Level
4.0 ADVANCED DIPLOMA IN MARKETING MANAGEMENT
Module
15 STRATEGIC MARKETING MANAGEMENT: PLANNING & CONTROL
Advanced Diploma in Marketing Management
Contents
1 INTRODUCTION TO PLANNING AND CONTROL 3
Need for Marketing Planning 3
Establishing Strategic Business Units 6
Market Audit 9
Control Defined 14
Responsibility Centre 22
Approaches to Control 32
Variance Analysis 52
Taking Corrective Action 68
2 WHERE ARE WE NOW? 77
Control of Marketing Operations 77
Importance of Marketing Control 79
3 WHERE DO WE WANT TO BE? 87
Mission Statement 87
Environment Drivers 89
Techniques for Conducting an Internal Appraisal 94
Portfolio Analysis 96
4 HOW MIGHT WE GET THERE AND WHICH WAY IS BEST 100
Cost-Volume-Profit Analysis 100
5 HOW CAN WE ENSURE ARRIVAL 114
The Concept of Strategic Architecture and Control 114
Financial Control Style 115
Module 15 Strategic Marketing Management 1 Introduction to Planning and Control
Need for Marketing Planning
The discussion leads us to the point that wherever you have to deal with future, which is quite uncertain, and beyond visualiasation and prediction, the only way to success is to develop appropriate plans. Alternative plans are to be conceived; they must be assessed and the best may be chosen. This requires application of management principles in the marketing functional area also. Again, such plans should be well integrated into other functions of the organization and there should be a harmonious combination of all facts of an organization.
Marketing planning helps to appraise performance, capitalize on strengths, minimize weaknesses and threats and finally open up new opportunities.
Planning generally means ‘looking into the future’. This is inevitable in marketing because of two reasons: the incredible multiplication of products available and the multiplication of choices (and the veto power of consumers too) open to consumers. This entails great chances of failure of products. Planning is basically advocated to minimize this risk of failure.
Yet another feature of marketing planning is that is an unending process. This is because selling is a continuous process, and not a single act. It is a process of building the foundation of confidence with every prospect, and the future sales rest on that foundation. This foundation is created by:
· Understanding the basic needs satisfied by the products
· Identifying the prospects who have those needs
· Making the prospects recognize the needs
· Convincing the prospect that the product will satisfy his needs
· Giving an opportunity to the prospect to accept the product
What is Marketing Planning?
Marketing planning is given systematic attention today because marketing management calls for careful coordination of corporate means and marketing ends. In fact, planning precedes marketing action and covers all business tasks. Planning process is to be carried out in all details before a programme is made operational. Henry Foyol stated: “Marketing planning refers to forecasting and providing a means of examining the future and drawing up a plan of action”. Accordingly the purpose of planning is to manipulate the present systematically in order to be prepared for the future. In short, the essential aspect of planning is to develop creative and innovative policies to guide corporate efforts in the market place.
Formal marketing planning is an integrative process, which blends objectives of the firm with its policies and strategies. It is the means by which a company seeks to monitor and control the hundreds of external and internal influences on its ability to achieve profitable sales, as well as providing an understanding throughout the organization. The whole process of planning may be grouped as follows:
· Conceptual and Analytical
· Assess areas of marketing opportunities, and
· Determining market goals
· Operational
Module 15 Strategic Marketing Management 1 Introduction to Planning and Control
· Developing marketing action
· Coordinating marketing action, and
· Evaluation of marketing programme
As Ackoff has stated, “ planning is the design of a desired future and of effective ways of bringing it about”. In a marketing context, a useful definition will be:
Marketing planning involves the setting of marketing objectives, choice of the marketing mix, selection of markets and designing of marketing programmes for each product market for a specified future period.
There are two more aspects one should take note of regarding marketing planning. The first is the formulation of strategic marketing planning, which is concerned with the planning of the fundamental means for achieving the company’s objectives through the markets entered and the marketing programmes used to serve them.
The second is the operational marketing planning concerned with the implementation of the strategic plan. It involves the planning of marketing programmes that are designed to effect the strategic decided on.
The stages involved in strategic and operational marketing planning and the relationship of the two are illustrated below:
The Marketing Planning Process
Figure 1
Strategic Marketing Planning
1 2 3 4
Operational Marketing Planning
5 6 7 8
Module 15 Strategic Marketing Management 1 Introduction to Planning and Control
Marketing planning is necessarily practiced in all economies irrespective of the political philosophy of different governments. But, the location and nature of the planning organizations may vary widely from country to country.
It may be noted that both the earliest and the greatest among systematic marketing planning have been done in the Soviet Union. It is, however, ironic that this is the country in which marketing did not exist officially till recently.
Benefits of Marketing Planning
The experience of firms in which planning is done obviously indicates that if sound procedures are used, formal planning of the marketing operation results in a number of benefits. Some of them are:
Makes the Company Basically Market/Consumer-Oriented
Encourages systematic thinking ahead by management. Informal planning, careful thought must be given to objectives and how they can be realized. Further, both objectives and how they can be realized. Further, both objectives and means of achieving them must be made explicit and communicated to others, a process that discourages uninformed analysis and careless reasoning. This would establish better communications an effective coordination between departments.
Helps to identify possible developments facing the company. Rapid changes have been the hallmark of most of the world’s economies in the post-world War II period. A systematic look at these changes can help identify the opportunities and the problems they may bring for the firm. Further, new customer needs could be recognized with the help of greater communications. This will make the firm to give more attention to market enlargement rather than market maintenance.
Planning, in fact, injects innovations into the organization on a systematic basis. For instance, a careful assessment of marketing opportunity will often result in some form of product or process innovation
Results in better preparations to meet changes when they occur. Through the process of planning, management will have definiteness on what actions or counteractions it has to take when opportunities arise and problems occur.
