Marketing Planning and Marketing Planning and ControlControl

Revision session

Different kinds of organizations

• Production led

• Product led

• Sales led

• Market led

• People Led

Planning IssuesPlanning Issues

Short-term vs long term Profit margins vs competitive position

Profit vs non-profit objectives Related vs non-related growth

opportunitiesMarket penetration effort vs market

development effortGrowth vs stability Risk avoidance vs risk taking

SOSTAC ModelSOSTAC ModelSS SituationSituation (where are we now?)(where are we now?)

O ObjectivesObjectives (where do we want to be?)(where do we want to be?)

SS StrategyStrategy (how do we get there – (how do we get there – broad direction?)broad direction?)

TT TacticsTactics (how do we get there – (how do we get there – tactical tools?)tactical tools?)

AA ActionAction (implementation)(implementation)

CC ControlControl (how do we know that we (how do we know that we have arrived?)have arrived?)

SOSTAC ModelS Situation PEST, Micro environment

O Objectives SMART, Planning Qs

S Strategy Acquire? Incremental vs Step change etc

T Tactics 4 Ps etc

A Action Project management

C Control Contingency, Variance Analysis

Marketing environmentMarketing environment

• Comprised of actors and forces affecting marketing Comprised of actors and forces affecting marketing management’s ability to develop and maintain management’s ability to develop and maintain successful relationships with its target customers.successful relationships with its target customers.

• These can be both inside and outside the These can be both inside and outside the organisationorganisation

• Micro or macroMicro or macro• Long term or short termLong term or short term• Future or nowFuture or now

The microenvironmentThe microenvironment

The company’s The company’s macroenvironmentmacroenvironment

Segmentation

• Buyers have different needs and wants

• Segmentation divides market into buyer groups with similar needs / characteristics

• Each segment can be considered a separate market

Segmentation

• Use segmentation to decide:– Which segments to address (i.e. which markets

to target)

• Positioning– How to position offerings in a way that will

appeal to each chosen segment

• Marketing strategies for each offering in each segment– Segments, by their nature, differ from each other

Characteristics Segmentation

• Geographic– Region, city etc. e.g. popularity of black pudding in

North of England

• Demographic– Age, gender, lifestage, family size etc. e.g. breakfast

cereals aimed at children vs. adults, different box sizes

• Geodemographic– Residential areas organised into demographic groups

• Psychographic– Social class, lifestyle, personality e.g. Organic foods

and healthy eaters

Behavioural Segmentation• Buying / usage occasion

– e.g. Regular coffee for the morning, decaf for the evening

• Benefits sought– e.g. Economy, status, convenience

• User status: non-user, ex-user, potential user• Usage rate: light, medium, heavy users• Loyalty status, e.g. through reward schemes• Buyer-readiness, e.g. remind when car service is

due• Attitudes, to determine time / effort on given groups

Sales and Advertising Plan

• Advertising plan

• To convey information• To alter perceptions• To alter attitudes• To create desires• To establish connections• To direct actions• To provide reassurances• To remind• To give reasons for buying• To demonstrate• To generate enquiries

• Sales plan • Personal selling and

manpower issues

Price plan

• Selecting the pricing objective• Determining demand• Estimating costs• Selecting a pricing method

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Pricing objectives

»Market share»Profit maximisation»Survival»Product Quality leadership»Relationship pricing»Cost recovery»Customer Behavioural changes

The Ansoff MatrixProduct or Service

Market

Existing New

Market penetration

Market Development

Product Development

Diversification

Existing

New

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Pricing methods»Cost based (mark up, target margin)»Competitor based (leader, follower, challenger, niche)

»Market based

Premium,Good value, Low cost, Overcharging (also plc issues)

Adapting prices: BOGOF, 99p, discriminatory, product line

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Profit levels•Cost from Supplier = £1

•Cover Variable Cost ie Gross profit , charge £1.20

•Cover Fixed costs ie ROS charge £1.40

•Justify heavy Investment ie ROCE, charge £1.50

•Share holder value ie money needed for Dividend, charge £1.60

What is price elasticity?

• This determines the changes in demand with unit change in price

• If there is little or no change in demand, it is said to be price inelastic.

• If there is significant change in demand, then it is said to be price elastic.

