up

the event. For example, a plan to respond to the promotional moves of a competitor in a particular region would be an example of a project plan.

Planning Levels

In large, multiproduct line companies, planning typically occurs at

three levels: (1) corporate level planning, which generates what is usually referred to as a strategic plan; (2) strategic business unit (SBU) planning, which generates what is referred to as a strategic marketing plan; and (3) product/market level planning, which is re- ferred to as an operating marketing plan. Exhibit 1.2 illustrates the typical questions and outcomes addressed at each of these levels. In moderate-size businesses with a single SBU, the strategic marketing and operating marketing planning may be conducted as a single pro- cess, with longer-term strategic planning being conducted at the cor- porate level. In smaller organizations, the planning process incorpo- rates all three levels simultaneously. Our primary focus is on strategic and operating marketing plan- ning, which consist of planning issues at the SBU and product/market level. In Chapter 2, we will address those aspects of corporate-level strategic planning that heavily influence the development of plans at the other two levels. Our focus on marketing planning means that we will be concerned with the identification and exploitation of a com- petitive advantage for products targeted at specific customer groups. As indicated in Exhibit 1.2, we are finding answers to the following questions: “Where should we be going (given our corporate purpose and mission)?” and “How do we get there?” Answers to these ques- tions will be governed by the philosophy embodied in the societal

The Importance of Marketing Planning

13

EXHIBIT 1.2. Levels of planning.

Level

Name

Question

Output

Corporate

Strategic

What is our business? What should it be?

Mission

plan

Objectives

 

SBU portfolio

SBU

Strategic

Where should we be going?

Marketing strategy indicat- ing where we gain a sus- tainable competitive advantage

marketing

Product/

Operating

How do we get there?

Marketing plan

market

marketing

marketing concept—a customer-needs-driven orientation with long- range concerns for the welfare of our current and potential customer and one that is cognizant of the impact of our actions on society as a whole.

THE MARKETING PLANNING PROCESS

Nowhere in the organization is planning more needed than in mar- keting. The complexity of today’s environment in terms of social, le- gal, environmental, economic, competitive, technological, and re- source constraints requires a high degree of skill to provide structure to a course of action an organization can follow to achieve desired results. For marketing managers, the marketing planning process becomes paramount. The societal marketing orientation has no impact on an organization’s operating procedures unless it is reflected in the per- formance of the administrative function of planning. The customers’ needs are the focus of an organization’s operations under the market- ing philosophy, and this is made evident in the planning process. Which customer segments will the organization try to serve? Where will we gain a competitive advantage in serving those targeted seg- ments? How will the marketing functions be performed? Who will perform them? What sales volume will be generated? What are the short- and long-term consequences to our customers and society from

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performing these marketing actions? These questions can all be an- swered by a well-thought-out and carefully written marketing plan. In essence, the plan becomes a tool through which the societal marketing orientation is implemented into decision-making proce- dures. An understanding of the marketing planning process is also a valu- able aid in helping managers organize their thinking about the mar- keting process and the various methods and procedures used. When they talk about sales volume, managers relate such figures to objec- tives accomplished. A study reporting customer attitudes toward the firm’s activities becomes another aspect of situation analysis. Manag- ers begin to think systematically and analytically about the marketing process in their organization. This may be one of the most crucial contributions of a manager’s involvement in marketing planning. Before discussing the details of a marketing plan, specify the rela- tionship between the strategic marketing plan and the operating mar- keting plan. The strategic marketing plan is the long-term marketing plan for the marketing area. It deals with the overall marketing objec- tives of the organization and how the organization plans to accom- plish these objectives. The operating marketing plan, by contrast, is a detailed plan indicating the results of a situation analysis and offering a set of objectives to be attained by the end of the year. It is a detailed tactical statement explaining what must be done, when, and how. In other words, the strategic marketing plan deals with what is to be ac- complished in the long run, while the operating marketing plan deals with what is to be done in a given period, usually a year. The strategic marketing plan does not necessarily differ in format from the operating marketing plan. In fact, it must cover some of the same basic topics, objectives, strategies, and so forth. The difference is in scope and may lay out a strategy that indicates in which prod- uct/markets the company wishes to compete. The operating market- ing plan focuses on the tactical marketing decisions needed to carry out the strategic marketing plan. The time frame for the operating marketing plan is usually a year and normally coincides with the or- ganization’s fiscal year. The situation analysis deals only with the current operating environment and details only important events that influence changes in marketing activities. The strategy portion con- tains the detailed tactical decisions that spell out changes in such items as advertising themes, new products, etc.

The Importance of Marketing Planning

15

The interrelationships between the corporate strategic plan, the strategic marketing plan, and the operating marketing plan will be discussed more fully in Chapter 2. Since formats of the strategic mar- keting plan and the operating marketing plan usually differ more in scope and time frame than in what is covered, the term marketing plan will be used throughout the book. If you are working on an oper- ating plan, remember the need for specific details in your plan. The worksheets provided in Appendix A will permit you to begin work on the details of what is to be done in the marketing area during that time frame. The marketing plan is a written document containing four basic el- ements:

1. A summary of the situation analysis, including general develop- ments, consumer analysis, and opportunity analysis.

2. A set of objectives.

3. A detailed strategy statement of where the competitive advan- tage lies and how the marketing variables will be combined to achieve the objectives as well as the financial impact.

