There is an adage that ‘he who fails to plan, plan to fail’. This statement is as true as tomorrow, because whether you like it or not, tomorrow must surely come – unless you are dead! Planning is the integral part of our daily activities. If you don’t plan your day before going out, no wonder you failed everyday!
For marketers planning is an essential task that must be continually undertaken. As we will see, shifting market conditions, including changing customer needs, advance in technology and competitive threats, almost always insure that what worked in the past will not work in the future, thus requiring a new strategy on how a product is marketed.
Marketing planning is also important since it is often a prerequisite for obtaining funding whether one is a marketer in a large corporation seeking additional money for his or her department or is part of a small start-up company looking for initial funding.
The 21st century business environment is driven by advances in technology, globalisation, deregulation, world politics, hypercompetition, consumers’ participation in major decision making of companies and the present financial meltdown. This makes planning a daily affair for managers who wish to succeed in this competitive business environment.
Marketers consider many factors when making decisions. Of course the main factors are those directly associated with how customers (including distribution partners) respond to an organization’s marketing efforts, such as how they may react to changes in a product, new advertisements, special pricing promotions, etc.
But when making decisions, marketers face other concerns that are not directly customer related. Decisions must be made with an understanding of the value these provide not only to customers but to the marketing organization. Consequently, marketers must be well aware of how their decisions fit with the overall objectives of their companies.
For example, a company whose goal is to be the low-price leader may have concerns if the company’s marketing department wants to market a very high-end product, since this would go against the reputation and core strengths of the company.
Marketers’ decisions may affect peripheral stakeholders who are not directly connected to the marketing organization but have the potential to impact the organization if issues arise that draw their attention.
Marketing decisions also directly affect an organization’s financial condition. Marketers’ efforts generate the funds (i.e., sales) needed for the company to survive, but do so while using company resources, in particular, expenditure of funds. Controls must be put in place to insure the results of what the organization spends through marketing (i.e., return on investment) meet expectations.
Because marketing decisions have both internal and external impact, marketers must make their decisions only after engaging in a careful, disciplined planning process. Marketers who make hasty, off-the-cuff decisions without regard to the implications are taking risks that may lead to problems. Instead, marketing decisions should be made with consideration of how these affect others and the resources required to carry out the plan.
The central point in planning for marketing decisions is the Marketing Plan. Marketing plan serves several functions such as;
Forcing marketing personnel to look internally in order to fully understand the results of past marketing decisions.
Forcing marketing personnel to look externally in order to fully understand the market in which they operate.
Setting future goals and providing direction for future marketing efforts that everyone within the organization should understand and support; and Serving as a key component in obtaining funding to pursue new initiatives.
The scope of Marketing Plan depends on the company and industry. A small technology start-up company may, for instance, have a less elaborate plan that is highly flexible to meet the needs of a rapidly changing market. A more established marketing organization, such as a large consumer products firm, may create a very structured plan that clearly identifies all activities that take place over a 12-month period.
Whether the marketer is creating a short plan intended to cover a narrow timeframe or a full-blown document laying out plans for a year or more, any plan requires undertaking significant market research to better understand the market. With knowledge of the market, the marketer can then begin to build the plan which will include the following key concepts:
Organizational Mission
Objectives – Reflects what the organization expects to achieve with its marketing efforts. As with the mission, objectives also flow from the top of the organization down to the marketing department. Objectives can be in the form of financial goals (i.e., profits) or marketing goals (e.g., achieve certain level of market share).
Marketing Strategy - Achieving objectives requires the marketer to engage in marketing decision-making which indicates where resources will be directed. However, before spending begins on individual marketing decisions the marketer needs to establish a general plan of action that summarizes what will be done to reach the stated objectives.
Tactical Programmes – Marketing strategy sets the stage for specific actions that will take place. Marketing tactics are the day-to-day actions that marketers undertake and involve the major marketing decision areas. As would be expected, this is the key area of the Marketing Plan since it explains exactly what will be done to reach the organization’s objectives.
Marketing Budget – Carrying out marketing tactics almost always means that money must be spent. The marketing budget lays out the spending requirements needed to carry out marketing tactics. While the marketing department may request a certain level of funding they feel is required, in the end it is upper-management that will have final say on how much financial support will be offered.
One of the most important concepts of the marketing planning process is the need to develop a cohesive marketing strategy that guides tactical programmes for the marketing decision areas. In marketing there are two levels to strategy formulation: General Marketing Strategies and Decision Area Strategies.
General marketing strategies are sets of direction for all marketing efforts by describing, in general terms, how marketing will achieve its objectives. There are many different General Marketing Strategies, though most can be viewed as falling into one of the following categories:
Market Expansion – This strategy looks to grow overall sales in one of two ways: Grow Sales with Existing Products – With this approach the marketer seeks to actively increase the overall sales of products the company currently markets. This can be accomplished by: 1) getting existing customers to buy more; 2) getting potential customers to buy (i.e., those who have yet to buy); or 3) selling current products in new markets.
Grow Sales with New Products – With this approach the marketer seeks to achieve objectives through the introduction of new products. This can be accomplished by: 1) introducing updated versions or refinements to existing products; 2) introducing products that are extensions of current products; or 3) introducing new products not previously marketed.
Market Share Growth – This strategy looks to increase the marketer’s overall percentage or share of market. In many cases this can only be accomplished by taking sales away from competitors. Consequently, this strategy often relies on aggressive marketing tactics.