Price Elasticity of DemandPrice

Demand (units)

50

40

30

20

10

100 200 300 400 500

50

40

30

20

10

100 200 300 400 500

Price

Demand (units)

Inelastic demand Elastic demand

Price elasticity of demand = % change in demand

% change in price

Price Sensitivity

• Generally less price-sensitive where:– Superior benefits justify the premium– Buyers think price increases are justified

• e.g. inflation, increased quality, improved customer service

– Few competitors or substitutes– Outlay a small proportion of income– Cost is borne by another party– Buyers are slow to notice price increases– Buyers are reluctant to ‘shop around’ for low

prices

Price Quality Strategies

Super value(Damn I AM smart)

High value Premium(I want the best)

Good value Medium value Overcharging(it makes me feel good!)

Economy False economy(I think I am being smart)

Rip off(Please take my money!)

Price

qual

ity

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PLC and the diffusion process

Pro

fita

bili

ty

Product Market share

Intro Growth Maturity Decline Senility

Sales

Profit

Time

Sal

es a

nd

pro

fit PLC

Innovators2.5%

Early adopters13.5%

Early Majority34%

Late Majority34%

Laggards 16%

Roger’s DiffusionProcess

Types of Intermediary

Wholesalers

RetailersFranchisees

Agents and brokers

Distributors and dealers

Types of Channels• Consumer:

– Retailers / dealers– Catalogues / mail order companies– Vending machines– Direct marketing sources

• eg telesales, direct mail, door to door– Internet– QVC / TV shopping channels

• Industrial:– Own salesforce / agents– Industrial distributors– Growth in direct (Internet) for industrial supplies

What Channels Do

• Find and communicate with customers• Promote and sell the product to customers• Provide information on customer needs

and competitors’ activities• Agree price and trading terms• Transport and store the product• Carry the cost of all the above• Assume the risks of all the above

Key Channel Decisions

• How wide the distribution (market coverage) should be:– How many channels– How many levels

• Type of channel• Depends on:

– Number and nature of market segments – Range and nature of tasks to move products to

end customer– Effectiveness of channel alternatives

Market Coverage

• Intensive– Mass distribution e.g. confectionery, soft drinks,

batteries, camera film

• Selective– e.g. electrical appliances (electrical retailers and

department stores)– may also be specialist e.g. package holidays

• Exclusive– Restricted or sole rights e.g. franchisees, designer

items, luxury cars

Selecting Channel Members

• Own strengths & weaknesses– e.g. company size, brand strength

• Channels used by competitors

• Characteristics of the product / service– Range and nature of tasks needed to move

product / service to end customer

• Effectiveness of the channel alternatives

Differences between country markets

• Stage of economic development

• Market structure and competition

• Rate of growth in similar markets

• Diverse cultures and languages

• Politics, regulations and associated risk

• Legal and financial systems and bodies

• Business rules and customs

• Currency and exchange risks

• Customer profiles • Data expensive and

difficult to obtain• Control & coordination

difficult

Order of Entry

• Indirect exporting•Direct Exporting• Licensing• Franchising•Strategic alliances•Joint Ventures• Acquisition

•ASSESS ON TIME COST CONTROL

•Consider also profit and risk

• Planning Regulations, Tenders/Bribes

• Consideration to Environment,

• Compliance Issues/H&S

• Local Materials, Earthquakes

• Level of development• Climate (Materials

required)• Level of technological

advancement• Family culture (size of

house)• Amount of available

land

• Use of Sub Contractors• Communication/

Logistics, • Availability and

skill/knowledge of labour,

• Low cost supplier, Cultural differences, Low income, Poor infrastructure/distribution

• Different eating habits (ie more family meals, less packaged food),

• No fridges/freezers (or electricity)

• MR difficult

Lesser developed Countries

Marketing Information

• Data

• Information

• Knowledge

• Wisdom/intelligence

• But things change and so information has to reflect this!

Implementation issues

• The main issues are:

• 1. Size

• 2. Diversity

• 3. Culture

• 4. History

• 5. Nature of the industry

• 6. The management team.