4. A set of procedures of monitoring and controlling the plan through feedback about results.

The logic of this approach to planning is clear. We must (1) deter- mine where we are now (situation analysis); (2) decide where we want to go (objectives); (3) decide how we are going to get there (strategy); and (4) decide what feedback we need to let us know if we are staying on course (monitor and control). A complete marketing plan provides the answers to these questions. The marketing planning process should not be confused with departmental or personnel plans developed under a system such as management by objectives (MBO). Even though the processes used to develop both types of plans are compatible, the MBO plans usually deal with personnel activities rather than marketing activities. The feasibility of combining products for planning purposes de- pends on the similarities of customer needs and the importance of each product to the firm’s market position. For example, a firm may develop a plan for a whole line of products aimed at the same custom- ers. Yamaha uses this approach with its musical instrument line. The

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MARKETING PLANNING GUIDE

basic advertisement theme is used for different instruments: “Wel- come to the world of Yamaha.” One of the most important contributions of this type of planning

process is the perspective managers must take to use it properly. Man- agers must study the entire marketing process from the customer’s vantage point, which creates new patterns for administrative develop- ment and organization. An understanding of the planning process provides a framework for organized thought patterns for the variety

of marketing activities that take place in an organization.

THE MARKETING PLAN FORMAT

An outline of the format for marketing plans is provided in Exhibit 1.3. Subsequent chapters discuss in detail the rationale and proce-

dures used to develop the plan. This book focuses on marketing plan- ning as a process and suggests tools and techniques that can be used

in developing a marketing plan. A sample marketing plan for a firm

adding a new product is provided in Appendix B.

Budgeting for Marketing

Marketing efforts require that expenditures of funds be budgeted.

A manager should budget expenditures to ensure that the financial

EXHIBIT 1.3. Outline of a marketing plan.

I.

Situation analysis

A. Market analysis

B. Customer analysis

C. Competitive analysis

D. Opportunity analysis

II.

Objectives

A. Sales objectives

B. Profitability objectives

C. Customer objectives

III.

Strategy

A. Overall strategy

B. Marketing mix variables

C. Financial impact statement

IV.

Monitoring and control

A. Performance analysis

B. Customer data feedback

The Importance of Marketing Planning

17

support needed to undertake marketing activities is available. The three most commonly used budgeting methods are the percentage of sales approach, the “all-you-can-afford” approach, and the task or objective approach.

Percentage of Sales Approach

This common marketing budgeting approach is determined by ap- plying a fixed percentage of either past or forecasted sales. The pro- portion of sales allocated to marketing may be based upon past results or on management judgments about the future. This method is widely used for many reasons. Besides being sim- ple to calculate, it is exact and easy to define by administrators who are accustomed to thinking of costs in percentage terms. Also, it is fi- nancially safe, since it links expenditures directly to revenues. The major problem with the percentage approach is its inherent fallacy of implying that sales determine marketing expenditures rather than vice versa. However, this method can legitimately be used as a starting point for budgeting and can offer good direction in this pro- cess.

“All-You-Can-Afford” Approach

Some organizations set marketing budgets on the basis of avail- ability funds. Here the organization spends as much as it can afford without impairing financial stability. Thus, the budget adopted and the monies needed to accomplish the required marketing tasks may be unrelated. On the one hand, the organization could miss opportu- nities because of underspending. Conversely, it could easily spend too much.

Task or Objective Approach

Because the methods discussed so far have major faults, none closely approximates a good standard. Consequently, the task or ob- jective approach—or the build-up approach, as it is often called—is an alternative that has the most merit. This method requires that mar- keting objectives be stated clearly, and then expenditures necessary to reach these objectives be determined. The implementation of this

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method is more complex, but the end result is that only what is needed in a give period is spent to accomplish the stated objectives. This ap- proach requires a great deal of experience to know what can be ac- complished with a specific level of expenditures.

SUMMARY

The marketing planning process should be intimately tied to the societal marketing orientation. The marketing process described in this text ensures that the societal marketing orientation will be put into the organization’s operations through the planning process. The process begins with a detailed analysis of clients and their operating environment before any attention is devoted to what objectives should be sought or what strategies are needed. Chapter 2 addresses the organizational aspects of marketing plan- ning in terms of the firm’s purpose, objectives, and responsibility for planning. Chapter 3 discusses the need and procedures for building a database for planning. Part II, which includes Chapters 4 through 7, presents the concepts used in the situation analysis portion of the marketing plan. Part III, Chapter 8, reviews the details of the objec- tive-setting step in the marketing planning process. Part IV, Chapters 9 through 14, addresses the strategy-related elements of the plan; Part V, Chapters 15 and 16, covers controlling the plan; and Part VI, Chap- ter 17, discusses a planning audit and the implementation of the marketing plan.