Niche Market – This strategy looks to obtain a commanding position within a certain segment of the overall market. Usually the niche market is much smaller in terms of total customers and sales volume than the overall market. Ideally this strategy looks to have the product viewed as being different from companies targeting the larger market.
Status Quo – This strategy looks to maintain the marketer’s current position in the market, such as maintaining the same level of market share.
Market Exit – This strategy looks to remove the product from the organization’s product mix. This can be accomplished by: 1) selling the product to another organization, or 2) eliminating the product.
Decision area strategies on the other hand are used to achieve the General Marketing Strategies by guiding the decisions within important marketing areas (product, pricing, distribution, promotion, target marketing). For example, a General Marketing Strategy that centres on entering a new market with new products may be supported by Decision Area Strategies that include:
Target Market Strategy – employ segmenting techniques; Product Strategy – develop new product line; Pricing Strategy – create price programs that offer lower pricing versus competitors; Distribution Strategy – use methods to gain access to important distribution partners that service the target market; and Promotion Strategy – create a plan that can quickly build awareness of the product.
Achieving the decision area strategies is accomplished through the development of detailed Tactical Programmes for each area. For instance, to meet the Pricing Strategy that lowers cost versus competitors’ products, the marketer may employ such tactics as: quantity discounts, trade-in allowances or sales volume incentives to distributors.
The product life cycle (PLC) is tied closely to the concept of Diffusion of Innovation, which explains how information and acceptance of new products spread through a market. Innovation is anything new that solves needs by offering a significant advantage over existing methods customers use. Innovation can encompass both highly advanced technology products, such as new computer chips, and non-technological products, such as a new soft drink.
For marketers, a key concept to emerge from research on new product diffusion is the identification of adopter categories into which members of a market are likely to fall. These categories include:
Innovators – Represent a small percentage of the market that is at the forefront of adopting new products. These people are often viewed as enthusiasts and are eager to try new things, often without regard to price. While a good test ground for new products, marketers find that Innovators often do not remain loyal as they continually seek new products.
Early Adopters – This group contains more members than the Innovator category. They share Innovators’ enthusiasm for new products though they tend to be more practical about their decisions. They also are eager to communicate their experiences with the Early Majority and because of their influence they are important to the future success of the product (i.e., act as opinion leaders).
Early Majority – This represents the beginning of entry into the mass market. The Early Majority account for up to one-third of the overall market. The Early Majority like new things but tend to wait until they have received positive opinions from others (i.e., early adopters) before purchasing. Adoption by the Early Majority is key if a new product is to be profitable. On the other hand, many new products die quickly because they are not accepted beyond early trials by Innovators and Early Adopters and never reach mass market status.
Late Majority – Possibly as large as the Early Majority, this group takes a wait-and-see approach before trying something new. Marketers are likely to see their highest profits once this group starts to purchase.
Laggards – This is the last group to adopt something new and, in fact, may only do so if they have no other choice. Depending on the market this group can be large though because of their reluctance to accept new products marketers are not inclined to direct much attention to them.
As we have seen, there are many components, both internal and external, that must be considered within the marketing planning process. In fact, for many marketers creating the Marketing Plan represents one of the most challenging and burdensome tasks they face.
Fortunately, over the years marketing academics and professionals have put forth theories, models and other tools that aid planning. Possibly the most widely used planning tool within marketing is the Product Life Cycle (PLC) concept. The basic premise of the PLC is that products go through several stages of “life” with each stage presenting the marketer with different challenges that must be met with different marketing approaches. By understanding a product’s position in the PLC, the marketer may be able to develop more effective plans.
There have been several attempts over the years to define the stages that make up the PLC. Unfortunately, the PLC may be different for different products, different markets and different market conditions (e.g., economic forces). Consequently, there is not a one-model-fits-all PLC. Yet there is enough evidence to suggest that most products experience patterns of activity that divide the evolution of the product into six distinct stages. These stages are:
· Development – Occurs before the product is released to the market and is principally a time for honing the product offering and preparing the market for product introduction.
· Introduction – Product is released to the market and sales begin though often gradually as the market becomes aware of the product.
· Growth – If the product is accepted it may reach a stage of rapid growth in sales and in profits.
· Maturity –At some point sales of a product may stabilize. For some products the maturity phase can be the longest stage as the product is repeatedly purchased by loyal customers. However, while overall sales may grow year-over-year, percentage sales increases may be small.
· Saturation – at this point, the market become saturated with competitors coming up with complimentary products that consumers find appealing. Most times the product could be a replica of the mother product which competitors have copied as a counter strategy.
· Decline – All products eventually see demand decline as customers no longer see value in purchasing the product.
As expatiated above, the PLC helps the marketer understand that marketing decisions must change as a product moves from one stage to another. For example, marketers will find that what works when appealing to Innovators in the Introduction stage is different than marketing methods used to attract Early Majority during the Growth stage.
While not perfect, the PLC is a marketing tool that should be well understood by marketers since its underlying message, that markets are dynamic, supports the need for frequent marketing planning. Also, for many markets the principles presented by the PLC will in fact prove to be very much representative of the conditions they will face in the market.
Finally, the PLC is just one of many models that can assist marketers as they are engaged in the planning process. Most are beyond the scope of this article. For those interested in learning more about these models are encouraged to consult one or more of the many excellent Marketing Strategy textbooks or trade books as this article represent the writer’s views and understanding of the marketing planning.
The 21st century is an era of diversity. It is a time of reassessment of the basis that forms the foundation, comprises the structure and serves as a covering of any organisation that will remain relevant in the market place.
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