Control

Awareness – effectiveness of advertising, maturity of market, noise, timingDemand – The right mix of 4Ps, growth in market, complexity of product, competitorsSupply – Stock, Delivery, Variance analysisService – Satisfaction levels, repeat purchase, word of mouth

Boston Matrix

Stars High Market share/High Market growth Usually New products in growth phase High Market Share Cash generation may not cover investment

needs Strategy to grow cash cow

Problem Children Low Market share/High Market growth Usually new product, not yet in growth

phase Consumes cash heavily Strategy to grow through star to cash

cow stage if market remains attractive May need to be killed quietly

Cash Cows High market share , low market growth

rate Typically mature life cycle phase Low investment needs, hence profit cash

generator Use cash to invest in other new products –

‘milking’

Dogs Low Market share/Low Market growth No future prospects Can consume resources Strategy is to discontinue where

practical.

Hi Relative Market Share Lo

Hi

Lo

MarketGrowth

DPM/GE Matrix

Invest forgrowth

Invest selectivelyfor growth

Developfor income

Investselectively forgrowth

Developselectively for

income

Harvesting

Developselectively.

Build onstrengths

Harvesting Divest

High

Medium

Low

Marketattractivness

Competitive position

Strong Average Weak

Advantages of models

•Makes complexity understandable•Communicable (eg Cash cows)•Aids planning•Gives a customer and/or competitor focus•Considers cash and/or profit consequences•Looks at both gaps and future performance•Can look at products and/or SBUs

Problems with models

• Generally useful to compare one model with another•Tends towards the average (DPM)•Focus on cash (BCG) - ignores profit•Focus on profit (DPM) - ignores cash•Too inward looking (PLC), (Value Chain) -ignores customers•Ignores competitors (4Ps)•Difficult to gather data•Better at control than forecasting

Problems with models

• Too reliant on supposedly hard info (BCG)•(ie definition of market, measuring share/growth)• Possibly subjective but can take many factors into account(DPM)• One factor can mask another• Market share focus (PIMS/BCG) - ignores value of niche• Often better at control than forecasting (PLC)• What’s true generally of an industry may not be true of a particularly successful (or unsuccessful) company (Porter’s 5 forces)

Strategic implications - BCG

Problem children = BUILD Create awareness, Improve New Product Development etc

Rising Stars BUILD/HOLD Grow = invest££, Advertise, Competitor response, Price response may be needed

Cash cows = HOLD/HARVEST Cash to flow to PCs and RSs, Rejuvenate /Differentiate

Dogs = HARVEST/DIVEST low cost survivor, introduce new products?

Other issues: Tendency to invest in safer cash cows and dogs, Market growth difficult to influence

Invest for growth Capital needed, might be starving other products, shareholders may expect quick results

Invest selectively Needs regular reviews, competitor response may force you to double or quit

Harvest Price hikes may damage brand, low cost survivor? Will leaving market give competitors a bonus?

Divest Gov’t intervention? might have unforseen consequences, may weaken portfolio

Strategic Implications - DPM

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Porter’s Five Forces

Competitive Rivalry

Threat of new entrants

Power ofsuppliers

Power ofbuyers

Threat of substitutes

Exam format and expectations

• Part A Compulsory (60%)

• Part B one out of 3 (40%)

• Write well and give examples show the marker that you know the subject area!

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Tackling the exam paper

• read the whole paper• identify context/content for ALL questions• identify the questions you will answer• identify points split in all questions • answer your favourite question first• start each new question on a new page• manage your time effectively

CCF format

• Content– the Syllabus area(s) that are being examined

• Context– the industry/business/situation to which you

must apply the theory

• Format– typically report but check for other types

• Evaluate and Examples– some questions demand them

As the Marketing Operations Manager of a tour operations business that targets package holidays at the 55 and over age group, you have been asked by your Marketing Director to review your distribution strategy

a. Outline the various channels of distribution available.(7 marks)

b. Identify a set of criteria for their evaluation. (7 marks)

c. Recommend an appropriate strategy for your target market. (6 marks)

Sometimes it’s obvious

As the Marketing Operations Manager of a tour operations business that targets package holidays at the 55 and over age group, you have been asked by your Marketing Director to review your distribution strategy. He has asked you to outline the various channels of distribution available, . identify a set of criteria for their evaluation and to recommend an appropriate strategy for your target market.

Sometimes it isn’t

Benefits of planning your answers….

• you must plan– it avoids duplication– it provides a logical structure to your answer

• writing is easy when you know what to say next!

• it is better to move onto the next question after 30 minutes than plough on– more marks are gained in the first 15 minutes spent per

question than the second 15 mins. – therefore running over time risks not moving on and

gaining the next batch of marks