Considering these advantages, it is wrong to say that ‘planning is a luxury appendage of marketing’. It is a managerial element that is indispensable for the survival, growth and profitable operations of the firm.
Marketing Planning Process
As has been pointed out in the previous paragraphs decisions made can be classified by whether they are strategic or operational in nature. Logically, the strategic marketing decisions need to be made first, since they are to be implemented through the planned marketing operations. A cycle of marketing planning can be tentatively put as follows:
Strategic Marketing Plans are Made
Operating plans are put into effect
The operational plans are put into effect
The outcomes are monitored, and
The results are fed back into both strategic and the operating marketing planning process for making necessary modifications, if required
Module 15 Strategic Marketing Management 1 Introduction to Planning and Control
Strategic Marketing Planning
From a marketing perspective, a strategic plan outlines what marketing actions a firm should undertake, why these actions are necessary, who is responsible for carrying them out where they will be accomplished, and how they will be completed. It also determines a firm’s current position, future orientation and allocation of resources. In other words, strategy formulation essentially involves the matching of competencies with threats and opportunities.
Figure 2: The strategic process consists of seven inter-related steps illustrated below.
Defining organizational goals refers to a long-term commitment to a type of business and a place in the market. Goals can be defined in terms of customer groups served, functions performed, and technologies utilized. Organizational objectives are to be specified in the context when a new good or service is introduced, an old good or service is deleted, a new customer group is abandoned, the business is diversified through acquisition, or part the business is liquidated or sold.
Establishing Strategic Business Units (Sbus)
The second aspect is to establish business unit in the organization. Each SBU is a self-contained division, product line or product department within an organization with a specific market focus and a manager with complete responsibility for integrating all functions into a strategy. An SBU may include all products with the same physical features or products that are bought for the same use of customers, depending on the goals of the organization. Each SBU will normally have three attributes: a specific goal, a precise target market, and a manager empowered to take decisions.
Module 15 Strategic Marketing Management 1 Introduction to Planning and Control
Setting Marketing Objectives
Marketing objectives are not independent but are closely related to business goals. The objectives should be formulated in quantitative or qualitative statements. These are prepared taking into account the internal company situation through an interaction and evolution of other functional objectives. For example, goals could be set as follows:
Quantitative goals – adding new products or increasing retail sales from 20% to 30%
Qualitative goals – Trading up/Trading down policies (Adding Quality versions – good or cheap quality)
Broad-range goals – Covers all aspects of the firm – Reduction in manufacturing cost
Marketing objectives are, therefore, statements of the corporate mission as operationalised for specific time period. They are made specific with regard to market segments and customer needs. (Marketing objectives about marketing mix elements – the four P’s – which are only strategies with which objectives should be achieved).
Strategic objectives should be stated clearly and in measurable terms. For this, a sales forecast is to be prepared. The objectives should also be closer to realities.
Situation analysis. Setting marketing objectives can be done only with certain preparatory exercises. “Situation analysis” is one of them. In this problem it faces. Situation analysis seeks answers to two general questions: where is the firm now? Where it is proposed to go? These questions are answered by studying the environment, searching for opportunities, assessing strengths and weaknesses relative to competitors, and anticipating competitors’ responses to company strategies.
Appraisal of the company’s or products’ strengths and/or weaknesses in the market is often termed ‘Self-appraisal’ and takes three forms:
Appraisal of Industry and General Economic Trends
Company analysis: done using the following methods
Market share analysis defined as a ratio of company’s sales to the total industry sales either on actual or potential basis. This analysis will give an idea about the leftover quantity in total demand.
Market factor analysis is an item or element, which exists in a market, which may be measured quantitatively and which is related to demand for a product. For example, it could be calculated as to how many tyres may be needed for replacement if the total number of vehicles on road is known.
Market potential analysis: is the expected combined sales volume for all sellers of that product during a stated period of time in a stated market.
These analyses would help the firm to plan how much to produce, when to produce, where to sell, etc. this forms the essential prerequisite for setting marketing objectives.
Competitive conditions – this a comparative assessment made in respect of competitive currently adopted by other sellers. Detailed analysis is made on the differences in product features, promotional and distribution strategies. This would help features, promotional and distribution strategies. This would help in devising better plans to meet the competition effectively.
Module 15 Strategic Marketing Management 1 Introduction to Planning and Control
Developing Marketing Strategies
A marketing strategy outlines the manner in which the marketing mix is used to attract and satisfy the target market and accomplishes the organization’s objectives. Marketing mix decisions center on product, distribution, promotion, and price plans. A separate strategy is necessary for each SBU and the strategies must be well coordinated.
Often, firm must select a strategy from among two or more possible alternatives. For example, a company that has the objective of achieving a market share of 40 per cent may accomplish the objective in several ways. It can improve product image through extensive advertising increasing sales personnel, introduce a new product, lower prices, or sell through more retail outlets. Another option would be to combine these marketing elements in a well-coordinated way.
Several systematic approaches are available and these approaches involve portfolio analysis by which an organization individually assesses and positions every SBU and/or product. Then, efforts and resources are allocated to each SBU and separate marketing mixes are aimed at their chosen target markets on the basis of these assessments.
The product/market opportunity matrix identifies four alternatives marketing strategies that may be used to maintain and/or increase sales of business units and products as illustrated below:
Table 1:The product/market opportunity matrix
Market
Product / Present / New
Present / MARKET PENETRATION / MARKET DEVELOPMENT
New / PRODUCT DEVELOPMENT / DIVERSIFICATION
Market penetration – increasing the sales of existing products existing markets. This is done through intensive distribution, aggressive promotion, and competitive pricing.